Dear Clients and Friends,
We are pleased to share highlights of key regulatory updates, proposed legislation, enforcement events, and court decisions pertaining to international trade regulation over the third quarter of 2026. These developments may affect compliance requirements for companies operating in Israel and abroad.
Regulatory Updates | Proposed Regulations | Enforcement Updates | Court Decisions
REGULATORY UPDATES
US – Commerce Department Eases Export Controls for the UAE
On July 10, 2026, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) announced the removal of the United Arab Emirates from EAR Country Groups D:3 and D:4, and its placement in Country Group A:5, along with other favorable policies toward the UAE. The change allows greater license exceptions and authorizations for the transfer of many more sensitive items, including advanced computing and aerospace items.
US – Executive Order Tightens Oversight and Domestic Sourcing Requirements for Defense Supply Chains
On July 20, 2026, the President signed Executive Order 14415 to tighten oversight of U.S. Department of Defense supply chains and reduce reliance on raw materials and critical components from adversary nations. Under the order, beginning January 1, 2027, waivers for non-compliant components under the regulation (10 U.S.C. § 4872) will be restricted unless contractors present a detailed plan to replace them with domestic or allied-nation sources. The order also introduces a new “supply chain mapping” requirement, mandating suppliers at all tiers to submit an Indentured Bill of Materials detailing raw material origins through to the finished product, alongside rigorous screening and risk-monitoring processes. The order requires companies integrated into U.S. defense supply chains to reassess their component sourcing and accelerate qualification of approved sources.
EU – 21st Russia Sanctions Package and Belarus Measures
On July 23, 2026, the EU adopted its 21st Russia sanctions package and accompanying Belarus mirror measures. The package contains the largest batch of individual designations in four years, placing focus, among other things, on Russia’s banks and other financial institutions, as well as crypto-related service platforms. As part of these efforts, the EU introduced a tool allowing for full third-country bans for crypto-assets services, as a measure to deter third countries assisting Russia in sanctions evasion through crypto services. Designated entities under the package include entities contributing to the Russian Military-Industrial Complex, and designated third-country companies (China, Turkey, UAE, etc.) assisting in circumventing export restrictions for technology and items critical to Russia’s war effort, including microelectronics and equipment for semiconductor processing.
Israel – Import and Export Order Prohibiting Import of Goods Produced by Forced Labor
On July 28, 2026, the Ministry of Economy and Industry published a draft Import and Export Order (Prohibition on Import of Goods Produced by Forced Labor), 5786-2026, for public comment. The proposed order creates for the first time a mechanism granting customs and enforcement authorities active power to prevent the entry of products and raw materials produced, in whole or in part, through forced labor abroad. The order aligns Israel with international regulatory frameworks, including the U.S. Uyghur Forced Labor Prevention Act (UFLPA) and the EU Forced Labor Regulation (FLR). The order was advanced following Government Decision 4416, particularly against the backdrop of direct U.S. pressure within trade agreement negotiations and a Section 301 investigation opened in March 2026. Following a public hearing on August 13, 2026, the order entered into force on August 17, 2026, and was published in the Official Gazette. As of the date of this update, no list of goods subject to the import prohibition has been published, though once items are listed, the import ban takes effect after only 30 days. Importers and companies relying on international procurement should implement due diligence mechanisms in their supply chains and prepare for increased procurement and operational costs.
US – FCC Updates Covered Equipment List
On July 28, 2026, the Federal Communications Commission (FCC) updated its “Covered Equipment List”, a list of communications equipment and services determined to pose a risk to US national security. Based on determinations by the Department of Homeland Security (DHS) and the Department of Defense, two categories of foreign-manufactured technology were added, advanced robotic devices and connected power inverters produced in foreign countries. The update imposes a blanket prohibition on granting new FCC equipment authorizations for these products, effectively preventing their import, marketing, and sale in the U.S. market due to cybersecurity, data-security, and critical-infrastructure disruption risks. The prohibition does not apply retroactively to products and models that previously received FCC authorization, and does not prevent authorized software and firmware updates. Foreign manufacturers may apply for a conditional approval pathway through U.S. security agencies, provided they demonstrate that these items do not pose such risks. Israeli manufacturers and suppliers should assess whether their products fall within the new covered categories.
EU – Extended Suspension of Rebalancing Measures Against U.S. Exports
On July 31, 2026, the European Commission extended indefinitely the suspension of the EU’s rebalancing measures against U.S. exports. The rebalancing measures were issued in response to US threats of high tariffs, and covered €93 billion of EU imports from the United States and imposed export restrictions affecting €95 million of EU exports to the United States. The suspension is a sign of greater stability with regards to EU and US trade relations.
Israel – Knesset Committee Approves First Stage of Defense Export Licensing Reform
On August 3, 2026, the Knesset Foreign Affairs and Defense Committee approved the first stage of the Ministry of Defense and Defense Export Control Agency (DECA) reform to shorten timelines for exporter registration and marketing licenses. Planned next stages would significantly expand permitted destinations exempt from marketing licenses for unclassified products and create a marketing-license exemption for “Restricted” classified products for a country list, alongside increased enforcement. The planned improvements are aimed at allowing increased efficiency for handling registration and licensing requests, while at the same time strengthening enforcement and controls.
US – President Trump Imposes Tariffs on Drone Imports
On August 13, 2026, President Trump signed a Proclamation imposing tariffs on imported drones and their components, citing national security concerns. The Proclamation imposes a 100% tariff on larger or sensitive drones and other components, a 25% tariff on smaller drones and other components, and reduced rates for drones originating from allied countries. The tariffs take effect 21 days after signing, with a 180-day phase-in for certain non-sensitive components. The Secretary of Commerce is authorized to establish an onshoring program for new drone manufacturing investments. Israeli and international drone manufacturers and component suppliers should assess exposure to the new import tariffs.
US – Agencies Rescind Syria Terrorism Designations
On August 24, 2026, the U.S. Department of State rescinded Syria’s State Sponsor of Terrorism (SST) designation, which further lifts restrictions on investments and commercial activities in Syria. The US updated its Tri-Seal Advisory on Syria sanctions and export-controls relief to reflect the new status. As restrictions on trade with Syria have been easing globally in the past months, it is important to note that Israel’s Trading with the Enemy Ordinance still widely prohibits engagements with Syria absent a special permit.
US – Expanded Use of Secondary Sanctions in Russian and Iranian Sanctions Frameworks
On August 24, 2026, the U.S. Department of the Treasury and OFAC announced Operation Economic Outcast, an aggressive expansion of U.S. sanctions against Iranian financial connections globally. As part of the program, the US expanded secondary sanctions exposure for non-U.S. persons doing business with Iran and for the customers, suppliers, shippers, banks, and other counterparties that support that trade. Treasury stated that the campaign expands secondary sanctions exposure for those who continue doing business with Iran and that entities facilitating Iranian sanctions evasion risk being cut off from the U.S. financial system.
Similarly, on September 18, 2026, the US enacted the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026. The act imposes additional sanctions, tariffs, and prohibitions relating to Russia and Iran, and includes secondary sanctions for non-U.S. persons engaged in related restricted activities. The framework also imposes tariffs on goods imported from countries engaged in Russian oil sanctions evasions.
Secondary sanctions allow US regulators to apply restrictions to any person that operates in designated manners contrary to the goals of the US sanction program, regardless of location of that person and irrespective of any U.S. nexus, Business partners from countries that have not adopted sanctions against Iran and Russia who continue to do business with Iran and Russia face increased exposure to secondary sanctions.
UK, France, Canada and Other Countries Announce Coordinated Sanctions and Trade Restrictions Targeting Israeli Settlements
On September 8, 2026, the foreign ministers of Canada, Denmark, Finland, France, Iceland, Ireland, Norway, Poland, Portugal, Spain, Sweden, and the UK issued a Joint Foreign Ministers’ Statement confirming their intention to introduce national and/or support European restrictions on trade in goods with “settlements which are illegal under international law”.
The UK Foreign Secretary announced the following specific measures to be implemented through a new comprehensive sanctions regime within the next six to nine months: an import ban on goods from illegal settlements; a prohibition on providing services (construction, infrastructure, financing, real estate) for the purposes of settlement expansion; a ban on the advertising of illegal settlements in the UK; a refusal of all license applications for arms and other exports “that materially contribute to the occupation”; and sanctions on additional “extremist settlers”.
The Netherlands adopted specific restrictions, effective September 22, 2026, targeting the “import, purchase, and sale of goods from unlawful Israeli settlements”. It is worth noting that the Dutch restrictions define “unlawful settlements” based on the EU exclusion from eligibility for preferential tariff treatment, which includes not only Israeli settlements in Judea and Samaria, but all “brought under Israeli administration since June 1967”, to include the Golan Heights (see the EU list).
While the specific features of each of these programs have not been finalized, these measures represent a significant escalation in international trade restrictions with direct relevance to Israeli companies and their international partners. Companies with activities touching the affected areas, including in supply chains, real estate, construction, financial services, or exports, should carefully review their exposure and monitor the implementation of these restrictions across multiple jurisdictions.
EU – Adopts 2026 Update of Dual-Use Export Control List
On September 14, 2026, the European Commission updated the EU dual-use export control list (Annex I of Regulation (EU) 2021/821). The update aligns the list with 2025 decisions from the Wassenaar Arrangement, Australia Group, and Nuclear Supplier Group, and includes additional commitments accepted by EU Member States. In addition, the list unilaterally introduces items (“500 series”) not found in the underlying multilateral regime lists. The EU new controls cover semiconductor manufacturing and testing equipment, as well as advanced computing ICs. The updated list enters into force after a two-month scrutiny period. Companies exporting dual-use items, particularly in the semiconductor and advanced computing sectors, should review the updated list.
EU – Extends Russia Asset Freeze Sanctions by Three Years
On September 22, 2026, the EU Council extended the EU’s Russia asset freeze sanctions under Decision 2014/145 by three years, until September 22, 2029. The extension confirms the EU’s continued commitment to maintaining sanctions pressure on Russia for the foreseeable future.
US – Implementation of BIS Affiliates Rule Continues to be Uncertain
On September 29, 2025, BIS introduced the Affiliates Rule which expanded the Entity List and Military End-User (MEU) List to automatically include foreign entities owned 50% or more, directly or indirectly, by one or more listed parties, imposing the same licensing requirements and presumptions of denial. The rule is modeled after the Department of the Treasury’s Office of Foreign Assets Control’s (OFAC) 50 percent ownership rule for the Specially Designated Nationals and Blocked Persons List (SDN List). In addition, BIS has added a red flag requiring additional due diligence requirements for exporters engaging with entities with significant minority ownership by an Entity List or MEU list entity.
In November 2025, as part of trade talks with China, the US suspended the rule for a year. On November 10, 2026, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) Affiliates Rule was scheduled to be reinstituted. Then on September 23, 2026, reports indicated that the United States and China have agreed to extend the Busan Agreement until January 10, 2027, the U.S.-China trade framework under which the Affiliates Rule was suspended. If the extension holds, the Affiliates Rule reimplementation, previously scheduled for November 10, 2026, will be deferred accordingly. Companies should continue to monitor developments and maintain preparedness for the rule’s eventual reinstatement.
Israel – Update to Declared Terror Organizations Lists
Over the past quarter, the National Bureau for Counter Terror Financing (NBCTF) updated the lists of declared terror organizations. Companies should ensure their screening processes incorporate the updated lists.
Israel – Export Control Agency of the Ministry of Economy and Industry Updates Dual Use Control List
Following the Wassenaar Arrangement’s 2025 updates to its List of Dual Use Goods and Technologies, Israel’s Ministry of Economy and Industry has announced that it has updated its Dual Use Control List in accordance with the changes. Israel’s MOE updates its control list nine months after the initial updates under the Wassenaar Arrangement so as to give exporters time to adjust to the changes. The updates went into effect on October 1, 2026.
PROPOSED REGULATIONS
US – Lawmakers Consider Extending US Controls on Allied Countries’ Chipmaking Equipment (MATCH Act and NDAA Amendment 6585)
On April 2, 2026, the Multilateral Alignment of Technology Controls on Hardware Act (MATCH Act, H.R. 8170) was introduced in the US House of Representatives. On July 13, 2026, a substantively similar provision has been proposed as Amendment 6585 (Section 1094) to the Senate version of the National Defense Authorization Act (NDAA).
The bill would require the Bureau of Industry and Security (BIS) and other agencies to identify allied countries’ controls on critical chipmaking equipment. In the event that allied countries have not adopted sufficient controls per US standards, US controls would extend to restrict equipment produced there. The bill focuses on two areas. The first is identifying “chokepoint” tools essential to advanced chipmaking and prohibiting their sale and servicing in countries of concern (China, Cuba, Iran, North Korea, Russia and the Country Group D:5 countries), with exceptions for US- or allied-controlled facilities. The second is applying Entity List-style restrictions to all facilities operated by CXMT, Hua Hong, Huawei, SMIC and YMTC, including their subsidiaries and affiliates, to stop circumvention through front companies.
Both measures are at an early legislative stage, and their text may change substantially before enactment, if they are enacted at all. The more likely near-term effect is indirect pressure on allied regulators, including Israel, to expand their own Semiconductor Manufacturing Equipment (SME) export controls. Israeli equipment and component suppliers that work with Chinese chipmakers should monitor these developments.
EU – Public Consultation on Review of Dual-Use Export Control Regulation 2021/821
On July 23, 2026, the European Commission published a targeted consultation to evaluate the functioning and effectiveness of the EU’s Dual-Use Export Control Regulation (EU) 2021/821. The review examines the alignment of the control framework with technological and geopolitical developments, with particular focus on controls on cyber-surveillance technologies, general licensing mechanisms, and reducing the administrative burden on companies. The consultation is open for submissions by companies, research institutions, and international organizations until October 15, 2026. Its publication represents an opportunity for exporters and technology companies operating in the European market to influence the direction of enforcement policy and control frameworks in the coming years.
Israel – DECA Publishes Marketing License Exemptions Draft
On July 28, 2026, Israel’s Defense Export Control Agency (DECA) published draft amendments to the Defense Export Control Regulations (Exemption from Marketing License) for public comment. The amendment seeks to narrow the list of marketing activities which would require a license, decreasing the regulatory burden on exporters.
The most significant change in the draft is the creation of a new exemption track for marketing products classified as “Restricted” (subject to restrictions regarding the country of registration and end use), alongside new tracks for extending existing licenses to intermediaries, providing remote service and maintenance from Israel, and displaying classified products—whose very existence is unclassified—at exhibitions and in the media.
The draft amendment will serve as a replacement of the existing exemption regime with a more detailed, formal, and conditional one. The draft tightens some of the existing pathways: it establishes a normative threshold requirement of a formal “country of registration” (citizenship/incorporation of the counterparty), excludes the marketing of defense-related knowledge for development purposes from the exemption, limits exemptions for overseas services to unclassified equipment only, and defines narrower criteria for what constitutes a “conference” and an “exhibition.” The practical implication for exporters will be a greater shift in the burden of compliance from the regulator to the company. Companies should conduct internal reviews to verify classifications, countries of registration, and supply chains to prevent mistakes in reliance on licensing exemptions.
Israel – Ministry of Economy Publishes Draft Order Banning Import of Certain Drone Components
On September 24, 2026, the Ministry of Economy and Industry published for public comment the draft Import and Export Order (Prohibition on the Import of Certain Drone Components) (Temporary Provision), 5787-2026. The purpose of the order is to impose restrictions and import bans, including on personal imports, on fiber-optic-controlled drones, their parts, fiber-winding machines, and related electronic components for signal conversion. The order is being advanced in accordance with a decision by the Prime Minister, the Minister of Defense, and the Political-Security Cabinet, against the backdrop of an immediate security risk posed by the misuse of these devices against security forces and critical infrastructure. It has also been exempted from a Regulatory Impact Assessment (RIA) due to classified urgency, based on the opinion of the National Security Council. The ban will not apply to “authorized entities” (such as the Ministry of Defense, the IDF, and the Israel Police) or to anyone who has received a special import license from the Minister of Defense or the competent authority. The draft order is open for public comment on the government legislation website until October 5, 2026, at 2:00 p.m. Its publication requires importers, manufacturers, and developers in the drone and optoelectronics sectors to reevaluate their component specifications and supply chains. The order is expected to take effect immediately as a temporary provision, with no transition period, for approximately six months.
Israel – Space Agency Releases Draft Space Law for Public Comment
On September 15, 2026, the Israel Space Agency at the Ministry of Innovation, Science and Technology released the draft Outer Space Law, 5786-2026, for public and industry review. The core principle of the legislation is to operationalize international space treaties into domestic law and establish a structured regulatory framework for outer space activities through a statutory permit and licensing mechanism administered by the Israel Space Agency.
The law primarily targets owners and operators of space platforms and objects (including satellite owners and operators, launch vehicle providers, and spacecraft developers). It sets forth comprehensive rules regarding mandatory licensing, national registry recording, compliance with international safety and environmental standards, and third-party legal liability and insurance arrangements. The mandatory licensing requirement is scheduled to take effect within one year from the date of the law’s official publication in the Official Gazette.
The draft law and the accompanying licensing application form are open for public and industry feedback until December 13, 2026.
ENFORCEMENT UPDATES
UK – OFSI Penalizes Citibank’s London Branch for Sanctions Breaches
On August 11, 2026, OFSI imposed a £4,732,830.58 penalty on Citibank, N.A., London Branch for breaches of the UK’s Russia and Global Anti-Corruption sanctions regulations. The breaches involved 970 payments totaling over £19 million. OFSI identified a range of failings including: delays in reviewing and escalating alerts; errors in ownership and control assessments; incomplete account restrictions; weaknesses in name and BIC screening; automatic bank selection after screening; delays in manual processes; internal fees charged on frozen accounts; and human error. Companies should expect stricter compliance requirements from their banks, as banks face heightened scrutiny over sanctions breaches.
US – OFAC Settles with Rice Lake Weighing Systems due to Distributor’s Violations
On August 12, 2026, OFAC announced a settlement with Rice Lake Weighing Systems, Inc. for eight apparent Iran-sanctions violations. The conduct involved Rice Lake’s Italian subsidiary, Dini Argeo S.r.l., which exported weighing equipment to a UAE distributor while knowing that the goods would be reexported to an Iranian end user. The $60,764 settlement involved sales between July 2019 and November 2021, when Dini sold approximately $121,527 of weighing equipment through a UAE distributor to an Iranian end-user. The enforcement event underscores the responsibility companies have through their subsidiaries and distributors, and the requirement to maintain adequate compliance processes including vetting distributors and end users, maintaining clear reexport conditions, and enhanced diversion diligence to known diversion routes.
US – State Department Announced $36 Million Settlement with BAE Systems, Inc. for Defense Exports Violations
On August 13, 2026, the US Department of State Directorate of Defense Trade Controls (DDTC) announced a consent agreement with BAE Systems, Inc. with a $36 million civil penalty resolving 104 Arms Export Control Act (AECA) and International Traffic in Arms Regulations (ITAR) violations. The violations involved unauthorized exports and retransfers of defense articles and technical data to multiple countries, unauthorized defense services, and violations of DDTC authorization terms and provisos. As part of the agreement, BAE agreed to remedial activities including a Special Compliance Officer, audits, training, improved technical-data and authorization controls, and additional compliance measures. The enforcement event underscores the importance of strict controls on technology and technical data.
US – BIS Settles Unlicensed Exports by Medical Technology Company to China
On August 14, 2026, BIS issued an order resolving eight unlicensed exports by Plexon, Inc. between February 2022 and August 2023. Plexon is a small US neuroscience technology company, and exported neural-recording systems and accessories classified under ECCN 4A994.k and valued at approximately $178,721 through an Asian distributor to China’s Academy of Military Medical Sciences, an Entity List party. It is of note that in 2018 BIS identified brain computer interfaces and AI for brain modelling to be considered emerging technology essential for US national security. The settlement reinforces that companies developing scientific and medical technology should not disregard potential restrictions applicable to their products, and may even be subject to heightened controls.
US – BIS Settles Export Violations by Container Manufacturing Ltd.
On August 24, 2026, BIS issued an administrative settlement imposing a $1,000,000 civil penalty on Container Manufacturing Ltd. for ten EAR violations occurring from March 2023 through March 2025. Container Manufacturing Ltd. specializes in the provision of metalworking presses used to manufacture the tops of aluminum beverage cans. The violations involved approximately $264,721 of EAR99 aluminum-metalworking spare parts, restricted due to their HTS codes, and were exported to a Russian end user without the required authorization, including shipments routed through intermediaries in the UAE and Türkiye. BIS identified several red flags, including bank warnings and altered consignee descriptions, that were not resolved before shipment. The settlement reinforces the reality that even low-level technology may be subject to heightened restrictions, and underscores the need for proper screening and resolution of red flags.
COURT DECISONS
Tel Aviv Magistrate’s Court Upholds Bank’s Refusal to Receive Funds Originating from a Sanctioned Bank
On September 17, 2026, the Tel Aviv Magistrate’s Court (CC 7827-10-24 Mashbets v. Mizrahi Tefahot Bank Ltd.) ruled that a bank’s refusal to accept funds whose business origin is a bank listed on international sanctions lists constitutes a “reasonable refusal” under the Banking (Service to Customer) Law, 5741–1981. The Court established that using a non-sanctioned bank or account as a “conduit” to transfer funds originating from a sanctioned institution carries a risk of sanctions evasion, and that an individual check of the funds’ origin also justifies refusing cash deposits linked to such activity. It was held that implementing a compliance policy in line with the Supervisor of Banks’ directives provides legitimate grounds for refusal, provided the bank fulfills its duty to furnish a reasoned written response within a reasonable timeframe. This ruling reinforces the need to examine the source of funds and all entities along the transfer chain, rather than limiting scrutiny solely to the direct sender and recipient.
This client update highlights certain developments in the field of international trade that can assist in meeting compliance requirements. It does not review all the updates that took effect in the third quarter of 2026 and is not intended to provide a comprehensive summary. This client update provides general information and may not be relied upon in any particular situation without additional legal advice.
