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ChristianKl comments on Rationality when Insulated from Evidence - Less Wrong Discussion
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For products not made in Israel but in territory that isn't in Israel according to the UN decisions about what happens to be Israel.
And now go and look at OP again. The EU directive insists on having labels "product from the West Bank (Israeli settlement)" and "product from the West Bank (Palestinian product)".
The core issue of the conflict is whether "made in Israel" can be written on products that aren't made in the official territory of Israel as set by the UN.
I don't think that produces of products labeled "product from the West Bank (Israeli settlement)" want to write "produced in Palestina" on their products, so I see no problem with offering them that label. Furthermore those products simply might not be covered by the trade deals with the Palestianian authority and therefore there might be a need to distinguish them from other West Bank products.