Rules of Origin and Trade Agreements

The State of Israel is a signatory to Free Trade Agreements (FTAs) with numerous countries and economic blocs (the U.S., the European Union, Canada, Turkey, and others). In theory, this means full customs duty exemption on imports from these countries. In practice, however, many importers pay full customs duties unnecessarily due to lack of knowledge, or alternatively — file incorrect exemption declarations and subsequently face massive deficit demands. The most common mistake is the assumption that the "country of shipment" is the "country of origin." The fact that goods arrived from a warehouse in Germany does not make them German if they were manufactured in China. The Customs Authority conducts rigorous "origin verification" procedures, and failure in these results in retroactive revocation of the exemption and heavy penalties.

To benefit from the exemption, goods must comply with the specific "rules of origin" of each agreement. These rules examine where the product was manufactured, or whether it underwent "substantial processing" in the agreement country. The law requires the presentation of specific and accurate documents at the time of release, such as:

• Certificate of Origin (e.g., EUR1): An official document signed by the customs authorities in the exporting country.

• Invoice Declaration: A declaration by the exporter in the body of the invoice (subject to conditions and amount limitations). Understanding the nuances of "Accumulation" rules and direct shipment is critical to preserving the exemption.

The firm assists importers in planning their supply chain to meet trade agreement requirements, saving up to tens of percent on import costs. In cases of international "origin verification" investigations, where Israeli Customs contacts foreign customs authorities to verify the authenticity of certificates, we manage the legal proceedings to prevent disqualification of the exemption. Additionally, we handle retroactive customs refunds for importers who mistakenly paid full duties, based on origin documents obtained after the fact.