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 benefits.
What do the laws prohibit?
Conduct that may be penalized under the TRA and/or
prohibited under the EAR includes:
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 countries."
How to report:
EAR reports are filed quarterly on form BXA 621-P, available from the Commerce Department's International Trade Administration and Bureau of Export Administration field offices or from the Office of Antiboycott Compliance in Washington, D.C.
TRA reports are filed with tax returns on IRS Form 5713. This form is available from local IRS offices.
Violations of the antiboycott provisions of the EAR carry the same penalties as those for export control violations. These can include:
Where to get more information:
U.S. Department of Commerce
Department of the Treasury
Source: Office of Antiboycott Compliance