RESTRICTED  WORLD TRADE  
ORGANIZATION  GPA/MOD/ISR/1 
19 November 2004 
 (04-5046) 
Committee on Government Procurement Original:   English 
   
 
PROPOSED MODIFICATIONS TO APPENDIX I OF ISRAEL  
 
Communication from Israel pursuant to Article XXIV:6(a)
1 of the GPA  
 
 
  The following communication, dated 18 Novemb er 2004, from the Delegation of Israel is 
being circulated to the Parties to the Agreement on Government Procurement.  
_______________ 
   
1. Pursuant to Article XXIV:6(a) of the Agre ement on Government Procurement (hereinafter 
"the Agreement"), the Government of Israel  wishes to notify the Committee on Government 
Procurement of the following proposed modifications  to its Note to Appendix I of the Agreement: 
 
- Paragraph 1(c) of the Note will read as fo llows:  "Offsets in any form may be required 
up to 35 per cent of the contract, going down to 30 per cent after five years beginning from the date Israel implements the Agreemen t, and subsequently to 25 per cent on 1 
January 2007 and to 20 per cent on 1 January 2010."  
 
- Paragraph 2(a) of the Note will read as follo ws:  "At the end of each period Israel will 
submit a report concerning the implementation of this Note." 
 2. The proposed modification implies the following changes: 
 
- According to Israel's Note to its Appendix  I of the Agreement, the level of offsets 
invoked by Israeli procuring entities should be set at 20 per cent of the value of the contract, beginning on 1 January 2005. 
 
- Israel is proposing to modify its Note in or der to maintain its current level of offsets 
at 30 per cent for an additional two-year peri od, after which time the level of offsets 
would be set at 25 per cent, followed by an  additional reduction to the level of 20 per 
cent  after three years . 
 
                                                     
 
 1 Article XXIV:6(a) reads as follows:  Rectifications or  Modifications   (a) Rectifications, transfers of an entity 
from one Annex to another or, in exceptional cases, other modifi cations relating to Appendices I through IV shall be notified 
to the Committee, along with information as to the likely cons equences of the change for the mutually agreed coverage 
provided in this Agreement.  If the rectifications, transfers or  other modifications are of a pur ely formal or minor nature, th ey 
shall become effective provided there is no objection within 30 days.  In other case s, the Chairman of the Committee shall 
promptly convene a meeting of the Committee.  The Committee shall consider the proposal and any claim for compensatory 
adjustments, with a view to maintaini ng a balance of rights and obligations and a comparable level of mutually agreed 
coverage provided in this Agreement prior to such notification.   In the event of agreement not being reached, the matter may 
be pursued in accordance with the provisions contained in Article XXII. GPA/MOD/ISR/1 
Page 2  
- Israel is proposing to modify its Note in order to adjust the time-periods for the 
submission of reports specifie d in paragraph 2(a), in order to reflect the proposed 
modifications to paragraph 1(c) of the Note. 
 
3. The reasons for the proposed modification are as follows: 
 
(a) The Israeli economy is dominated by small and medium-size enterprises which, 
currently, lack the capabilities to secure tenders covered by the Agreement as prime 
contractors.  Therefore, the offset pr ovision in the Agreement, which enables 
industrial cooperation between Israeli and fo reign enterprises, is essential for Israel’s 
industry.  Maintaining the level of offset at 30 per cent will allow the industry to 
meaningfully participate and be nefit from industrial cooperation. 
 (b) The reduction of the offset level has been until now gradual.  It started at 35 per cent 
for the first five years from the implementa tion date of the Agreement and decreased 
to a level of 30 per cent for the subsequent  four-year period.  The scheduled reduction 
to a level of 20 per cent is a steep and sh arp decline which would cause injury to the 
Israeli industry.  
 (c)  The circumstances described above are all the more serious in light of the ongoing 
recession in the Israeli economy.  Small and medium-size enterprises are the first 
ones to bear the consequences of any lo ss of industrial cooperation opportunities 
which is likely to result in the increase of the unemployment rate.  
 (d) Maintaining the level of offset at 30 per cent will prevent further deterioration of the 
domestic industry.  The gradual reduction of the offset level will facilitate the 
industry's transition and will allow it to adap t to the situation arising from the reduced 
offset levels.  
 4. The proposed modification prescribes a well-de fined time-frame for the gradual reduction of 
the level of offsets.  5. There are no consequences of the proposed m odification for the mutually agreed coverage as 
scheduled by Israel in Annexes 1 to 5 of Appendix I.  The proposed modification implies that foreign 
suppliers may be required to enga ge in industrial cooperation at th e levels and for the time-periods 
specified in paragraph 2 above.  6. Attachment A indicates the proposed changes to page 1/1 of the Note of Appendix I.  
Attachment B shows how page 1/1 of the Note of Appendix I would appear after the proposed 
modification has been made.
2 
 
                                                      
2 Attachments A and B are in English only. GPA/MOD/ISR/1 
Page 3 
 
APPENDIX I ISRAEL  NOTE Page 1/1
 
1 March  2000 (WT/Let/ 330) ATTACHMENT A 
 
NOTE 
 
Offset  
  
1. Having regard to Article XVI and to genera l policy considerations regarding development, 
Israel may operate provisions wh ich require the limited incorpor ation of domestic content, 
offset procurement or transfer of technology, in the form  of objective and clearly defined 
conditions for participation in procedures for th e award of contracts, which do not discriminate 
between other Parties. 
 
 This shall be done under the following terms:   (a) Israel shall ensure that its entities indicate the existe nce of such conditions in their 
tender notices and specify them cl early in the contract documents. 
 
 (b) Suppliers will not be required to purc hase goods that are not offered on competitive 
terms, including price and quality, or to take  any action which is not justified from a 
commercial standpoint. 
  (c) Offsets in any form may be requir ed up to 35 per cent of the contract,
 going down to 
30 per cent after five years and 2 0 per cent af ter nine years beginning from the date 
Israel implements the Agreement, and s ubsequently to 25 per cent on 1 January 2007 
and to 20 per cent on 1 January 2010.  
 2. (a) At the end of each period of five and four years
 Israel will submit a report concerning 
the implementation of this Note. 
  (b) When the level of the offset has reached 20 per cent, Israel will consult with the Parties 
to this Agreement on the level of the use of of fset by Israel.  The review shall take into 
consideration inter alia  general and economic developments in Israel, its trade balance, 
the actual performance within the framewor k of this Agreement and the views of the 
other Parties. 
 GPA/MOD/ISR/1 
Page 4  
APPENDIX I ISRAEL  NOTE Page 1/1
 
...  (WT/Let/...)  ATTACHMENT B 
 
NOTE 
 
Offset  
 1. Having regard to Article XVI and to genera l policy considerations regarding development, 
Israel may operate provisions wh ich require the limited incorpor ation of domestic content, 
offset procurement or transfer of technology, in the form  of objective and clearly defined 
conditions for participation in procedures for th e award of contracts, which do not discriminate 
between other Parties. 
 
 This shall be done under the following terms: 
  (a) Israel shall ensure that its entities indicate the existe nce of such conditions in their 
tender notices and specify them cl early in the contract documents. 
 
 (b) Suppliers will not be required to purc hase goods that are not offered on competitive 
terms, including price and quality, or to take  any action which is not justified from a 
commercial standpoint. 
  (c) Offsets in any form may be required up to 35 per cent of the contract, going down to 
30 per cent after five years beginning from th e date Israel implements the Agreement, 
and subsequently to 25 per cent on 1 January 2007 and to 20 per cent on 
1 January 2010. 
 2. (a) At the end of each period Israel will submit a report concerni ng the implementation of 
this Note. 
 
 (b) When the level of the offset has reached 20 per cent, Israel will consult with the Parties 
to this Agreement on the level of the use of of fset by Israel.  The review shall take into 
consideration inter alia  general and economic developments in Israel, its trade balance, 
the actual performance within the framewor k of this Agreement and the views of the 
other Parties. 
__________ 