WORLD TRADE  
ORGANIZATION  WT/REG202/R/B/1 
G/L/743 7 September 2005 
 
(05-3911) 
Committee on Regional Trade Agreements Original:   English 
  
FREE TRADE AGREEMENT BETWEEN THE UNITED STATES AND ISRAEL
∗ 
 
Biennial Report on the Operation of the Agreement  
 
Communication from the Parties 
 
 The report below presents the information r eceived from the Permanent Delegation of the 
United States, dated 22 July 2005.  It is orga nized in accordance to th e Standard Format for 
Information on Regional Trade Agreements (WT/REG/W/6).  
_______________ 
 
AGREEMENT ON THE ESTABLISHMENT OF 
A FREE TRADE AREA BETWEEN 
THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND 
THE GOVERNMENT OF ISRAEL 
  
I. BACKGROUND INFORMATION ON THE AGREEMENT 
 
1. Membership and Dates of Signature,  Ratification and Entry into Force 
The Agreement on the Establishment of a Free Trade Area between the Government of the 
United States of America and the Government of Israel (herein after the Free Trade Agreement or FTA) was signed on April 22, 1985.  The agre ement entered into force on August 19, 1985.
1  This 
Report covers the last two biennial  periods - 1999-2001 and 2001-2003. 
2. Trade Data 
Statistical data on the evolution of trade between  the United States of America and Israel is 
presented in Annex I. 
II. TRADE PROVISIONS 
The Free Trade Agreement fulfilled the aims of both parties to meet fully the requirements of 
GATT Article XXIV.  The FTA: 
- eliminated duties and other restrictive re gulations of commerce (except as permitted 
under Article XXIV) on substantially all tr ade between the United States and Israel; 
and 
                                                      
∗ The full text of the Agreement is available at the following URL address:  
http://www.ustr.gov/Trade_Agreements /Bilateral/Israel/Section_Index.html  
1 See Report of the GATT Workin g Party, Free Trade Area Agreemen t between Israel and the United 
States (adopted May 14, 1987), BISD 34S/58. WT/REG202/R/B/1 
G/L/743 Page 2 
 
 
 - maintained duties and other regulations of commerce on third party trade not higher 
or more restrictive than those which existed prior to the formation of the FTA and created no new barriers.  
The FTA conforms with GATT Article XXIV.   It provides for implementation of duty-free 
treatment for all trade between the United States and Israel, as provided for in four categories set out 
in the annexes to the FTA, by January 1, 1995.  With  respect to the United Stat es, it is estimated that 
97.9 per cent of chapter 1 through 97 tariff lines are now free of duty for Israeli imports.  Furthermore, for the United States, over 99 per cent of trade from Israel, by value, enters duty free. 
With respect to Israel - although customs duties are still applied with regard to a number of 
agricultural products imported from the United States to Israel - a large part of those dutiable items 
enjoys a TRQ regime.  It is estimated that over 99 per cent of total trade from the United States by 
value, entered Israel free of duty in 2004 with the application of the new protocol on Agriculture. 
Moreover, in certain areas, the FTA enhanced  GATT obligations with specific provisions 
disciplining balance-of-payments, specific duties and trade-related performance requirements.  It also 
addressed certain issues that were subject to GA TT Codes, e.g., licensing, government procurement 
and export subsidies.  Further, it contained pr ovisions on transparency, consultations, dispute 
settlement and rules of origin, as well as reaffirm ing bilateral and multilateral trade commitments. 
3. Rules of origin  
To receive FTA benefits, three tests must be met:  (1) the article must be wholly produced in a 
Party OR undergo substantial transf ormation in a Party;  (2) the arti cle must be imported directly from 
the other Party;   and (3) the sum of the costs of input produced in the exporting Party plus the direct 
processing costs performed in the exporting Party must  comprise at least 35 per cent of the appraised 
value of the article when imported into the other Pa rty.  The FTA rules specifically exclude any article 
from eligibility by virtue of merely undergoing (a) simple combining or packaging operations or (b) 
mere dilution with water or mere dilution with ot her substances that do not materially alter the 
characteristics of the article.  These rules do not create any extra barriers vis-à-vis  third countries.   
4. Standards 
4.1 Technical barriers to trade and other barriers to trade 
With respect to the potential trade-inhibiting e ffects of standards, technical barriers to trade 
and non-tariff barriers, the two sides agreed to restri ctions on the right of either nation to impose new 
restrictions on the trade of the other, unless permitted by the FTA or GATT (Article 3 of the FTA).  
The FTA decreased the restrictive effects of non-ta riff barriers in such areas as licensing, subsidies 
and government procurement. 
Article 8 of the FTA does not preclude the adop tion or enforcement of measures relating to 
religious or ritual prohibitions, provided they are a pplied consistent with the principle of  national 
treatment. 
4.2 Sanitary and Phyto sanitary measures 
Article 9 provides a framework for the resolution of problems relating specifically to 
veterinary and plant health matters.   WT/REG202/R/B/1 
 G/L/743 
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 5. Safeguards 
Article 5 provides for the application of genera l safeguard measures by a Party if its imports 
led to serious injury or threat thereof.  It also provides that when in the view of the importing Party, 
the importation of a product from the other Party is not a substantial cause of the serious injury or 
threat thereof, the product of the Party may be ex empted from any import relief that may be imposed 
with respect to imports of that product from third countries.  Under this provision, Israeli imports 
were excluded from five of the seven global safe guard measures the United States has imposed since 
1996. 
6. Subsidies and State Aid 
Under Annex 4 of the FTA, Israel committed not to institute any new export subsidy 
programs and not to increase the level of subsidiza tion in existing programs above levels existing on 
July 11, 1984.  Annex 4 also provides a schedule to eliminate or reduce subsidy elements for the four 
identified programs for financi ng exports or processing exports. 
7. Sector-Specific Provision 
On November 4, 1996, the United States and Israel signed a five-year adjunct to the FTA 
concerning certain aspects of their trade in agricu ltural products.  The 1996 agreement states: “Israel 
and the United States acknowledge that the ...[Israel U.S. FTA] applies in full to U.S. and Israeli 
agricultural products and to trade in these produc ts between the two countries.  However, both 
countries also acknowledge that they have differing in terpretations as to the meaning of certain rights 
and obligations in Articles 2 and 6 of the ...[FTA] rela ted to agricultural products.  In the interest of 
achieving practical improvements in agricultural tr ade between the two countries, the United States 
and Israel therefore have agreed to set aside thei r differences and enter in to this agreement through 
December 31, 2001, with regard to certain border m easures of each party that relate to agricultural 
products of the other party.”  The 1996 agreement was extended twice, first through December 31, 
2002, and then to December 31, 2003.  In July 20 04, the United States and Israel concluded a new, 
five-year agricultural adjunct applicable to certai n agricultural products during the period January 1, 
2004, through December 31, 2008.2  The agencies responsible for the implementation and 
enforcement of the 2004 agreement are the O ffice of United States Trade Representative and the 
Ministry of Industry, Trade, Labor and Communications (Israel). 
Israeli agricultural exports to the United Stat es enter duty-free, except a few products that 
remain dutiable pending resolution of the parties’ differing interpretation of some aspects of the 
agreement, as noted above.  Th ese dutiable lines are the results of tariffication of previously 
applicable quotas on certain agricultural products under Section 22 of the U.S. trade laws (7 U.S.C. § 
624), and tariff rate quotas on unmanufactured tobacc o established in October 1995.  Under the 2004 
agreement, the United States libera lized access to its market by granting zero in-quota tariff rates to a 
specified portion of Israeli imports of some of thes e products.  For its part, Israel granted additional 
access to its market for certain U. S. agricultural products (e.g., wi ne, almonds and certain cheeses) 
under one of three different categories: duty-free access, tariff-rate quotas (TRQs) with duty-free within-quota amounts, or preferential tariffs which are set at least 10 per cent below Israel’s most-
favoured-nation (MFN) rates. 
                                                     
 
2 See Annex II. 
 WT/REG202/R/B/1 
G/L/743 Page 4 
 
 
 III. GENERAL PROVISIONS OF THE AGREEMENT 
A Joint Committee is established pursuant to Ar ticle 17 to supervise the implementation of 
the FTA and to discuss bilateral trade issues.  Article 18 provides for notice and consultation 
procedures, and Article 19 establishes a mechanis m for the resolution of bilateral disputes. 
The Joint Committee last met in July 2004.  During this meeting the parties discussed 
measures to expand bilateral trade under the FTA through enhanced cooperation in such areas as 
customs administration, standards, and intellectual property rights protection. 
 
 
  
  WT/REG202/R/B/1
 G/L/743
 Page 5ANNEX I 
U.S. IMPORTS/EXPORTS/BALANCE/TO TAL TRADE WITH ISRAEL, 1999-2003 
U.S. IMPORTS FOR CONSUMPTION DOMESTIC EXPORTS BALANCE TOTAL TRADE NAIC CATEGORY 1999 2000 2001 2002 2003 1999 2000 2001 2002 2003 1999 2000 2001 2002 2003 1999 2000 2001 2002 2003 
 TOTAL 9,863.4 12,948.8 11,968.8 12,436.7  12,766.6  6,337.6 6,190.6 6,147.8 5,304.3 4,569.2 -3,525.9 -6,758.2  -5,820.9  -7,132.4  -8,197.4  16,201.0  19,139.4  18,116.6  17,741.0  17,335.8 
111 Agricultural products 45.7 47.7 50.3 55.2 74.9 294.2 317.4 255.5 305.6 263.8           
112 Livestock and livestock 
products 0.2 0.3 0.6 0.9 1.3 2.3 1.6 2.0 2.5 3.2 248.5 269.6 205.2 250.3 188.9 339.9 365.1 305.9 360.8 338.7 
113 Forestry products, nesoi 5.4 3.6 4.6 3.9 2.9 4.1 4.7 2.0 0.9 1.0 2.1 1.4 1.4 1.6 1.9 2.6 1.9 2.6 3.4 4.5 
114 Fish and other marine 
products 0.1 0.0 0.1 0.3 0.8 4.6 4.0 3.4 2.1 3.0 -1.3 1.1 -2.6 -3.0 -2.0 9.6 8.3 6.7 4.9 3.9 
211 Oil and gas 0.0 0.0 0.0 0.0 0.0 0.1 0.2 0.4 0.2 0.2 4.5 4.0 3.3 1.8 2.2 4.6 4.1 3.6 2.5 3.8 
212 Minerals and ores 0.6 1.5 1.9 2.0 1.2 24.2 4.7 5.4 6.8 4.2 0.1 0.2 0.4 0.2 0.2 0.1 0.2 0.4 0.2 0.2 
311 Food manufacturing 62.8 58.1 68.7 69.1 78.4 123.9 161.0 169.1 152.9 154.6 23.6 3.1 3.5 4.8 3.0 24.8 6.2 7.3 8.8 5.4 
312 Beverages and tobacco 
products 3.8 3.7 3.8 5.6 7.9 102.0 103.5 77.0 52.7 59.8 61.1 102.8 100.4 83.8 76.2 186.7 219.1 237.8 222.1 232.9 
313 Textiles and fabrics 84.7 98.8 103.2 115.4 134.5 38.0 28.1 18.2 16.1 22.6 98.2 99.8 73.1 47.1 51.9 105.8 107.2 80.8 58.3 67 .7 
314 Textile mill products 68.3 74.7 90.6 85.4 91.7 20.5 18.7 20. 6 13.9 12.0 -46.6 -70.7 -85.1 -99.3 -111.9 122.7 126.9 121.4 13 1.6 157.1 
315 Apparel and accessories 421.8 477.0 445.2 411.9 396.4 9.7 9.5 7. 8 6.9 7.4 -47.9 -56.0 -70.0 -71.5 -79.7 88.8 93.4 111.2 99. 3 103.7 
316 Leather and allied products  19.8 19.1 17.6 21.7 21.8 5.6 4.9 3.6 2.4 2.5 -412.1 -467.5 -437.4 -405.0 -389.0 431.5 486.5 452.9 418.8 403.8 
321 Wood products 1.3 1.0 1.4 1.1 1.2 13.9 14.8 10.2 10.9 10. 3 -14.2 -14.2 -14.0 -19.3 -19.2 25.3 24.0 21.2 24.2 24.3 
322 Paper 22.4 26.5 29.9 28.8 30.0 85.0 96.7 77.5 61.0 55.8 12.6 13.9 8.7 9.8 9.1 15.2 15.8 11.6 11.9 11.5 
323 Printing, publishing 
products 17.2 17.4 21.0 21.6 25.8 19.1 16.5 19.2 12.9 11.9 62.7 70.1 47.6 32.2 25.8 107.4 123.2 107.5 89.7 85.8 
324 Petroleum and coal 
products 3.0 47.7 14.7 64.9 17.5 81.1 78.5 99.7 117.5 130.2 1.9 -1.0 -1.8 -8.7 -13.9 36.3 33.9 40.2 34.5 37.7 
325 Chemicals 596.5 717.3 975.5 1,007.6 1,221.2 321.8 373.8 422.7 352.0 412.8 78.0 30.8 85.0 52.6 112.7 84.1 126.2 114.3 182.4 147.7 
326 Plastics and rubber 
products 164.4 200.7 222.0 234.1 236.7 67.0 59.4 56.9 48.7 65.5 -274.8 -343. 6 -552.8 -655.6 -808.5 918.3 1,091.1 1,398.2 1,359.6 1,634.0  
327 Nonmetallic mineral 
products 42.6 47.0 51.1 55.9 53.2 35.2 33.3 28.5 21.4 21.1 -97.4 -141.2 -165.1 -185.4 -171.2 231.4 260.1 278.9 282.8 302.2 
331 Primary metal 
manufacturing 71.9 76.4 55.9 54.5 51.5 107.6 132.3 143.9 129.6 130.6 -7.4 -13.7 -22.5 -34.5 -32.1 77.9 80.3 79.6 77.3 74.3 
332 Fabricated metal products, 
nesoi 120.5 156.5 151.3 157.3 110.5 206.2 191.1 262.0 177.5 199.5 35.7 55.9 88.1 75.1 79.1 179.6 208.7 199.8 184.1 182.1 
333 Machinery, except electrical  462.8 640.6 551.5 522.1 470.6 683.5 676.6 567.0 596.6 441.6 85.7 34.6 110.6 20.1 88.9 326.7 347.6 413.3 334.8 310.0 
334 Computer and electronic 
products 1,575.4 2,846.5 2,196.5 1,926.2 1,984.1 1,547.9 1,794.3 1,415.8 1,057.6 972.1 220.7 35.9 15.4 74.5 -29.0 1,146.3 1,317.2 1,118. 5 1,118.7 912.2 
335 Electrical equipment, 
appliances and components  104.3 367.7 138.7 111.9 106.3 212.6 255.5 226.6 186.8 181.6 -27.5 -1,052.3  -780.7 -868.6 -1,011.9  3,123.4 4,640.8 3,612.3 2,983.9 2,956.2 
336 Transportation equipment 459.1 510.0 564.8 608.3 611.0 1,897.7 1,027.0 1,309.9 1,127.2 1,005.2 108.3 -112.1 87.9 74.9 75.3 316.9 623.2 365.2 298.8 287.9 
337 Furniture and fixtures 61.9 64.8 57.0 42.8 52.8 15.1 16.3 15.7 26.2 10.6 1,438.6 517.0 745.1 518.9 394.2 2,356.9 1,536.9 1, 874.7 1,735.5 1,616.2 
339 Miscellaneous 
manufactures commodities 4,846.7 5,806.0 5,535.0 6,228.2 6,467.0 129.8 460.5 652.0 584.0 139.3 -46.8 -48.5 -41.3 -16.6 - 42.2 76.9 81.1 72.7 69.0 63.4 
 Other 600.2 638.0 615.8 599.7 515.5 284.8 305.7 275.2 231.4 246.7 -4,717.0 -5,345.5  -4,883.0  -5,644.2  -6,327.7  4,976.5 6,266.5 6,187.0 6,812.2 6,606.3 
Source :  U.S. Department of Commerce (USITC Dataweb). WT/REG202/R/B/1 
G/L/743 Page 6 
 
 
 ANNEX II 
 
  
His Excellency Ehud Olmert 
Vice Prime Minister and  Minister of Industry, Trade, Labor and Communications State of Israel  
Dear Mr. Minister: 
  I have the honor to confirm the following ag reement reached between the delegation of the 
Government of the United States of America (“United States”) and the delegation of the Government of Israel (“Israel”) concerning certain aspects of tr ade in agricultural products.  Israel and the United 
States acknowledge that the Agreement on the Esta blishment of a Free Trade Area between the 
Government of Israel and the Government of the United States of America (“FTAA”), dated April 22, 
1985 (which corresponds to the first day of Iyar, 5745) , applies in full to U.S. and Israeli agricultural 
products and to trade in these products between th e two countries.  However, both countries also 
acknowledge that they have differing interpreta tions as to the meaning of certain rights and 
obligations in Articles 2 and 6 of the FTAA as they rela te to agricultural products.  In the interest of 
achieving practical improvement in agricultural tr ade between the two countries, the United States 
and Israel have therefore agreed to set aside thei r differences and enter in to this agreement through 
December 31, 2008, with regard to certain border m easures of each party that relate to agricultural 
products of the other party (as defined in A nnex 3 of the FTAA entitled “Rules of Origin”). 
 
 This agreement is without prejudice to the pa rties’ rights and obligations under Articles 2.1, 
2.2, and 6 of the FTAA with respect to agricultura l products and is without prejudice to the parties’ 
other rights and obligations under the FTAA or th e Marrakesh Agreement Establishing the World 
Trade Organization.    During the period January 1, 2004, through December 31, 2008, Israel shall accord 
agricultural products of the United States treatment  no less favorable than that specified in the 
attachment to this agreement, and the United St ates shall accord agricultural products of Israel 
treatment no less favorable than that specified in th e attachment to this agreement.  The attachment 
and annexes to this agreement are an integral part  of this agreement.  During the period January 1, 
2004, through December 31, 2008, both governments shall refrain from adopting, applying or 
otherwise maintaining any measures pursuant to Article 6 of the FTAA, unless such measures are 
otherwise specifically permitted by this agreement.   Beginning February 2004, the two governme nts agree to consult quarterly on the 
administration and utilization of quantities provided u nder the agreement by Israel for free import into 
Israel from the United States and by the United States for free import into the United States from 
Israel.  The lead offices for these discussions shall be the Office of the U.S. Trade Representative and 
the U.S. Department of Agriculture for the United States and the Ministry of Industry and Trade and 
the Ministry of Agriculture for Israel.   To facilitate a better understanding of each pa rty’s agricultural economy in the course of 
future discussions on improving agricultural market  access, either party may present information on 
factors of importance to their respective agricultura l sectors.  Such factors may include, but are not 
limited to: annual overall trade in a product, the sc ope of U.S.-Israeli trade in that product and the 
interests which each party has in expanding access to  the other’s market;  trends in domestic 
production, prices and profitability of a product and th e capacity for further market access;  economic 
circumstances of producers, such  as changes in rural income;  the benefits of liberalization of  WT/REG202/R/B/1 
 G/L/743 
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 agricultural trade, including benefits to consum ers, trade and food processors;  and additional 
agricultural policy considerations related to i ssues such as national and regional development 
priorities, government assistance, food security , special security conditions, and multilateral 
agricultural policy objectives.  The aforementioned factors may be referenced by the parties and 
provide guidance in future discussions, including in the U.S.-Israel Joint Committee, on further 
improvements in agricultural market access.   No later than June 1, 2007, our  two governments shall initiate a review of the operation of this 
agreement and seek ways to make further improvements.   In the event it appears that negotiations will 
not be concluded by December 31, 2008, the pa rties mutually agree to address the issue of 
maintaining the treatment that each provides to the agricultural products of the other party under this 
agreement until such time as a new agreement is in force.     I have the honor to propose that this letter, th e attachment to this letter, and annexes, which 
are authentic in English, and your letter of confir mation in reply constitute an agreement between our 
two governments, to enter into effect on this date.  
Sincerely, 
  
 
  
Robert B. Zoellick 
United States Trade Representative 
 WT/REG202/R/B/1 
G/L/743 Page 8 
 
 
 ATTACHMENT
* 
 
 
1. The Government of Israel shall, with respect to products of the United States: 
 
 (A) Listed in Annex A, permit the importation into Israel free of any customs duty, fee, or 
other import charge; 
  (B) Listed in Annex B: 
 
  i. permit the importation into Israel free of any customs duty, fee, or other 
 import charge of not less than the qua ntity specified in that Annex for the 
 applicable year, other than for items 08.02.1100 and 08.02.1200;   and 
 
ii. for items 08.02.1100 and 08.02.1200, permit the importation into 
 Israel of not less than the quantity specified in Annex B at a rate not  greater than that specified in that Annex;   and 
iii. permit the importation of any quantity in excess of the quantity specified in 
Annex B, at a rate not greater than the lesser of:  
a. the most-favored-nation rate of customs duty applied by the 
 Government of Israel as specified in Annex C or 
 b. the most-favored-nation rate of customs duty applied by the 
Government of Israel at the time of importation 
 
each reduced by the percentage specified in Annex C. 
  (C) Listed in Annex C provide treatment at a rate not greater than the lesser of:  
i. the most-favored-nation rate of customs duty applied by the Government of 
Israel as specified in Annex C for the applicable year or 
ii. the most-favored-nation rate of customs duty applied by the Government of 
Israel at the time of importation 
each reduced by the percentage specified in Annex C. 
2. With respect to any good within chapters 1 through 24 of the Harmonized System that is not 
listed in Annex A, B, or C, the G overnment of Israel shall permit its  importation into Israel at a rate 
no greater than ninety per cent of the rate applied at the time of importation to imports of that good 
from other countries. With respect to any agricultur al product listed in paragr aph 1(ii) of Annex 1 of 
the Agreement on Agriculture  annexed to the Marrakesh Agreement Establishing the World Trade 
Organization  that is not listed in Annex A, B, or C of this agreement, the Government of Israel shall 
permit its importation free of any customs duty, fee, or other import charge.  
3. The Government of the United States shall, w ith respect to products of Israel imported into 
the customs territory of the United States listed in Annex D, permit the importation free of any 
                                                     
 
* The full text of the 2004 agreement is available at the Secretariat (Office 1174) for consultation by 
interested Members. It is also ava ilable at the following URL address:  
http://www.ustr.gov/assets/Tra de_Agreements/Bilateral/Israe l/asset_upload_file899_7902.pdf .  WT/REG202/R/B/1 
 G/L/743 
 Page 9 
 
 
 customs duty, fee or other import charge of not less than the quantity specified in that Annex for the 
applicable year. For products in Annex D, the U.S. treatment of quantities above the quantity 
specified in that Annex for the applicable year sha ll be no less favorable that what is specified in the 
U.S. WTO Schedule.  The U.S. treatment of over-quo ta quantities for products of Israel imported into 
the customs territory of the United States of th e type listed in WTO notifications G/AG/N/USA/2 
dated March 8, 1995, and G/AG/N/USA/2 Add.1, da ted April 21, 1995, (“WTO notifications”) that 
are not listed in Annex D, shall be no less favorable than what is specified in the U.S. WTO Schedule, 
and, as specified in the U.S. WTO Schedule, th e in-quota quantities for such products shall be 
imported free of any customs duty, fee, or other import charge.  With respect to any agricultural 
product of Israel imported into the customs territory  of the United States listed in paragraph 1 of 
Annex 1 of the Agreement on Agriculture annexed to the Marrakesh Agreement Establishing the 
World Trade Organization  that is not listed in either Annex D of this agreement or of the type listed in 
the WTO notifications, the Government of the Un ited States shall permit its importation free of any 
customs duty, fee, or other import charge. 
 
4. The item numbers in Annexes A, B, and C refer to the item numbers in the 2004 Israeli 
Customs Tariff in effect on January 1, 2004.  The item numbers in Annex D refer to the Harmonized 
Tariff Schedule of the United States 2004 in effect on January 1, 2004.  5. Each successive annual quantity in Annex B or  Annex D shall be made effective on January 1 
of the applicable year. 
 6. The Annexes to this attachment are an integral part of this Attachment. 
 7. The term “customs duty, fee, or other impor t charge” shall not include any such charge: 
 
 (A) imposed pursuant to Article 4, 5, 7, 11, or 20 of the FTAA;  or   (B) to the extent not inconsistent with th e FTAA, permitted by the agreements listed in 
Annex 1 to the Marrakesh Agreement Establishing the World Trade Organization , 
other than Article 5 of the Agreement on Agriculture . 
 
__________