The U.S. Antiboycott Regulations: Permission to Violate Foreign Law?

The United States Antiboycott Regulations were promulgated to prevent U.S. citizens or companies from complying with any boycotts not sanctioned by the United States. 

Wait, are you saying I can’t comply with applicable law?  

Well…maybe.

Background:  from time to time, countries decide to prevent interactions with people, entities, or other countries through regulatory boycotts.  One almost universally-justifiable example:  you may prevent countries with whom you are at WAR from entering your ports to conduct trade.

One step further:  the United States prohibits and penalizes compliance with certain foreign boycotts, a prime example being the Arab League’s boycott of Israel.  Certain countries in the Arab League (such as Iraq, Lebanon, and Kuwait) boycott business with Israel, or with anyone who does business with Israel.  However, companies and citizens of the United States are not permitted to participate in the Arab League’s Israeli boycott.

US antiboycott regulations approach the issue from two different regimes: tax and commerce. 

• Applicable US Treasury regulations require reporting of illegal boycott requests; violations are penalized by loss of foreign tax credits. 
• Applicable US Commerce regulations also prohibit compliance with, and require reporting of, illegal boycott requests.  As of the date of this blog, violators risk administrative fines of $300,000 for a first offense, loss of export privileges, and criminal charges of up to $1,000,000 and jail time. 

With such severe penalties, you might think that compliance is simple.  Unfortunately, precise language matters; minor modifications make prohibited and penalized requests into completely acceptable alternatives.  To complicate matters further, what is prohibited under Commerce may not be penalized under Treasury. 

An example of the current mess of affairs:  a vessel’s owner can certify that a vessel is eligible to enter Arab ports under Commerce but is penalized for doing so under Treasury.  A vessel’s agent making the same certification offends both Treasury and Commerce.  Of course, this may not apply to certificates issued to third parties from Egypt, Jordan, and Saudi Arabia.  As of April 8th, 2021, it also may not apply to the UAE.  Finally, if the certification is expressly linked only to environmental, health, and safety concerns, none of the above applies.

Additional note:  while your author writes from the US perspective, other countries have “blocking legislation” too.  Consider, for example, Canada’s FEMO (1982) prevents Canadian companies from complying with US anti-Cuba laws.

(Yes, in this case, local Canadian law prohibits you from complying with US prohibitions.)

So how do you comply with US Antiboycott regulations?  Ask for expert advice.

Luckily, you’ve come to the right place.  At the Wallenstein Law Group, our mission is simple: expert advice at reasonable rates. Whether you need help with Antiboycott compliance, international trade law, or contract review, we stand ready to assist. To receive Ivy League support at a local firm price, contact The Wallenstein Law Group today!