Overview

The West Bank population is heavily concentrated in the four major towns of Nablus, Ramallah, Jenin, and Tulkarem in the northern part of the West Bank, and in Bethlehem and Hebron in the southern part. In Gaza, the population is heavily concentrated in or near the urban centers of Gaza City.

The West Bank and Gaza have no ports or freight-handling airports, so goods must transit Israeli, Jordanian, or Egyptian ports. The Palestinian Authority (PA) and the governments of Israel, Egypt, and Jordan have concluded agreements to allow goods across the Allenby Bridge from Jordan into the West Bank markets and through the Salah al-Din Gate from Egypt into Gaza. All commercial goods can only enter and exit Gaza to/from Israel through the Kerem Shalom checkpoint and delays due to Israeli security and standards inspections are common.

U.S. companies are strongly advised to work with local clearing agents to expedite goods through the customs-clearance process. Currently, only Israeli firms are licensed as customs-clearance agents. The U.S. Commercial Service in Jerusalem routinely assists in expediting delayed or blocked U.S. shipments into Palestinian markets.

Using an Agent or Distributor

Many American companies have reoriented their marketing efforts to acknowledge the Palestinian market as culturally, economically, and commercially distinct from the Israeli market. Palestinian Authority (PA) regulations require foreign companies selling goods in the West Bank and Gaza to operate through a PA-registered, local, direct importer, distributor, or agent. Using local agents and distributors allows U.S. firms to maximize their sales exposure to the local market by taking advantage of linguistics/cultural expertise and local connections. Also, since Palestinian agents and distributors typically demand a considerably smaller profit margin than Israeli firms, American products may be more competitive.

There are numerous small and mid-sized West Bank and Gaza distributorships available for U.S. food products, household products, computer and telecommunications equipment, medical supplies, and pharmaceuticals.

Local distributors import goods on their own, carry limited stocks sufficient to satisfy immediate needs, and maintain their own sales organizations. When concluding a representation agreement, U.S. companies should include the following elements:

• Contract duration.
• Exclusivity (if applicable).
• Compensatory amount as a function of contract duration, in case of termination of exclusivity.
• Promotional input by agent and volume of sales.
• Dispute settlement mechanisms, if possible.

The U.S. Commercial Service in Jerusalem offers a variety of promotional services and programs, including company-to-company matchmaking services, single company promotions, and company background check services.

Establishing an Office

Given the complexity of jurisdictional authority between the Palestinian Authority (PA) and Israel, U.S. businesses should work closely with local partners and the U.S. Commercial Service in Jerusalem.

Foreign companies wishing to conduct business in the West Bank and Gaza have the same registration requirements as locally established companies. They must file copies of both their certificate of incorporation and memorandum and articles of association, all authenticated by the registrar of companies located where they are incorporated. These documents must be translated into Arabic. Registration fees for foreign companies are not the same as those for locally established companies.

All new West Bank and Gaza commercial enterprises must also register with the Ministry of National Economy, the Ministry of Finance, and open income tax and Value Added Tax (VAT) accounts.

For the latest Investment Climate Statement (ICS) which includes information on investment and business environments in foreign economies pertinent to establishing and operating an office and to hiring employees, visit the U.S. Department of Department of State’s Investment Climate Statements website.

For assistance with authentication of company documents and agreements, please contact Senior Commercial Specialist Assad Barsoum at Assad.Barsoum@trade.gov

Franchising

The franchising sector, especially in fast food, has witnessed a great expansion in the last five years. A niche market exists for franchisors of fast-food restaurants, garments, electronic equipment, and office supplies. Palestinian businesspeople generally prefer a direct franchise agreement with the parent company and not through the Israeli franchisee.

Keys to successful franchising in the West Bank include cost competitiveness in relation to comparable items, brand recognition, strong management and marketing, and initial and ongoing training programs. To be able to succeed in the Palestinian market, fast food franchisors must take into consideration the cultural and dietary customs of the general population; for example, neither alcohol nor pork meat or its byproducts, like gelatin, are acceptable, and only halal meats can be used. It is also very helpful if food products, such as chicken and beef, are sourced locally.

There is no franchising law in the West Bank and Gaza and franchising agreements may come under agent/distributor laws. American franchisors are encouraged to work with a local law firm when drafting a franchising agreement.

U.S. companies that want to develop local franchising arrangements should contact Senior Commercial Specialist Assad Barsoum at Assad.Barsoum@trade.gov

Direct Marketing

Local companies importing American-made products have introduced direct marketing in the West Bank. Other companies are also following this new trend. Printed flyers and ads in local newspapers and TV stations are heavily used; telemarketing, social media platforms, and SMS marketing are also on the rise.

Joint Ventures/Licensing

Palestinian businesses in the West Bank are eager to develop joint-venture arrangements. Larger local companies, particularly those with export experience, may be reliable partners for U.S. companies. Several small-scale joint ventures with U.S. companies currently operate in the West Bank.

Express Delivery

There are several express delivery firms within the West Bank that are very reliable. Delivery time, however, is impacted by the number of Israeli military check points between the different cities.

Due Diligence

American firms interested in doing business in the West Bank and Gaza are advised to perform due diligence before concluding any kind of business deal. However, this service has not been available to U.S. companies since Hamas took over Gaza in 2007. U.S. companies can avail themselves of the U.S. Commercial Service International Company Profile (ICP) service to check on potential local partners. An ICP provides information about a local company or entity, its financial standing, reputation in the business community and includes a site visit to the local company and a confidential interview with the company management.