20. U.S.-Israel Free Trade Area Agreement (ILFTA)

 

20. U.S.-Israel Free Trade Area Agreement (ILFTA) 

The United States-Israel Free Trade Area agreement was originally enacted to provide for  duty-free treatment for merchandise produced in Israel to stimulate trade between the two  countries. This program was authorized by the United States in the Trade and Tariff Act of 1984,  became effective September 1, 1985, and has no termination date. The Harmonized Tariff  Schedule was amended to include General Note 8 implementing the U.S.-Israel Free Trade Area  Implementation Act. 

The ILFTA Implementation Act was amended on October 2, 1996, authorizing the  president to implement certain changes affecting the duty status of goods from the West Bank,  Gaza Strip, and qualifying industrial zones (QIZs). Presidential Proclamation 6955 of November  13, 1996, created General Note 3(v) to implement the new program for these goods. Pursuant to  General Note 3(v), duty-free treatment is allowed for products of the West Bank, Gaza Strip, or a  QIZ, imported directly from the West Bank, Gaza Strip, a QIZ or Israel, provided certain  requirements are met. Presidential Proclamation 6955 also modified the eligibility requirements  for duty-free treatment of articles that are the product of Israel. 

 General Note 3(a)(v)(G) of the Harmonized Tariff Schedule defines a QIZ as any area  that: 

1) Encompasses portions of the territory of Israel and Jordan or Israel and Egypt;  2) Has been designated by local authorities as an enclave where merchandise may  enter without payment of duty or excise taxes; and 

3) Has been designated as a QIZ by the United States Trade Representative in a  notice published in the Federal Register. 

Eligible Items 

The ILFTA applies to a broad range of tariff items listed in the Harmonized Tariff  Schedule and identified by “IL” in the “Special” column. 

Products Of Israel 

An article imported into the customs territory of the United States is eligible for treatment  as a “product of Israel” only if: 

• The merchandise has been produced in Israel. This requirement is satisfied when  (1) The goods are wholly the growth, product, or manufacture of Israel, or  (2) The goods have been substantially transformed into a new or different article  of commerce in Israel; 

• That article is imported directly from Israel, the West Bank, Gaza Strip, or a  QIZ into the customs territory of the United States; 

• The sum of: 

(1) The cost or value of the materials produced in Israel, the West Bank, Gaza  Strip, or a QIZ, plus 

(2) The direct costs of processing operations performed in Israel, the West Bank,  Gaza Strip, or a QIZ 

is not less than 35 percent of the appraised value of such article at the time it is entered. If the  cost or value of materials produced in the customs territory of the United States is included with  respect to an eligible article, an amount not to exceed 15 percent of the appraised value of the  article at the time it is entered may be applied toward determining the 35 percent. 

Products of The West Bank, Gaza Strip, or a Qualifying Industrial Zone   An article imported into the customs territory of the United States is eligible for treatment  as a product of the West Bank, Gaza Strip, or a QIZ only if: 

• The article is the growth, product, or manufacture of the West Bank, Gaza Strip or  a QIZ, 

• The article is imported directly from the West Bank, Gaza Strip, a QIZ or Israel  into the customs territory of the United States, 

• The sum of: 

1. The cost or value of the materials produced in the West Bank, Gaza Strip, a  QIZ or Israel, plus 

2. The direct costs of processing operations performed in the West Bank, Gaza  Strip, a QIZ or Israel 

is not less than 35 percent of the appraised value of such article at the time it is entered. If the  cost or value of materials produced in the customs territory of the United States is included with  respect to an eligible article, an amount not to exceed 15 percent of the appraised value of the  article at the time it is entered may be applied toward the 35 percent. 

No article may be considered to meet these requirements by virtue of having undergone: 

• Simple combining or packaging operations, or 

• Mere diluting with water or another substance that does not materially alter the  characteristics of the article. 

 The phrase “direct costs of processing operations” includes, but is not limited to: 

• All actual labor costs involved in the growth, production, manufacture or  assembly of the specific merchandise, including fringe benefits, on-the-job  training and the costs of engineering, supervisory, quality control and similar personnel. 

• Dies, molds, tooling and depreciation on machinery and equipment that are  allocable to the specific merchandise. 

 Direct costs of processing operations do not include costs that are not directly attributable  to the merchandise concerned or are not costs of manufacturing the product, such as: 

1. Profit, 

2. General expenses of doing business that are either not allocable to the specific  merchandise or are not related to the growth, production, manufacture or 

assembly of the merchandise, such as administrative salaries, casualty and  liability insurance, advertising and sales staff salaries, or commissions or  expenses. 

Certificate of Origin Form A 

The United Nations Conference on Trade and Development Certificate of Origin Form A  is used as documentary evidence to support duty-free and reduced-rate claims for Israeli articles  covered by a formal entry. It does not have to be produced at the time of entry, however, unless  CBP requests it at that time. 

Form A may be presented on an entry-by-entry basis or may be used as a blanket  declaration for a period of 12 months. Form A can be obtained from the Israeli authorizing  issuing authority or from: 

United Nations Conference on Trade and Development 

Two U.N. Plaza 

Room 1120 

New York, NY 10017 

Tel. 212.963.6895 

Informal Entries 

Form A is not required for commercial or non-commercial shipments covered by an  informal entry. However, the port director may require other evidence of the country of origin as  deemed necessary. 

In order to avoid delays to passengers, the inspecting CBP officer will extend Israeli  duty-free or reduced-rate treatment to all eligible articles accompanying the traveler if the  available facts satisfy the officer that the merchandise concerned is a product of Israel. In such  cases, Form A is not required. 

Sources of Additional Information 

Questions about the administrative or operational aspects of the ILFTA should be  addressed to: 

Executive Director, Trade Compliance and Facilitation Division 

 U.S. Customs and Border Protection 

Washington, DC 20229 

Requests for information about ILFTA policy issues should be directed to: 

Chairman, Trade Policy Staff Subcommittee 

Office of U.S. Trade Representative 

600 17th St., NW 

Washington, DC 20506.