Stay Ahead: Navigate Anti-Boycott Laws with Confidence

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.

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.

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 and Letters of Credit which means that multiple departments within an organization need to be aware of boycott language and escalate internally as necessary.   Typical boycott requests include requirements to refuse business with another country, agreement to discriminate against businesses or persons based on their race, sex, national origin, or nationality.

It is also important to remember that although the U.S. Government publishes a list identifying frequent boycotting countries; all boycott-related requests are actionable regardless of whether the issuing country or entity is on such a list. Overall, boycott requests must be reported to the U.S. government regardless of whether they are acted upon.

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 meant to be used as 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 are 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)

 

Do you need guidance on reporting requirements or ensuring compliance with U.S. export laws?  Schedule a no-charge consultation with one of our team members today.

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