Israeli exporters to Europe regularly hide the origin of produce grown in occupied Palestine to qualify for unlawful tax breaks that bolster the settler economy, a rights group investigation has found.

The legal non-profit Global Echo analysed more than 30,000 export documents for thousands of Israeli shipments to the UK and EU over eight years.

One in six shipments it investigated contained agricultural products that had originated in illegal settlements in occupied Palestine and the Syrian Golan Heights, which had been mislabelled as Israeli-grown.

“This isn’t an aberration and its not accidental,” said Emily Schaeffer Omer-Man, the executive director of Global Echo. “This is a system that the UK and the EU have perpetuated and agreed to.”

The group is demanding the UK government review controls on Israeli imports, and has promised to take legal action if HMRC does not tackle verification concerns.

Europe is Israel’s biggest market, and the EU its single top trading partner, accounting for almost 30% of exports.

A free trade agreement signed in 1995 reduced tariffs for Israeli imports, but products from settlements do not qualify, because Israel’s military occupation of Palestine and Syrian territory is illegal under international law.

However, Global Echo’s research indicated that mislabelled settlement goods accounted for “a substantial and recurring component” of agricultural trade from Israel to Europe in recent years, the group said in a 400-page report.

In addition to reviewing export documents, the investigation analysed publicly available data and interviewed Palestinians and senior Israeli industry representatives, including whistleblowers.

Concealing the origin of produce from settlements allows importers to claim lower import tariffs. These make fruit and vegetables from occupied land more competitive in European shops, while reducing tax revenues for European governments.

The overall effect of mislabelling is that European consumers and governments unknowingly subsidise settlement agriculture.

“European trade continues to contribute materially to an unlawful territorial regime, in direct tension with EU law,” Global Echo said. Settlement exports were “not the result of isolated lapses, but of a systemic failure of regulatory design, enforcement, and accountability”, it said.

Israeli exports used legal loopholes or fraud to import to Europe under a “grown in Israel” label, the report found, with three main techniques.

Some producers give an accurate settlement address and postcode, but list their produce as Israeli, an approach Global Echo called “hiding in plain sight”.

The misleading labelling is allowed under a 2005 technical agreement between Israel and the EU, and encouraged in guidance from the Israeli tax authority, even though that guidance also recognises settlement products are not eligible for lower tariffs. This labelling puts the burden of detecting and correctly taxing goods from occupied territory on EU and UK border officials.

The other two approaches explored in the report involved fraud, although they had been publicly detailed by Israeli businessmen in a 2015 Knesset session.

Settlement firms either give a “sham address” that falsely indicates production inside Israel’s recognised borders, or “mingle” settlement goods with Israeli products for export, often in cooling or packing facilities, and label the mix as “grown in Israel”.

“Together, these practices undermine the effective application of EU trade and policy rules by systematically obscuring territorial origin,” Global Echo said.

European customs authorities also routinely accepted invalid Israeli-issued organic and plant health certificates for settlement products, Global Echo said. Only Palestinian or Syrian authorities can certify produce grown in occupied territory.

The shipments examined by Global Echo, which represent a tiny fraction of Israel’s total agricultural trade with Europe, contained €13m (£11.2m) worth of mislabelled settlement goods grown on land stolen from Palestinians.

Amer Abu Khader, 35, has never set foot on three plots of family land near his home in the north Jordan valley village of Ein al-Beida. Shortly after the six-day war in 1967, Israeli settlers fenced them into a new settlement, Mehola.

‘‘We have all the documents proving that it belongs to us,” Khader said, adding that other families had also been robbed by settlers in Mehola who falsely claimed the land was owned by absentee landlords in order to seize it. “Many of the owners are still alive and living in the area, yet their land was taken.”

One of the Khader family plots was now incorporated into agricultural holdings of a major Israeli importer that supplied the UK market, Global Echo said, citing documents from the company and Israel’s agriculture ministry.

Europe has for decades deemed Israel’s settlements illegal, a position strengthened by the international court of justice’s 2024 ruling that Israel should end its occupation of Palestine “as rapidly as possible”.

However, the EU has never used its vast economic leverage to “attach meaningful consequences to that illegality”, according to the legal scholar Michael Lynk, who wrote an introduction to the investigation.

Lynk, a professor emeritus of law at Canada’s Western University and former UN special rapporteur for human rights in the occupied Palestinian territories, said the findings exposed a “gap between European principle and conduct”.

Even when Europe did apply its own trade rules, Israeli government subsidies blunted their impact on the settlement economy, Global Echo said. When exporters of produce grown in occupied territories are barred from claiming preferential tariffs in Europe, they can get compensation from a secretive fund.

The EU is debating imposing tariffs on goods from occupied Palestine in an attempt to curb Israeli violence and settlement expansion, but there is little sense of how much trade could be at stake.

Neither European countries nor Israel publish data on exports from illegal settlements.

The scale of the settlement economy is obscured by Israel’s determination to prevent any economic or political distinction between citizens and companies in occupied territory and those inside its recognised borders.

The only public figure is from an unverified estimate provided by Israel to the World Bank 15 years ago, that 2.23% of exports to Europe came from settlements.

Since then, the settler population in the occupied West Bank has increased by over 50% and Israeli leaders have been explicit about the role of settlement farms in expanding control of occupied Palestine.

“We are erasing the Green Line through agriculture in Judea and Samaria [the occupied West Bank],” the Israeli finance minister, Bezalel Smotrich, posted on X in 2024. The green line is the 1949 armistice boundary, once seen as a potential template for Israel’s border with a future Palestinian state.

Israel’s subsidies for everything from water to transport underpin the economic viability of many settlements, whose population long ago expanded beyond an ideologically committed core. One US immigrant to Israel recently told the Haaretz newspaper that she had moved to the West Bank “to manage her costs”.

Support for Israeli agriculture in occupied territories is paired with attacks and restrictions that undermine Palestinian farmers. These range from cutting off access to water and limiting their movements, to violent attacks, and have all escalated since the 7 October 2023 Hamas-led attacks.

‘‘We sell our produce in Nablus, Qabatiya and Jenin, but reaching those markets is difficult because checkpoints [on the roads] are frequently closed,” said Mohamed Faiz Daraaq, 53, one of Khader’s neighbours.

“The spring near our land, that was an essential resource for our farming, has been taken from us,” he added. ‘‘The settlers turned the area into a recreational site for themselves, with swings, seating areas and other facilities. It has become a place for [their] tourism and leisure.”

Additional reporting by Sufian Taha and Quique Kierszenbaum