Rules of Origin and Certificates of Origin in Trade Agreements

A customs duty exemption or reduction under a trade agreement is granted only when the goods meet the agreement's rules of origin, were shipped in a manner permitted by the agreement, and a proof of origin document in the required format is presented. Under the Customs Tariff Order, the preference document must be submitted no later than the release of the import declaration. The agreement exempts from customs duties only; purchase tax and VAT on import are paid as usual.

Send us your proof of origin documents and import declarations, and we will check whether the exemption will withstand verification.

Usually when Customs questions the exemption, and sometimes before starting to work with a new supplier:

• Customs sent the proof of origin document for verification by the customs authority of the exporting country and requested documents from you.

• A negative verification response was received, followed by a demand for payment of customs duty differentials spanning several years.

• A European supplier issues an invoice declaration of origin, but the shipment value exceeds €6,000.

• The product is manufactured in one country and shipped from a warehouse in another, and it is unclear whether it still qualifies as an originating product.

• You paid full customs duties because the proof of origin document was not available at the time of release.

• You are planning a new supply chain and want to verify in advance whether the product will meet the rules of origin.

Each agreement has its own rules of origin and proof procedures, but the questions to examine are recurring.

Conditions for Exemption

• The product meets the agreement's rules of origin: it was produced in a party state, or underwent sufficient processing there as defined by the rule applicable to its tariff heading.

• It was transported directly, or passed through a third country only under conditions permitted by the agreement.

• A proof of origin document in the format required by the agreement is presented and was submitted on time.

The country of shipment is not necessarily the country of origin. A product manufactured in China and shipped from a warehouse in Germany remains a Chinese product. Under the agreement with the European Union and additional agreements, the Regional Convention on Pan-Euro-Mediterranean Preferential Rules of Origin applies, specifying which operations are insufficient to confer origin.

Proof of Origin Documents

• In the Euro-Mediterranean agreements, including the agreement with the European Union, a EUR.1 movement certificate or an exporter's invoice declaration of origin is used under prescribed conditions. An approved exporter may make a declaration on the invoice without any value limitation.

• Under the agreement with the United States, since 30.6.2018 Israel accepts only an exporter's invoice declaration, replacing the certificate of origin previously in use.

• The list of agreements in force is published in the Ministry of Economy's trade agreements database. The agreement with South Korea, for example, entered into force on 1.12.2022.

The preference document must be submitted no later than the release of the import declaration. From 29.4.2026, its validity depends on the country of origin: a document from the European Union is accepted up to 12 months from the date of issue; from the United Kingdom, EFTA states, Turkey, and Ukraine up to 4 months; and from Jordan up to 6 months. The accepted documents are a EUR.1 movement certificate, an invoice declaration, and in Jordan a chamber of commerce certificate of origin (Customs Tariff Order, Section 14(b)(1)).

Post-Release Verification of Origin

After release, Israel Customs may request the customs authority of the exporting country to verify the proof of origin document. Under the Regional Convention, such verification is conducted at random or where there is reasonable doubt as to the authenticity of the document or the origin status of the product. If origin is not confirmed, the exemption is revoked and a demand for payment of customs duty differentials is issued. Such a demand may be made within 5 years, and beyond that period where the shortfall resulted from incorrect information provided in bad faith (Indirect Taxes Law). An incorrect detail regarding the origin of goods in the import declaration also constitutes grounds for a financial penalty under Section 223B of the Customs Ordinance.

The evidence is usually held by the supplier, so a significant part of the work is done in coordination with them:

1. You send us the proof of origin documents, invoices, bills of lading, and import declarations, and if available, the Customs letter regarding the verification.

2. We examine which rule of origin applies to the product under the relevant agreement based on its tariff heading, and how it was transported to Israel.

3. We collect evidence of origin from the supplier: supplier declarations, bills of materials, and production data.

4. We submit a reasoned position to Customs. If a demand for payment has been issued, we file an appeal with the Customs House within 30 days. When it is known that the proof of origin document will arrive late, we request release of the goods against a guarantee until it arrives.

5. Before ordering from a new supplier, we review the supply chain to ensure the document is issued correctly from the outset.

Origin and trade agreement cases are handled by Adv. Udi Asa, who heads the Customs, Import and Export practice at the firm. Import, export, and international trade law are part of his area of practice, and he is a member of the Israel Bar Association's VAT and Customs Committee.