Israel-China trade to flourish under new customs deal

Recently signed Authorized Economic Operator agreement is expected to boost business ties, say Israeli officials

Israel Tax Authority head Moshe Asher (L)) with China's Customs Minister Sun Yibiao at the signing of the AEO agreement in Beijing on Tuesday, May 26 2015 (Photo credit: Courtesy)
Israel Tax Authority head Moshe Asher (L)) with China's Customs Minister Sun Yibiao at the signing of the AEO agreement in Beijing on Tuesday, May 26 2015 (Photo credit: Courtesy)

For the first time, Israel imported more from China that it did from the United States. Statistics released on Wednesday by Israel’s Central Bureau of Statistics showed that Israel imported $8.1 billion in goods and services from China in 2014, compared to $7.4 billion in from the US during the year.

And Israel is likely to import – and export – more to China in the coming years, the result of the signing of an agreement between the two countries setting up an Authorized Economic Operator (AEO) program. A project of the World Customs Organization, the AEO allows governments to appoint specific “trusted” companies and agents that are vetted for their ability to adhere to all international labeling and shipping measures. The benefit for participants: a fast-track customs policy between the participating countries, which allows exporters to get their products to market in the partner country without customs checks or delays.

With the agreement, said Alain Dobkin, Managing Partner at Catalyst CEL, an Israeli-Chinese fund (managed by Israeli Catalyst and China Everbright Ltd), “we are already seeing the fruits from the cooperation between the Israeli government and the private sector to strengthen the business relations with China, and this is definitely only the beginning of a long-term trend.”

The AEO program is relatively new, first implemented in the US in 2007. According to the World Customs Organization, the objective is to get all national programs mutually recognized, meaning that AEO accreditations would have the same value everywhere. As a result secure supply chains can be established, as all parts of the chain from origin (place of stuffing of the container) to destination (place of unpacking of the container) are deemed to be safe, albeit under different AEO programs. This would greatly facilitate global trade.

The US is by far the most active member of the program. Washington has agreements with Canada, New Zealand, Japan, South Korea and Israel. Until Wednesday, the US was Israel’s only AEO “customer,” but with the new agreement, Israel and China will accredit exporters in each other’s country, based on AEO criteria. For China, the agreement with Israel is its first outside of Asia.

One of the benefits Israel hopes to realize from the deal is an increase of its exports to China. While Israel imported over $8 billion in goods (mostly electronics, food and textiles) and goods from that country in 2014, it was able to export only $2.7 billion worth of goods and services.

Israeli officials are optimistic that their export numbers will grow said Moshe Asher, head of the Israel Tax Authority. “The mutual recognition program with China will make it easier for trade to take place between the two countries, ensuring the highest standards of legal compliance,” he said. “The deal will also make trade with China more attractive for companies in both countries, and we are positive that it will lead to a flowering of trade relations between both us.”

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