G/VAL/Q/ISR/4  
 
1 May 2023 
(23-3029) Page: 1/40 
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  
REPLIES FROM ISRAEL TO QUESTIONS FROM THE UNITED STATES  
CONTAINED IN  DOCUMENT G/VAL/ Q/ISR/ 3 
ISRAEL 
The following communication, dated 27 April 2023 , is being circulated at the request of the 
delegation of Israel . 
 
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Question 1  
 
In its response to Question 1 in G/VAL/Q/ISR/2, Israel identified "Customs Valuation Instruction 
Article 2.2.2 C" as the provision implementing the "circumstances of the sale" test for the use of 
transaction value in related -party transactions. Would Israel please provide a copy of this document?  
 
Response  
 
Please see attached the Israel Customs Valuation Procedure in Hebrew .1 Article 2.2.2 is highlighted 
in page 8.  For your convenience, we have added an unofficial translation.  
 
[Unofficial translation]  
 
c. Examination of the existence of a special relationship and its effect on the transaction value.  
 
1) As stated in section 132 of the Customs Ordinance, the 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,  including:  
 
a. A copy of the sales contract.  
 
b. A declaration from the two parties, both the importer and the supplier, accounting for the nature 
of their relationship, including any proof document, namely, formal publications, importer's affidavit, 
official company records.  
 
c. Any document or information that may prove that the special relationship did not affect the value 
of the transaction, according to any of the alternatives stated in section 132 (b) (4) (b).  
 
3. In case the importer is able to prov e, to the satisfaction of the Customs Director, that the 
transaction value and the value of the chosen alternative are close in value, as stated in section 2 
(c), then the transaction value will be accepted.  
 
1 PP 3 – 40 Offset (PDF file attached) . G/VAL/Q/ISR/4  
 
- 2 - 
 
  Question 2 
 
In its response to Question 1 in G/V AL/Q/ISR/2, Israel also indicates: "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."  
 
Would Israel please explain whether it requires an importer to prove that the relationship between 
the buyer and the seller did not affect the price in every case or, in accordance with the Agreement, 
whether such proof is requested only when Customs has do ubts about the acceptability of the price? 
See Interpretative Note to Article 1, Paragraph 2(2) ("It is not intended that there should be an 
examination of the circumstances in all cases where the buyer and the seller are related. Such 
examination will onl y be required where there are doubts about the acceptability of the price.").  
 
Response  
 
Such proof is requested only when Customs has doubts about the acceptability of the price. It is not 
intended that there should be an examination of the circumstances in all cases where the buyer and 
the seller are related.  
 
Question 3 
 
In response to Question 2 in G/VAL/Q/ISR/2, is there a circumstance where the Collector of Customs 
would deny an importer the opportunity to reverse the order of applicatio n of the deductive value 
method and the computed value method?  
 
Response  
 
In cases where there is difficulty in determining the reliability of the data using the computed value 
method, a customs collector will most likely employ the deductive method.  
 
Ques tion 4 
 
Israel's response to Question 3 in G/VAL/Q/ISR/2 provides, "If VAT has not been paid for the 
software, 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 t he Israeli VAT Law article concerning the 
duty applicable to the importation of intangible property." Does the term value here refer to the 
value of the goods for VAT assessment purposes, or the value of the goods for the assessment of 
customs duties?  
 
Response  
 
Import duties do not apply to these types of goods; therefore, the determined value of the software 
is only used in calculations of the applicable import VAT.  
 
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