Supervision on the Export of Dual-Use Equipment - Part I

                          

 Adv. Gill Nadel, Adv. Adv

Every individual who wishes to pursue the export or marketing of defense equipment, the transfer of defense know-how and the provision of defense services, is obligated to act according tothe Defense Export Control Law 2007, and according to the regulations and orders under this law.

The authorized authority 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 regards to the prevention of transfer of sensitive technology, information and defense equipment.

Alongside the supervision of defense export, there is another supervision regiment, which is the supervision of dual-use equipment - equipment which was designated for civil uses, but could also be used in defense industries.

Dual-use equipment could be hard to recognize even for the exporter himself, because it is possible that the exporter is not involved 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!

As part of this article we will discuss the "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 which acted without the proper license, which are available under the law.

It is a complex field which requires appropriate professional consulting; the regulation which deals with this matter is complex and multifaceted, and sometimes the exporter is not aware that the product he is exporting is regulated and supervised.

General Background

The supervision on defense export 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 supervision system on the export of defense equipment, defense know-how and defense services from the state of Israel, is structured; and based on this legislation, supervision lists which define the supervised 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, which is 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 supervision of export of defined defense equipment and of export of dual-use equipment which is 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 civil use, could be suitable for use by defense forces which are armed forces or a state police entities, intelligence entities, etc.

"Supervised dual-use equipment" is defined under the law as dual-use equipment included in the list of dual-use goods and technologies determined by the Wassenaar Arrangement, and intended by defense uses, or other dual-use equipment determined by a Defense Minister's order.

The Wassenaar Arrangement to which the law directs to, is an international arrangement signed by numerous countries in the Netherlands in 1996, which includes the list of dual-use equipment, with classification 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 obligated in license by 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 a license issued by the Defense Ministry, but is subjected 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 was put into force on January 1^st 2007, states that an individual will not export goods or technology detailed in the Wassenaar list, but only by 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 which its export is supervised by the Ministry of Defense as aforementioned. 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 subjected to the supervision of the Ministry of Economy.

The responsibility of every exporter is to closely examine whether the exported goods or technology appear in the Wassenaar list. If the export-designated goods appear in the list, the exporter should turn to the appropriate authorized 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 will turn the Defense Export Controls Agency (DECA) in the Ministry of Defense; and if the goods are intended to be exported to a civil user, the exporter should turn to the Chemistry and Environment Administration in the Ministry of Economy, for obtaining an exporter license.

For example, if the exporter receives an order for mobile and personal communications systems, which could be used as a civil aid product (such as for travelers while navigating), or for the use of military or police entities; these are dual-use goods, therefore the exporter should examine who is the end-user. When the end-user is for example a travelling agency, then obtaining the license will be preformed through the Ministry of Economy, and when the end-user is a military/ police entity or another defense ministry, then obtaining the license will be through the DECA.

For illustration, we will use the example of an exporter which 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 civil use of navigating model airplanes and small aircrafts which will be 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 only 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 collecting intelligence and assisting combat units in the field in real time, etc.

According to the aforementioned analysis, it is feasible to say that it is a product under the "dual-use goods" definition, as defined in law and decrees. In the following situation 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 is exported to, and not obtaining the license accordingly will result in aggressive sanctions under the law, as thoroughly explained hereinafter.

In the next part of this article we will discuss on The Licensing Process of Dual-Use Equipment and on the Sanctions for violating the order.

 

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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 on 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: 03-6089848.