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.

Key Takeaways

  • Anti-boycott regulations are laws that governments enact in order to prohibit companies and individuals from complying with boycotts mandated by foreign countries.
  • In the United States, the Export Administration Act (EAA) establishes anti-boycott regulations, which include civil and criminal penalties for individuals and companies that violate the law.
  • The EAA's regulations prohibit U.S. companies from implementing a foreign country's boycott policies when those policies violate U.S. policies.
  • Anti-boycott regulations have provisions prohibiting discrimination, refusal to do business with boycotted countries or firms, and distribution of information about boycotted countries and firms.
  • Penalties for violating U.S. anti-boycott regulations can include fines up to $1 million per violation and imprisonment up to 20 years.

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 it was amended by the Export Control Reform Act (ERCA). The penalties for violating these regulations include 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?

In the United States, anti-boycott regulations are largely covered by the Export Administration Act (EAA), the Export Control Reform Act (ECRA), and the Anti-Boycott Act of 2018. These laws prohibit any U.S. business or individual from participating in a foreign country's boycott of a country friendly to the United States, or from furnishing information to those governments about any individual's relationship to a boycotted country.

In addition, U.S. banking entities may not implement letters of credit whose terms include participation in such a boycott. If any U.S. company receives a request for information from a foreign government in furtherance of such a boycott, they must notify the U.S. Office of Anti-Boycott Compliance.

What Are Anti-Boycott Penalties?

In the United States, the Office of Antiboycott Compliance can enforce administrative and criminal penalties on companies and individuals that participate in foreign-enforced boycotts against a country that is friendly to the U.S. In the case of administrative violations, the government may apply a monetary penalty of up to $300,000 or twice the value of the underlying transaction, as well as possible revocation of the offender's export privileges. Criminal penalties include fines of up to $1 million, and up to 20 years in prison.

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.