Export Compliance Matters

Insight on Export/Import & Compliance Issues

By Doreen Edelman Posted in Compliance, OFAC

Due Diligence in International Business Isn’t an Option as List of USG’s “Bad Guys” Grows

U.S. businesses must be more and more careful when choosing foreign business partners because the list of “bad guys” keeps getting longer and longer.  The U.S. Government (USG) is once again extending the reach of U.S. Syrian and Iranian sanctions.  A new Executive Order (EO) targeting “foreign sanctions evaders” (FSE) prohibits U.S. persons from transacting or dealing with listed foreign entities who have, attempted to, or helped to violate U.S. sanctions against Iran or Syria.  The EO also prohibits FSEs from entering the U.S.  See EO 13608 “Prohibiting Certain Transactions With and Suspending Entry Into the United States of Foreign Sanctions Evaders With Respect to Iran and Syria.”

The U.S. Treasury Department can now publically identify FSEs in order to isolate them from the U.S. financial and commercial systems.  Unlike other sanction programs, the FSE EO does not block assets, but instead stops transactions, financial or otherwise, by prohibiting U.S. persons from taking part in them.  For U.S. persons and businesses, this means a bar on all aspects of trade in goods, services, or technology with evaders.  Previously acquired Office of Foreign Assets Control (OFAC) licenses do not exempt a transaction and license holders must stop all dealings with listed evaders unless OFAC re-authorizes the transaction under the FSE EO.  This means U.S. companies and individuals must conduct comprehensive due diligence on foreign partners to ensure there are no connections to prohibited entities.

I always recommend researching potential partners as part of a comprehensive compliance program – whether foreign or domestic – and running names through government lists only takes a few moments of time.  In fact your lawyer or compliance officer may have access to database that can review all the lists with just one search.  A few small steps now can save a lot of headaches and liabilities in the future.

Doreen

By Doreen Edelman Posted in Compliance

Companies Take Note: You Cannot Rely on Your Customs Broker if Mistakes are Made on Your CBP Documentation

I want to remind everyone of a big “what not to do.” Hopefully, this blog can help you avoid cumbersome mistakes and costly liability. Companies and individuals assume that their broker is an expert and is correctly following the law. (I know this blog is about exporting but this is relevant because many exporters are also importers. In fact, an exporter just had this problem when it was using a duty-free “temporary import under bond” HTS number.) What many companies do not realize is that brokers are almost never liable for providing wrong information to Customs and Border Protection (CBP). Really. If the HTS code is wrong…you are responsible and required to check the documents. If the duty is wrong…you are responsible for the payments and penalties. If you are claiming a special program like NAFTA and you get the calculation wrong or chose the wrong applicable tariff shift…you are responsible. It doesn’t matter if the broker picked it for you. If there are safety standards or reporting requirements that have not been met…you are responsible for the costs when the shipment gets seized.

And not only are you the person that CBP will call when there is a problem, but you can’t look to the broker to reimburse you. Brokers have very limited liability. You are the importer. You are legally required to ensure that the broker has done everything correctly. This means that you have to understand the customs laws and regulations. You have to be educated on the programs you want to use for duty deferral or duty reduction. You have to keep all your documentation to support your determination and program choices. So, even when your broker does make a mistake, you are responsible. Since examples speak louder than lectures, here are a couple examples that happen a lot:

A company importing products from abroad allowed its customs broker to classify the product under the HTS without ever verifying that the classification was correct. Many importers assume that because brokers do this all the time they are classification experts. Not true. Unfortunately for this company, the broker got it wrong. He classified the item with an incorrect HTS number that was duty-free. CBP noticed and proposed a penalty of almost $200,000 on top of the $70,000 the company owed in unpaid duties. Moreover, many brokers are not experts at filing protests to correct such errors. The point is that you, the importer, must be proactive. There is no alternative. You must pay attention and be involved. Learn what you need to do or hire counsel.

In another case, a shipment was seized because the foreign manufacturer, not the importer, failed to provide required manufacturing information to the USG. The customs broker didn’t know the industry standards. The importer knew nothing about the manufacturer requirements, yet he was the one on the hook for the liability. Luckily, the importer petitioned CBP (with the help of a lawyer) and was eventually allowed to send the non-compliant goods back to where they came from, but only after paying thousands of dollars in fines and storage fees.

The moral is – save yourself the headaches and liability. Ensure you have your classifications correct and your duties consistent with the law. You are responsible for what you import. You cannot rely on the broker if you have a problem.  Audits are a really useful tool.

Hope this is helpful.

Doreen

By Doreen Edelman Posted in Compliance, OFAC

The Rules are the Rules – Every Business Big and Small Needs to Pay Attention to Sanctions and Embargos

Our friends at the Office of Foreign Assets Control (OFAC) have been busy lately.  We not only have enforcement news for you, but procedural news, a new Executive Order responding to human rights abuses in Syria and Iran, and a Burma program General License. But before we get into the details of program changes, I want to use a recently settled case to remind readers that OFAC sanctions apply to EVERYONE regardless of how small a company is or how harmless a product might seem. Rules are rules. They apply equally, and this month OFAC ensures us that they plan to enforce that way. So step up your compliance game — OFAC is playing hardball.

Case Study – Don’t Export to Iran Without a License

This month Essie Cosmetics Ltd. and one of its corporate officers agreed to a settlement with OFAC concerning unlicensed exports to Iran of about $33,000 worth of nail care products. While nail care products are not the type of export that might raise eyebrows, seem inherently dangerous, or tend to support a hostile government regime, unlicensed exports to Iran are prohibited and it’s clear that OFAC isn’t tolerating any attempts to circumvent those rules. OFAC determined that there was no voluntary self-disclosure and considers the case egregious because there were intentional efforts to evade the sanctions. After taking mitigating factors into account, including no history of violations and cooperation with the investigation, OFAC reduced the settlement from the base penalty of $750,000 to $450,000! The investigation also lead to prosecution agreements in the Southern District of New York and a civil forfeiture to the Department of Homeland Security.

Take away – JUST DON’T DO IT.

Case Study — Be Careful Who You Do Business With…You Never Know

Working for or with U.S. Government blocked parties may lead to less money for you. When the blocked party tries to pay you, the funds will be seized by the USG and you won’t get paid. On April 23, the U.S. government issued a new Executive Order blocking anyone that supports human rights abuses in Iran and Syria through the use of technology. See the White House Fact Sheet.  This new law reminds EVERY exporter to ensure that you check the lists before exporting. This means:

  • Check the restricted parties lists at all agencies
  • Review the red flags
  • Review embargoed and sanctions prohibitions and
  • Review the transshipment country prohibitions list under 15 CFR Part…(General Prohibition 8)

Burma/Myanmar License Change

On April 17, OFAC replaced and superseded Burma General License No. 14-B (14-B) with General License No. 14-C (14-C). 14-C expands upon 14-B authorizations and allows for the export and reexport to Burma of financial services in support of certain not-for-profit activities in the country. Qualifying activities include: projects to meet basic human needs, democracy building and good governance projects, educational activities, sports activities, certain non-commercial development projects and religious activities. For more details, see General License 14-C. 

Modernization of OFAC Licensing Process

As of March 26, there is a new licensing numbering system. Moving forward, expect the new system to be reflected in new licenses, denial letters and other correspondence. Amended licenses will continue to use the old system.  For a complete description of the new numbering system, see here.

By Doreen Edelman Posted in Compliance

New Resource To Facilitate International Sales – Even For Small Companies!

I talk to business executives weekly that have an opportunity to sell a product or service overseas. The executives are divided into one of two camps.  Either they fall for some “too good to be true” proposition (in Nigeria or Mexico), or they have no idea how to determine if the opportunity is real or is a waste of time and money.  Global expansion is possible for every company of any size.  There are many resources available to help and businesses owners should not let fear stand in the way of increasing profits through international business opportunities.  Since 2009, U.S. exports to the western hemisphere have jumped an amazing 49%.  Everyone can do it.  I find that many business owners are afraid because they don’t know where to begin.

One new government resource is the new Small Business Network of the Americas or SBNA.  The White House announced this new initiative on April 13. See the White House fact sheet here. The SBNA’s prerogative is to promote job growth and encourage trade throughout the western hemisphere through small and medium-sized enterprises (SME).  The SBNA plans to “expand the pool of available resources for business development, enhance access to business counseling services for entrepreneurs, and foster SME growth by providing a framework to connect businesses across the hemisphere.”  This plan includes:

  1. Expanding and connecting the already existing Small Business Development Center (SBDC) model — which partners the government with universities to provide free education and low cost training to small businesses — to other countries in the western hemisphere. The Small Business Administration administers the SBDC program which includes services like individualized long-term business counseling and market research. Currently there are almost 1,000 SBDCs in the U.S., 104 offices in Mexico and 10 offices in El Salvador.  (Don’t ask me why we started here first.)  For more information, look over the U.S. Small Business Administration SBDC page located here.
  2. Using U.S. Export Assistance Centers (USEACs) in our overseas Embassies to provide international business partner matchmaking and referrals to SBDC clients.  While these services are already offered at a cost to larger businesses, hopefully the initiative will provide assistance to SME for free or at a reduced cost through their local SBDC.  
  3. Expanding websites and online tools like SBDCGlobal.com that provide SME support.  For example, SBDCGlobal.com provides information on international buyers and sellers and provides opportunities to promote products.
  4. Increasing U.S. Government financial support with more working capital grants, Overseas Private Investment Corporation (OPIC) financing, loan guarantees, and private sector lending.  The specifics of these programs have not been announced yet, so the particular lenders and application processes are still unknown.  However, it is clear that some of these opportunities will be focused on and available solely for business development in the Americas.

Great words from our President, but what will really change?  How many new offices will be opened to assist exporters? What are the criteria for obtaining the loans and guarantees?  Unfortunately, I don’t know.  However, I can say there are ways to use government resources to explore international opportunities right now. We use the U.S. Commercial Service all the time to help small, mid-size, and even large U.S. businesses.  We get reports on foreign companies and names of potential companies that might make good business partners. We also coordinate due diligence efforts with U.S. consulates abroad.  Some of this is free, some of this costs several hundred dollars, but it is a good investment.  If you are going to export or set up a sales agent or distribution network, you must start by finding the right partner and performing due diligence.  Such due diligence protects you from a violation of U.S. law — the Foreign Corrupt Practices Act and export control laws come to mind — and will give you substantive information to determine if this company is a good fit for your growth strategy and is a knowledgeable partner in your industry.  This is step one for a global strategic plan.

–Doreen

P.S. – I wanted to move on to step 2, but you know the blog police don’t want the posts too long.  Here is a hint… know your customer.  That is followed by learn a little about the local law.

By Doreen Edelman Posted in Compliance

Export Control Reform – Will It Make Your Exporting Easier?

As everyone knows in the exporting world, the U.S. government is in the process of reorganizing export requirements. The agencies really are spending a lot of time and energy trying to do the right thing and bring the controls up to date and make the system easier for companies to do business globally. If you don’t know, the State and Commerce Departments are working together on a weekly basis to facilitate this reform.  Moreover, Commerce holds conferences calls for businesses to ask questions about the proposed changes.   Expect more changes in the coming months with the final implementation rules out by the end of 2012.  The State and Commerce Departments hope to make the export control regime more business friendly within the limitations imposed and ongoing by Congress (who must approve the changes).

What will it mean for your company and how difficult it will be for you to work with the reforms is still unclear.  Ultimately, it will benefit thousands of companies that currently register under the International Traffic in Arms Regulations (ITAR) that no longer will need to register. However, it will be a long time before all the transition issues will be implemented and then clarified.  The process will require compliance officers to struggle to understand what is expected and how the new requirements are meant to apply to your business. It will be like having a teenager….an expected but often painful part of the maturing process.

The new export program, as expressed by officials, is a mantra that goes like this –

 To have a:

  • Single enforcement agency for exports
  • Single control list of items
  • Single IT system and a
  • Single licensing agency

One of the first steps is the new “600 Series” which will be controls for items that are moving from the State Department’s control under the U.S. Munitions List (USML) to the Commerce Department’s  Commerce Control List (CCL).  The conventional thinking is that exporting will be easier if items move from the USML to the CCL because the CCL requires less items have a license for export. However, this may not be true for most companies.  At least with ITAR if you are on the list you know what you need to do. You need to register and get a license.  The list is the list – there is little confusion regarding applicable categories and no catch-all USML category.   For the items moving to Commerce, rumor has it that BIS will have a Commerce Munitions List of sorts.   Items that were once covered by Technical Assistance Agreements  (TAAs) and Manufacturing License Agreements (MLAs) or under a license pursuant to ITAR will now be subject to Commerce rules.  These rules are more broadly based and include such topics as the amorphous concept of “Am I subject to the EAR”, the  de minimis exception, brokering issues,  and  the reexport provisions.  These rules make determining licensing requirements “fuzzy.”   There may be additional new reporting requirements under the EAR and waiting periods.  Moreover, the transition from an existing ITAR license or ITAR exemption to a Commerce license or Commerce exception are not yet clear.

What this means for you is that there is no guidance available yet for modifying your business activities. Compliance risks will increase because new rules require “interpretation.”  These changes will require internal auditing, new procedures and revised compliance programs.  Transition rules are being drafted.  BIS will likely have a new license exception for Military License Export (MLX) that will allow series 600 exports without a license for parts and components that support items exported under a DDTC license, a TAA or MLA.  What is frustrating for compliance folks is that we cannot yet plan for the changes.

Obviously, this blog won’t go into details regarding the changes or be a report on the substantive issues.  However, I will try to be ahead of the curve and provide thought on how to get your hands around some of the foreseeable issues you will need to think about regarding the upcoming changes and their effects on your compliance program and export procedures.

Have a great rest of the week,

Doreen

By Doreen Edelman Posted in Compliance

Size Doesn’t Matter – All Companies can benefit from an Exporter Checklist

Are you a small business that only ships products internationally once in a while?  Are you a large corporation that exports regularly?  Do you fall somewhere in between?  For our purposes today, it doesn’t really matter.  Anyone that ships to destinations outside the U.S. can use some kind of exporter checklist to protect themselves and their business from liability including fines, penalties, and even jail time.  I’ve put together an example of a basic exporter’s checklist that can help ensure you have the necessary information to be in compliance with the U.S. government’s various export controls.

Are you using the Department of Commerce’s Red Flags as guidance?  If you encounter a red flag, be sure to perform the appropriate due diligence.

Do you know the final end-user, end-use, and destination of your product?

Does your transaction require an export license?

  1.  Are you exporting a commercial good?  If so, have you classified your product on the Commerce control list and cross-referenced your product with the destination country on the Commerce Country Chart?
  2.  Is your product a defense service or article or listed on the State Department’s U.S. Munitions List?
  3. Does the product’s end-use require a license?
  4. Are you exporting to an embargoed or sanctioned country?
  5. Are the purchasers or end-users found on any government restricted parties lists?

Do you have all the appropriate export documentation?

Do you have a statement included on your invoices to prevent transshipments and diversions to prohibited or unknown destinations?

Do you keep your records for at least 5 years after the date of export?

Is your transaction compliant with antiboycott regulations and the Foreign Corrupt Practices Act (FCPA)?

Do you have an adequate export compliance program that protects your company?  Does it include the following key aspects:

  1. Written manual available to staff when needed
  2. Upper management “buy in” creating a culture of compliance from the top down
  3. Appropriate training for all relevant staff
  4. Proper allocation of responsibilities among different parties
  5. Full integration into your day to day business activities
  6. Consistent program reviews and updates

The essence of this checklist is that the more you know about your export transactions, the better!  Remember, information protects you and your business.

Have a great week,

Doreen

By Doreen Edelman Posted in Compliance

So if you don’t sell to Iran you don’t need to worry about the Iranian Transactions Regulations, right? — Wrong.

I know companies have plenty to worry about these days so I hate to be full of  “be careful” warnings.  However, this issue is surfacing more and more and I at least want to raise it so you can add it to your red flags.

China and India are selling more and more (in addition to Middle Eastern countries) to Iran.  On February 17, there was another guilty verdict for transshipping to Iran. This time it was a New York  man who exported computer equipment to Iran through the UAE and was sentenced to 18 months in federal prison, along with a $1.25 million forfeiture of profits and loss of exporting privileges for ten years.  Although these cases are arguably not the same as a U.S. company whose products inadvertently end up in Iran, U.S. government regulators a concerned that U.S. products are getting into Iran in increasing numbers via China and India.  Thus, the U.S. government enforcement divisions are focusing on these issues and are expecting U.S. entities to ramp up their due diligence.  I suggest the following due diligence proactive efforts:

  • Screen parties to see if they have Iranian subsidiaries. You can’t just stop with the SDN list.
  • Ask whether the goods will be exported and if so to where. Document this correspondence or have a checklist.
  • Obtain certifications from your buyers.
  • Add re-export prohibitions in your contracts.
  • Make sure you have such language on your invoices, etc. even if not required by Commerce or State because you are sending EAR99 items.
  • Run reports (like Dun & Bradstreet or a Commerce Department company profile) on your buyers and file the results.
  • Update your compliance manual regularly and supplement your training with these new concerns. 

Regulators expect you to investigate your customers. I know this seems like a burden for smaller companies but you can get your compliance program going without spending lots of money and such prevention will save you money in the long run…and you will sleep better at night with one less thing to worry about. 

Have a good weekend,

Doreen

By Doreen Edelman Posted in Compliance, OFAC

OFAC Offers More Public Guidance at its International Trade Symposium

While most people spend Valentine’s Day with their favorite person, I spent Valentine’s Day with my favorite government office, Treasury’s Office of Foreign Assets Control (OFAC). OFAC held an all-day international trade symposium where it provided guidance on many of its programs, and discussed program requirements and licensing procedures.  For those of you who were not lucky enough to attend, here are my top ten OFAC tips right from the horse’s mouth:

  1. As part of the Export Control Reform Initiative (ECRI), OFAC worked with Commerce’s Bureau of Industry and Security (BIS) and Department of State’s Directorate of Defense Trade Controls (DDTC) to create a consolidated screening list.  You can find it here.  Note that it does not include all government lists.  It only combines lists from the big three.  Other lists such as law enforcement wanted persons lists, U.S. General Services Administration excluded party lists, and international blocked persons, wanted, and entity lists are not included in this database.  If you find it necessary for your business, there are software programs available that provide a fully consolidated search of both domestic and international restricted parties.
  2. Despite all the new sanctions laws and recent blogger comments that TSRA can’t survive, Treasury will continue to issue Trade Sanctions Reform and Export Enhancement Act (TSRA) licenses, “but it will be a different environment in which you’ll operate.”  This means you can still get a license to export medicine, medical devices and food stuffs from OFAC.  The new Central Bank sanctions do not shut down the program.
  3. Although the U.S. seems to be restoring its diplomatic relationship with Burma due to Burma’s changing political atmosphere, there are presently no changes to OFAC’s Burma sanctions.  OFAC has not begun licensing beyond the scope of the current Burma program.
  4. BIS will provide an illustrative list of TSRA eligible medical device replacement parts.  Keep a look out.  OFAC and BIS recognize that replacement parts need to be exported.
  5. There is no formal process for expedited OFAC license processing. This needs to be repeated because no one wants to believe this statement.  There really is no formal process for expedited processing.  However, you can tell OFAC if there is an urgent situation.   You can request expedited processing on the top of your license application and OFAC will consider the circumstances.  OFAC has complete discretion and will decide if you really do need to jump the processing line.  In certain rare cases that OFAC considers true emergencies, OFAC will grant your request, but again there is no formal process for expedited processing.  So if some lawyer tells you he can get you a license through expedited processing–call another lawyer.  A business issue is generally not considered an urgent need.
  6. The new SDN Search tool performs a simple search so always try searching in a variety of ways such as last name first, first name first, and using key words. The new OFAC search tool can be accessed at SDN Search.
  7. Screen parties multiple times throughout a transaction.  The SDN list can change daily.  Reliance on an outdated SDN list is a frequent cause of OFAC violations. It is best to run the names at the beginning of your transaction and as a last step before exporting.
  8.  “Legal services” exemptions or general licenses generally cover activities distinct from the registration and protection of intellectual property.  However, depending on the sanctions program, there may be a separate authorization for these activities.  For example, the Iranian Transactions Regulations (ITR) contain a specific authorization for certain patent, trademark and copyright transactions. In other words protecting IP rights is not always authorized under a legal services exemption.  Read general licenses and exemptions carefully.
  9. OFAC violations frequently result from the following actions: misunderstanding the regulations, miscommunication with institutions, failure to escalate SDN matches, failure to comply with the terms and conditions of a license, use of an expired license, and reliance on the due diligence of a freight forwarder.  Make sure your compliance program is thorough and includes checks to avoid these common mistakes!
  10. Read your OFAC license! It does not necessarily include everything you requested and in some cases it contains reporting requirements.

Big kudos to OFAC for holding this public meeting and showing some transparency in what it does to keep us safe.  Also note that as the symposium was taking place, OFAC issued guidance concerning the implementation of section 1245 of the National Defense Authorization Act (NDAA) into the Iran sanctions program.  The new guidance can be found on OFAC’s website.

Have a great day,

Doreen

 

By Doreen Edelman Posted in Compliance, OFAC

IRAN SANCTIONS UPDATE – Be careful what you read.

Although I practice within these regulations on a daily basis I have avoided blogging on Iran transactions because the current political situation is causing daily changes to the OFAC program.   Following this recent trend, a new Executive Order (EO) and two general licenses, General License A and General License B, were released on Monday, February 6.  Thankfully,  it seems that OFAC understands there might be some confusion with the EO and released FAQs and a Fact Sheet: Implementation of National Defense Authorization Act Sanctions on Iran.

The new EO builds upon the Iranian Transaction Regulations (ITR) and existing sanctions while implementing Section 1245(c) of the National Defense Authorization Action Act for fiscal year 2012 (NDAA).  It blocks property and interests in property of the Government of Iran (including the Central Bank of Iran) as well as any Iranian financial institutions.  This includes anyone owned, controlled, or acting on behalf of either the Iranian government or Iranian financial institutions.  In other words, anyone that meets the definition of “Government of Iran” or is an Iranian financial institution (both denoted by the [IRAN] tag when listed on the Specially Designated Nationals (SDN) list) is blocked.

How is this different from the previous ITR rules you ask?  This is where the devil is in the details.  If you’re thinking that U.S. persons were already prohibited from transacting with these same entities – you’re right!  The difference is that now, rather than banks simply rejecting a transaction, the transactions are blocked, meaning they will be frozen where they are and neither party will have access to the money until the funds are released by OFAC.

There is comforting news. The two General Licenses mainly restate and confirm the existing authorized general licenses and TSRA authorizations.

General License A permits transactions that were previously authorized under the ITR general licenses (minus a couple of specific exceptions) and does not generally allow payments from blocked funds or debits to blocked accounts unless authorized by certain specific licenses.  General License A also reauthorizes most transactions with an authorizing specific license including those under the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA). See General License A for more details on unauthorized ITR licenses. 

General License B authorizes the transfer of non-commercial personal remittances to or from Iran for or on behalf of someone not defined at the Government of Iran that is ordinarily resident in Iran. Again, this is a reauthorization under the new EO of previously existing allowances.  The transfer cannot be by, to, or through a blocked person except those only blocked by the new EO.  Because U.S. banks are prohibited from operating correspondent accounts for Iranian banks, these transactions should go through intermediary third-country non-U.S. financial institutions.   Conveniently, this license provides an example of an authorized transaction for added clarity. The example explains that personal remittance transfer from one family member in the U.S. to another in Iran would be allowed if the remittance is routed through a third-country bank to an Iranian bank that has not been blocked under any OFAC regulation or EO other than the new February 6 EO. See General License B for more detailed information.  I know that some U.S. banks are still blocking authorized transactions when they receive the funds transfer.  We are working on the best protections for U.S. parties to ensure U.S. banks will allow authorizes transfers.

BE CAREFUL what you read. There is now a lot of misinformation floating around out there as if the Iran sanctions are new.   The real “new” problem is the inability to export legitimate funds from Iran within its banking system and the rial valuation against the dollar. Meanwhile, expect more changes to come from OFAC.

Have a great weekend,

Doreen

By Doreen Edelman Posted in Compliance

Antiboycott Enforcement is Alive and Well – do you know what requests are reportable?

One aspect of compliance that is often ignored (or seen as archaic) is antiboycott compliance.  The reason I am blogging about it is because your compliance obligations include a pro-active requirement to report any requests by others to comply with such a boycott. Odds are your employees aren’t even aware of “what” requires reporting.  It can be tricky.  Requests for information concerning the shipping line you use can be a disguised request for compliance with a boycott and thus reportable. For example, the following was determined to be a reportable condition in a letter of credit  — provide  a  ”signed statement from the shipping company, or its agent, stating the name, flag and nationality of the carrying vessel and confirming … that it is permitted to enter Arab ports.” 

The antiboycott laws were created as a deterrent against U.S. companies participating in boycotts not sanctioned by the U.S. government.  The laws were adopted under the Export Administration Act (implemented though Export Administration Regulations (EAR)) and the Ribicoff Amendment to the 1976 Tax Reform Act (TRA).  (For a comparison of the Commerce and Treasury antiboycott laws see here.)

The law, enforced by the Office of Antiboycott Compliance at the Commerce Department, forbids U.S. businesses and individuals from participating in boycotts against countries (namely Israel), and requires you to report any boycott requests to the U.S. government.  Obviously, the U.S. antiboycott laws are primarily focused on the Arab League boycott of Israel.   While some boycott requests are fairly apparent such as “Goods of Israeli origin not acceptable” or “Goods must not be shipped on vessels/carriers included in the Israeli Boycott list”, many requests are more subtle.  Here are some examples of harder to spot requests or conditions that U.S.  persons cannot comply with and must report.

  • Do you have or ever have had a branch or main company, factory or assembly plant in Israel or have sold to an Israeli?
  • Please state the name and nationality of each company and the percentage of share of their total capital.
  • Certificate issued by the air company/agent that it is not blacklisted by the Arab League boycott committee.
  • Certificate from insurance company stating that  it is not blacklisted.
  • On no conditions may a bank listed on the Arab Israeli Boycott list be permitted to negotiate this credit.

Penalties for violating these laws can include denial of tax benefits, criminal penalties of up to $1 million and 20 years imprisonment per violation, general denial of export privileges, and civil penalties of up to $250,000 per violation under the EAR.  See the BIS Website for more information.  An antiboycott violation can infamously turn on a single word or phrase so read contracts and shipping documents carefully and learn  what may be a RED FLAG.

Have a great day,

Doreen