WT/REG398/2  
 
15 September  2020 
(20-6009) Page: 1/3 
Committee on Regional Trade Agreements  Original: English /Spanish  
 
• FREE TRADE AGREEMENT BETWEEN SOUTHERN COMMON MARKET  
(MERCOSUR) AND ISRAEL (GOODS)  
QUESTIONS AND REPLIES  
 The following communication, dated 11 September  2020, is being circulated at the request of 
the delegations of  the Southern Common Market (MERCOSUR) and Israel.  
 
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Question from the delegation of Chile  
 
1.1.  "In light of the time that has elapsed since the signing (2007) and entry into force 
of the Agreement, Chile wishes to know whether the Parties plan, in the short or medium 
term, to initiate negotiations to further develop or expand the Agreement. If so, are there 
plans to extend this development and/or expansion to other areas (besides goods )?" 
Joint response from the Parties  
 
 At the first Joint Committee, the Parties held preliminary discussions on the implementation 
of Article 9(1) of Chapter II regarding Trade in Services and Article 4(5) of Chapter VI on Mutual 
Recognition Agreements . So far, the possibility of extending the Agreement to other areas has not 
been discussed  in concrete terms.  
 
Questions from the delegation of Mexico  
 
Competition  
 
1.2.  Paragraph 4.21: Subject to its laws, regulations and decisions regarding competit ion, 
each Party shall accord to the individuals and companies of the other Party such treatment 
as necessary to the pursuit of their activities under the Agreement.  
• Are there any cooperation activities between the Parties regarding investigations 
into anti -competitive practices and other areas of antitrust policy, such as 
merger control or promotion, have required greater specificity in terms of the 
competition provisions contained in the Agreement?  
Joint response from the Parties  
 
 There are no cooperation activities between the Parties beyond those provided for in the 
Agreement.  
 
• Is amending the text of the Agreement seen to be necessary as a result of the 
legal and institutional changes in competition that have occurred in Israel a nd in 
the community bloc, such as the creation of the Israel Competition Authority or 
the MERCOSUR Committee for the Protection of Competition (CT5)?  
Joint response from the Parties  
 
 At the moment, there are no plans to do so.  WT/REG398/2  
 
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  Investment and Trade in Serv ices 
 
1.3.  The Parties recognize the importance of the areas of investments and trade in 
services. In their efforts to gradually deepen and broaden their economic relations, they 
will consider in the Joint Committee the possible modalities for opening negotiations on  
market access on investments and trade in services, on the basis of the GATS framework 
as applicable. The Parties informed that they had not yet opened negotiations on market 
access on investments and trade in services, although preliminary discussions in  relation 
to these topics were held during the first meeting of the Joint Committee.  
• Regarding trade in Services, are the Parties seeking to create a GATS plus 
framework in a Chapter of the Treaty?  
Joint response from the Parties  
 
 The Parties held prelimi nary discussions on the implementation of Article 9(1) of Chapter II 
regarding Trade in Services . 
 
• What would be the improvement of this Chapter compared to the provisions set 
out in GATS?  
Joint response from the Parties  
 
 So far  the Parties have not discussed in concrete terms the possibility of introducing a GATS 
plus framework in the Agreement.  
 
• Why the Parties have not reached agreements on the Chapters of Investment 
and Trade of Services in the  negotiation?  Are there legal im pediments in any of 
the parts for it?  
Joint response from the Parties  
 
 Although there are no legal obstacles for negotiations on market access for investment and 
trade in services, the Parties have not started them.  
 
Question s from the delegation of Thail and 
 
Tariff rate quotas  
 
1.4.  Question based on Paragraph 3.18: Under the Agreement Israel offers the 
MERCOSUR Parties tariff rate quotas in addition to its WTO TRQs  on a range of agricultural 
products as outlined in the tables in Annex 2. For most products the TRQs provide for fixed 
quota amounts at duty free rates. None of the TRQs are liberalized over time.  
From Paragraph 3.18 of the document shows that Israel offers the MERCOSUR 
Parties TRQs in most agricultural products at duty free rates. In this regard, it would be 
highly appreciated if Israel could explain the approximate period of TRQ Israel offering to  
MERCOSUR.  
 
Joint r esponse from the Parties  
 
 The TRQs offered by Israel to MERCOSUR will be permanent, unless the Parties reach an 
agreement in the future to broaden current concessions.  
 
Rules of origin  
 
1.5.  Question based on Paragraph 3.21: A product is c onsidered to be originating if the 
non-originating materials used in its manufacture undergo working or processing beyond 
the operations referred to in Chapter IV:6 and (a) the production process results in a tariff 
charge of the non -originating materials from a four -digit HS heading into another 
four-digit heading, or (b) the value of all non -originating materials used in its manufacture 
does not exceed 50% of the ex -works price. In case of Paraguay, the value of all WT/REG398/2  
 
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  non-originating materials does not exce ed 60% of the ex -works price. As regards trade 
between Uruguay and Israel and Paraguay and Israel, a product will be considered to 
have undergone a change in tariff classification if the value of all non -originating materials 
that are used in the productio n of the good and that do not undergo the applicable change 
in tariff classification does not exceed 10% of the ex -works value of the product 
(Chapter  IV:5).  
 Referring to the Free Trade Agreement between MERCOSUR and Israel on 
Chapter  IV: Rules of Origin , the definition of material explained that "(b) material means 
any ingredient, raw material, component or parts used in the manufacture of the product".  
Does it mean that ex -works price for cumulation criteria would calculate from the 
materials used only or include other costs of the production as well?  
 
Joint r esponse from the Parties  
 
 In accordance with Article 1 (g) of Chapter IV (Rules of Origin), ex -works price "means the 
price paid for the product ex -works to the manufacturer in Israel or in a Member State of MERCOSUR 
in whose undertaking the last working or processing is carried out, provided the price includes the 
value of all the materials used, minus any internal taxes which are, or may be, repaid when the 
product obtained is exported ". Furthermore, as per Article 11 ( "Neutral Elements ") of the same 
Chapter, i n order to determine whether a product is originating in one of the Parties, it shall not be 
necessary to determine the origin of the  (a) energy and fuel, (b) plant and equipment, (c) ma chines 
and tools and  (d) goods which do not enter into the final composition of the product  used in its 
manufacture . Therefor e, the verification of compliance with the value -added test rule takes into 
account only the amount of originating /imported  materia ls used and/or the level of working or 
processing  a product undergoes in one of the Parties, including for bilateral cumulation (Article 3 of 
Chapter IV).  
 
 Referring to Paragraph 3.21 explained that trade between Uruguay – Israel, and 
Paraguay - Israel, a product will be considered to have undergo a change in tariff 
classification if the value of all non -originating material that are used in the production 
and that do not undergo the application change in tariff classification does not exceed 
10% of the ex -works value of the product classified in HS Chapter 50 to 63.  It would be 
highly appreciated if Israel could explain, what are the factors to consider the differential 
treatment on the De minimis among MERCOSUR member?  
Response from the delegati on of Israel  
 
 The Differential treatment on the De minimis among MERCOSUR members is a result of the 
negotiations and reflects the interest of all Parties.  
 
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