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Israel Information Service Gopher
Information Division Israel Foreign Ministry - Jerusalem
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PROTOCOL ON ECONOMIC RELATIONS
between
the Government of the State of Israel
and
the P.L.O., representing the Palestinian people
PREAMBLE
The two parties view the economic domain as one of the cornerstone in
their mutual relations with a view to enhance their interest in the
achievement of a just, lasting and comprehensive peace. Both parties
shall cooperate in this field in order to establish a sound economic
base for these relations, which will be governed in various economic
spheres by the principles of mutual respect of each other's economic
interests, reciprocity, equity and fairness.
This protocol lays the groundwork for strengthening the economic base
of the Palestinian side and for exercising its right of economic
decision making in accordance with its own development plan and
priorities. The two parties recognise each other's economic ties with
other markets and the need to create a better economic environment
for their peoples and individuals.
Article I
FRAMEWORK AND SCOPE OF THIS PROTOCOL
1. This protocol establishes the contractual agreement that will
govern the economic relations between the two sides and will
cover the West Bank and the Gaza Strip during the interim period.
The implementation will be according to the stages envisaged in
the Declaration of Principles on Interim Self Government
Arrangements signed in Washington D.C. on September 13, 1993 and
the Agreed Minutes thereto. It will therefore begin in the Gaza
Strip and the Jericho Area and at a later stage will also apply
to the rest of the West Bank, according to the provisions of the
Interim Agreement and to any other agreed arrangements between
the two sides.
2. This Protocol, including its Appendixes, will be incorporated
into the Agreement on the Gaza Strip and the Jericho Area (in
this Protocol - the Agreement), will be an integral part thereof
and interpreted accordingly. This paragraph refers solely to the
Gaza Strip and the Jericho Area.
3. This Protocol will come into force upon the signing of the
Agreement.
4. For the purpose of this Protocol, the term "Areas" means the
areas under the jurisdiction of the Palestinian Authority,
according to the provisions of the Agreement regarding
territorial jurisdiction.
The Palestinian Jurisdiction in the subsequent agreements could
cover areas, spheres or functions according to the Interim
Agreement. Therefore, for the purpose of this Protocol, whenever
applied, the term "Areas" shall be interpreted to mean functions
and spheres also, as the case may be, with the necessary
adjustments.
Article II
THE JOINT ECONOMIC COMMITTEE
1. Both parties will establish a Palestinian-Israeli Joint Economic
Committee (hereinafter - the JEC) to follow up the implementation
of this Protocol and to decide on problems related to it that may
arise from time to time. Each side may request the review of any
issue related to this Agreement by the JEC.
2. The JEC will serve as the continuing committee for economic
cooperation envisaged in Annex III of the Declaration of
Principles.
3. The JEC will consist of an equal number of members from each side
and may establish sub-committees specified in this Protocol.
A sub-committee may include experts as necessary.
4. The JEC and its sub-committees shall reach their decisions by
agreement and shall determine their rules of procedure and
operation, including the frequency and place or places of their
meetings.
Article III
IMPORT TAXES AND IMPORT POLICY
1. The import and customs policies of both sides will be according
to the principles and arrangements detailed in this Article.
2. a. The Palestinian Authority will have all powers and
responsibilities in the sphere of import and customs policy
and procedures with regard to the following:
(1) Goods on List Al, attached hereto as Appendix I
locally-produced in Jordan and in Egypt particularly and
in the other Arab countries, which the Palestinians will
be able to import in quantities agreed upon by the two
sides up to the Palestinian market needs as estimated
according to para 3 below.
(2) Goods on List A2, attached hereto as Appendix II, from the
Arab, Islamic and other countries, which the Palestinians
will be able to import in quantities agreed upon by the
two sides up to the Palestinian market needs as estimated
according to para 3 below.
b. The import policy of the Palestinian Authority for Lists Al
and A2 will include independently determining and changing
from time to time the rates of customs, purchase tax, levies,
excises and other charges, the regulation of licensing
requirements and procedures and of standard requirements. The
valuation for custom purposes will be based upon the GATT 1994
agreement as of the date it will be introduced in Israel, and
until then - on the Brussels Definition of Valuation (BDV)
system. The classification of goods will be based on the
principles of "the Harmonized Commodity Description and Coding
System". Concerning imports referred to in Article VII of this
Protocol (Agriculture), the provisions of that Article will
apply.
3. For the purposes of para 2(a) above, the Palestinian market needs
for 1994 will be estimated by a sub-committee of experts. These
estimates will be based on the best available data regarding past
consumption, production, investment and external trade of the
Areas. The sub-committee will submit its estimate within three
months from the signing of the Agreement. These estimates will be
reviewed and updated every six months by the sub-committee, on
the basis of the best data available regarding the latest period
for which relevant data are available, taking into consideration
all relevant economic and social indicators. Pending an agreement
on the Palestinian market needs, the previous period's estimates
adjusted for population growth and rise in per-capita GNP in the
previous period, will serve as provisional estimates.
4. The Palestinian Authority will have all powers and
responsibilities to independently determine and change from time
to time the rates of customs, purchase taxes; levies, excises and
other charges on the goods on List B, attached hereto as Appendix
III, of basic food items and other goods for the Palestinian
economic development program, imported by the Palestinians to the
Areas.
5. a. With respect to all goods not specified in Lists Al, A2 and B,
and with respect to quantities exceeding those determined in
accordance with paras 2(a) & 3 above (hereinafter - the
Quantities), the Israeli rates of customs, purchase tax,
levies, excises and other charges, prevailing at the date of
signing of the Agreement, as changed from time to time, shall
serve as the minimum basis for the Palestinian Authority. The
Palestinian Authority may decide on any upward changes in the
rates on these goods and exceeding quantities when imported by
the Palestinians to the Areas.
b. With respect to all goods not specified in Lists A1 and A2,
and with respect to quantities exceeding the Quantities,
Israel and the Palestinian Authority will employ for all
imports the same system of importation, as stipulated in para
10 below, including inter alia standards, licensing, country
of origin, valuation for customs purposes etc.
6. Each side will notify the other side immediately of changes made
in rates and in other matters of import policy, regulations and
procedures, determined by it within its respective powers and
responsibilities as detailed in this Article. With regard to
changes which do not require immediate application upon decision,
there will be a process of advance notifications and mutual
consultations which will take into consideration all aspects and
economic implications.
7. The Palestinian Authority will levy VAT at one rate on both
locally produced goods and services and on imports by the
Palestinians (whether covered by the three Lists mentioned above
or not), and may fix it at the level of 15% to 16%.
8. Goods imported from Jordan, Egypt and other Arab countries
according to para 2(a)(1) above (List A1) will comply with rules
of origin agreed upon by a joint sub-committee within three
months of the date of the signing of the Agreement. Pending an
agreement, goods will be considered to have been "locally
produced" in any of those countries if they conform with all the
following:
a. (i) They have been wholly grown, produced, or manufactured in
that country, or have been substantially transformed there
into new or different goods, having a new name, character, or
use, distinct from the goods or materials from which they were
so transformed;
(ii) They have been imported directly from the said country;
(iii) The value or the costs of the materials produced in that
country, plus the direct processing costs in it, do not fall
short of 30 percent of the export value of the goods. This
rate may be reviewed by the joint committee mentioned in para
16 a year after the signing of the Agreement.
(iv) The goods are accompanied by an internationally
recognized certificate of origin;
(v) No goods will be deemed as substantially new or different
goods, and no material will be eligible for inclusion as
domestic content, by virtue of having merely undergone simple
combining or packaging, or dilution with water or other
substances, which do not materially alter the characteristics
of the said goods.
9. Each side will issue import licences to its own importers,
subject to the principles of this Article and will be responsible
for the implementation of the licensing requirements and
procedures prevailing at the time of the issuance of the
licenses.
Mutual arrangements will be made for the exchange of information
relevant to licensing matters.
10. Except for the goods on Lists A1 and A2 and their Quantities - in
which the Palestinian Authority has all powers and
responsibilities, both sides will maintain the same import policy
(except for rates of import taxes and other charges for goods in
List B) and regulations including classification, valuation and
other customs procedures, which are based on the principles
governing international codes, and the same policies of import
licensing and of standards for imported goods, all as applied by
Israel with respect to its importation. Israel may from time to
time introduce changes in any of the above, provided that changes
in standard requirements will not constitute a non-tariff-barrier
and will be based on considerations of health, safety and the
protection of the environment in conformity with Article 2.2. of
the Agreement on Technical Barriers to trade of the Final Act of
the Uruguay Round of Trade Negotiations.
Israel will give the Palestinian Authority prior notice of any
such changes, and the provisions of para 6 above will apply.
11. a. The Palestinian Authority will determine its own rates of
customs and purchase tax on motor vehicles imported as such,
to be registered with the Palestinian Authority. The vehicle
standards will be those applied at the date of the signing of
the Agreement as changed according to para 10 above.
However, the Palestinian Authority may request, through the
sub-committee on transportation, that in special cases
different standards will apply.
Used motor vehicles will be imported only if they are
passenger cars or dual-purpose passenger cars of a model of
no more than three years prior to the importation year. The
sub-committee on transportation will determine the procedures
for testing and confirming that such used cars comply with the
standards' requirements for that model year.
The issue of importing commercial vehicles of a model prior to
the importation year will be discussed in the joint
sub-committee mentioned in para 16 below.
b. Each side may determine the terms and conditions for the
transfer of motor vehicles registered in the other side to the
ownership or use of a resident of its own side, including the
payment of the difference of import taxes, if any, and the
vehicle having been tested and found compatible with the
standards required at that time by its own registration
administration, and may prohibit transfer of vehicles.
12. a. Jordanian standards, as specified in the attached Appendix I,
will be acceptable in importing petroleum products into the
Areas, once they meet the average of the standards existing in
the European Union countries, or the USA standards, which
parameters have been set at the values prescribed for the
geographical conditions of Israel, the Gaza Strip and the West
Bank.
Cases of petroleum products which do not meet these
specifications will be referred to a joint experts' committee
for a suitable solution. The committee may mutually decide to
accept different standards for the importation of gasoline
which meet the Jordanian standards even though, in some of
their parameters, they do not meet the European Community or
USA standards. The committee will give its decision within six
months.
Pending the committee's decision, and for not longer than six
months of the signing of the Agreement, the Palestinian
Authority may import to the Areas, gasoline for the
Palestinian market in the Areas, according to the needs of
this market, provided that:
(1) this gasoline is marked in a distinctive colour to
differentiate it from the gasoline marketed in Israel; and
(2) the Palestinian Authority will take all the necessary
steps to ensure that this gasoline is not marketed in
Israel.
b. The difference in the final price of gasoline to consumers in
Israel and to consumers in the Areas, will not exceed 15% of
the official final consumer price in Israel. The Palestinian
Authority has the right to determine the prices of petroleum
products, other than gasoline, for consumption in the Areas.
c. If Egyptian gasoline standards will comply with the conditions
of sub-para (a) above, the importation of Egyptian gasoline
will also be allowed.
13. In addition to the points of exit and entry designated according
to the Article regarding Passages in Annex I of the Agreement for
the purpose of export and import of goods, the Palestinian side
has the right to use all points of exit and entry in Israel
designated for that purpose. The import and export of the
Palestinians through the points of exit and entry in Israel will
be given equal trade and economic treatment.
14. In the entry points of the Jordan River and the Gaza Strip:
a. Freight shipment
The Palestinian Authority will have full responsibility and
powers in the Palestinian customs points (freight-area) for
the implementation of the agreed upon customs and importation
policy as specified in this protocol, including the inspection
and the collection of taxes and other charges, when due.
Israeli customs officials will be present and will receive
from the Palestinian customs officials a copy of the necessary
relevant documents related to the specific shipment and will
be entitled to ask for inspection in their presence of both
goods and tax collection.
The Palestinian customs officials will be responsible for the
handling of the customs procedure including the inspection and
collection of due taxes.
In case of disagreement on the clearance of any shipment
according to this Article, the shipment will be delayed for
inspection for a maximum period of 48 hours during which a
joint sub-committee will resolve the issue on the basis of the
relevant provisions of this Article. The shipment will be
released only upon the sub-committee's decision.
b. Passengers customs lane
Each side will administer its own passengers customs
procedures, including inspection and tax collection. The
inspection and collection of taxes due in the Palestinian
customs lane will be conducted by customs officials of the
Palestinian Authority.
Israeli customs officials will be invisibly present in the
Palestinian customs lane and entitled to request inspection of
goods and collection of taxes when due. In the case of
suspicion, the inspection will be carried out by the
Palestinian official in a separate room in the presence of the
Israeli customs official.
15. The clearance of revenues from all import taxes and levies,
between Israel and the Palestinian Authority, will be based on
the principle of the place of final destination. In addition,
these tax revenues will be allocated to the Palestinian Authority
even if the importation was carried out by Israeli importers when
the final destination explicitly stated in the import
documentation is a corporation registered by the Palestinian
Authority and conducting business activity in the Areas. This
revenue clearance will be effected within six working days from
the day of collection of the said taxes and levies.
16. The Joint Economic Committee or a sub-committee established by it
for the purposes of this Article will deal inter alia with the
following:
1) Palestinian proposals for addition of items to Lists A1, A2
and B. Proposals for changes in rates and in import
procedures, classification, standards and licensing
requirements for all other imports,
2) Estimate the Palestinian market needs, as mentioned in para 3
above;
3) Receive notifications of changes and conduct consultations, as
mentioned in para 6 above;
4) Agree upon the rules of origin as mentioned in para 8 above,
and review their implementation;
5) Co-ordinate the exchange of information relevant to licensing
matters as mentioned in para 9 above.
6) Discuss and review any other matters concerning the
implementation of this Article and resolve problems arising
therefrom.
17. The Palestinian Authority will have the right to exempt the
Palestinian returnees who will be granted permanent residency in
the Areas from import taxes on personal belongings including
house appliances and passenger cars as long as they are for
personal use.
18. The Palestinian Authority will develop its system for temporary
entry of needed machines and vehicles used for the Palestinian
Authority and the Palestinian economic development plan.
Concerning other machines and equipment, not included in Lists
A1, A2 and B, the temporary entry will be part of the import
policy as agreed in para 10 above, until the joint sub-committee
mentioned in para 16 decides upon a new system proposed by the
Palestinian Authority. The temporary entry will be coordinated
through the joint sub-committee.
19. Donations in kind to the Palestinian Authority will be exempted
from customs and other import taxes if destined and used for
defined development projects or non-commercial humanitarian
purposes.
The Palestinian Authority will be responsible exclusively for
planning and management of the donors' assistance to the
Palestinian people. The Joint Economic Committee will discuss
issues pertaining to the relations between the provisions in this
Article and the implementation of the principles in the above
paragraph.
Article IV
MONETARY AND FINANCIAL ISSUES
1. The Palestinian Authority will establish a Monetary Authority
(PMA) in the Areas.
The PMA will have the powers and responsibilities for the
regulation and implementation of the monetary policies within the
functions described in this Article.
2. The PMA will act as the Palestinian Authority's official economic
and financial advisor.
3. The PMA will act as the Palestinian Authority's and the public
sector entities' sole financial agent, locally and
internationally.
4. The foreign currency reserves (including gold) of the Palestinian
Authority and all Palestinian public sector entities will be
deposited solely with the PMA and managed by it.
5. The PMA will act as the lender of last resort for the banking
system in the Areas.
6. The PMA will authorize foreign exchange dealers in the Areas and
will exercise control (regulation and supervision) over foreign
exchange transactions within the Areas and with the rest of the
world.
7. a. The PMA will have a banking supervision department that will
be responsible for the proper functioning, stability, solvency
and liquidity of the banks operating in the Areas.
b. The banking supervision department will predicate its
supervision on the international principles and standards
reflected in international conventions and especially on the
principles of the "Basle Committee".
c. The supervision department will be charged with the general
supervision of every such bank, including:
-The regulation of all kinds of banking activities, including
their foreign activities;
-The licensing of banks formed locally and of branches,
subsidiaries, joint ventures and representative offices of
foreign banks and the approval of controlling shareholders;
-The supervision and inspection of banks.
8. The PMA will relicense each of the five branches of the Israeli
banks operating at present in the Gaza Strip and the West Bank,
as soon as its location or the authorities regarding it come
under the jurisdiction of the Palestinian Authority. These
branches will be required to comply with the general rules and
regulations of the PMA concerning foreign banks, based on the
"Basle Concordat". Para I0 d, e, and f below will apply to these
branches.
9. a. Any other Israeli bank wishing to open a branch or a
subsidiary in the Areas will apply for a license to the PMA
and will be treated equally to other foreign banks, provided
that the same will apply to the Palestinian banks wishing to
open a branch or a subsidiary in Israel.
b. Granting of a license by both authorities will be subject to
the following arrangements based on the "Basle Concordat"
valid on the date of signing of the Agreement and to the host
authority's prevailing general rules and regulations
concerning opening of branches and subsidiaries of foreign
banks.
In this para 10 "host authority" and "home authority" apply
only to the Bank of Israel (BOI) and the PMA.
c. A bank wishing to open a branch or establish a subsidiary will
apply to the host authority, having first obtained the
approval of its home authority. The host authority will notify
the home authority of the terms of the license, and will give
its final approval unless the home authority objects.
d. The home authority will be responsible for the consolidated
and comprehensive supervision of banks, inclusive of branches
and subsidiaries in the area under the jurisdiction of the
host authority. However, the distribution of supervision
responsibilities between the home and the host authorities
concerning subsidiaries will be according to the "Basle
Concordat".
e. The host authority will regularly examine the activities of
branches and subsidiaries in the area under its jurisdiction.
The home authority will have the right to conduct on site
examinations in the branches and subsidiaries in the host
area. However, the supervision responsibilities of the home
authority concerning subsidiaries will be according to the
"Basle Concordat".
Accordingly, each authority will transfer to the other
authority copies of its examination reports and any
information relevant to the solvency, stability and soundness
of the banks, their branches and subsidiaries.
f. The BOI and the PMA will establish a mechanism for cooperation
and for the exchange of information on issues of mutual
interest.
10. a. The New Israeli Sheqel (NIS) will be one of the circulating
currencies in the Areas and will legally serve there as means
of payment for all purposes including official transactions.
Any circulating currency, including the NIS, will be accepted
by the Palestinian Authority and by all its institutions,
local authorities and banks, when offered as a means of
payment for any transaction.
b. Both sides will continue to discuss, through the JEC, the
possibility of introducing mutually agreed Palestinian
currency or temporary alternative currency arrangements for
the Palestinian Authority.
11. a. The liquidity requirements on all deposits in banks operating
in the Areas will be determined and announced by the PMA.
b. Banks in the Areas will accept NIS deposits. The liquidity
requirements on the various kinds of NIS deposits (or deposit
linked to the NIS) in banks operating in the Areas will not be
less than 4% to 8%, according to the type of deposits. Changes
of over 1% in the liquidity requirements on NIS deposits (or
deposits linked to the NIS) in Israel will call for
corresponding changes in the above mentioned rates.
c. The supervision and inspection of the implementation of all
liquidity requirements will be carried out by the PMA.
d. The reserves and the liquid assets required according to this
paragraph will be deposited at the PMA according to rules and
regulations determined by it. Penalties for non compliance
with the liquidity requirements will be determined by the PMA.
12. The PMA will regulate and administer a discount window system and
the supply of temporary finance for banks operating in the Areas.
13. a. The PMA will establish or license a clearing house in order to
clear money orders between the banks operating in the Areas,
and with other clearing houses.
b. The clearing of money orders and transactions between banks
operating in the Areas and banks operating in Israel will be
done between the Israeli and the Palestinian clearing houses
on same working day basis, according to agreed arrangements.
14. Both sides will allow correspondential relations between each
others' banks.
15. The PMA will have the right to convert at the BOI excess NIS
received from banks operating in the Areas into foreign currency,
in which the BOI trades in the domestic inter-bank market, up to
the amounts determined per period, according to the arrangements
detailed in para 16 below.
16. a. The excess amount of NIS, due to balance of payments flows,
that the PMA will have the right to convert into foreign
currency, will be equal to:
(1) Estimates of all Israeli "imports" of goods and services
from the Areas, valued at market prices (inclusive of
taxes), which were paid for in NIS, less:
(i) the taxes collected by the Palestinian Authority on
all Israeli "imports" from the Areas and rebated to Israel
in NIS, and
(ii) the taxes collected by Israel on all Israeli
"imports" from the Areas and included in their market
value, and not rebated to the Palestinian Authority,
minus
(2) Estimates of all Israeli "exports" of goods and services
to the Areas, valued at market prices (inclusive of
taxes), which were paid for in NIS, less:
(i) the taxes collected by Israel on such "exports" and
rebated to the Palestinian Authority, and
(ii) the taxes collected by the Palestinian Authority on
such "exports" and included in their market value, and not
rebated to Israel;
plus
(3) The accumulated net amounts of foreign currency converted
previously into NIS by the PMA, as recorded in the BOI
Dealing Room.
b. The said flows and amounts will be calculated as of the date
of the signing of the Agreement.
Notes to para 16:
(i) The estimates of the said "exports and imports" of goods
and services will include inter alia labor services, NIS
expenditure of tourists and Israelis in the Areas and NIS
expenditure of Palestinians of the Areas in Israel.
(ii) Taxes and pension contributions on "imports" of labor
services, paid to "importing" side and rebated to the
"exporting" one, will not be included in the estimates of
the sums to be converted, as the "exports'" earnings of
labor services are recorded in the statistics inclusive
of them, although they do not accrue to the individuals
supplying them.
17. The PMA and the BOI will meet annually to discuss and determine
the annual amount of convertible NIS during the following
calendar year and will meet semi-annually to adjust the said
amount. The amounts determined annually and adjusted
semi-annually will be based on data and estimates regarding the
past and on forecasts for the following period, according to the
formula mentioned in para 16. The first meeting will be as soon
as possible within three months after the date of the signing of
the Agreement.
18. a. The exchange of foreign currency for NIS and vice-versa by the
PMA will be carried out through the BOI Dealing Room, at the
market exchange rates.
b. The BOI will not be obliged to convert in any single month
more than 1/5 of the semi-annual amount, as mentioned in para
17.
19. There will be no ceiling on the annual foreign currency
conversions by the PMA into NIS. However, in order to avoid
undesirable fluctuations in the foreign exchange market, monthly
ceilings of such conversions will be agreed upon in the annual
and semi-annual meetings referred to in para 17.
20. Banks in the Areas will convert NIS into other circulating
currencies and vice-versa.
21. The Palestinian Authority will have the authorities, powers and
responsibilities regarding the regulation and supervision of
capital activities in the Areas, including the licensing of
capital market institutions, finance companies and investment
funds.
Article V
DIRECT TAXATION
1. Israel and the Palestinian Authority will each determine and
regulate independently its own tax policy in matters of direct
taxation, including income tax on individuals and corporations,
property taxes, municipal taxes and fees.
2. Each tax administration will have the right to levy the direct
taxes generated by economic activities within its area.
3. Each tax administration may impose additional taxes on residents
within its area on (individuals and corporations) who conduct
economic activities in the other side's area.
4. Israel will transfer to the Palestinian Authority a sum equal to:
a. 75% of the income taxes collected from Palestinians from the
Gaza Strip and the Jericho Area employed in Israel.
b. The full amount of income taxes collected from Palestinians
from the Gaza Strip and Jericho Area employed in the
settlements.
5. The two sides will agree on a set of procedures that will address
all issues concerning double taxation.
Article VI
INDIRECT TAXES ON LOCAL PRODUCTION
1. The Israel and the Palestinian tax administrations will levy and
collect VAT and purchase taxes on local production, as well as
any other indirect taxes, in their respective areas.
2. The purchase tax rates within the jurisdiction of each tax
administration will be identical as regards locally produced and
imported goods.
3. The present Israeli VAT rate is 17%. The Palestinian VAT rate
will be 15% to 16%.
4. The Palestinian Authority will decide on the maximum annual
turnover for businesses under its jurisdiction to be exempt from
VAT, within an upper limit of 12,000 US $.
5. The VAT on purchases by businesses registered for VAT purposes
will accrue to the tax administration with which the respective
business is registered.
Businesses will register for VAT purposes with the tax
administration of the side of their residence, or on the side of
their ongoing operation.
There will be clearance of VAT revenues between the Israeli and
Palestinian VAT administrations on the following conditions:
a. The VAT clearance will apply to VAT on transactions between
businesses registered with the VAT administration of the side
in which they reside.
b. The following procedures will apply to clearance of VAT
revenues accruing from transactions by businesses registered
for VAT purposes:
(1) To be acceptable for clearance purposes, special invoices,
clearly marked for this purpose, will be used for
transactions between businesses registered with the
different sides.
(2) The invoices will be worded either in both Hebrew and
Arabic or in English and will be filled out in any of
these three languages, provided that the figures are
written in "Arabic" (not Hindi) numerals.
(3) For the purpose of tax rebates, such invoices will be
valid for six months from their date of issue.
(4) Representatives of the two sides will meet once a month,
on the 20th day of the month, to present each other with a
list of invoices submitted to them for tax rebate, for VAT
clearance. This list will include the following details
regarding each invoice:
(a) The number of the registered business issuing it;
(b) The name of the registered business issuing it;
(c) The number of the invoice;
(d) The date of issue;
(e) The amount of the invoice;
(f) The name of the recipient of the invoice.
(5) The clearance claims will be settled within 6 days from
the meeting, through a payment by the side with the net
balance of claims against it, to the other side.
(6) Each side will provide the other side, upon demand, with
invoices for verification purposes. Each tax
administration will be responsible for providing invoices
for verification purposes for 6 months after receiving
them.
(7) Each side will take the necessary measure to verify the
authenticity of the invoices presented to it for clearance
by the other side.
(8) Claims for VAT clearance which will not be found valid
will be deducted from the next clearance payment.
(9) Once an inter-connected computer system for tax rebates to
businesses and for VAT clearance between the two sides is
operational, it will replace the clearance procedures
specified in sub-paras (4) - (8).
(10) The two tax administrations will exchange lists of the
businesses registered with them and will provide each
other with the necessary documentation, if required, for
the verification of transactions.
(11) The two sides will establish a sub-committee which will
deal with the implementation arrangements regarding the
clearance of VAT revenues set above.
6. VAT paid by not-for-profit Palestinian organizations and
institutions, registered by the Palestinian Authority, on
transactions in Israel, will accrue to the Palestinian tax
administration. The clearance system set out in para 5 will apply
to these organizations and institutions.
Article VII
LABOR
1. Both sides will attempt to maintain the normality of movement of
labor between them, subject to each side's right to determine
from time to time the extent and conditions of the labor movement
into its area. If the normal movement is suspended temporarily by
either side, it will give the other side immediate notification,
and the other side may request that the matter be discussed in
the Joint Economic Committee.
The placement and employment of workers from one side in the area
of the other side will be through the employment service of the
other side and in accordance with the other sides' legislation.
The Palestinian side has the right to regulate the employment of
Palestinian labor in Israel through the Palestinian employment
service, and the Israeli Employment Service will cooperate and
coordinate in this regard.
2. a. Palestinians employed in Israel will be insured in the Israeli
social insurance system according to the National Insurance
Law for employment injuries that occur in Israel, bankruptcy
of employers and maternity leave allowance.
b. The National Insurance fees deducted from the wages for
maternity insurance will be reduced according to the reduced
scope of maternity insurance, and the equalization deductions
transferred to the Palestinian Authority, if levied, will be
increased accordingly.
c. Implementation procedures relating thereto will be agreed upon
between the Israeli National Insurance Institute and the
Palestinian Authority or the appropriate Palestinian social
insurance institution.
3. a. Israel will transfer to the Palestinian Authority, on a
monthly basis, the equalization deductions as defined by
Israeli legislation, if imposed and to the extent levied by
Israel. The sums so transferred will be used for social
benefits and health services, decided upon by the Palestinian
Authority, for Palestinians employed in Israel and for their
families.
The equalization deductions to be so transferred will be those
collected after the date of the signing of the Agreement from
wages of Palestinians employed in Israel and from their
employers.
These sums will not include
(1) Payments for health services in places of employment.
(2) 2/3 of the actual administrative costs in handling the
matters related to the Palestinians employed in Israel by
the Payments Section of the Israeli Employment Service.
4. Israel will transfer, on a monthly basis, to a relevant pension
insurance institution to be established by the Palestinian
Authority, pension insurance deductions collected after the
establishment of the above institution and the completion of the
documents mentioned in para 6.
These deductions will be collected from wages of Palestinians
employed in Israel and their employers, according to the relevant
rates set out in the applicable Israeli collective agreements.
2/3 of the actual administrative costs in handling these
deductions by the Israeli Employment Service will be deducted
from the sums transferred. The sums so transferred will be used
for providing pension insurance for these workers. Israel will
continue to be liable for pension rights of the Palestinian
employees in Israel, to the extent accumulated by Israel before
the entry into force of this para 4.
5. Upon the receipt of the deductions, the Palestinian Authority and
its relevant social institutions will assume full responsibility
in accordance with the Palestinian legislation and arrangements,
for pension rights and other social benefits of Palestinians
employed in Israel, that accrue from the transferred deductions
related to these rights and benefits. Consequently, Israel and
its relevant social institutions and the Israeli employers will
be released from, and will not be held liable for any obligations
and responsibilities concerning personal claims, rights and
benefits arising from these transferred deductions, or from the
provisions of paras 2-4 above.
6. Prior to the said transfers, the Palestinian Authority or its
relevant institutions, as the case may be, will provide Israel
with the documents required to give legal effect to their
aforesaid obligations, including mutually agreed implementation
procedures of the principles agreed upon in paras 3-5 above.
7. The above arrangements concerning equalization deductions and/or
pension deductions may be reviewed and changed by Israel if an
authorized court in Israel will determine that the deductions or
any part thereof must be paid to individuals, or used for
individual social benefits or insurance in Israel, or that it is
otherwise unlawful. In such a case the liability of the
Palestinian side will not exceed the actual transferred
deductions related to the case.
8. Israel will respect any agreement reached between the Palestinian
Authority, or an organization or trade-union representing the
Palestinians employed in Israel, and a representative
organization of employees or employers in Israel, concerning
contributions to such organization according to any collective
agreement.
9. a. The Palestinian Authority may integrate the existing health
insurance scheme for Palestinians employed in Israel and their
families in its health insurance services. As long as this
scheme continues, whether integrated or separately, Israel
will deduct from their wages the health insurance fees
("health stamp") and will transfer them to the Palestinian
Authority for this purpose.
b. The Palestinian Authority may integrate the existing health
insurance scheme for Palestinians who were employed in Israel
and are receiving pension payments through the Israeli
Employment Service, in its health insurance services. As long
as this scheme continues, whether integrated or separately,
Israel will deduct the necessary sum of health insurance fees
("health stamp") from the equalization payments and will
transfer them to the Palestinian Authority for this purpose.
10. The JEC will meet upon the request of either side and review the
implementation of this Article and other issues concerning labor,
social insurance and social rights.
11. Other deductions not mentioned above, if any, will be jointly
reviewed by the JEC. Any agreement between the two sides
concerning these deductions will be in addition to the above
provisions.
12. Palestinians employed in Israel will have the right to bring
disputes arising out of employee - employer relationships and
other issues before the Israeli Labor Courts, within these
courts' jurisdiction.
13. This Article governs the future labor relations between the two
sides and will not impair any labor rights prior to the date of
signing of the Agreement.
Article VIII
AGRICULTURE
1. There will be free movement of agricultural produce, free of
customs and import taxes, between the two sides, subject to the
following exceptions and arrangements.
2. The official veterinary and plant protection services of each
side will be responsible, within the limits of their respective
jurisdiction, for controlling animal health, animal products and
biological products, and plants and parts thereof, as well as
their importation and exportation.
3. The relations between the official veterinary and plant
protection services of both sides will be based on mutuality in
accordance with the following principles, which will be applied
in all the areas under their respective jurisdiction:
a. Israel and the Palestinian Authority will do their utmost to
preserve and improve the veterinary standards.
b. Israel and the Palestinian Authority will take all measures to
reach equivalent and compatible standards regarding animal
disease control, including mass vaccination of animals and
avians, quarantines, "stamping out" measures and residue
control standards.
c. Mutual arrangements will be made to prevent the introduction
and spread of plant pests and diseases, for their eradication
and concerning residue control standards in plant products.
d. The official veterinary and plant protection services of
Israel and the Palestinian Authority will co-ordinate and
regularly exchange information regarding animal diseases, as
well as plant pests and diseases, and will establish a
mechanism for immediate notification of the outbreak of such
diseases.
4. Trade between the two sides in animals, animal products and
biological products will be in keeping with the principles and
definitions set out in the current edition of the OIE National
Animal Health Code as updated from time to time (hereinafter -
I.A.H.C.)
5. Transit of livestock, animal products and biological products
from one side through the area under the jurisdiction of the
other side, should be conducted in a manner aimed at the
prevention of diseases spreading to or from the consignment
during its movement. For such a transit to be permitted, it is a
prerequisite that the veterinary conditions agreed upon by both
sides will be met in regard to importation of animals, their
products and biological products from external markets. Therefore
the parties agree to the following arrangements.
6. The official veterinary services of each side have the authority
to issue veterinary import permits for import of animals, animal
products and biological products to the areas under its
jurisdiction. In order to prevent the introduction of animal
diseases from third parties, the following procedures will be
adopted:
a. The import permits will strictly follow the professional
veterinary conditions for similar imports to Israel as
prevailing at the time of their issuance. The permits will
specify the country of origin and the required conditions to
be included in the official veterinary certificates which
should be issued by the veterinary authorities in the
countries of origin and which should accompany each
consignment.
Each side may propose a change in these conditions. The change
will come into force 10 days after notice to the other side,
unless the other side requested that the matter be brought
before the Veterinary Sub-Committee specified in para 14
(hereinafter - VSC). If it is more stringent than the
prevailing conditions - it will come into force 20 days after
the request, unless both sides decide otherwise through the
VSC, and if more lenient - it will come into force only if
agreed upon by both sides through the VSC.
However, if the change is urgent and needed for the protection
of animal and public health, it will come into force
immediately after notice by the other side and will remain in
force unless and until both sides agree otherwise through the
VSC.
b. The official veterinary certificates will include the
provisions regarding OIE Lists A & B Diseases as specified in
the I.A.H.C. When the I.A.H.C. allows alternative requirements
regarding the same disease, the most stringent one will be
adopted unless otherwise agreed upon by the VSC.
c. When infectious diseases which are not included in Lists A & B
of the I.A.H.C. exist or are suspected, on scientific grounds,
to exist in the exporting country, the necessary veterinary
import conditions that will be required and included in the
official veterinary certificates, will be discussed in the
VSC, and in the case of different professional opinions, the
most stringent ones will be adopted.
d. The import of live vaccines will be permitted only if so
decided by the VSC.
e. Both sides will exchange, through the VSC, information
pertaining to import licensing, including the evaluation of
the disease situation and zoosanitary capability of exporting
countries, which will be based upon official information as
well as upon other available data.
f. Consignments which do not conform with the above mentioned
requirements will not be permitted to enter the areas under
the jurisdiction of either side.
7. Transportation of livestock and poultry and of animal products
and biological products between areas under the jurisdiction of
one side through areas under the jurisdiction of the other side,
will be subject to the following technical rules:
a. The transportation will be by vehicles which will be sealed
with a seal of the official veterinary services of the place
of origin and marked with a visible sign "Animal
Transportation" or "Products of Animal Origin" in Arabic and
Hebrew, in coloured and clearly visible letters on white
background.;
b. Each consignment will be accompanied by a veterinary
certificate issued by the official veterinary services of the
place of origin, certifying that the animals or their products
were examined and are free of infectious diseases and
originate from a place which is not under quarantine or under
animal movement restrictions.
8. Transportation of livestock and poultry, animal products and
biological products destined for Israel from the Areas and vice
versa will be subject to veterinary permits issued by the
official veterinary services of the recipient side, in keeping
with the OIE standards used in international traffic in this
field. Each such consignment will be transported by a suitable
and marked vehicle, accompanied by a veterinary certificate in
the form agreed upon between the official veterinary services of
both sides. Such certificates will be issued only if permits of
the recipient side are presented.
9. In order to prevent the introduction of plant pests and diseases
to the region, the following procedures will be adopted :
a. The transportation between the Areas and Israel, of plants and
parts thereof (including fruits and vegetables), the control
of pesticide residues in them and the transportation of plant
propagation material and of animal feed, may be inspected
without delay or damage by the plant protection services of
the recipient side.
b. The transportation between the Areas through Israel of plants
and parts thereof (including fruits and vegetables) as well as
of pesticides, may be required to pass a phytosanitary
inspection without delay or damage.
c. The official Palestinian plant protection services have the
authority to issue permits for the import of plants and parts
thereof as well as of pesticides from external markets. The
permits will be based on the prevailing standards and
requirements.
The permits will specify the required conditions to be
included in the official Phytosanitary Certificates (hence
P.C.) based upon the standards and the requirements of the
International Plant Protection Convention (I.P.P.C.)and those
of the European and Mediterranean Plant Protection
Organization (E.P.P.O.) which should accompany each
consignment.
The P.C.'s will be issued by the plant protection services in
the countries of origin. Dubious or controversial cases will
be brought before the sub-committee on plant protection.
10. The agricultural produce of both sides will have free and
unrestricted access to each others' markets, with the temporary
exception of sales from one side to the other side of the
following items only: poultry, eggs, potatoes, cucumbers,
tomatoes and melons. The temporary restrictions on these items
will be gradually removed on an increasing scale until they are
finally eliminated by 1998, as listed below:
Year Poultry Eggs Potatoes Cucumbers Tomatoes Melons
--------------------------------------------------------------------
(In tons) (In (In tons) (In tons) (In tons) (In tons)
millions)
1994 5,000 30 10,000 10,000 13,000 10,000
1995 6,000 40 13,000 13,000 16,000 13,000
1996 7,000 50 15,000 15,000 19,000 15,000
1997 8,000 60 17,000 17,000 22,000 17,000
1998 unlimited unlimited unlimited unlimited unlimited unlimited
---------------------------------------------------------------------
Note: The above figures refer to the combined quantities marketed
from the West Bank and Gaza Strip to Israel and vice-versa.
The Palestinian Authority will notify Israel the apportioning
of these quantities between these areas concerning the
quantities pertaining to the Palestinian produce.
11. The Palestinians will have the right to export their agricultural
produce to external markets without restrictions, on the basis of
certificates of origin issued by the Palestinian Authority.
12. Without prejudice to obligations arising out of existing
international agreements, the two sides will refrain from
importing agricultural products from third parties which may
adversely affect the interests of each other's farmers.
13. Each side will take the necessary measures in the area under its
jurisdiction to prevent damage which may be caused by its
agriculture to the environment of the other side.
14. The two sides will establish sub-committees of their respective
official veterinary and plant protection services, which will
update the information and review issues, policies and procedures
in these fields. Any changes in the provisions of this Article
will be agreed upon by both sides.
15. The two sides will establish a sub-committee of experts in the
dairy sector in order to exchange information, discuss and
coordinate their production in this sector so as to protect the
interests of both sides. In principle, each side will produce
according to its domestic consumption.
Article IX
INDUSTRY
1. There will be free movement of industrial goods free of any
restrictions including customs and import taxes between the two
sides, subject to each side's legislation.
2. a. The Palestinian side has the right to employ various methods
in encouraging and promoting the development of the
Palestinian industry by way of providing grants, loans,
research and development assistance and direct-tax benefits.
The Palestinian side has also the right to employ other
methods of encouraging industry resorted to in Israel.
b. Both sides will exchange information about the methods
employed by them in the encouragement of their respective
industries.
c. Indirect tax rebates or benefits and other subsidies to sales
shall not be allowed in trade between the two sides.
3. Each side will do its best to avoid damage to the industry of the
other side and will take into consideration the concerns of the
other side in its industrial policy.
4. Both sides will cooperate in the prevention of deceptive
practices, trade in goods which may endanger health, safety and
the environment and in goods of expired validity.
5. Each side will take the necessary measures in the area under its
jurisdiction to prevent damage which may be caused by its
industry to the environment of the other side.
6. The Palestinians will have the right to export their industrial
produce to external markets without restrictions, on the basis of
certificates of origin issued by the Palestinian Authority.
7. The JEC will meet and review issues pertaining to this Article.
Article X
TOURISM
1. The Palestinian Authority will establish a Palestinian Tourism
Authority which will exercise, inter alia, the following powers
in the Areas.
a. Regulating, licensing, classifying and supervising tourist
services, sites and industries.
b. Promoting foreign and domestic tourism and developing the
Palestinian tourist resources and sites.
c. Supervising the marketing, promotion and information
activities related to foreign and domestic tourism .
2. Each side shall, under its respective jurisdiction, protect,
guard and ensure the maintenance and good upkeep of historical,
archaeological, cultural and religious sites and all other
tourist sites, to fit their status as well as their purpose as a
destination for visitors.
3. Each side will determine reasonable visiting hours and days for
all tourist sites in order to facilitate visits at a wide variety
of days and hours, taking into consideration religious and
national holidays. Each side shall publicize such opening times.
Meaningful changes in the opening times will take into
consideration tourist programs already committed to.
4. Tourist buses or any other form of tourist transport authorized
by either side, and operated by companies registered and licensed
by it, will be allowed to enter and proceed on their tour within
the area under the jurisdiction of the other side, provided that
such buses or other vehicles conform with the EEC technical
specifications [I. currently adopted.] All such vehicles will be
clearly marked as tourist vehicles.
5. Each side will protect the environment and the ecology around the
tourist sites under its jurisdiction. In view of the importance
of beaches and maritime activities for tourism, each side will do
its best efforts to ensure that development and construction on
the Mediterranean coast, and especially at ports (such as
Ashqelon or Gaza), will be planned and carried out in a manner
that will not adversely affect the ecology, environment or the
functions of the coastline and beaches of the other side.
6. Tourism companies and agencies licensed by either side shall
enjoy equal access to tourism - related facilities and amenities
in border points of exit and entry according to the regulations
of the authority operating them.
7. a. Each side will license, according to its own rules and
regulations, travel agents, tour companies, tour guides and
other tourism businesses (hereinafter - tourism entities)
within its jurisdiction.
b. Tourism entities authorized by either side, will be allowed to
conduct tours that include the area under the jurisdiction of
the other side, provided that their authorization as well as
their operation will be in accordance with rules, professional
requirements and standards agreed upon by both sides in the
sub-committee mentioned in para 9.
Pending that agreement, existing tourism entities in the Areas
which are currently allowed to conduct tours that include
Israel, will be allowed to continue to do so, and Israeli
authorized tourism entities will continue to be allowed to
conduct tours that include the Areas.
In addition, any tourism entity of one side that the tourism
authorities of the other side will certify as fulfilling all
its rules, professional requirements and standards, will be
allowed to conduct tours that include that other side.
8. Each side will make its own arrangement for compensation of
tourists for bodily injury and property damages caused by
political violence in the areas under its respective
jurisdiction.
9. The JEC or a tourism sub-committee established by it shall meet
upon the request of either side in order to discuss the
implementation of the provisions of this Article and resolve
problems that may arise. The sub-committee will also discuss and
consider tourist issues of benefit to both sides, and will
promote educational programs for tourism entities of both sides
in order to further their professional standards and their
ethics. Complaints of one side against the behaviour of tourism
entities of the other side will be channelled through the
committee.
Note: It is agreed that the final wording in the last sentence in
para 4 will be adopted according to the final wording in the
relevant provisions of the Agreement.
Article XI
INSURANCE ISSUES
1. The authorities, powers and responsibilities in the insurance
sphere in the Areas, including inter alia the licensing of
insurers, insurance agents and the supervision of their
activities, will be transferred to the Palestinian Authority.
2. a. The Palestinian Authority will maintain a compulsory absolute
liability system for road accident victims with a ceiling on
the amount of compensation based upon the following
principles:
(1) Absolute liability for death or bodily injury to road
accident victims, it being immaterial whether or not there
was fault on the part of the driver and whether or not
there was fault or contributory fault on the part of
others, each driver being responsible for persons
travelling in his vehicle and for pedestrians hit by his
vehicle.
(2) Compulsory insurance for all motor vehicles, covering
death or bodily injury to all road accident victims,
including drivers.
(3) No cause of action in tort for death or bodily injury
resulting from road accidents.
(4) The maintenance of a statutory fund (hereinafter - the
Fund) for compensation of road accident victims who are
unable to claim compensation from an insurer for the
following reasons:
(i) the driver liable for compensation is unknown;
(ii) the driver is not insured or his insurance does not
cover the liability involved; or
(iii) the insurer is unable to meet his liabilities.
b. Terms in this Article will have the same meaning as in the
legislation prevailing at the date of signing of the Agreement
concerning compulsory motor vehicle insurance and compensation
of road accident victims.
c. Any change by either side in the rules and regulations
regarding the implementation of the above mentioned principles
will require prior notice to the other side. A change which
might substantially affect the other side will require prior
notice of at least three months.
3. a. Upon the signing of the Agreement the Palestinian Authority
will establish a Fund for the Areas (hereinafter - the
Palestinian Fund) for the purposes detailed in para 2(a)(4)
above and for the purposes detailed below. The Palestinian
Fund will assume the responsibilities of the statutory Road
Accident Victims Compensation Fund in the West Bank and the
Gaza Strip (hereinafter - the Existing Fund) regarding the
Areas, according to the prevailing law at that time.
Accordingly, the Existing Fund will cease to be responsible
for any liability regarding accidents occurring in the Areas
from the date of signing of the Agreement.
b. The Existing Fund will transfer to the Palestinian Fund, after
the assumption of the above mentioned responsibilities by it,
the premiums paid to the Existing Fund by the insurers for
vehicles registered in the Areas, pro-rata to the unexpired
period of each insurance policy.
4. a. Compulsory motor vehicle insurance policies issued by
insurers licensed by either side will be valid in the
territories of both sides. Accordingly, a vehicle registered
in one side covered by such a policy will not be required to
have an additional insurance coverage for travel in the areas
under the other side's jurisdiction. These insurance policies
will cover all the liabilities according to the legislation of
the place of the accident.
b. In order to cover part of the liabilities which may incur due
to road accidents in Israel by uninsured vehicles registered
in the Palestinian Authority, the Palestinian Fund will
transfer to the Israeli Fund, on a monthly basis, for each
insured vehicle, an amount equal to 30% of the amount paid to
the Israeli Fund by an insurer registered in Israel, for the
sat-ne type of vehicle, for the same period of insurance
(which will not be less than 90 days).
5. In cases where a victim of a road accident wishes to claim
compensation from an insurer registered by the other side or from
the Fund of the other side or in cases where a driver or an owner
of a car is sued by a victim, by an insurer or by the Fund of the
other side, he may nominate the Fund of his side as his proxy for
this purpose. The Fund so nominated may address any relevant
party from the other side directly or through the other sides'
Fund.
6. In the case of a road accident in which neither the registration
number of the vehicle nor the identity of the driver are known,
the Fund of the side which has jurisdiction over the place of the
accident will compensate the victim, according to its own
legislation.
7. The Fund of each side will be responsible towards the victims of
the other side for any liability of the insurers of its side
regarding the compulsory insurance and will guarantee their
liabilities.
8. Each side will guarantee its Fund's liabilities according to this
Article.
9. The two sides will negotiate within three months from the date of
the signing of the Agreement a cut-off agreement between the
Existing Fund and the Palestinian Fund concerning accidents which
occurred in the Areas prior to the date of the signing of the
Agreement, whether claims have been reported or not. The cut-off
agreement will not include compensation for Israeli victims
involved in accidents which occurred in the Areas prior to the
date of the signing of the Agreement.
10. a. The two sides will establish immediately upon the signing of
the Agreement, a sub-committee of experts (hereinafter - the
Sub-Committee) which will deal with issues regarding the
implementation of this Article, including:
(1) Procedures concerning the handling of claims of victims of
the one side from insurers or from the Fund of the other
side;
(2) Procedures concerning the transfer of the amounts between
the Funds of both sides as mentioned in para 4(b) above-,
(3) The details of the cut-off agreement between the Existing
Fund and the Palestinian Fund, as set out in para 9 above;
(4) Any other relevant issue raised by either side.
b. The Sub-Committee will act as a continuous committee for
issues regarding this Article.
c. The two sides will exchange, through the Sub-Committee, the
relevant information regarding the implementation of this
Article, including police reports, medical information,
relevant statistics, premiums, etc.. The two sides will
provide each other with any other assistance required in this
regard.
11. Each side may require the re-examination of the arrangements set
out in this Article a year after the date of the signing of the
Agreement.
12. Insurers from both sides may apply for a license to the relevant
authorities of the other side, according to the rules and
regulations regarding foreign insurers in the latter side. The
two sides agree not to discriminate against such applicants.
Done in Paris, this twenty ninth day of April, 1994
For the Government of Israel For the PLO
Finance Minister Avraham Shohat Abu Ala (Ahmed Korei)
.
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