2U.S. ANTIBOYCOTT LAWSSection 203 of the International Emergency Economic Powers Act. Regulations in EAR 760Ribicoff Amendment to the Tax Reform Act of 1976 Section 999 of the Internal Revenue Code
3WHAT KIND OF BOYCOTT?Primary: Restricts imports from boycotted country*Secondary: Restricts trade with firms dealing with boycotted country*Tertiary: Restricts trade with firms dealing with blacklisted persons“*”--Jurisdiction of Antiboycott RulesThe boycott regulations prohibit cooperation with the secondary and tertiary boycotts not recognized by the U.S. The Commerce Department has identified these countries as currently participating in one or more aspects of the Arab League boycott of Israel:BahrainKuwaitLebanonLibyaOmanQatarSaudi ArabiaSyriaUnited Arab EmiratesYemen Arab RepublicJordan was removed from the above list of countries, so you do not have to presume that requests from Jordan for information or requests that you take certain action are boycott-based. If you receive a request from Jordan that clearly is based on the boycott, you must treat it as a boycott issue.Saudi Arabia is currently seeking to become a member of the World Trade Organization. As part of that process, Saudi Arabia has recently announced its intention to no longer participate with the Arab League in its boycott of Israel. Until the U.S. government removes Saudi Arabia from the above list of countries, you must be on the lookout for boycott issues.In addition to the above list, you must be on the lookout for boycott issues when dealing with other countries, especially Islamic countries such as Bangladesh, Indonesia, and Pakistan.
4HOW TO ANALYZE AN ANTIBOYCOTT ISSUE Jurisdiction: U.S. persons and U.S commerce?Prohibitions: Is conduct illegal?Exceptions: Is conduct excepted from prohibitions?Reporting: Is there a boycottrequest?
5JURISDICTIONAn activity is subject to the jurisdiction of the antiboycott regulations if it involves a “U.S. person” and “U.S. commerce.”U.S. PERSON:U.S. citizen or residentU.S. permanent resident alien“Controlled in fact” foreign subsidiaries of U.S. companiesU.S. COMMERCE:Imports into and exports from the United States of goods, services and informationActivities of foreign affiliates in the stream of U.S. commerceThe antiboycott rules apply only if the activity involves both a U.S. person and U.S. Commerce.
6U.S. ANTIBOYCOTT REGULATIONS ProhibitionsTo understand the antiboycott regulations you must recognize that they are based on a series of prohibitions and exceptions.The prohibitions tell you what you cannot do.If you find an activity is prohibited, the next thing to do is check the exceptions.The exceptions tell you can do something even though it is described by a prohibition. In other words, the exceptions overrule the prohibitions.If an activity is not prohibited, you may proceed without checking the exceptions.Compliance with Antiboycott Rules are often managed from a company’s legal office.Since boycott-related requests are often included in contracts, purchase orders and letters of credit, departments that review these documents should be trained to recognize and handle them.& Exceptions
7PROHIBITIONSAgreements to refuse, or actual refusal to do business, with or in IsraelAgreements to refuse, or actual refusal to do business with companies the Arab League has blacklistedExamples:Using black listUsing white listExclusion of specific supplierRefusal can be implied from pattern of conduct
8PROHIBITIONSAgreements to furnish or actual furnishing of information about business relationships with or in IsraelAgreements to furnish information about business relationships with Arab League blacklisted companiesFurnishing of business informationExamples:Information concerning sales, purchasesLegal or commercial representationShipping and other transportation informationInformation about relationships with similarly-named firmsIncludes publicly available information -- annual reportsNeed not be in response to any requestCovers:Any business with or in a boycotted countryWith any national or resident of a boycotted countryWith any other person who is known or believed to be restricted from having any business relationship with or in an Arab League countryResulting from direct or indirect requestsDirect or indirect provision of informationEven normal information is covered (e.g., catalogues, brochures) if it is KNOWN that the information being sought is for boycott purposesRegulations list information always permissible (Supplement 5). The important issue for this prohibition is to avoid the appearance of cooperating with the Boycott. You may not even imply that there “is no reason for us to be blacklisted.”
9PROHIBITIONSImplementing letters of credit containing prohibited boycott terms or conditionsOther Prohibitions:Discriminating or agreeing to discriminate based on race, religion, sex, national origin or nationalityFurnishing or agreeing to furnish information about the aboveExamples of implementing Letters of Credit with boycott terms:HonoringConfirmingPayingNegotiatingLetters of Credit negotiated outside the United States by a U.S. person are presumed to include items in U.S. commerceBanks often catch boycott related terms in Letters of Credit. Antiboycott rules also apply to applications for letters of credit.
10PROHIBITIONSInformation Concerning Association with Charitable and Fraternal OrganizationsFurnishing information about charitable or fraternal organizationsNo exceptions
11EXCEPTIONS Compliance with Import Requirements of a Boycotting Country Examples:Exports to boycotted country, directly or indirectlyRoute of shipment of exports to or through boycotted countryApplies to a boycotting country’s internal rules that:Prohibit the import of goods or services directly from the boycotted countryProhibit the import of goods produced or services provided nationals of the boycotted countryThis exception applies only to transactions involving imports into a boycotting countryYou may not agree on an “across the board” basis to do business with a boycotted countryThis exception does not include “blacklisted” firms
12EXCEPTIONSCompliance with Shipping Document Requirements of Boycotting CountryPositive RequestsExamples:Country of OriginName of CarrierName of Supplier or Service ProviderThis exception can only apply if the requestor states the requirements in positive, “non-blacklisting” language.
13EXCEPTIONS Compliance with Unilateral and Specific Selection “Necessary and Customary”Goods specifically identifiableApplies to “Pre-selection” and “Pre-award” servicesThere is a fine line as to when this exception applies. Each situation must be analyzed on a case-by-case basis.
14EXCEPTIONS Compliance with Local Laws: Applies to “laws,” not “policies”Applies to U.S. persons that are resident in a foreign countryIncludes entering into contracts, employing host country residents, purchasing and selling host country goods, furnishing informationThere is a fine line as to when this exception applies. Each situation must be analyzed on a case-by-case basis.
15ANTIBOYCOTT REPORTING REQUIREMENTS SCHEDULE FOR QUARTERLY REPORTSU.S. Company: January - March quarter due April 30Foreign Sub: January - March quarter due May 31Submit reports in duplicate to: Report Processing Staff, Office of Antiboycott Compliance, U.S. Department of Commerce, Room 6099C, Washington, DCUse Form BXA 621P for single transaction or BXA 6051P for multiple transactions, according to instructions in 760.5(b)(4).You must indicate whether you intend to take or have taken the action requested.You must submit two copies of relevant pages of any documents in which the request appears. You must keep these on file for five years.Documents will be made available for public inspection.
16REPORTING REQUIREMENTS Reports required quarterlyU.S. person must report receipt of request to take action that furthers boycott even if they did not act on itMust relate to transaction of anticipated business in U.S. CommerceIncludes overseas subsidiaries that are controlled “in fact” by the U.S. parentCompliance Hint:Ensure all staff know enough about the boycott to communicate the receipt of requests to the legal department.Failure to report receipt of a request is a violation in some cases.
17EXCEPTIONS TO REPORTING REQUIREMENT Route of vesselUse of specified country’s vesselPositive certification of originCompliance with country’s laws if boycott laws not mentionedCertificates of vessel eligibility
18ENFORCEMENT Criminal: Each "knowing" violation up to $50,000 or five times the value of the exports involved, whichever is greaterImprisonment of up to five years
19WHERE COMPANIES GO WRONG Only check targeted countriesDo not train their subsidiaries to report
20ENFORCEMENT Administrative: General denial of export privileges Fines of up to $11,000 per violationExclusion from practiceFor transactions after October 23, 1996 the maximum administrative fine is $11,000 per violation.Boycott agreements under IRS rules involve the denial of all or part of the foreign tax benefits.
21Penalties imposed for each "knowing" violation fine of up to $50,000 or 5 times the value of the exports involved, whichever is greater, and imprisonment of up to five years.
22During Fiscal Year 200710 companies paid civil penalties totaling $194,500 to settle allegations they violated the antiboycott provisions of the EAR. Most of the settlements involved alleged violations of the prohibition against furnishing information about business relationships with or in Israel, or with companies on boycotting countries’ blacklists. Other settlements involved failure to report receipt of requests to engage in restrictive trade practices or boycotts.
23In Fiscal Year 2007, BIS’s Office of Antiboycott Compliance responded to 1,097 requests from companies for guidance on compliance with the antiboycott regulations. During the same period, BIS officials made 16 public presentations on the antiboycott regulations to exporters, manufacturers, financial services institutions, freight forwarders, and attorneys involved in international trade. BIS also provided extensive counseling to individual companies with specific boycott problems.
24SUMMARY U.S. Antiboycott laws How to analyze your antiboycott problem Exceptions and ProhibitionsReporting requirementsEnforcementQUESTIONS?