In a little-noticed provision of the annual US military authorization law, which took effect on January 1, 2021, the US Congress issued yet another push for the US Commerce Department to grant eligibility to Israel for a key authorization under US export controls. Israeli companies in the tech, aerospace/defense, and other sectors that are regulated under military and “dual-use” (i.e., military/commercial) export controls should watch these developments closely and consider engaging with the US government and/or the Israeli government regarding the implementation of this regulatory change. The same is true for US and other global companies in these sectors that trade with Israel, maintain facilities in Israel, cooperate with Israeli partners on R&D, or employ or contract with Israelis who are not US citizens or green card holders. The export controls authorization in question applies to a broad array of dual-use products/technologies, and even certain military products/technologies, and allows companies to operate without the need to obtain specific licenses from the US Commerce Department in certain instances and thereby may help avoid the added costs, delays and uncertainties that can result from the licensing process. In short, if the Commerce Department granted this regulatory authorization to Israel, trade and technology cooperation in these sectors with Israel and Israelis would be much simpler.
Looking at the details, Section 1276 of the National Defense Authorization Act for Fiscal Year 2021 (the “NDAA”) requires the State Department to brief Congress during the first few months of the Biden administration “by describing the steps taken to include Israel in the list of countries eligible for” a key authorization under US export controls, License Exception Strategic Trade Authorization (“STA”), which is administered by the US Commerce Department under the Export Administration Regulations (“EAR”). Specifically, this congressional mandate relates to so-called “STA-37,” or paragraph (c)(1) of STA, which is by far the broadest and most relevant part of STA that currently applies to 37 countries (as listed in “Country Group A:5” of the EAR). That includes many European countries, the UK, Canada, Japan, S. Korea, Australia, and New Zealand, along with India (which was recently added), Argentina and Turkey. Israel is already eligible for a much narrower STA provision (applicable to “Country Group A:6” of the EAR), along with Albania, Cyprus, Malta, Mexico, Singapore, South Africa, and Taiwan. Congress is pushing Commerce to include Israel in the former group that benefits from the much broader regulatory authorization.
This provision of the 2021 NDAA amps up the pressure from Congress for Commerce to act and grant this broader STA eligibility to Israel, after Congress had issued a similar mandate with the United States-Israel Strategic Partnership Act of 2014. That 2014 law, coming shortly after STA was created, determined that Israel “has adopted high standards in the field of export controls” by joining and/or adhering to the key international export control regimes, and it mandated that the executive branch “take steps so that Israel may be included in the list of countries eligible for” this broader STA provision, “consistent with the commitments of the United States under international arrangements.” The Commerce Department itself has publicly recognized that Israel “implements controls in line with these [key international export control] regimes and requires authorization for exports of all items listed on their control lists.” The Israeli government maintains active cooperation and dialogue with the staff of the Wassenaar Arrangement, which is the most relevant of the international export control regimes in this context, i.e., dual-use and military products and technologies. Some observers have suggested that a factor preventing Israel from formally joining the Wassenaar Arrangement may be opposition by Turkey, as it is a consensus-based organization.
As we’ve recently written, the Commerce Department has been actively updating its export control policies as applied to particular countries, so it may be possible for companies or other interested parties to engage in that process.
Those impacted by the EAR in trade or technology cooperation with Israel should follow these developments and consider engaging with relevant government authorities.