US government to probe Israeli company that manufactures Iron Dome components

The United States government will open an unprecedented legal probe into Finkelstein Metals, the Israeli company that manufactures components for the Iron Dome aerial defense system.

U.S. authorities argue that the Israeli firm has received U.S. government grants it was not entitled to and that these funds have enabled Finkelstein Metals to sell products in the U.S. market at inflated prices, according to a report from Israel's Maariv daily news on Wednesday.

Israeli officials are reportedly surprised by Washington's decision to investigate Finkelstein Metals and impose sanctions against the long-established manufacturer of components industries worldwide,

Founded in 1940 as a family-owned company, Finkelstein Metals has its headquarters in the northern Israeli town of Afula and additional facilities in the state of Illinois. While Finkelstein’s market share in the U.S. market is less than 3%, it constitutes around 75% of the company’s total sales volume.

U.S. authorities argue that the company’s conduct contradicts the trade agreement between the United States and Israel, which was signed in 1985, the purpose of which is to reduce, and sometimes eliminate, all duties on Israeli products and services exported to the United States. However, Finkelstein Metals exists in a grey zone due to its dual presence in Israel, as well as in the U.S.

U.S. sanctions on the company have reportedly had a negative impact on the company’s ability to operate and because it is a crucial supplier in the defense industry, the U.S. government’s harsh measures could potentially also impact major defense industry projects, in addition to the Iron Dome aerial defense system.

The Israeli Foreign Ministry is attempting to resolve the legal crisis with help from the Israeli Association of Manufacturers (MAI).

MAI President Ron Tomer criticized the U.S. government’s legal measure as contradicting the American Israeli trade agreement.

"This is an unfounded lawsuit, which may lead to the closure of the factory. If this case is successful, it may harm other Israeli companies and is contrary to existing trade agreements," Tomer said.

U.S. authorities’ legal action against Finkelstein Metals could potentially impact the broader American-Israeli trade relationship, he warned.

Establishing industrial plants frequently requires government grants, however, if Washington ultimately rules that this arrangement constitutes a prohibited subsidy, then they would incur customs duties on products exported to the American market. In such a scenario, it will become more difficult for Israeli companies to export their products and services to the U.S. market.

Due to the limited domestic market, the Israeli 500-billion-dollar economy is highly export-oriented, with a particular focus on the U.S., European and Asian markets.

The United States and Israel are close allies, with extensive trade and military cooperation. However, the Biden administration has increasingly sharpened its tone towards Israeli Prime Minister Benjamin Netanyahu's government, as well as Israeli residents in the Judea and Samaria region, internationally known as the West Bank.

In December, Biden's administration decided to deny entry visas to dozens of Israeli West Bank residents who were accused of attacking local Arab residents. At the time, U.S. Secretary of State Antony Blinken argued that Washington “consistently opposed actions that undermine stability in the West Bank, including attacks by Israeli settlers against Palestinians, and Palestinian attacks against Israelis.”