Made in Europe – or not?
Israel is a party to a wide range of free trade agreements which, subject to certain conditions, provide an exemption from customs duty or a reduced rate of duty for products imported from various countries and trading blocs. Israel has entered into such agreements with, among others, the United States, Canada, Mexico, the European Union, the EFTA States, the Mercosur States, Colombia, the United Kingdom, Ukraine, South Korea, Vietnam and the United Arab Emirates.
However, the mere fact that a product was purchased in, or dispatched from, a particular country – or bears a marking such as “Made in Europe” – does not necessarily confer originating status upon it or entitle it to preferential tariff treatment. It is necessary to establish that the product satisfies the rules of origin prescribed by the relevant trade agreement.
Rules of origin vary according to the applicable agreement and the type of product concerned. They may relate to the place where the product was manufactured, the origin of the raw materials and components used in its production, the processing operations it underwent, any change in its customs classification, or the proportion of value added in the country of manufacture. In addition, the applicable requirements concerning the transportation of the goods must be satisfied, and valid proof of origin – such as a certificate of origin or an origin declaration – must be presented in accordance with the relevant agreement.
Although customs duties on many industrial products have been reduced or abolished over the years, numerous agricultural products and foodstuffs remain subject to customs duty, sometimes at significant rates. In this field, compliance with the applicable rules of origin and the presentation of complete and valid proofs of origin may therefore be particularly important.
The Israel Customs Authority is entitled to examine whether goods qualify for preferential tariff treatment and may initiate a verification procedure with the customs authorities in the exporting country. A defect in a document, a discrepancy between the particulars of the transaction, or an adverse outcome of the verification procedure may result in the preference being denied and a retroactive demand for customs duty in respect of consignments released several years earlier.
Disputes in this area may concern substantive questions – such as whether the product genuinely satisfies the applicable rules of origin – as well as issues relating to the validity of the documents, the time limits for their submission and the manner in which the verification procedure was conducted. As the rejection of proofs of origin may give rise to a substantial retroactive customs debt, it is advisable to examine in advance both the rules of the relevant trade agreement and the documents accompanying the importation.