Adv. Gill Nadel, Adv. Hila Wohlgemuth, Accountant (Jurist) Amit Zomer
Any individual who wishes to pursue the exporting or marketing of defense equipment, the transfer of defense know-how or the provision of defense services, is obligated to act in accordance withthe Defense Export Control Law 2007, and in accordance with the regulations and orders under this law.
The authority that is authorized to implement the Defense Export Control Law in the State of Israel is the Defense Export Controls Agency (DECA) in the Ministry of Defense. The DECA's purpose is to supervise and enforce the law, thus putting into action the policy and interests of the State of Israel in regard to preventing the transfer of sensitive technology, information and defense equipment.
Alongside the supervision of defense exports, there is another export control regime, that is the supervision of dual-use equipment - equipment designated for civil uses, but which could also be used in the defense industry.
Dual-use equipment may be hard to recognize as such, even for the exporter himself, because in some cases the exporter may have no involvement in the export of defense equipment, the equipment is not designated for defense purposes and even the purchaser is not a client from the defense sector. Nevertheless, the export of dual-use goods will be obligated to receive an export license and in the absence of a proper license, the exporter will be exposed to sanctions under the law, including a fine and even imprisonment.
In this article, we will discuss dual-use equipment, for which the exporter is obligated to present an export license in order to transfer it from the State of Israel; the manner in which the license is obtained; and the sanctions against an exporter acting without the proper license thatare available under the law.
Dual-use equipment is a complex field which requires appropriate professional advice; since the regulation that governs this matter is complex and multifaceted, and sometimes the exporter is not even aware that the product he is exporting is under regulation and supervision.
General Background
The supervision of defense exports from the State of Israel is based on the "Defense Export Control Law, 2007" [hereinafter: "the law"] and on the regulations and orders under it. In this primary and secondary legislation, the system that supervises the export of defense equipment, defense know-how and defense services from the State of Israel is structured; and based on this legislation, control lists that define the controlled equipment, know-how and services which require marketing licenses and export licenses were published.
The purpose of the primary and secondary legislation in this matter, as defined under the law, is "to regulate state control of the export of defense equipment, the transfer of defense know-how and the provision of defense services, for reasons of national security considerations, foreign relations considerations, international obligations and other vital interests of the state".
This law also relates to the controlling the export of defined defense equipment and the export of dual-use equipment sold for defense uses.
Supervised Export of Dual-Use Equipment:
Materials and equipment which were intended for civil uses and are also suitable for defense uses are defined under the law as "dual-use equipment". It is easy to see that this wide definition could include a wide variety of materials and equipment, that even when intended for civilian uses, could be suitable for use by defense forces such as armed forces or state police entities, intelligence entities, etc.
"Controlled dual-use equipment" is defined under the law as dual-use equipment that is included in the list of dual-use goods and technologies defined by the Wassenaar Arrangement and is intended for defense uses, or other dual-use equipment defined by a Defense Minister's order.
The Wassenaar Arrangement to which the law refers, is an international arrangement signed by numerous countries in the Netherlands in 1996, which includes a list of dual-use equipment that is classified into nine categories: advance materials, processed materials, electronics, computers, telecommunications, information technology, sensors and lasers, navigation and avionics (aviation electronics), naval, ignition. [hereinafter: "the Wassenaar list"]
The export of goods which are detailed in one of these categories and which are intended for defense forces is requires the obtainment of a license from the Defense Export Controls Agency (DECA) in the Ministry of Defense.
The Export of Dual-Use Equipment:
Dual-use equipment which is not intended for defense forces, is exempt from obtaining a license issued by the Ministry of Defense, but is subject to the supervision of another government ministry - the Ministry of Economy (formerly known as the Ministry of Industry, Trade and Labor).
The Import and Export Order (Control of Dual-Purpose Goods, Services and Technology Exports), 2006 [hereinafter: "the order"], which came into force on January 1st, 2007, states that an individual may not export goods or technology detailed in the Wassenaar list, except with a license from the Chemistry and Environment Administration in the Ministry of Industry, Trade and Labor [today, the Ministry of Economy].
The order excludes the supervised dual-use equipment, the export of which is supervised by the Ministry of Defense as mentioned above. In other words, dual-use equipment intended for defense uses is subject to the supervision of the Ministry of Defense, and "regular" dual-use equipment is subject to the supervision of the Ministry of Economy.
The responsibility of every exporter is to closely examine and determine whether the exported goods or technology appear in the Wassenaar list. If the export-designated goods appear in the list, the exporter must turn to the appropriate authority (according to the end-user) in order to receive an export license.
If the goods are intended to be exported to a defense user, the exporter should turn to the Defense Export Controls Agency (DECA) in the Ministry of Defense; and if the goods are intended to be exported to a civilian user, the exporter should turn to the Chemistry and Environment Administration in the Ministry of Economy, in order to obtain an exporter license.
For example, if the exporter receives an order for mobile and personal communications systems, which can be used either by civilians (such as by travelers while navigating), or by military or police entities, these are dual-use goods, therefore the exporter must determine who the end-user is. When the end-user is, for example, a travelling agency, then the export license will issued by the Ministry of Economy, and when the end-user is a military/ police entity or another defense ministry, then obtaining the license will be done through the DECA.
To illustrate, we will use the example of an exporter that exports a computer/ navigation software which is used to remotely control small aircrafts (hereinafter: "the software"). On the one hand, it is feasible to say that this software is designated for the civilian use of navigating model airplanes and small aircrafts, used and classified as toys. On the other hand, in light of the wide interpretation of the objects detailed in the Wassenaar Arrangement, which also includes the possible uses of the product and is not satisfied by its primary function, name and verbal description while being marketed; even when it is a seemingly "innocent" product, one could claim that the software could be used for military uses such as navigating "suicide model airplanes", navigating unmanned aerial vehicles for the collection of intelligence and assisting combat units in the field in real time, etc.
According to the above analysis, it is feasible to say that such a product is included in the "dual-use goods" definition, as defined in the law and decrees. In this case, and according to chapter B of the law, it is an export which requires obtaining a relevant license, regardless of the identity of the end-user to which the goods are exported, and failing to obtain a license accordingly will result in aggressive sanctions under the law, as thoroughly explained hereinafter.
The Process of Licensing Dual-Use Equipment:
A request for a license to export dual-use equipment must be filed, as previously stated, with the Chemistry and Environment Administration in the Ministry of Economy, while stating who the end-user of the equipment is. The Administration is entitled to demand documents or additional details needed to examine the request within ten working days from the day of receiving the request. The Administration will transfer the request to the Ministry of Defense and the Ministry of Foreign Affairs in order to receive their opinions within fifteen days from the day of receiving the request.
Within twenty days, at the most, from the day of receiving the request, or within ten days at the most, from the time it received the additional details, the Administration should reply to the request. [In exceptional cases, the Administration or the Minister is entitled to extend the period of time].
If there is a conflict between the opinions of the Administration and the Ministry of Defense or the Ministry of Foreign Affairs, the matter will be decided by a committee of Director Generals, whose members include the Director General of the Ministry of Economy, the Director General of the Ministry of Foreign Affairs and the Director General of the Ministry of Defense. If a decision is not reached by the committee, the matter is brought to the decision of Israel's Prime Minister.
The applicant can appeal the Administration's decision before the committee of Director Generals within fourteen working days from the day the decision was brought to his attention.
Sanctions:
An individual who exports defense items without a defense export license or exports not in accordance with the license's terms, as opposed to the instructions of the law, may be sentenced to 3 years imprisonment or a fine of up to 6 million NIS. When the export is to an enemy country, or when the equipment is classified, or when the equipment is such regarding which a U.N. Security Council decision was published, the law provides the possibility of sentencing the individual to five years imprisonment or a fine of up to 10 million NIS.
If an individual exports dual-use equipment against the law or without an export license, the goods and all objects used for their shipment will be confiscated, and the exporter or importer of the goods or the agent or the forwarder of the goods and anyone who tries to ship them, will be sentenced to two years imprisonment or a fine of up to three times the value of the goods or the value of the objects used for their shipping, all according to the larger value.
Comments:
It should be noted that the State Comptroller's report included harsh criticism of the lack of sufficient enforcement of export controls. Thus we expect that in the near future the enforcement of dual-use equipment export controls will be tightened, by, among others, the Customs Authority which supervises exports.
We believe that due to the complexity of the regulations and the significant importance in which the state holds the enforcement of this matter, the unsure exporter should be aided by professional advice as he confronts the array of information and regulations, for assistance in making the decision whether to obtain a certain license.
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This document provides a general summary and is for information purposes only. It is not intended to be comprehensive nor does it constitute legal advice. If you are interested to obtain further information or wish to follow the legal developments in this matter, please contact Adv. Gill Nadel - Chair of the firm's Import, Export and International Trade Law Practice, Tax and Executive Compensation Department. Email: Gill.Nadel@goldfarb.com, phone: +972-3-6089848.
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