G/VAL/Q/ISR/2  
 
26 April 2022  
(22-3325) Page: 1/2 
Committee on Customs Valuation  Original: English  
 
 
NOTIFICATION UNDER ARTICLE 22 OF AGREEMENT  ON IMPLEMENTATION  
OF ARTICLE VII OF THE GENERAL AGREEMENT  
ON TARIFFS AND TRADE  1994  
RESPONSES FROM ISRAEL TO QUESTIONS POSED BY THE UNITED STATES  
REGARDING DOCUMENT G/VAL/N/2/ISR/1  
ISRAEL 
The following communication , dated 13 April 2022,  is being circulated at the request of the 
delegation of Israel . 
 
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Question  1: Regarding the response to Checklist Question 1(a)(i), would Israel please identify the 
provision of law that implem ents the "circumstances of the sale " analysis provided in the 
Interpretative Note to Paragraph 2 of Article 1 of the Customs Valuation Agreement ( "CVA" or 
"Agreement ")? 
 
Answer : Customs examines the circumstances of the sale where a special relationship ex ists 
between the seller and the buyer, only in case suspicion arises that the relationship affected the 
transaction value. This procedure is stated in Customs Evaluation Instruction Article 2.2.2 C.  
 
1) As stated in section 132 of the Customs Ordinance, t he transaction value is the price actually paid 
or payable. In case of a transaction between two parties with a special relationship, the importer 
must provide proof, as stated in section 132 (b) (4) (b), that the value of the transaction was not 
affected by the relationship.  
 
2) In case the customs Director speculates that the special relationship did affect the transaction 
value, the Director will notify the importer and will enable them to file a claim.  
 
Question  2: In its response to Checklist Question 2, Israel cites to Article 130(6), which provides 
that, in order to reverse the order of application of the deductive value method and the computed 
value method, the importer must submit an application and receive ap proval from the Collector of 
Customs. We note that Article 4 of the CVA provides that "at the request of the importer, the order 
of application of Articles 5 and 6 shall be reversed. " Would Israel please explain what information 
the importer must submit an d what criteria the Collector of Customs applies when assessing whether 
to grant permission to reverse the order of application of the deductive and computed value 
methods?  
 
Answer : There are no specific instructions for this kind of application, and ther e are almost no 
applications as the one described. In such applications, the importer should explain their request 
that the evaluation will be made according to the method in Article 6 rather than that of Article 5, 
and specify the information available fr om the supplier/manufacturer in the exporting country. In 
principle, according to the method of Article 4, Customs can examine and verify the information 
originating in the importing country. It is either difficult or impossible to verify information from 
other countries. The Customs Collector examines the necessity of the request and the degree of 
reliability of the data sent from the supplier/manufacturer.  
 G/VAL/Q/ISR/2  
 
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  Question  3: In its response to Checklist Question 15, Israel indicates, "According to Customs 
regulations, when determining the value of abstract goods such as software, films, etc., the value 
of the software is not to be differentiated from the value of the device containing the software, as 
both are to be considered in the course of determination of value for the purpose calculation of 
import taxes. " However, in notification G/VAL/N/3/ISR/1, Israel indicates it applies the Committee 
Decision on the Valuation of Car rier Media Bearing Software for Data Processing Equipment 
(Decision  4.1). Would Israel please confirm whether, for software, its valuation regulations provide 
for the valuation of both the software and the device, or whether, in accordance with Decision 4. 1, 
they provide that only the cost or value of the carrier medium itself, i.e., the device, is taken into 
account.  
 
Answer : Israel Customs and Purchase Tax Tariff makes a distinction between Carrier Media Bearing 
Software for Data Processing and an empty d evice. As no additional tax applies to this customs 
heading except for import VAT, and according to Section 26 (b) of the Israeli VAT Law, VAT applies 
to the import of software (intangible asset), and customs examines whether the VAT applicable to 
the soft ware has already been paid. In case the tax due was paid, the value of the customs 
declaration should only include the Carrier Media device, and this is in accordance with Decision 4.1 
of the World Trade Organization. If VAT has not been paid for the softw are, then the value of the 
goods will be determined according to the software component and the magnetic media to which it 
is recorded, according to the Israeli VAT Law article concerning the duty applicable to the importation 
of intangible property.  
 
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