The Ministry of Defense Export Controls Agency intends to harden its policy towards companies violating the Defense Export Controls Act, and significantly raise the imposed administrative fine to a NIS 5 million maximum. At present, the Ministry of Defense is capable of imposing a maximum fine of NIS 1 million. According to the head of the Defense Control Agency Dubi Lavi, NIS 5 million fines will be imposed for violations of the Defense Export Controls Act by companies with sales exceeding $80 million during three consecutive years.
The toughened policy towards companies exporting arms and means which require Ministry of Defense marketing permits, as well as the receipt of export permits beforehand, has followed criticism that NIS 1 million are not enough to deter 'rogue' companies. Lavi says, "When a company is fined with NIS 5 million detracted from its profit - this is a significant sum, even for a large corporation."
Despite the trend of raising fines for defense companies and exporters violating regulations, Lavi told "Globes", "The vast majority of Israel's defense industries are disciplined, responsible and abide by the Defense Export Controls Act. During the decade in which the Ministry of Defense Export Controls Agency has been operating, both the establishment and the companies themselves have matured: even the largest companies do not like reaching a situation in which they are invited to a hearing due to a suspected violation. No company seeks this combination of fines and damage to its image." Yesterday, the Export Controls Agency held its annual conference, with the participation of senior figures in the defense establishment, including Minister of Defense Avigdor Liberman, and the ministry's director-general Maj. Gen. (res.) Udi Adam, as well as representatives of defense exporters. The conference marked a decade from the establishment of the agency, which is responsible for providing defense industries with permits enabling them to market and export their products abroad. It is aimed at protecting Israeli defense interests and preventing the spillover of defense technology, information and measures to enemy states and organizations.
At the conference, Lavi disclosed that alongside the hardening of sanctions on companies violating export regulations, the trend of simplifying the export of non-classified means, initiated two years ago, will continue. Thereby, the list of 98 states to which such means could be exported without a permit will be expanded. Lavi says that the mitigations also include fast-tracking export and marketing licenses in special cases; exemption from further marketing permit for intermediate agents - an exporter with a marketing permit will not be required to file a further permit for a foreign company that will market its products abroad; extending the license duration from 3 to 4 years; updating non-controlled technologies in the Combat Equipment Act to include unmanned aerial vehicles and satellites for civilian ends corresponding to the standards defined in the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies.
Earlier this year, an initiative promoted by the Defense Export Controls Agency and the Prime Minister's Office National Cyber Bureau to regulate cyber products developed in Israel was called off. This initiative raised the suspicions of senior figures in Israel's cyber industry, who claimed that it will negatively affect investments in the field, potentially leading local cyber firms to transfer their operations abroad.
Following the uproar, and after Prime Minister Benjamin Netanyahu had become directly involved, the state went back on its intentions to require all cyber export deals to receive an Export Controls Agency permit, thereby maintained the current situation. Lavi says, "The cyber field is currently supervised according to Wassenaar Arrangement standards. The arrangement might be modified, but the changes will only come into effect at the end of 2017"
$5.7 billion exports
According to data reported by the Ministry of Defense in June, in 2015 the Export Control Agency received 40,000 new applications for marketing permits for arms, systems and components, to 190 states. This is a 20% drop from 2014. The drop was explained by the expansion in the list of countries not requiring marketing permits. In the same year, the Ministry of Defense received about 9,000 export permit applications - the preliminary process preceding a marketing permit - to 130 countries, a 13% rise.
Ministry of Defense figures further indicate that in the past year there were 176 cases in which defense companies or exporters were suspected of violating the Defense Export Controls Act, but only a few exporters were fined a total sum of NIS 2.8 million.
In 2015, 1,400 exporters were listed in the Defense Export Registry, with about 200,000 valid marketing permits. In the past year, Israel's defense exports totaled $5.7 billion, a slight increase from $5.6 billion in 2014.
Published by Globes [online], Israel business news - www.globes-online.com - on September 6, 2016
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