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To satisfy the FTA's rules of origin criteria, one's products must be grown, produced, or manufactured entirely in the United States. If they are not, they must be substantially transformed into new products with a different name, character, or use. For example, one cannot simply combine or repackage his/her products to fulfill this requirement. Also, exporters must export products directly from the United States into Israel - products cannot be sent through a third country. A U.S.-Israel Certificate of Origin must accompany all qualifying goods in order to be accorded the preferences outlines in the FTA.
Product meeting U.S.-Israel FTA Rule of Origin = No (zero) tariff. A product qualifies for FTA tariff treatment if it contains at least 35% American and/or Israeli content. The green-colored U.S.-Israel FTA Certificate of Origin must be completed to obtain the zero duty-rate. If product does not qualify, look at general column - Taxes are in right hand columns.
An article imported into the Customs territory of Israel is eligible for treatment as "Product of the United States" only if:
The sum of: (1) The cost or value of the materials produced in the United States, plus (2) the direct costs of processing operations performed in the United States constitutes at least 35 percent of the appraised value of the article at the time of import. If the cost or value of materials produced in the customs territory of Israel 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 that is attributable to such Israel cost or value may be applied toward determining the 35 percent.
The cost or value of materials imported into the United States from a third country may be included in calculating the 35 percent value-added requirement, provided they are first substantially transformed into new and different articles of commerce and are then used as constituent materials in the production of the eligible article.
No article may be considered to meet these requirements by virtue of having undergone:
1. Simply combining or packaging operations; or
2. 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.
Dyes, molds, tooling and depreciation on machinery and equipment that are allocable to the specific merchandise.
Direct costs of processing operations do not include costs which are not directly attributable to the merchandise concerned, or are not costs of manufacturing the product, such as (1) profit and (2) general expenses of doing business which 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's salaries, commissions or expenses.
Prepared by the International Trade Administration
Trade Information Center