Earlier this month, BIS’ Office of Boycott Compliance announced a Settlement Agreement with Mitsui Plastics, Inc., a domestic concern doing business in New York, to settle its potential civil liability for nine alleged violations of the Export Administration Regulations (EAR).

Charges Details Summary Enforcement Action
§ 760.2(d) Furnishing Information about Business Relationships with Boycotted Countries or Blacklisted Persons In connection with the sale and/or transfer of goods from the U.S. to Bahrain, Mitsui, on two occasions “furnished information concerning another person’s business relationships with another person who is known or believed to be restricted from having any business relationship with or in a boycotting country.” Civil Monetary Penalty of $28,600
§ 760.5 Failing to Report the Receipt of a Request to Engage in a Restrictive Trade Practice or Foreign Boycott Against a Country Friendly to the United States Also in connection with the sale and/or transfer of goods from the U.S. to Bahrain, Mitsui, on seven occasions “received a request to take an action which would have the effect of furthering or supporting a restrictive trade practice or unsanctioned foreign boycott. Mitsui failed to report its receipt of these requests to the Department…”

On January 8, the Treasury Department published its quarterly ‘List of Countries Requiring Cooperation with International Boycott’ in the Federal Register.

On the basis of the best information currently available to the Department of the Treasury, the following countries require or may require participation in, or cooperation with, an international boycott (within the meaning of section 999(b)(3) of the Internal Revenue Code of 1986:

  • Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, United Arab Emirates, and Yemen.

This list is unchanged from Treasury’s last Federal Register Notice regarding boycott, published on August 2, 2017.

Is the ongoing effort to punish Qatar economically a boycott covered by the Bureau of Industry and Security’s (BIS) Antiboycott Regulations? What about the Boycott, Divestment, and Sanctions (BDS) movement? Both present challenges for international business – what position will you take? How do you choose between the competing commercial and policy options? But, do they require compliance with part 760, Restrictive Trade Practices or Boycotts, of the BIS regulations?

According to the BIS web site, “The Arab League boycott of Israel is the principal foreign economic boycott that U.S. companies must be concerned with today. The antiboycott laws, however, apply to all boycotts imposed by foreign countries that are unsanctioned by the United States.” So, the question is whether the collective effort to isolate Qatar and the BDS movement are unsanctioned boycotts.

  1. Qatar. In what is being termed a diplomatic crisis, several countries suspended relations – such as a trade and travel ban — in June, including Saudi Arabia, United Arab Emirates, Bahrain, and Egypt. The origins of the split can be found in the shifting allegiances in the Middle East, and a variety of differences between Qatar on the one hand and Saudi Arabia on the other. Caught in the middle, global business must navigate around the economic conflict, and find ways to maintain trade relations.
  2. Boycott, Divestment, Sanctions (BDS). The BDS movement claims inspiration from the South African anti-apartheid movement, and is designed to put economic pressure on Israel through consumer and other boycotts of Israel, urging divestment, and advocating for sanctions. New York, among other states, is pushing back on BDS and taking the position that support for BDS disqualifies companies from doing business with NY State.

Guidance from BIS’ Office of Antiboycott Compliance (OAC)

What does BIS think? After many months of silence, the Director of the Office of Antiboycott Compliance expressed the agency’s position on both actions. At October’s BIS Update 2017 in Washington, DC, the Director of the OAC explained that neither the Qatar “diplomatic crisis” nor BDS are considered “unsanctioned” foreign boycotts subject to Part 760.* The Director did warn, however, that OAC is monitoring these actions and reserves the option to address them in the future.

For more information or to discuss antiboycott compliance, please contact Dj Wolff or Jeff Snyder.

* Please note that no official statement has been made by the IRS, which administers the Treasury provisions of the Antiboycott law. Treasury could, therefore, adopt the position that its regulations did extend to the Qatar dispute and/or BDS.

Bureau of Industry and Security (BIS)

  • Export Violations
    • On August 18, BIS announced a Settlement Agreement with Cryofab, Inc. of New Jersey. On two different occasions in 2012, the company engaged in conduct prohibited by the Export Administration Regulations (EAR). Cryofab exported gas storage containers and related tools and accessories from the U.S. to an Indian entity, the Bhabha Atomic Research Center (BARC), listed on the Entity List. The company was assessed a penalty of $35,000 and agreed to an external audit of its export controls compliance program covering the 12-month period beginning on the date of the order.
  • Alleged Antiboycott Violations
    • On August 22, BIS announced a Settlement Agreement with Carrier Saudi Services Company Ltd. (CSSC), a controlled-in-fact affiliate of Carrier Corporation, a U.S. firm for four alleged violations of Part 760 of the EAR, Restrictive Trade Practices or Boycotts. The company was charged with two violations of “Refusal to Do Business” and two violations of “Failing to Report the Receipt of a Request to Engage in a Restrictive Trade Practice or Foreign Boycott Against a Country Friendly to the United States”. All four violations came as a result contracts from 2012. CSSC agreed to pay a $12,000 civil penalty.
    • On August 22, BIS announced a Settlement Agreement with CH Robinson Freight Services, Ltd. (CHR) for 17 alleged violations of Part 760 of the EAR. The company was charged with ten violations of “Furnishing Information about Business Relationships with Boycotted Countries or Blacklisted Persons” and seven “Failing to Report the Receipt of a Request to Engage in a Restrictive Trade Practice or Foreign Boycott Against a Country Friendly to the United States”. All 17 violations occurred between 2012 and 2015 and were transactions involving the sale and/or transfer of goods or services (including information) from the U.S. to the UAE. CHR agreed to pay a $12,000 civil penalty.

Office of Foreign Assets Control (OFAC)

    • On August 10, OFAC announced IPSA International Services, Inc. agreed to pay $259,000 to settle its potential civil liability for 72 apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR).
      • IPSA, on 44 occasions, imported Iranian-origin services into the U.S. and on 28 occasions, IPSA engaged in transactions or dealings related to Iranian-origin services by approving and facilitating its foreign subsidiaries’ payments to providers of Iranian-origin services.
      • The company did not voluntarily disclose the apparent violations and OFAC determined it to be a non-egregious case. OFAC found at least one of IPSA’s senior management knew, or had reason to know, it was dealing in transactions related to Iran; however, the fine was mitigated by, among other things, the company undertaking remedial measures and submitting an investigation report to OFAC without an administrative subpoena. It answered additional questions promptly, and entered into a statute of limitations tolling agreement.
    • On August 17, OFAC announced Blue Sky Blue Sea, Inc., doing business as American Export Lines and International Shipping Company (USA), agreed to pay $518,063 to settle potential civil liability for 140 apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR).
      • Between 2010 and 2012, the company appears to have transshipped used and junked cars and parts from the U.S. via Iran to Afghanistan on 140 occasions.
      • The company did not voluntarily disclose the apparent violations and OFAC determined it to be a non-egregious case. OFAC found the company’s President and co-owner knew and approved of the transshipments via Iran; however, the fine was mitigated by, among other things, taking remedial steps before OFAC’s investigation began. It also cooperated, to include agreeing to toll the statute of limitations for 804 days.
    • On August 24, OFAC announced COSL Singapore Ltd., an oilfield services company located in Singapore and a subsidiary of China Oilfield Service Limited, agreed to pay $415,350 to settle its potential civil liability for 55 apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR).
      • Between 2011 and 2013, the company, through two subsidiaries, exported or attempted to export 55 orders of oil rig supplies from the U.S. to Singapore and the UAE, then re-exported or attempted to re-export these supplies to four oil rigs in Iranian territorial waters.
      • The company did not voluntarily disclose the apparent violations and OFAC determined it to be a non-egregious case. COSL Singapore’s fine was mitigated by, among other things, the institution of an OFAC sanctions compliance program and its display of substantial cooperation, to include entering a tolling agreement with OFAC.

For more information, contact: Jeff Snyder, Edward Goetz