Israel has a single-column import tariff based on the Brussels nomenclature classification. Ad valorem rates predominate, although specific and compound rates are also used. Most basic food commodities, raw materials, and machinery for agricultural or industrial purposes are exempt from customs duties. The highest rates are applied to nonessential foodstuffs, luxury items, and manufactured goods that are of a type produced in Israel. There are also a 17% value-added tax (VAT), which is levied on virtually all commodities except fresh fruits and vegetables, and a purchase tax ranging from 5–90% on most consumer goods.
A free-trade agreement between Israel and the then-European Community (today, the European Union) took effect on 1 July 1975. Under this agreement, EC tariffs on Israel's industrial exports were immediately reduced by 60% and were subsequently eliminated. Preferential treatment has also been extended to Israel's agricultural exports. In return, Israel has granted concessions to the European Union on many categories of industrial and agricultural imports and agreed to gradually abolish its customs duties on imports from the European Union.
Israel also belongs to the World Trade Organization (WTO) and operates its trade regime according to WTO guidelines. Most significantly, the WTO calls for the elimination of non-tariff barriers. Israel also signed a free trade agreement with the United States in 1985, which called for the elimination of all remaining duties on US-made products by 1 January 1995. However, Israel and the United States differ on the interpretation of the treaty and it has yet to be fully implemented.