Export Compliance Basics: Beware of Antiboycott Provisions

David Noah | February 17, 2016 | Export Compliance
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Export Compliance Basics: Beware of Antiboycott ProvisionsOne of the most basic components of export compliance is often one of the most overlooked: antiboycott regulations. These regulations prohibit U.S. companies from acknowledging or complying with requests from foreign entities to boycott Israel and certain other countries.

Not only do these regulations prohibit U.S. companies from complying with these requests, in some circumstances they require companies to report these requests.

Current Antiboycott Conduct

According to David Mills, Assistant Secretary of Export Enforcement at the Department of Commerce’s Bureau of Industry and Security (BIS), most of the antiboycott requests currently come from the United Arab Emirates (UAE) and Malaysia.

Unfortunately the Office of Antiboycott Compliance (OAC) reports that some U.S. companies unwittingly violate these regulations because the antiboycott provisions are inserted into the fine print of a foreign purchase order or sales contract and are agreed to without notice. You’ll find examples of some of the language foreign entities have used in the past to solicit antiboycott cooperation from U.S. companies at the OAC website.

The History of Antiboycott Regulations

In the mid 1970s, the United States adopted two laws intended to counteract the participation of U.S. citizens in other nation's economic boycotts or embargoes. These antiboycott laws are the 1977 amendments to the Export Administration Act (EAA) and the Ribicoff Amendment to the 1976 Tax Reform Act (TRA).

Antiboycott compliance refers to the provisions found in Part 760, Restrictive Trade Practices or Boycotts, of the Export Administration Regulations (EAR). These laws discourage, and in some cases, “prohibit U.S. companies from furthering or supporting the boycott of Israel sponsored by the Arab League, and certain other countries, including complying with certain requests for information designed to verify compliance with the boycott.”

Antiboycott Provisions

Antiboycott provisions under the TRA and/or found in the EAR prohibit a variety of activities:

  • Agreements to refuse or actual refusal to do business with or in Israel or with blacklisted companies.
  • Agreements to discriminate or actual discrimination against other persons based on race, religion, sex, national origin, or nationality.
  • Agreements to furnish or actual furnishing of information about business relationships with or in Israel or with blacklisted companies.
  • Agreements to furnish or actual furnishing of information about the race, religion, sex or national origin of another person.
  • Implementing letters of credit containing prohibited boycott terms or conditions.

The TRA does not actually prohibit any conduct, but it penalizes companies that participate in these agreements by denying them certain tax benefits. Needless to say, they are significant enough to make non-compliance expensive.

According to the OAC, these laws apply to “U.S. persons in the interstate or foreign commerce of the United States.” This includes all individuals, corporations and unincorporated associations resident in the U.S. including the permanent domestic affiliates of foreign concerns.

U.S. persons also include U.S. citizens abroad (except when they reside abroad and are employed by non-U.S. persons) and the controlled in fact affiliates of domestic concerns. The test for "controlled in fact" is the ability to establish the general policies or to control the day to day operations of the foreign affiliate.

For More Information

For more information about the antiboycott regulations, check out these additional resources:

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