Anti-Boycott Regulations

What Are Anti-Boycott Regulations?

Anti-boycott regulations prevent customers from withholding their patronage to a business. In the United States, anti-boycott regulations primarily deal with opposing restrictive trade practices against Israeli businesses.

The Arab League formally requires member countries to boycott trade with Israel and trade with companies that trade with Israel based on an agreement it enacted in 1948. In response, the U.S implemented anti-boycott laws in the mid-1970s to prevent U.S. companies from boycotting trade with Israeli companies. The law also prohibits the refusal to employ U.S. citizens because of their nationality, race, sex, or religion.

Understanding Anti-Boycott Regulations

The Export Administration Act (EAA) of 1979 set forth the U.S. anti-boycott regulations and the criminal and civil penalties for companies and employees who don't comply with the law. The EAA lapsed in 2001 and the President used an executive order to extend it until the Export Control Reform Act (ERCA) of 2018. These penalties included heavy fines, imprisonment, and denial of export privileges.

The purpose of the regulations is to prohibit U.S. companies from implementing other countries' foreign policies when those policies disagree with U.S. policy. The related Ribicoff Amendment to the Tax Reform Act of 1976, which is overseen by the Internal Revenue Service (IRS), denies tax benefits to companies that do not comply with anti-boycott laws.

In the United States, the Office of Antiboycott Compliance (OAC) within the Bureau of Industry and Security is responsible for administering and enforcing anti-boycott regulations.

Examples of Anti-Boycott Regulations

As a result of the laws dealing with boycotts fostered or imposed by foreign countries against other countries friendly to the U.S., the following actions are prohibited. A person or company may not discriminate against or agree to discriminate against any U.S. person on the basis of race, religion, sex, or national origin. They also may not refuse to do business with a boycotted or blacklisted entity.

According to the regulations, companies and individuals are not permitted to furnish information about business relationships with a boycotted country or a blacklisted entity. In addition, the U.S. Department of Commerce (DOC) must be notified if a person receives a request to comply with an unsanctioned foreign boycott against a boycotted country or a blacklisted entity.

Special Considerations

The ERCA lists a number of penalties for violations of anti-boycott regulations. The civil penalties include a fine of up to $300,000 per violation or twice the value of the exports involved (whichever is greater), with a possible imprisonment term of up to up to 20 years. The U.S. government may also decide to impose a $1 million criminal penalty on either individuals or companies for criminal violations.

Anti-boycott penalties may involve the denial of export privilege and exclusion from trade practices as well as denial of foreign tax benefits via the Ribicoff Amendment.

What Do Anti-Boycott Regulations Prohibit?

The Export Administration Act (EAA) prohibits U.S. persons and businesses from supporting or complying with boycotts mandated by foreign nations against nations friendly to the United States.

The EAA anti-boycott regulations prohibit:

What Are Anti-Boycott Penalties?

The EAA specifies various administrative and criminal penalties for violations of anti-boycott regulations. Administrative penalties can include denial of export privileges, exclusion from practice, and/or fines of up to $11,000 per violation.

Criminal penalties for violations can include imprisonment of up to five years. Violators may also be required to pay a fine of up to $50,000 or five times the value of the involved exported goods, whichever is greater. Criminal penalties can increase if the violations occur when an executive order under the International Emergency Economic Powers Act is in effect. In these cases, imprisonment can be up to 10 years and fines up to $50,000 for each willful violation.

What Is a Counter Boycott?

A counter boycott is a response to a boycott that is intended to counter, offset, or negate the efforts of the original boycott. For example, a group of consumers that oppose a particular company's product may organize a boycott to encourage others to not buy that product. A different group of consumers that enjoy the product may organize a counter boycott to encourage others to stock up and buy more of the company's products than they normally would. Their goal is to disrupt the original boycott and lead to its failure.