RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG54/3
27 January 1999
(99-0309)
Committee on Regional Trade Agreement Original: English
FREE TRADE AGREEMENT BETWEEN ISRAEL AND HUNGARY
Communication from the Parties
The following communication has been received from the Permanent Missions of Israel and
Hungary with the request that it be distributed to WTO Members.
_______________
I. BACKGROUND INFORMATION ON THE AGREEMENT
1. Membership and Dates of Signature, Ratification and Entry into Force
The Parties to the Agreement are the State of Israel and the Republic of Hungary.  The
Agreement applies to the customs territories of the Parties.
The Free Trade Agreement was signed on 14 October 1997, was ratified by Israel on
10 December 1997 and by the Republic of Hungary on 6 November 1997 and entered into force on
1 February 1998.
The Agreement was notified to the Council for Trade in Goods on 25 March 1998, in
accordance with Article XXIV:7(a) of GATT 1994.
2. Type of Agreement
The Agreement creates a free-trade area in conformity with the definition set out in
Article XXIV:8(b) of GATT 1994.
3. Scope
The free-trade area established by the Agreement provides the framework for future trade
relations between Hungary and Israel.
The Agreement covers all trade in industrial products (HS Chapters 25-97), and substantially
all trade in agriculture products (HS Chapters 1-24).  The products covered are products originating in
Israel or Hungary according to the rules of or igin laid out in Protocol 3 of the Agreement.
The agricultural products covered by the Agreement are those listed in Table A to Protocol 2
of the Agreement for Hungary and Table B to Protocol 2 of the Agreement for Israel.
In addition, Article 11.2 of the Agreement provides that the Parties shall examine
periodically, within the framework of the Joint Committee, the possibilities of granting each other
further concessions in trade in agriculture products.WT/REG54/3
Page 2
4. Trade Data
Total trade coverage of the Agreement is as follows:
Republic of Hungary:  Imports from Israel (US$)
Total Trade Trade Covered % of Trade Covered
1995 47,440,120 44,515,000 94%
1996 49,404,709 43,259,880 88%
1997 44,359,800 42,339,450 95%
State of Israel:  Imports from the Republic of Hungary (US$)
Total Trade Trade Covered % of Trade Covered
1995 48,200,834 44,761,324 92.9%
1996 48,029,158 47,450,859 98.8%
1997 50,547,289 49,645,228 98.2%
More detailed trade data can be found in the Annex.
II. TRADE PROVISIONS
1. Import Restrictions
1.1 Duties and charges
In accordance with Article 3.2 of the Agreement and as provided for in Protocol 1 of the
Agreement, customs duties on all originating goods listed in HS Chapters 25-97 except those listed in
Annexes 1(a) and (b) of the Agreement and those listed in Annexes A, B and C of Protocol 1 of the
Agreement, shall be abolished on the date of entry into force of the Agreement.
Customs duties on products listed in Annex A to Protocol 1 of the Agreement shall be
progressively reduced by Hungary in accordance to the timetable listed in Protocol 1 of the
Agreement and finally eliminated by 1 January 2001.
Customs duties on products listed in Annex B to Protocol 1 of the Agreement shall be
reduced by Israel to one-third of the basic duty on the date of entry into force of the Agreement andeliminated on 1 January 1999.
Customs duties on products listed in Annex C to Protocol 1 of the Agreement shall be
progressively reduced by Israel in accordance to the timetable listed in Protocol 1 of the Agreement
and finally eliminated by 1 September 2000.
All charges having an effect equivalent to customs duties on imports shall be abolished on the
date of the entry into force of the Agreement, except for a few products listed in Annex 2 of the
Agreement which shall be progressively reduced  in accordance with the timetable specified in
Annexes B and C to Protocol 1 of the Agreement.WT/REG54/3
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In the case of agricultural products (HS Chapters 1-24) and Annexes 1(a) and (b) of the
Agreement, specific concessions, in the form of preferential duty and/or tariff quotas, for a broad
range of products are listed in Tables A and 2 of Protocol B of the Agreement.
1.2 Quantitative restrictionsArticle 8.1 of the Agreement provides that no new quantitative restrictions or measures
having equivalent effect on imports shall be introduced in trade between the Parties.
Article 8.2 of the Agreement abolishes all quantitative restrictions and measures having
equivalent effect on imports of products originating in the Parties on the date of entry into force of
this Agreement, with a few exceptions listed in Annexes 3(a), (b) and (c) to the Agreement.
For the products listed in Annex 3(a) of the Agreement, all restrictions shall be progressively
abolished by Hungary by 31 December 2000.
For the products listed in Annex 3(b) of the Agreement, annual ceilings shall be opened by
Hungary for these products originating in Israel from 1998.
For the products listed in Annex 3(c) of the Agreement, Israel shall abolish all quantitative
restrictions on them by 1 January 2001.
2. Export Restrictions
2.1 Duties and charges
Article 7.1 of the Agreement provides that for industrial products, no new custom duties on
exports or charges having equivalent effect shall be introduced in trade between the Parties.
Article 7.2 of the Agreement provides that the Parties shall abolish between them on the date
of entry into force of the Agreement any custom duties on exports and any charges having equivalent
effect.
2.2 Quantitative restrictionsArticle 9.1 of the Agreement provides that no new quantitative restrictions or measures
having equivalent effect shall be introduced in trade between the Parties.
Article 9.2 of the Agreement provides that all quantitative restrictions and measures having
equivalent effect on export of products shall be abolished on the date of entry into force of the
Agreement.
3. Rules of Origin
Protocol 3 of the Agreement lays down the rules of origin.  In general, origin is confirmed
when:
- the good is wholly obtained or produced in the territory of a Party;  or
- each of the non-originating materials used in the production of the good undergoes an
applicable change in tariff classification set out in the specific rule for that good
(detailed in Annex II to Protocol 3), and the good satisfies any other applicableWT/REG54/3
Page 4
requirement set out in that rule, as a result of production occurring in the territory of a
Party;  and
- the good satisfies other particular circumstances as set out in Protocol 3 of the
Agreement.
The rules of origin enable bila teral cumulation of origin between the Parties, i.e. materials
originating in a Party shall be considered as materi als originating in the other Party when incorporated
into a product obtained there.
In addition, the rules of origin provide for up to 10 per cent tolerance for non-originating
materials and for up to 10 per cent tolerance for outward processing in a non-member country exceptfor products falling within HS Chapters 50-63.
The specific rules of origin per product provided for in Annexes I and II to Protocol 3 of the
Agreement are identical to the new European rules of the European Community, in order to facilitate
cumulation of origin with the Eu ropean Community and with other countries maintaining free-trade
area agreements with Israel and with Hungary.
4. Standards
4.1 Technical barriers to tradeArticle 22.1 of the Agreement stipulates that this area in the Parties' relations shall be
governed by the WTO Agreement on Technical Barriers to Trade.
Article 22.3 of the Agreement states that the Parties shall aim to reduce technical barriers to
trade.  To this end, the Parties will conclude where appropriate agreements on mutual recognition in
the field of conformity assessment.
4.2 Sanitary and phytosanitary measuresArticle 10.2 of the Agreement states that the Parties shall apply their sanitary and
phytosanitary measures in accordance with the provisions of the  GATT 1994 Agreements.  TheParties shall not apply their regulations in veterinary, plant health and health matters in an arbitrary,
unjustifiable or discriminatory way or as a disguised restriction on trade between them.
5. Safeguards
Article 29 of the Agreement establishes the administrative procedures for the application of
safeguard measures between the Parties in the case of dumping (Article 23), emergency action on
imports of particular products (Article 25) and measures relating to re-export and serious
shortage (Article 27).
Article 25.1 provides for the application of general safeguard measures by a party, where any
product is being imported in such quantities and under such conditions as to cause or threaten to
cause:
- serious injury to domestic producers of the like or directly competitive products in the
territory of the importing Party;  or
- serious disturbances in any sector of the economy or difficulties which could bring
about serious deterioration in the economic situation of a region.WT/REG54/3
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Article 25.2 of the Agreement provides that when, in the view of the importing Party, the
importation of a product from the other party is not the substantial cause of a serious injury or threat
thereof, the product of the Party shall be exempted  from any import relief that may be imposed with
respect to imports of that product from third countries.
Article 30.1 of the Agreement states that the Parties will attempt to avoid the imposition of
restrictive measures relating to imports for balance of payment purposes.
In the case of serious balance-of-payment difficulties, Article 30.2 of the Agreement allows
the Parties to adopt restrictive measures in accord ance with the conditions laid down in the framework
of WTO/GATT 1994.
6. Anti-Dumping and Countervailing Measures
Article 23 of the Agreement provides that if a Party finds that dumping within the meaning of
Article VI of the GATT 1994 is taking place in trade relations governed by the Agreement, it maytake appropriate measures against that practice in  accordance with Article VI of the GATT 1994 and
agreements related to that Article, under the cond itions and in accordance with the procedure laid
down in Article 29 of the Agreement.
7. Subsidies and State-Aid
Article 20 of the Agreement refers to state aid:- Article 20.3 of the Agreement provides that the Parties shall ensure transparency in
the area of state aid in accordance with the provision of the Agreement on Subsidiesand Countervailing Measures and the WTO/GATT 1994.
- Article 20.4 of the Agreement provides that measures taken must be under the
condition of and in accordance to the procedure laid down in Article 29 of the
Agreement.  Such appropriate measures may only be taken in conformity with the
procedures and under the conditions laid down by the Agreement on Subsidies and
Countervailing Measures and the WTO/GATT 1994.
8. Sector-Specific Provisions
The Agreement does not contain sector-specific provisions.
9. Other
Customs Cooperation
Article 13.1 of the Agreement establishes a framework for cooperation in customs
administration, with particular regard to methods of cooperation in the administration of rules of
origin.
State Monopolies
Article 17.1 of the Agreement, calls for the Parties to ensure that any state monopoly of a
commercial character be adjusted so that no di scrimination regarding the conditions under which
goods are procured and marketed exists between nationals of the Parties.WT/REG54/3
Page 6
Competition Policy
Article 19 of the Agreement, relates to the rules of competition.  Article 19.5 of the
Agreement states that with regard to activities under the Agreement and in accordance to the Parties'
laws, regulations and policies, each Party shall accord  fair and equitable treatment to the individuals,
companies, government agencies and other entities of the other Party.
Internal Taxation
Article 14 of the Agreement prohibits any measures or practice of internal fiscal nature
establishing discrimination between the products originating from either Party.  This Article also
prohibits repayment of indirect taxation in exce ss of the amount of indirect or direct taxes.
Payments
Article 18 of the Agreement prohibits restrictions on payments in freely convertible
currencies relating to commercial transactions betw een the Parties and refers to Article VIII of the
Statutes of the International Monetary Fund.
Public Procurement
On public procurement, under Article 21.2 of the Agreement, Israel shall grant Hungarian
companies access to contract award procedures in its government procurement of goods, according to
the Agreement on Government Procurement of 15 April 1994, subject to its undertakings therein.
Under Article 21.3 of the Agreement, Hungary shall grant Israeli companies access to
contract award procedures under a treatment no less favourable than that accorded to companies ofany other country.
Intellectual Property
On intellectual property, under Article 24.1 of the Agreement, the Parties shall grant and
ensure adequate, effective and non-discriminatory protection of intellectual rights.  The protection
where necessary, shall be extended, before the end of 1998 to a level corresponding to the substantivestandards of the multilateral Agreements which are specified in Annex 4 of the Agreement.
III. GENERAL PROVISIONS OF THE AGREEMENT
1. Exceptions and Reservations
Article 15 of the Agreement allows restrictions on imports, exports or goods in transit on
grounds of public morality, public health or public security;  the protection of health and life of
humans, animals and plants, including the environmental measures necessary to protect human,animal or plant life or health;  of the protection of natural treasures possessing artistic, historic or
archaeological value;  of protection of intellectual property; of rules related to gold, silver or the
conservation of exhaustive natural resources.
Article 16 of the Agreement provides that nothing in the Agreement shall prevent a Party
from taking any measure, in accordance with Article XXI of GATT 1994, which it considers
necessary.WT/REG54/3
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2. Accessions
The Agreement does not contain provisions regarding accession.
3. Dispute Settlement Procedures
Article 34 of the Agreement provides that for any disputes relating to the application or the
interpretation of the Agreement, the Partie s may refer the Joint Committee settlement.
4. Relations with Other Trade Agreements
The Agreement incorporates certain provisi ons of GATT 1994 including Article VI and
Article XXI.  Other WTO/GATT 1994 Agreements incorporated into the Agreement are:  the
Agreement on Subsidies and Countervailing Measures, the Agreement on Technical Barriers to Trade,
the Agreement on Government Procurement and the Agreement on Sanitary and Phytosanitary
Measures.
As mentioned in Section IV, for protection of intellectual property, the Agreement relates to
the multilateral agreements listed in Annex 4 of the Agreement.
5. Institutional Framework
The Agreement establishes a Joint Committ ee which shall be responsible for the
administration of the Agreement and shall meet at least once a year.  The Joint Committee shall be
composed of the representatives of the Parties.WT/REG54/3
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ANNEX
Israel – Total Imports from Hungary, 1995-97
(US$)
HS Chapter 1995 1996 1997
1 0 1,943 16,993
2 0 0 188,663
30 0 2 , 9 6 0
4 567,452 0 67,212
5 000
6 000
7 378,040 206,376 149,417
8 81,236 0 1,860
9 242,131 0 410,430
10 5,235,222 3,283,018 3,103,367
1 1 000
12 3,437,665 1,443,679 9,735
13 32,012 0 0
14 4,628 4,861 40,590
15 633 0 11,250
1 6 000
17 4,067 0 0
18 2,460 2,598 45,052
1 9 000
20 533,890 538,703 745,798
21 52,368 18,255 133
22 3,466 4,830 51,811
23 159,548 88,059 202,475
2 4 000
25 24,799 18,340 71,288
2 6 000
27 0 0 14,426
28 1,605,299 2,026,434 1,710,665
29 4,034,723 4,704,034 5,400,320
30 10,156 432 1,432
31 0 0 955
32 1,269 13,894 0
33 3,885 300 18,826
34 3,843 120 3,173
35 0 0 650
36 3,975 0 6,709
37 53,569 31,684 72,169
38 1,424,277 747,011 360,762
39 19,659,878 16,252,233 18,408,881
40 114,601 250,346 445,009
41 0 0 25,679
42 1,665 2,869 833
4 3 000
44 113,730 360,635 19,514
4 5 000
46 20,942 19,985 26,043
4 7 000
48 20,704 157,132 740,253
49 29,696 8,410 8,098
5 0 000
51 0 0 18,287
52 140,019 182,833 227,546
53 84,027 72,242 48,167
54 9,376 52,309 232,185
55 13,073 3,225 183,992WT/REG54/3
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HS Chapter 1995 1996 1997
5 6 000
57 199 65 2,417
58 0 839 15,373
5 9 000
60 2,314 6,377 4,674
61 3,235 1,638 55,941
62 41,449 38,555 67,796
63 1,220 3,399 2,726
64 1,522 7,883 0
65 38,022 32,612 168,964
6 6 000
67 0 16 0
68 85,963 287,923 263,366
69 225,659 2,416 1,541
70 114,871 176,904 116,250
71 562,360 707,100 458,448
72 323,107 1,779,484 3,184,654
73 181,927 109,889 144,976
74 0 65,620 2,887
7 5 000
76 2,766,024 4,837,290 3,461,153
7 7 000
78 0 38,006 0
7 9 000
8 0 000
81 80,135 0 0
82 268 170,503 98,817
83 12,152 20,863 47,088
84 1,348,232 4,829,339 4,048,895
85 3,626,911 3,638,292 3,084,783
8 6 000
87 127,627 271,815 1,453,694
88 51,880 14,574 112,005
89 0 0 460,425
90 349,838 286,749 5,881
91 0 3,090 2,537
92 300 400 0
9 3 000
94 32,792 27,503 11,902
95 52,297 87,183 26,575
96 3,272 24 8,111
97 18,627 60,972 22,074
Other 40,307 25,045 119,728
Total 48,200,834 48,029,158 50,547,289WT/REG54/3
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Hungary Total Imports from Israel, 1995-97
(US$)
HS Chapter 1995 1996 1997
1 176,705 14,620 38,005
2 0 0 54,845
3 000
4 1,278,898 1,515,772 1,420,174
5 28,493 0 0
6 564,513 487,054 461,824
7 11,589 7,596 15,004
8 139,682 131,143 83,360
9 000
10 0 3,699 0
1 1 000
12 65,711 67,445 19,513
1 3 000
1 4 000
15 0 5,932 1,606
16 4,723 2,097 37,421
1 7 000
1 8 000
19 121,117 85,799 100,564
20 3,182,756 3,021,898 2,436,399
21 667,574 239,791 966,337
22 0 3,126 0
23 837,764 64,040 0
2 4 000
25 199,347 494,817 330,541
2 6 000
27 0 7,560 26,552
28 167,505 102,608 65,225
29 884,643 1,780,672 1,432,471
30 1,843,935 3,166,401 3,528,427
31 195,467 424,260 367,203
32 21,963 5,429 86,581
33 324,967 289,352 298,145
34 215,073 202,470 189,792
35 27,003 36,011 16,568
3 6 000
37 2,228 999 12
38 1,847,252 2,622,325 2,760,454
39 694,090 526,472 544,118
40 46,276 58,229 164,763
4 1 000
42 83,192 131,974 273,835
4 3 000
44 481 9,000 14,776
4 5 000
4 6 000
4 7 000
48 1,246,949 1,165,264 595,987
49 147,803 217,912 221,336
5 0 000
51 0 36,897 0
52 149,494 691,534 787,872
53 0 0 11,154
54 40,564 22,000 255,020
55 18,550 9,251 16,044
56 4,255 2,389 12,619
57 4,934 21,870 19,191WT/REG54/3
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HS Chapter 1995 1996 1997
58 0 5,409 22,546
59 51,169 91 5,801
60 1,770,540 0 4,655
61 85,593 28,221 65,264
62 100,626 35,842 69,062
63 215,920 84,702 83,221
64 5,738 4,723 11,707
65 35,325 382 243
66 14,071 5,100 4,415
67 124,990 0 0
68 9,605 102,994 24,032
69 75,030 86,222 43,416
70 4,046 20,976 16,087
71 2,416,052 247,841 193,279
72 0 410 533
73 19,263 410,226 101,265
74 182,256 143,567 18,206
7 5 000
76 200,751 198,484 307,179
7 7 000
7 8 000
7 9 000
8 0 000
8 1 000
82 2,200,122 2,263,651 2,749,972
83 677,033 441,619 233,938
84 10,289,379 9,373,686 10,174,126
85 10,200,978 14,746,827 9,142,094
86 300 0 68,281
87 13,434 46,028 216,078
88 0 37,136 0
8 9 000
90 3,052,125 3,215,763 2,837,135
91 2,470 24,184 42,154
92 0 0 10,544
93 112,468 13,307 25,372
94 311,599 118,183 190,122
95 3,135 23,533 27,252
96 131,629 48,741 17,006
97 1,468 1,153 1,077
Total 47,440,120 49,404,709 44,359,800
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