Customs & Trade in Israel | The New Standardization Reform: The Consequences of Violating Trust As An Importer

Around a year ago, a new standardization reform came into effect in Israel, bringing with it a significant change in the way imported products are assessed for compliance with official standards. The most noteworthy shift is the transition from a system of inspection upon import to one of release based on the importer’s declaration of compliance with the standard. The ultimate goal of this reform is to ensure that approximately 90% of these shipments are cleared at the port without delays, negating the need for identification and acceptance tests or reliance on laboratory approvals.

However, while this reform offers much-needed relief for importers, there are significant concerns related to potential violations of legislative and regulatory provisions and the misuse of the trust involved in the declaration process. The Standardization Commissioner has emphasized that such violations can have detrimental effects on public safety and health, primarily due to non-standard products making their way into the market. Additionally, these violations may lead to unfair competition with importers and manufacturers who abide by the rules and ensure the quality of their products. The consequence could be the potential deterioration of the reform itself.

To address these concerns and safeguard the integrity of the reform, the Standardization Commissioner has devised an enforcement approach that guarantees compliance with the law. This strategy is rooted in a few key elements:

1. Sampling Shipments: Shipments entering Israel are subject to sampling based on the Standardization Commissioner’s risk assessment system. This system collaborates with customs to identify shipments that may warrant inspection.
2. Market Inspections: Inspections are carried out in markets based on targeted information and planning, enabling authorities to identify products that may not meet the required standards.
3. Deterrence Through Sanctions: significant sanctions are imposed To deter importers from breaching trust. These sanctions can have serious financial consequences for those who violate standards and regulations.

In response to these efforts, dozens of inspectors have been recruited to increase enforcement. In practice, the intensity of enforcement has risen, especially when importers breach trust.

So, What Defines an Importer in Breach of Trust?

The Import and Export Ordinance in Israel defines an importer who violates trust as:

1. A person who imported goods or attempted to import goods based on false or incorrect information, including through false or incorrect documents.
2. A person who violated conditions established for the importation of goods, with the Standardization Commissioner determining the nature, seriousness, or circumstances of the violation warrant, labeling the importer as being in breach of trust.
3. A person who violated provisions of the ordinance or a supervisory order or other legislation related to the importation of goods, with the Commissioner of Standardization determining that the nature, severity, or circumstances of the violation warrant labeling the importer as being in breach of trust.

In more practical terms, the guidelines provided by the Standardization Commissioner have identified several scenarios where an importer may be considered to be in breach of trust:

1. An importer who has obtained a release permit with the condition that he shall not sell the goods until inspection within their warehouses by a laboratory shall be considered in breach of trust if they contravene this condition. Moreover, preventing the laboratory or an authorized inspector from confirming the presence of goods in their possession will be deemed as an unauthorized sale
2. An importer who imported goods or sought to import goods based on false or incorrect information, including through false or incorrect documents.
3. When an importer prevents the laboratory from completing the shipment approval process within six months of release under the condition that they shall not sell the goods until inspection without the grant of an extension.
4. Importers who fail to cooperate with a testing laboratory as part of procedures for controlling imported shipments in the declaration routes specified by the Standardization Commissioner. This includes not following the laboratory’s instructions to correct product defects, continuing to market products under investigation, neglecting to post warning notices, or failing to withdraw goods from the public.

This definition also extends to importers who submit multiple import requests for the same shipment to different laboratories without indicating that it’s the same shipment. It may also apply when the title to a shipment under inspection is transferred or when an importer breaches an obligation to open containers or packaging in the presence of a laboratory representative.

The status of breach of trust is not permanent and is subject to a maximum duration of one year, as dictated by the Import and Export Ordinance. The Standardization Commissioner has the discretion to determine a shorter period based on various factors, including the number and severity of violations, the risk to public safety, and the steps taken by the importer to mitigate risks. In some cases, a warning may be issued for first-time offenders within the three years preceding the violation if it does not pose a significant risk to the public or if the importer promptly addresses the issue.

The Implications of Breach of Trust Status

Being classified as an importer in breach of trust can lead to significant restrictions and costs. Importers with this status will face the following consequences:

1. They will not receive exemptions as per Section 2(c)(2) of the Free Import Order.
2. Any periodic invoice approval previously granted will be immediately canceled.
3. Periodic compliance letters that approve adherence to the Standardization Commissioner requirements will also be canceled immediately.
4. Importers who breach trust will be prohibited from importing goods based solely on a declaration of compliance and a certificate of inspection in accordance with international or official Israeli standards for goods in groups 2 and 3. They will be reclassified to group 1 and subjected to model checks and delivery inspections.
5. When customs grant release under obligation, it will require a bank guarantee in line with the commissioner’s procedures.

The Process of Entering the Breach of Trust Status

If an importer faces the prospect of entering the status of breach of trust, there is a defined process to ensure fairness and due consideration. As a general rule, the commissioner is obligated to grant the importer an opportunity to present his claim before making a final decision. It’s important to note that the hearing in this context is conducted in writing.

The commissioner will send a letter detailing the specific cases and circumstances under consideration for placing the importer in a breach of trust status. This letter may also indicate the potential cancellation of the importer’s registration in the importers’ registry due to the violations in question. Upon receiving this letter, the importer is allowed to respond by presenting their claim in writing.

Should the importer choose not to respond to the letter of hearing or provide a response to the claims listed therein, this could be interpreted as a waiver of their right to present their claims. In such cases, the supervisor will make a decision based on the available information.

In light of the above, it becomes evident that dealing with a hearing summons before entering breach of trust status requires a systematic and comprehensive approach. A mere acknowledgment of the hearing is insufficient; rather, it’s essential to construct a well-structured and well-founded argument. The goal is to convince the supervisor that the factual circumstances differ from what is described in the hearing letter to the extent that this is the case. To support these claims effectively, it is advisable to provide relevant documents and evidence.

Moreover, during this process, consideration should be given to factors such as the number of violations, the severity of the violation, the risk posed to public safety, and the steps taken by the importer to mitigate potential risks. Another critical aspect to address is whether the current violation is a first-time occurrence.

These details and a well-prepared case can contribute significantly to the outcome of the process. It may lead to a non-admission decision to the breach of trust status, a change in status to a warning, or a determination of a shorter status period of just a few months. Based on our experience, legal advice and support are often essential during this stage to navigate the process effectively.

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The content in this communication is provided for informational purposes only and is not intended to be comprehensive. It does not serve to replace professional legal advice required on a case by case basis. The firm does not undertake to update the information in this communication or its recipients about any normative, legal or other changes that may impact the subject matter of this communication.

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