Palestine signed trade agreements with Arab countries (GAFTA), and interim agreements with both the EU and EFTA states. The majority of Palestine's foreign trade is with Israel, followed by some of the Arab countries, the European Union, Turkey, South and East Asia and the United States. Like all countries that have a high trade dependence on one particular country, Palestine's dependence on Israel has both positive and negative consequences. On one hand, exporters know their markets very well and benefit from their advanced technology, but adversely, any shock to the Israeli economy can have strong effects on the Palestinian markets. Therefore, the Palestinian Authority and the private sector are cooperating to increase the rate of direct trade transactions with less dependency on Israeli intermediation. Trade with Israel is governed by the economic agreement with Israel (Paris protocol).

Read more about the Investment Legislation

The development of Palestine’s transport policy and infrastructure is severely constrained, particularly due to Israel’s occupation and closure regime, and issues relating to permitting and ownership.

Infrastructure represents a challenge to the Palestinian economy as it doesn’t control sea ports or airports.

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According to the International Telecommunication Union, though Palestine has a high percentage of individuals using the Internet (61.2% compared to 45.9% globally), it has limited fixed-broadband penetration where the percentage of fixed-broadband subscribers is only 6.9% compared to 12.4% globally.

Palestine Infrastructure Overview

Palestine exports witnessed an increase in 2021 reaching 1.45 Billion USD compared to 1.054 billion USD in 2020, and imports reached 6.4 billion USD. Most of Palestine trade is with Israel due to the fact that Palestine has no control over its border or customs points.

• The main export markets for Palestinian products are: Israel, Jordan, United Arab Emirates, USA, Saudi Arabia, Turkiye, Kuwait, UK, Qatar.
• The main export products are: fruits, pharmaceutical products, stones, vegetables, spices, aluminum, raw hides and skins.
• The main countries where imports come from are: Israel, Turkiye, China, Jordan, Germany, Switzerland, Egypt, Italy.
• The main imports are: vehicles, pharmaceutical products, cereals, machinery and mechanical appliances, electrical machinery and equipment.

Source of data: Trademap (International Trade Centre) Palestine Central Bureau of Statistics

Import Procedures

Palestinian and foreign entities must obtain a trade authorization before engaging in any trade transaction. The Foreign Trade Dealing Registration is a one-time authorization to trade, applicable for both import and export across international borders. Applications are submitted to the Ministry of National Economy, upon approval, they will provide authorization for both Palestine and Israel. No fees are charged and the time frame of the procedure should not exceed three weeks.

The importer must be aware of certain requirements that must be fulfilled prior to importing and while clearing goods at the port of entry. These requirements do not apply to all categories of imported goods. Failure to meet these requirements may result in delays and additional costs. These requirements are:

• Valid Import Licenses
• Valid Certificates of Origin
• Compliance with Standards & Testing
• Compliance with Sanitary and Phytosanitary Regulations
• Proper Marking, Labeling and Packaging

The Palestinian licensing system requires an import license in the following cases:

• When imports are subject to quotas, as in the case of agricultural products and goods cited on Lists A1, A2 and B of the Paris Protocol.
• When public health is involved (i.e. meat, foodstuffs or pharmaceuticals) a license is required to verify that imports meet Palestinian standards.
• When importing petroleum, gas, telecommunications equipment, or motor vehicles.
• As the Palestinian applies the Israeli import policy, an import license is required when an (L) indication appears in the Tariff Book of Israel.

Applications for import licenses are obtained at the General Directorate of Internal Trade – Ministry of National Economy. The applicant is required to provide four copies of the application form.

The following categories of products require approval from relevant Palestinian ministries and/or entities prior to the issuance of the license:

• Gasoline (petrol) and oil require the approval of the General Petroleum Corporation.
• Cigarettes and tobacco require authorization from the Palestinian Tobacco Authority.
• Insecticide and paint mixtures require approval from the Environmental Department.
• Motor vehicles and related spare parts require approval from the Ministry of Transportation.
• Telecommunications items require the approval of the Ministry of Post and Telecommunications.
• Agricultural products and foodstuffs require the approval of the Ministry of Agriculture.
• Chemical products require the approval of the Ministry of Health.

Additional detailed information regarding the above requirements can be obtained from the Ministry of National Economy, trade associations, trade agencies or from The Palestinian Export Import Guide.
Prohibited Goods
Clearance of Goods
Tariffs
Customs Valuation
Other Levies: Surcharges
Purchase and Excise Taxes
Value-Added Tax (VAT)
Transportation
 

Prohibited Goods
All sources of internationally controlled substances such as narcotic drugs and psychotropic substances. Pornographic publications, hate literature and any other materials contrary to generally accepted public morals, human, animal & plant health or national security.
Imports of motor vehicles older than 3 years, according to Article 3, Paragraph 11 (a) of the Paris Protocol.
 

Clearance of Goods
before goods arrive to the port, the importer should inform the clearing agent regarding the date of arrival and provide the agent with the required documents. Assuming all the documentation is in order, the Customs Declaration Form will be issued.

Once the shipment arrives, goods must be unloaded, cleared, inspected and pass security clearance.

After being inspected, a gate pass is provided to the importer. The goods can then leave the port area. Special arrangements to leave the port area apply to trucks transporting frozen meat and livestock to the West Bank and Gaza Strip (which require an Israeli Authority escort either (1) directly to the importer's warehouse or (2) to the Palestinian checkpoint when such a warehouse lies within Area A). The same escorting procedures apply to goods destined for the Gaza Strip on Palestinian trucks.
 

Value-Added Tax (VAT)
The value-added tax is an indirect form of taxation on both locally produced and imported goods. The VAT is calculated at 16 % and is applied after all other tariffs and taxes have been added to the CIF value.

Transportation
Transporting goods from Israeli ports to the West Bank or Gaza can be done by Israeli-licensed trucks (yellow plated) or Palestinian-licensed (green plated) trucks. When Palestinian trucks are used, they require special permits.

Goods transported to the West Bank by Israeli-licensed trucks are permitted to proceed all the way to the final destination. Some Palestinian vehicles are granted Israeli permission to transport goods from Israeli ports back to the West Bank.

Goods transported to Gaza by Israeli-licensed trucks must be unloaded at the Israeli crossing point with Gaza and reloaded on Palestinian trucks.

Read more about: Import Laws and Procedures

Export procedures:

Exports do not normally require licenses. However, certain categories of goods need to meet specific standards and other controls. For these goods, export authorizations should be obtained; these automatically become export licenses when all the requirements have been fulfilled.

• Categories of goods requiring an authorization are the following:
  Food stuffs and chemicals - authorization is obtained from the Ministry of Health. 
• Agricultural products - authorization is obtained from the Ministry of Agriculture and is valid for a single shipment.
   

Certificates of Origin
It is necessary to have certificates of origin in order to benefit from preferential tariff treatment. The trade agreements signed between the PA and the EU, USA, Canada, and the Arab countries state that exported goods should be accompanied with a certificate of origin in order to benefit from duty-free and the other preferential tariff treatments.
 

Shipping Documents
The clearing agent receives products on behalf of the exporter and starts the process of transferring goods onto the international carrier. The international carrier can be paid either on "Freight Collect" or on "Freight Prepaid" basis.

The following are the documents to be prepared prior to shipping:

• Insurance: The most common clauses related to the trader's liability for the goods are "Free On Board" (FOB) and "Cost, Insurance and Freight" (CIF).
• Bill of Lading 
• Airway Bill
• Invoices (pro-forma and commercial)
• Packing List

Marking and Labeling
Common shipping marks are the identification of the importer, the number of the packing case, the port of destination, gross and net weights, outside measurements of the case, the country of origin and cautionary marks if careful handling is needed. However, rules applying to shipping marks can vary according to the country of destination.

Labeling requirements vary according to the country of destination. Normally, detailed rules are applied to foodstuffs, pharmaceuticals and cosmetics, textile and garments. The importer provides details on labels according to the requirements in the country of destination.
 

Fees & Taxes
There are no taxes, tariffs or duties to pay on exports. The importer will pay the required duties and taxes at the port of destination. Port fees to be paid are 1.3% of the value of the shipment.
 

Transportation
Goods can be transported to the port area in containers or in other transport cases. In the latter case, the clearing agent, the trucking agency or the forwarding company may load the container. If the goods are transported in containers from the warehouse, then the exporter must arrange with the shipping or forwarding company for the container to be brought and filled at the factory.
 

Procedure from Gaza to the Port of Embarkation
In case the exporting process starts from the Gaza Strip, goods must be transported to a crossing point with Israel, using Palestinian trucks. From the crossing points, the exporter has two options, either using Israeli-licensed trucks to reach the port area, or using Palestinian-licensed trucks.
 

Exporting and Re-exporting
In the case of exporting goods which may be re-imported to the country of origin, there is a special license to be obtained from the Ministry of National Economy. This license is made available for traders participating in fairs abroad and for exporters of machines to be repaired abroad.

In the case of foreign trade fairs, tariffs and duties will be paid only on the items sold abroad, based on counting of items returned to the West Bank and Gaza as compared to the packing list. In case machinery is being repaired abroad, only VAT will be paid on the value of the repair, this value is verified by the service invoice.
 

Drawback System
The exporter can apply at the Ministry of National Economy for a license that allows reimbursement of duties for imports intended for processing and re-export. The request for this license must articulate the reasons for re-exporting and contain the following:

• Name and address of the exporter
• Type of products, quantity and the acquisition year 
• Origin of the inputs and source of acquisition proved by the purchasing invoice
   

Re-exporting License
The re-exporting license is used when exporting defects previously imported, such as motor vehicles, computers or electronic parts.

Read more: Export Procedures and Regulations 

Customs:

Palestinian tariffs are usually set at the same level as their Israeli tariffs. The Palestinian Authority may apply tariffs below Israeli tariff rates with respect to goods listed in annexes to the Paris Protocol.

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Tariffs
Most tariffs are ad valorem (proportionate to the value of the goods) and consequently, are calculated as a percentage that includes cost, insurance and freight (CIF).

Sometimes tariffs are calculated on a pre-specified basis, which is assessed on a statistical unit, as listed in the Tariff Book. Specific duties are common in the agricultural sector, particularly on meat, fruit, nuts and animal or vegetable fats and oils.

Tariffs can be combined (ad valorem plus specific). The total tariff is the sum of an ad valorem and a specific tariff. Combined tariffs apply mostly to textiles and textile articles, beverages and spirits, some electrical machinery, fish and crustaceans, edible vegetables and prepared cereals.
Tariffs can also be alternative (either ad valorem or specific). The Tariff Book indicates which of the two apply with the following acronyms: "But Not Less" (BNL) or "But Not More" (BNM). Alternative rates are applied mainly to clothing, dairy products, live animals, poultry, meat, edible fruit, prepared vegetables and some electrical machinery and equipment.
 

Customs Valuation
Customs valuation follows the Brussels definition of value: the value of imported goods is the value of the goods on the open market on the day they are released from the customs authorities.
 

Other Levies: Surcharges
The Tariff Book contains a special column indicating compulsory surcharges (indicated by the letter ("C")) applied on a number of imported goods including foodstuffs such as edible meat, fish and crustaceans, and textile products.
 

Purchase and Excise Taxes
Purchase and excise taxes are levied on both local and imported goods. Purchase taxes are levied on consumer goods (perfumery, carpets, clocks and watches), iron and steel products, some copper products, alcohol, machinery and boilers, some electrical machinery, motor vehicles, cosmetics, and tobacco. The purchase tax is calculated on the value of goods, adding the import increment.

Excise taxes are applied to alcoholic beverages, petroleum, arms and tobacco.
 

Agencies involved in foreign Trade