Customs, VAT and standards in Israel

The regulatory part of importing is the one most importers leave to the end, and it is the one that is most dangerous to leave. A wrong customs classification changes the cost, a standards requirement that was not handled can keep goods you have already paid for out of the country, and missing Hebrew marking stops a shipment at the port. All of these can be established in advance, and establishing them is far cheaper than fixing them.

This guide explains the principles. It is not customs advice and it does not replace a licensed customs broker — and it deliberately contains no percentages or figures, because those vary by product and by orders that get updated.

It all starts with classification

Every item entering Israel has a customs tariff item — a number identifying the category the product belongs to. That item is what determines the duty rate, whether purchase tax applies, and which standards and licensing requirements are in force. It is not set by what you call the product, nor by what the supplier's invoice says, but by the rules of the Customs Tariff Order.

Two products that look completely alike can sit under two different items because of material composition, intended use or function. That is why classification is professional work and not guesswork.

The three charges, and the order they are calculated in

The charges are not calculated in parallel but one on top of another, and this is a point many people miss.

1. The customs value of the goods is set first. It is based on the transaction price, and it usually includes freight and insurance components too — meaning it is higher than the factory price.
2. Customs duty is calculated on that value, according to the tariff item.
3. Purchase tax, where it applies to the category, is calculated after it.
4. VAT is calculated on all of it together — that is, on the duty and the purchase tax as well.

The practical result: a high duty rate makes the shipment more expensive twice over, because it costs what it costs and it also enlarges the VAT base. That is why establishing the classification can change whether the project is worth doing at all, not just a line in the cost.

Standards: not every product, and you cannot know without checking

Some products are subject to an official Israeli standard, which is a binding requirement and not a recommendation. Categories where this is common include electrical goods, toys, products that come into contact with food, and safety equipment. Not every product in those categories is subject to a standard, and there are products outside them that are.

What matters to understand: a factory's declaration that the product meets some standard is not equivalent to meeting the Israeli requirement. A foreign standard and an Israeli standard are two different things, and testing in Israel is sometimes required.

• Establish in advance whether the product is subject to an official standard. The sources for that are the Standards Institution of Israel and the relevant authorities.
• If it is — establish exactly what is required and what the timeline is. A standards process takes time, and it is better started alongside production rather than after it.
• Make sure the specification you are ordering against meets the requirement, before production. Correcting after production usually means producing again.

Import licensing and additional bodies

Beyond standards, some products require the approval of a specific government body before entry — for example in health, pharmaceuticals and cosmetics, agriculture, or communications. That check has to happen before the order, because in certain cases the answer is that the product cannot be imported in its current form at all.

Hebrew marking

An imported product must carry marking in Hebrew, and the responsibility for that sits with the importer. What is required varies by product type, but the core recurs almost every time: the product name, the importer's name and address, the country of manufacture, and relevant details such as composition, volume or weight, instructions for use and warnings.

The sensible way is to build the marking into the packaging print at the factory. Labels applied in Israel cost labour on every unit, and sometimes look exactly like what they are — a correction after the fact.

The documents that travel with the shipment

• Supplier invoice — the document the customs value is based on. A mismatch between it and reality is a serious problem.
• Packing list — exactly what is in each carton.
• Bill of lading — the transport document, and in some cases a document of title to the goods as well.
• Certificate of origin — required when claiming a benefit under a trade agreement, where one exists.
• Standards and licensing approvals — as required for the product.

Checking the documents before they are issued is one of the best-value actions in the whole process. Correcting a document after issue causes delay, and sometimes port storage that is charged by the day.