Archive for the ‘Israel’ Category

U.S. Antiboycott Compliance: New Federal List Published

Tuesday, January 31st, 2017 by Danielle McClellan

By: Melissa Proctor, Polsinelli PC

Companies doing business in the Middle East take note: The Treasury Department recently published its quarterly list of countries that currently require participation or cooperation with an international boycott, such as the Arab League‘s boycott of Israel.

Even though many of these countries are WTO members and were required to shut down their Arab League offices as a condition of membership, many boycott-related requests are still being issued by government agencies and companies in these countries. The countries that are designated on this list, which by the way are the very same countries that were listed in the Third Quarter list, are:

  • Iraq
  • Kuwait
  • Lebanon
  • Libya
  • Qatar
  • Saudi Arabia
  • Syria
  • United Arab Emirates
  • Yemen

To view the list, click here.

If you are not familiar with U.S. antiboycott requirements, Part 750 of the Export Administration Regulations (EAR) prohibits U.S. companies and their foreign affiliates from complying with requests related to a foreign boycott that is not sanctioned by the U.S. Government. Specifically, U.S. companies and their overseas affiliates are prohibited from agreeing to:

  1. Refuse to do business with or in Israel or with blacklisted companies
  2. Discriminate against other persons based on race, religion, sex, national origin or nationality
  3. Furnish information about business relationships with or in Israel or with blacklisted companies, or
  4. Furnish information about the race, religion, sex, or national origin of another person

Foreign boycott-related requests can take many forms, and can be either verbal or written. They can appear in bid invitations, purchase agreements, letters of credit and can even be seen in emails, telephone conversations and in-person meetings. Some recent examples of boycott-related requests include:

  • “Provide a certificate of origin stating that your goods are not products of Israel.”
  • “Provide the religion and nationality of your officers and board members.” 
  • “Suppliers cannot be on the Israel boycott list published by the central Arab League.”  
  • “Provide a signed statement from the shipping company or its agent containing the name, flag and nationality of the carrying vessel and its eligibility to enter Arab ports “

In addition, implementing letters of credit that contain foreign boycott terms or conditions is also prohibited under the EAR.

Antiboycott compliance is a key issue for U.S. companies doing business in the Middle East, and personnel on the front lines with customers and supply chain partners in these countries should be trained to identify potential foreign boycott-related requests and escalate them to senior compliance personnel or in-house counsel to determine the applicable OAC and IRS reporting requirements.

Companies that receive boycott-related requests must submit quarterly reports to the Office of Antiboycott Compliance (OAC) unless an exemption applies. Failing to timely report a boycott request or complying with the request itself can lead to the imposition of civil penalties by the OAC. The IRS also requires U.S. taxpayers to report their operations in countries that require participation or cooperation with an international boycott on IRS Form 5713 (International Boycott Report) – the forms are submitted annually with U.S. tax returns.  Failure to comply with the Internal Revenue Code’s antiboycott requirements can lead to the revocation of certain international tax credits and benefits.

© Polsinelli PC, Polsinelli LLP in California

Israel’s Defense Ministry Raises Export Violation Fines

Wednesday, October 12th, 2016 by Danielle McClellan

By: Danielle McClellan

Currently, the Ministry of Defense is capable of imposing a maximum fine of NIS 1 million for companies who violate the Defense Export Controls Act.  The head of Defense Control Agency, Dub Lavi, announced that Israel will be raising the maximum fine to NIS 5 million for violations by companies with sales exceeding NIS 80 million during 3 consecutive years.  The Ministry of Defense does require marketing permits as well as receipts of export permits before items are exported.

Dub Lavi explained that, “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 Exports Agency has been operating, both 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 suspected violation.” Over the past few years, Israel has worked to simplify the exports of non-classified means and has continued to add to the current list of 98 states that can receive exports without a permit.  They are also doing the following to aid in simplifying rules for exporters:

  • Fast-tracking export and marketing licenses in special cases;
  • Exemption from further marketing permits 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 Combat Equipment Act to include unmanned aerial vehicles and satellites for civilian ends corresponding to the standards defined in the Wassenaar Arrangement on the Export Controls for Conventional Arms and Dual-Use Goods and Technologies

Data shows that in 2015 the Export Control Agency received 40,000 new applications for marketing permits for arms, systems, and components to 190 states. They also received about 9,000 export permit applications which is the preliminary process preceding a marketing permit. In the past year they had 176 cases in which defense companies or exporters were suspected of violating the Defense Export Controls Act, but only a few exporters were fined with a total of NIS 2.8 million in penalties received. Israel’s defense exports totaled $5.7 billion last year.

Read more: http://www.globes.co.il/en/article-defense-ministry-mitigates-export-restriction-while-increasing-fines-1001150528

DDTC Upgrades the ITAR Status of Israel and Makes ITAR Clarifications

Friday, May 11th, 2012 by John Black

The Directorate of Defense Trade Controls (DDTC) revised the International Traffic in Arms Regulations (ITAR) to upgrade Israel’s status and make a wide range of clarifications.  These changes are in the same Federal Register notice that created the ITAR UK exemption and revised the Canadian exemption.

DDTC made three key changes to upgrade Israel’s ITAR status.  The first is that DDTC added Israel to the list of NATO and other countries eligible to receive certain retransfers of US components incorporated into a foreign defense article under an exemption.  The second is that DDTC added Israel to the list of NATO plus other countries eligible for the faster 15-day time period and high dollar value threshold for Congressional Notification.  The third is that Israel was added to the NATO plus countries that have fewer requirements for prior approval or prior notification under the ITAR brokering rules in Part 129.

Many of the changes either clarified or harmonized the existing rules.  Some changes worthy of note:

123.9(b):  Formerly said you have to put the ITAR destination control statement on “the bill of lading and the invoice.”  Now it says you have to put the statement on “the bill of lading, airway bill, or other shipping documents.”

123.9(c):  Revised to change, increase, and clarify the requirements’ information and documentation to be submitted with an application for written retransfer authorization from DDTC

123.26:  Formerly specified recordkeeping requirements for exports of unclassified technical data.  Now it specifies the recordkeeping requirements for all exports under exemptions.  The records must include the following:

  • A description of the defense article, including technical data, or defense service;
  • Name and address of the end-user and other available contact information (e.g.,
  • telephone number and electronic mail address);
  • Name of the natural person responsible for the transaction;
  • Stated end-use of the defense article or defense service;
  • Date of the transaction;
  • Electronic Export Information (EEI) Internal Transaction Number (ITN);
  • Method of transmission.

I used bold face to highlight the things above that at least arguably are new, different, or worth thinking about.

Treasury Identifies Countries Participating in the Secondary and Tertiary Arab League Boycotts of Israel

Monday, June 27th, 2011 by Anna Barone

By: Anna Barone

In accordance with section 999(a)(3) of the Internal Revenue Code of 1986, the Department of the Treasury is publishing the following list of countries which require or may require participation in, or cooperation with, an international boycott:

Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, United Arab Emirates, and Yemen (more…)

Freezing in Lebanon: US Halts Weapons Shipments

Tuesday, May 3rd, 2011 by Anna Barone

The U.S. has quietly frozen weapon shipments to Lebanon’s armed forces following the collapse of the country’s pro-Western government in January, underlining growing concerns about Hezbollah’s role there.

Since 2006, the U.S. has provided more than $720 million in support to the Lebanese military, including equipment and advanced training. Between March and October 2010 alone, this support included at least $18 million worth of military equipment and ammunition, including antitank missiles and launchers. Other shipments were in the pipeline for late last year and earlier this year but it is unclear what was delivered.

A senior defense official said the Pentagon is now reviewing all U.S. security assistance to the Lebanese Armed Forces “during this period of government formation.” A second U.S. official said the administration would base future decisions about security assistance, including whether to renew deliveries of lethal arms, after assessing the composition and conduct of the next government.

Defense officials say they want to keep some level of support for the Lebanese armed forces. Though weakened, officials say, the Lebanese armed forces are likely the only state institution with a chance of maintaining stability.

In talks with their U.S. counterparts, Israeli officials pushed to suspend arms transfers to Lebanon “out of fear that [arms] would end up in the wrong hands and eventually be used against us,” an Israeli official said.

More Information Available:

http://online.wsj.com/article/SB10001424052748703806304576241132242232562.html