Agreement on the Establishment of a Free Trade Area between
the Government of Israel and the Government of the United States of
April 22, 1985* * *
The Government of Israel and the Government of the United States of
Desiring to promote mutual relations and further the
historic friendship between them;
Determined to strengthen and develop the economic
relations between them for their mutual benefit;
Recognizing that Israel's economy is still in a process
of development, wishing to contribute to the harmonious development and
expansion of world trade;
Wishing to establish bilateral free trade between the two
nations through the removal of trade barriers;
Wishing to promote cooperation in areas which are of
Have decided to conclude this Agreement:
[ESTABLISHMENT OF A FREE TRADE AREA]
The governments of Israel and the United States of America (the Parties),
consistent with Article XXIV (8) (b) of the General Agreement on Tariffs
and Trade (GATT), establish hereby between them a Free Trade Area and will
in accordance with the provisions of this Agreement eliminate the
duties and other restrictive regulations of commerce on trade between the
two nations in products originating therein.
- Products of Israel shall, when imported into the customs
the United States, be governed by the provisions of Annex 1.
- Products of the United States shall, when imported into Israel, be
governed by the provisions of Annex 2.
- The rules of origin applicable to this Agreement are set forth in
- The commitment with respect to export subsidies is contained in Annex
- The Annexes to this Agreement constitute an integral part thereof.
[RELATIONSHIP TO OTHER AGREEMENTS]
The Parties affirm their respective rights and obligations with respect to
each other under existing bilateral and multilateral agreements, including
the Treaty of Friendship, Commerce and Navigation between the United
States and Israel and the GATT. In the event of an inconsistency between
provisions of this Agreement and such existing agreements, the provisions
of this Agreement shall prevail.
[NEW RESTRICTIONS ON TRADE]
New customs duties on imports or exports or any charge having equivalent
effect and new quantitative restrictions on imports or exports or any
measure having equivalent effect may be introduced in the trade between
the Parties only if permitted by this Agreement or by the GATT as in
effect on the date of entry into force of this Agreement and as
interpreted by the CONTRACTING PARTIES to the GATT and insofar as not
inconsistent with this Agreement.
[RELIEF FROM INJURY CAUSED BY IMPORT
- When a product is being imported in such increased quantities
be a substantial cause of serious injury or the threat thereof to domestic
producers of like or directly competitive products, the importing Party
shall consult with the other Party in accordance with Article 18 before
taking any action affecting the trade of the other Party.
- Neither Party shall take an action which provides solely for a
suspension of the reduction or elimination of any duty provided for by
this Agreement unless the serious injury or threat thereof which is
substantially caused by imports to the domestic producers of like or
directly competitive products results from the reduction or elimination of
a duty provided for by this Agreement.
- When, in the view of the importing Party, the importation of a
from the other Party is not a substantial cause of the serious injury or
threat thereof referred to in paragraph 1, the importing Party may except
the product of the other Party from any import relief that may be imposed
with respect to imports of that product from third countries, taking into
account the objective of achieving bilateral free trade as embodied in
this Agreement, the domestic laws and international obligations of the
[IMPORT RESTRICTIONS ON
Import restrictions, other than customs duties, including, but not
limited to, quantitative restrictions and fees, based on agricultural
policy considerations may be maintained by the Parties.
[GENERAL AND SECURITY
Article XX and XXI of the GATT are hereby incorporated into and made a
part of this Agreement.
[SPECIAL EXCEPTION FOR
This Agreement shall not preclude the adoption or enforcement by either
Party of measures relating to prohibitions on religious or ritual grounds
provided that they are applied in accordance with the principle of
- The Parties shall review their current and future rules on
and plant health matters to insure that these rules are applied in a
non-discriminatory manner, and that these rules do not have the effect of
unduly obstructing trade.
- With reference to the matters in paragraph 1, the Parties shall
on any difficulties that may arise in their trade in agricultural products
and shall seek to provide solutions which will allow trade in agricultural
products insofar as they do not endanger animal and plant health.
- To insure harmonious development of trade in agricultural products,
Joint Committee shall establish a working group, in accordance with
subparagraph 3 (b) of Article 17, which shall convene at the request of
either Party to consider matters relating to paragraphs 1 and 2 of this
- Insofar as its industrialization and development make
measures necessary Israel may through December 31, 1990, after
consultation within the Joint Committee, and after that date, upon
agreement within the Joint Committee, introduce, increase or re-introduce
ad valorem customs duties not exceeding 20 percentage points above the
level that would otherwise be in effect. The total value of the products
for which these measures can be applied may not exceed 10% of the total
value of Israel's imports from the United States in 1984.
- These measures may be taken only if they are necessary to protect
favor the development of a new processing industry not already existing in
Israel on the date of the entry into force of the Agreement; they may be
applied only with respect to the production of specific goods.
- Twenty-four months after introducing, increasing or re-introducing
customs duties, Israel shall reduce the tariffs by at least 5% per year in
respect of imports of the products in question originating in the United
States. The abolition of such duties must be completed by not later than
January 1, 1995.
[BALANCE OF PAYMENTS]
- A Party may apply temporary trade measures when it
by, or suffers from, a serious balance of payments situation. A Party may
impose temporary trade measures only to provide time for macroeconomic
adjustment measures to correct its balance of payments problems to take
effect. Temporary trade measures permitted by this paragraph may not be
used to protect individual industries or sectors.
- A serious balance of payments situation would be indicated by one or
more of the following: a substantial deterioration in the trade and
current account positions, significant pressure on the exchange rate, or a
substantial fall in net reserves, as projected either in a decrease of
reserves or in an increase of short term debt.
- Temporary trade measures which may be applied under paragraph 1
- an import surcharge in the form of import duties;
- an import deposit; or
- quantitative restrictions.
- Whenever practicable the Parties will prefer the use
temporary measures specified in subparagraphs 2 (a) and 2 (b).
Quantitative restrictions will be imposed when measures 2(a) and 2(b)
would be inadequate in terms of their balance of payments effects.
- Whenever practicable, the Parties will avoid applying more than one of
the measures specified in paragraph 2 to any single product at the same
- A temporary trade measure applied under paragraph 1 may remain in
for a period not exceeding 150 days unless extended by the appropriate
legislative body of the Party concerned for a subsequent period of 150
days. Quantitative restrictions may be extended only for one additional
period of 150 days.
- Temporary trade measures applied under paragraph 1 will be consistent
in duration and effect with the severity of the balance of payments
problem experienced by the Party imposing the measures and will be
progressively relaxed consistent with improvements in that Party's balance
of payments situation.
- In the event that temporary trade measures are applied under
1, consultations will be held between the Parties on the
balance of payments situation, to consider, inter alia, other economic
measures which might be taken to deal with the balance of payments
problems to permit early elimination of the temporary trade measures.
Significant intensification of trade measures may be a cause for
consultations between the Parties.
- In applying temporary trade measures, the Parties will accord
no less favorable to imports originating in the other Party than to
imports originating in third countries, and will not impair the relative
benefits accorded to the other Party under this Agreement.
- Temporary trade measures specified under subparagraphs 2 (a) and 2 (b)
shall apply to all imports, except that certain imports may be excluded if
their exclusion improves the effectiveness of the measures consistent with
the purposes stated in paragraph 1.
Article 11 shall be subject to the procedures of Articles 18 and 19. It is
understood that notification for balance of payments reasons will
generally be provided under paragraph 3 of Article 18.
- Neither Party shall impose import licensing requirements on
exported by the other Party, unless licenses issued under such
- automatically approved;
- necessary to administer a quantitative
ceiling on imports justified under this Agreement or under the GATT
insofar as it is not inconsistent with this Agreement; or
to administer restrictions in conformity with this Agreement or under the
GATT insofar as it is not inconsistent with this Agreement.
- Each Party shall answer within thirty days all reasonable inquiries
from the other Party with regard to criteria employed by its respective
licensing authorities in granting or denying import licenses. In addition,
the Parties recognize the desirability of publication of such criteria.
- The Parties shall provide each other with a list of items subject to
licensing requirements which shall specify whether each item is entitled
to automatic or non-automatic import licensing. Notification of changes in
this list shall be made on a timely basis and shall include a
justification for each addition.
- If an import license is denied for an item specified in the list
prepared pursuant to paragraph 3 as being entitled to automatic licensing,
then such item shall be considered to be subject to non-automatic
licensing. Notification and justification for the action shall be provided
within sixty days by the Party which has made such denial.
- In the administration of automatic and non-automatic licensing
requirements, the Parties shall adhere to the provisions of the Agreement
on Import Licensing Procedures. For the purposes of this Agreement the
reporting requirements provided in the Agreement on Import Licensing
Procedures between the Contracting Parties of said agreement shall only
apply to the United States and Israel.
Neither Party shall impose, as a condition of establishment, expansion or
maintenance of investments by nationals or companies of the other Party,
requirements to export any amount of production resulting from such
investments or to purchase locally-produced goods and services. Moreover,
neither Party shall impose requirements on investors to purchase
locally-produced goods and services as a condition for receiving any type
of governmental incentives.
The Parties reaffirm their obligations under bilateral and multilateral
agreements relating to intellectual property rights, including industrial
property rights, in effect between the Parties. Accordingly, nationals and
companies of each Party shall continue to be accorded national and most
favored nation treatment with respect to obtaining, maintaining and
enforcing patents of invention, with respect to obtaining and enforcing
copyrights, and with respect to rights in trademarks, service marks,
tradenames, trade labels, and industrial property of all kinds.
- The Parties agree to endeavor to eliminate all restrictions
- The United States shall waive all Buy National restrictions with
respect to government agency purchases of a contract value of $50,000 or
more which would be subject to the Agreement on Government Procurement at
the time of entry into force of this Agreement but for the threshold
provided for in Article I(l) (b) of the Agreement on Government
- Israel shall waive all Buy National restrictions with respect to
government agency purchases of a contract value of $50,000 or more which
would be subject to the Agreement on Government Procurement at the time of
entry into force of this Agreement but for the threshold provided for in
Article I (1)(b) of the Agreement on Government Procurement and by the
Ministry of Defense subject to exceptions comparable in character and
extent to those included in the United States' entity list of the
Agreement on Government Procurement with regard to the Department of
- In implementing paragraphs 2 and 3 of this Article the Parties shall
apply the provisions of the Agreement on Government Procurement.
- Israel shall relax offset requirements on purchases by government
agencies other than the Ministry of Defense.
- The provisions of this Article with respect to offset requirements and
to purchases by government agencies other than Israel's Ministry of
Defense and the United States Department of Defense shall be effective one
year from the date of entry into force of this Agreement. The provisions
of this Article with respect to purchases by Israel's Ministry of Defense
and the United States Department of Defense shall be effective one year
from the entry into force of this Agreement or one year from the
completion by Israel of a list of the exceptions referred to in
paragraph 3, whichever is later.
- The Parties agree to consider promptly further trade liberalizing
measures in regard to both government procurement and offset requirements
in the context of the Joint Committee established by this Agreement. In
particular it is agreed that should the entity coverage of the Agreement
on Government Procurement be expanded, priority consideration will be
given to expanding this Agreement to apply to those purchases.
[TRADE IN SERVICES]
The Parties recognize the importance of trade in services and the need to
maintain an open system of services exports which would minimize
restrictions on the flow of services between the two nations. To this end,
the Parties agree to develop means for cooperation on trade in services
pursuant to the provisions of a Declaration to be made by the Parties.
- A Joint Committee is hereby established to supervise the proper
implementation of this Agreement and to review the trade relationship
between the Parties.
- The functions of the Joint Committee shall include, inter alia:
- reviewing the general functioning of this Agreement;
- holding consultations with respect to any matter affecting the
operation and the interpretation of this Agreement, as provided in Article
- reviewing the results of this Agreement, the experience gained during
its functioning, and the objectives defined therein, and considering ways
of improving trade relations between the Parties, including possible
improvements in this Agreement. The adoption of any amendments shall be
subject to the domestic legal requirements of both Parties;
- reviewing the Declaration on Trade in Services.
- The Joint Committee shall be composed of
representatives of the
Parties and shall be headed by the United States Trade Representative and
Israel's Minister of Industry and Trade or their designees.
- The Joint Committee may establish working groups and delegate its
powers to them.
- Each party shall preside in turn over the Joint Committee, which shall
convene at least once a year in regular session in order to review the
general functioning of the Agreement. Special meetings of the Joint
Committee shall also be convened within 21 days at the request of either
Party. Regular sessions of the Joint Committee shall be held alternately
in the two countries. The Joint Committee shall establish its own rules of
[NOTICE AND CONSULTATION]
- Before either Party takes any trade measure with
products traded between the Parties, it shall provide prior written notice
to the other Party as far in advance as may be practicable. The notice
shall include a description of the circum- stances leading to the proposed
- Before either Party commits itself to take any action, unilaterally or
by agreement, which would reduce the barriers to trade applicable to third
countries, including those with whom that Party intends to enter into a
customs union, free trade area, arrangement for frontier trade or those to
whom that Party int ends unilaterally to grant trade concessions, it shall
provide prior written notice to the other Party as far in advance as may
- If the Party affected by the proposed measure referred to in paragraph
1 requests consultations with regard to such measures the Party proposing
the measure shall afford adequate opportunity for consultations regarding
the proposed measures.
- In special circumstances, where delay or prior notice would cause
damage which would be difficult to remedy, action may be taken without
prior notice or consultation, provided that notice and an opportunity to
consult in accordance with paragraphs 1 and 2 are provided as soon
thereafter as practicable.
- Whenever a dispute arises concerning the
interpretation of this
Agreement, or whenever a Party considers that the other Party has filed to
carry out its obligations under this Agreement, the dispute settlement
mechanism described in this Article may be invoked. In addition, the
dispute settlement mechanism may also be invoked if one Party considers
that measures taken by the other Party, including a violation of the Annex
an subsidies, severely distort the balance of trade benefits accorded by
this Agreement or substantially undermine fundamental objectives of this
Agreement. This paragraph shall not apply to the imposition of antidumping
or countervailing duties.
- When a dispute arises, the Parties shall make every attempt to arrive
at a mutually agreeable resolution through consultations.
- If the Parties fail to resolve the dispute through consultations,
either Party may refer the matter to the Joint Committee, which shall be
convened and shall endeavor to resolve the dispute.
- If a dispute referred to the Joint Committee has not been resolved
within a period of sixty days after the dispute was referred to it, or
within such longer period as the Joint Committee has agreed upon, either
Party may refer the matter to a conciliation panel. The conciliation panel
shall be composed of three members: each Party shall appoint, within
fifteen days of the date of referral, one member, and the two appointees
shall choose, within forty-five days of the date of referral, a third who
will serve as the chairman. The panel shall establish its own rules of
- The panel shall endeavor to resolve the dispute through agreement of
the Parties. If the panel fails to reach such a resolution, it shall,
within three months after the first member is appointed, present to the
Parties a report containing findings of fact, its determination as to
whether either Party has failed to carry out its obligations under the
Agreement or whether a measure taken by either Party severely distorts the
balance of trade benefits accorded by this Agreement or substantially
undermines the fundamental objectives of this Agreement, and a proposal on
the settlement of the dispute. The report of the panel shall be
- If the conciliation panel under this Agreement or any other applicable
international dispute settlement mechanism has been invoked by either
Party with respect to any matter, the mechanism invoked shall have
exclusive jurisdiction over that matter.
- After a dispute has been referred to a panel and the panel has
presented its report the affected Party shall be entitled so to take any
- In the event that the value of the currency of the United
America, measured in Special Drawing Rights of the International monetary
Fund, decreases by more than twenty percent#, specific duties and charges
imposed by the United States of America and expressed in the currency of
the United States of America may be increased by no more than the amount
needed to maintain the value of the specific duty in accordance with Annex
11 measured in Special Drawing Rights. The first such adjustment shall be
calculated from the last adjustment prior to January 1, 1985. Subsequent
adjustments shall be calculated from the date of the most recent increase
in specific duties.
- In the event that the value of the currency of Israel, measured
the currency of the United states of America, decreases by more than
twenty percent, specific duties and charges imposed by Israel and
expressed in the currency of Israel may be increased by no more than the
amount needed to maintain the value of the specific duty in accordance
with Annex 2, measured against the currency of the United States of
America. The first such adjustment shall be calculated from the last
adjustment prior to January 11, 1985. Subsequent adjustments shall be
calculated from the date of the most recent increase in specific
In the event that either Party changes its tariff schedules, it shall so
notify the other Party. In the case of a change other than a major
revision that change shall not adversely affect the tariffs applicable to
any product as set forth in Annexes 1 and 2 of this Agreement. In the case
of a major revision the balance of tariff concessions set forth in Annexes
1 and 2 shall be preserved. The Joint Committee shall modify the tariff
nomenclature of the relevant annexes to conform to such change.
[ENTRY INTO FORCE]
- The entry into force of this Agreement will be subject to the
completion of necessary domestic legal procedures by each Party.
- This Agreement shall enter into force on the date on which both
have provided written notification to each other that such procedures have
been completed with paragraph 2.
- Either Party may terminate this Agreement by written notification to
the other Party. This Agreement shall expire twelve months after the date
of such notification.
In Witness Whereof, the respective representatives, having been duly
authorized, have signed this Agreement.
Done in duplicate, in the Hebrew and English languages, both equally
authentic, at Washington, D.C., this twenty second day of April 1985,
which corresponds to this first day of Iyar, 5745.
FOR THE GOVERNMENT OF ISRAEL
William E. Burk
FOR THE GOVERNMENT OF THE UNITED STATES OF AMERICA
Annexes (Ministry of Industry and Trade)