From: <a href="http://www.aftenposten.no/spesial/wikileaksdokumenter/article3974066.ece">Aftenposten</a><br>
Date: 14. 6. 2006

<pre>
MARKET ACCESS
S E C R E T SECTION 01 OF 03 TEL AVIV 002301 
SIPDIS 
NOFORN 
E.O. 12958:
DECL: 06/14/2016
TAGS: ETRD, ECON, PGOV, KWBG, PINR, IS, SCRM, 
ECONOMY AND FINANCE, ISRAELI-PALESTINIAN AFFAIRS
SUBJECT: ALLEGED ISRAELI CORRUPTION AT KARNI IMPEDES U.S. MARKET ACCESS 
REF: TEL AVIV 2120 
Classified By: Ambassador Richard H. Jones, reasons 1.4 (b) and (d). 
This is a joint cable with Consulate General Jerusalem.

1. (S/NF)
Summary: U.S. businesses allege that corruption by Israeli
officials at Karni crossing is impeding their access to the
Gaza market. As of late May 34 shipments of American goods,
amounting to nearly USD 1.9 million dollars, have been waiting
three to four months to cross into Gaza. U.S. distributors
assert they are being asked to pay "special fees" which amount
to as much as 75 times the standard processing fee as quoted
by GOI officials. According to one major American distributor,
corruption extends to Karni management and involves logistics
companies working as middlemen for military and civilian
officials at the terminal. An open and transparent truck
registration system and the development and publication of
clear procedures, charges and service standards for Karni
would go a long way to fight corruption and advance the
Agreement on Movement and Access, goal of effective service
standards for the border crossings. End summary and comment.

-------------------------
ALLEGATIONS OF CORRUPTION
------------------------- 

2. (S/NF)
According to business contacts, allegations of corruption at
Karni have a long history. Recently, COGAT head General Yossef
Mishlev acknowledged the problem telling EconCouns that
corruption was the root cause of backlogged shipments waiting
to cross into Gaza at Karni and that some businessmen have had
to pay NIS 9,000 (USD 2,500) to guarantee that their shipments
could cross (reftel). However, the fact that Karni has been
closed nearly 40 percent of the time has exacerbated the
problem of access and appears to have forced up the cost of
bribes, Embassy business contacts allege. The normal cost of
shipping cargo is USD 600-650 to transport a load from the
West Bank or the port of Ashdod to Karni and, according to
Israeli Airports Authority (IAA, which manages Karni terminal)
Deputy Director General Yoram Shapira, the standard processing
fee at Karni is NIS 370 (USD 82) for a full trailer, NIS 350
(USD 78) for a semi-trailer, and NIS 250 (USD 56) for a single
trailer. Coca Cola distributor Joerg Hartmann (strictly
protect) claimed to econoff that the cost of guaranteeing that
one,s shipment will cross into Gaza on a certain day increases
sharply after a long closure, while the price goes down after
the terminal has experienced a long period without any
closures. Hartmann also alleged that he has been asked to pay
as much as NIS 13,000-15,000 (USD 2,889-USD 3,333) per
truckload, which includes a flat fee plus an additional two
shekels per case charge, which is not recorded on the invoice.
The AmCit Westinghouse general manager supplied FCS with
invoices where he was charged NIS 14,000 and NIS 28,000 (USD
3,111 and USD 6,222) per truckload. Caterpillar alleges that
it was asked to pay NIS 12,000 (USD 2,667) to move two small
caterpillar generators through the passage, which the company
refused to pay.

3. (S/NF)
What does one get for $3,000 payment to move cargo? Hartmann
said that for that price, your truck is promised the first
place in line or a spot near the head of the so-called
"Israeli line" which does move. Hartmann said that usually two
or three lines at Karni are reserved for Israeli
companies/shippers, which he speculated pay a much lower
amount to get their products across the border. These lines
process transfers much more rapidly than the other lines at
Karni. In any case, he alleged, the queue at Karni is "a joke"
because everyone whose shipment is going to move has paid a
bribe long before the trucks get in line. Hartmann said he
tried to bypass the exorbitant bribes by making a deal with
Coca Cola Israel to use their Beer Sheva warehouse and have
them truck his merchandise to Karni. However, IDF officer
Mikhail Sorolnik told him that was not permissible, he
claimed.

4. (C/NF)
Distributors of American companies selling products in Gaza
have complained to emboffs that the lack of a clear and
predictable truck registration system enables widespread
corruption at Karni crossing and impedes their ability to do
business. These companies include Coca Cola, Proctor &
Gamble, Caterpillar, Philip Morris, Westinghouse, Hewlett
Packard, Motorola, Aramex, and Dell computers. As of late May,
according to data compiled by FCS, 34 shipments of American
goods, amounting to nearly USD 1.9 million dollars, have been
waiting three to four months to cross into Gaza. These
businessmen have criticized the fact that calls to the phone
reservation system for receiving a date and time to cross are
never answered and that their discussions with GOI officials
have resulted in only temporary (one or two day) improvements.
(Note: Many of the businesses affected have operations in the
West Bank and ship from there to Gaza, but shipments coming
directly from the port of Ashdod similarly suffer. End note.)
While these businesmen concede that security concerns and
frequent closures this year have severely cut overall imports
into Gaza, they say these factors do not explain why these
truckloads of U.S. imports have had to wait as much as four
months to enter the territory, while some trucks, according to
the AmCit general manager for Westinghouse, have been
delivering two shipments in one day. Unable to cross, American
products are forced to waste unproductive days waiting at
Karni and then spend weeks on end in a warehouse. Under such
conditions, U.S. businesses are unable to plan effectively and
incur additional costs.

-----------------
HOW DOES IT WORK?
----------------- 

5. (S/NF)
Hartmann claimed that a certain high-level official at the
terminal heads the bribery ring. Directly under him, Hartmann
alleges, are an Arab-Israeli, another Israeli civilian, and
two IDF officers, who have met with Hartmann and other
businessmen. Hartmann said that he has met with the terminal
official, who discussed the price of bribes required to
facilitate the movement of goods through the terminal. He said
the usual middlemen for bribes are logistic companies with
close ties to the Karni terminal management. He also said that
the terminal official works with Palestinians. Hartmann
recounted one occasion when he met a Palestinian middleman in
Gaza and drove with him to the Karni terminal for a meeting
with the terminal official where bribes were discussed.
(Comment: Hartmann is not the only contact to have named this
particular official as the head of the bribery ring, but has
been the only one willing to discuss the set-up in detail. End
comment.)

------------------ 
EFFORTS TO RESOLVE
------------------ 

6. (C/NF)
Hartmann and representatives of Westinghouse, Caterpillar,
Proctor & Gamble, and Philip Morris joined emboffs for a
meeting on May 26 with Karni officials. During this meeting,
the business representatives vociferously complained to Karni
officials about the bribes they had to pay. The officials did
not address the issue of bribes, but suggested that the USG
either push the Palestinian Authority to allow the businessmen
to ship through Kerem Shalom or fund the purchase of more
conveyor belts at Karni.

7. (C/NF)
Hartmann is chairman of the local Overseas Security Advisory
Council (OSAC). OSAC, which is affiliated with the Department
and supported by the U.S. Commercial Service, focuses on
security issues, but has also served as an umbrella group to
tackle the delay problem. Hartmann said that OSAC tried to
reach an agreement with Karni management that would have had
OSAC members working through a single logistics company and
receiving a guarantee from the management that six of the
group,s shipments would cross each day. Finalizing that
proposed MOU has stalled since the victory of Hamas in
January. Consequently, Hartmann said that he and the other
U.S. companies would prefer that there be a solution based on
a real registration/management system that is transparent and
open.

-------
COMMENT
------- 

8. (C/NF)
The GOI,s commitments to the Agreement on Movement and Access
(AMA) notwithstanding, the deeply problematic procedures and
allegations of endemic corruption at Karni terminal constitute
a major non-tariff barrier to trade. An open and transparent
truck registration system, such as a website where one could
register and monitor the movement of the queue would go a long
way toward resolving this problem. The development and
publication of clear procedures, charges and service standards
for Karni will advance the AMA goal of creating an effective
system for trade with the Palestinian territories. Embassy
officers continue to meet with COGAT and IAA officials to try
to resolve this issue. The Ambassador will meet with
appropriate ministerial-level officials to seek a solution.
</pre>