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.