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Presentation on theme: "U.S. ANTIBOYCOTT REGULATIONS"— Presentation transcript:


2 U.S. ANTIBOYCOTT LAWS Section 203 of the International Emergency Economic Powers Act. Regulations in EAR 760 Ribicoff Amendment to the Tax Reform Act of 1976 Section 999 of the Internal Revenue Code

3 WHAT 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 Rules The 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: Bahrain Kuwait Lebanon Libya Oman Qatar Saudi Arabia Syria United Arab Emirates Yemen Arab Republic Jordan 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.

Jurisdiction: U.S. persons and U.S commerce? Prohibitions: Is conduct illegal? Exceptions: Is conduct excepted from prohibitions? Reporting: Is there a boycott request?

5 JURISDICTION An 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 resident U.S. permanent resident alien “Controlled in fact” foreign subsidiaries of U.S. companies U.S. COMMERCE: Imports into and exports from the United States of goods, services and information Activities of foreign affiliates in the stream of U.S. commerce The antiboycott rules apply only if the activity involves both a U.S. person and U.S. Commerce.

Prohibitions To 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

7 PROHIBITIONS Agreements to refuse, or actual refusal to do business, with or in Israel Agreements to refuse, or actual refusal to do business with companies the Arab League has blacklisted Examples: Using black list Using white list Exclusion of specific supplier Refusal can be implied from pattern of conduct

8 PROHIBITIONS Agreements to furnish or actual furnishing of information about business relationships with or in Israel Agreements to furnish information about business relationships with Arab League blacklisted companies Furnishing of business information Examples: Information concerning sales, purchases Legal or commercial representation Shipping and other transportation information Information about relationships with similarly-named firms Includes publicly available information -- annual reports Need not be in response to any request Covers: Any business with or in a boycotted country With any national or resident of a boycotted country With any other person who is known or believed to be restricted from having any business relationship with or in an Arab League country Resulting from direct or indirect requests Direct or indirect provision of information Even normal information is covered (e.g., catalogues, brochures) if it is KNOWN that the information being sought is for boycott purposes Regulations 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.”

9 PROHIBITIONS Implementing letters of credit containing prohibited boycott terms or conditions Other Prohibitions: Discriminating or agreeing to discriminate based on race, religion, sex, national origin or nationality Furnishing or agreeing to furnish information about the above Examples of implementing Letters of Credit with boycott terms: Honoring Confirming Paying Negotiating Letters of Credit negotiated outside the United States by a U.S. person are presumed to include items in U.S. commerce Banks often catch boycott related terms in Letters of Credit. Antiboycott rules also apply to applications for letters of credit.

10 PROHIBITIONS Information Concerning Association with Charitable and Fraternal Organizations Furnishing information about charitable or fraternal organizations No exceptions

11 EXCEPTIONS Compliance with Import Requirements of a Boycotting Country
Examples: Exports to boycotted country, directly or indirectly Route of shipment of exports to or through boycotted country Applies to a boycotting country’s internal rules that: Prohibit the import of goods or services directly from the boycotted country Prohibit the import of goods produced or services provided nationals of the boycotted country This exception applies only to transactions involving imports into a boycotting country You may not agree on an “across the board” basis to do business with a boycotted country This exception does not include “blacklisted” firms

12 EXCEPTIONS Compliance with Shipping Document Requirements of Boycotting Country Positive Requests Examples: Country of Origin Name of Carrier Name of Supplier or Service Provider This exception can only apply if the requestor states the requirements in positive, “non-blacklisting” language.

13 EXCEPTIONS Compliance with Unilateral and Specific Selection
“Necessary and Customary” Goods specifically identifiable Applies to “Pre-selection” and “Pre-award” services There is a fine line as to when this exception applies. Each situation must be analyzed on a case-by-case basis.

14 EXCEPTIONS Compliance with Local Laws:
Applies to “laws,” not “policies” Applies to U.S. persons that are resident in a foreign country Includes entering into contracts, employing host country residents, purchasing and selling host country goods, furnishing information There is a fine line as to when this exception applies. Each situation must be analyzed on a case-by-case basis.

SCHEDULE FOR QUARTERLY REPORTS U.S. Company: January - March quarter due April 30 Foreign Sub: January - March quarter due May 31 Submit reports in duplicate to: Report Processing Staff, Office of Antiboycott Compliance, U.S. Department of Commerce, Room 6099C, Washington, DC Use 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.

Reports required quarterly U.S. person must report receipt of request to take action that furthers boycott even if they did not act on it Must relate to transaction of anticipated business in U.S. Commerce Includes overseas subsidiaries that are controlled “in fact” by the U.S. parent Compliance 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.

Route of vessel Use of specified country’s vessel Positive certification of origin Compliance with country’s laws if boycott laws not mentioned Certificates of vessel eligibility

18 ENFORCEMENT Criminal:
Each "knowing" violation up to $50,000 or five times the value of the exports involved, whichever is greater Imprisonment of up to five years

Only check targeted countries Do not train their subsidiaries to report

20 ENFORCEMENT Administrative: General denial of export privileges
Fines of up to $11,000 per violation Exclusion from practice For 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.

21 Penalties 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.

22 During Fiscal Year 2007 10 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.

23 In 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.

24 SUMMARY U.S. Antiboycott laws How to analyze your antiboycott problem
Exceptions and Prohibitions Reporting requirements Enforcement QUESTIONS?


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