Industrial Cooperation in Israel
ICA is an Israeli Government entity, operating within the Ministry of Economy.
ICA initiates, coordinates and monitors industrial and commercial cooperation activities following Government, Government-owned companies, public institutes and other State entities procurement.
ICA also promotes and monitors commercial and industrial cooperation activities related to selected areas of non-government trade.
ICA is authorized to supervise the enforcement of the “Mandatory Tenders Regulations,” pertaining to the Mandatory Tenders Law regarding Mandatory Commercial Cooperation.
ICA operates within the rules of the Government Procurement Act and other international agreements.
ICA cooperates with parallel organizations in countries worldwide.
ICA is based in Jerusalem and also has an office at the Israel Economic mission in New York, covering activities in North America.
ICA’S INDUSTRIAL COOPERATION APPROACHCooperation Based on Competitiveness
In many countries local directives obligate foreign companies to purchase - due to their sales in these countries - locally manufactured products, or carry out other reciprocal business activities to a value of up to and over 100 percent of said sales, involving the signing of back-to-back purchase, offset or other counter-trade agreements.
In most cases, such agreements contain legally-binding clauses, which specify a variety of penalties to be directly imposed on the company in the event of non-compliance. These penalties, apart from the realization of bank guarantees, warranties etc., are imposed irrespective of the competitiveness of the products offered in these countries, or of the company’s actual needs.
ICA feels that long-term cooperation must ultimately depend on the competitiveness of Israeli products. ICA believes that a company’s undertaking for industrial cooperation to be realized in Israel should not carry penalties, warranties or other financial guarantees.
ICA’s policy is aimed at developing new markets for high quality competitive goods and creating a framework for bilateral or multilateral industrial and trade cooperation between the Company or its subsidiaries and Israeli industry.
Purchases, or any other industrial cooperation activities, subsequent to an industrial cooperation undertaking, are expected to be carried out on a competitive basis.
Once contact has been established between a foreign company and an Israeli manufacturer, ICA will assist the parties, as much as required by either of them, without being directly involved in the detailed negotiations between them. Within the framework of its undertaking, the company will carry out all necessary activities aimed at enabling Israeli firms to qualify as its subcontractors, such as quality assurance qualification, or any other certification in order to become a qualified supplier.
The company will appoint a local liaison officer to be responsible on its behalf for fulfilling the undertaking, for managing all relevant activities and serving as the Company’s coordinator with ICA and Israeli industry.
Locating Appropriate Partners
ICA is the government authority designated to manage, monitor and initiate industrial cooperation programs subsequent to Government procurement, both commercial and defense related.
ICA coordinates its activities with the relevant government ministries, entities and industries. Overseas companies may contact ICA regarding any subject related directly or indirectly to their Industrial Cooperation Undertaking or fulfillment activity.
Services and support provided by the ICA include:
• Assistance to overseas companies in identifying and locating suitable Israeli manufacturers and partners for joint ventures, outsourcing, R&D and other modes of cooperation and strategic partnerships with Israeli industry.
• Providing information about Israeli industry.
• Conducting surveys related to Israeli industry.
• Coordinating visits by representatives of Israeli industry to foreign companies.
• Coordinating visits by representatives of foreign companies to Israel in order to survey local industry.
• Organizing conferences between foreign companies and Israeli industry. All ICA support, assistance and services are provided on a complimentary basis.
INDUSTRIAL COOPERATION UNDERTAKING
In accordance with the “Tenders Law Regulations” of imported goods, any Israeli Government or Government related entity is required to include, as an integral part of its bid, a signed undertaking to implement an Industrial Cooperation Program with Israeli industry. An Industrial Cooperation Undertaking is to be submitted to each bidder by the Government entity, as part of the tender or R.F.P. documents. A standard form of undertaking is available at ICA’s website:
The entity issuing the tender, in agreement with ICA, may to a certain point alter the undertaking form. The undertaking must be signed and executed by the manufacturer of the goods offered and will become an integral part of the proposal.
Government entities are obligated by the “Tenders Law Regulations” to obtain ICA’s approval regarding the company’s Industrial Cooperation Undertaking, prior to signing any supply contract exceeding the amount of 5 million US$. ICA will grant its approval after reviewing the undertaking and ensuring its full compliance with the Regulations.
In accordance with the “Tenders Law Regulations” the volume of Industrial Cooperation must be at least 35 percent of the value of the supply contract. In cases where foreign governments require Israeli defense suppliers to offset higher levels, Israel may also require companies from such countries to engage in higher levels of Industrial Cooperation.
ICA grants credits for Industrial Cooperation implementation based on semi-annual reports, submitted by the Company, after verifying the reported transactions with the Israeli manufacturers mentioned in the reports.
Any dispute arising during the implementation of the Industrial Cooperation Program, will be resolved within the framework of the Company’s Undertaking, or the Cooperation Agreement, in a spirit of good will and mutual cooperation.
Preference for Local Subcontracting
As a general rule, local Subcontracting related to the project/product purchased from a foreign company is preferred for fulfilling the company’s Industrial Cooperation Undertaking.
According to the Tenders Law Regulations, tenders exceeding 5 million US$, will require foreign companies to comply with one of the following alternatives.
Alternative 1: Include in their proposal an undertaking for local subcontracting with Israeli manufacturers, at a value of not less than 20 percent of the contract scope, as part of their comprehensive Industrial Cooperation undertaking.
Alternative 2: Specify in their proposal the scope and value of local subcontracting they undertake to carry out with Israeli manufacturers as part of their Industrial Cooperation Undertaking. When comparing between proposals of foreign bidders, a preference of one percent of the offered price will be given for the first 10 percent of local subcontracting included in the proposal. An additional preference of one percent of the proposal price will be given for each additional 5 percent of local subcontracting included in the proposal, carried out as part of the comprehensive undertaking for industrial cooperation. The maximum preference in respect of local subcontracting will be limited to 5 percent.
Preference Granted to Israeli Products
In accordance with the Tenders Law Regulations, preference - only as to the price criteria - is granted to Israeli products over imported products, provided that the price of the given Israeli product does not exceed that of the imported product by more than 15 percent. In contracts of a government owned corporation or agency which exports at least 30 percent of its output, the preference to be granted to Israeli products, shall not exceed 10 percent instead of 15 percent, of that of the imported products.
An Israeli product is a product in which the Israeli content exceeds 35%.
The aforementioned does not apply to cases contradictory to the international “Government Procurement Agreement.”
INDUSTRIAL COOPERATION UNDERTAKINGS RESULTING FROM GOVERNMENT PURCHASES
Responsibility for Undertakings
The responsibility for obtaining a formal Industrial Cooperation Undertaking signed by the foreign company lies with the relevant government purchasing department. Once the undertaking is signed, the responsibility for communicating with the company and monitoring its fulfillment will be ICA’s.
ICA will receive the company’s periodical progress reports and keep the relevant departments updated concerning any developments related to the fulfillment of the company’s undertaking.
Duration and Monitoring of Industrial
The Industrial Cooperation Undertaking shall be fully implemented concurrently with the realization of the contract - the subject of the tender.
ICA may extend the period of fulfillment of the Industrial Cooperation Undertaking, after considering the nature of the Industrial Cooperation, or the complexity of the transaction.
Monitoring the fulfillment of the Industrial Cooperation Undertaking, including classifying the fields of activity and calculating the extent of industrial cooperation (credits) will be carried out by ICA, following the signing of the contract between the buyer and the foreign company.
ICA also monitors large-scale import transactions carried out by the non-government sector which result in industrial cooperation undertakings with the Companies concerned, based on the understanding that industrial cooperation can be beneficial to all parties.
UMBRELLA INDUSTRIAL COOPERATION AGREEMENT - UICA
Advantages of UICAs
An Umbrella Industrial Cooperation Agreement (UICA) is an agreement between
ICA and a foreign Supplier to the government of Israel, which covers its Industrial
Cooperation Undertakings related to its sales during a defined period of time. This type of agreement may be advantageous to both parties due to the following:
• Negotiations regarding Industrial Cooperation Undertakings occur only once. Since all the procurements by the Government of Israel are covered by the UICA, any subsequent negotiation concerning each purchase is unnecessary.
• Company’s surplus industrial cooperation activities in Israel are maintained in its account and will serve to cover obligations resulting from its future sales in Israel.
• The company’s corporate divisions, as well as its subsidiaries, may also take part in the fulfillment of the obligations stemming from the UICA, to an agreed extent.
• The agreement is brought to the attention of potential Israeli buyers, Government purchasing departments, agencies etc. A standard UICA form is available at the ICA website:
INDUSTRIAL COOPERATION AUTHORITY (ICA) CREDITING POLICY
ICA crediting policy is consistent with the “Tender’s Law Regulations” and is stated below.
Credits granted by the ICA will be used to monitor the Company’s fulfillment of its
Industrial Cooperation Undertaking and will be given upon submission of detailed semiannual reports and verifications with the Israeli industries involved.
Subcontracting and Purchasing of Israeli Goods and Services. Subcontracting or purchasing of Israeli goods, work or services will be credited with 100 percent of their contracted price.
Investments in Israel’s Economy
Direct investment in Israeli enterprises will be credited with 150 percent of the value of such investment.
Research and Development
R&D funding will be granted with 150 percent of the value of the funding amount where the majority of the benefits, or the rights to make use thereof, shall remain in the hands of the Israeli R&D entity. All other cases will be 100 percent credited.
The First Step in Long-Term Relationships
Industrial Cooperation with Israel may be your company’s introduction to one of the world’s most advanced industries and economies. ICA is confident that your Industrial Cooperation Program will be the cornerstone of a mutually beneficial and long-lasting business relationship with Israeli industry.
Surveys undertaken over the past five years have shown the following positive indications:
• The vast majority of the undertakings have been successfully fulfilled.
• A growing number of companies continue cooperating with Israeli industry, following the mutually beneficial fulfillment of their undertakings. A considerable number of Industrial Cooperation activities have begun with simple purchases and a cursory mutual acquaintance, and developed into full-scale ongoing joint ventures in research, development and manufacturing.
May your Cooperation Program follow such a successful pattern.
Additional information is available at the ICA offices:
Industrial Cooperation Authority – Jerusalem - Israel
5 Bank of Israel Street
Tel: +972 2 666 2410
Fax: +972 2 666 2979
Industrial Cooperation Authority – Tel Aviv - Israel
86 Menachem Begin Rd.
P.O. Box 36049Tel Aviv, 67138
Tel: +972 3 7347513/4
Fax: +972 3 7347639