By: Melissa Proctor, Polsinelli PC
Companies doing business in the Middle East take note: The Treasury Department recently published its quarterly list of countries that currently require participation or cooperation with an international boycott, such as the Arab League‘s boycott of Israel.
Even though many of these countries are WTO members and were required to shut down their Arab League offices as a condition of membership, many boycott-related requests are still being issued by government agencies and companies in these countries. The countries that are designated on this list, which by the way are the very same countries that were listed in the Third Quarter list, are:
- Saudi Arabia
- United Arab Emirates
To view the list, click here.
If you are not familiar with U.S. antiboycott requirements, Part 750 of the Export Administration Regulations (EAR) prohibits U.S. companies and their foreign affiliates from complying with requests related to a foreign boycott that is not sanctioned by the U.S. Government. Specifically, U.S. companies and their overseas affiliates are prohibited from agreeing to:
- Refuse to do business with or in Israel or with blacklisted companies
- Discriminate against other persons based on race, religion, sex, national origin or nationality
- Furnish information about business relationships with or in Israel or with blacklisted companies, or
- Furnish information about the race, religion, sex, or national origin of another person
Foreign boycott-related requests can take many forms, and can be either verbal or written. They can appear in bid invitations, purchase agreements, letters of credit and can even be seen in emails, telephone conversations and in-person meetings. Some recent examples of boycott-related requests include:
- “Provide a certificate of origin stating that your goods are not products of Israel.”
- “Provide the religion and nationality of your officers and board members.”
- “Suppliers cannot be on the Israel boycott list published by the central Arab League.”
- “Provide a signed statement from the shipping company or its agent containing the name, flag and nationality of the carrying vessel and its eligibility to enter Arab ports “
In addition, implementing letters of credit that contain foreign boycott terms or conditions is also prohibited under the EAR.
Antiboycott compliance is a key issue for U.S. companies doing business in the Middle East, and personnel on the front lines with customers and supply chain partners in these countries should be trained to identify potential foreign boycott-related requests and escalate them to senior compliance personnel or in-house counsel to determine the applicable OAC and IRS reporting requirements.
Companies that receive boycott-related requests must submit quarterly reports to the Office of Antiboycott Compliance (OAC) unless an exemption applies. Failing to timely report a boycott request or complying with the request itself can lead to the imposition of civil penalties by the OAC. The IRS also requires U.S. taxpayers to report their operations in countries that require participation or cooperation with an international boycott on IRS Form 5713 (International Boycott Report) – the forms are submitted annually with U.S. tax returns. Failure to comply with the Internal Revenue Code’s antiboycott requirements can lead to the revocation of certain international tax credits and benefits.
© Polsinelli PC, Polsinelli LLP in California