U.S.-Israel Economic Cooperation: Antiboycott Regulations
(1976 - Present)
During the mid-1970s the United States adopted two laws that seek to counteract the participation of U.S. citizens in other nations’ 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 provisions of the EAR encourage, and in specified cases, require U.S. persons to refuse to participate in unsanctioned foreign boycotts. They have the effect of preventing U.S. persons from advancing foreign policies of other nations that run counter to U.S. policy.
The Arab League boycott of Israel is the principal unsanctioned foreign boycott that U.S. persons must be concerned with today. The antiboycott provisions of the EAR, however, apply to all unsanctioned foreign boycotts.
The Antiboycott Provisions of the EAR: Jurisdiction
The antiboycott provisions of the EAR (see Part 760) apply to certain activities of “U.S. persons,” undertaken with boycott intent, in the “interstate or foreign commerce of the United States.”
U.S. person: includes all individuals, including foreign nationals, who are resident in the United States, and corporations and unincorporated associations that are resident in the United States, including the permanent domestic establishments of foreign concerns. The term also applies to U.S. citizens residing abroad (except when they are employed by non-U.S. persons) and the “controlled in fact” foreign subsidiaries, affiliates or other permanent foreign establishments of domestic concerns. The test for “controlled in fact” is the authority or ability to establish the general policies or to control the day-to-day operations of the foreign subsidiary, affiliate, partnership, branch, office, or other permanent foreign establishment. See Section 760.1 of the EAR, including its examples regarding key definitions.
Boycott intent: The antiboycott provisions of the EAR apply to certain activities of U.S. persons undertaken with intent to comply with, further, or support an unsanctioned foreign boycott.
The Interstate or foreign commerce of the United States includes activities involving the sale, purchase, or transfer of goods (including information) or services between two or more U.S. states or between a U.S. state and a foreign country. Exports/imports from/to the U.S. of goods or services may also be covered. See Section 760.1(d) of the EAR.
What do the Antiboycott Provisions of the EAR Prohibit?
Activities that may be prohibited under the EAR include:
- Refusals or agreements to refuse to do business with or in a boycotted country or with blacklisted companies.
- Discrimination or agreements to discriminate against a U.S. person based on race, religion, sex, or national origin.
- Furnishing information or agreements to furnish information about business relationships with or in a boycotted country or with blacklisted companies.
- Furnishing information or agreements to furnish information about the race, religion, sex, or national origin of a U.S. person.
- Implementation of letters of credit containing prohibited boycott terms or conditions.
- Taking actions with the intent to evade Part 760 of the EAR.
What Must Be Reported?
The antiboycott provisions of the EAR require U.S. persons to report requests they have received to take certain actions to comply with, further, or support an unsanctioned foreign boycott.
The ECRA specifies administrative and criminal penalties for violations of the Anti-Boycott Act of 2018.
In the case of administrative antiboycott violations, BIS may impose the following penalties:
- A monetary penalty in the amount of the greater of approximately $300,000 per violation or twice the value of the underlying transaction, as appropriate;
- Denial of export privileges; and/or
- Revocation of any BIS export licenses.
In the case of violations that occurred prior to August 13, 2018, the potential sanctions are provided for in the International Emergency Economic Powers Act (IEEPA). Currently, the maximum monetary penalty under IEEPA for each violation is the greater of $307,922 per violation, or twice the value of the transaction that forms the basis of the violation. In situations involving alleged violations that occurred on or after August 13, 2018, the potential sanctions are specified in Section 1774(b) of the ECRA, including a maximum monetary penalty per violation of the greater of $300,000 or twice the value of the underlying transaction.
The U.S. Government may impose a criminal penalty of up to $1 million on individuals or companies for a criminal antiboycott violation. Individuals may additionally (or alternatively) face up to 20 years of imprisonment.
In October 2022, the Biden administration announced enhanced penalties for violation of the antiboycott laws, a new requirement that companies admit wrongdoing before settling with the U.S. government, and a renewed focus on enforcement efforts against controlled foreign subsidiaries of U.S. parent companies. “Discrimination will not be tolerated regardless of whether it impacts people or trade,” said Assistant Secretary of Commerce for Export Enforcement Matthew S. Axelrod announcing the changes.
Sources: Office of Antiboycott Compliance.
“Bureau of Industry and Security Announces Enhanced Enforcement of the Antiboycott Rules,” Press Release, U.S. Department of Commerce, (October 6, 2022).