Israel - Using an Agent to Sell US Products and Services Israel - Using an Agent
While the use of an agent or distributor is not legally required, partnering with a local representative who has good industry contacts, proven reliability, loyalty, technical skills and after-sales service capabilities is important for selling and maintaining a continued presence in Israel. U.S. companies need to be aggressive in their pursuit of business opportunities and maintain an active in-country presence.
The Israeli industry generally prefers to purchase goods through a local agent that will be able to provide after-sales service. Government and government-owned buyers will often require an agent in Israel. Many agents have exclusive representation rights because of Israel’s small size. Most U.S. heavy industrial equipment exporters to Israel use a commissioned agent who conducts promotional campaigns and active buyer calls.
Using a local importer/distributor is the most common approach for U.S. manufacturers of light industrial equipment and consumer goods. Distributors will import on their own account and carry sufficient stock to satisfy ongoing demand and use for demonstration. Distributors maintain their own sales organization, supplying spare parts and, if applicable, maintain a service division. In addition, local representatives often provide legal support for ongoing operations.
When executing a representation agreement, U.S. companies should be sure to specify:
- Contract duration
- Exclusivity (if applicable)
- The amount of compensation that will be provided to the representative in case of termination of exclusivity (as per Israeli law)
- Promotional input by agent and volume of sales
- Dispute settlement mechanism, either by arbitration, or by assigning a tribunal (preferably U.S.)
Advance Notice of Termination: According to the law, the supplier must notify his agent in advance of the intended termination of the relationship between them as follows:
- A two-week advance notice for a relationship that lasted up to six months
- A one-month notice for a contract signed 6-12 months earlier; or
- A two-month notice to terminate an agency contract signed 12-24 months earlier, and up to a maximum advance notice of six months for a relationship that lasted 6 years or longer.
Financial Compensation for Termination: The compensation paid to the commercial agent upon termination must be commensurate to the size of the business developed as a result of the agency agreement. The compensation shall be in the amount of the average monthly profits resulting from sales of the supplier’s goods/services over the last three years of the agency relationship multiplied by the number of years the relationship lasted. The compensation cannot exceed twelve months of the average monthly profits. The agent shall not be entitled to compensation from the supplier if the termination is due to breach of contract by the agent. In case of legal action, the Courts have the right to reduce the amount of compensation or deny compensation entirely if the Courts find justification to do so.
For additional information about the Israel Agency Contract Law please visit the U.S. Commercial Service website: Export.gov - The Israel Agency Contract Law