Dear clients and colleagues,
The year 2022 brought with it many changes in the fields of import and customs. Further to our Clients Update regarding the reduction of duties and the rise of the global export tariff system (Click here for the previous update regarding this subject), we would like to bring to your attention the main changes in the field of import legality, as well as the fact that new reporting positions have been published in the field of import taxes, as follows.
At the end of 2021, a comprehensive and significant reform in the field of imports was approved for the year 2022 as part of the Economic Plan Law (Legislative Amendments for Implementation of Economic Policy for 2021 and 2022 Budget Years), 2021 (the “Arrangements Law“).
The reform’s purpose is to facilitate the processes of importing to Israel and to change the method of monitoring the import legality, to remove some of the import barriers, to increase the supply of products imported to Israel, reduce the cost of living, lower import costs and increase competition in the Israeli market. Alongside this, greater responsibility was placed on the importers for the compliance of the products with the requirements of the relevant regulation, enforcement in the markets was increased and we can see more cases in which importers are defined as “trust violators”.
Below are the main points of the reform in the various areas:
- The standardization reform – the Standardization Reform entered into force on June 1, 2022, and its main points are as follows:
• As part of the reform, a new declaration-based import route was established, which allows products to be imported based on compliance with foreign standards (known as “Cassis”), subject to compliance with the marking requirements in accordance with Israeli law and compliance with the electricity network in Israel. Certain standards are excluded from this route.
• In addition, many changes were made in the route of adaptation to an official standard, so that most of the standards moved to Import Group 2 and Import Group 3, in which products can be imported based on a declaration (and also a model approval in Import Group 2), this is in contrast to Import Group 1, which requires model approval and inspection of each shipment.
• It is also important to note that as part of the reform, the directives of the Commissioner for Standardization were updated, Directive 2.6, which regulates the subject of exemptions granted from presenting a certificate of compliance with an official standard, was updated, and an exemption from the obligation to comply with an official standard regarding the import of products intended for export, research, or development was added.
- The reform in the energy field – the reform in the field of energy entered into force on September 1, 2022. As part of the reform, the European regulation was fully adopted with regard to products that are subject to the obligation to mark the level of energy efficiency. In addition, it is possible to import products included in the reform (such as air conditioners, refrigerators, washing machines, etc.) subject to a declaration only, with the addition of one of the required documents. A transition period of six months has been established, during which the products can also be imported according to the existing regulations until February 28, 2023,.
- The Food Reform – the food reform entered into force on January 1, 2023 and its main points are as follows:
• As part of the reform, four European regulations were adopted regarding the content of biological pollutants (except listeria and salmonella), chemical pollutants, the content of pesticide residues and the content of mercury compounds, except for certain foods. On December 28, 2022, a temporary order was published that applies from January 1, 2023, to March 31, 2023, which establishes conditions and exceptions regarding the application of the said instructions.
• In addition, the reform defined “proper importers”, who would be able to register in the database of the National Food Service, subject to the fulfillment of certain conditions, and benefit from the ease of import procedures. The reform also created a new import route intended for proper importers – the “European Route”, which is based on a declaration and applies to products marketed in the European Union. This route also applies to some of the food products that are defined as sensitive, and allows a statement to be submitted instead of a request for prior approval.
• A route has been established to de-officialization of food standards that do not deal with the protection of public health or standards regulated in the adopted European legislation, with the exception of certain standards. The officiality of some of the standards was canceled on 1.1.2023. However, it should be noted that standards whose official status has been revoked may still apply by virtue of the Consumer Protection Order (Marking and Packaging of Food Products), 1998, which actions are being taken to cancel it.
• The maximum validity of advance approval for the import of sensitive food was extended from 4 years to 6 years.
• An obligation was imposed on food manufacturers to maintain a quality control system until 2026.
- The Cosmetics Reform – part of the cosmetics reform entered into force on January 1, 2023 , and it does not apply to perfumes and solid soaps. The main points of the reform are as follows:
• Adding a new route for importing products marketed in the European market based on compliance with European regulations. In order to import via this route, it is required, among other things, to have a product portfolio and appoint a responsible representative. This part of the reform has been postponed and will enter into force on April 1, 2023, as long as it is not postponed again. This route is added to the existing route for the import of cosmetics, which will continue to exist for at least 4 years.
• Adding a new parallel import route without requiring documents originating from the manufacturer. In this way, a parallel importer can import a cosmetics product base on the basis of a certificate of conformity to the reference cosmetic that will be issued by a recognized laboratory. The route does not apply to all cosmetics.
New positions that must be reported to customs
As is known, a business whose transaction turnover exceeds NIS 3,000,000 and a financial institution must submit a report if in the previous tax year they took a position that is contrary to the position published as a position that must be reported. The report must be made within 60 days of the end of the tax year in which the position was taken.
A position that is required to report on import taxes is a position that contradicts a position published by the Tax Authority as a position subject to reporting, and the tax advantage resulting from it (customs, purchase tax, VAT, as well as other taxes or levies imposed on imports) resulting from it exceeds NIS 2,000,000 per year or NIS 5,000,000 during four years.
On December 28, 2022, the Tax Authority published the list of positions that required to be reported in all tax forms, including two new positions in the import field –
• A position concerning synthetic fuels/oils obtained by chemical processes, which must be classified in item 27.10.
• A position concerning the classification of different tobacco products (for example – processed and unprocessed) according to the ingredient that most characterizes them – if they are packaged together also to achieve a common purpose of use.
For your convenience, in the following link, you can find all the positions required to be reported to customs, which deal with both the provisions relating to the determination of the value for customs purposes and the provisions relating to the classification of certain goods. We recommend going through all the positions to make sure you are not obligated to submit a report.