The International Trade Blog arrow Export Compliance

Export Compliance Basics: Beware of Antiboycott Provisions

On: April 15, 2024    |    By: David Noah David Noah    |    4 min. read

Export Compliance Basics: Beware of Antiboycott Provisions | Shipping SolutionsOne of the most basic components of export compliance is often one of the most overlooked: antiboycott regulations. The Export Administration Regulations (EAR) 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, they also require them to report certain boycott-related requests to the Office of Antiboycott Compliance (OAC).

To make it easier for exporters, freight forwarders and others to comply, the Department of Commerce's Bureau of Industry and Security (BIS) has published a list of organizations and individuals that have made boycott requests. The entities on this list were reported on the antiboycott reporting form on the OAC website which was updated in July 2023 to include the specific party that made the boycott request. According to a BIS press release, this list is not exhaustive and will be updated quarterly. Companies should not confine their due diligence to only companies on this list.

The Commerce Department strengthened its enforcement of antiboycott violations in October 2022 "enhancing" penalties against violators. These enhancements include a broadening of the classification of violations that deserve to pay the maximum penalty of $300,000 per violation or twice the value of the transaction, and increasing the amount of penalties for less serious violations.

Current Antiboycott Conduct

The Arab League boycott of Israel is the primary foreign boycott that U.S. exporters must pay attention to. According to BIS, many of the antiboycott requests come from the United Arab Emirates (UAE) and Malaysia.

In the past 10 years, the OAC has issued penalties against more than 50 U.S. companies, banks or other entities. The 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 on the OAC website.

There are strict regulations regarding export compliance. Download this free  whitepaper to make sure you know what's required of you.

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 nations' 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 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 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 noncompliance 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 general policies or to control the day-to-day operations of the foreign affiliate.

Export penalties are assessed against companies of all sizes. Download this  free BIS publication:Don't Let This Happen to You!

Antiboycott Enforcement Enhancements

BIS says they have strengthened their enforcement against antiboycott violations in October 2022 in four ways:

  1. Increased penalties for violations. While BIS has relied on the maximum penalty allowed under the Anti-Boycott Act of 2018 for the most serious violations, it has increased penalties for what it considers Category B and Category C violations as well.
  2. Reprioritized its violation categories to reflect what the agency considers the most serious violations.
  3. Eliminated violation settlements that allow companies to pay a penalty without admitting misconduct. According to the BIS, "OAC will require those who enter into settlement agreements for antiboycott violations to admit to a statement of fact outlining their conduct as part of the settlement agreement." This is consistent with BIS enforcement changes for other export regulation violations.
  4. Renewed focus on enforcement activities against foreign subsidiaries of U.S. companies.

For More Information

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


Like what you read? Subscribe today to the International Trade Blog to get the latest news and tips for exporters and importers delivered to your inbox.

This article was first published in February 2016 and has been updated to include current information, links and formatting.

David Noah

About the Author: David Noah

As president of Shipping Solutions, I've helped thousands of exporters more efficiently create accurate export documents and stay compliant with import-export regulations. Our Shipping Solutions software eliminates redundant data entry, which allows you to create your export paperwork up to five-times faster than using templates and reduces the chances of making the types of errors that could slow down your shipments and make it more difficult to get paid. I frequently write and speak on export documentation, regulations and compliance issues.

Learn everything you need to know about export compliance.

Designed for small and medium-sized businesses, this resource on the basics of export compliance is perfect for sharing with company personnel. Avoid future headaches—download it now.

Download Now

SS CTA - What You Need to Know about Export Compliance
email

Subscribe to the Newsletter!

Join the 33,143 other exporters and importers who get the latest news, tips and insights from international trade professionals.