Background

The Treasury Department has published its quarterly list of countries that require or may require participation in, or cooperation with, an international boycott. This list comprises Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, the United Arab Emirates and Yemen and is unchanged from the previous list.

Sandler, Travis & Rosenberg’s on-demand webinar entitled “Dealing with Antiboycott Issues in the Real World” can be accessed here.

U.S. law prohibits U.S. companies and their foreign affiliates from participating in foreign boycotts that the U.S. does not sanction. The Arab League boycott of Israel is the principal foreign economic boycott that U.S. companies must be concerned with today, but the anti-boycott laws apply to all boycotts imposed by foreign countries that are unsanctioned by the U.S.

The U.S. maintains two anti-boycott laws that are enforced by the Commerce Department through the Export Administration Regulations and the Treasury Department through the Internal Revenue Code. Under the anti-boycott provisions of the EAR, companies are prohibited from the following actions.

- refusing to do business with or in Israel or with blacklisted companies

- furnishing information about relationships with or in Israel or with blacklisted companies

- discriminating against others based on race, religion, sex, national origin or nationality

- furnishing information about the race, religion, sex or national origin of another person

- implementing letters of credit containing prohibited boycott terms or conditions

The EAR also require U.S. persons to report each quarter requests they have received to take certain actions to comply with, further or support an unsanctioned foreign boycott. Maximum civil penalties under the EAR for anti-boycott violations are the greater of $250,000 per violation or twice the value of the transaction. For criminal violations, penalties of up to $1 million and/or 20 years’ imprisonment may be imposed.

The anti-boycott provisions of the Internal Revenue Code require U.S. taxpayers to report annually to the Internal Revenue Service their operations in boycotting countries. These provisions also penalize taxpayers who participate in or cooperate with an unsanctioned foreign boycott by denying them the right to claim certain tax benefits. Willful violations of the IRS anti-boycott requirements can lead to a criminal fine of up to $25,000 and/or imprisonment for one year.

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