Trade Policy


Trade Barriers
Major Constraints Affecting Trade-Related Services

Palestinian external trade has continued to face a range of constraints that prevent exploiting and benefiting from the free trade arrangements at regional and international level, especially the arrangements with Jordan, Egypt, European community, U.S.A, EFTA and Canada. Certain constraints affect trade with all partners; others are specific to trade with specific markets. The following section highlights the areas that are most pertinent to facilitating trade with these two major Arab partners and which appear most amenable to cooperative efforts to resolve problems.

To facilitate review of the broad range of problem areas requiring attention under each of the three sectors under examination, these have been grouped under three types: policy-related, procedural/institutional and technical. Some could be considered under more than one of these three categories.

Customs procedures and formalities
Policy framework

Israeli customs rules, which are combined with severe security measures, are seen to lead to limit Jordanian-Palestinian trade significantly.

Goods within the two main Lists specified in the Paris Protocol are for trade with Islamic and Arab countries and specifically with Jordan and Egypt. The lists are small (do not exceed 50 items) and need to be increased. In addition, they are subject to quantity limitations.

PA has no authority or sovereignty over the borders and the crossing points, especially over the commercial ones.

There is no Palestinian customs law that can be implemented.

Israel collects more taxes, fees, duties, etc. by controlling Jordanian-Palestinian trade, and seeks to neutralize Palestinian trade initiatives by suggesting alternative measures to enhancing Jordanian-Israeli and Palestinian-Israeli trade.

There is no Israeli recognition of Palestinian clearing agents. All that exists is a Palestinian representative for the Israeli clearing agencies that deal with the Palestinian importer/exporter.

Furthermore, Palestinian importers/exporters are not allowed to enter customs territory. Neither the Palestinian importer nor the Palestinian clearing agent can obtain necessary information on a consignment, due to the fact that they have no direct access to customs information, except through Israeli officials.

PA traders have expressed concern at the impact of the Jordanian taxation system on Palestinian exports, especially in the way of calculating the sales tax on goods that are exempted from customs.

There is no written agreement between the Jordanian and Palestinian Customs Departments.

Since Egypt has a huge number of agencies needed to approve and control the shipments separately from the customs department, lack of coordination becomes the rule, rather than the exception.

Procedural/Institutional
Customs documentation is not centralized. An importer/exporter has to go through a lengthy and sometimes costly process to perform his foreign trade transactions.

Some businessmen and Palestinian clearing agents have pointed out that the customs procedures are unclear. They also mentioned that clearing times, rules, and costs paid on goods inside the PA custom territory are not always clear and definite.

Delays at the crossing points between PA and Jordan and Egypt are less than those associated with importing or exporting via other commercial borders as Ashdod sea port or Tel Aviv airport. Most shipments' delays occur due to strict security measures by the Israelis or due to different customs valuation.

There is no cooperation or coordination of any fashion between Jordanian and Palestinian clearing agents. There are no transparent rules or protocols allowing for joint PA-Jordanian clearing services.

Procedures on the Israeli side

Israeli customs procedures

Because of the requirements of Israeli security, identical control procedures apply to all transactions, irrespective of the parties or goods involved. The Israeli inspection process is unjustifiably lengthy and complex.

Jordanian exporters pay high customs duties over and above the 17% VAT.

Israel imposes specific times for Jordanian goods to enter the crossings, with no mechanism to account for delays.

Customs formalities by Israeli officers, who are customs and security officers, are tedious.

The calculation of Customs is not subject to a fixed or uniform formula.

Jordanian goods entering the PA must obtain an import license from Israel, which can take months to obtain.

For customs purposes, Gaza is separated from the West Bank and there are more stringent Israeli rules are applied to exports to Gaza.

Procedures on the Jordanian side

Customs procedures on the Jordanian side

There is an apparent absence of customs clearing facilities as well as private clearing services at the Jordanian crossing points with the PA. The customs center has the authority to do clearing, but the lack of customs facilities, such as customs inspection zones, customs overnight parking areas, or customs bonded areas, makes it difficult to exercise such authority.

The absence of customs clearing agents, licensed to undertake clearance at the Jordan-PA crossing points, impedes institutionalization of clearing functions at the two bridges.

Customs procedures on the Jordanian side are complex and even if made transparent, continue to create problems with high customs fees and duties on raw material industrial inputs.

The King Hussein and Prince Mohammed Bridges do not have the authority to do any clearing and all goods clearance must take place at the Amman Customs Center.

Procedures governing the issuance of certificates of origin are subject to differential applications and rules.

Clearing and inspection procedures at Jordanian Customs do not take one form.

Hours of work at Jordanian customs clearing centers are limited.

Procedures on the Egyptian side

Large numbers of agencies are involved in the approval of declaration before final release.

Samples inspected may be sent to laboratories outside the customs area.

Unified formats for all kinds of trading processes are lacking.

Difficulties and complex procedures associated with drawback and refund systems.

The large number of documents and formalities required in clearing the shipment.

The absence of standards and the lack of price and value information.

The normal action by customs officials is to consider the invoice provided by the traders as undervalued. The procedures of solving problems regarding the valuation of the goods takes time (between 5-15 days) in normal cases, and creates a feeling that its better to clear now at higher cost that to wait for arbitration.

The arbitration procedures are unfair as customs department has the full power to constitute the revaluation committee and the majority of its members are customs officials.

Lack of professional skills regarding customs activities, risk management, and valuation of this goods.

Technical

Palestinian customs administration has, to a certain extent, sufficient staff number for the tasks needed to be done. Training programs and upgrading of the human resources in various areas is needed for the PA customs administration.

The computer systems now in use by the PA tax authorities in West Bank and Gaza Strip do not provide the kind of functionality that a modern tax administration requires to support effective administration of a tax system.

Customs Valuation
Valuation of imported goods for customs purposes

All documents and goods are examined inside the customs administration beginning from the bill of lading to the packing list. The law of customs & excises in Israel concentrates on the following:

All packages must be opened and examined by the customs officer in the presence of the owner or his clearing agent.

Any lack of information in the documents or any differences discovered between goods and documents, especially undeclared goods, is considered smuggling and duties are doubled and legal action is considered.

The customs officer has the right to examine all the goods or part of it more than once.

If goods are spoiled or putrid a committee will examine it. The presence of the clearing agent is favored.

The customs officer has the right to send samples to certain authorities or labs, but the owner or his agent should be there.

The expenses of examining goods or lab analysis are charged to the importer.

The customs officer also has the right to inspect and check the people and their luggage & packages.

All imported goods to P.A territories are subjected to Israel measures & specification. The Israeli customs system for clearing imported goods includes the following charges in sequence:

Customs duty: either

a- A compound rate + % ad valorem tariff on Accepted Fair Price ( AFP ) or

b- The higher of an absolute or ad valorem tariff on the AFP

AFP= Total CIF invoice value + Israeli port fees + other charges i.e. real cost of goods through port.

Purchase Tax: compound % of the AFP + duty after inflation by additional percentage on customs' assessment of the importers' typical mark-up on the goods in question. According to the Israeli customs book it is called "importation rate uplift" as it is commonly referred to as "TAMA". The purchase tax is not due to all products, in most cases it is applicable for products that are manufactured in Israel – (a protective tax).

Value Added Tax (VAT): currently 17% of AFP + customs duty + purchase tax with the TAMA. It is applicable for all products and services.

Revenue collection

The goods inside the customs areas cannot be released without the payment of all duties and fees in demand. The driver makes payments on the spot for the account of the Palestinian customs authorities at Bank of Palestine at the bridges. A receipt is taken and shown to the customs officer to issue the release permission. These payments are done in accordance with the Israeli customs forms.

It should be noted that if the customs officer asks for a different customs duty amount than the one that is carried by the driver, the importer or his clearing agent must provide the remaining amount on the spot or the shipment will not be cleared. In most cases they do a bank transfer from one of the local banks to the Bank of Palestine branch at the bridge to send a fax to the driver stating that the due amount was paid. If this arrangement does not work (bank is closed, no fax, etc.) the shipment will wait till next day for clearance.

Export Import Control
CUSTOMS RELATION WITH OTHER PARTIES

Cooperation with clearing agents and traders

There are mutual and well-integrated relation between customs and other Ministries and bodies as mentioned in previous sections. Each agency or ministry has its own specific role and task. However, due to the Israeli regulations and its requirements to deal with different PA agencies, this makes customs procedures complicated and ambiguous.

Customs regional offices respond to inquiries from traders and clearing agents according to their knowledge. However, several issues are within the purview of the Israeli authorities, and therefore, they (either the PA customs authority or the PA Ministry of Trade) have to check with the Israeli authorities. The Israeli authorities do not accept any inquiries from private businessmen.

Customs administration on bridges and crossing point has strong coordination with the Ministry of Civil Affairs. Most of the coordination with the Israeli side has to be done by that Ministry.

Some businessmen and Palestinian clearing agents have pointed out that the customs procedures are unclear. They also mentioned that clearing times, rules, and costs paid on goods inside the custom territory are not always clear and definite.

Clarity of customs regulations to clearing agents and traders

There is no Israeli recognition of Palestinian clearing agents, and all that exists is a Palestinian representative for the Israeli clearing agencies that deal with the Palestinian importer/exporter. Furthermore, the Palestinian importers/exporters are not allowed to enter customs territory. They are not allowed to inspect their goods at any stage until the completion of the clearing procedures. This means that the importer is dealing with documents only, and ends up of seeing the shipment at his warehouses.

Neither the Palestinian importer nor the Palestinian clearing agent can obtain necessary information on a consignment, due to the fact that they have no direct access to customs information, except through Israeli officials. Up to now there is no implemented Palestinian Customs Law that could be applied to better regulate commercial trade transactions. There is no sovereignty over the borders and therefore, complications and ambiguity exist in customs procedures and formalities.

CURRENT CUSTOMS RULES, PROCEDURES & FORMALITIES IN THE PA

Since 1987, Israel has adopted the harmonised system (HS) and applied the GATT agreement since January 1998. However, Goods and services transactions in Palestinian foreign trade are done according to the Israeli customs laws and procedures. The applicable customs laws and procedures depend on the Israeli law and the Israeli military order number 1 for the year 1962 with its all modifications and amendments.

In every customs territory there is a commercial entry and a passenger entry. PA has complete authority over the passengers’ entry, especially in the process of inspection, examining and collecting duties.

Below are the major roles of Palestinian customs at the passengers entry:

-Examining and inspecting goods

-Sending expropriated goods to the customs regional office to complete the rest of the procedures.

-Clearing customs on personal cars, follow up on problems and solve disputes.

-Storing goods in customs warehouse.

-Handing over any product sample to the ministry of health if it needs further inspection.

-Registering and classifying data for statistic and customs purposes.

However, it should be mentioned that the Palestinian officials check the passengers after the Israeli security procedures are done for the passengers and their luggage. The tariff applied to passengers in West Bank and Gaza Strip is the PA tariff.

Import Licenses
1. Customs clearance arrangements and documentation

The PA has adopted the following import mechanism:-

Direct importation of goods or services from out side countries, the customs revenues are directly transferred to P.A treasury through Israel.

Importing goods or services produced in Israel VAT is levied through unified invoices (clearance system).

Products imported through Israeli ports and airports cannot be controlled or defined because of Israel management over clearing procedures.

Importing is done according to Israel procedures whether its destination is Israel or the PA.