Any product, service, or know-how that is used (or may be used) for defense purposes is subject to the supervision of the Ministry of Defense. Any transfer thereof to a foreign entity, as well as any marketing activity relating to such products, requires the approval of the Ministry of Defense. Applications for marketing and export licenses may be submitted solely for products registered with DECA and assigned a product code and classification. Currently, most license applications may be submitted through the Ministry of Defense’s online system (the Defense Exporters Community website - Ecom). Each application received by DECA is circulated for review among various divisions of the Ministry of Defense and additional government ministries, such as the Ministry of Foreign Affairs, the Ministry of Economy, and others. Upon completion of the review process, the application is returned to DECA for issuance of the license or rejection. The department overseeing dual-use products and non-conventional materials supervises equipment, services, and technology included in the Wassenaar Arrangement dual-use control lists. Products classified as dual-use and intended for civilian customers require the submission of an online export license application to the Ministry of Economy. In light of the extended timeframes involved in the issuance of licenses, it is of significant importance to submit applications accurately and correctly in order to prevent their return to the exporter for completion of additional details, which would result in delay or suspension of the processing of such applications. Heronis offers its clients assistance in the preparation of marketing and export license applications. The company also assists in drafting appeal submissions against decisions of the competent authorities and in submitting requests under expedited procedures. Heronis’ expertise is reflected, inter alia, in the drafting of license applications ranging from the most straightforward submissions to special, complex, and non-routine applications.

Heronis advises Israeli and international investment entities and venture capital funds (VC, PE) seeking to acquire or invest in Israeli companies and products regulated by DECA. Executing a proper investment in, or acquisition of, a defense company and regulated products requires a thorough analysis and examination of the applicable Israeli export control framework and foreign control regimes, including a comprehensive review of the company’s ongoing conduct in export control matters. Heronis conducts rigorous and professional due diligence reviews and presents to potential investors the full scope of regulatory implications arising from the transaction. In addition, Heronis provides advisory and ongoing support to Israeli companies regulated by DECA that seek to raise capital or to sell their intellectual property to foreign entities. For this purpose, the regulated company is required to establish an appropriate export control infrastructure in preparation for engagement with potential foreign investors, as well as to conduct dialogue with the Ministry of Defense in cases involving the transfer of knowledge prior to the sale of the company’s intellectual property to foreign entities. Heronis assists in these processes.

Heronis has long operated, and continues to operate, in close cooperation with foreign companies, primarily European, in advancing and promoting their products in Israel. Among its engagements, Heronis represented for many years a leading German armored vehicle manufacturer in a central national project in Israel, a demining company, and additional entities. Heronis further works in collaboration with European manufacturers to promote the products of European companies in both the Israeli and international markets, including in the fields of military electronics, intelligence products, cyber, and related domains.

The vast majority of enforcement incidents stem from errors made in good faith, arising from lack of experience or difficulty in properly interpreting the language of the law or the export license granted to the company. In most cases, such good faith does not preclude the imposition of substantial fines, the company’s designation as a “violator,” and all attendant consequences - including removal from the defense exporters registry. How can good-faith errors be prevented? The answer lies in the establishment of structured, clearly defined working procedures. Companies engaged in defense export are required to embed within their organizational DNA comprehensive and unambiguous procedures governing all aspects of defense export activity. These procedures must clearly address the company’s operational processes in its dealings with DECA, the manner in which marketing and export activities are conducted, including explicit “do and don’t” guidelines - all with the objective of minimizing, to the greatest extent possible, the occurrence of compliance failures. Beyond the drafting of procedures, there is substantial importance in conducting periodic training for all employees involved in defense marketing and export activities, ensuring a thorough understanding of the provisions of the Defense Export Control Law and the organization’s relevant internal procedures. Heronis places particular emphasis on the training and professional development of employees - not only at the managerial level and the Export Control Officer level, but across all personnel engaged in export activities - alongside the effective implementation of internal procedures. As part of our services, we draft procedures tailored to each organization in accordance with its structure and the nature of its activities (whether a company engaged in manufacturing products or a company providing training and courses). In addition, we assist company management and the Export Control Officer in preparing training presentations, compiling the documentation required in advance of audits, and conducting training sessions for company employees.

Dual-use products comprise materials and equipment primarily intended for civilian use, yet capable of serving defense-related purposes. For access to the Wassenaar Arrangement website, please refer to the following link: https://www.wassenaar.org/. For the purpose of determining whether a product is subject to control, it must be examined against the applicable control orders. Where equipment is classified as “dual-use,” the identity of the end customer carries significant regulatory implications. Where the end customer is a defense entity, an application must be submitted to the Ministry of Defense (DECA) for the issuance of the relevant licenses. Where the end customer is a civilian entity (including a governmental body that is not part of the security forces), the competent authority for the issuance of licenses is the Ministry of Economy. Products examined and determined to be controlled under the dual-use equipment list are not required to be registered with DECA; however, in such circumstances, they may not be sold to defense customers. In addition, the licensing and control processes conducted with the Ministry of Economy do not require companies to register as exporters (as required with DECA). No marketing license is required for the performance of marketing activities; however, upon execution of an export transaction, an application for an export license must be submitted, including full details of the company, the product, intermediary users, end users, and related particulars. Heronis assists companies in the classification of products and in determining whether an application must be submitted through the Ministry of Economy or the Ministry of Defense. Heronis further assists in the preparation and submission of applications, as well as in licensing proceedings, audits, and enforcement processes conducted by the Ministry of Economy.

The Defense Export Control Law places upon the exporter the responsibility to determine whether a particular product is subject to control. However, even in cases where companies are convinced that a specific product is not controlled, they often prefer, as a matter of prudence, to obtain formal confirmation from DECA. For this purpose, an Applicability Committee operates within DECA, whose mandate is to determine whether a particular product is included in the control lists and, accordingly, subject to DECA supervision. A submission to the DECA Applicability Committee requesting a determination of control applicability must include supporting documentation, such as a technical specification, a technological opinion presenting a techno-legal analysis explaining why the product is not subject to control, as well as additional supporting materials. Heronis brings over 15 years of proven experience in preparing applications for exemption from control for a wide range of products, including the preparation of the required technological opinion. In the majority of cases, such applications have been approved and the products designated as exempt from control. The commercial significance for the company is substantial: obtaining confirmation from DECA that a product is exempt from control enables the company to conduct marketing and export activities without the need to obtain marketing and/or export licenses.

Can personal liability be imposed upon a corporate executive for actions carried out by the corporation’s employees and agents, even where such actions were undertaken without the executive’s knowledge and contrary to his or her instructions? The answer to this question is affirmative - as reflected in a long line of court decisions in Israel and worldwide. The Ministry of Defense has announced its intention to require defense industries to implement a Compliance Program aimed at the prevention of corruption, as a condition for obtaining marketing and export licenses for defense equipment. Executives who regard the implementation of a Compliance Program as merely a regulatory obligation overlook its significant advantages. A Compliance Program is not only a first-rate managerial tool, enabling the corporation to compel employees and agents to adhere to its code of conduct; where it is determined that the corporation has violated the law, the existence of an effective Compliance Program may prove to be a critical safeguard for executives, directors, and officers, and a strong defense against criminal charges and personal claims. Heronis assists in the design and implementation of Compliance Programs in small, medium, and large companies across a diverse range of operational profiles.

The registration of products with DECA constitutes a mandatory prerequisite for the submission of applications for marketing and export licenses relating to tangible and intangible products, including software, training, and similar items. Before a company may proceed with the registration of its products, it must first be duly registered in the Defense Exporters Registry maintained by DECA. Prior to reaching a decision regarding product registration, the company is required to assess and determine whether the product is subject to control under the law and under which control category it falls (defense, dual-use, encryption). Pursuant to the law, this determination rests with the company; however, the consequences of error are significant. This decision constitutes a strategic and critically important juncture in the company’s operations. A comprehensive understanding of the regulatory burden associated with each classification and control category - as well as the criteria governing such classifications (defense, dual-use, encryption) - carries substantial operational and commercial implications. Numerous companies have registered, and continue to register, with DECA products that are not required to be subject to control. Conversely, an erroneous independent determination that a product is not controlled may result in severe consequences for the company - instances of such determinations have occurred and continue to occur. The registration process itself involves additional headquarters bodies within the defense establishment. Where the company has concluded that the product forming the subject of its activity is controlled by DECA, the product must undergo a security classification process before MALMAB (the Director of Security for the Defense Establishment). As appropriate, the registration application may be forwarded for review by additional bodies within the defense establishment. Heronis has been engaged in product registration with DECA for approximately 15 years. Under its guidance, hundreds of products have been classified and registered, affording the company extensive experience and in-depth familiarity with product registration procedures, processes, and the various considerations underlying classification determinations. Heronis assists in determining the appropriate classification and corresponding control obligations, as well as in preparing all documentation required for product registration. Given that the product registration process may extend over several months, professional guidance can significantly streamline the submission process and expedite the overall registration timeline. The relevant legislative instruments for the purpose of analysis and decision-making in this matter are the control orders. For the purpose of determining whether a product is subject to control, the product must be examined against the Law and the control orders, including: Defense Export Control Law, 5767-2007 Defense Export Control Order (Combat Equipment), 5768-2008 MTCR List Defense Export Control Order (Missile Equipment), 5768-2008 Defense Export Control Order (Controlled Dual-Use Equipment), 5768-2008 Wassenaar List Import and Export Order (Control of Export of Dual-Use Goods, Services and Technology), 5766-2006 Order Concerning the Control of Commodities and Services (Engagement in Encryption Means), 5735-1974

The Defense Export Control Law provides that any Israeli citizen or corporation engaged in the marketing and export of defense products is required to be registered in the Exporters Registry maintained by the Ministry of Defense. How does one determine whether a product is controlled? Click here. Accordingly, as a mandatory (though not sufficient) prerequisite to any activity intended to promote a defense export transaction - including a telephone call to a foreign customer, the sending of an email, a meeting, the transfer of information to an agent, and similar actions - both the company and all employees engaged in defense marketing and export activities must be registered in the Defense Exporters Registry maintained by the Ministry of Defense. The registration process for the company and its personnel may be prolonged. The process includes, inter alia, handling security classification and reliability aspects relating to both the employees and the company. Until the company’s registration in the Registry has been completed, it is prohibited from engaging in defense export activities. Drawing on its extensive experience in company registration processes, Heronis assists its clients in submitting and completing registration procedures in a manner that significantly shortens and streamlines the process.

The Order Governing the Control of Commodities and Services (Engagement in Encryption Items) - 1974 provides that “no person shall engage in encryption items unless granted a license for that purpose by the Director General of the Ministry of Defense.” As of today, the authority responsible for supervision and enforcement of the Order is the Defense Export Controls Agency (DECA) within the Ministry of Defense (this responsibility is expected to be transferred to the Ministry of Economy following approval of the export control reform by the Knesset Foreign Affairs and Defense Committee). The term “engagement in encryption” is defined broadly and encompasses virtually any activity in this field, including the development, manufacture, integration, sale, import, and export of encryption items and components. A license to engage in encryption items is granted in accordance with the nature of the activity and the technology involved. Several types of licenses exist (“Limited,” “Special,” and “General”). In certain cases, encryption components do not require licensing where they appear on the list of “Free Means” established within the encryption domain at DECA. Many companies operate in the field of encryption and are required to obtain a license for such activity, yet not all are aware of the existence of the Order. An unskilled or non-professional analysis of such terminology may result in significant harm to the exporter. For many years, Heronis has assisted companies operating in this domain, including in drafting applications and securing licenses tailored to the nature of the company’s activities.

The professional background of the company’s founders and team members, together with its sustained and close collaboration with numerous companies in the defense industry in Israel and worldwide, as well as with foreign entities across multiple jurisdictions over many years, has resulted in focused and successful business activity across a range of sectors, both defense and civilian. Leveraging a broad and high-quality network of relevant relationships in various countries worldwide, Heronis promotes and advances the sales of products for companies operating in diverse sectors and markets. This includes products from the civilian sphere (primarily within the gas and oil industry and the water sector), as well as products spanning multiple and varied domains of the defense, cyber, and intelligence industries. Heronis has also assisted in the establishment and operational structuring of startup companies, as well as in capital raising initiatives for companies.

The Israeli industry operates today within a global environment in which products considered “Israeli” incorporate foreign components. This reality imposes an additional burden on the defense exporter, as it requires consideration not only of Israeli export control laws, but also of foreign control regimes, at times of multiple jurisdictions. The inclusion of foreign components in Israeli products likewise arises and requires consideration within the framework of product registration with DECA. Under such circumstances, the cost of error may be particularly high, as the sanctions imposed for violations of foreign export control regulations in general - and United States regulations in particular - may be severe, including placement on the “blacklist” of the U.S. Department of Justice and the cessation of the company’s business operations. For this reason, it is of particular importance to conduct a meticulous analysis of the export control obligations imposed upon the Israeli company by the country of origin of such components, especially with respect to items of U.S. origin. All of the foregoing must be addressed in advance, prior to entering procurement processes and within cooperation agreements with foreign companies. Heronis provides comprehensive and professional solutions to matters involving foreign export control through close cooperation with advisory firms in Europe and the United States.

Interaction with the Defense Export Controls Agency (DECA) within the Ministry of Defense in matters relating to product registration and the issuance of licenses entails complex bureaucratic procedures. Leveraging more than 15 years of experience in the field of defense export control, Heronis effectively resolves diverse licensing challenges encountered by numerous companies and formulates regulatory pathways that enable companies to maximize operational latitude within the bounds of the law. Heronis provides strategic advisory services designed to identify and implement creative solutions to a broad range of issues arising in the field of defense export control. Our advisory services extend across the entire licensing lifecycle - from preparation for the licensing process, through submission and monitoring of the application, and continuing with ongoing support at any stage at which a regulatory obstacle may arise in the implementation of the chosen course of action. The provisions of the law and the applicable regulations serve as a guiding principle in all Heronis activities. Any solution or strategic course of action recommended to a company for the purpose of enabling its business operations will, at all times, remain strictly within the framework of the law.