(1976 - 1977)
During the mid-1970's the United States adopted two
laws that seek 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), [which
is found in Section 999 of the Internal Revenue Code].
The antiboycott laws were adopted to require U.S. firms
to refuse to participate in foreign boycotts that the United States
does not sanction. They have the effect of preventing U.S. firms from
being used to implement foreign policies of other nations which run
counter to U.S. policy.
The Arab League boycott of Israel is the principal
foreign economic boycott that U.S. companies must be concerned with
today. The antiboycott laws, however, apply to all boycotts that are
unsanctioned by the United States.
Who is covered by the laws?
The antiboycott provisions of the Export Administration
Regulations (EAR) apply to all "U.S. persons," defined to
include individuals and companies located in the United States and their
foreign affiliates. These persons are subject to the law when their
activities relate to the sale, purchase, or transfer of goods or services
between the United States and a foreign country. This covers U.S. exports
and imports, financing, forwarding and shipping, and certain other transactions
that may take place wholly offshore.
Generally, the Tax Reform Act applies to all
U.S. taxpayers (and their related companies). The TRA's reporting requirements
apply to taxpayers' "operations" in, with, or related to boycotting
countries or their nationals. Its penalties apply to those taxpayers
with DISC (Domestic International Sales Corporation), FSC (Foreign Sales
Corporation), foreign subsidiary deferral, and/or foreign tax credit
What do the laws prohibit?
Conduct that may be penalized under the TRA and/or
prohibited under the EAR includes:
- Agreements to refuse or actual refusals 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
- Agreements to furnish or actually furnishing information
about business relationships with or in Israel or with blacklisted
- Agreements to furnish or the actual furnishing
of information about the race, religion, sex, or national origin
of another person.
- Furnishing information about business relationships
with Israel or with blacklisted persons.
- Implementing letters of credit containing prohibited
boycott terms or conditions.
TRA does not "prohibit" conduct, but denies tax benefits
("penalizes") for certain types of boycott- related agreements.
What must be reported?
The EAR requires U.S. persons to report quarterly any
requests they have received to take any action to comply with, further,
or support an unsanctioned foreign boycott.
The TRA requires taxpayers to report "operations"
in, with, or related to a boycotting country or its nationals and requests
received to participate in or cooperate with an international boycott.
The Treasury Department publishes a quarterly list of "boycotting
Violations of the antiboycott provisions of the EAR
carry the same penalties as those for export control violations. These
- "knowing violators": The penalties for
each such violation can be a fine of up to $50,000 or five times
the value of the exports involved, which ever is greater, may be
imposed in addition to imprisonment of up to five years.
- "Willful violators": The penalties for
each violation -- where the violator has knowledge that the items
will be used for the benefit of, or that the destination or intended
destination of the items, is any country to which exports are restricted
for national security or foreign policy purposes -- for individuals
is a fine of up to $250,000, imprisonment for up to ten years, or
both. For firms the penalties for each violation can be $1 million
or up to five times the value of the exports involved, whichever
- For each violation of the EAR any or all of the
following may be imposed:
- Revocation of validated export licenses;
- The general denial of export privileges;
- The exclusion from practice; and/or
- The imposition of fines of up to $10,000 per violation,
or $100,000 where the violation of national security export controls
The maximum civil penalty allowed by law during
periods where the regulations are continued in effect by an Executive
Order pursuant to the International Economic Emergency Powers Act
(IEEPA) is $10,000 per violation.
Violations of the TRA involve the denial of all
or part of the foreign tax benefits discussed above.
of Antiboycott Compliance