Did you know that the anti-boycott laws are part of export compliance? If not, you are not alone, as this is often an overlooked due diligence requirement necessary to comply with the U.S. export laws. Understanding what U.S. anti-boycott compliance means and how it affects day-to-day operations is key to adhering to the requirements. These rules affect all industries, as well as manufacturers, resellers, freight forwarders, and even foreign subsidiaries of U.S companies. And most importantly – companies that receive specific boycott-related requests have an obligation to submit reports to the Office of Antiboycott Compliance, even though the recipient did nothing to prompt receiving them and even if they do not comply with the originator’s request.
So, What are Anti-Boycott Regulations Anyway?
In a nutshell, these regulations prevent US companies (and their foreign subsidiaries) from complying with foreign-mandated boycotts contrary to U.S. regulations. The purpose being to discourage companies from being used as tools to implement foreign policies that run counter to U.S. policy by participating in unsanctioned boycotts. The most common unsanctioned foreign boycott is the Arab League boycott of Israel.
To address this, the U.S. implemented specific regulations to guide companies on what to do if they receive a boycott request. Remember that receiving requests from foreign parties to effectively boycott certain countries or businesses from those countries that are friendly to the United States (for example, Israel) is contrary to US regulations. The tricky part about boycott requests is that language typically appears in standard documents such as Purchase Orders, Letters of Credit, Quote Requests, Contracts, Certificates of Origin, Shipping Instructions, and even Vendor Questionnaires, which means that multiple departments within an organization need to be aware of boycott language and escalate internally as necessary. Long gone are the days of Export Compliance sitting with the Shipping Department.
Real Life Examples By Department
Customer Service
Your customer requires a Certificate of Origin for the goods you are exporting. You know that the goods originated from Mexico and are imported into the U.S., where they are further incorporated and assembled into your item for export. It is normal and customary for some customers to request a Certificate of Origin. Your customer is requesting that the following language be added to the Certificate of Origin:
Why is this request a problem if you know that the goods are not of Israeli origin?
Because by adding this language to the Certificate of Origin, even though it is not of Israeli origin, you are furthering the boycott of Israel, which is contrary to current U.S. export regulations.
Finance /Accounting Scenario
You receive a Letter of Credit and embedded in the fine print reads:
Why is this request a problem if the order has nothing to do with Bahrain or Israel?
Because by accepting this language, even though the order has nothing to do with these countries, you are furthering the boycott of Israel, which is contrary to current U.S. export regulations.
Contracts Scenario
You know that the order will export via air and receive the contract, which is 20 pages long. You review the important parts such as territory, products, exclusivity language, pricing, etc. However, there is fine print within the T&Cs as an addendum that states:
“The bill of lading shall bear a note that the vessel delivering the cargo is not on the “Black List” and does not call at Israeli ports.”
Why is this request a problem if the goods are exporting via air and not ocean?
Because by accepting this language, even though the order has nothing to do with ocean transport, you are furthering the boycott of Israel, which is contrary to current U.S. export regulations.
Shipping / Logistics Scenario
The shipment is finally ready to export after months of delays, and internally there is a lot of pressure to get this order out the door before End of Quarter. Your customer requests that your freight forwarder immediately provide the following:
“Certificate from insurance company stating that they are not blacklisted.”
Why is this request a problem if it is only a questionnaire?
Because by providing this certificate, you are furthering the boycott of Israel, which is contrary to current U.S. export regulations. Whether the company is blacklisted or not, if your company provides this certificate, they have complied with a boycott request contrary to U.S. law.
Legal Scenario
Your company does not have a representative nor distributor/reseller within Iraq. Thankfully, Sales found an authorized agent from Lebanon who will require a Power of Attorney to appoint an Iraqi firm to act on your behalf. To move this order forward, Legal needs to review the POA per company policy of all POA’s requiring Legal’s review. Within the document is the following statement:
Why is this request a problem if it is only a questionnaire?
Because by completing a questionnaire that contains this type of language, even if it is the only way to move forward with this sale, you are furthering the boycott of Israel, which is contrary to current U.S. export regulations.
Sales / Procurement Scenario
You are located in the United States but know that you have other offices in the U.S. as well as sales offices globally. Tender documents are received, and within them is the following language:
Why is this request a problem if your company does not have offices in Israel/
The originator is requesting a declaration that you do not have a footprint in Israel. Although this may be accurate, by providing this declaration, you are furthering the boycott of Israel which is contrary to current U.S. export regulations.
Who Must Report Boycott Requests?
Good question! The regulations call out any person who is a United States resident or national, including individuals, domestic concerns, and “controlled in fact” foreign subsidiaries, affiliates, or other permanent foreign establishments of a US person (including US companies/entities and foreign subsidiaries/affiliates/office/partnership etc.) A request received by a U.S. person located outside the United States (that is, a foreign subsidiary, partnership, affiliate, branch, office, etc.), is reportable if it is received in connection with a transaction or activity in the interstate or foreign commerce of the United States.
What Exactly is Not Allowed?
Prohibited activities 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 (ADD LINK)
What Must Be Reported?
The antiboycott rules require U.S. persons to report requests they have received to take certain actions to comply with, further, or support an unsanctioned foreign boycott. Reporting is not optional, and it is important to understand why the US Government has this requirement. Not only is it complying with an unsanctioned boycott contrary to US foreign policy, but the Office of Antiboycott Compliance (OAC) also tracks the countries that submit these types of requests as well as the name of the entity requesting that the U.S. company participate in boycott activity. OAC then uses the information within the report to remind those companies that requesting boycott activity from U.S. companies is contrary to U.S. export regulations. This attempt is made to cease future boycott requests to U.S. entities. In addition, the U.S. Government has been publishing quarterly updates of the Boycott Requester List, which means that those parties are more likely to make reportable boycott-related requests. Companies are encouraged to diligently review transaction documents from all sources, but especially transaction documents with or involving these listed parties, given that they have been identified by others as a source of boycott-related requests. Note that an entity listed on this list does not mean business cannot proceed. Instead, U.S. companies are on notice that they are more likely to make boycott-related requests.
Unsure if language you have received falls under a Boycott request? Thankfully, the US Government has recent examples of boycott requests that have been reported to the government. Note that this list is not exhaustive and is meant to be used as a reference. Below are some examples for reference:
- Agreements by US companies to refuse to do business with a blacklisted entity for boycott-related reasons
- Agreements by U.S. companies to refuse to do business with a boycotted country
- Furnishing information about an entity’s business relationships with a boycotted country or with blacklisted persons
- Implementation (by U.S. banking entities) of letters of credit that include prohibited boycott-related terms or conditions.
What Are the Reporting Requirements?
What most companies may not realize is that simply receiving a boycott request triggers compliance obligations on the part of the receiver. Many boycott-related requests are generally reportable regardless of whether the recipient complies with the request or not. If the request was received in the United States, the report must be filed with the Department of Commerce within one month following the end of the quarter during which the request was received. If received outside the United States, the United States person receiving the request has one additional month to report. All reporting can be done online using Form BIS-621P (for single requests), and Form BIS 6051-P (for multiple requests).
What Happens if there is a Failure to Report?
As with any law that is not complied with, violations of the reporting requirements can result in civil and criminal penalties, including fines, imprisonment, and denial of export privileges. In the case of administrative antiboycott violations, the US Government may impose the following penalties:
- A monetary penalty in the amount of the greater of approximately $350,000 per violation or twice the value of the underlying transaction, as appropriate;
- Criminal penalties of up to $1 million on individuals or companies;
- Denial of export privileges; and/or
- Revocation of any BIS export licenses.
Fortunately, voluntary self-disclosure procedures are available and may serve as mitigating factors during enforcement.
Case Study
Recently, the U.S. Government imposed a civil penalty of over $151,000 against Quantum Corporation, a data storage, management, and protection company based in San Jose, California, for 45 alleged violations of the antiboycott regulations. Quantum Corporation voluntarily self-disclosed 45 violations of Section 760.5 of the Export Administration Regulations, which involves failing to report the receipt of a request to engage in a restrictive trade practice or foreign boycott against a country friendly to the United States.
As detailed in the BIS release (September 30, 2024):
- Between July 2018 and December 2019, Quantum Corporation received 45 requests from a customer—a distributor in the United Arab Emirates (UAE)—to refrain from importing goods of Israeli origin into the UAE. The company failed to report these requests to BIS.
- The company voluntarily disclosed the conduct to the U.S. Government, cooperated with the investigation by the Office of Antiboycott Compliance (OAC), and implemented remedial measures.
Additional details of the boycott language that Quantum Corporation received per the charging letter have been published.
What is my Take-Away?
The U.S. antiboycott laws essentially prevent companies from taking part in economic boycotts initiated by foreign countries against nations considered friendly to the U.S. This means that your company has a responsibility to report any requests to participate in such boycotts to the U.S. Government and is generally required to refuse to comply with them, to avoid inadvertently supporting foreign policies that contradict U.S. interests.
Reference: eCFR :: 15 CFR 760.5 — Reporting requirements.
Office of Antiboycott Compliance (OAC) | Bureau of Industry and Security (bis.gov)
Kristine Kelleher is a Trade Compliance Consultant for Export Solutions -- a full-service consulting firm specializing in U.S. import and export regulations.