Compliance with US Anti-Boycott Laws and Regulations

• Author: Melissa Proctor and Kim Strosnider
• Pages: 106-127

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Chapter 7

Compliance with US Anti-Boycott Laws and Regulations

Melissa Proctor and Kim Strosnider*

I. Executive Summary

The United States maintains two sets of anti-boycott laws designed to prevent US

companies from supporting or participating in boycotts of countries friendly to the United

States.1 The first is maintained by the US Department of Commerce in the Export Administration

Regulations (EAR).2 The second was implemented in Section 999 of the US Treasury

Department’s Internal Revenue Code.3 The US anti-boycott laws impose far-reaching restrictions

on certain actions, agreements, and the furnishing of certain information by US persons, and

impact US companies and their foreign affiliates overseas. Although both laws were drafted

without reference to any particular boycott, the key boycott of concern today is the Arab

League’s long-standing economic boycott of Israel. Penalties for violations of US anti-boycott

laws can include civil and criminal fines, imprisonment, denial of export privileges, and, for

engaging in boycott participation penalized by the tax code, loss of tax benefits.

This chapter provides an overview of the anti-boycott laws and regulations administered

and enforced by the US Commerce and Treasury Departments, government reporting

requirements, consequences of anti-boycott violations and boycott participation by US

companies and their foreign affiliates, and recommended “best practices” for ensuring anti-

boycott compliance. These anti-boycott laws and regulations will be of particular concern to

government contractors that are doing business in the Middle Eastern countries that boycott

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Israel, or those that must certify under federal government contracting rules that they do not

comply with certain aspects of the boycott.

II. The US Anti-Boycott Legal Regimes

A. Export Administration Regulations

1. Overview

The US Commerce Department’s Office of Anti-Boycott Compliance (OAC), which is

part of the Bureau of Industry and Security (BIS), is responsible for administering and enforcing

the US anti-boycott regulations, found in Part 760 of the EAR (“Restrictive Trade Practices and

Boycotts”).4 These regulations implement Section 8 of the Export Administration Act (EAA).5

Section 8 of the EAA was enacted to prevent US persons from furthering, endorsing, or

supporting foreign governments’ boycotts that are not sanctioned by the US government.

Generally, the term “boycott” refers to a type of economic coercion. There are three

distinct levels or types of boycotts: primary, secondary, and tertiary. A primary boycott is one in

which a country uses its sovereign authority to refuse to trade with another country. In a

secondary boycott, a country refuses to trade with any individual or firm that does business with

another country that is subject to a boycott. Tertiary boycotts exist where a country refuses to do

business with blacklisted individuals or firms. The US anti-boycott law and regulations were

intended to counteract the secondary and tertiary parts of the Arab League’s boycott of Israel.

On a quarterly basis, the Treasury Department publishes in the Federal Register a list of

countries that are known to support or require cooperation with foreign boycotts that are not

sanctioned by the United States. The current list includes nine countries: Iraq, Kuwait, Lebanon,

Libya, Qatar, Saudi Arabia, Syria, the United Arab Emirates (UAE), and Yemen. All documents