U.s.-Israel Free Trade Agreement Rules of Origin

The United States and Israel have had a long-standing free trade agreement (FTA) since 1985. The agreement has been amended many times since then, including in 2019 when both countries agreed to update the rules of origin.

Rules of origin are criteria used to determine whether a product qualifies for duty-free treatment under a free trade agreement. They define the amount of domestic content a product must have to qualify, as well as the transformation required in the country of origin. The main purpose of rules of origin is to prevent non-qualifying products from entering a market through a FTA, which could distort trade and harm domestic producers.

The U.S.-Israel FTA`s new rules of origin specify that for a product to be considered originating, it must meet one of two criteria. The first is a regional value content (RVC) requirement, which means that a certain percentage of the product`s value must come from the United States or Israel. The second is a tariff shift requirement, which means that the product must undergo a certain transformation process in one or both countries.

These criteria apply differently depending on the product. For example, a product such as steel must meet an RVC requirement of 50% based on the ex-works price of the product. This means that at least 50% of the value of the steel must be added in either the United States or Israel. On the other hand, a product such as automobiles must undergo a tariff shift requirement, which means that the product must have a certain percentage of regional content and be made with inputs from either the United States or Israel.

The rules of origin also include provisions for de minimis thresholds. These thresholds allow products that do not meet the RVC or tariff shift requirements to still qualify as originating if the non-originating materials used in the production of the product do not exceed a certain percentage of the product`s ex-works price. The de minimis threshold for agricultural products is set at 10%, while for industrial products, it is set at 7%.

By updating the rules of origin, the United States and Israel aim to make it easier for businesses to take advantage of the benefits of the FTA while also ensuring that only qualifying products benefit from it. This will help to foster greater trade and investment flows between the two countries, further strengthening their economic partnership.

In conclusion, the U.S.-Israel FTA`s updated rules of origin represent an important milestone in the trade relations between the two countries. As a professional, it is essential to understand the significance of rules of origin to ensure that articles on this topic are accurate and informative. The updated rules of origin will enable both countries to continue to benefit from their strong economic ties while also protecting their domestic producers.