Yesterday, the Treasury Department published its quarterly “List of Countries Requiring Cooperation with an International Boycott” (i.e., foreign boycotts that are not sanctioned by the United States). The current list of countries includes:
- Saudi Arabia
- United Arab Emirates
Per Section 999 of the Internal Revenue Code of 1986, the Treasury Department is required to identify on a quarterly basis those countries known to require U.S. companies (or their foreign affiliates) to participate in or cooperate with an international boycott. See 83 Federal Register 966 (January 8, 2018) for additional details.
Why is this important for U.S. companies and their foreign affiliates? It is not uncommon for U.S. companies (or their overseas affiliates) to receive requests from their foreign distributors, customers or supply chain partners located in countries such as those identified above asking them to participate in or cooperate with a foreign boycott. The primary boycott of concern today is the Arab League’s Boycott of Israel. Because Israel is an ally and strategic partner of the United States, the U.S. government does not want its citizens to participate in the Arab League’s Boycott of Israel. Specifically, under the U.S. Export Administration Regulations (EAR), U.S. companies and their foreign affiliates are prohibited from complying with requests directing them to—
- Refuse to do business with boycotted or “blacklisted” countries, companies or individuals.
- Furnish or agree to furnish information about business relationships with a boycotted country or blacklisted persons.
- Discriminate based on religion, race, sex or national origin.
- Furnish information about the religion, race, sex or national origin of a U.S. person.
- Implement a letter of credit, sales agreement or other transaction containing prohibited boycott-related conditions.
The EAR also requires U.S. companies and their foreign affiliates to timely report certain foreign boycott-related requests they have received to the Commerce Department’s Office of Antiboycott Compliance (OAC), even if they never actually honor such requests. Civil or criminal penalties can be imposed for violating the EAR’s antiboycott regulations.
Running parallel to the EAR’s antiboycott requirements, Section 999 of the Internal Revenue Code requires U.S. taxpayers to report their operations in the countries listed above and their receipt of any secondary or tertiary boycott-related requests to the Internal Revenue Service on IRS Form 5713 (International Boycott Report). Violations of the Internal Revenue Code’s antiboycott requirements can lead to the suspension or revocation of certain tax benefits provided under U.S. law.
If you have any questions pertaining to current list published by the Treasury Department, compliance with U.S. antiboycott laws and regulations, or other international trade issues, please contact Melissa Proctor at Miller Proctor Law PLLC (firstname.lastname@example.org).