International Boycotts .

1. International Boycotts. Title 15 of the Code of Federal Regulations: Part 760 – Restrictive Trade Practices and Boycotts Abygail Sunga & Asma Testouri

2. Objective of Anti-Boycott Laws • The anti-boycott laws were adopted to encourage, and in specified cases, require U.S. firms to refuse to participate in foreign boycotts that the United States does not sanction. They have the effect of preventing U.S. firms from being used to implement foreign policies of other nations which run counter to U.S. policy.1

3. Title 15 of the Code of Federal Regulations • Part 760Restrictive Trade Practices and Boycotts • Part 762Record keeping • Part 764Enforcement and Protective Measures • Part 766Administrative Enforcement Proceedings

4. History of the Anti-Boycott Laws • During the mid-1970's the United States adopted two laws that seek to counteract the participation of U.S. citizens in other nation's economic boycotts or embargoes. • These "antiboycott" laws are the 1977 amendments to the Export Administration Act (EAA) and the Ribicoff Amendment to the 1976 Tax Reform Act (TRA)

5. What do the Anti-Boycott Laws prohibit? 2 • Agreements to refuse or actual refusal to do business with or in Israel or with blacklisted companies. • Agreements to discriminate or actual discrimination against other persons based on race, religion, sex, national origin or nationality. • Agreements to furnish or actual furnishing of information about business relationships with or in Israel or with blacklisted companies. • Agreements to furnish or actual furnishing of information about the race, religion, sex, or national origin of another person.

6. Reporting

7. Parties Involved • Enforcement of Export Administration Regulations (EAR) • Department of Commerce, Bureau of Industry and Security, Office of Anti-Boycott Compliance • Enforcement of Tax Reform Act • Department of Treasury, Internal Revenue Service

8. Parties Involved • Export Administration Regulations (EAR) • “U.S. persons” - individuals and companies located in the United States and their foreign affiliates whose activities relate to the sale, purchase, or transfer of goods or services (including information) within the United States or between the U.S. and a foreign country. This covers U.S. exports and imports, financing, forwarding and shipping, and certain other transactions that may take place wholly offshore.

9. Parties Involved • Ribicoff Amendment to the 1976 Tax Reform Act (TRA) • “U.S. taxpayers” (and their related companies) - taxpayers' "operations" in, with, or related to boycotting countries or their nationals. Its penalties apply to those taxpayers with foreign tax credit, foreign subsidiary deferral, FSC (Foreign Sales Corporation), and IC-DISC (Interest Charge-Domestic International Sales Corporation) benefits. -for more info… U.S. Department of Treasury, Internal Revenue Service. http://www.irs.gov/irm/part4/ch47s06.html#d0e518718

10. Major Impact of Anti-Boycott Laws • Strengths of Anti-Boycott Laws • Encourages & requires U.S. firms from being used to implement foreign policies of other nations which run counter to U.S. policy • Weaknesses of Anti-Boycott Laws • Relies on companies to report anti-boycott violations • Loss of contracts from importing countries requiring information of origin of goods • Penalties are imposed on U.S. companies instead of boycotting countries

11. Arab League Boycott of Israel

12. Case Summary “ The Arab League has maintained an official boycott of Israeli companies and Israeli-made goods since the founding of Israel in 1948. The United States actively opposes the boycott and works on both bilateral and multilateral fronts to end it. The U.S. government also enforces laws that prohibit U.S. firms from participating in the boycott.” Source: www.fas.org

13. Background • The Arab League is an umbrella organization comprising 23 Middle Eastern and African countries and entities, • It is administered by the Damascus-based Central Boycott Office, a specialized bureau of the Arab League, • and it is justifying the Boycott as a mean of resistance to the Israeli “occupation & violence” in the Palestinian territory

14. Boycott Status & enforcement There are three tiers of the boycott: • The primary boycott: prohibits the importation of Israeli-origin goods and services into boycotting countries. • The secondary boycott: prohibits individuals, as well as private and public sector firms and organizations, in member countries from engaging in business with any entity that does business in Israel. The Arab League maintains a blacklist of such firms. • The tertiary boycott: prohibits any entity in a member country from doing business with a company or individual that has business dealings with U.S. or other firms on the Arab League blacklist.

15. Impacts of the Boycott Primary Boycott effect: • limited since intraregional trade and investment are small *However , there is some limited trade between Israel and its Arab neighbors. In 2004, according to the Manufacturers Association of Israel (IMA), Israeli exports to Arab countries and entities (mainly Egypt, Jordan, and the Palestinian Authority) totaled $192 million. Secondary and tertiary boycotts effect: • They have both decreased over time, reducing their effect. *It appears that since intra-regional trade is small, and that the secondary and primary boycotts are not aggressively enforced, the boycott may not currently have an extensive effect on the Israeli economy Conclusion Despite the lack of economic impact on either Israeli or Arab economies, the boycott remains of strong symbolic importance to all parties. Many Arab countries want to deny normalization with Israel until there is a final resolution to the conflict in the Palestinian territories. Israel, on the other hand, asserts that it wants to be accepted in the neighborhood both in political terms and as a source of, and for, foreign investment.`

16. U.S efforts to abort the Boycott The U.S. government opposes the boycott and works to end its enforcement on multiple levels through language inclusion in successive foreign operations legislation concerning the boycott. Section 535 of the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 2006 (P.L. 109-102), states that it is the sense of Congress that: (1) the Arab League boycott is an impediment to peace in the region and to United States investment and trade in the region; (2) the boycott should be revoked and the Central Boycott Office disbanded;

17. .....Continued • (3) all Arab League states should normalize relations with Israel; and • (4) the President and the Secretary of State should continue to oppose the boycott vigorously and encourage Arab states to assume normal trading relations with Israel.

18. Other ways to pressure the Arab League’s countries Bilateral as well as multilateral trade agreements are other ways used by the U.S. government to end the boycott: • Bahrain, Oman and the United Arab Emirates during the FTA negotiations, reaffirmed their position not to comply with the Boycott. • Saudi Arabia agreed to dismantle all aspects of Boycott in order to access to the World Trade Organization In 2005

19. Latest Developments • In June 2006, an Omani customs official reportedly told The Jerusalem Post, “Products from Israel are not permitted because of the boycott ... If someone brings products from Israel, they will be confiscated.” • In February 2006, Muhammad Rashid a-Din, a staff member of the Dubai Customs Department told The Jerusalem Post, “Yes, of course the boycott is still in place and is still enforced ... if a product contained even some components that were made in Israel, and you wanted to import it to Dubai, it would be a problem.” • In June 2006, The Jerusalem Post said that Saudi Arabia’s ambassador to the United States told a luncheon audience at the Brookings Institution that Saudi Arabia intends to continue enforcing the primary boycott. Reportedly, Prince Turki Al-Faisel stated that he believed “the primary boycott is an issue of national sovereignty guaranteed within the makeup of the WTO and its rules.”

20. Increasing Concerns • The Commerce Department reports that for all boycott countries, during FY2006, U.S. companies submitted 1,291 reports on boycott-related requests from Arab League members and other countries that enforced the boycott on Israel. • In FY2006, the number of requests from Iraq for U.S. companies to comply with the boycott increased 287% from FY2005, from 8 to 31 requests. • For many countries, the figure increased from FY2005. Requests from Lebanon were up 33% to 125; from Bahrain, up 32% to 37; and from Qatar, up 32% to 90. The United Arab Emirates remained the largest source of boycott-related requests with 486 requests. Requests from Saudi Arabia decreased 49% to 42 from 85 in FY2005.

21. Congressional Actions • The recent rise in boycott requests received by U.S. business and statements of support for the boycott from U.S. trading partners in the region has continued to keep the boycott an issue of interest for Members of Congress. • In addition to legislative provisions directing U.S. officials to pursue diplomatic negotiations to end the boycott’s enforcement and those preventing U.S. companies from cooperating with the boycott, Members of Congress periodically introduce Sense of Congress legislation related to the boycott. • During the 109th Congress Representative Clay Shaw introduced a concurrent resolution (H.Con.Res. 370) expressing the sense of Congress that Saudi Arabia, which joined the World Trade Organization (WTO) in 2005, is not living up to its WTO commitments by continuing to support the boycott. he resolution passed the House unanimously on April 5, 2006. No boycott-specific legislation has been introduced during the 110th Congress.

22. Specific Examples: • Kenclaire (West) Electrical Agencies, • Violations of the provisions of the Export Administration Regulations between April 1992 and February 1993 • Agreeing not to do business with manufacturers banned under the Arab boycott rules • The DOC found the following language contained in 11 purchase orders from Saudi Arabia: "No items or components thereof made by the manufacturer covered and banned under the Arab Boycott Rules shall be sold to the Buyer. Seller shall be fully responsible to replace all such items at no costs to Buyer. Seller shall be further responsible to pay for all penalties and expenses for defying the Arab Boycott laws." • On June 15, 2000, the DOC imposed a $104,000 civil penalty on Kenclaire (West) Electrical Agencies, Inc. (2) BDP International, Inc. (3) Panalpina, Inc. Details on examples (2) & (3) are available at: http://www.bis.doc.gov

23. Conclusions.. • Political reasons stand behind the Arab boycott vis-à-vis Israel • Economic Impacts on Israel are “negligible ” and difficult to determine • Sanctions on U.S. companies that “participate” with the Arab boycott are irrational and inaccurate

24. Policy Proposal • Office of Anti-Boycott Compliance • Make reporting of violations easy and efficient • Keep agency information up to date (website) • Department of Commerce • Study the possible consequences (loss of revenues) on U.S. persons as a result of Anti-Boycott laws (EAR does not track losses)

25. Questions or Comments? -for more info… Office of Anti-Boycott Compliance Bureau of Industry and Security, U.S. Department of Commerce http://www.bis.doc.gov/antiboycottcompliance/default.htm