“(a) Application and Interpretation.—In this section:“(1) Tariff classification.—The basis for any tariff classification is the HTS.
“(2) Reference to hts.—Whenever in this section there is a reference to a heading or sub-heading, such reference shall be a reference to a heading or subheading of the HTS.
“(b) Originating Goods.—“(1) In general.—For purposes of this Act and for purposes of implementing the preferential tariff treatment provided for under the Agreement, a good is an originating good if—“(A) the good is imported directly—“(i) from the territory of Morocco into the territory of the United States; or
“(ii) from the territory of the United States into the territory of Morocco; and
“(B)(i) the good is a good wholly the growth, product, or manufacture of Morocco or the United States, or both;
“(ii) the good (other than a good to which clause (iii) applies) is a new or different article of commerce that has been grown, produced, or manufactured in Morocco, the United States, or both, and meets the requirements of paragraph (2); or
“(iii)(I) the good is a good covered by Annex 4–A or 5–A of the Agreement;
“(II)(aa) each of the nonoriginating materials used in the production of the good undergoes an applicable change in tariff classification specified in such Annex as a result of production occurring entirely in the territory of Morocco or the United States, or both; or
“(bb) the good otherwise satisfies the requirements specified in such Annex; and
“(III) the good satisfies all other applicable requirements of this section.
“(2) Requirements.—A good described in paragraph (1)(B)(ii) is an originating good only if the sum of—“(A) the value of each material produced in the territory of Morocco or the United States, or both, and
“(B) the direct costs of processing operations performed in the territory of Morocco or the United States, or both,
is not less than 35 percent of the appraised value of the good at the time the good is entered into the territory of the United States.
“(c) Cumulation.—“(1) Originating good or material incorporated into goods of other country.—An originating good or a material produced in the territory of Morocco or the United States, or both, that is incorporated into a good in the territory of the other country shall be considered to originate in the territory of the other country.
“(2) Multiple procedures.—A good that is grown, produced, or manufactured in the territory of Morocco or the United States, or both, by 1 or more producers, is an originating good if the good satisfies the requirements of subsection (b) and all other applicable requirements of this section.
“(d) Value of Materials.—“(1) In general.—Except as provided in paragraph (2), the value of a material produced in the territory of Morocco or the United States, or both, includes the following:“(A) The price actually paid or payable for the material by the producer of such good.
“(B) The freight, insurance, packing, and all other costs incurred in transporting the material to the producer’s plant, if such costs are not included in the price referred to in subparagraph (A).
“(C) The cost of waste or spoilage resulting from the use of the material in the growth, production, or manufacture of the good, less the value of recoverable scrap.
“(D) Taxes or customs duties imposed on the material by Morocco, the United States, or both, if the taxes or customs duties are not remitted upon exportation from the territory of Morocco or the United States, as the case may be.
“(2) Exception.—If the relationship between the producer of a good and the seller of a material influenced the price actually paid or payable for the material, or if there is no price actually paid or payable by the producer for the material, the value of the material produced in the territory of Morocco or the United States, or both, includes the following:“(A) All expenses incurred in the growth, production, or manufacture of the material, including general expenses.
“(B) A reasonable amount for profit.
“(C) Freight, insurance, packing, and all other costs incurred in transporting the material to the producer’s plant.
“(e) Packaging and Packing Materials and Containers for Retail Sale and for Shipment.—Packaging and packing materials and containers for retail sale and shipment shall be disregarded in determining whether a good qualifies as an originating good, except to the extent that the value of such packaging and packing materials and containers have been included in meeting the requirements set forth in subsection (b)(2).
“(f) Indirect Materials.—Indirect materials shall be disregarded in determining whether a good qualifies as an originating good, except that the cost of such indirect materials may be included in meeting the requirements set forth in subsection (b)(2).
“(g) Transit and Transshipment.—A good shall not be considered to meet the requirement of subsection (b)(1)(A) if, after exportation from the territory of Morocco or the United States, the good undergoes production, manufacturing, or any other operation outside the territory of Morocco or the United States, other than unloading, reloading, or any other operation necessary to preserve the good in good condition or to transport the good to the territory of the United States or Morocco.
“(h) Textile and Apparel Goods.—“(1) De minimis amounts of nonoriginating materials.—“(A) In general.—Except as provided in subparagraph (B), a textile or apparel good that is not an originating good because certain fibers or yarns used in the production of the component of the good that determines the tariff classification of the good do not undergo an applicable change in tariff classification set out in Annex 4–A of the Agreement shall be considered to be an originating good if the total weight of all such fibers or yarns in that component is not more than 7 percent of the total weight of that component.
“(B) Certain textile or apparel goods.—A textile or apparel good containing elastomeric yarns in the component of the good that determines the tariff classification of the good shall be considered to be an originating good only if such yarns are wholly formed in the territory of Morocco or the United States.
“(C) Yarn, fabric, or group of fibers.—For purposes of this paragraph, in the case of a textile or apparel good that is a yarn, fabric, or group of fibers, the term ‘component of the good that determines the tariff classification of the good’ means all of the fibers in the yarn, fabric, or group of fibers.
“(2) Goods put up in sets for retail sale.—Notwithstanding the rules set forth in Annex 4–A of the Agreement, textile or apparel goods classifiable as goods put up in sets for retail sale as provided for in General Rule of Interpretation 3 of the HTS shall not be considered to be originating goods unless each of the goods in the set is an originating good or the total value of the nonoriginating goods in the set does not exceed 10 percent of the value of the set determined for purposes of assessing customs duties.
“(i) Definitions.—In this section:“(1) Direct costs of processing operations.—“(A) In general.—The term ‘direct costs of processing operations’, with respect to a good, includes, to the extent they are includable in the appraised value of the good when imported into Morocco or the United States, as the case may be, the following:“(i) All actual labor costs involved in the growth, production, or manufacture of the good, including fringe benefits, on-the-job training, and the costs of engineering, supervisory, quality control, and similar personnel.
“(ii) Tools, dies, molds, and other indirect materials, and depreciation on machinery and equipment that are allocable to the good.
“(iii) Research, development, design, engineering, and blueprint costs, to the extent that they are allocable to the good.
“(iv) Costs of inspecting and testing the good.
“(v) Costs of packaging the good for export to the territory of the other country.
“(B) Exceptions.—The term ‘direct costs of processing operations’ does not include costs that are not directly attributable to a good or are not costs of growth, production, or manufacture of the good, such as—“(i) profit; and
“(ii) general expenses of doing business that are either not allocable to the good or are not related to the growth, production, or manufacture of the good, such as administrative salaries, casualty and liability insurance, advertising, and sales staff salaries, commissions, or expenses.
“(2) Good.—The term ‘good’ means any merchandise, product, article, or material.
“(3) Good wholly the growth, product, or manufacture of morocco, the united states, or both.—The term ‘good wholly the growth, product, or manufacture of Morocco, the United States, or both’ means—“(A) a mineral good extracted in the territory of Morocco or the United States, or both;
“(B) a vegetable good, as such a good is provided for in the HTS, harvested in the territory of Morocco or the United States, or both;
“(C) a live animal born and raised in the territory of Morocco or the United States, or both;
“(D) a good obtained from live animals raised in the territory of Morocco or the United States, or both;
“(E) a good obtained from hunting, trapping, or fishing in the territory of Morocco or the United States, or both;
“(F) a good (fish, shellfish, and other marine life) taken from the sea by vessels registered or recorded with Morocco or the United States and flying the flag of that country;
“(G) a good produced from goods referred to in subparagraph (F) on board factory ships registered or recorded with Morocco or the United States and flying the flag of that country;
“(H) a good taken by Morocco or the United States or a person of Morocco or the United States from the seabed or beneath the seabed outside territorial waters, if Morocco or the United States has rights to exploit such seabed;
“(I) a good taken from outer space, if such good is obtained by Morocco or the United States or a person of Morocco or the United States and not processed in the territory of a country other than Morocco or the United States;
“(J) waste and scrap derived from—“(i) production or manufacture in the territory of Morocco or the United States, or both; or
“(ii) used goods collected in the territory of Morocco or the United States, or both, if such goods are fit only for the recovery of raw materials;
“(K) a recovered good derived in the territory of Morocco or the United States from used goods and utilized in the territory of that country in the production of remanufactured goods; and
“(L) a good produced in the territory of Morocco or the United States, or both, exclusively—“(i) from goods referred to in subparagraphs (A) through (J), or
“(ii) from the derivatives of goods referred to in clause (i),
at any stage of production.
“(4) Indirect material.—The term ‘indirect material’ means a good used in the growth, production, manufacture, testing, or inspection of a good but not physically incorporated into the good, or a good used in the maintenance of buildings or the operation of equipment associated with the growth, production, or manufacture of a good, including—“(A) fuel and energy;
“(B) tools, dies, and molds;
“(C) spare parts and materials used in the maintenance of equipment and buildings;
“(D) lubricants, greases, compounding materials, and other materials used in the growth, production, or manufacture of a good or used to operate equipment and buildings;
“(E) gloves, glasses, footwear, clothing, safety equipment, and supplies;
“(F) equipment, devices, and supplies used for testing or inspecting the good;
“(G) catalysts and solvents; and
“(H) any other goods that are not incorporated into the good but the use of which in the growth, production, or manufacture of the good can reasonably be demonstrated to be a part of that growth, production, or manufacture.
“(5) Material.—The term ‘material’ means a good, including a part or ingredient, that is used in the growth, production, or manufacture of another good that is a new or different article of commerce that has been grown, produced, or manufactured in Morocco, the United States, or both.
“(6) Material produced in the territory of morocco or the united states, or both.—The term ‘material produced in the territory of Morocco or the United States, or both’ means a good that is either wholly the growth, product, or manufacture of Morocco, the United States, or both, or a new or different article of commerce that has been grown, produced, or manufactured in the territory of Morocco or the United States, or both.
“(7) New or different article of commerce.—“(A) In general.—The term ‘new or different article of commerce’ means, except as provided in subparagraph (B), a good that—“(i) has been substantially transformed from a good or material that is not wholly the growth, product, or manufacture of Morocco, the United States, or both; and
“(ii) has a new name, character, or use distinct from the good or material from which it was transformed.
“(B) Exception.—A good shall not be considered a new or different article of commerce by virtue of having undergone simple combining or packaging operations, or mere dilution with water or another substance that does not materially alter the characteristics of the good.
“(8) Recovered goods.—The term ‘recovered goods’ means materials in the form of individual parts that result from—“(A) the complete disassembly of used goods into individual parts; and
“(B) the cleaning, inspecting, testing, or other processing of those parts that is necessary for improvement to sound working condition.
“(9) Remanufactured good.—The term ‘remanufactured good’ means an industrial good that is assembled in the territory of Morocco or the United States and that—“(A) is entirely or partially comprised of recovered goods;
“(B) has a similar life expectancy to, and meets similar performance standards as, a like good that is new; and
“(C) enjoys a factory warranty similar to that of a like good that is new.
“(10) Simple combining or packaging operations.—The term ‘simple combining or packaging operations’ means operations such as adding batteries to electronic devices, fitting together a small number of components by bolting, gluing, or soldering, or packing or repacking components together.
“(11) Substantially transformed.—The term ‘substantially transformed’ means, with respect to a good or material, changed as the result of a manufacturing or processing operation so that—“(A)(i) the good or material is converted from a good that has multiple uses into a good or material that has limited uses;
“(ii) the physical properties of the good or material are changed to a significant extent; or
“(iii) the operation undergone by the good or material is complex by reason of the number of processes and materials involved and the time and level of skill required to perform those processes; and
“(B) the good or material loses its separate identity in the manufacturing or processing operation.
“(j) Presidential Proclamation Authority.—“(1) In general.—The President is authorized to proclaim, as part of the HTS—“(A) the provisions set out in Annex 4–A and Annex 5–A of the Agreement; and
“(B) any additional subordinate category necessary to carry out this title consistent with the Agreement.
“(2) Modifications.—“(A) In general.—Subject to the consultation and layover provisions of section 104, the President may proclaim modifications to the provisions proclaimed under the authority of paragraph (1)(A), other than provisions of chapters 50 through 63 of the HTS, as included in Annex 4–A of the Agreement.
“(B) Additional proclamations.—Notwithstanding subparagraph (A), and subject to the consultation and layover provisions of section 104, the President may proclaim—“(i) modifications to the provisions proclaimed under the authority of paragraph (1)(A) as are necessary to implement an agreement with Morocco pursuant to article 4.3.6 of the Agreement; and
“(ii) before the end of the 1-year period beginning on the date of the enactment of this Act [Aug. 17, 2004], modifications to correct any typographical, clerical, or other nonsubstantive technical error regarding the provisions of chapters 50 through 63 of the HTS, as included in Annex 4–A of the Agreement.