VI. TRADE REGULATIONS AND STANDARDS Tariffs and Import Taxes ------------------------ Under the U.S.-Israel Free Trade Area Agreement (FTAA), all remaining duties imposed on U.S.-made products will be eliminated by January 1, 1995. The duties remaining at this time generally range between 8-22.5%. As Israel also maintains FTAA's with the EU and EFTA, U.S.-origin products will compete on a par with most European Community and EFTA goods and have a substantial market access advantage over suppliers from the Far East, Japan, Canada, and other countries. As Israel's FTAA with the EU does not include agriculture, the duties paid on food of European origin partially offset the increased transportation expenses which add to the cost of U.S. products. (See "Membership in Free Trade Agreements" below.) Although import duties are being eliminated for U.S. imports into Israel, they are still subject to value added and, for some products, purchase taxes as described in the next section. Customs Valuation ----------------- The basis for customs valuation is the CIF value of a product. However, whenever Israeli Customs determines the landed price to be below the "normal price", it may uplift the CIF Value for tax (purchase tax and VAT) purposes. This practice, known as "Harama" (the Hebrew acronym for uplift), is considered by the U.S. Government to be in non-compliance with Israel's obligations under the GATT. In recent bilateral negotiations, the Government of Israel stated its intention to become a signatory to the GATT valuation code and to eliminate the practice of "Harama". This practice remains in place at the present time. Israel levies a 17% value added tax (VAT) on virtually all products sold in Israel, including imports. The VAT is levied on the CIF landed cost plus uplift plus import duties plus purchase tax. VAT is recovered by the importer upon resale of the goods and is ultimately paid by the consumer on the basis of the retail price. A purchase tax is levied on some products, primarily luxury and consumer items. The tax is levied on the wholesale price of domestic products and on the CIF landed value plus customs duty plus "Tama" (the Hebrew acronym for "additional rate of increase") of imported products. The U.S. and Israeli Governments have agreed upon an "optional Tama track", under which a U.S. exporter can declare the real wholesale price of a product for purchase tax calculation. The purchase tax is then applied to the adjusted price. Interested U.S. companies should contact the U.S. Department of Commerce Israel Desk for further information on this system. Import Licenses --------------- All import licensing requirements for U.S.-made consumer and industrial goods have been eliminated under the FTAA. However, licensing requirements and quantitative restrictions still exist for a wide range of food and agricultural products. Information on these requirements is available from FAS. (Also see "Prohibited Products".) Export Licenses --------------- Israel maintains very few export controls; those that do exist are primarily targetted against internationally controlled substances and/or designed to protect national security. Israel is not a member of COCOM, but does maintain export controls on a variety of military and sensitive technologies destined for certain proscribed countries. U.S. export licences are required for exports of high-technology and defense equipment/technologies to Israel. U.S. exporters should ensure that they are in compliance with export control regulations as administered through the U.S. Department of Commerce Bureau of Export Administration and U.S. Department of State Office of Defense Trade Controls. Import/Export Documentation --------------------------- Shipping documentation: U.S. exporters to Israel must follow U.S. Government requirements regarding export control documentation. Israeli Customs prefers that exporters use their own commercial invoice forms, so long as they contain all required information. This information includes: name and address of supplier; general nature of the goods; country of origin of the goods; name and address of the customer in Israel; name of the agent in Israel; terms; rate of exchange (if applicable); Israel import license number (if applicable); shipping information; and a full description of all goods in the shipment, including shipping marks, quantity or measure, composition of goods (by percentage if mixed), tariff heading number, gross weight of each package, net weight of each package, total weight of shipment, price per unit as sold, and total value of shipment. Total value of the shipment includes packing, shipping, dock and agency fees, and insurance charges incurred in the exportation of the goods to Israel. The commercial invoice must be signed by the manufacturer, consignor, owner, or authorized agent. U.S. exporters should also double check what other documentation, including a bill of lading and packing list, is required by their freight forwarder, shipping company, or importer. U.S. Certificates of Origin for Exporting to Israel: In order to benefit from the provisions of the FTAA, a special "U.S. Certificate of Origin for Exporting to Israel" (CO) must be presented to Israeli Customs. The certificate does not need to be notarized or stamped by a Chamber of Commerce. Instead, the exporter should make the following declaration in box 11 of the certificate: "The undersigned hereby declares that he is the producer of the goods covered by this certificate and that they comply with the origin requirements specified for those goods in the U.S.-Israel Free Trade Area Agreement for goods exported to Israel". The actual forms are printed by a number of commercial printing houses in the U.S. For further information on how to obtain them, U.S. exporters may wish to contact the U.S. Department of Commerce Israel Desk Officer. It is possible for exporters to apply for a blanket CO, or "Approved Exporter" status. An "approved exporter" need only present an invoice which substitutes for the CO, and which contains an "approved exporter" number and a declaration that the goods comply with origin requirements. Certification and notarization are not necessary. Authorization Procedures for "Approved Exporter" Status: a) A manufacturer or exporter who wishes to become an "Approved Exporter" should complete a declaratory form and present it to: Export Department, Israeli Customs, 32 Agron Street, P.O.Box 320, Jerusalem. Candidates must be U.S. firms whose exports to Israel total at least $20 million per annum and who have clean records with Israeli Customs. b) Israeli Customs will examine whether or not the manufacturer or exporter complies with the criteria and grant approval to operate as an "Approved Exporter". The approved exporter will be given an identity number to be stamped on all invoices. The approval is valid for six months after which the exporter should receive an automatic extension from Israeli Customs. If the exporter does not receive an extension notice he/she must terminate use of the approval. Compliance Procedures for Approved Exporters: a) The "Approved Exporter" should stamp the invoice with his/her identify number and add the following declaration: "The undersigned hereby declares that the goods listed in this invoice were prepared in the United States of America and they comply with the origin requirements specified for those goods in the U.S.-Israel Free Trade Area Agreement for goods exported to Israel." b) Invoices involving mixed goods: separate invoices must be prepared for goods which do not comply with origin requirements and/or for which approval to operate as an "Approved Exporter" has not been granted. Temporary Entry --------------- Temporary entry of U.S.-made goods may be effected either with an "ATA Carnet" issued by a U.S. Chamber of Commerce, or through payment of a deposit, which is reimbursed upon re-export. Labeling/Marking Requirements ----------------------------- Israel has strict marking and labeling requirements which frequently differ from those of other countries. It is recommended that U.S. exporters consult with their Israeli importer prior to shipping. All imports into Israel must have a label indicating the country of origin, the name and address of the producer, the name and address of the Israeli importer, the contents, and the weight and volume in metric units. In all instances, Hebrew must be used; English may be added provided the printed letters are no larger than those in Hebrew. Food products sold in Israel must be packaged according to standard uniform weights and volumes, usually metric. Nutritional labeling is compulsory on all packaged foods. Specific information on these standards is available from: Director, Department of Weights and Measures, Ministry of Industry and Trade, 30 Agron Street, Jerusalem 94190. Marking should be done by printing, engraving, stamping, or any other means, on the package or the goods themselves. If marking is not possible, a label should be well sewn or stuck to the goods or package. Marking details should be clear, legible, easy to trace, and in a different color from the background in order to be clearly distinguishable. Printing dyes and other marking materials should not affect merchandise quality. The marking should not be blurred. On a multi-layered package, the external layer should be marked. If the external layer is transparent then the marking should be done underneath that layer, provided it is still clear and legible. On a package containing subpackages, the labeling should specify: the number of subpackages, the net content of a subpackage, and the overall net weight of the package. An aerosol container should indicate the net quantity weight unit for semisolid or powder products, and volume unit for liquids. For products that tend to lose weight under regular marketing/commercial conditions, the greatest quantity of expected depletion should be mentioned. Specific labeling regulations apply to some consumer goods, paper products, handbags, musical recordings, fertilizers, insecticides, chemicals, pharmaceuticals, some food products, seeds, and alcoholic beverages. In addition, special packaging requirements apply to fruit, plants and meat. Outside and inside containers of dangerous articles, such as poisons, insecticides, drugs, flammable goods, ammunition, explosives, reptiles, insects, bacteria and radioactive materials should be clearly marked. For information on food labeling and packaging contact: Israel Ministry of Health, Food Inspection Service, 12-14 Ha'Arba'a Street, Tel Aviv 61070; Tel: 972-3-5634782; Fax: 972-3-5619549. Prohibited Imports ------------------ Israel maintains prohibitions on agricultural products based on religious/ritualistic grounds which may affect some U.S. exporters. Quantitative restrictions and prohibitions on agricultural products may also be maintained by either country, under the U.S.-Israel FTAA, based on agricultural policy considerations. The only other product prohibitions are targetted against internationally controlled substances and/or are designed to protect public morals, human, animal or plant health, or national security. Standards --------- It is the declared policy of the Government of Israel to adopt international standards wherever possible, and to implement mandatory standards related only to safety, health, and the environment. In practice, however, many products are still subject to mandatory standards, often still specified in terms of design rather than performance and thereby incompatible with similar international standards. The Standards Institute of Israel (SII) is the agency responsible for the development of most product standards, compliance testing, and certification of products and industry quality assurance systems. For further information, interested firms should contact: The Standards Institute of Israel, 42 Levanon Street, Tel Aviv 69977; Tel: 3-6465154; Fax: 3-6419683. Israel has not officially adopted ISO-9000 standards, although there is a growing preference for ISO-9000 standard products among Israeli importers. Most imported food products are subject to metric system package size requirements which may exclude standard sizes used by U.S. companies, thereby requiring them to package products especially for export to Israel. Although the metric system is not mandatory for other product areas, metric standards are preferred by Israeli importers so that non-conformity may affect marketability. The electrical standard is 220V, 50Hz. The Government of Israel requires that food and health products be registered with the Ministry of Health before they can be sold in the country. FDA approval for food and healthcare products is not mandatory, but it is preferred by Israeli importers as it accelerates the product registration process and import license approval. Product registration normally takes from 4-6 weeks if all documentation is in order. Free Trade Zones/Warehouses --------------------------- Israel has one free trade zone, the Red Sea port city of Eilat. In addition to the Eilat Free Trade Zone, there are three free ports: Haifa Port (including Kishon); Port of Ashdod; and the Port of Eilat. The Israeli parliament passed legislation in May authorizing creation of free processing zones (FPZ's). (See "VII. Investment Climate" for further information.) The Israeli government has plans to expand and upgrade the major ports of Haifa (in the north) and Ashdod (in the south). There is good quality warehousing in all of the major ports and trade zones, but current capacity is inadequate in the face of growing demand. Special Import Provisions ------------------------- There are no special import provisions. Free Trade Agreements --------------------- Israel has adopted a liberal import policy, and has thus far concluded Free Trade Area Agreements (FTAAs) with the European Union (EU), the United States, and EFTA. Israel signed its first FTAA in 1975 with the EEC (now the EU) which was fully implemented by 1989. A second FTAA was concluded with the U.S. in 1985, under which all duties will be eliminated by January 1, 1995. A third FTAA was signed in 1992 with the EFTA countries.