Respond to anti-boycott laws with confidence

Did you know that 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 U.S. export laws. Understanding what U.S. anti-boycott compliance means and how it affects day-to-day operations is key to complying with the requirements. These rules affect all industries, as well as manufacturers, dealers, freight forwarders, and even foreign subsidiaries of U.S. companies.

So, what exactly are anti-boycott statutes?

In short, these regulations prevent U.S. companies (and their foreign subsidiaries) from complying with foreign-imposed boycotts in violation of U.S. regulations. The purpose is to prevent companies from participating in unsanctioned boycotts and become a tool for implementing foreign policy that runs counter to U.S. policy.

To address this issue, the United States implemented specific regulations to guide companies on what to do if they receive a boycott request. Remember, it is a violation of U.S. regulations to receive requests from foreign parties that effectively boycott certain countries or businesses from countries friendly to the United States, such as Israel. The tricky part about boycott requests is that the language often appears in standard documents like purchase orders and letters of credit, which means multiple departments within the organization need to understand the boycott language and escalate it internally as needed. Typical boycott requests include requests to refuse to do business with other countries and to agree to discriminate against businesses or individuals based on race, gender, national origin or citizenship.

It is also important to remember that although the U.S. government publishes a list of countries that frequently boycott; all boycott-related requests are actionable regardless of whether the issuing country or entity is on such a list. In general, boycott requests must be reported to the U.S. government regardless of whether action is taken.

Who must report boycott requests?

Good question! The regulations provide that any U.S. resident or national, including individuals, domestic corporations, and foreign subsidiaries, affiliates, or other permanent foreign establishments (including U.S. corporations/entities and foreign subsidiaries)/affiliates/offices “effectively controlled” by a U.S. person Requests received by U.S. persons (i.e., foreign subsidiaries, partnerships, affiliates, branches, offices, etc.) located outside the United States should be reported if they relate to: U.S. interstate or foreign A transaction or activity in trade.

What exactly is not allowed?

Prohibited activities include:

• Refuse or agree to refuse to do business with a boycotted country or a blacklisted company.
• Agreements that discriminate against or discriminate against Americans based on race, religion, sex, or national origin.
• Providing information or agreements to provide information regarding business relationships with boycotted countries or blacklisted companies.
• Providing information or agreements regarding a U.S. person’s race, religion, gender, or national origin.
• Implement letters of credit containing prohibited boycott terms or conditions.
• Taking action with intent to circumvent part 760 of the EAR (add link)

What must be reported?

The anti-boycott rule requires Americans to report requests they receive 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 U.S. government requires it. Not only does it comply with unsanctioned boycotts that violate U.S. foreign policy, but the Office of Anti-Boycott Compliance (OAC) also tracks the countries that submit such requests and names the entities requesting U.S. companies to participate in boycott activities. The OAC then uses the information in the report to alert these companies that requiring U.S. companies to boycott violates U.S. export regulations. The move is intended to halt future boycott requests to U.S. entities. Additionally, the U.S. government releases quarterly updates to its list of boycott requesters, meaning these parties are more likely to file reportable boycott-related requests. Firms are encouraged to carefully review transaction documents from all sources, particularly those with or involving these listed parties, because they have been identified by others as the source of boycott-related requests. Please note that the presence of an entity on this list does not mean that business cannot be conducted. In contrast, U.S. companies noted that they were more likely to make boycott-related demands.

Not sure if the language you received is a boycott request? Thankfully, the U.S. government has recently received examples of boycott requests reported to the government. Please note that this list is not exhaustive and is for reference only. Here are some examples for reference:

• U.S. companies reject agreements to do business with blacklisted entities for boycott-related reasons
• U.S. companies reject agreements to do business with boycotted countries
• Provide information about an entity’s business relationships with boycotted countries or blacklisted persons
• Enforce letters of credit (by U.S. banking entities) that contain prohibited boycott-related terms or conditions.

What are the reporting requirements?

Most companies may not realize that simply receiving a boycott request triggers the recipient’s compliance obligations. Many boycott-related requests generally require reporting regardless of whether the recipient complies with the request. If the request is received in the United States, the report must be submitted to the Department within one month of the end of the quarter in which the request was received. If received outside the United States, the U.S. person receiving the request also has one month to report it. All reports can be completed online using Form BIS-621P (for a single request) and Form BIS 6051-P (for multiple requests).

What happens if you fail to report?

As with any failure to comply with the law, violations of reporting requirements may result in civil and criminal penalties, including fines, imprisonment, and loss of export privileges. For administrative anti-boycott violations, the U.S. government may impose the following penalties:

• Penalties of approximately $350,000 per violation or twice the value of the underlying transaction, as appropriate;
• Criminal penalties for individuals or companies of up to $1 million;
• Deny export privileges; and/or
• Revoke any BIS export license.

Fortunately, voluntary self-disclosure procedures are available and can serve as a mitigating factor during law enforcement.

case study

Most recently, the U.S. government imposed a civil penalty of more than $151,000 on Quantum Corporation, a San Jose, California-based data storage, management and protection company, for 45 alleged violations of anti-boycott statutes. Quantum voluntarily self-disclosed 45 violations of Section 760.5 of the Export Administration Regulations involving failure to report requests for restrictive trade practices or foreign boycotts against countries friendly to the United States.

As stated in the BIS press release (September 30, 2024):

• Between July 2018 and December 2019, Quantum Corporation received 45 requests from a customer, a dealer in the United Arab Emirates (UAE), not to import goods originating in Israel into the UAE. The company failed to report these requests to BIS.
• The company voluntarily disclosed this conduct to the U.S. government, cooperated with the Office of Anti-Boycott Compliance (OAC) investigation, and implemented remedial measures.

More details of the boycott language Quantum received under the charging letter have been released.

What’s my takeaway?

U.S. anti-boycott laws essentially prohibit companies from participating in foreign-sponsored economic boycotts against countries deemed friendly to the United States. This means that your company is responsible for reporting 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 policy that conflicts with U.S. interests.

Reference: eCFR :: 15 CFR 760.5 — Reporting Requirements.

Office of Antiboycott Compliance (OAC) | Bureau of Industry and Safety (bis.gov)

Do you need guidance on reporting requirements or ensuring compliance with U.S. export laws? Schedule a free consultation with one of our team members today.

Subscribe to the Export Solutions Blog – Subscribe here: