We ship goods to an Israeli company that keeps paying late. How do we secure payment from outside Israel?

The purchase orders keep coming and so do the excuses. A distributor in Petah Tikva that paid in 45 days for four years now pays in 90, then 120, and the balance outstanding has reached USD 380,000. The supplier in Ohio has no Israeli entity, no security, and a one-page terms document that says nothing about which law applies. There are answers here, but the useful ones are taken before the next container ships, not after.

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Detailed Answer

Israel gave the United Nations Convention on Contracts for the International Sale of Goods, signed at Vienna on 11 April 1980, force of law through the Sale (International Sale of Goods) Law 5760-1999, and went a step further than the Convention itself by applying its provisions also to a contract where one party's place of business is in a state that is not a party. So unless your terms expressly exclude it, the Convention very often supplies the framework for a cross-border sale into Israel: formation, conformity of the goods, the buyer's obligation to pay, the seller's right to suspend performance where it becomes apparent the buyer will not perform, and the notice periods that govern complaints about the goods. That last point cuts both ways and is worth knowing before a dispute, since a buyer who fails to give notice of a non-conformity within a reasonable time, and in any event within two years of delivery, loses the right to rely on it. Exclusion of the Convention is a deliberate choice, not an accident, and suppliers who exclude it usually do so in favour of their own domestic law without asking whether an Israeli court will apply that choice to a mandatory local rule.

Security is where the practical work sits. A confirmed irrevocable documentary credit issued by an Israeli bank and confirmed by a bank in your own country converts the buyer's credit risk into a bank's, and it is normal in Israeli import practice rather than an insult. A standby credit or a bank guarantee performs the same function on open-account terms. Trade credit insurance is the alternative where the relationship cannot bear a credit. If you decide instead to take security over goods, stock or receivables, note that Israeli law treats that as a charge over the company's assets, and a charge created by an Israeli company must be registered with the Companies Registrar within 21 days of its creation under Section 178 of the Companies Ordinance [New Version] 5743-1983, failing which it is void against a liquidator and against other creditors. Foreign suppliers discover that rule during an insolvency, which is the one moment it cannot be fixed. Two structural points complete the picture. Put an arbitration or jurisdiction clause in the contract deliberately, since Israel is a party to the New York Convention and an arbitral award is far easier to enforce across borders than a judgment. And open a route for the money to move, because an Israeli buyer's compliance department will ask for documentation on every outbound payment, a friction we describe in the context of opening an Israeli bank account as a non-resident.

In Practice: The Sale (International Sale of Goods) Law 5760-1999 brings the Vienna Convention into Israeli law and extends it to parties in non-contracting states, so it governs by default unless excluded in writing. Any charge you take over an Israeli company's assets must be registered at the Companies Registrar within 21 days under Section 178 of the Companies Ordinance [New Version] 5743-1983. A confirmed documentary credit typically costs the buyer 0.5% to 1.5% of the invoice value and is issued within 5 to 10 business days, against a debt claim in the Israeli courts that takes 12 to 30 months and recovers nothing from a company that has already failed.

When to Consult a Lawyer

• The balance is growing and the buyer is still ordering. That is the fact pattern that later looks like extending credit to an insolvent company, and it affects both your recovery and any preference argument in a liquidation.
• Your Israeli customer has asked you to ship against a promise while it arranges finance. The right response is a documentary credit or a personal guarantee from the shareholders, and it has to be negotiated before the goods leave.
• You are considering suing. Whether to claim in Israel, to enforce a foreign judgment, or to arbitrate is a decision worth taking on advice, because the choice made at the outset determines what recovery looks like two years later.

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Speak With an Israeli Attorney

We review the terms that actually govern your sales into Israel, put documentary or registered security in place before the next shipment, and pursue recovery through the route that fits the debtor rather than the one that feels fastest.

Contact us for a confidential initial consultation.