Adv. Gill Nadel, Adv. Or Cohen-Sasson
At the end of 2007, the Defense Export Control Law, 2007 [hereinafter: "the law"] came into effect.
The law and the regulations and orders that were legislated under the law replace the secondary legislation which existed until the law came into effect. The law regularizes in primary legislation the supervision of the exportation of defense equipment from Israel, the transfer of defense know-how and the provision of defense services. The law's purpose is to regularize the supervision of defense exports by reason of national security, foreign policy, international obligations, and maintaining other vital interests of the State of Israel.
In previous articles (see links below) we explained that a defense exporter who wishes to market his goods needs to obtain a marketing license before he can market the goods, and also before he can conduct pre-marketing activities (such as offering a product or negotiating).
We also explained that the marketing license is a necessary precondition for the defense exporter, since without a valid marketing license he will not be able to obtain an export license for the goods and/or the know-how.
This article will cover the stage of obtaining an export license for a defense exporter.
What is an export license?
Defense export is defined under the law as each one of the following:
a. Export of defense equipment
b. Transfer of defense know-how
c. Provision of defense services
The law requires a defense exporter to obtain an export license from the Defense Export Controls Agency (DECA) in order to engage in the exportation of defense equipment, know-how or services. It is important to understand that the export license is in addition to any other license required by law, and not instead; therefore an export license does not exempt the exporter from having a valid marketing license. In fact, an export license will not be granted if the exporter does not have a valid marketing license.
The obligation to obtain an export license applies to any individual or company that wishes to export defense equipment or know-how, as well as to all advisory and intermediary transactions relating to such equipment or know-how. The export license must be obtained before the actual exportation.
What are the different types of export licenses?
There are two types of export licenses: the first is a license to export equipment, and the second is a license to export know-how. A license to export equipment includes an approval for exporting the instructions for using and operating the equipment (there are some restrictions on this relating to missile equipment, software and technology [MTCR - Missile Technology Control Regime]).
A license to export know-how includes training and advice on defense matters as well as know-how relating to the production of defense equipment.
It is important to note in this context that although a license to export equipment includes an approval for exporting the instructions for using and operating the equipment, it does not constitute a license for training related to that same equipment, since training requires a license to export know-how, which is, as mentioned, a separate license. In a case where the exporter wishes to conduct training relating to the equipment, he must apply for both types of licenses.
How is an export license obtained?
As we explained earlier, a precondition for obtaining an export license is having a valid marketing license that includes the details of the exporter, the goods for which the export license is requested and the destination country. As an aside, it should be noted that in certain cases the purchaser of the goods must also be listed on the license.
In order to obtain a defense export license, the exporter must file an application with the Defense Export Controls Agency (DECA) and attach the relevant documents. The application should be filed close to the date of signing the contract between the exporter and his client, and before the transaction is actually carried out. In a case where the order includes a number of shipments, the application must be filed before the first shipment is made.
The application form includes various items: personal information, security classification, description of the goods, quantity, monetary value, delivery schedule, and more. In addition, the exporter must submit a declaration regarding royalities in connection with the goods exported by him. Without going into great detail, we note that in certain cases it is necessary to attach additional documents to the application (this is the case, for instance, with regard to exporting in the framework of the TSWG [framework for US-Israel cooperation in the defense field], counterterrorism, security, guerrilla warfare, re-exportation, MTCR [missile technology and software] and more).
Does the existence of a marketing license mean an export license will be granted?
It is important to note that having a valid marketing license does not obligate the DECA to grant an export license for the goods; the decision whether to grant an export license is under the authority and at the discretion of the DECA, regardless of its decision regarding the marketing license.
Since the decision regarding the export license is made by the DECA and does not depend on the exporter, and since the application is filed after the contract between the exporter and the client is signed, it is recommended to include in the contract the stipulation that exporting the goods from Israel is conditional upon receiving an export license from the DECA.
In Part 2 of this article, we will continue to discuss issues relating to obtaining a defense export license, as well as related issues such as the rejection of an application for an export license, receiving a limited license, etc.
To view previous articles we have written on the topic of defense export control, please click the following links:
· Supervision of the Export of Dual-Use Equipment
· The Fundamentals of Defense Export Supervision - Part 1
· Important Things to Know About Encryption Items - Part I
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The content in this communication is provided for informational purposes only and is not intended to be comprehensive. It does not serve to replace professional legal advice required on a case by case basis. The firm does not undertake to update the information in this communication or its recipients about any normative, legal or other changes that may impact the subject matter of this communication. If you are interested in obtaining 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 Department. Email: Gill.Nadel@goldfarb.com, phone: +972-3-6089979.
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