U.S.-Israel Free Trade Agreement
How U.S. Companies Can Benefit
Background information
In 1985, President Ronald Reagan signed the U.S.-Israel Free Trade Agreement (FTA), the first FTA into which the United States entered. Pursuant to the agreement, all custom duties between the two countries have been eliminated. In 2003, U.S. exports accounted for roughly 25% of all Israeli imports - a value of over $6 billion. In that same year, Israeli exports to the US exceeded more than $11 billion, a 200% increase since 1985. Israel is America's 20th leading trading partner.
The United States-Israel Free Trade Area provides for the elimination of duties for merchandise from Israel entering the United States, thus stimulating trade between two countries. The FTA program became effective September 1, 1985; as of January 1, 1995, all eligible reduced-rate importations from Israel were accorded duty-free treatment.
Tariff Elimination Schedule
The Elimination Schedule for tariffs rates has been fully implemented. As of January 1, 1995, all eligible reduced rate imports from Israel were accorded duty-free treatment. The FTA does allow the two countries to protect sensitive agricultural subsectors with nontariff barriers including import bans, quotas, and fees.
Benefits
Under this Agreement, American exporters can expect to receive the following benefits:
1. No Israeli tariffs of any kind on U.S. products (except for agricultural products).
The following fees, however, may apply:
- A Port Fee of one percent on the cost, insurance, and freight value (CIF) of the product is imposed on goods sent by ship.
- A Stevedoring Fee of 0.5 percent of the CIF value is imposed when products are unloaded from ships.
- A Compulsory Levy is imposed at various rates on the CIF value of food and agricultural products.
- A Purchase Tax is applied to specific products, primarily luxury and consumer items, whether or not they are imported or produced locally. The purchase tax is levied on the wholesale price of the item.
- Israel imposes a Value-Added Tax (VAT) on most goods and services sold in Israel, including all imports, with the exception of fresh fruits and vegetables. The VAT rate is presently 18 percent. The VAT on an imported product is recovered by the importer upon resale of the goods.
2. Limited import licensing requirements; No other import restrictions, except on agricultural products; No barriers or discrimination in bidding on Israeli government procurement; No requirements to purchase locally-produced goods or services; Full intellectual property rights; And an open market for trade in services.
All American companies interested in exporting under this Agreement must satisfy two important conditions: products must meet the Agreement's designated rules of origin criteria, and must be accompanied by all required documentation.
The Israeli Customs Service prefers that exporters use their own commercial invoice forms to provide all required information. Exporters should include the following information on their invoice forms: the supplier's name and address, general nature of the goods, country of origin, name and address of the recipient in Israel, name and address of the agent in Israel, rate of exchange, terms of exchange, Israeli import license number (if applicable), shipping information, full description of all goods in the shipment, price per units and total value of the shipment. The commercial invoice must be signed by the manufacturer, consignor, owner, or authorized agent.
The Department of Commerce's Market Access and Compliance offices are charged with monitoring this Agreement to ensure that Israel fully complies with its trade obligations. If you encounter problems under the U.S.-Israel FTA, please contact our Agreements Compliance office.
Additional Resources
Text of the Agreement
Tariff Elimination
Frequently Asked Questions
Declaring Origin
Rules of Origin
U.S. Commercial Service Israel Website
Textile, Apparel, Footwear, Leather and Travel Goods Information
Prepared by the International Trade Administration
Trade Information Center
