Recently, on June 30, the Israeli Ministry of Economy and Industry (the MOE) published a reminder on its updates page that its “amnesty campaign” is now half over.
The MOE embarked on this campaign last March with the goal of encouraging Israeli companies to review their business activity in light of Israel’s civilian dual use export control regime. The campaign allows Israeli companies, meeting certain criteria (described below), to voluntarily disclose past export violations and, in return, receive amnesty from enforcement action for those violations.
The MOE and Israeli Export Controls
The MOE is one of two Israeli regulators that enforces Israeli export controls. The MOE’s Diamonds and Dual Use Export Control Administration administers Israel’s civilian dual use export control regime (which is akin to the US Department of Commerce’s Bureau of Industry and Security) and the Israeli Ministry of Defense’s Defense Export Control Agency (the DECA) administers Israel’s defense export control regime (which is akin to the US Department of State’s Directorate of Defense Trade Controls).
These are list-based regimes. The MOE adopts two export control lists: (1) a dual use “Chemical, Biological and Nuclear-Items List,” which, currently, is a collation of certain control lists published by the Australia Group, Nuclear Suppliers Group and under the Chemical Weapons Convention; and (2) the Wassenaar Arrangement’s List of Dual Use Goods and Technologies when exports are for non-defense purposes. Currently, the dual use list is adopted as is, but carves out the cryptography-related control provisions in Category 5(2) on Information Security, which are regulated under a separate encryption controls regime.
Similarly, the DECA adopts three export control lists: (1) the Missile Technology Control Regime’s Equipment, Software and Technology Index (as is); (2) a unique “Combat Equipment List,” which is based on an older version of the Wassenaar Arrangement’s Munitions List; and (3) the Wassenaar Arrangement’s List of Dual Use Goods and Technologies when exports are for defense purposes (defense end uses or end users). Regarding the dual use list, here too, Category 5(2)’s cryptography controls are carved out and otherwise regulated under Israel’s unique encryption controls regime.
It is noted that both the MOE and the DECA are actively pursuing legislative reform which, in the future, will see changes in these controls.
The MOE’s Amnesty Campaign
The main purpose of the amnesty campaign is to increase awareness of Israel’s civilian dual use export control regime and of its regulator, and not necessarily to induce exporters to disclose past violations. For this reason, only those who are least likely to be familiar with this regulatory regime are eligible to participate in the campaign.
To participate, exporters must meet specific conditions, which include:
- Disclosing past violations when the Israel Police is not investigating exports related to the disclosure;
- Making disclosures when the MOE is neither involved in ongoing regulatory audits or investigations nor in possession of information regarding previous non-compliant exports;
- Not having applied for export licenses from the MOE within the previous three years;
- Disclosing previous violations of the civilian dual use exports regulated by the MOE, as opposed to exports regulated by the DECA; and
- The exporter cannot be registered as a defense exporter with the DECA.
Disclosures must be made using a designated form and submitted by the September 30, 2022 deadline.
Three Takeaways from the Amnesty Campaign
First, making voluntary disclosures carries risk.
Other than this amnesty campaign, there are no other formal frameworks (statutory or otherwise) for disclosing past violations in exchange for leniencies or amnesty. Ultimately, this campaign gives the Head of the Diamonds and Dual Use Export Control Administration sole discretion to grant amnesty from enforcement action. While there is potential upside to taking this path, doing so means informing the regulator of past violations in the hope that it uses its discretion to grant amnesty in practice.
Second, the MOE is becoming more active with enforcement.
In recent years, the MOE has strengthened its enforcement capacity and now has a dedicated arm that deals with enforcement which, over the last few years, has actively engaged in industry outreach and regulatory audits of Israeli exporters. In the past few months specifically, it conducted its first enforcement actions in recent memory, one of which began with a voluntary disclosure of past export control violations and ended in painful consequences. Developing teeth as a regulator is an important (and necessary) step in strengthening this export control regime, and Israeli industry should be aware of this as it continues to develop and export advanced technologies. This amnesty campaign is reflective of the MOE’s movement towards more active enforcement.
Third, many Israeli companies (unknowingly) engage in controlled exports.
Israeli civilian dual use export controls regulate transfers of intangible software, technology and services, in addition to the export of physical goods. Many Israeli companies are unaware of this reality and that the technology in which they engage may be regulated. The MOE is well aware of this fact, noting it in its recent regulatory impact assessment ahead of contemplated legislative reform. Therefore, this campaign may also impact Israeli companies that do not engage in traditional exports of physical goods.
Even if voluntary disclosure is not the best path forward for Israeli industry, this campaign should, at least, serve as a wake-up call for Israeli companies to review their technology and business practices through the lens of Israeli export controls.