EAR Part 760

EAR 760.txt

Five-Year Records Retention Requirement for Export Transactions and Boycott Actions

EAR Part 760

OMB: 0694-0096

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e-CFR Data is current as of February 7, 2011



PART 760RESTRICTIVE TRADE PRACTICES OR BOYCOTTS



Section Contents

760.1 Definitions.

760.2 Prohibitions.

760.3 Exceptions to prohibitions.

760.4 Evasion.

760.5 Reporting requirements.

Supplement No. 1 to Part 760Interpretations

Supplement No. 2 to Part 760Interpretation

Supplement No. 3 to Part 760Interpretation

Supplement No. 4 to Part 760Interpretation

Supplement No. 5 to Part 760Interpretation

Supplement No. 6 to Part 760Interpretation

Supplement No. 7 to Part 760Interpretation

Supplement No. 8 to Part 760Interpretation

Supplement No. 9 to Part 760Interpretation

Supplement No. 10 to Part 760Interpretation

Supplement No. 11 to Part 760Interpretation

Supplement No. 12 to Part 760Interpretation

Supplement No. 13 to Part 760Interpretation

Supplement No. 14 to Part 760Interpretation

Supplement No. 15 to Part 760Interpretation

Supplement No. 16 to Part 760Interpretation





Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; E.O.

13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; Notice of August 12, 2010,

75 FR 50681 (August 16, 2010).

Source: 61 FR 12862, Mar. 25, 1996, unless otherwise noted.

760.1 Definitions.

top

In this part, references to the EAR are references to 15 CFR chapter VII,

subchapter C.

(a) Definition of person. For purposes of this part, the term person means

any individual, or any association or organization, public or private,

which is organized, permanently established, resident, or registered to do

business, in the United States or any foreign country. This definition of

person includes both the singular and plural and, in addition, includes:

(1) Any partnership, corporation, company, branch, or other form of

association or organization, whether organized for profit or non-profit

purposes;

(2) Any government, or any department, agency, or commission of any

government;

(3) Any trade association, chamber of commerce, or labor union;

(4) Any charitable or fraternal organization; and

(5) Any other association or organization not specifically listed in

paragraphs (a)(1) through (4) of this section.

(b) Definition of United States person. (1) This part applies to United

States persons. For purposes of this part, the term United States person

means any person who is a United States resident or national, including

individuals, domestic concerns, and controlled in fact foreign

subsidiaries, affiliates, or other permanent foreign establishments of

domestic concerns. This definition of United States person includes both

the singular and plural and, in addition, includes:

(i) The government of the United States or any department, agency, or

commission thereof;

(ii) The government of any State of the United States, the District of

Columbia, the Commonwealth of Puerto Rico, any territory or possession of

the United States, or any subdivision, department, agency, or commission

of any such government;

(iii) Any partnership, corporation, company, association, or other entity

organized under the laws of paragraph (b)(1)(i) or (ii) of this section;

(iv) Any foreign concern's subsidiary, partnership, affiliate, branch,

office, or other permanent establishment in any state of the United

States, the District of Columbia, the Commonwealth of Puerto Rico, or any

territory or possession of the United States; and

(v) Any domestic concern's foreign subsidiary, partnership, affiliate,

branch, office, or other permanent foreign establishment which is

controlled in fact by such domestic concern. (See paragraph (c) of this

section on Definition of 'Controlled in Fact'.)

(2) The term domestic concern means any partnership, corporation, company,

association, or other entity of, or organized under the laws of, any

jurisdiction named in paragraph (b)(1) (i) or (ii) of this section, or any

permanent domestic establishment of a foreign concern.

(3) The term foreign concern means any partnership, corporation, company,

association, or other entity of, or organized under the laws of, any

jurisdiction other than those named in paragraph (b)(1)(i) or (ii) of this

section.

(4) The term United States person does not include an individual United

States national who is resident outside the United States and who is

either employed permanently or temporarily by a non-United States person

or assigned to work as an employee for, and under the direction and

control of, a non-United States person.

Examples of United States Person

The following examples are intended to give guidance in determining

whether a person is a United States person. They are illustrative, not

comprehensive.

(i) U.S. bank A has a branch office in foreign country P. Such branch

office is a United States person, because it is a permanent foreign

establishment of a domestic concern.

(ii) Ten foreign nationals establish a manufacturing plant, A, in the

United States, incorporating the plant under New York law.

A is a United States person, because it is a corporation organized under

the laws of one of the states of the United States.

(iii) A, a foreign corporation, opens an office in the United States for

purposes of soliciting U.S. orders. The office is not separately

incorporated.

A's U.S. office is a United States person, because it is a permanent

establishment, in the United States, of a foreign concern.

(iv) A, a U.S. individual, owns stock in foreign corporation B.

A is a United States person. However, A is not a domestic concern,

because the term domestic concern does not include individuals.

(v) A, a foreign national resident in the United States, is employed by B,

a foreign corporation.

A is a United States person, because he is resident in the United States.

(vi) A, a foreign national, who is resident in a foreign country and is

employed by a foreign corporation, makes occasional visits to the United

States, for purposes of exploring business opportunities.

A is not a United States person, because he is not a United States

resident or national.

(vii) A is an association of U.S. firms organized under the laws of

Pennsylvania for the purpose of expanding trade.

A is a United States person, because it is an association organized under

the laws of one of the states of the United States.

(viii) At the request of country Y, A, an individual employed by U.S.

company B, is assigned to company C as an employee. C is a foreign company

owned and controlled by country Y. A, a U.S. national who will reside in

Y, has agreed to the assignment provided he is able to retain his

insurance, pension, and other benefits. Accordingly, company B has agreed

to keep A as an employee in order to protect his employee benefits, and

company C has agreed to pay for A's salary. At all times while he works

for C, A will be under C's direction and control.

A is not a United States person while under C's direction and control,

because he will be resident outside the United States and assigned as an

employee to a non-United States person. The arrangement designed to

protect A's insurance, pension, and other benefits does not destroy his

status as an employee of C so long as he is under the direction and

control of C.

(ix) A, a U.S. citizen, has resided in Europe for three years, where he is

a self-employed consultant for United States and foreign companies in the

communications industry.

A is a United States person, because he is a U.S. national and because he

is not a resident outside the United States who is employed by other than

a United States person.

(c) Definition of Controlled in Fact. (1) This part applies to any

domestic concern's foreign subsidiary, partnership, affiliate, branch,

office, or other permanent foreign establishment which is controlled in

fact by such domestic concern. Control in fact consists of the authority

or ability of a domestic concern to establish the general policies or to

control day-to-day operations of its foreign subsidiary, partnership,

affiliate, branch, office, or other permanent foreign establishment.

(2) A foreign subsidiary or affiliate of a domestic concern will be

presumed to be controlled in fact by that domestic concern, subject to

rebuttal by competent evidence, when:

(i) The domestic concern beneficially owns or controls (whether directly

or indirectly) more than 50 percent of the outstanding voting securities

of the foreign subsidiary or affiliate;

(ii) The domestic concern beneficially owns or controls (whether directly

or indirectly) 25 percent or more of the voting securities of the foreign

subsidiary or affiliate, if no other person owns or controls (whether

directly or indirectly) an equal or larger percentage;

(iii) The foreign subsidiary or affiliate is operated by the domestic

concern pursuant to the provisions of an exclusive management contract;

(iv) A majority of the members of the board of directors of the foreign

subsidiary or affiliate are also members of the comparable governing body

of the domestic concern;

(v) The domestic concern has authority to appoint the majority of the

members of the board of directors of the foreign subsidiary or affiliate;

or

(vi) The domestic concern has authority to appoint the chief operating

officer of the foreign subsidiary or affiliate.

(3) A brokerage firm or other person which holds simple record ownership

of securities for the convenience of clients will not be deemed to control

the securities.

(4) A domestic concern which owns, directly or indirectly, securities that

are immediately convertible at the option of the holder or owner into

voting securities is presumed to own or control those voting securities.

(5) A domestic concern's foreign branch office or other unincorporated

permanent foreign establishment is deemed to be controlled in fact by such

domestic concern under all circumstances.

Examples of Controlled in Fact

The following examples are intended to give guidance in determining the

circumstances in which a foreign subsidiary, affiliate, or other permanent

foreign establishment of a domestic concern is controlled in fact. They

are illustrative, not comprehensive.

(i) Company A is incorporated in a foreign country. Fifty-one percent of

the voting stock of A is owned by U.S. company B.

A is presumed to be controlled in fact by B. This presumption may be

rebutted by competent evidence showing that control does not, in fact, lie

with B.

(ii) Company A is incorporated in a foreign country. Ten percent of the

voting stock of A is owned by U.S. company B. A has an exclusive

management contract with B pursuant to which A is operated by B.

As long as such contract is in effect, A is presumed to be controlled in

fact by B. This presumption may be rebutted by competent evidence showing

that control does not, in fact, lie with B.

(iii) Company A is incorporated in a foreign country. Ten percent of the

voting stock of A is owned by U.S. company B. A has 10 persons on its

board of directors. Six of those persons are also members of the board of

directors of U.S. company B.

A is presumed to be controlled in fact by B. This presumption may be

rebutted by competent evidence showing that control does not, in fact, lie

with B.

(iv) Company A is incorporated in a foreign country. Thirty percent of the

voting securities of A is owned by U.S. company B and no other person owns

or controls an equal or larger share.

A is presumed to be controlled in fact by B. This presumption may be

rebutted by competent evidence showing that control does not, in fact, lie

with B.

(v) Company A is incorporated in a foreign country. In A's articles of

incorporation, U.S. company B has been given authority to appoint A's

board of directors.

A is presumed to be controlled in fact by B. This presumption may be

rebutted by competent evidence showing that control does not, in fact, lie

with B.

(vi) Company A is a joint venture established in a foreign country, with

equal participation by U.S. company B and foreign company C. U.S. Company

B has authority to appoint A's chief operating officer.

A is presumed to be controlled in fact by B. This presumption may be

rebutted by competent evidence showing that control does not, in fact, lie

with B.

(vii) Same as (vi), except that B has no authority to appoint A's chief

operating officer.

B is not presumed to control A, absent other facts giving rise to a

presumption of control.

(viii) Company A is incorporated in a foreign country. U.S. companies B,

C, and D each own 20 percent of A's voting securities and regularly cast

their votes in concert.

A is presumed to be controlled in fact by B, C, and D, because these

companies are acting in concert to control A.

(ix) U.S. bank B located in the United States has a branch office, A, in a

foreign country. A is not separately incorporated.

A is deemed to be controlled in fact by B, because A is a branch office of

a domestic concern.

(x) Company A is incorporated in a foreign country. Fifty-one percent of

the voting stock of A is owned by company B, which is incorporated in

another foreign country. Fifty-one percent of the voting stock of B is

owned by C, a U.S. company.

Both A and B are presumed to be controlled in fact by C. The presumption

of C's control over B may be rebutted by competent evidence showing that

control over B does not, in fact, lie with C. The presumption of B's

control over A (and thus C's control over A) may be rebutted by competent

evidence showing that control over A does not, in fact, lie with B.

(xi) B, a U.S. individual, owns 51 percent of the voting securities of A,

a manufacturing company incorporated and located in a foreign country.

A is not controlled in fact under this part, because it is not

controlled by a domestic concern.

(d) Definition of Activities in the Interstate or Foreign Commerce of the

United States.

Activities Involving United States Persons Located in the United States

(1) For purposes of this part, the activities of a United States person

located in the United States are in the interstate or foreign commerce of

the United States if they involve the sale, purchase, or transfer of goods

or services (including information) between:

(i) Two or more of the several States (including the District of

Columbia);

(ii) Any State (including the District of Columbia) and any territory or

possession of the United States;

(iii) Two or more of the territories or possessions of the United States;

or

(iv) A State (including the District of Columbia), territory or possession

of the United States and any foreign country.

(2) For purposes of this part, the export of goods or services from the

United States and the import of goods or services into the United States

are activities in United States commerce. In addition, the action of a

domestic concern in specifically directing the activities of its

controlled in fact foreign subsidiary, affiliate, or other permanent

foreign establishment is an activity in United States commerce.

(3) Activities of a United States person located in the United States may

be in United States commerce even if they are part of or ancillary to

activities outside United States commerce. However, the fact that an

ancillary activity is in United States commerce does not, in and of

itself, mean that the underlying or related activity is in United States

commerce.

(4) Hence, the action of a United States bank located in the United States

in providing financing from the United States for a foreign transaction

that is not in United States commerce is nonetheless itself in United

States commerce. However, the fact that the financing is in United States

commerce does not, in and of itself, make the underlying foreign

transaction an activity in United States commerce, even if the underlying

transaction involves a foreign company that is a United States person

within the meaning of this part.

(5) Similarly, the action of a United States person located in the United

States in providing financial, accounting, legal, t ransportation, or

other ancillary services to its controlled in fact foreign subsidiary,

affiliate, or other permanent foreign establishment in connection with a

foreign transaction is in United States commerce. But the provision of

such ancillary services will not, in and of itself, bring the foreign

transaction of such subsidiary, affiliate, or permanent foreign

establishment into United States commerce.

Activities of Controlled in Fact Foreign Subsidiaries, Affiliates, and

Other Permanent Foreign Establishments

(6) Any transaction between a controlled in fact foreign subsidiary,

affiliate, or other permanent foreign establishment of a domestic concern

and a person located in the United States is an activity in United States

commerce.

(7) Whether a transaction between such a foreign subsidiary, affiliate, or

other permanent foreign establishment and a person located outside the

United States is an activity in United States commerce is governed by the

following rules.

Activities in United States Commerce

(8) A transaction between a domestic concern's controlled in fact foreign

subsidiary, affiliate, or other permanent foreign establishment and a

person outside the United States, involving goods or services (including

information but not including ancillary services) acquired from a person

in the United States is in United States commerce under any of the

following circumstances

(i) If the goods or services were acquired for the purpose of filling an

order from a person outside the United States;

(ii) If the goods or services were acquired for incorporation into,

refining into, reprocessing into, or manufacture of another product for

the purpose of filling an order from a person outside the United States;

(iii) If the goods or services were acquired for the purpose of fulfilling

or engaging in any other transaction with a person outside the United

States; or

(iv) If the goods were acquired and are ultimately used, without

substantial alteration or modification, in filling an order from, or

fulfilling or engaging in any other transaction with, a person outside the

United States (whether or not the goods were originally acquired for that

purpose). If the goods are indistinguishable as to origin from similar

foreign-trade goods with which they have been mingled in a stockpile or

inventory, the subsequent transaction involving the goods is presumed to

be in United States commerce unless, at the time of filling the order, the

foreign-origin inventory on hand was sufficient to fill the order.

(9) For purposes of this section, goods or services are considered to be

acquired for the purpose of filling an order from or engaging in any other

transaction with a person outside the United States where:

(i) They are purchased by the foreign subsidiary, affiliate, or other

permanent foreign establishment upon the receipt of an order from or on

behalf of a customer with the intention that the goods or services are to

go to the customer;

(ii) They are purchased by the foreign subsidiary, affiliate, or other

permanent foreign establishment to meet the needs of specified customers

pursuant to understandings with those customers, although not for

immediate delivery; or

(iii) They are purchased by the foreign subsidiary, affiliate, or other

permanent foreign establishment based on the anticipated needs of

specified customers.

(10) If any non-ancillary part of a transaction between a domestic

concern's controlled foreign subsidiary, affiliate, or other permanent

foreign establishment and a person outside the United States is in United

States commerce, the entire transaction is in United States commerce. For

example, if such a foreign subsidiary is engaged in filling an order from

a non-United States customer both with goods acquired from the United

States and with goods acquired elsewhere, the entire transaction with that

customer is in United States commerce.

Activities Outside United States Commerce

(11) A transaction between a domestic concern's controlled foreign

subsidiary, affiliate, or other permanent foreign establishment and a

person outside the United States, not involving the purchase, sale, or

transfer of goods or services (including information) to or from a person

in the United States, is not an activity in United States commerce.

(12) The activities of a domestic concern's controlled foreign subsidiary,

affiliate, or other permanent foreign establishment with respect to goods

acquired from a person in the United States are not in United States

commerce where:

(i) They were acquired without reference to a specific order from or

transaction with a person outside the United States; and

(ii) They were further manufactured, incorporated into, refined into, or

reprocessed into another product.

(13) The activities of a domestic concern's controlled foreign subsidiary,

affiliate, or other permanent foreign establishment with respect to

services acquired from a person in the United States are not in United

States commerce where:

(i) They were acquired without reference to a specific order from or

transaction with a person outside the United States; or

(ii) They are ancillary to the transaction with the person outside the

United States.

(14) For purposes of this section, services are ancillary services if they

are provided to a controlled foreign subsidiary, affiliate, or other

permanent foreign establishment primarily for its own use rather than for

the use of a third person. These typically include financial, accounting,

legal,transportation, and other services, whether provided by a domestic

concern or an unrelated entity.

(15) Thus, the provision of the project financing by a United States bank

located in the United States to a controlled foreign subsidiary unrelated

to the bank is an ancillary service which will not cause the underlying

transaction to be in United States commerce. By contrast, where a domestic

concern, on behalf of its controlled foreign subsidiary, gives a guaranty

of performance to a foreign country customer, that is a service provided

to the customer and, as such, brings that subsidiary's transaction with

the customer into United States commerce. Similarly, architectural or

engineering services provided by a domestic concern in connection with its

controlled foreign subsidiary's construction project in a third country

are services passed through to the subsidiary's customer and, as such,

bring that subsidiary's foreign transaction into United States commerce.

General

(16) Regardless of whether the subsequent disposition of goods or services

from the United States is in United States commerce, the original

acquisition of goods or services from a person in the United States is an

activity in United States commerce subject to this part. Thus, if a

domestic concern's controlled foreign subsidiary engages in a prohibited

refusal to do business in stocking its inventory with goods from the

United States, that action is subject to this part whether or not

subsequent sales from that inventory are.

(17) In all the above, goods and services will be considered to have been

acquired from a person in the United States whether they were acquired

directly or indirectly through a third party, where the person acquiring

the goods or services knows or expects, at the time he places the order,

that they will be delivered from the United States.

Letters of Credit

(18) Implementation of a letter of credit in the United States by a United

States person located in the United States, including a permanent United

States establishment of a foreign concern, is an activity in United States

commerce.

(19) Implementation of a letter of credit outside the United States by a

United States person located outside the United States is in United States

commerce where the letter of credit (a) specifies a United States address

for the beneficiary, (b) calls for documents indicating shipment from the

United States, or (c) calls for documents indicating that the goods are of

United States origin.

(20) See 760.2(f) of this part on Letters of Credit to determine the

circumstances in which paying, honoring, confirming, or otherwise

implementing a letter of credit is covered by this part.

Examples of Activities in the Interstate or Foreign Commerce of the United

States

The following examples are intended to give guidance in determining the

circumstances in which an activity is in the interstate or foreign

commerce of the United States. They are illustrative, not comprehensive.

United States Person Located in the United States

(i) U.S. company A exports goods from the United States to a foreign

country. A's activity is in U.S. commerce, because A is exporting goods

from the United States.

(ii) U.S. company A imports goods into the United States from a foreign

country. A's activity is in U.S. commerce, because A is importing goods

into the United States.

(iii) U.S. engineering company A supplies consulting services to its

controlled foreign subsidiary, B. A's activity is in U.S. commerce,

because A is exporting services from the United States.

(iv) U.S. company A supplies consulting services to foreign company B. B

is unrelated to A or any other U.S. person.

A's activity is in U.S. commerce even though B, a foreign-owned company

located outside the United States, is not subject to this part, because A

is exporting services from the United States.

(v) Same as (iv), except A is a bank located in the United States and

provides a construction loan to B.

A's activity is in U.S. commerce even though B is not subject to this

part, because A is exporting financial services from the United States.

(vi) U.S. company A issues policy directives from time to time to its

controlled foreign subsidiary, B, governing the conduct of B's activities

with boycotting countries.

A's activity in directing the activities of its foreign subsidiary, B, is

an activity in U.S. commerce.

Foreign Subsidiaries, Affiliates, and Other Permanent Foreign

Establishments of Domestic Concerns

(i) A, a controlled foreign subsidiary of U.S. company B, purchases goods

from the United States.

A's purchase of goods from the United States is in U.S. commerce, because

A is importing goods from the United States. Whether A's subsequent

disposition of these goods is in U.S. commerce is irrelevant. Similarly,

the fact that A purchased goods from the United States does not, in and of

itself, make any subsequent disposition of those goods an activity in U.S.

commerce.

(ii) A, a controlled foreign subsidiary of U.S. company B, receives an

order from boycotting country Y for construction materials. A places an

order with U.S. company B for the materials.

A's transaction with Y is an activity in U.S. commerce, because the

materials are purchased from the United States for the purpose of filling

the order from Y.

(iii) A, a controlled foreign subsidiary of U.S. company B, receives an

order from boycotting country Y for construction materials. A places an

order with U.S. company B for some of the materials, and with U.S. company

C, an unrelated company, for the rest of the materials.

A's transaction with Y is an activity in U.S. commerce, because the

materials are purchased from the United States for the purpose of filling

the order from Y. It makes no difference whether the materials are ordered

from B or C.

(iv) A, a controlled foreign subsidiary of U.S. company B, is in the

wholesale and retail appliance sales business. A purchases finished air

conditioning units from the United States from time to time in order to

stock its inventory. A's inventory is also stocked with air conditioning

units purchased outside the United States. A receives an order for air

conditioning units from Y, a boycotting country. The order is filled with

U.S.-origin units in A's inventory.

A's transaction with Y is in U.S. commerce, because its U.S.-origin goods

are resold without substantial alteration.

(v) Same as (iv), except that A is in the chemicals distribution business.

Its U.S.-origin goods are mingled in inventory with foreign-origin goods.

A's sale to Y of unaltered goods from its general inventory is presumed to

be in U.S. commerce unless A can show that at the time of the sale the

foreign-origin inventory on hand was sufficient to cover the shipment to

Y.

(vi) A, a foreign subsidiary of U.S. company B, receives an order from

boycotting country Y for computers. A places an order with U.S. company B

for some of the components; with U.S. company C, an unrelated company, for

other components; and with foreign company D for the rest of the

components. A then assembles the computers and ships them to Y.

A's transaction with Y is an activity in U.S. commerce, because some of

the components are acquired from the United States for purposes of filling

an order from Y.

(vii) Same as (vi), except A purchases all the components from

non-U.S.sources.

A's transaction with Y is not an activity in U.S. commerce, because it

involves no export of goods from the United States. It makes no difference

whether the technology A uses to manufacture computers was originally

acquired from its U.S. parent.

(viii) A, a controlled foreign subsidiary of U.S. company B, manufactures

computers. A stocks its general components and parts inventory with

purchases made at times from the United States and at times from foreign

sources. A receives an order from Y, a boycotting country, for computers.

A fills that order by manufacturing the computers using materials from its

general inventory.

A's transaction with Y is not in U.S. commerce, because the U.S.-origin

components are not acquired for the purpose of meeting the anticipated

needs of specified customers in Y. It is irrelevant that A's operations

may be based on U.S.-origin technology.

(ix) Same as (viii), except that in anticipation of the order from Y, A

orders and receives the necessary materials from the United States.

A's transaction with Y is in U.S. commerce, because the U.S.-origin goods

were acquired for the purpose of filling an anticipated order from Y.

(x) A, a controlled foreign subsidiary of U.S. company B, manufactures

typewriters. It buys typewriter components both from the United States and

from foreign sources. A sells its output in various places throughout the

world, including boycotting country Y. Its sales to Y vary from year to

year, but have averaged approximately 20 percent of sales for the past

five years. A expects that its sales to Y will remain at approximately

that level in the years ahead although it has no contracts or orders from

Y on hand.

A's sales of typewriters to Y are not in U.S. commerce, because the U.S.

components are not acquired for the purpose of filling an order from Y. A

general expectancy of future sales is not an order within the meaning of

this section.

(xi) U.S. company A's corporate counsel provides legal advice to B, its

controlled foreign subsidiary, on the applicability of this Part to B's

transactions.

While provision of this legal advice is itself an activity in U.S.

commerce, it does not, in and of itself, bring B's activities into U.S.

commerce.

(xii) A, a controlled foreign subsidiary of U.S. company B, is in the

general construction business. A enters into a contract with boycotting

country Y to construct a power plant in Y. In preparing engineering

drawings and specifications, A uses the advice and assistance of B.

A's transaction with Y is in U.S. commerce, because B's services are used

for purposes of fulfilling the contract with Y. B's services are not

ancillary services, because the engineering services in connection with

construction of the power plant are part of the services ultimately

provided to Y by A.

(xiii) Same as (xii), except that A gets no engineering advice or

assistance from B. However, B's corporate counsel provides legal advice to

A regarding the structure of the transaction. In addition, B's corporate

counsel draws up the contract documents.

A's transaction with Y is not in U.S. commerce. The legal services

provided to A are ancillary services, because they are not part of the

services provided to Y by A in fulfillment of its contract with Y.

(xiv) A, a controlled foreign subsidiary of U.S. company B, enters into a

contract to construct an apartment complex in boycotting country Y. A will

fulfill its contract completely with goods and services from outside the

United States. Pursuant to a provision in the contract, B guarantees A's

performance of the contract.

A's transaction with Y is in U.S. commerce, because B's guaranty of A's

performance involves the acquisition of services from the United States

for purposes of fulfilling the transaction with Y, and those services are

part of the services ultimately provided to Y.

(xv) Same as (xiv), except that the guaranty of A's performance is

supplied by C, a non-U.S. person located outside the United States.

However, unrelated to any particular transaction, B from time to time

provides general financial, legal, and technical services to A.

A's transaction with Y is not in U.S. commerce, because the services

acquired from the United States are not acquired for purposes of

fulfilling the contract with Y.

(xvi) A, a foreign subsidiary of U.S. company B, has a contract with

boycotting country Y to conduct oil drilling operations in that country.

In conducting these operations, A from time to time seeks certain

technical advice from B regarding the operation of the drilling rigs.

A's contract with Y is in U.S. commerce, because B's services are sought

for purposes of fulfilling the contract with Y and are part of the

services ultimately provided to Y.

(xvii) A, a controlled foreign subsidiary of U.S. company B, enters into a

contract to sell typewriters to boycotting country Y. A is located in

non-boycotting country P. None of the components are acquired from the

United States. A engages C, a U.S. shipping company, to transport the

typewriters from P to Y.

A's sales to Y are not in U.S. commerce, because in carrying A's goods, C

is providing an ancillary service to A and not a service to Y.

(xviii) Same as (xvii), except that A's contract with Y calls for title to

pass to Y in P. In addition, the contract calls for A to engage a carrier

to make delivery to Y.

A's sales to Y are in U.S. commerce, because in carrying Y's goods, C is

providing a service to A which is ultimately provided to Y.

(xix) A, a controlled foreign subsidiary of U.S. company B, has general

product liability insurance with U.S. company C. Foreign-origin goods sold

from time to time by A to boycotting country Y are covered by the

insurance policy.

A's sales to Y are not in U.S. commerce, because the insurance provided by

C is an ancillary service provided to A which is not ultimately provided

to Y.

(xx) A, a controlled foreign subsidiary of U.S. company B, manufactures

automobiles abroad under a license agreement with B. From time to time, A

sells such goods to boycotting country Y.

A's sales to Y are not in U.S. commerce, because the rights conveyed by

the license are not acquired for the specific purpose of engaging in

transactions with Y.

(e) Intent. (1) This part prohibits a United States person from taking

or knowingly agreeing to take certain specified actions with intent to

comply with, further, or support an unsanctioned foreign boycott.

(2) A United States person has the intent to comply with, further, or

support an unsanctioned foreign boycott when such a boycott is at least

one of the reasons for that person's decision whether to take a particular

prohibited action. So long as that is at least one of the reasons for that

person's action, a violation occurs regardless of whether the prohibited

action is also taken for non-boycott reasons. Stated differently, the fact

that such action was taken for legitimate business reasons does not remove

that action from the scope of this part if compliance with an unsanctioned

foreign boycott was also a reason for the action.

(3) Intent is a necessary element of any violation of any of the

prohibitions under 760.2. It is not sufficient that one take action that

is specifically prohibited by this part. It is essential that one take

such action with intent to comply with, further,or support an unsanctioned

foreign boycott. Accordingly, a person who inadvertently, without boycott

intent, takes a prohibited action, does not commit any violation of this

part.

(4) Intent in this context means the reason or purpose for one's behavior.

It does not mean that one has to agree with the boycott in question or

desire that it succeed or that it be furthered or supported. But it does

mean that the reason why a particular prohibited action was taken must be

established.

(5) Reason or purpose can be proved by circumstantial evidence. For

example, if a person receives a request to supply certain boycott

information, the furnishing of which is prohibited by this part, and he

knowingly supplies that information in response, he clearly intends to

comply with that boycott request. It is irrelevant that he may disagree

with or object to the boycott itself. Information will be deemed to be

furnished with the requisite intent if the person furnishing the

information knows that it was sought for boycott purposes. On the other

hand, if a person refuses to do business with someone who happens to be

blacklisted, but the reason is because that person produces an inferior

product, the requisite intent does not exist.

(6) Actions will be deemed to be taken with intent to comply with an

unsanctioned foreign boycott if the person taking such action knew that

such action was required or requested for boycott reasons. On the other

hand, the mere absence of a business relationship with a blacklisted

person or with or in a boycotted country does not indicate the existence

of the requisite intent.

(7) In seeking to determine whether the requisite intent exists, all

available evidence will be examined.

Examples of Intent

The following examples are intended to illustrate the factors which will

be considered in determining whether the required intent exists. They are

illustrative, not comprehensive.

(i) U.S. person A does business in boycotting country Y. In selecting

firms to supply goods for shipment to Y, A chooses supplier B because B's

products are less expensive and of higher quality than the comparable

products of supplier C. A knows that C is blacklisted, but that is not a

reason for A's selection of B.

A's choice of B rather than C is not action with intent to comply with Y's

boycott, because C's blacklist status is not a reason for A's action.

(ii) Same as (i), except that A chooses B rather than C in part because C

is blacklisted by Y.

Since C's blacklist status is a reason for A's choice, A's action is taken

with intent to comply with Y's boycott.

(iii) U.S. person A bids on a tender issued by boycotting country Y. A

inadvertently fails to notice a prohibited certification which appears in

the tender document. A's bid is accepted.

A's action in bidding was not taken with intent to comply with Y's

boycott, because the boycott was not a reason for A's action.

(iv) U.S. bank A engages in letter of credit transactions, in favor of

U.S. beneficiaries, involving the shipments of U.S. goods to boycotting

country Y. As A knows, such letters of credit routinely contain conditions

requiring prohibited certifications. A fails to take reasonable steps to

prevent the implementation of such letters of credit. A receives for

implementation a letter of credit which in fact contains a prohibited

condition but does not examine the letter of credit to determine whether

it contains such a condition.

Although Y's boycott may not be a specific reason for A's action in

implementing the letter of credit with a prohibited condition, all

available evidence shows that A's action was taken with intent to comply

with the boycott, because A knows or should know that its procedures

result in compliance with the boycott.

(v) U.S. bank A engages in letter of credit transactions, in favor of U.S.

beneficiaries, involving the shipment of U.S. goods to boycotting country

Y. As A knows, the documentation accompanying such letters of credit

sometimes contains prohibited certifications. In accordance with standard

banking practices applicable to A, it does not examine such accompanying

documentation. A receives a letter of credit in favor of a U.S.

beneficiary. The letter of credit itself contains no prohibited

conditions. However, the accompanying documentation, which A does not

examine, does contain such a condition.

All available evidence shows that A's action in implementing the letter of

credit was not taken with intent to comply with the boycott, because A has

no affirmative obligation to go beyond applicable standard banking

practices in implementing letters of credit.

(vi) A, a U.S. company, is considering opening a manufacturing facility in

boycotted country X. A already has such a facility in boycotting country

Y. After exploring the possibilities in X, A concludes that the market

does not justify the move. A is aware that if it did open a plant in X, Y

might object because of Y's boycott of X. However Y's possible objection

is not a reason for A's decision not to open a plant in X.

A's decision not to proceed with the plant in X is not action with intent

to comply with Y's boycott, because Y's boycott of X is not a reason for

A's decision.

(vii) Same as (vi), except that after exploring the business possibilities

in X, A concludes that the market does justify the move to X. However, A

does not open the plant because of Y's possible objections due to Y's

boycott of X.

A's decision not to proceed with the plant in X is action taken with

intent to comply with Y's boycott, because Y's boycott is a reason for A's

decision.

(viii) A, a U.S. chemical manufacturer, receives a boycott questionnaire

from boycotting country Y asking, among other things, whether A has any

plants located in boycotted country X. A, which has never supported Y's

boycott of X, responds to Y's questionnaire, indicating affirmatively that

it does have plants in X and that it intends to continue to have plants in

X.

A's responding to Y's questionnaire is deemed to be action with intent to

comply with Y's boycott because A knows that the questionnaire is

boycott-related. It is irrelevant that A does not also wish to support Y's

boycott.

(ix) U.S. company A has a manufacturing facility in boycotted country X. A

receives an invitation to bid on a construction project in boycotting

country Y. The invitation states that all bidders must complete a boycott

questionnaire and send it in with the bid. The questionnaire asks for

information about A's business relationships with X. Regardless of whether

A's bid is successful, A intends to continue its business in X

undiminished and in fact is exploring and intends to continue exploring an

expansion of its activities in X without regard to Y's boycott.

A may not answer the questionnaire, because, despite A's intentions with

regard to its business operations in X, Y's request for completion of the

questionnaire is for boycott purposes and by responding, A's action would

be taken with intent to comply with Y's boycott.

[61 FR 12862, Mar. 25, 1996, as amended at 65 FR 34945, June 1, 2000; 73

FR 68327, Nov. 18, 2008; 73 FR 74349, Dec. 8, 2008]

760.2 Prohibitions.

top

(a) Refusals to do business .

Prohibition Against Refusals To Do Business

(1) No United States person may: refuse, knowingly agree to refuse,

require any other person to refuse, or knowingly agree to require any

other person to refuse, to do business with or in a boycotted country,

with any business concern organized under the laws of a boycotted country,

with any national or resident of a boycotted country, or with any other

person, when such refusal is pursuant to an agreement with the boycotting

country, or a requirement of the boycotting country, or a request from or

on behalf of the boycotting country.

(2) Generally, a refusal to do business under this section consists of

action that excludes a person or country from a transaction for boycott

reasons. This includes a situation in which a United States person chooses

or selects one person over another on a boycott basis or takes action to

carry out another person's boycott-based selection when he knows or has

reason to know that the other person's selection is boycott-based.

(3) Refusals to do business which are prohibited by this section include

not only specific refusals, but also refusals implied by a course or

pattern of conduct. There need not be a specific offer and refusal to

constitute a refusal to do business; a refusal may occur when a United

States person has a financial or commercial opportunity and declines for

boycott reasons to consider or accept it.

(4) A United States person's use of either a boycott-based list of persons

with whom he will not deal (a so-called blacklist) or a boycott-based

list of persons with whom he will deal (a so-called whitelist)

constitutes a refusal to do business.

(5) An agreement by a United States person to comply generally with the

laws of the boycotting country with which it is doing business or an

agreement that local laws of the boycotting country shall apply or govern

is not, in and of itself, a refusal to do business. Nor, in and of itself,

is use of a contractual clause explicitly requiring a person to assume the

risk of loss of non-delivery of his products a refusal to do business with

any person who will not or cannot comply with such a clause. (But see

760.4 of this part on Evasion.)

(6) If, for boycott reasons, a United States general manager chooses one

supplier over another, or enters into a contract with one supplier over

another, or advises its client to do so, then the general manager's

actions constitute a refusal to do business under this section. However,

it is not a refusal to do business under this section for a United States

person to provide management, procurement, or other pre-award services for

another person so long as the provision of such pre-award services is

customary for that firm (or industry of which the firm is a part), without

regard to the boycotting or non-boycotting character of the countries in

which they are performed, and the United States person, in providing such

services, does not act to exclude a person or country from the transaction

for boycott reasons, or otherwise take actions that are boycott-based. For

example, a United States person under contract to provide general

management services in connection with a construction project in a

boycotting country may compile lists of qualified bidders for the client

if that service is a customary one and if persons who are qualified are

not excluded from that list because they are blacklisted.

(7) With respect to post-award services, if a client makes a boycott-based

selection, actions taken by the United States general manager or

contractor to carry out the client's choice are themselves refusals to do

business if the United States contractor knows or has reason to know that

the client's choice was boycott-based. (It is irrelevant whether the

United States contractor also provided pre-award services.) Such actions

include entering into a contract with the selected supplier, notifying the

supplier of the client's choice, executing a contract on behalf of the

client, arranging for inspection and shipment of the supplier's goods, or

taking any other action to effect the client's choice. (But see 760.3(d)

on Compliance with Unilateral Selection as it may apply to post-award

services.)

(8) An agreement is not a prerequisite to a violation of this section

since the prohibition extends to actions taken pursuant not only to

agreements but also to requirements of, and requests from or on behalf of,

a boycotting country.

(9) Agreements under this section may be either express or implied by a

course or pattern of conduct. There need not be a direct request from a

boycotting country for action by a United States person to have been taken

pursuant to an agreement with or requirement of a boycotting country.

(10) This prohibition, like all others, applies only with respect to a

United States person's activities in the interstate or foreign commerce of

the United States and only when such activities are undertaken with intent

to comply with, further, or support an unsanctioned foreign boycott. The

mere absence of a business relationship with or in the boycotted country,

with any business concern organized under the laws of the boycotted

country, with national(s) or resident(s) of the boycotted country, or with

any other person does not indicate the existence of the required intent.

Examples of Refusals and Agreements To Refuse To Do Business

The following examples are intended to give guidance in determining the

circumstances in which, in a boycott situation, a refusal to do business

or an agreement to refuse to do business is prohibited. They are

illustrative, not comprehensive.

Refusals To Do Business

(i) A, a U.S. manufacturer, receives an order for its products from

boycotting country Y. To fill that order, A solicits bids from U.S.

companies B and C, manufacturers of components used in A's products. A

does not, however, solicit bids from U.S. companies D or E, which also

manufacture such components, because it knows that D and E are restricted

from doing business in Y and that their products are, therefore, not

importable into that country.

Company A may not refuse to solicit bids from D and E for boycott reasons,

because to do so would constitute a refusal to do business with those

persons.

(ii) A, a U.S. exporter, uses company B, a U.S. insurer, to insure the

shipment of its goods to all its overseas customers. For the first time, A

receives an order for its products from boycotting country Y. Knowing that

B is on the blacklist of Y, A arranges with company C, a non-blacklisted

U.S. insurer, to insure the shipment of its goods to Y.

A's action constitutes a refusal to do business with B.

(iii) A, a U.S. exporter, purchases all its liability insurance from

company B, a U.S. company that does business in boycotted country X. A

wishes to expand its operations into country Y, the boycotting country.

Before doing so, A decides to switch from insurer B to insurer C in

anticipation of a request from Y that A sever its relations with B as a

condition of doing business in Y.

A may not switch insurers for this reason, because doing so would

constitute a refusal to do business with B.

(iv) U.S. company A exports goods to boycotting country Y. In selecting

vessels to transport the goods to Y, A chooses only from among carriers

which call at ports in Y.

A's action is not a refusal to do business with carriers which do not call

at ports in Y.

(v) A, a U.S. bank with a branch office in boycotting country Y, sends

representatives to boycotted country X to discuss plans for opening a

branch office in X. Upon learning of these discussions, an official of the

local boycott office in Y advises A's local branch manager that if A opens

an office in X it will no longer be allowed to do business in Y. As a

result of this notification, A decides to abandon its plans to open a

branch in X.

Bank A may not abandon its plans to open a branch in X as a result of Y's

notification, because doing so would constitute a refusal to do business

in boycotted country X.

(vi) A, a U.S. company that manufactures office equipment, has been

restricted from doing business in boycotting country Y because of its

business dealings with boycotted country X. In an effort to have itself

removed from Y's blacklist, A ceases its business in X.

A's action constitutes a refusal to do business in boycotted country X.

(vii) A, a U.S. computer company, does business in boycotting country Y. A

decides to explore business opportunities in boycotted country X. After

careful analysis of possible business opportunities in X, A decides,

solely for business reasons, not to market its products in X.

A's decision not to proceed is not a refusal to do business, because it is

not based on boycott considerations. A has no affirmative obligation to do

business in X.

(viii) A, a U.S. oil company with operations in boycotting country Y, has

regularly purchased equipment from U.S. petroleum equipment suppliers B,

C, and D, none of whom is on the blacklist of Y. Because of its

satisfactory relationship with B, C, and D, A has not dealt with other

suppliers, including supplier E, who is blacklisted by Y.

A's failure affirmatively to seek or secure business with blacklisted

supplier E is not a refusal to do business with E.

(ix) Same as (viii), except U.S. petroleum equipment supplier E, a company

on boycotting country Y's blacklist, offers to supply U.S. oil company A

with goods comparable to those provided by U.S. suppliers B, C, and D. A,

because it has satisfactorily, established relationships with suppliers B,

C, and D, does not accept supplier E's offer.

A's refusal of supplier E's offer is not a refusal to do business, because

it is based solely on non-boycott considerations. A has no affirmative

obligation to do business with E.

(x) A, a U.S. construction company, enters into a contract to build an

office complex in boycotting country Y. A receives bids from B and C, U.S.

companies that are equally qualified suppliers of electrical cable for the

project. A knows that B is blacklisted by Y and that C is not. A accepts

C's bid, in part because C is as qualified as the other potential supplier

and in part because C is not blacklisted.

A's decision to select supplier C instead of blacklisted supplier B is a

refusal to do business, because the boycott was one of the reasons for A's

decision.

(xi) A, a U.S. general contractor, has been retained to construct a

highway in boycotting country Y. A circulates an invitation to bid to U.S.

manufacturers of road-building equipment. One of the conditions listed in

the invitation to bid is that, in order for A to obtain prompt service,

suppliers will be required to maintain a supply of spare parts and a

service facility in Y. A includes this condition solely for commercial

reasons unrelated to the boycott. Because of this condition, however,

those suppliers on Y's blacklist do not bid, since they would be unable to

satisfy the parts and services requirements.

A's action is not a refusal to do business, because the contractual

condition was included solely for legitimate business reasons and was not

boycott-based.

(xii) Company A, a U.S. oil company, purchases drill bits from U.S.

suppliers for export to boycotting country Y. In its purchase orders, A

includes a provision requiring the supplier to make delivery to A's

facilities in Y and providing that title to the goods does not pass until

delivery has been made. As is customary under such an arrangement, the

supplier bears all risks of loss, including loss from fire, theft, perils

of the sea, and inability to clear customs, until title passes.

Insistence on such an arrangement does not constitute a refusal to do

business, because this requirement is imposed on all suppliers whether

they are blacklisted or not. (But see 760.4 on Evasion.)

(xiii) A, a U.S. engineering and construction company, contracts with a

government agency in boycotting country Y to perform a variety of services

in connection with the construction of a large industrial facility in Y.

Pursuant to this contract, A analyzes the market of prospective suppliers,

compiles a suggested bidders list, analyzes the bids received, and makes

recommendations to the client. The client independently selects and awards

the contract to supplier C for boycott reasons. All of A's services are

performed without regard to Y's blacklist or any other boycott

considerations, and are the type of services A provides clients in both

boycotting and non-boycotting countries.

A's actions do not constitute a refusal to do business, because, in the

provision of pre-award services, A has not excluded the other bidders and

because A customarily provides such services to its clients.

(xiv) Same as (xiii), except that in compiling a list of prospective

suppliers, A deletes suppliers he knows his client will refuse to select

because they are blacklisted. A knows that including the names of

blacklisted suppliers will neither enhance their chances of being selected

nor provide his client with a useful service, the function for which he

has been retained.

A's actions, which amount to furnishing a so-called whitelist,

constitute refusals to do business, because A's pre-award services have

not been furnished without regard to boycott considerations.

(xv) A, a U.S. construction firm, provides its boycotting country client

with a permissible list of prospective suppliers, B, C, D, and E. The

client independently selects and awards the contract to C, for boycott

reasons, and then requests A to advise C of his selection, negotiate the

contract with C, arrange for the shipment, and inspect the goods upon

arrival. A knows that C was chosen by the client for boycott reasons.

A's action in complying with his client's direction is a refusal to do

business, because A's post-award actions carry out his client's

boycott-based decision. (Note: Whether A's action comes within the

unilateral selection exception depends upon factors discussed in 760.3(d)

of this part).

(xvi) Same as (xv), except that A is building the project on a turnkey

basis and will retain title until completion. The client instructs A to

contract only with C.

A's action in contracting with C constitutes a refusal to do business,

because it is action that excludes blacklisted persons from the

transaction for boycott reasons. (Note: Whether A's action comes within

the unilateral selection exception depends upon factors discussed in

760.3(d) of this part).

(xvii) A, a U.S. exporter of machine tools, receives an order for drill

presses from boycotting country Y. The cover letter from Y's procurement

official states that A was selected over other U.S. manufacturers in part

because A is not on Y's blacklist.

A's action in filling this order is not a refusal to do business, because

A has not excluded anyone from the transaction.

(xviii) A, a U.S. engineering firm under contract to construct a dam in

boycotting country Y, compiles, on a non-boycott basis, a list of

potential heavy equipment suppliers, including information on their

qualifications and prior experience. A then solicits bids from the top

three firms on its listB, C, and Dbecause they are the best qualified.

None of them happens to be blacklisted. A does not solicit bids from E, F,

or G, the next three firms on the list, one of whom is on Y's blacklist.

A's decision to solicit bids from only B, C, and D, is not a refusal to do

business with any person, because the solicited bidders were not selected

for boycott reasons.

(xix) U.S. bank A receives a letter of credit in favor of U.S. beneficiary

B. The letter of credit requires B to certify that he is not blacklisted.

B meets all other conditions of the letter of credit but refuses to

certify as to his blacklist status. A refuses to pay B on the letter of

credit solely because B refuses to certify as to his blacklist status.

A has refused to do business with another person pursuant to a boycott

requirement or request.

(xx) U.S. bank A receives a letter of credit in favor of U.S. beneficiary

B. The letter of credit requires B to provide a certification from the

steamship line that the vessel carrying the goods is not blacklisted. B

seeks payment from A and meets all other conditions of the letter of

credit but refuses or is unable to provide the certification from the

steamship line about the vessel's blacklist status. A refuses to pay B on

the letter of credit solely because B cannot or will not provide the

certification.

A has required another person to refuse to do business pursuant to a

boycott requirement or request by insisting that B obtain such a

certificate. (Either A or B may request an amendment to the letter of

credit substituting a certificate of vessel eligibility, however. See

Example (xxi) below).

(xxi) U.S. bank A receives a letter of credit from a bank in boycotting

country Y in favor of U.S. beneficiary B. The letter of credit requires B

to provide a certification from the steamship line that the vessel

carrying the goods is eligible to enter the ports in Y. B seeks payment

from A and meets all other conditions of the letter of credit. A refuses

to pay B solely because B cannot or will not provide the certification.

A has neither refused, nor required another person to refuse, to do

business with another person pursuant to a boycott requirement or request

because a request for a vessel eligibility certificate to be furnished by

the steamship line is not a prohibited condition. (See Supplement No. 1 to

this part, paragraph (I)(B), Shipping Certificate.)

(xxii) U.S. bank A confirms a letter of credit in favor of U.S.

beneficiary B. The letter of credit contains a requirement that B certify

that he is not blacklisted. B presents the letter of credit to U.S. bank

C, a correspondent of bank A. B does not present the certificate of

blacklist status to bank C, but, in accordance with these rules, bank C

pays B, and then presents the letter of credit and documentation to bank A

for reimbursement. Bank A refuses to reimburse bank C because the

blacklist certification of B is not included in the documentation.

A has required another person to refuse to do business with a person

pursuant to a boycott requirement or request by insisting that C obtain

the certificate from B.

(xxiii) U.S. bank A receives a letter of credit in favor of U.S.

beneficiary B. The letter of credit requires B to certify that he is not

blacklisted. B fails to provide such a certification when he presents the

documents to A for payment. A notifies B that the certification has not

been submitted.

A has not refused to do business with another person pursuant to a boycott

requirement by notifying B of the omitted certificate. A may not refuse to

pay on the letter of credit, however, if B states that B will not provide

such a certificate.

(xxiv) U.S. bank A receives a letter of credit in favor of U.S.

beneficiary B from the issuing bank for the purpose of confirmation,

negotiation or payment. The letter of credit requires B to certify that he

is not blacklisted. A notifies B that it is contrary to the policy of A to

handle letters of credit containing this condition and that, unless an

amendment is obtained deleting this condition, A will not implement the

letter of credit.

A has not refused to do business with another person pursuant to a boycott

requirement, because A has indicated its policy against implementing the

letter of credit containing the term without regard to B's ability or

willingness to furnish such a certificate.

Agreements To Refuse To Do Business

(i) A, a U.S. construction firm, is retained by an agency of boycotting

country Y to build a primary school. The proposed contract contains a

clause stating that A may not use goods or services in the project that

are produced or provided by any person restricted from having a business

relationship with country Y by reason of Y's boycott against country X.

A's action in entering into such a contract would constitute an agreement

to refuse to do business, because it is an agreement to exclude

blacklisted persons from the transaction. A may, however, renegotiate this

clause so that it does not contain terms prohibited by this part.

(ii) A, a U.S. manufacturer of commercial refrigerators and freezers,

receives an invitation to bid from boycotting country Y. The tender states

that the bidder must agree not to deal with companies on Y's blacklist. A

does not know which companies are on the blacklist; however, A submits a

bid without taking exception to the boycott conditions. A's bid makes no

commitment regarding not dealing with certain companies.

At the point when A submits its bid without taking exception to the

boycott request in Y's tender, A has agreed to refuse to do business with

blacklisted persons, because the terms of Y's tender require A to agree to

refuse to do business.

(iii) A, a U.S. construction firm, is offered a contract to perform

engineering and construction services in connection with a project located

in boycotting country Y. The contract contains a clause stating that, in

the event of a contract dispute, the laws of Y will apply.

A may enter into the contract. Agreement that the laws of boycotting

country Y will control in resolving a contract dispute is not an agreement

to refuse to do business.

(iv) Same as (iii), except that the contract contains a clause that A and

its employees will comply with the laws of boycotting country Y. A knows

that Y has a number of boycott laws.

Such an agreement is not, in and of itself, an agreement to refuse to do

business. If, however, A subsequently refuses to do business with someone

because of the laws of Y, A's action would be a refusal to do business.

(v) Same as (iv), except that the contract contains a clause that A and

its employees will comply with the laws of boycotting country Y,

including boycott laws.

A's agreeing, without qualification, to comply with local boycott laws

constitutes an agreement to refuse to do business.

(vi) Same as (v), except that A inserts a proviso except insofar as Y's

laws conflict with U.S. laws, or words to that effect.

Such an agreement is not an agreement to refuse to do business.

(vii) A, a U.S. general contractor, is retained to construct a pipeline in

boycotting country Y. A provision in the proposed contract stipulates that

in purchasing equipment, supplies, and services A must give preference to

companies located in host country Y.

A may agree to this contract provision. Agreeing to a buy local contract

provision is not an agreement to refuse to do business, because A's

agreement is not made for boycott reasons.

(viii) A, a U.S. exporter planning to sell retail goods to customers in

boycotting country Y, enters into a contract to purchase goods wholesale

from B, a U.S. appliance manufacturer. A's contract with B includes a

provision stipulating that B may not use components or services of

blacklisted companies in the manufacture of its appliances.

A's contract constitutes a refusal to do business, because it would

require another person, B, to refuse to do business with other persons for

boycott reasons. B may not agree to such a contract, because it would be

agreeing to refuse to do business with other persons for boycott reasons.

(ix) Same as (viii), except that A and B reach an implicit understanding

that B will not use components or services of blacklisted companies in the

manufacture of goods to be exported to Y. In the manufacture of appliances

to be sold to A for export to non-boycotting countries, B uses components

manufactured by blacklisted companies.

The actions of both A and B constitute agreement to refuse to do business.

The agreement is implied by their pattern of conduct.

(x) Boycotting country Y orders goods from U.S. company B. Y opens a

letter of credit with foreign bank C in favor of B. The letter of credit

specifies that negotiation of the letter of credit with a bank that

appears on the country X boycott blacklist is prohibited. U.S. bank A, C's

correspondent bank, advises B of the letter of credit. B presents

documentation to bank A seeking to be paid on the letter of credit,

without amending or otherwise taking exception to the boycott condition.

B has agreed to refuse to do business with blacklisted banks because, by

presenting the letter of credit for payment, B has accepted all of its

terms and conditions.

(b) Discriminatory actions.

Prohibition Against Taking Discriminatory Actions

(1) No United States person may:

(i) Refuse to employ or otherwise discriminate against any individual who

is a United States person on the basis of race, religion, sex, or national

origin;

(ii) Discriminate against any corporation or other organization which is a

United States person on the basis of the race, religion, sex, or national

origin of any owner, officer, director, or employee of such corporation or

organization;

(iii) Knowingly agree to take any of the actions described in paragraph

(b)(1)(i) and (ii) of this section; or

(iv) Require or knowingly agree to require any other person to take any of

the actions described in paragraph (b)(1)(i) and (ii) of this section.

(2) This prohibition shall apply whether the discriminatory action is

taken by a United States person on its own or in response to an agreement

with, request from, or requirement of a boycotting country. This

prohibition, like all others, applies only with respect to a United States

person's activities in the interstate or foreign commerce of the United

States and only when such activities are undertaken with intent to comply

with, further, or support an unsanctioned foreign boycott.

(3) The section does not supersede or limit the operation of the civil

rights laws of the United States.

Examples of Discriminatory Actions

The following examples are intended to give guidance in determining the

circumstances in which the taking of particular discriminatory actions is

prohibited. They are illustrative, not comprehensive.

(i) U.S. construction company A is awarded a contract to build an office

complex in boycotting country Y. A, believing that employees of a

particular religion will not be permitted to work in Y because of Y's

boycott against country X, excludes U.S. persons of that religion from

consideration for employment on the project.

A's refusal to consider qualified U.S. persons of a particular religion

for work on the project in Y constitutes a prohibited boycott-based

discriminatory action against U.S. persons on the basis of religion.

(ii) Same as (i), except that a clause in the contract provides that no

persons of country X origin are to work on this project.

A's agreement constitutes a prohibited boycott-based agreement to

discriminate against U.S. persons, among others, on the basis of national

origin.

(iii) Same as (i), except that a clause in the contract provides that no

persons who are citizens, residents, or nationals of country X are to work

on this project.

A's agreement does not constitute a boycott-based agreement to

discriminate against U.S. persons on the basis of race, religion, sex, or

national origin, because the clause requires exclusion on the basis of

citizenship, residency, and nationality only.

(iv) U.S. construction company A enters into a contract to build a school

in boycotting country Y. Y's representative orally tells A that no persons

of country X origin are to work on the project.

A may not comply, because to do so would constitute discrimination on the

basis of national origin.

It makes no difference that A learned of Y's requirement orally. It makes

no difference how A learns about Y's discriminatory requirement.

(v) Boycotting country Y tenders an invitation to bid on a construction

project in Y. The tender requires that the successful bidder's personnel

will be interviewed and that persons of a particular religious faith will

not be permitted to work on the project. Y's requirement is based on its

boycott of country X, the majority of whose citizens are of that

particular faith.

Agreement to this provision in the tender document by a U.S. person would

constitute a prohibited agreement to engage in boycott-based

discrimination against U.S. persons of a particular religion.

(vi) Same as (v), except that the tender specifies that women will not be

allowed to work on this project.

Agreement to this provision in the tender by a U.S. person does not

constitute a prohibited agreement to engage in boycott-based

discrimination, because the restriction against employment of women is not

boycott-based. Such an agreement may, however, constitute a violation of

U.S. civil rights laws.

(vii) A is a U.S. investment banking firm. As a condition of participating

in an underwriting of securities to be issued by boycotting country Y, A

is required to exclude investment banks owned by persons of a particular

faith from participation in the underwriting. Y's requirement is based on

its boycott of country X, the majority of whose citizens are of that

particular faith.

A's agreement to such a provision constitutes a prohibited agreement to

engage in boycott-based discrimination against U.S. persons on the basis

of religion. Further, if A requires others to agree to such a condition, A

would be acting to require another person to engage in such

discrimination.

(viii) U.S. company A is asked by boycotting country Y to certify that A

will not use a six-pointed star on the packaging of its products to be

imported into Y. The requirement is part of the enforcement effort by Y of

its boycott against country X.

A may not so certify. The six-pointed star is a religious symbol, and the

certification by A that it will not use such a symbol constitutes a

statement that A will not ship products made or handled by persons of that

religion.

(ix) Same as (viii), except that A is asked to certify that no symbol of

boycotted country X will appear on the packaging of its products imported

into Y.

Such a certification conveys no statement about any person's religion and,

thus, does not come within this prohibition.

(c) Furnishing information about race, religion, sex, or national origin.

Prohibition Against Furnishing Information About Race, Religion, Sex, or

National Origin

(1) No United States person may:

(i) Furnish information about the race, religion, sex, or national origin

of any United States person;

(ii) Furnish information about the race, religion, sex, or national origin

of any owner, officer, director, or employee of any corporation or other

organization which is a United States person;

(iii) Knowingly agree to furnish information about the race, religion,

sex, or national origin of any United States person; or

(iv) Knowingly agree to furnish information about the race, religion, sex,

or national origin of any owner, officer, director, or employee of any

corporation or other organization which is a United States person.

(2) This prohibition shall apply whether the information is specifically

requested or is offered voluntarily by the United States person. It shall

also apply whether the information requested or volunteered is stated in

the affirmative or the negative.

(3) Information about the place of birth of or the nationality of the

parents of a United States person comes within this prohibition, as does

information in the form of code words or symbols which could identify a

United States person's race, religion, sex, or national origin.

(4) This prohibition, like all others, applies only with respect to a

United States person's activities in the interstate or foreign commerce of

the United States and only when such activities are undertaken with intent

to comply with, further, or support an unsanctioned foreign boycott.

Examples of the Prohibition Against Furnishing Discriminatory Information

The following examples are intended to give guidance in determining the

circumstances in which the furnishing of discriminatory information is

prohibited. They are illustrative, not comprehensive.

(i) U.S. company A receives a boycott questionnaire from boycotting

country Y asking whether it is owned or controlled by persons of a

particular faith, whether it has any persons on its board of directors who

are of that faith, and what the national origin of its president is. The

information is sought for purposes of enforcing Y's boycott against

country X, and A knows or has reason to know that the information is

sought for that reason.

A may not answer the questionnaire, because A would be furnishing

information about the religion and national origin of U.S. persons for

purposes of complying with or supporting Y's boycott against X.

(ii) U.S. company A, located in the United States, is asked by boycotting

country Y to certify that A has no persons of a particular national origin

on its board of directors. A knows that Y's purpose in asking for the

certification is to enforce its boycott against country X.

A may not make such a certification, because A would be furnishing

information about the national origin of U.S. persons for purposes of

complying with or supporting Y's boycott against X.

(iii) U.S. company A believes that boycotting country Y will select A's

bid over those of other bidders if A volunteers that it has no

shareholders, officers, or directors of a particular national origin. A's

belief is based on its knowledge that Y generally refuses, as part of its

boycott against country X, to do business with companies owned,

controlled, or managed by persons of this particular national origin.

A may not volunteer this information, because it would be furnishing

information about the national origin of U.S. persons for purposes of

complying with or supporting Y's boycott against X.

(iv) U.S. company A has a contract to construct an airport in boycotting

country Y. Before A begins work, A is asked by Y to identify the national

origin of its employees who will work on the site. A knows or has reason

to know that Y is seeking this information in order to enforce its boycott

against X.

A may not furnish this information, because A would be providing

information about the national origin of U.S. persons for purposes of

complying with or supporting Y's boycott against X.

(v) Same as (iv), except that in order to assemble its work force on site

in Y, A sends visa forms to its employees and asks that the forms be

returned to A for transmittal to Y's consulate or embassy. A, itself,

furnishes no information about its employees, but merely transmits the

visa forms back and forth.

In performing the ministerial function of transmitting visa forms, A is

not furnishing information about any U.S. person's race, religion, sex, or

national origin.

(vi) Same as (iv), except that A is asked by Y to certify that none of its

employees in Y will be women, because Y's laws prohibit women from

working.

Such a certification does not constitute a prohibited furnishing of

information about any U.S. person's sex, since the reason the information

is sought has nothing to do with Y's boycott of X.

(vii) U.S. company A is considering establishing an office in boycotting

country Y. In order to register to do business in Y, A is asked to furnish

information concerning the nationalities of its corporate officers and

board of directors.

A may furnish the information about the nationalities of its officers and

directors, because in so doing A would not be furnishing information about

the race, religion, sex, or national origin of any U.S. person.

(d) Furnishing information about business relationships with boycotted

countries or blacklisted persons.

Prohibition Against Furnishing Information About Business Relationships

With Boycotted Countries or Blacklisted Persons

(1) No United States person may furnish or knowingly agree to furnish

information concerning his or any other person's past, present or proposed

business relationships:

(i) With or in a boycotted country;

(ii) With any business concern organized under the laws of a boycotted

country;

(iii) With any national or resident of a boycotted country; or

(iv) With any other person who is known or believed to be restricted from

having any business relationship with or in a boycotting country.

(2) This prohibition shall apply:

(i) Whether the information pertains to a business relationship involving

a sale, purchase, or supply transaction; legal or commercial

representation; shipping or other transportation transaction; insurance;

investment; or any other type of business transaction or relationship; and

(ii) Whether the information is directly or indirectly requested or is

furnished on the initiative of the United States person.

(3) This prohibition does not apply to the furnishing of normal business

information in a commercial context. Normal business information may

relate to factors such as financial fitness, technical competence, or

professional experience, and may be found in documents normally available

to the public such as annual reports, disclosure statements concerning

securities, catalogs, promotional brochures, and trade and business

handbooks. Such information may also appear in specifications or

statements of experience and qualifications.

(4) Normal business information furnished in a commercial context does not

cease to be such simply because the party soliciting the information may

be a boycotting country or a national or resident thereof. If the

information is of a type which is generally sought for a legitimate

business purpose (such as determining financial fitness, technical

competence, or professional experience), the information may be furnished

even if the information could be used, or without the knowledge of the

person supplying the information is intended to be used, for boycott

purposes. However, no information about business relationships with

blacklisted persons or boycotted countries, their residents or nationals,

may be furnished in response to a boycott request, even if the information

is publicly available. Requests for such information from a boycott office

will be presumed to be boycott-based.

(5) This prohibition, like all others, applies only with respect to a

United States person's activities in the interstate or foreign commerce of

the United States and only when such activities are undertaken with intent

to comply with, further, or support an unsanctioned foreign boycott.

Examples Concerning Furnishing of Information

The following examples are intended to give guidance in determining the

circumstances in which the furnishing of information is prohibited. They

are illustrative, not comprehensive.

(i) U.S. contractor A is considering bidding for a contract to build a dam

in boycotting country Y. The invitation to bid, which appears in a trade

journal, specifies that each bidder must state that he does not have any

offices in boycotted country X. A knows or has reason to know that the

requirement is boycott-based.

A may not make this statement, because it constitutes information about

A's business relationships with X.

(ii) U.S. contractor A is considering bidding for a contract to construct

a school in boycotting country Y. Each bidder is required to submit copies

of its annual report with its bid. Since A's annual report describes A's

worldwide operations, including the countries in which it does business,

it necessarily discloses whether A has business relations with boycotted

country X. A has no reason to know that its report is being sought for

boycott purposes.

A, in furnishing its annual report, is supplying ordinary business

information in a commercial context.

(iii) Same as (ii), except that accompanying the invitation to bid is a

questionnaire from country Y's boycott office asking each bidder to supply

a copy of its annual report.

A may not furnish the annual report despite its public availability,

because it would be furnishing information in response to a questionnaire

from a boycott office.

(iv) U.S. company A is on boycotting country Y's blacklist. For reasons

unrelated to the boycott, A terminates its business relationships with

boycotted country X. In exploring other marketing areas, A determines that

boycotting country Y offers great potential. A is requested to complete a

questionnaire from a central boycott office which inquires about A's

business relations with X.

A may not furnish the information, because it is information about A's

business relationships with a boycotted country.

(v) U.S. exporter A is seeking to sell its products to boycotting country

Y. A is informed by Y that, as a condition of sale, A must certify that it

has no salesmen in boycotted country X. A knows or has reason to know that

the condition is boycott-based.

A may not furnish the certification, because it is information about A's

business relationships in a boycotted country.

(vi) U.S. engineering company A receives an invitation to bid on the

construction of a dam in boycotting country Y. As a condition of the bid,

A is asked to certify that it does not have any offices in boycotted

country X. A is also asked to furnish plans for other dams it has

designed.

A may not certify that it has no office in X, because this is information

about its business relationships in a boycotted country. A may submit

plans for other dams it has designed, because this is furnishing normal

business information, in a commercial context, relating to A's technical

competence and professional experience.

(vii) U.S. company A, in seeking to expand its exports to boycotting

country Y, sends a sales representative to Y for a one week trip. During a

meeting in Y with trade association representatives, A's representative

desires to explain that neither A nor any companies with which A deals has

any business relationship with boycotted country X. The purpose of

supplying such information is to ensure that A does not get blacklisted.

A's representative may not volunteer this information even though A, for

reasons unrelated to the boycott, does not deal with X, because A's

representative would be volunteering information about A's business

relationships with X for boycott reasons.

(viii) U.S. company A is asked by boycotting country Y to furnish

information concerning its business relationships with boycotted country

X. A, knowing that Y is seeking the information for boycott purposes,

refuses to furnish the information asked for directly, but proposes to

respond by supplying a copy of its annual report which lists the countries

with which A is presently doing business. A does not happen to be doing

business with X.

A may not respond to Y's request by supplying its annual report, because A

knows that it would be responding to a boycott-based request for

information about its business relationships with X.

(ix) U.S. company A receives a letter from a central boycott office asking

A to clarify A's operations in boycotted country X. A intends to

continue its operations in X, but fears that not responding to the request

will result in its being placed on boycotting country Y's blacklist. A

knows or has reason to know that the information is sought for boycott

reasons.

A may not respond to this request, because the information concerns its

business relationships with a boycotted country.

(x) U.S. company A, in the course of negotiating a sale of its goods to a

buyer in boycotting country Y, is asked to certify that its supplier is

not on Y's blacklist.

A may not furnish the information about its supplier's blacklist status,

because this is information about A's business relationships with another

person who is believed to be restricted from having any business

relationship with or in a boycotting country.

(xi) U.S. company A has a manufacturing plant in boycotted country X and

is on boycotting country Y's blacklist. A is seeking to establish

operations in Y, while expanding its operations in X. A applies to Y to be

removed from Y's blacklist. A is asked, in response, to indicate whether

it has manufacturing facilities in X.

A may not supply the requested information, because A would be furnishing

information about its business relationships in a boycotted country.

(xii) U.S. bank A plans to open a branch office in boycotting country Y.

In order to do so, A is required to furnish certain information about its

business operations, including the location of its other branch offices.

Such information is normally sought in other countries where A has opened

a branch office, and A does not have reason to know that Y is seeking the

information for boycott reasons.

A may furnish this information, even though in furnishing it A would

disclose information about its business relationships in a boycotted

country, because it is being furnished in a normal business context and A

does not have reason to know that it is sought for boycott reasons.

(xiii) U.S. architectural firm A responds to an invitation to submit

designs for an office complex in boycotting country Y. The invitation

states that all bidders must include information concerning similar types

of buildings they have designed. A has not designed such buildings in

boycotted country X. Clients frequently seek information of this type

before engaging an architect.

A may furnish this information, because this is furnishing normal business

information, in a commercial context, relating to A's technical competence

and professional experience.

(xiv) U.S. oil company A distributes to potential customers promotional

brochures and catalogs which give background information on A's past

projects. A does not have business dealings with boycotted country X. The

brochures, which are identical to those which A uses throughout the world,

list those countries in which A does or has done business. In soliciting

potential customers in boycotting country Y, A desires to distribute

copies of its brochures.

A may do so, because this is furnishing normal business information, in a

commercial context, relating to professional experience.

(xv) U.S. company A is interested in doing business with boycotting

country Y. A wants to ask Y's Ministry of Trade whether, and if so why, A

is on Y's blacklist or is otherwise restricted for boycott reasons from

doing business with Y.

A may make this limited inquiry, because it does not constitute furnishing

information.

(xvi) U.S. company A is asked by boycotting country Y to certify that it

is not owned by subjects or nationals of boycotted country X and that it

is not resident in boycotted country X.

A may not furnish the certification, because it is information about A's

business relationships with or in a boycotted country, or with nationals

of a boycotted country.

(xvii) U.S. company A, a manufacturer of certain patented products,

desires to register its patents in boycotting country Y. A receives a

power of attorney form required to register its patents. The form contains

a question regarding A's business relationships with or in boycotted

country X. A has no business relationships with X and knows or has reason

to know that the information is sought for boycott reasons.

A may not answer the question, because A would be furnishing information

about its business relationships with or in a boycotted country.

(xviii) U.S. company A is asked by boycotting country Y to certify that it

is not the mother company, sister company, subsidiary, or branch of any

blacklisted company, and that it is not in any way affiliated with any

blacklisted company.

A may not furnish the certification, because it is information about

whether A has a business relationship with another person who is known or

believed to be restricted from having any business relationship with or in

a boycotting country.

(e) Information concerning association with charitable and fraternal

organizations.

Prohibition Against Furnishing Information About Associations With

Charitable and Fraternal Organizations

(1) No United States person may furnish or knowingly agree to furnish

information about whether any person is a member of, has made

contributions to, or is otherwise associated with or involved in the

activities of any charitable or fraternal organization which supports a

boycotted country.

(2) This prohibition shall apply whether:

(i) The information concerns association with or involvement in any

charitable or fraternal organization which (a) has, as one of its stated

purposes, the support of a boycotted country through financial

contributions or other means, or (b) undertakes, as a major organizational

activity, to offer financial or other support to a boycotted country;

(ii) The information is directly or indirectly requested or is furnished

on the initiative of the United States person; or

(iii) The information requested or volunteered concerns membership in,

financial contributions to, or any other type of association with or

involvement in the activities of such charitable or fraternal

organization.

(3) This prohibition does not prohibit the furnishing of normal business

information in a commercial context as defined in paragraph (d) of this

section.

(4) This prohibition, like all others, applies only with respect to a

United States person's activities in the interstate or foreign commerce of

the United States and only when such activities are undertaken with intent

to comply with, further, or support an unsanctioned foreign boycott.

Examples of Prohibition Against Furnishing Information About Associations

With Charitable or Fraternal Organizations

The following examples are intended to give guidance in determining the

circumstances in which the furnishing of information concerning

associations with charitable or fraternal organizations is prohibited.

They are illustrative, not comprehensive.

(i) U.S. engineering firm A receives an invitation to bid from boycotting

country Y. The invitation includes a request to supply information

concerning any association which A's officers have with charitable

organization B, an organization which is known by A to contribute

financial support to boycotted country X. A knows or has reason to know

that the information is sought for boycott reasons.

A may not furnish the information.

(ii) U.S. construction company A, in an effort to establish business

dealings with boycotting country Y, proposes to furnish information to Y

showing that no members of its board of directors are in any way

associated with charitable organizations which support boycotted country

X. A's purpose is to avoid any possibility of its being blacklisted by Y.

A may not furnish the information, because A's purpose in doing so is

boycott-based. It makes no difference that no specific request for the

information has been made by Y.

(iii) A, a citizen of the United States, is applying for a teaching

position in a school in boycotting country Y. In connection with his

application, A furnishes a resume which happens to disclose his

affiliation with charitable organizations. A does so completely without

reference to Y's boycott and without knowledge of any boycott requirement

of Y that pertains to A's application for employment.

The furnishing of a resume by A is not a boycott-related furnishing of

information about his association with charitable organizations which

support boycotted country X.

(f) Letters of credit.

Prohibition Against Implementing Letters of Credit Containing Prohibited

Conditions or Requirements

(1) No United States person may pay, honor, confirm, or otherwise

implement a letter of credit which contains a condition or requirement

compliance with which is prohibited by this part, nor shall any United

States person, as a result of the application of this section, be

obligated to pay, honor or otherwise implement such a letter of credit.

(2) For purposes of this section, implementing a letter of credit

includes:

(i) Issuing or opening a letter of credit at the request of a customer;

(ii) Honoring, by accepting as being a valid instrument of credit, any

letter of credit;

(iii) Paying, under a letter of credit, a draft or other demand for

payment by the beneficiary;

(iv) Confirming a letter of credit by agreeing to be responsible for

payment to the beneficiary in response to a request by the issuer;

(v) Negotiating a letter of credit by voluntarily purchasing a draft from

a beneficiary and presenting such draft for reimbursement to the issuer or

the confirmer of the letter of credit; and

(vi) Taking any other action to implement a letter of credit.

(3) In the standard international letter of credit transaction

facilitating payment for the export of goods from the United States, a

bank in a foreign country may be requested by its customer to issue a

revocable or irrevocable letter of credit in favor of the United States

exporter. The customer usually requires, and the letter of credit

provides, that the issuing (or a confirming) bank will make payment to the

beneficiary against the bank's receipt of the documentation specified in

the letter of credit. Such documentation usually includes commercial and

consular invoices, a bill of lading, and evidence of insurance, but it may

also include other required certifications or documentary assurances such

as the origin of the goods and information relating to the carrier or

insurer of the shipment.

Banks usually will not accept drafts for payment unless the documents

submitted therewith comply with the terms and conditions of the letter of

credit.

(4) A United States person is not prohibited under this section from

advising a beneficiary of the existence of a letter of credit in his

favor, or from taking ministerial actions to dispose of a letter of credit

which it is prohibited from implementing.

(5) Compliance with this section shall provide an absolute defense in any

action brought to compel payment of, honoring of, or other implementation

of a letter of credit, or for damages resulting from failure to pay or

otherwise honor or implement the letter of credit. This section shall not

otherwise relieve any person from any obligations or other liabilities he

may incur under other laws or regulations, except as may be explicitly

provided in this section.

Letters of Credit to Which This Section Applies

(6) This prohibition, like all others, applies only with respect to a

United States person's activities taken with intent to comply with,

further, or support an unsanctioned foreign boycott. In addition, it

applies only when the transaction to which the letter of credit applies is

in United States commerce and the beneficiary is a United States person.

Implementation of Letters of Credit in the United States

(7) A letter of credit implemented in the United States by a United States

person located in the United States, including a permanent United States

establishment of a foreign bank, will be presumed to apply to a

transaction in United States commerce and to be in favor of a United

States beneficiary where the letter of credit specifies a United States

address for the beneficiary. These presumptions may be rebutted by facts

which could reasonably lead the bank to conclude that the beneficiary is

not a United States person or that the underlying transaction is not in

United States commerce.

(8) Where a letter of credit implemented in the United States by a United

States person located in the United States does not specify a United

States address for the beneficiary, the beneficiary will be presumed to be

other than a United States person. This presumption may be rebutted by

facts which could reasonably lead the bank to conclude that the

beneficiary is a United States person despite the foreign address.

Implementation of Letters of Credit Outside the United States

(9) A letter of credit implemented outside the United States by a United

States person located outside the United States will be presumed to apply

to a transaction in United States commerce and to be in favor of a United

States beneficiary where the letter of credit specifies a United States

address for the beneficiary and calls for documents indicating shipment

from the United States or otherwise indicating that the goods are of

United States origin. These presumptions may be rebutted by facts which

could reasonably lead the bank to conclude that the beneficiary is not a

United States person or that the underlying transaction is not in United

States commerce.

(10) Where a letter of credit implemented outside the United States by a

United States person located outside the United States does not specify a

United States address for the beneficiary, the beneficiary will be

presumed to be other than a United States person. In addition, where such

a letter of credit does not call for documents indicating shipment from

the United States or otherwise indicating that the goods are of United

States origin, the transaction to which it applies will be presumed to be

outside United States commerce. The presumption that the beneficiary is

other than a United States person may be rebutted by facts which could

reasonably lead the bank to conclude that the beneficiary is a United

States person. The presumption that the transaction to which the letter of

credit applies is outside United States commerce may be rebutted by facts

which could reasonably lead the bank to conclude that the underlying

transaction is in United States commerce.

Examples of the Prohibition Against Implementing Letters of Credit

The following examples are intended to give guidance in determining the

circumstances in which this section applies to the implementation of a

letter of credit and in which such implementation is prohibited. They are

illustrative, not comprehensive.

Implementation of Letters of Credit in United States Commerce

(i) A, a U.S. bank located in the United States, opens a letter of credit

in the United States in favor of B, a foreign company located outside the

United States. The letter of credit specifies a non-U.S. address for the

beneficiary.

The beneficiary is presumed to be other than a U.S. person, because it

does not have a U.S. address. The presumption may be rebutted by facts

showing that A could reasonably conclude that the beneficiary is a U.S.

person despite the foreign address.

(ii) A, a branch of a foreign bank located in the United States, opens a

letter of credit in favor of B, a foreign company located outside the

United States. The letter of credit specifies a non-U.S. address for the

beneficiary.

The beneficiary is presumed to be other than a U.S.person, because it does

not have a U.S. address. The presumption may be rebutted by facts showing

that A could reasonably conclude that the beneficiary is a U.S. person

despite the foreign address.

(iii) A, a U.S. bank branch located outside the United States, opens a

letter of credit in favor of B, a person with a U.S. address. The letter

of credit calls for documents indicating shipment of goods from the United

States.

The letter of credit is presumed to apply to a transaction in U.S.

commerce and to be in favor of a U.S. beneficiary because the letter of

credit specifies a U.S. address for the beneficiary and calls for

documents indicating that the goods will be shipped from the United

States. These presumptions may be rebutted by facts showing that A could

reasonably conclude that the beneficiary is not a U.S. person or that the

underlying transaction is not in U.S. commerce.

(iv) A, a U.S. bank branch located outside the United States, opens a

letter of credit which specifies a beneficiary, B, with an address outside

the United States and calls for documents indicating that the goods are of

U.S.-origin. A knows or has reason to know that although B has an address

outside the United States, B is a U.S. person.

The letter of credit is presumed to apply to a transaction in U.S.

commerce, because the letter of credit calls for shipment of U.S.-origin

goods. In addition, the letter of credit is presumed to be in favor of a

beneficiary who is a U.S. person, because A knows or has reason to know

that the beneficiary is a U.S. person despite the foreign address.

(v) A, a U.S. bank branch located outside the United States, opens a

letter of credit which specifies a beneficiary with a U.S. address. The

letter of credit calls for documents indicating shipment of foreign-origin

goods.

The letter of credit is presumed to be in favor of a U.S. beneficiary but

to apply to a transaction outside U.S. commerce, because it calls for

documents indicating shipment of foreign-origin goods. The presumption of

non-U.S. commerce may be rebutted by facts showing that A could reasonably

conclude that the underlying transaction involves shipment of U.S.-origin

goods or goods from the United States.

Prohibition Against Implementing Letters of Credit

(i) Boycotting country Y orders goods from U.S. company B. Y opens a

letter of credit with foreign bank C in favor of B. The letter of credit

specifies as a condition of payment that B certify that it does not do

business with boycotted country X. Foreign bank C forwards the letter of

credit it has opened to U.S. bank A for confirmation.

A may not confirm or otherwise implement this letter of credit, because it

contains a condition with which a U.S. person may not comply.

(ii) Same as (i), except U.S. bank A desires to advise the beneficiary,

U.S. company B, of the letter of credit.

A may do so, because advising the beneficiary of the letter of credit

(including the term which prevents A from implementing it) is not

implementation of the letter of credit.

(iii) Same as (i), except foreign bank C sends a telegram to U.S. bank A

stating the major terms and conditions of the letter of credit. The

telegram does not reflect the boycott provision. Subsequently, C mails to

A documents setting forth the terms and conditions of the letter of

credit, including the prohibited boycott condition.

A may not further implement the letter of credit after it receives the

documents, because they reflect the prohibited boycott condition in the

letter of credit. A may advise the beneficiary and C of the existence of

the letter of credit (including the boycott term), and may perform any

essentially ministerial acts necessary to dispose of the letter of credit.

(iv) Same as (iii), except that U.S. company B, based in part on

information received from U.S. bank A, desires to obtain an amendment to

the letter of credit which would eliminate or nullify the language in the

letter of credit which prevents A from paying or otherwise implementing

it.

Either company B or bank A may undertake, and the other may cooperate and

assist in, this endeavor. A could then pay or otherwise implement the

revised letter of credit, so long as the original prohibited boycott

condition is of no force or effect.

(v) Boycotting country Y requests a foreign bank in Y to open a letter of

credit to effect payment for goods to be shipped by U.S. supplier B, the

beneficiary of the letter of credit. The letter of credit contains

prohibited boycott clauses. The foreign bank forwards a copy of the letter

of credit to its branch office A, in the United States.

A may advise the beneficiary but may not implement the letter of credit,

because it contains prohibited boycott conditions.

(vi) Boycotting country Y orders goods from U.S. company B. U.S. bank A is

asked to implement, for the benefit of B, a letter of credit which

contains a clause requiring documentation that the goods shipped are not

of boycotted country X origin.

A may not implement the letter of credit with a prohibited condition, and

may accept only a positive certificate of origin as satisfactory

documentation. (See 760.3(c) on Import and Shipping Document

Requirements.)

(vii) [Reserved]

(viii) B is a foreign bank located outside the United States. B maintains

an account with U.S. bank A, located in the United States. A letter of

credit issued by B in favor of a U.S. beneficiary provides that any

negotiating bank may obtain reimbursement from A by certifying that all

the terms and conditions of the letter of credit have been met and then

drawing against B's account. B notifies A by cable of the issuance of a

letter of credit and the existence of reimbursement authorization; A does

not receive a copy of the letter of credit.

A may reimburse any negotiating bank, even when the underlying letter of

credit contains a prohibited boycott condition, because A does not know or

have reason to know that the letter of credit contains a prohibited

boycott condition.

(ix) Same as (viii), except that foreign bank B forwards a copy of the

letter of credit to U.S. bank A, which then becomes aware of the

prohibited boycott clause.

A may not thereafter reimburse a negotiating bank or in any way further

implement the letter of credit, because it knows of the prohibited boycott

condition.

(x) Boycotting country Y orders goods from U.S. exporter B and requests a

foreign bank in Y to open a letter of credit in favor of B to cover the

cost. The letter of credit contains a prohibited boycott clause. The

foreign bank asks U.S. bank A to advise and confirm the letter of credit.

Through inadvertence, A does not notice the prohibited clause and confirms

the letter of credit. A thereafter notices the clause and then refuses to

honor B's draft against the letter of credit. B sues bank A for payment.

A has an absolute defense against the obligation to make payment under

this letter of credit. (Note: Examples (ix) and (x) do not alter any other

obligations or liabilities of the parties under appropriate law.)

(xi) [Reserved]

(xii) Boycotting country Y orders goods from U.S. company B. A letter of

credit which contains a prohibited boycott clause is opened in favor of B

by a foreign bank in Y. The foreign bank asks U.S. bank A to advise and

confirm the letter of credit, which it forwards to A.

A may advise B that it has received the letter of credit (including the

boycott term), but may not confirm the letter of credit with the

prohibited clause.

(xiii) Same as (xii), except U.S. bank A fails to tell B that it cannot

process the letter of credit. B requests payment.

A may not pay. If the prohibited language is eliminated or nullified as

the result of renegotiation, A may then pay or otherwise implement the

revised letter of credit.

(xiv) U.S. bank A receives a letter of credit in favor of U.S. beneficiary

B. The letter of credit requires B to certify that he is not blacklisted.

A may implement such a letter of credit, but it may not insist that the

certification be furnished, because by so insisting it would be refusing

to do business with a blacklisted person in compliance with a boycott.

(xv) A, a U.S. bank located in the U.S. opens a letter of credit in favor

of U.S. beneficiary B for B's sale of goods to boycotting country Y. The

letter of credit contains no boycott conditions, but A knows that Y

customarily requires the seller of goods to certify that it has dealt with

no blacklisted supplier. A, therefore, instructs B that it will not make

payment under the letter of credit unless B makes such a certification.

A's action in requiring the certification from B constitutes action to

require another person to refuse to do business with blacklisted persons.

(xvi) A, a U.S. bank located in the U.S., opens a letter of credit in

favor of U.S. beneficiary B for B's sale of goods to boycotting country Y.

The letter of credit contains no boycott conditions, but A has actual

knowledge that B has agreed to supply a certification to Y that it has not

dealt with blacklisted firms, as a condition of receiving the letter of

credit in its favor.

A may not implement the letter of credit, because it knows that an

implicit condition of the credit is a condition with which B may not

legally comply.

(xvii) Boycotting country Y orders goods from U.S. company B. Y opens a

letter of credit with foreign bank C in favor of B. The letter of credit

includes the statement, Do not negotiate with blacklisted banks. C

forwards the letter of credit it has opened to U.S. bank A for

confirmation.

A may not confirm or otherwise implement this letter of credit, because it

contains a condition with which a U.S. person may not comply.

[61 FR 12862, Mar. 25, 1996, as amended at 65 FR 34945, June 1, 2000]

760.3 Exceptions to prohibitions.

top

(a) Import requirements of a boycotting country.

Compliance With Import Requirements of a Boycotting Country

(1) A United States person, in supplying goods or services to a boycotting

country, or to a national or resident of a boycotting country, may comply

or agree to comply with requirements of such boycotting country which

prohibit the import of:

(i) Goods or services from the boycotted country;

(ii) Goods produced or services provided by any business concern organized

under the laws of the boycotted country; or

(iii) Goods produced or services provided by nationals or residents of the

boycotted country.

(2) A United States person may comply or agree to comply with such import

requirements whether or not he has received a specific request to comply.

By its terms, this exception applies only to transactions involving

imports into a boycotting country. A United States person may not, under

this exception, refuse on an across-the-board basis to do business with a

boycotted country or a national or resident of a boycotted country.

(3) In taking action within the scope of this exception, a United States

person is limited in the types of boycott-related information he can

supply. (See 760.2(d) of this part on Furnishing Information About

Business Relationships with Boycotted Countries or Blacklisted Persons

and paragraph (c) of this section on Import and Shipping Document

Requirements.)

Examples of Compliance With Import Requirements of a Boycotting Country

The following examples are intended to give guidance in determining the

circumstances in which compliance with the import requirements of a

boycotting country is permissible. They are illustrative, not

comprehensive.

(i) A, a U.S. manufacturer, receives an order from boycotting country Y

for its products. Country X is boycotted by country Y, and the import laws

of Y prohibit the importation of goods produced or manufactured in X. In

filling this type of order, A would usually include some component parts

produced in X.

For the purpose of filling this order, A may substitute comparable

component parts in place of parts produced in X, because the import laws

of Y prohibit the importation of goods manufactured in X.

(ii) Same as (i), except that A's contract with Y expressly provides that

in fulfilling the contract A may not include parts or components produced

or manufactured in boycotted country X.

A may agree to and comply with this contract provision, because Y

prohibits the importation of goods from X. However, A may not furnish

negative certifications regarding the origin of components in response to

import and shipping document requirements.

(iii) A, a U.S. building contractor, is awarded a contract to construct a

plant in boycotting country Y. A accepts bids on goods required under the

contract, and the lowest bid is made by B, a business concern organized

under the laws of X, a country boycotted by Y. Y prohibits the import of

goods produced by companies organized under the laws of X.

For purposes of this contract, A may reject B's bid and accept another,

because B's goods would be refused entry into Y because of Y's boycott

against X.

(iv) Same as (iii), except that A also rejects the low bid by B for work

on a construction project in country M, a country not boycotted by Y.

This exception does not apply, because A's action is not taken in order to

comply with Y's requirements prohibiting the import of products from

boycotted country X.

(v) A, a U.S. management consulting firm, contracts to provide services to

boycotting country Y. Y requests that A not employ residents or nationals

of boycotted country X to provide those services.

A may agree, as a condition of the contract, not to have services

furnished by nationals or residents of X, because importation of such

services is prohibited by Y.

(vi) A, a U.S. company, is negotiating a contract to supply machine tools

to boycotting country Y. Y insists that the contract contain a provision

whereby A agrees that none of the machine tools will be produced by any

business concern owned by nationals of boycotted country X, even if the

business concern is organized under the laws of a non-boycotted country.

A may not agree to this provision, because it is a restriction on the

import of goods produced by business concerns owned by nationals of a

boycotted country even if the business concerns themselves are organized

under the laws of a non-boycotted country.

(b) Shipment of goods to a boycotting country.

Compliance With Requirements Regarding the Shipment of Goods to a

Boycotting Country

(1) A United States person, in shipping goods to a boycotting country, may

comply or agree to comply with requirements of that country which prohibit

the shipment of goods:

(i) On a carrier of the boycotted country; or

(ii) By a route other than that prescribed by the boycotting country or

the recipient of the shipment.

(2) A specific request that a United States person comply or agree to

comply with requirements concerning the use of carriers of a boycotted

country is not necessary if the United States person knows, or has reason

to know, that the use of such carriers for shipping goods to the

boycotting country is prohibited by requirements of the boycotting

country. This exception applies whether a boycotting country or the

purchaser of the shipment:

(i) Explicitly states that the shipment should not pass through a port of

the boycotted country; or

(ii) Affirmatively describes a route of shipment that does not include a

port in the boycotted country.

(3) For purposes of this exception, the term carrier of a boycotted

country means a carrier which flies the flag of a boycotted country or

which is owned, chartered, leased, or operated by a boycotted country or

by nationals or residents of a boycotted country.

Examples of Compliance With the Shipping Requirements of a Boycotting

Country

The following examples are intended to give guidance in determining the

circumstances in which compliance with import and shipping document

requirements of a boycotting country is permissible. They are

illustrative, not comprehensive.

(i) A is a U.S. exporter from whom boycotting country Y is importing

goods. Y directs that the goods not pass through a port of boycotted

country X.

A may comply with Y's shipping instructions, because they pertain to the

route of shipment of goods being shipped to Y.

(ii) A, a U.S. fertilizer manufacturer, receives an order from boycotting

country Y for fertilizer. Y specifies in the order that A may not ship the

fertilizer on a carrier of boycotted country X.

A may comply with this request, because it pertains to the carrier of a

boycotted country.

(iii) B, a resident of boycotting country Y, orders textile goods from A,

a U.S. distributor, specifying that the shipment must not be made on a

carrier owned or leased by nationals of boycotted country X and that the

carrier must not pass through a port of country X enroute to Y.

A may comply or agree to comply with these requests, because they pertain

to the shipment of goods to Y on a carrier of a boycotted country and the

route such shipment will take.

(iv) Boycotting country Y orders goods from A, a U.S. retail merchant. The

order specifies that the goods shipped by A may not be shipped on a

carrier registered in or owned by boycotted country X.

A may agree to this contract provision, because it pertains to the carrier

of a boycotted country.

(v) Boycotting country Y orders goods from A, a U.S. pharmaceutical

company, and requests that the shipment not pass through a port of country

P, which is not a country boycotted by Y.

This exception does not apply in a non-boycotting situation. A may comply

with the shipping instructions of Y, because in doing so he would not

violate any prohibition of this part.

(vi) Boycotting country Y orders goods from A, a U.S. manufacturer. The

order specifies that goods shipped by A must not be shipped on vessels

blacklisted by country Y.

A may not agree to comply with this condition because it is not a

restriction limited to the use of carriers of the boycotted country.

(c) Import and shipping document requirements.

Compliance With Import and Shipping Document Requirements of a Boycotting

Country

(1) A United States person, in shipping goods to a boycotting country, may

comply or agree to comply with import and shipping document requirements

of that country, with respect to:

(i) The country or origin of the goods;

(ii) The name and nationality of the carrier;

(iii) The route of the shipment;

(iv) The name, residence, or address of the supplier of the shipment;

(v) The name, residence, or address of the provider of other services.

(2) Such information must be stated in positive, non-blacklisting,

non-exclusionary terms except for information with respect to the names or

nationalities of carriers or routes of shipment, which may continue to be

stated in negative terms in conjunction with shipments to a boycotting

country, in order to comply with precautionary requirements protecting

against war risks or confiscation.

Examples of Compliance With Import and Shipping Document Requirements

The following examples are intended to give guidance in determining the

circumstances in which compliance with the import requirements of a

boycotting country is permissible. They are illustrative, not

comprehensive.

(i) Boycotting country Y contracts with A, a U.S. petroleum equipment

manufacturer, for certain equipment. Y requires that goods being imported

into Y must be accompanied by a certification that the goods being

supplied did not originate in boycotted country X.

A may not supply such a certification in negative terms but may identify

instead the country of origin of the goods in positive terms only.

(ii) Same as (i), except that Y requires that the shipping documentation

accompanying the goods specify the country of origin of the goods.

A may furnish the information.

(iii) [Reserved]

(iv) A, a U.S. apparel manufacturer, has contracted to sell certain of its

products to B, a national of boycotting country Y. The form that must be

submitted to customs officials of Y requires the shipper to certify that

the goods contained in the shipment have not been supplied by

blacklisted persons.

A may not furnish the information in negative terms but may certify, in

positive terms only, the name of the supplier of the goods.

(v) Same as (iv), except the customs form requires certification that the

insurer and freight forwarder used are not blacklisted.

A may not comply with the request but may supply a certification stating,

in positive terms only, the names of the insurer and freight forwarder.

(vi) A, a U.S. petrochemical manufacturer, executes a sales contract with

B, a resident of boycotting country Y. A provision of A's contract with B

requires that the bill of lading and other shipping documents contain

certifications that the goods have not been shipped on a blacklisted

carrier.

A may not agree to supply a certification that the carrier is not

blacklisted but may certify the name of the carrier in positive terms

only.

(vii) Same as (vi), except that the contract requires certification that

the goods will not be shipped on a carrier which flies the flag of, or is

owned, chartered, leased, or operated by boycotted country X, or by

nationals or residents of X.

Such a certification, which is a reasonable requirement to protect against

war risks or confiscation, may be furnished at any time.

(viii) Same as (vi), except that the contract requires that the shipping

documents certify the name of the carrier being used.

A may, at any time, supply or agree to supply the requested documentation

regarding the name of the carrier, either in negative or positive terms.

(ix) Same as (vi), except that the contract requires a certification that

the carrier will not call at a port in boycotted country X before making

delivery in Y.

Such a certification, which is a reasonable requirement to protect against

war risks or confiscation, may be furnished at any time.

(x) Same as (vi), except that the contract requires that the shipping

documents indicate the name of the insurer and freight forwarder.

A may comply at any time, because the statement is not required to be made

in negative or blacklisting terms.

(xi) A, a U.S. exporter, is negotiating a contract to sell bicycles to

boycotting country Y. Y insists that A agree to certify that the goods

will not be shipped on a vessel which has ever called at a port in

boycotted country X.

As distinguished from a certification that goods will not be shipped on a

vessel which will call enroute at a port of boycotted country X, such a

certification is not a reasonable requirement to protect against war risks

or confiscation, and, hence, may not be supplied.

(xii) Same as (xi), except that Y insists that A agree to certify that the

goods will not be shipped on a carrier that is ineligible to enter Y's

waters.

Such a certification, which is not a reasonable requirement to protect

against war risks or confiscation may not be supplied.

(d) Unilateral and specific selection.

Compliance with Unilateral and Specific Selection

(1) A United States person may comply or agree to comply in the normal

course of business with the unilateral and specific selection by a

boycotting country, a national of a boycotting country, or a resident of a

boycotting country (including a United States person who is a bona fide

resident of a boycotting country) of carriers, insurers, suppliers of

services to be performed within the boycotting country, or specific goods,

provided that with respect to services, it is necessary and customary that

a not insignificant part of the services be performed within the

boycotting country. With respect to goods, the items, in the normal course

of business, must be identifiable as to their source or origin at the time

of their entry into the boycotting country by (a) uniqueness of design or

appearance or (b) trademark, trade name, or other identification normally

on the items themselves, including their packaging.

(2) This exception pertains to what is permissible for a United States

person who is the recipient of a unilateral and specific selection of

goods or services to be furnished by a third person. It does not pertain

to whether the act of making such a selection is permitted; that question

is covered, with respect to United States persons, in paragraph (g) of

this section on Compliance with Local Law. Nor does it pertain to the

United States person who is the recipient of an order to supply its own

goods or services. Nothing in this part prohibits or restricts a United

States person from filling an order himself, even if he is selected by the

buyer on a boycott basis (e.g., because he is not blacklisted), so long as

he does not himself take any action prohibited by this part.

Unilateral and Specific Character of the Selection

(3) In order for this exception to apply, the selection with which a

United States person wishes to comply must be unilateral and specific.

(4) A specific selection is one which is stated in the affirmative and

which specifies a particular supplier of goods or services.

(5) A unilateral selection is one in which the discretion in making the

selection is exercised by the boycotting country buyer. If the United

States person who receives a unilateral selection has provided the buyer

with any boycott-based assistance (including information for purposes of

helping the buyer select someone on a boycott basis), then the buyer's

selection is not unilateral, and compliance with that selection by a

United States person does not come within this exception.

(6) The provision of so-called pre-selection or pre-award services,

such as providing lists of qualified suppliers, subcontractors, or

bidders, does not, in and of itself, destroy the unilateral character of a

selection, provided such services are not boycott-based. Lists of

qualified suppliers, for example, must not exclude anyone because he is

blacklisted. Moreover, such services must be of the type customarily

provided in similar transactions by the firm (or industry of which the

firm is a part) as measured by the practice in non-boycotting as well as

boycotting countries. If such services are not customarily provided in

similar transactions or such services are provided in such a way as to

exclude blacklisted persons from participating in a transaction or

diminish their opportunity for such participation, then the services may

not be provided without destroying the unilateral character of any

subsequent selection.

Selection To Be Made by Boycotting Country Resident

(7) In order for this exception to be available, the unilateral and

specific selection must have been made by a boycotting country, or by a

national or resident of a boycotting country. Such a resident may be a

United States person. For purposes of this exception, a United States

person will be considered a resident of a boycotting country only if he is

a bona fide resident. A United States person may be a bona fide resident

of a boycotting country even if such person's residency is temporary.

(8) Factors that will be considered in determining whether a United States

person is a bona fide resident of a boycotting country include:

(i) Physical presence in the country;

(ii) Whether residence is needed for legitimate business reasons;

(iii) Continuity of the residency;

(iv) Intent to maintain the residency;

(v) Prior residence in the country;

(vi) Size and nature of presence in the country;

(vii) Whether the person is registered to do business or incorporated in

the country;

(viii) Whether the person has a valid work visa; and

(ix) Whether the person has a similar presence in both boycotting and

non-boycotting foreign countries in connection with similar business

activities.

Note to paragraph (d)(8) of this section: No one of the factors is

dispositive. All the circumstances will be examined closely to ascertain

whether there is, in fact, a bona fide residency. Residency established

solely for purposes of avoidance of the application of this part,

unrelated to legitimate business needs, does not constitute bona fide

residency.

(9) The boycotting country resident must be the one actually making the

selection. If a selection is made by a non-resident agent, parent,

subsidiary, affiliate, home office or branch office of a boycotting

country resident, it is not a selection by a resident within the meaning

of this exception.

(10) A selection made solely by a bona fide resident and merely

transmitted by another person to a United States person for execution is a

selection by a bona fide resident within the meaning of this exception.

Duty of Inquiry

(11) If a United States person receives, from another person located in

the United States, what may be a unilateral selection by a boycotting

country customer, and knows or has reason to know that the selection is

made for boycott reasons, he has a duty to inquire of the transmitting

person to determine who actually made the selection. If he knows or has

reason to know that the selection was made by other than a boycotting

country, or a national or resident of a boycotting country, he may not

comply. A course or pattern of conduct which a United States person

recognizes or should recognize as consistent with boycott restrictions

will create a duty to inquire.

(12) If the United States person does not know or have reason to know that

the selection it receives is boycott-based, its compliance with such a

selection does not offend any prohibition and this exception is not

needed.

Selection of Services

(13) This exception applies only to compliance with selections of certain

types of suppliers of services-carriers, insurers, and suppliers of

services to be performed within the boycotting country. Services to be

performed wholly within the United States or wholly within any country

other than the boycotting country are not covered.

(14) For purposes of this part, services are to be performed within the

boycotting country only if they are of a type which would customarily be

performed by suppliers of those services within the country of the

recipient of those services, and if the part of the services performed

within the boycotting country is a necessary and not insignificant part of

the total services performed.

(15) What is customary and necessary for these purposes depends on the

usual practice of the supplier of the services (or the industry of which

he is a part) as measured by the practice in non-boycotting as well as

boycotting countries, except where such practices are instituted to

accommodate this part.

Selection of Goods

(16) This exception applies only to compliance with selections of certain

types of goodsgoods that, in the normal course of business, are

identifiable as to their source or origin at the time of their entry into

the boycotting country. The definition of specifically identifiable

goods is the same under this section as it is in paragraph (g) of this

section on Compliance with Local Law.

(17) Goods specifically identifiable in the normal course of business

are those items which at the time of their entry into a boycotting country

are identifiable as to source or origin by uniqueness of design or

appearance; or trademark, trade name, or other identification normally on

the items themselves, including their packaging. Goods are specifically

identifiable in the normal course of business if their source or origin

is ascertainable by inspection of the items themselves, including their

packaging, regardless of whether inspection takes place. Goods are not

considered to be specifically identifiable in the normal course of

business if a trademark, trade name, or other form of identification not

normally present is added to the items themselves, including their

packaging, to accommodate this part.

General

(18) If a unilateral selection meets the conditions described in paragraph

(d) of this section, the United States person receiving the unilateral

selection may comply or agree to comply, even if he knows or has reason to

know that the selection was boycott-based. However, no United States

person may comply or agree to comply with any unilateral selection if he

knows or has reason to know that the purpose of the selection is to effect

discrimination against any United States person on the basis of race,

religion, sex, or national origin.

Examples of Compliance With a Unilateral Selection

The following examples are intended to give guidance in determining what

constitutes a unilateral selection and the circumstances in which

compliance with such a selection is permissible. They are illustrative,

not comprehensive.

Specific and Unilateral Selection

(i) A, a U.S. manufacturer of road-grading equipment, is asked by

boycotting country Y to ship goods to Y on U.S. vessel B, a carrier which

is not blacklisted by Y. A knows or has reason to know that Y's selection

of B is boycott-based.

A may comply with Y's request, or may agree to comply as a condition of

the contract, because the selection is specific and unilateral.

(ii) A, a U.S. contractor building an industrial facility in boycotting

country Y is asked by B, a resident of Y, to use C as the supplier of air

conditioning equipment to be used in the facility. C is not blacklisted by

country Y. A knows or has reason to know that B's request is

boycott-based.

A may comply with B's request, or may agree to comply as a condition of

the contract, because the selection of C is specific and unilateral.

(iii) A, a U.S. manufacturer of automotive equipment, is asked by

boycotting country Y not to ship its goods to Y on U.S. carriers, B, C, or

D. Carriers B, C, and D are blacklisted by boycotting country Y. A knows

or has reason to know that Y's request is boycott-based.

A may not comply or agree to comply with Y's request, because no specific

selection of any particular carrier has been made.

(iv) A, a U.S. exporter shipping goods ordered by boycotting country Y, is

provided by Y with a list of eligible U.S. insurers from which A may

choose in insuring the shipment of its goods. A knows or has reason to

know that the list was compiled on a boycott basis.

A may not comply or agree to comply with Y's request that A choose from

among the eligible insurers, because no specific selection of any

particular insurer has been made.

(v) A, a U.S. aircraft manufacturer, is negotiating to sell aircraft to

boycotting country Y. During the negotiations, Y asks A to identify the

company which normally manufactures the engines for the aircraft. A

responds that they are normally manufactured by U.S. engine manufacturer

B. B is blacklisted by Y. In making the purchase, Y specifies that the

engines for the aircraft should be supplied by U.S. engine manufacturer C.

A may comply or agree to comply with Y's selection of C, because Y's

selection is unilateral and specific.

(vi) A, a U.S. construction firm, is retained by an agency of boycotting

country Y to build a pipeline. Y requests A to suggest qualified

engineering firms to be used on-site in the construction of the pipeline.

It is customary for A, regardless of where it conducts its operations, to

identify qualified engineering firms to its customers so that its

customers may make their own selection of the firm to be engaged. Choice

of engineering firm is customarily a prerogative of the customer. A

provides a list of five engineering firms, B-F, excluding no firm because

it may be blacklisted, and then confers with and gives its recommendations

to Y. A recommends C, because C is the best qualified. Y then selects B,

because C is blacklisted.

A may comply with Y's selection of B, because the boycott-based decision

is made by Y and is unilateral and specific. Since A's pre-award services

are of the kind customarily provided in these situations, and since they

are provided without reference to the boycott, they do not destroy the

unilateral character of Y's selection.

(vii) A, a U.S. aircraft manufacturer, has an order to supply a certain

number of planes to boycotting country Y. In connection with the order, Y

asks A to supply it with a list of qualified aircraft tire manufacturers

so that Y can select the tires to be placed on the planes. This is a

highly unusual request, since, in A's worldwide business operations,

choice of tires is customarily made by the manufacturer, not the customer.

Nonetheless, A supplies a list of tire manufacturers, B, C, D, and E. Y

chooses tire manufacturer B because B is not blacklisted. Had A, as is

customary, selected the tires, company C would have been chosen. C happens

to be blacklisted, and A knows that C's blacklist status was the reason

for Y's selection of B.

A's provision of a list of tire manufacturers for Y to choose from

destroys the unilateral character of Y's selection, because such a

pre-selection service is not customary in A's worldwide business

operations.

(viii) A, a U.S. aircraft manufacturer, receives an order from U.S.

company C, which is located in the United States, for the sale of aircraft

to company D, a U.S. affiliate of C. D is a bona fide resident of

boycotting country Y. C instructs A that in order to avoid boycott

problems, A must use engines that are manufactured by company B, a

company that is not blacklisted by Y. Engines built by B are unique in

design and also bear B's trade name.

Since A has reason to know that the selection is boycott-based, he must

inquire of C whether the selection was in fact made by D. If C informs A

that the selection was made by D, A may comply.

(ix) Same as (viii), except that C initially states that the designation

was unilaterally and specifically made by D.

A may accept C's statement without further investigation and may comply

with the selection, because C merely transmitted D's unilateral and

specific selection.

(x) Same as (ix), except that C informs A that it, C, has selected B on

behalf of or as an agent of its affiliated company resident in the

boycotting country.

A may not comply with this selection, because the decision was not made by

a resident of the boycotting country.

(xi) A, a U.S. management consulting firm, is advising boycotting country

Y on the selection of a contracting firm to construct a plant for the

manufacture of agricultural chemicals. As is customary in its business, A

compiles a list of potential contractors on the basis of its evaluation of

the capabilities of the respective candidates to perform the job. A has

knowledge that company B is blacklisted, but provides Y with the names of

companies B, C, D, and E, listing them in order of their qualifications. Y

instructs A to negotiate with C.

A may comply with Y's instruction, because Y's selection is unilateral and

specific.

(xii) A, a U.S. exporter, is asked by boycotting country Y not to ship

goods on carriers B, C, or D, which are owned by nationals of and are

registered in country P, a country not boycotted by Y.

A may comply or agree to comply with Y's request even though the selection

is not specific, because A does not know or have reason to know that the

request is boycott-based.

(Note: In example (xii), A has violated no prohibition, because it does

not know or have reason to know that Y's instruction is boycott-based.

Therefore, A could not act with the requisite intent to comply with the

boycott.)

(xiii) A, a U.S. construction company, receives a contract to construct a

hotel in boycotting country Y. As part of the contract, A is required to

furnish Y with lists of qualified suppliers of various specifically

identifiable items. A compiles lists of various qualified suppliers wholly

without reference to the boycott, and thereafter Y instructs A to

negotiate with, enter into contracts with, and arrange for delivery from

each of the suppliers which Y designates. A knows that Y's choices are

made on a boycott basis.

A may comply with Y's selections and carry out these post-award services

for Y, because Y's selections were unilateral and specific and A's

pre-award services were provided without reference to Y's boycott.

Examples of Boycotting Country Buyer

(The factors in determining whether a United States person is a bona fide

resident of a boycotting country are the same as in paragraph (g) of this

section on Compliance with Local Law. See also the examples in that

section.)

(i) A, a U.S. exporter, is asked by B, a U.S. person who is a bona fide

resident of boycotting country Y, to ship goods on U.S. carrier C. C is

not blacklisted by Y, and A knows that B has chosen on a boycott basis in

order to comply with Y's boycott laws.

A may comply or agree to comply with B's request, because B is a bona fide

resident of Y.

(ii) A is a U.S. computer company whose subsidiary, B, is a bona fide

resident of boycotting country Y. A receives an order from B for specific,

identifiable products manufactured by company C in connection with a

computer which B is installing in Y.

A may comply or agree to comply with B's unilateral and specific

selection, so long as the discretion was in fact exercised by B, not A.

(Note: Unilateral selection transactions involving related United States

persons will be scrutinized carefully to ensure that the selection was in

fact made by the bona fide resident of the boycotting country.)

(iii) A, a U.S. engineering firm, has chief engineer B as its resident

engineer on a dam construction site in boycotting country Y. B's presence

at the site is necessary in order to ensure proper supervision of the

project. In order to comply with local law, B selects equipment supplier C

rather than D, who is blacklisted, and directs A to purchase certain

specific equipment from C for use in the project.

A may comply with this unilateral selection, because the decision was made

by a bona fide resident of Y.

(As noted above, unilateral selections involving related United States

persons will be scrutinized carefully to ensure that the selection was in

fact made by the bona fide resident of the boycotting country.)

(iv) B, a branch of U.S. bank A, is located in boycotting country Y. B is

in need of office supplies and asks the home office in New York to make

the necessary purchases. A contacts C, a U.S. company in the office supply

business, and instructs C to purchase various items from certain specific

companies and ship them directly to B. In order to avoid any difficulties

for B with respect to Y's boycott laws, A is careful to specify only

non-blacklisted companies or suppliers. C knows that that was A's purpose.

C may not comply with A's instruction, because the selection of suppliers

was not made by a resident of a boycotting country.

(v) Same as (iv), except that A has given standing instructions to B that

whenever it needs office supplies, it should specify certain suppliers

designated by A. To avoid running afoul of Y's boycott laws, A's

designations consist exclusively of non-blacklisted firms. A receives an

order from B with the suppliers designated in accordance with A's

instructions.

A may not comply with B's selection, because the selection was not in fact

made by a bona fide resident of the boycotting country, but by a person

located in the United States.

Examples of Suppliers of Services

(i) A, a U.S. manufacturer, is asked by boycotting country Y to ship goods

to Y on U.S. vessel B, a carrier which is not blacklisted by Y.

A may comply or agree to comply with Y's request, because compliance with

the unilateral and specific selection of carriers is expressly permitted

under this exception.

(ii) A, a U.S. exporter shipping goods ordered by C, a national of

boycotting country Y, is asked by C to insure the shipment through U.S.

insurer B.

A may comply or agree to comply with C's request, because compliance with

the unilateral and specific selection of an insurer is expressly permitted

under this exception.

(iii) A, a U.S. construction company, is hired by C, an agency of the

government of boycotting country Y, to build a power plant in Y. C

specifies that A should subcontract the foundation work to U.S. contractor

B. Part of the foundation design work will be done by B in the United

States.

A may comply or agree to comply with Y's designation, because a necessary

and not insignificant part of B's services are to be performed within the

boycotting country, and such services are customarily performed on-site.

(iv) A, a U.S. contractor, is engaged by boycotting country Y to build a

power plant. Y specifies that U.S. architectural firm B should be retained

by A to design the plant. In order to design the plant, it is essential

that B's personnel visit and become familiar with the site, although the

bulk of the design and drawing work will be done in the United States.

A may comply or agree to comply with Y's unilateral and specific selection

of architectural firm B, because a necessary and not insignificant part of

B's services are to be performed within Y, and such on-site work is

customarily involved in the provision of architectural services. The fact

that the bulk of the actual work may be performed in the United States is

irrelevant since the part to be performed within Y is necessary to B's

effective performance.

(v) Same as (iv), except that Y specifies that the turbine for the power

plant should be designed by U.S. engineer C. It is neither customary nor

necessary for C to visit the site in order to do any of his work, but C

has informed A that he would probably want to visit the site in Y if he

were selected for the job.

A may not comply or agree to comply with Y's request, because, in the

normal course of business, it is neither customary nor necessary for

engineer C's services to be performed in Y.

(vi) A, a U.S. aircraft manufacturer, receives a contract from boycotting

country Y to manufacture jet engines for Y's use. Y specifies that the

engines should be designed by U.S. industrial engineering firm B.

A may not comply or agree to comply with Y's request, because, in the

normal course of business, the services will not be performed in Y.

(vii) U.S. company A has a contract to supply specially designed road

graders to boycotting country Y. Y has instructed A that it should engage

engineering firm B in the design work rather than engineering firm C,

which A normally uses, because C is blacklisted. When A contacts B, B

informs A that one of B's personnel customarily visits the location in

which any equipment B designs is used after it is in use, in order to

determine how good a design job B has done. Such visits are necessary from

B's point of view to provide a check on the quality of its work, and they

are necessary from Y's point of view because they make it possible for Y

to discuss possible design changes should deficiencies be detected.

A may not comply with Y's selection of B, because the services which B

would perform in Y are an insignificant part of the total services to be

performed by B.

Examples of Specifically Identifiable Goods

(The test of what constitutes specifically identifiable goods under this

exception also applies to the term specifically identifiable goods as

used in paragraph (g) of this section on Compliance with Local Law.)

(i) A, a U.S. contractor, is constructing an apartment complex, on a

turnkey basis, for boycotting country Y. Y instructs A to use only kitchen

appliances manufactured by U.S. company B in completing the project. The

appliances normally bear the manufacturer's name and trademark.

A may comply with Y's selection of B, because Y's unilateral and specific

selection is of goods identifiable as to source or origin in the normal

course of business at the time of their entry into Y.

(ii) Same as (i), except that Y directs A to use lumber manufactured only

by U.S. company C. In the normal course of business, C neither stamps its

name on the lumber nor identifies itself as the manufacturer on the

packaging. In addition, normal export packaging does not identify the

manufacturer.

A may not comply with Y's selection, because the goods selected are not

identifiable by source or origin in the normal course of business at the

time of their entry into Y.

(iii) B, a U.S. contractor who is a bona fide resident of boycotting

country Y, is engaged in building roads. B retains the services of A, a

U.S. engineering firm, to assist it in procuring construction equipment. B

directs A to purchase road graders only from manufacturer C because other

road grader manufacturers which A might use are blacklisted. C's road

graders normally bear C's insignia.

A may comply with B's selection of C, because the goods selected are

identifiable by source or origin in the normal course of business at the

time of their entry into Y.

(iv) A, a U.S. company, manufactures computer-operated machine tools. The

computers are mounted on a separate bracket on the side of the equipment

and are readily identifiable by brand name imprinted on the equipment.

There are five or six U.S. manufacturers of such computers which will

function interchangeably to operate the machine tools manufactured by A.

B, a resident of boycotting country Y, contracts to buy the machine tools

manufactured by A on the condition that A incorporate, as the computer

drive, a computer manufactured by U.S. company C. B's designation of C is

made to avoid boycott problems which could be caused if computers

manufactured by some other company were used.

A may comply with B's designation of C, because the goods selected are

identifiable by source or origin in the normal course of business at the

time of their entry into Y.

(v) A, a U.S. wholesaler of electronic equipment, receives an order from

B, a U.S. manufacturer of radio equipment, who is a bona fide resident of

boycotting country Y. B orders a variety of electrical components and

specifies that all transistors must be purchased from company C, which is

not blacklisted by Y. The transistors requested by B do not normally bear

the name of the manufacturer; however, they are typically shipped in

cartons, and C's name and logo appear on the cartons.

A may comply with B's selection, because the goods selected by B are

identifiable as to source or origin in the normal course of business at

the time of their entry into Y by virtue of the containers or packaging

used.

(vi) A, a U.S. computer manufacturer, receives an order for a computer

from B, a university in boycotting country Y. B specifies that certain

integrated circuits incorporated in the computer must be supplied by U.S.

electronics company C. These circuits are incorporated into the computer

and are not visible without disassembling the computer.

A may not comply or agree to comply with B's specific selection of these

components, because they are not identifiable as to their source or origin

in the normal course of business at the time of their entry into Y.

(vii) A, a U.S. clothing manufacturer, receives an order for shirts from

B, a retailer resident in boycotting country Y. B specifies that the

shirts are to be manufactured from cotton produced by U.S. farming

cooperative C. Such shirts will not identify C or the source of the

cotton.

A may not comply or agree to comply with B's designation, because the

cotton is not identifiable as to source or origin in the normal course of

business at the time of entry into Y.

(viii) A, a U.S. contractor, is retained by B, a construction firm located

in and wholly-owned by boycotting country Y, to assist B in procuring

construction materials. B directs A to purchase a range of materials,

including hardware, tools, and trucks, all of which bear the name of the

manufacturer stamped on the item. In addition, B directs A to purchase

steel beams manufactured by U.S. company C. The name of manufacturer C

normally does not appear on the steel itself or on its export packaging.

A may comply with B's selection of the hardware, tools, and trucks,

because they are identifiable as to source or origin in the normal course

of business at the time of entry into Y. A may not comply with B's

selection of steel beams, because the goods are not identifiable as to

source or origin by trade name, trademark, uniqueness or packaging at the

time of their entry into Y.

Example of Discrimination on Basis of Race, Religion, Sex, or National

Origin

(i) A, a U.S. paper manufacturer, is asked by boycotting country Y to ship

goods to Y on U.S. vessel B. Y states that the reason for its choice of B

is that, unlike U.S. vessel C, B is not owned by persons of a particular

faith.

A may not comply or agree to comply with Y's request, because A has reason

to know that the purpose of the selection is to effect religious

discrimination against a United States person.

(e) Shipment and transshipment of exports pursuant to a boycotting

country's requirements.

Compliance With a Boycotting Country's Requirements Regarding Shipment and

Transshipment of Exports

(1) A United States person may comply or agree to comply with the export

requirements of a boycotting country with respect to shipments or

transshipments of exports to:

(i) A boycotted country;

(ii) Any business concern of a boycotted country;

(iii) Any business concern organized under the laws of a boycotted

country; or

(iv) Any national or resident of a boycotted country.

(2) This exception permits compliance with restrictions which a boycotting

country may place on direct exports to a boycotted country; on indirect

exports to a boycotted country (i.e., those that pass via third parties);

and on exports to residents, nationals, or business concerns of, or

organized under the laws of, a boycotted country, including those located

in third countries.

(3) This exception also permits compliance with restrictions which a

boycotting country may place on the route of export shipments when the

restrictions are reasonably related to preventing the export shipments

from coming into contact with or under the jurisdiction of the boycotted

country. This exception applies whether a boycotting country or the vendor

of the shipment:

(i) Explicitly states that the shipment should not pass through the

boycotted country enroute to its final destination; or

(ii) Affirmatively describes a route of shipment that does not include the

boycotted country.

(4) A United States person may not, under this exception, refuse on an

across-the-board basis to do business with a boycotted country or a

national or resident of a boycotted country.

Examples of Compliance With a Boycotting Country's Requirements Regarding

Shipment or Transshipment of Exports

The following examples are intended to give guidance in determining the

circumstances in which compliance with the export requirements of a

boycotting country is permissible. They are illustrative, not

comprehensive.

(i) A, a U.S. petroleum company, exports petroleum products to 20

countries, including the United States, from boycotting country Y. Country

Y's export regulations require that products not be exported from Y to

boycotted country X.

A may agree to and comply with Y's regulations with respect to the export

of goods from Y to X.

(ii) Same as (i), except that Y's export regulations require that goods

not be exported from boycotting country Y to any business concern

organized under the laws of boycotted country X.

A may agree to and comply with Y's regulations with respect to the export

of goods from Y to a business concern organized under the laws of X, even

if such concern is located in a country not involved in Y's boycott of X.

(iii) B, the operator of a storage facility in country M, contracts with

A, a U.S. carrier, for the shipment of certain goods manufactured in

boycotting country Y. A's contract with B contains a provision stating

that the goods to be transported may not be shipped or transshipped to

boycotted country X. B informs A that this provision is a requirement of

C, the manufacturer of goods who is a resident of boycotting country Y.

Country M is not boycotted by Y.

A may agree to and comply with this provision, because such a provision is

required by the export regulations of boycotting country Y in order to

prevent shipment of Y-origin goods to a country boycotted by Y.

(iv) A, a U.S. petroleum refiner located in the United States, purchases

crude oil from boycotting country Y. A has a branch operation in boycotted

country X. Y requires, as a condition of sale, that A agree not to ship or

transship the crude oil or products refined in Y to A's branch in X.

A may agree to and comply with these requirements, because they are export

requirements of Y designed to prevent Y-origin products from being shipped

to a boycotted country.

(v) A, a U.S. company, has a petrochemical plant in boycotting country Y.

As a condition of securing an export license from Y, A must agree that it

will not ship or permit transshipment of any of its output from the plant

in Y to any companies which Y lists as being owned by nationals of

boycotted country X.

A may agree to this condition, because it is a restriction designed to

prevent Y-origin products from being exported to a business concern of

boycotted country X or to nationals of boycotted country X.

(vi) Same as (v), except that the condition imposed on A is that Y-origin

goods may not be shipped or permitted to be transshipped to any companies

which Y lists as being owned by persons whose national origin is X.

A may not agree to this condition, because it is a restriction designed to

prevent Y-origin goods from being exported to persons of a particular

national origin rather than to residents or nationals of a particular

boycotted country.

(vii) A, a U.S. petroleum company, exports petroleum products to 20

countries, including the United States, from boycotting country Y. Y

requires, as a condition of sale, that A not ship the products to be

exported from Y to or through boycotted country X.

A may agree to and comply with this requirement because it is an export

requirement of Y designed to prevent Y-origin products from coming into

contact with or under the jurisdiction of a boycotted country.

(viii) Same as (vii), except that boycotting country Y's export

regulations require that products to be exported from Y not pass through a

port of boycotted country X.

A may agree to and comply with Y's regulations prohibiting Y-origin

exports from passing through a port at boycotted country X, because they

are export requirements of Y designed to prevent Y-origin products from

coming into contact with or under the jurisdiction of a boycotted country.

(ix) Same as (vii), except that Y's export regulations require that A not

transship the exported products in or at boycotted country X.

A may agree to and comply with Y's regulations with respect to the

transshipment of goods in or at X, because they are export requirements

of Y designed to prevent Y-origin products from coming into contact with

or under the jurisdiction of a boycotted country.

(f) Immigration, passport, visa, or employment requirements of a

boycotting country.

Compliance With Immigration, Passport, Visa, or Employment Requirements of

a Boycotting Country

(1) A United States individual may comply or agree to comply with the

immigration, passport, visa, or employment requirements of a boycotting

country, and with requests for information from a boycotting country made

to ascertain whether such individual meets requirements for employment

within the boycotting country, provided that he furnishes information only

about himself or a member of his family, and not about any other United

States individual, including his employees, employers, or co-workers.

(2) For purposes of this section, a United States individual means a

person who is a resident or national of the United States. Family means

immediate family members, including parents, siblings, spouse, children,

and other dependents living in the individual's home.

(3) A United States person may not furnish information about its employees

or executives, but may allow any individual to respond on his own to any

request for information relating to immigration, passport, visa, or

employment requirements. A United States person may also perform any

ministerial acts to expedite processing of applications by individuals.

These include informing employees of boycotting country visa requirements

at an appropriate time; typing, translation, messenger and similar

services; and assisting in or arranging for the expeditious processing of

applications. All such actions must be undertaken on a non-discriminatory

basis.

(4) A United States person may proceed with a project in a boycotting

country even if certain of its employees or other prospective participants

in a transaction are denied entry for boycott reasons. But no employees or

other participants may be selected in advance in a manner designed to

comply with a boycott.

Examples of Compliance With Immigration, Passport, Visa, or Employment

Requirements of a Boycotting Country

The following examples are intended to give guidance in determining the

circumstances in which compliance with immigration, passport, visa, or

employment requirements is permissible. They are illustrative, not

comprehensive.

(i) A, a U.S. individual employed by B, a U.S. manufacturer of sporting

goods with a plant in boycotting country Y, wishes to obtain a work visa

so that he may be assigned to the plant in Y. Country Y's immigration laws

specify that anyone wishing to enter the country or obtain a visa to work

in the country must supply information about his religion. This

information is required for boycott purposes.

A may furnish such information, because it is required by Y's immigration

laws.

(ii) Same as (i), except that A is asked to supply such information about

other employees of B.

A may not supply this information, because it is not information about

himself or his family.

(iii) A, a U.S. building contractor, has been awarded a construction

contract to be performed in boycotting country Y. Y's immigration laws

require that individuals applying for visas must indicate race, religion,

and place of birth. The information is sought for boycott purposes. To

avoid repeated rejections of applications for work visas by A's employees,

A desires to furnish to country Y a list of its prospective and current

employees and required information about each so that Y can make an

initial screening.

A may not furnish such a list, because A would be furnishing information

about the race, religion, and national origin of its employees.

(iv) Same as (iii), except that A selects for work on the project those of

its current employees whom it believes will be granted work visas from

boycotting country Y.

A may not make a selection from among its employees in a manner designed

to comply with the boycott-based visa requirements of Y, but must allow

all eligible employees to apply for visas. A may later substitute an

employee who obtains the necessary visa for one who has had his

application rejected.

(v) Same as (iii), except that A selects employees for the project and

then allows each employee individually to apply for his own visa. Two

employees' applications are rejected, and A then substitutes two other

employees who, in turn, submit their own visa applications.

A may take such action, because in so doing A is not acting in

contravention of any prohibition of this part.

(vi) Same as (v), except that A arranges for the translation, typing and

processing of its employees' applications, and transmits all the

applications to the consulate of boycotting country Y.

A may take such ministerial actions, because in so doing A is not itself

furnishing information with respect to race, religion, sex, or national

origin, but is merely transmitting information furnished by its individual

employees.

(vii) A, a U.S. contractor, selects U.S. subcontractor B to perform

certain engineering services in connection with A's project in boycotting

country Y. The work visa application submitted by the employee whom B has

proposed as chief engineer of this project is rejected by Y because his

national origin is of boycotted country X. Subcontractor B thereupon

withdraws.

A may continue with the project and select another subcontractor, because

A is not acting in contravention of any prohibition of this part.

(g) Compliance with local law. (1) This exception contains two parts. The

first covers compliance with local law with respect to a United States

person's activities exclusively within a foreign country; the second

covers compliance with local import laws by United States persons resident

in a foreign country. Under both parts of this exception, local laws are

laws of the host country, whether derived from statutes, regulations,

decrees, or other official sources having the effect of law in the host

country. This exception is not available for compliance with presumed

policies or understandings of policies unless those policies are reflected

in official sources having the effect of law.

(2) Both parts of this exception apply only to United States persons

resident in a foreign country. For purposes of this exception, a United

States person will be considered to be a resident of a foreign country

only if he is a bona fide resident. A United States person may be a bona

fide resident of a foreign country even if such person's residency is

temporary.

(3)(i) Factors that will be considered in determining whether a United

States person is a bona fide resident of a foreign country include:

(A) Physical presence in the country;

(B) Whether residence is needed for legitimate business reasons;

(C) Continuity of the residency;

(D) Intent to maintain the residency;

(E) Prior residence in the country;

(F) Size and nature of presence in the country;

(G) Whether the person is registered to do business or incorporated in the

country;

(H) Whether the person has a valid work visa; and

(I) Whether the person has a similar presence in both boycotting and

non-boycotting foreign countries in connection with similar business

activities.

(ii) No one of the factors in paragraph (g)(3) of this section is

dispositive. All the circumstances involved will be closely examined to

ascertain whether there is, in fact, bona fide residency. Residency

established solely for purposes of avoidance of the application of this

part, unrelated to legitimate business needs, does not constitute bona

fide residency.

Examples of Bona Fide Residency

The following examples are intended to give guidance in determining the

circumstances in which a United States person may be a bona fide resident

of a foreign country. For purposes of illustration, each example discusses

only one or two factors, instead of all relevant factors. They are

illustrative, not comprehensive.

(i) A, a U.S. radio manufacturer located in the United States, receives a

tender to bid on a contract to supply radios for a hotel to be built in

boycotting country Y. After examining the proposal, A sends a bid from its

New York office to Y.

A is not a resident of Y, because it is not physically present in Y.

(ii) Same as (i), except that after receiving the tender, A sends its

sales representative to Y. A does not usually have sales representatives

in countries when it bids from the United States, and this particular

person's presence in Y is not necessary to enable A to make the bid.

A is not a bona fide resident of Y, because it has no legitimate business

reasons for having its sales representative resident in Y.

(iii) A, a U.S. bank, wishes to establish a branch office in boycotting

country Y. In pursuit of that objective, A's personnel visit Y to make the

necessary arrangements. A intends to establish a permanent branch office

in Y after the necessary arrangements are made.

A's personnel in Y are not bona fide residents of Y, because A does not

yet have a permanent business operation in Y.

(iv) Same as (iii), except A's personnel are required by Y's laws to

furnish certain non-discriminatory boycott information in order to

establish a branch in Y.

In these limited circumstances, A's personnel may furnish the

non-discriminatory boycott information necessary to establish residency to

the same extent a U.S. person who is a bona fide resident in that country

could. If this information could not be furnished in such limited

circumstances, the exception would be available only to firms resident in

a boycotting country before January 18, 1978.

(v) A, a U.S. construction company, receives an invitation to build a

power plant in boycotting country Y. After receipt of the invitation, A's

personnel visit Y in order to survey the site and make necessary analyses

in preparation for submitting a bid. The invitation requires that

otherwise prohibited boycott information be furnished with the bid.

A's personnel in Y are not bona fide residents of Y, because A has no

permanent business operation in Y. Therefore, A's personnel may not

furnish the prohibited information.

(vi) Same as (v), except that A is considering establishing an office in

boycotting country Y. A's personnel visit Y in order to register A to do

business in that country. A intends to establish ongoing construction

operations in Y. A's personnel are required by Y's laws to furnish certain

non-discriminatory boycott information in order to register A to do

business or incorporate a subsidiary in Y.

In these limited circumstances, A's personnel may furnish

non-discriminatory boycott information necessary to establish residency to

the same extent a U.S. person who is a bona fide resident in that country

could. If this information could not be furnished in such limited

circumstances, the exception would be available only to firms resident in

a boycotting country before January 18, 1978.

(vii) A, a subsidiary of U.S. oil company B, is located in boycotting

country Y. A has been engaged in oil explorations in Y for a number of

years.

A is a bona fide resident of Y, because of its pre-existing continuous

presence in Y for legitimate business reasons.

(viii) Same as (vii), except that A has just been established in Y and has

not yet begun operations.

A is a bona fide resident of Y, because it is present in Y for legitimate

business reasons and it intends to reside continuously.

(ix) U.S. company A is a manufacturer of prefabricated homes. A builds a

plant in boycotting country Y for purposes of assembling components made

by A in the United States and shipped to Y.

A's personnel in Y are bona fide residents of Y, because A's plant in Y is

established for legitimate business reasons, and it intends to reside

continuously.

(x) U.S. company A has its principal place of business in the United

States. A's sales agent visits boycotting country Y from time to time for

purposes of soliciting orders.

A's sales agent is not a bona fide resident of Y, because such periodic

visits to Y are insufficient to establish a bona fide residency.

(xi) A, a branch office of U.S. construction company B, is located in

boycotting country Y. The branch office has been in existence for a number

of years and has been performing various management services in connection

with B's construction operations in Y.

A is a bona fide resident of Y, because of its longstanding presence in Y

and its conduct of ongoing operations in Y.

(xii) U.S. construction company A has never done any business in

boycotting country Y. It is awarded a contract to construct a hospital in

Y, and preparatory to beginning construction, sends its personnel to Y to

set up operations.

A's personnel are bona fide residents of Y, because they are present in Y

for the purposes of carrying out A's legitimate business purposes; they

intend to reside continuously; and residency is necessary to conduct their

business.

(xiii) U.S. company A manufactures furniture. All its sales in foreign

countries are conducted from its offices in the United States. From time

to time A has considered opening sales offices abroad, but it has

concluded that it is more efficient to conduct sales operations from the

United States. Shortly after the effective date of this part, A sends a

sales representative to boycotting country Y to open an office in and

solicit orders from Y. It is more costly to conduct operations from that

office than to sell directly from the United States, but A believes that

if it establishes a residence in Y, it will be in a better position to

avoid conflicts with U.S. law in its sales to Y.

A's sales representative is not a bona fide resident of Y, because the

residency was established to avoid the application of this part and not

for legitimate business reasons.

(xiv) Same as (xiii), except that it is in fact more efficient to have a

sales office in Y. In fact, without a sales office in Y, A would find it

difficult to explore business opportunities in Y. A is aware, however,

that residency in Y would permit its sales representative to comply with

Y's boycott laws.

A's sales representative is a bona fide resident of Y, because A has a

legitimate business reason for establishing a sales office in Y.

(xv) U.S. company B is a computer manufacturer. B sells computers and

related programming services tailored to the needs of individual clients.

Because of the complex nature of the product, B must have sales

representatives in any country where sales are made. B has a sales

representative, A, in boycotting country Y. A spends two months of the

year in Y, and the rest of the year in other countries. B has a permanent

sales office from which A operates while in Y, and the sales office is

stocked with brochures and other sales materials.

A is a bona fide resident of Y, because his presence in Y is necessary to

carry out B's legitimate business purposes; B maintains a permanent office

in Y; and B intends to continue doing business in Y in the future.

(xvi) A, a U.S. construction engineering company, is engaged by B, a U.S.

general contracting company, to provide services in connection with B's

contract to construct a hospital complex in boycotting country Y. In order

to perform those services, A's engineers set up a temporary office in a

trailer on the construction site in Y. A's work is expected to be

completed within six months.

A's personnel in Y are bona fide residents of Y, because A's on-site

office is necessary to the performance of its services for B, and because

A's personnel are continuously there.

(xvii) A, a U.S. company, sends one of its representatives to boycotting

country Y to explore new sales possibilities for its line of transistor

radios. After spending several weeks in Y, A's representative rents a post

office box in Y, to which all persons interested in A's products are

directed to make inquiry.

A is not a bona fide resident of Y, because rental of a post office box is

not a sufficient presence in Y to constitute residency.

(xviii) A, a U.S. computer company, has a patent and trademark registered

in the United States. In order to obtain registration of its patent and

trademark in boycotting country Y, A is required to furnish certain

non-discriminatory boycott information.

A may not furnish the information, because A is not a bona fide resident

of Y.

(h) Activities exclusively within a foreign country. (1) Any United States

person who is a bona fide resident of a foreign country, including a

boycotting country, may comply or agree to comply with the laws of that

country with respect to his activities exclusively within that country.

These activities include:

(i) Entering into contracts which provide that local law applies or

governs, or that the parties will comply with such laws;

(ii) Employing residents of the host country;

(iii) Retaining local contractors to perform work within the host country;

(iv) Purchasing or selling goods or services from or to residents of the

host country; and

(v) Furnishing information within the host country.

(2) Activities exclusively within the country do not include importing

goods or services from outside the host country, and, therefore, this part

of the exception does not apply to compliance with import laws in

connection with importing goods or services.

Examples of Permissible Compliance With Local Law With Respect to

Activities Exclusively Within a Foreign Country

The following examples are intended to give guidance in determining the

circumstances in which compliance with local law is permissible. They are

illustrative, not comprehensive.

Activities Exclusively Within a Foreign Country

(i) U.S. construction company A, a bona fide resident of boycotting

country Y, has a contract to build a school complex in Y. Pursuant to Y's

boycott laws, the contract requires A to refuse to purchase supplies from

certain local merchants. While Y permits such merchants to operate within

Y, their freedom of action in Y is constrained because of their

relationship with boycotted country X.

A may enter into the contract, because dealings with local merchants are

activities exclusively within Y.

(ii) A, a banking subsidiary of U.S. bank B, is a bona fide resident of

boycotting country Y. From time to time, A purchases office supplies from

the United States.

A's purchase of office supplies is not an activity exclusively within Y,

because it involves the import of goods from abroad.

(iii) A, a branch of U.S. bank B, is a bona fide resident of boycotting

country Y. Under Y's boycott laws, A is required to supply information

about whether A has any dealings with boycotted country X. A compiles and

furnishes the information within Y and does so of its own knowledge.

A may comply with that requirement, because in compiling and furnishing

the information within Y, based on its own knowledge, A is engaging in an

activity exclusively within Y.

(iv) Same as (iii), except that A is required to supply information about

B's dealings with X. From its own knowledge and without making any inquiry

of B, A compiles and furnishes the information.

A may comply with that requirement, because in compiling and furnishing

the information within Y, based on its own knowledge, A is engaging in an

activity exclusively within Y.

(v) Same as (iv), except that in making its responses, A asks B to compile

some of the information.

A may not comply, because the gathering of the necessary information takes

place partially outside Y.

(vi) U.S. company A has applied for a license to establish a permanent

manufacturing facility in boycotting country Y. Under Y's boycott law, A

must agree, as a condition of the license, that it will not sell any of

its output to blacklisted foreign firms.

A may not comply, because the agreement would govern activities of A which

are not exclusively within Y.

Discrimination Against United States Persons

(i) A, a subsidiary of U.S. company B, is a bona fide resident of

boycotting country Y. A manufactures air conditioners in its plant in Y.

Under Y's boycott laws, A must agree not to hire nationals of boycotted

country X.

A may agree to the restriction and may abide by it with respect to its

recruitment of individuals within Y, because the recruitment of such

individuals is an activity exclusively within Y. However, A cannot abide

by this restriction with respect to its recruitment of individuals outside

Y, because this is not an activity exclusively within Y.

(ii) Same as (i), except that pursuant to Y's boycott laws, A must agree

not to hire anyone who is of a designated religion.

A may not agree to this restriction, because the agreement calls for

discrimination against U.S. persons on the basis of religion. It makes no

difference whether the recruitment of the U.S. persons occurs within or

without Y.

(Note: The exception for compliance with local law does not apply to

boycott-based refusals to employ U.S. persons on the basis of race,

religion, sex, or national origin even if the activity is exclusively

within the boycotting country.)

(i) Compliance with local import law. (1) Any United States person who is

a bona fide resident of a foreign country, including a boycotting country,

may, in importing goods, materials or components into that country, comply

or agree to comply with the import laws of that country, provided that:

(i) The items are for his own use or for his use in performing contractual

services within that country; and

(ii) In the normal course of business, the items are identifiable as to

their source or origin at the time of their entry into the foreign country

by:

(a) Uniqueness of design or appearance; or

(b) Trademark, trade name, or other identification normally on the items

themselves, including their packaging.

(2) The factors that will be considered in determining whether a United

States person is a bona fide resident of a foreign country are those set

forth in paragraph (g) of this section. Bona fide residence of a United

States company's subsidiary, affiliate, or other permanent establishment

in a foreign country does not confer such residence on such United States

company. Likewise, bona fide residence of a United States company's

employee in a foreign country does not confer such residence on the entire

company.

(3) A United States person who is a bona fide resident of a foreign

country may take action under this exception through an agent outside the

country, but the agent must act at the direction of the resident and not

exercise his own discretion. Therefore, if a United States person resident

in a boycotting country takes action to comply with a boycotting country's

import law with respect to the importation of qualified goods, he may

direct his agent in the United States on the action to be taken, but the

United States agent himself may not exercise any discretion.

(4) For purposes of this exception, the test that governs whether goods or

components of goods are specifically identifiable is identical to the test

applied in paragraph (d) of this section on Compliance With Unilateral

and Specific Selection to determine whether they are identifiable as to

their source or origin in the normal course of business.

(5) The availability of this exception for the import of goods depends on

whether the goods are intended for the United States person's own use at

the time they are imported. It does not depend upon who has title to the

goods at the time of importation into a foreign country.

(6) Goods are for the United States person's own use (including the

performance of contractual services within the foreign country) if:

(i) They are to be consumed by the United States person;

(ii) They are to remain in the United States person's possession and to be

used by that person;

(iii) They are to be used by the United States person in performing

contractual services for another;

(iv) They are to be further manufactured, incorporated into, refined into,

or reprocessed into another product to be manufactured for another; or

(v) They are to be incorporated into, or permanently affixed as a

functional part of, a project to be constructed for another.

(7) Goods acquired to fill an order for such goods from another are not

for the United States person's own use. Goods procured for another are not

for one's own use, even if the furnishing of procurement services is the

business in which the United States person is customarily engaged. Nor are

goods obtained for simple resale acquired for one's own use, even if the

United States person is engaged in the retail business. Likewise, goods

obtained for inclusion in a turnkey project are not for one's own use if

they are not customarily incorporated into, or do not customarily become

permanently affixed as a functional part of the project.

(8) This part of the local law exception does not apply to the import of

services, even when the United States person importing such services is a

bona fide resident of a boycotting country and is importing them for his

own use. In addition, this exception is available for a United States

person who is a bona fide resident of a foreign country only when the

individual or entity actually present within that country takes action

through the exercise of his own discretion.

(9) Use of this exception will be monitored and continually reviewed to

determine whether its continued availability is consistent with the

national interest. Its availability may be limited or withdrawn as

appropriate. In reviewing the continued availability of this exception,

the effect that the inability to comply with local import laws would have

on the economic and other relations of the United States with boycotting

countries will be considered.

(10) A United States person who is a bona fide resident of a foreign

country may comply or agree to comply with the host country's import laws

even if he knows or has reason to know that particular laws are

boycott-related. However, no United States person may comply or agree to

comply with any host country law which would require him to discriminate

against any United States person on the basis of race, religion, sex, or

national origin, or to supply information about any United States person's

race, religion, sex, or national origin.

Examples of Permissible Compliance With Local Import Law

The following examples are intended to give guidance in determining the

circumstances in which compliance with local import law is permissible.

They are illustrative, not comprehensive.

Compliance by a Bona Fide Resident

(i) A, a subsidiary of U.S. company B, is a bona fide resident of

boycotting country Y and is engaged in oil drilling operations in Y. In

acquiring certain large, specifically identifiable products for carrying

out its operations in Y, A chooses only from non-blacklisted firms because

Y's import laws prohibit the importation of goods from blacklisted firms.

However, with respect to smaller items, B makes the selection on behalf of

A and sends them to A in Y.

A may choose from non-blacklisted firms, because it is a U.S. person who

is a bona fide resident in Y. However, because B is not resident in Y, B

cannot make boycott-based selections to conform with Y's import laws

prohibiting the importation of goods from blacklisted firms.

(ii) Same as (i), except that after making its choices on the larger

items, A directs B to carry out its instructions by entering into

appropriate contracts and making necessary shipping arrangements.

B may carry out A's instructions provided that A, a bona fide resident of

Y, has in fact made the choice and B is exercising no discretion, but is

acting only as A's agent.

(Note: Such transactions between related companies will be scrutinized

carefully. A must in fact exercise the discretion and make the selections.

If the discretion is exercised by B, B would be in violation of this

part.)

(iii) U.S. construction company A has a contract to build a school in

boycotting country Y. A's employees set up operations in Y for purposes of

commencing construction. A's employees in Y advise A's headquarters in the

United States that Y's import laws prohibit importation of goods

manufactured by blacklisted firms. A's headquarters then issues

invitations to bid only to non-blacklisted firms for certain specifically

identifiable goods.

A's headquarters' choice of non-blacklisted suppliers is not a choice made

by a U.S. person who is a bona fide resident of Y, because the discretion

in issuing the bids was exercised in the United States, not in Y.

(iv) Same as (iii), except that A's employees in Y actually make the

decision regarding to whom the bids should be issued.

The choices made by A's employees are choices made by U.S. persons who are

bona fide residents of Y, because the discretion in choosing was exercised

solely in Y.

(Note: Choices purportedly made by employees of U.S. companies who are

resident in boycotting countries will be carefully scrutinized to ensure

that the discretion was exercised entirely in the boycotting country.)

Specifically Identifiable Goods

The test and examples as to what constitutes specifically identifiable

goods are identical to those applicable under paragraph (d) of this

section on Compliance With Unilateral Selection.

Imports for U.S. Person's Own Use Within Boycotting Country

(i) A, a subsidiary of U.S. company B, is a bona fide resident of

boycotting country Y. A plans to import computer operated machine tools to

be installed in its automobile plant in boycotting country Y. The

computers are mounted on a separate bracket on the side of the equipment

and are readily identifiable by brand name. A orders the tools from U.S.

supplier C and specifies that C must incorporate computers manufactured by

D, a non-blacklisted company. A would have chosen computers manufactured

by E, except that E is blacklisted, and Y's import laws prohibit the

importation of goods manufactured by blacklisted firms.

A may refuse to purchase E's computers, because A is importing the

computers for its own use in its manufacturing operations in Y.

(ii) A, a subsidiary of U.S. company B, is a bona fide resident of

boycotting country Y. To meet the needs of its employees in Y, A imports

certain specifically identifiable commissary items for sale, such as

cosmetics; and canteen items, such as candy. In selecting such items for

importation into Y, A chooses items made only by non-blacklisted firms,

because Y's import laws prohibit importation of goods from blacklisted

firms.

A may import these items only from non-blacklisted firms, because the

importation of goods for consumption by A's employees is an importation

for A's own use.

(iii) A, a U.S. construction company which is a bona fide resident of

boycotting country Y, has a contract to build a hospital complex for the

Ministry of Health in Y. Under the contract, A will be general manager of

the project with discretion to choose all subcontractors and suppliers.

The complex is to be built on a turnkey basis, with A retaining title to

the property and bearing all financial risk until the complex is conveyed

to Y. In choosing specifically identifiable goods for import, such as

central air conditioning units and plate glass, A excludes blacklisted

suppliers in order to comply with Y's import laws. These goods are

customarily incorporated into, or permanently affixed as a functional part

of, the project.

A may refuse to deal with blacklisted suppliers of specifically

identifiable goods, because importation of goods by a general contractor

to be incorporated into a construction project in Y is an importation of

goods for A's own use.

(iv) Same as (iii), except that, in addition, in choosing U.S. architects

and engineers to work on the project, A excludes blacklisted firms,

because Y's import laws prohibit the use of services rendered by

blacklisted persons.

A may not refuse to deal with blacklisted architectural or engineering

firms, because this exception does not apply to the import of services. It

is irrelevant that, at some stage, the architectural or engineering

drawings or plans may be brought to the site in Y. This factor is

insufficient to transform such services into goods for purposes of this

exception.

(v) Same as (iii), except that the project is to be completed on a cost

plus basis, with Y making progress payments to A at various stages of

completion.

A may refuse to deal with blacklisted suppliers of specifically

identifiable goods, because the importation of goods by A to be

incorporated in a project A is under contract to complete is an

importation of goods for its own use. The terms of payment are irrelevant.

(vi) A, a U.S. construction company which is a bona fide resident of

boycotting country Y, has a contract for the construction of an office

building in Y on a turnkey basis. In choosing goods to be used or included

in the office complex, A orders wallboard, office partitions, and lighting

fixtures from non-blacklisted manufacturers. A likewise orders desks,

office chairs, typewriters, and office supplies from non-blacklisted

manufacturers.

Because they are customarily incorporated into or permanently affixed as a

functional part of an office building, the wallboard, office partitions,

and lighting fixtures are for A's own use, and A may select

non-blacklisted suppliers of these goods in order to comply with Y's

import laws. Because they are not customarily incorporated into or

permanently affixed to the project, the desks, office chairs, typewriters,

and office supplies are not for A's own use, and A may not make

boycott-based selections of the suppliers of these goods.

(vii) A, a U.S. company engaged in the business of selling automobiles, is

a bona fide resident of boycotting country Y. In ordering automobiles from

time to time for purposes of stocking its inventory, A purchases from U.S.

manufacturer B, but not U.S. manufacturer C, because C is blacklisted.

Retail sales are subsequently made from this inventory.

A's import of automobiles from B is not an import for A's own use, because

the importation of items for general inventory in a retail sales operation

is not an importation for one's own use.

(viii) A, a U.S. company engaged in the manufacture of pharmaceutical

products, is a bona fide resident of boycotting country Y. In importing

chemicals for incorporation into the pharmaceutical products, A purchases

from U.S. supplier B, but not U.S. supplier C, because C is blacklisted.

A may import chemicals from B rather than C, because the importation of

specifically identifiable items for incorporation into another product is

an importation for one's own use.

(ix) A, a U.S. management company which is a bona fide resident of

boycotting country Y, has a contract with the Ministry of Education in Y

to purchase supplies for Y's school system. From time to time, A purchases

goods from abroad for delivery to various schools in Y.

A's purchase of goods for Y's school system does not constitute an

importation of goods for A's own use, because A is acting as a procurement

agent for another. A, therefore, cannot make boycott-based selections of

suppliers of such school supplies.

(x) A, a U.S. company which is a bona fide resident of boycotting country

Y, has a contract to make purchases for Y in connection with a

construction project in Y. A is not engaged in the construction of, or in

any other activity in connection with, the project. A's role is merely to

purchase goods for Y and arrange for their delivery to Y.

A is not purchasing goods for its own use, because A is acting as a

procurement agent for Y. A, therefore, cannot make boycott selections of

suppliers of such goods.

(xi) A, a U.S. company which is a bona fide resident of boycotting country

Y, imports specifically identifiable goods into Y for exhibit by A at a

trade fair in Y. In selecting goods for exhibit, A excludes items made by

blacklisted firms.

A's import of goods for its exhibit at a trade fair constitutes an import

for A's own use. However, A may not sell in Y those goods it imported for

exhibit.

(xii) A is a bona fide resident of boycotting countries Y and Z. In

compliance with Y's boycott laws, A chooses specifically identifiable

goods for its oil drilling operations in Y and Z by excluding blacklisted

suppliers. The goods are first imported into Y. Those purchased for A's

use in Z are then transshipped to Z.

In selecting those goods for importation into Y, A is making an import

selection for its own use, even though A may use some of the imported

goods in Z. Further, the subsequent shipment from Y to Z of those goods

purchased for use in Z is an import into Z for A's own use.

[61 FR 12862, Mar. 25, 1996, as amended at 65 FR 34946, June 1, 2000; 73

FR 68327, Nov. 18, 2008]

760.4 Evasion.

top

(a) No United States person may engage in any transaction or take any

other action, either independently or through any other person, with

intent to evade the provisions of this part. Nor may any United States

person assist another United States person to violate or evade the

provisions of this part.

(b) The exceptions set forth in 760.3(a) through (i) do not permit

activities or agreements (express or implied by a course of conduct,

including a pattern of responses) which are otherwise prohibited by this

part and which are not within the intent of such exceptions. However,

activities within the coverage and intent of the exceptions set forth in

this part do not constitute evasion regardless of how often such

exceptions are utilized.

(c) Use of any artifice, device or scheme which is intended to place a

person at a commercial disadvantage or impose on him special burdens

because he is blacklisted or otherwise restricted for boycott reasons from

having a business relationship with or in a boycotting country will be

regarded as evasion for purposes of this part.

(d) Unless permitted under one of the exceptions, use of risk of loss

provisions that expressly impose a financial risk on another because of

the import laws of a boycotting country may constitute evasion. If they

are introduced after January 18, 1978, their use will be presumed to

constitute evasion. This presumption may be rebutted by a showing that

such a provision is in customary usage without distinction between

boycotting and non-boycotting countries and that there is a legitimate

non-boycott reason for its use. On the other hand, use of such a provision

by a United States person subsequent to January 18, 1978 is presumed not

to constitute evasion if the provision had been customarily used by that

person prior to January 18, 1978.

(e) Use of dummy corporations or other devices to mask prohibited activity

will also be regarded as evasion. Similarly, it is evasion under this part

to divert specific boycotting country orders from a United States parent

to a foreign subsidiary for purposes of complying with prohibited boycott

requirements. However, alteration of a person's structure or method of

doing business will not constitute evasion so long as the alteration is

based on legitimate business considerations and is not undertaken solely

to avoid the application of the prohibitions of this part. The facts and

circumstances of an arrangement or transaction will be carefully

scrutinized to see whether appearances conform to reality.

Examples

The following examples are intended to give guidance to persons in

determining circumstances in which this section will apply. They are

illustrative, not comprehensive.

(i) A, a U.S. insurance company, receives a request from boycotting

country Y asking whether it does business in boycotted country X. Because

furnishing such information is prohibited, A declines to answer and as a

result is placed on Y's blacklist. The following year, A's annual report

contains new information about A's worldwide operations, including a list

of all countries in which A does business. A then mails a copy of its

annual report, which has never before contained such information, to

officials of the government of country Y.

Absent some business justification unrelated to the boycott for changing

the annual report in this fashion, A's action constitutes evasion of this

part.

(ii) A, a U.S. construction firm resident in boycotting country Y, orders

lumber from U.S. company B. A unilaterally selects B in part because U.S.

lumber producer C is blacklisted by Y and C's products are therefore not

importable. In placing its order with B, A requests that B stamp its name

or logo on the lumber so that A can be certain that it is, in fact,

receiving B's products. B does not normally so stamp its lumber, and A's

purpose in making the request is to appear to fit within the unilateral

selection exception of this part.

Absent additional facts justifying A's action, A's action constitutes

evasion of this part.

(iii) A, a U.S. company, has been selling sewing machines to boycotting

country Y for a number of years. A receives a request for a negative

certificate of origin from a new customer. A is aware that furnishing such

certificates are prohibited; therefore, A arranges to have all future

shipments run through a foreign corporation in a third country which will

affix the necessary negative certificate before forwarding the machines on

to Y.

A's action constitutes evasion of this part, because it is a device to

mask prohibited activity carried out on A's behalf.

(iv) A, a U.S. company, has been selling calculators to distributor B in

country C for a number of years and routinely supplies positive

certificates of origin. A receives an order from country Y which requires

negative certificates of origin. A arranges to make all future sales to

distributor B in country C. A knows B will step in and make the sales to Y

which A would otherwise have made directly. B will make the necessary

negative certifications. A's warranty, which it will continue to honor,

runs to the purchaser in Y.

A's action constitutes evasion, because the diverting of orders to B is a

device to mask prohibited activity carried out on A's behalf.

(v) A, a U.S. company, is negotiating a long-term contract with boycotting

country Y to meet all Y's medical supply needs. Y informs A that before

such a contract can be concluded, A must complete Y's boycott

questionnaire. A knows that it is prohibited from answering the

questionnaire so it arranges for a local agent in Y to supply the

necessary information.

A's action constitutes evasion of this part, because it is a device to

mask prohibited activity carried out on A's behalf.

(vi) A, a U.S. contractor which has not previously dealt with boycotting

country Y, is awarded a construction contract by Y. Because it is

customary in the construction industry for a contractor to establish an

on-site facility for the duration of the project, A establishes such an

office, which satisfies the requirements for bona fide residency.

Thereafter, A's office in Y takes a number of actions permitted under the

compliance with local law exception.

A's actions do not constitute evasion, because A's facility in Y was

established for legitimate business reasons.

(vii) A, a controlled foreign subsidiary of U.S. company B, is located in

non-boycotting country M. A and B both make machine tools for sale in

their respective marketing regions. B's marketing region includes

boycotting country Y. After assessing the requirements of this part, B

decides that it can no longer make machines for sale in Y. Instead, A

decides to expand its facilities in M in order to service the Y market.

The actions of A and B do not constitute evasion, because there is a

legitimate business reason for their actions. It is irrelevant that the

effect may be to place sales which would otherwise have been subject to

this part beyond the reach of this part.

(viii) A, a U.S. manufacturer, from time to time receives purchase orders

from boycotting country Y which A fills from its plant in the United

States. A knows that it is about to receive an order from Y which contains

a request for a certification which A is prohibited from furnishing under

this part. In order to permit the certification to be made, A diverts the

purchase order to its foreign subsidiary.

A's diversion of the purchase order constitutes evasion of this part,

because it is a device to mask prohibited activity carried out on A's

behalf.

(ix) A, a U.S. company, is engaged in assembling drilling rigs for

shipment to boycotting country Y. Because of potential difficulties in

securing entry into Y of materials supplied by blacklisted firms, A

insists that blacklisted firms take a 15 percent discount on all materials

which they supply to A. As a result, no blacklisted firms are willing to

transact with A.

A's insistence on the discount for materials supplied by blacklisted firms

constitutes evasion of this part, because it is a device or scheme which

is intended to place a special burden on blacklisted firms because of Y's

boycott.

(x) Same as (ix), except that shortly after January 18, 1978, A, a U.S.

company, insists that its suppliers sign contracts which provide that even

after title passes from the supplier to A, the supplier will bear the risk

of loss and indemnify A if goods which the supplier has furnished are

denied entry into Y for boycott reasons.

A's action constitutes evasion of this part, because it is a device or

scheme which is intended to place a special burden on blacklisted persons

because of Y's boycott.

(xi) Same as (x), except that A customarily insisted on such an

arrangement with its supplier prior to January 18, 1978.

A's action is presumed not to constitute evasion, because use of this

contractual arrangement was customary for A prior to January 18, 1978.

(xii) A, a U.S. company, has a contract to supply automobile sub-assembly

units to boycotting country Y. Shortly after January 18, 1978, A insists

that its suppliers sign contracts which provide that even after title

passes to A, the supplier will bear the risk of loss and indemnify A if

goods which the supplier has furnished are denied entry into boycotting

country Y for any reason.

A's insistence on this arrangement is presumed to constitute evasion,

because it is a device which is intended to place a special burden on

blacklisted firms because of Y's boycott. The presumption may be rebutted

by competent evidence showing that use of such an arrangement is customary

without regard to the boycotting or non-boycotting character of the

country to which it relates and that there is a legitimate non-boycott

business reason for its use.

(xiii) Same as (vii), except that A requires that all suppliers make

in-country delivery.

A's action does not constitute evasion, because it is an ordinary

commercial practice to require in-country delivery of goods.

(xiv) Same as (xii), except that A requires that title remain with the

supplier until delivery in Y has been made.

A's action does not constitute evasion, because it is ordinary commercial

practice to require that title remain with the supplier until delivery has

been made. This example is distinguishable from example (xii), because in

example (xii) A had insisted on an extraordinary arrangement designed to

require that the risk of loss remain with the supplier even after title

had passed to A.

(xv) U.S. bank A is contacted by U.S. company B to finance B's transaction

with boycotting country Y. Payment will be effected through a letter of

credit in favor of B at its U.S. address. A knows that the letter of

credit will contain restrictive boycott conditions which would bar its

implementation by A if the beneficiary were a U.S. person. A advises B of

the boycott condition and suggests to B that the beneficiary should be

changed to C, a shell corporation in non-boycotting country M. The

beneficiary is changed accordingly.

The actions of both A and B constitute evasion of this part, because the

arrangement is a device to mask prohibited activities.

(xvi) Same as (xv), except that U.S. company B, the beneficiary of the

letter of credit, arranges to change the beneficiary to B's foreign

subsidiary so that A can implement the letter of credit. A knows that this

has been done.

A's implementation of the letter of credit in the face of its knowledge of

B's action constitutes evasion of this part, because A's action is part of

a device to mask prohibited activity by both parties.

(xvii) U.S. bank A, located in the United States, is contacted by foreign

company B to finance B's transaction with boycotting country Y. B is a

controlled subsidiary of a U.S. company. The transaction which is to be

financed with a letter of credit payable to B at its foreign address,

requires B to certify that none of its board members are of a particular

religious faith. Since B cannot legally furnish the certificate, it asks A

to convey the necessary information to Y through A's bank branch in Y.

Such information would be furnished wholly outside the letter of credit

transaction.

A's action constitutes evasion of this part, because it is undertaken to

assist B's violation of this part.

(xviii) U.S. bank A is asked by foreign corporation B to implement a

letter of credit in favor of B so that B might perform under its long-term

contract with boycotting country Y. Under the terms of the letter of

credit, B is required to certify that none of its suppliers is

blacklisted. A knows that it cannot implement a letter of credit with this

condition, so it tells B to negotiate the elimination of this requirement

from the letter of credit and instead supply the certification to Y

directly.

A's suggestion to B that it provide the negative certification to Y

directly constitutes evasion of this part, because A is taking an action

through another person to mask prohibited activity on A's part.

[61 FR 12862, Mar. 25, 1996, as amended at 65 FR 34947, June 1, 2000]

760.5 Reporting requirements.

top

(a) Scope of reporting requirements. (1) A United States person who

receives a request to take any action which has the effect of furthering

or supporting a restrictive trade practice or boycott fostered or imposed

by a foreign country against a country friendly to the United States or

against any United States person must report such request to the

Department of Commerce in accordance with the requirements of this

section. Such a request may be either written or oral and may include a

request to furnish information or enter into or implement an agreement. It

may also include a solicitation, directive, legend or instruction that

asks for information or that asks that a United States person take or

refrain from taking a particular action. Such a request shall be reported

regardless of whether the action requested is prohibited or permissible

under this part, except as otherwise provided by this section.

(2) For purposes of this section, a request received by a United States

person is reportable if he knows or has reason to know that the purpose of

the request is to enforce, implement, or otherwise further, support, or

secure compliance with an unsanctioned foreign boycott or restrictive

trade practice.

(i) A request received by a United States person located in the United

States is reportable if it is received in connection with a transaction or

activity in the interstate or foreign commerce of the United States, as

determined under 760.1(d)(1) through (5) and (18) of this part.

(ii) A request received by a United States person located outside the

United States (that is, a foreign subsidiary, partnership, affiliate,

branch, office, or other permanent foreign establishment which is

controlled in fact by any domestic concern, as determined under 760.1(c)

of this part) is reportable if it is received in connection with a

transaction or activity in the interstate or foreign commerce of the

United States, as determined under 760.1(d)(6) through (17) and (19) of

this part.

(iii) A request such as a boycott questionnaire, unrelated to a particular

transaction or activity, received by any United States person is

reportable when such person has or anticipates a business relationship

with or in a boycotting country involving the sale, purchase or transfer

of goods or services (including information) in the interstate or foreign

commerce of the United States, as determined under 760.1(d) of this part.

(3) These reporting requirements apply to all United States persons. They

apply whether the United States person receiving the request is an

exporter, bank or other financial institution, insurer, freight forwarder,

manufacturer, or any other United States person subject to this part.

(4) The acquisition of information about a boycotting country's boycott

requirements through the receipt or review of books, pamphlets, legal

texts, exporters' guidebooks and other similar publications does not

constitute receipt of a reportable request for purposes of this section.

In addition, a United States person who receives an unsolicited invitation

to bid, or similar proposal, containing a boycott request has not received

a reportable request for purposes of this section where he does not

respond to the invitation to bid or other proposal.

(5) Because of the use of certain terms for boycott and non-boycott

purposes; because of Congressional mandates to provide clear and precise

guidelines in areas of inherent uncertainty; and because of the

Department's commitment to minimize paperwork and reduce the cost of

reporting where it will not impair the Department's ability to continue to

monitor foreign boycotts, the following specific requests are not

reportable:

(i) A request to refrain from shipping goods on a carrier which flies the

flag of a particular country or which is owned, chartered, leased or

operated by a particular country or by nationals or residents of a

particular country, or a request to certify to that effect.

(ii) A request to ship goods via a prescribed route, or a request to

refrain from shipping goods via a proscribed route, or a request to

certify to either effect.

(iii) A request to supply an affirmative statement or certification

regarding the country of origin of goods.

(iv) A request to supply an affirmative statement or certification

regarding the name of the supplier or manufacturer of the goods shipped or

the name of the provider of services.

(v) A request to comply with the laws of another country except where the

request expressly requires compliance with that country's boycott laws.

(vi) A request to an individual to supply information about himself or a

member of his family for immigration, passport, visa, or employment

purposes.

(vii) A request to supply an affirmative statement or certification

indicating the destination of exports or confirming or otherwise

indicating that such cargo will be unloaded or discharged at a particular

destination.

(viii) A request to supply a certificate by the owner, master, charterer,

or any employee thereof, that a vessel, aircraft, truck or any other mode

of transportation is eligible, otherwise eligible, permitted, or allowed

to enter, or not restricted from entering, a particular port, country, or

group of countries pursuant to the laws, rules, or regulations of that

port, country, or group of countries.

(ix) A request to supply a certificate from an insurance company stating

that the insurance company has a duly authorized agent or representative

within a boycotting country and/or the name and address of such agent.

(x) A request to comply with a term or condition of a transaction that

provides that the vendor bear the risk of loss and indemnify the purchaser

if the vendor's goods are denied entry into a country for any reason

(risk of loss clause) if such clause was in use by the purchaser prior

to January 18, 1978.

(6) No United States person may engage in any transaction or take any

other action, either independently or through any other person, with

intent to evade the provisions of this part.

(7) From time to time the Department will survey domestic concerns for

purposes of determining the worldwide scope of boycott requests received

by their controlled foreign subsidiaries and affiliates with respect to

their activities outside United States commerce. This pertains to requests

which would be reportable under this section but for the fact that the

activities to which the requests relate are outside United States

commerce. The information requested will include the number and nature of

non-reportable boycott requests received, the action(s) requested, the

actions(s) taken in response and the countries in which the requests

originate. The results of such surveys, including the names of those

surveyed, will be made public.

(b) Manner of reporting. (1) Each reportable request must be reported.

However, if more than one document (such as an invitation to bid, purchase

order, or letter of credit) containing the same boycott request is

received as part of the same transaction, only the first such request need

be reported. Individual shipments against the same purchase order or

letter of credit are to be treated as part of the same transaction. Each

different boycott request associated with a given transaction must be

reported, regardless of how or when the request is received.

(2) Each United States person actually receiving a reportable request must

report that request. However, such person may designate someone else to

report on his behalf. For example, a United States company, if authorized,

may report on behalf of its controlled foreign subsidiary or affiliates; a

freight forwarder, if authorized, may report on behalf of the exporter;

and a bank, if authorized, may report on behalf of the beneficiary of a

letter of credit. If a person designated to report a request received by

another receives an identical request directed to him in connection with

the same transaction, he may file one report on behalf of himself and the

other person.

(3) Where a person is designated to report on behalf of another, the

person receiving the request remains liable for any failure to report or

for any representations made on his behalf. Further, anyone reporting on

behalf of another is not relieved of his own responsibility for reporting

any boycott request which he receives, even if it is an identical request

in connection with the same transaction.

(4) Reports must be submitted in duplicate to: Report Processing Staff,

Office of Antiboycott Compliance, U.S. Department of Commerce, Room 6098,

Washington, D.C. 20230. Each submission must be made in accordance with

the following requirements:

(i) Where the person receiving the request is a United States person

located in the United States, each report of requests must be postmarked

by the last day of the month following the calendar quarter in which the

request was received (e.g., April 30 for the quarter consisting of

January, February, and March).

(ii) Where the person receiving the request is a United States person

located outside the United States, each report of requests must be

postmarked by the last day of the second month following the calendar

quarter in which the request was received (e.g., May 31 for the quarter

consisting of January, February, and March).

(5) At the reporting person's option, reports may be submitted on either a

single transaction form (Form BIS621P, Report of Restrictive Trade

Practice or Boycott Request Single Transaction (revised 1089)) or on a

multiple transaction form (Form BIS6051P, Report of Request for

Restrictive Trade Practice or Boycott Multiple Transactions (revised

1089)). Use of the multiple transaction form permits the reporting person

to provide on one form all required information relating to as many as 75

reportable requests received within any single reporting period.

(6) Reports, whether submitted on the single transaction form or on the

multiple transaction form, must contain entries for every applicable item

on the form, including whether the reporting person intends to take or has

taken the action requested. If the reporting person has not decided what

action he will take by the time the report is required to be filed, he

must later report the action he decides to take within 10 business days

after deciding. In addition, anyone filing a report on behalf of another

must so indicate and identify that other person.

(7) Each report of a boycott request must be accompanied by two copies of

the relevant page(s) of any document(s) in which the request appears.

Reports may also be accompanied by any additional information relating to

the request as the reporting person desires to provide concerning his

response to the request.

(8) Records containing information relating to a reportable boycott

request, including a copy of any document(s) in which the request appears,

must be maintained by the recipient for a five-year period after receipt

of the request. The Department may require that these materials be

submitted to it or that it have access to them at any time within that

period. (See part 762 of the EAR for additional recordkeeping

requirements.)

(c) Disclosure of information. (1) Reports of requests received on or

after October 7, 1976, as well as any accompanying documents filed with

the reports, have been and will continue to be made available for public

inspection and copying, except for certain proprietary information. With

respect to reports of requests received on or after August 1, 1978, if the

person making the report certifies that a United States person to whom the

report relates would be placed at a competitive disadvantage because of

the disclosure of information regarding the quantity, description, or

value of any articles, materials, and supplies, including related

technical data and other information, whether contained in a report or in

any accompanying document(s), such information will not be publicly

disclosed except upon failure by the reporting entity to edit the public

inspection copy of the accompanying document(s) as provided by paragraph

(c)(2) of this section, unless the Secretary of Commerce determines that

the disclosure would not place the United States person involved at a

competitive disadvantage or that it would be contrary to the national

interest to withhold the information. In the event the Secretary of

Commerce considers making such a determination concerning competitive

disadvantage, appropriate notice and an opportunity for comment will be

given before any such proprietary information is publicly disclosed. In no

event will requests of reporting persons to withhold any information

contained in the report other than that specified in this paragraph be

honored.

(2) Because a copy of any document(s) accompanying the report will be made

available for public inspection and copying, one copy must be submitted

intact and another copy must be edited by the reporting entity to delete

the same information which it certified in the report would place a United

States person at a competitive disadvantage if disclosed. In addition, the

reporting entity may delete from this copy information that is considered

confidential and that is not required to be contained in the report (e.g.,

information related to foreign consignee). This copy should be

conspicuously marked with the legend Public Inspection Copy. With

respect to documents accompanying reports received by the Department on or

after July 1, 1979, the public inspection copy will be made available as

submitted whether or not it has been appropriately edited by the reporting

entity as provided by this paragraph.

(3) Reports and accompanying documents which are available to the public

for inspection and copying are located in the BIS Freedom of Information

Records Inspection Facility, Room 4525, Department of Commerce, 14th

Street and Constitution Avenue, N.W., Washington, D.C. 20230. Requests to

inspect such documents should be addressed to that facility.

(4) The Secretary of Commerce will periodically transmit summaries of the

information contained in the reports to the Secretary of State for such

action as the Secretary of State, in consultation with the Secretary of

Commerce, may deem appropriate for carrying out the policies in section

8(b)(2) of the Export Administration Act of 1979.

Examples

The following examples are intended to give guidance in determining what

is reportable. They are illustrative, not comprehensive.

(i) A, a U.S. manufacturer, is shipping goods to boycotting country Y and

is asked by Y to certify that it is not blacklisted by Y's boycott office.

The request to A is reportable, because it is a request to A to comply

with Y's boycott requirements.

(ii) A, a U.S. manufacturing company, receives an order for tractors from

boycotting country Y. Y's order specifies that the tires on the tractors

be made by B, another U.S. company. A believes Y has specified B as the

tire supplier because otherwise A would have used tires made by C, a

blacklisted company, and Y will not take shipment of tractors containing

tires made by blacklisted companies.

A must report Y's request for tires made by B, because A has reason to

know that B was chosen for boycott reasons.

(iii) Same as (ii), except A knows that Y's request has nothing to do with

the boycott but simply reflects Y's preference for tires made by B.

Y's request is not reportable, because it is unrelated to Y's boycott.

(iv) Same as (ii), except A neither knows nor has reason to know why Y has

chosen B.

Y's request is not reportable, because A neither knows nor has reason to

know that Y's request is based on Y's boycott.

(v) A, a controlled foreign subsidiary of U.S. company B, is a resident of

boycotting country Y. A is a general contractor. After being supplied by A

with a list of competent subcontractors, A's customer instructs A to use

subcontractor C on the project. A believes that C was chosen because,

among other things, the other listed subcontractors are blacklisted.

The instruction to A by its customer that C be used on the project is

reportable, because it is a request to comply with Y's boycott

requirements.

(vi) A, a controlled foreign subsidiary of U.S. company B, is located in

non-boycotting country P. A receives an order for washing machines from

boycotting country Y. Y instructs A that a negative certificate of origin

must accompany the shipment. The washing machines are made wholly in P,

without U.S. components.

Y's instruction to A regarding the negative certificate of origin is not

reportable, because the transaction to which it relates is not in U.S.

commerce.

(vii) Same as (vi), except that A obtains components from the United

States for the purpose of filling the order from Y. Y's instruction to A

regarding the negative certificate of origin is reportable, because the

transaction to which it relates is in U.S. commerce.

(viii) A, a U.S. construction company, receives in the mail an unsolicited

invitation to bid on a construction project in boycotting country Y. The

invitation to bid requires those who respond to certify that they do not

have any plants or branch offices in boycotted country X. A does not

respond.

A's receipt of the unsolicited invitation to bid is not reportable,

because the request does not relate to any present or anticipated business

of A with or in Y.

(ix) Same as (viii), except that A receives a boycott questionnaire from a

central boycott office. A does not do business in any of the boycotting

countries involved, and does not anticipate doing any business in those

countries. A does not respond.

A's receipt of the boycott questionnaire is not reportable, because it

does not relate to any present or anticipated business by A with or in a

boycotting country.

(x) A, a U.S. manufacturer, is seeking markets in which to expand its

exports. A sends a representative to boycotting country Y to explore Y's

potential as a market for A's products. A's representative discusses its

products but does not enter into any contracts on that trip. A does,

however, hope that sales will materialize in the future. Subsequently, A

receives a boycott questionnaire from Y.

A's receipt of the boycott questionnaire is reportable, because the

request relates to A's anticipated business with or in a boycotting

country. For purposes of determining whether a report is required, it

makes no difference whether A responds to the questionnaire, and it makes

no difference that actual sales contracts are not in existence or do not

materialize.

(xi) Same as (x), except that A's representative enters into a contract to

sell A's products to a buyer in boycotting country Y. Subsequently, A

receives a boycott questionnaire from Y.

A's receipt of the boycott questionnaire is reportable, because it relates

to A's present business with or in a boycotting country. For purposes of

determining whether a report is required, it makes no difference whether A

responds to the questionnaire.

(xii) A, a U.S. freight forwarder, purchases an exporter's guidebook which

includes the import requirements of boycotting country Y. The guidebook

contains descriptions of actions which U.S. exporters must take in order

to make delivery of goods to Y.

A's acquisition of the guidebook is not reportable, because he has not

received a request from anyone.

(xiii) A, a U.S. freight forwarder, is arranging for the shipment of goods

to boycotting country Y at the request of B, a U.S. exporter. B asks A to

assume responsibility to assure that the documentation accompanying the

shipment is in compliance with Y's import requirements. A examines an

exporters' guidebook, determines that Y's import regulations require a

certification that the insurer of the goods is not blacklisted and asks

U.S. insurer C for such a certification.

B's request to A is reportable by A, because it constitutes a request to

comply with Y's boycott as of the time A takes action to comply with Y's

boycott requirements in response to the request. A's request to C is

reportable by C.

(xiv) A, a U.S. freight forwarder, is arranging for the shipment of U.S.

goods to boycotting country Y. The manufacturer supplies A with all the

necessary documentation to accompany the shipment. Among the documents

supplied by the manufacturer is his certificate that he himself is not

blacklisted. A transmits the documentation supplied by the manufacturer.

A's action in merely transmitting documents received from the manufacturer

is not reportable, because A has received no request to comply with Y's

boycott.

(xv) Same as (xiv), except that A is asked by U.S. exporter B to assume

the responsibility to assure that the necessary documentation accompanies

the shipment whatever that documentation might be. B forwards to A a

letter of credit which requires that a negative certificate of origin

accompany the bill of lading. A supplies a positive certificate of origin.

Both A and B must report receipt of the letter of credit, because it

contains a request to both of them to comply with Y's boycott.

(xvi) Same as (xiv), except that the manufacturer fails to supply a

required negative certificate of origin, and A is subsequently asked by a

consular official of Y to see to it that the certificate is supplied. A

supplies a positive certificate of origin.

The consular official's request to A is reportable by A, because A was

asked to comply with Y's boycott requirements by supplying the negative

certificate of origin.

(xvii) A, a U.S. manufacturer, is shipping goods to boycotting country Y.

Arrangements have been made for freight forwarder B to handle the shipment

and secure all necessary shipping certifications. B notes that the letter

of credit requires that the manufacturer supply a negative certificate of

origin and B asks A to do so. A supplies a positive certificate of origin.

B's request to A is reportable by A, because A is asked to comply with Y's

boycott requirements by providing the negative certificate.

(xviii) A, a controlled foreign subsidiary of U.S. company B, is a

resident of boycotting country Y. A is engaged in oil exploration and

drilling operations in Y. In placing orders for drilling equipment to be

shipped from the United States, A, in compliance with Y's laws, selects

only those suppliers who are not blacklisted.

A's action in choosing non-blacklisted suppliers is not reportable,

because A has not received a request to comply with Y's boycott in making

these selections.

(xix) A, a controlled foreign subsidiary of U.S. company B, is seeking

permission to do business in boycotting country Y. Before being granted

such permission, A is asked to sign an agreement to comply with Y's

boycott laws.

The request to A is reportable, because it is a request that expressly

requires compliance with Y's boycott law and is received in connection

with A's anticipated business in Y.

(xx) A, a U.S. bank, is asked by a firm in boycotting country Y to confirm

a letter of credit in favor of B, a U.S. company. The letter of credit

calls for a certificate from B that the goods to be supplied are not

produced by a firm blacklisted by Y. A informs B of the letter of credit,

including its certification condition, and sends B a copy.

B must report the certification request contained in the letter of credit,

and A must report the request to confirm the letter of credit containing

the boycott condition, because both are being asked to comply with Y's

boycott.

(xxi) Same as (xx), except that the letter of credit calls for a

certificate from the beneficiary that the goods will not be shipped on a

vessel that will call at a port in boycotted country X before making

delivery in Y.

The request is not reportable, because it is a request of a type deemed by

this section to be in common use for non-boycott purposes.

(xxii) A, a U.S. company, receives a letter of credit from boycotting

country Y stating that on no condition may a bank blacklisted by Y be

permitted to negotiate the credit.

A's receipt of the letter of credit is reportable, because it contains a

request to A to comply with Y's boycott requirements.

(xxiii) A, a U.S. bank, receives a demand draft from B, a U.S. company, in

connection with B's shipment of goods to boycotting country Y. The draft

contains a directive that it is valid in all countries except boycotted

country X.

A's receipt of the demand draft is reportable, because it contains a

request to A to comply with Y's boycott requirements.

(xxiv) A, a U.S. exporter, receives an order from boycotting country Y. On

the order is a legend that A's goods, invoices, and packaging must not

bear a six-pointed star or other symbol of boycotted country X.

A's receipt of the order is reportable, because it contains a request to

comply with Y's boycott requirements.

(xxv) Same as (xxiv), except the order contains a statement that goods

exported must not represent part of war reparations to boycotted country

X.

A's receipt of the order is reportable, because it contains a request to A

to comply with Y's boycott requirements.

(xxvi) A, a U.S. contractor, is negotiating with boycotting country Y to

build a school in Y. During the course of the negotiations, Y suggests

that one of the terms of the construction contract be that A agree not to

import materials produced in boycotted country X. It is A's company policy

not to agree to such a contractual clause, and A suggests that instead it

agree that all of the necessary materials will be obtained from U.S.

suppliers. Y agrees to A's suggestion and a contract is executed.

A has received a reportable request, but, for purposes of reporting, the

request is deemed to be received when the contract is executed.

(xxvii) Same as (xxvi), except Y does not accept A's suggested alternative

clause and negotiations break off.

A's receipt of Y's request is reportable. For purposes of reporting, it

makes no difference that A was not successful in the negotiations. The

request is deemed to be received at the time the negotiations break off.

(xxviii) A, a U.S. insurance company, is insuring the shipment of drilling

equipment to boycotting country Y. The transaction is being financed by a

letter of credit which requires that A certify that it is not blacklisted

by Y. Freight forwarder B asks A to supply the certification in order to

satisfy the requirements of the letter of credit.

The request to A is reportable by A, because it is a request to comply

with Y's boycott requirements.

(xxix) A, a U.S. manufacturer, is engaged from time-to-time in supplying

drilling rigs to company B in boycotting country Y. B insists that its

suppliers sign contracts which provide that, even after title passes from

the supplier to B, the supplier will bear the risk of loss and indemnify B

if goods which the supplier has furnished are denied entry into Y for

whatever reason. A knows or has reason to know that this contractual

provision is required by B because of Y's boycott, and that B has been

using the provision since 1977. A receives an order from B which contains

such a clause.

B's request is not reportable by A, because the request is deemed to be

not reportable by these regulations if the provision was in use by B prior

to January 18, 1978.

(xxx) Same as (xxix), except that A does not know when B began using the

provision.

Unless A receives information from B that B introduced the term prior to

January 18, 1978, A must report receipt of the request.

(xxxi) A, a U.S. citizen, is a shipping clerk for B, a U.S. manufacturing

company. In the course of his employment, A receives an order for goods

from boycotting country Y. The order specifies that none of the components

of the goods is to be furnished by blacklisted firms.

B must report the request received by its employee, A, acting in the scope

of his employment. Although A is a U.S. person, such an individual does

not have a separate obligation to report requests received by him in his

capacity as an employee of B.

(xxxii) U.S. exporter A is negotiating a transaction with boycotting

country Y. A knows that at the conclusion of the negotiations he will be

asked by Y to supply certain boycott-related information and that such a

request is reportable. In an effort to forestall the request and thereby

avoid having to file a report, A supplies the information in advance.

A is deemed to have received a reportable request.

(xxxiii) A, a controlled foreign affiliate of U.S. company B, receives an

order for computers from boycotting country Y and obtains components from

the United States for the purpose of filling the order. Y instructs A that

a negative certificate of origin must accompany the shipment.

Y's instruction to A regarding the negative certificate of origin is

reportable by A. Moreover, A may designate B or any other person to report

on its behalf. However, A remains liable for any failure to report or for

any representations made on its behalf.

(xxxiv) U.S. exporter A, in shipping goods to boycotting country Y,

receives a request from the customer in Y to state on the bill of lading

that the vessel is allowed to enter Y's ports. The request further states

that a certificate from the owner or master of the vessel to that effect

is acceptable.

The request A received from his customer in Y is not reportable because it

is a request of a type deemed to be not reportable by these regulations.

(A may not make such a statement on the bill of lading himself, if he

knows or has reason to know it is requested for a boycott purpose.)

(xxxv) U.S. exporter A, in shipping goods to boycotting country Y,

receives a request from the customer in Y to furnish a certificate from

the owner of the vessel that the vessel is permitted to call at Y's ports.

The request A received from his customer in Y is not reportable because it

is a request of a type deemed to be not reportable by these regulations.

(xxxvi) U.S. exporter A, in shipping goods to boycotting country Y,

receives a request from the customer in Y to furnish a certificate from

the insurance company indicating that the company has a duly authorized

representative in country Y and giving the name of that representative.

The request A received from his customer in Y is not reportable if it was

received after the effective date of these rules, because it is a request

of a type deemed to be not reportable by these regulations.

[61 FR 12862, Mar. 25, 1996, as amended at 65 FR 34948, June 1, 2000]

Supplement No. 1 to Part 760Interpretations

top

It has come to the Department's attention that some U.S. persons are being

or may be asked to comply with new boycotting country requirements with

respect to shipping and insurance certifications and certificates of

origin. It has also come to the Department's attention that some U.S.

persons are being or may be asked to agree to new contractual provisions

in connection with certain foreign government or foreign government agency

contracts. In order to maximize its guidance with respect to section 8 of

the Export Administration Act of 1979, as amended (50 U.S.C. app. 2407)

and part 760 of the EAR, the Department hereby sets forth its views on

these certifications and contractual clauses.1

1 The Department originally issued this interpretation pursuant to the

Export Administration Amendments Act of 1979 (Public Law 9552) and the

regulations on restrictive trade practices and boycotts (15 CFR part 369)

published on January 25, 1978 (43 FR 3508) and contained in the 15 CFR

edition revised as of January 1, 1979.

I. Certifications

760.2(d) of this part prohibits a U.S. person from furnishing or

knowingly agreeing to furnish:

Information concerning his or any other person's past, present or

proposed business relationships:

(i) With or in a boycotted country;

(ii) With any business concern organized under the laws of a boycotted

country;

(iii) With any national or resident of a boycotted country; or

(iv) With any other person who is known or believed to be restricted from

having any business relationship with or in a boycotting country.

This prohibition, like all others under part 760, applies only with

respect to a U.S. person's activities in the interstate or foreign

commerce of the United States and only when such activities are undertaken

with intent to comply with, further, or support an unsanctioned foreign

boycott. (760.2(d)(5) of this part.)

This prohibition does not apply to the furnishing of normal business

information in a commercial context. ( 760.2(d)(3) of this part). Normal

business information furnished in a commercial context does not cease to

be such simply because the party soliciting the information may be a

boycotting country or a national or resident thereof. If the information

is of a type which is generally sought for a legitimate business purpose

(such as determining financial fitness, technical competence, or

professional experience), the information may be furnished even if the

information could be used, or without the knowledge of the person

supplying the information is intended to be used, for boycott purposes.

(760.2(d)(4) of this part).

The new certification requirements and the Department's interpretation of

the applicability of part 760 thereto are as follows:

A. Certificate of origin. A certificate of origin is to be issued by the

supplier or exporting company and authenticated by the exporting country,

attesting that the goods exported to the boycotting country are of purely

indigenous origin, and stating the name of the factory or the

manufacturing company. To the extent that the goods as described on the

certificate of origin are not solely and exclusively products of their

country of origin indicated thereon, a declaration must be appended to the

certificate of origin giving the name of the supplier/manufacturer and

declaring:

The undersigned, ______, does hereby declare on behalf of the above-named

supplier/manufacturer, that certain parts or components of the goods

described in the attached certificate of origin are the products of such

country or countries, other than the country named therein as specifically

indicated hereunder:

Country of Origin and Percentage of Value of Parts or Components Relative

to Total Shipment

1.____________________

2.____________________

3.____________________

Dated:____________________

Signature____________________


Sworn to before me, this ____ day of ______, 19 __. Notary Seal.

Interpretation

It is the Department's position that furnishing a positive certificate of

origin, such as the one set out above, falls within the exception

contained in 760.3(c) of this part for compliance with the import and

shipping document requirements of a boycotting country. See 760.3(c) of

this part and examples (i) and (ii) thereunder.

B. Shipping certificate. A certificate must be appended to the bill of

lading stating: (1) Name of vessel; (2) Nationality of vessel; and (3)

Owner of vessel, and declaring:

The undersigned does hereby declare on behalf of the owner, master, or

agent of the above-named vessel that said vessel is not registered in the

boycotted country or owned by nationals or residents of the boycotted

country and will not call at or pass through any boycotted country port

enroute to its boycotting country destination.

The undersigned further declares that said vessel is otherwise eligible

to enter into the ports of the boycotting country in conformity with its

laws and regulations.

Sworn to before me, this ____ day of _____, 19 __. Notary Seal.

Interpretation

It is the Department's position that furnishing a certificate, such as the

one set out above, stating: (1) The name of the vessel, (2) The

nationality of the vessel, and (3) The owner of the vessel and further

declaring that the vessel: (a) Is not registered in a boycotted country,

(b) Is not owned by nationals or residents of a boycotted country, and (c)

Will not call at or pass through a boycotted country port enroute to its

destination in a boycotting country falls within the exception contained

in 760.3(c) for compliance with the import and shipping document

requirements of a boycotting country. See 760.3(c) and examples (vii),

(viii), and (ix) thereunder.

It is also the Department's position that the owner, charterer, or master

of a vessel may certify that the vessel is eligible or otherwise

eligible to enter into the ports of a boycotting country in conformity

with its laws and regulations. Furnishing such a statement pertaining to

one's own eligibility offends no prohibition under this part 760. See

760.2(f), example (xiv).

On the other hand, where a boycott is in force, a declaration that a

vessel is eligible or otherwise eligible to enter the ports of the

boycotting country necessarily conveys the information that the vessel is

not blacklisted or otherwise restricted from having a business

relationship with the boycotting country. See 760.3(c) examples (vi),

(xi), and (xii). Where a person other than the vessel's owner, charterer,

or master furnishes such a statement, that is tantamount to his furnishing

a statement that he is not doing business with a blacklisted person or is

doing business only with non-blacklisted persons. Therefore, it is the

Department's position that furnishing such a certification (which does not

reflect customary international commercial practice) by anyone other than

the owner, charterer, or master of a vessel would fall within the

prohibition set forth in 760.2(d) unless it is clear from all the facts

and circumstances that the certification is not required for a boycott

reason. See 760.2(d)(3) and (4). See also part A., Permissible

Furnishing of Information, of Supplement No. 5 to this part.

C. Insurance certificate. A certificate must be appended to the insurance

policy stating: (1) Name of insurance company; (2) Address of its

principal office; and (3) Country of its incorporation, and declaring:

The undersigned, ________, does hereby certify on behalf of the

above-named insurance company that the said company has a duly qualified

and appointed agent or representative in the boycotting country whose name

and address appear below:

Name of agent/representative and address in the boycotting country.

Sworn to before me this ____ day of ______, 19__. Notary Seal.

Interpretation

It is the Department's position that furnishing the name of the insurance

company falls within the exception contained in 760.3(c) for compliance

with the import and shipping document requirements of a boycotting

country. See 760.3(c)(1)(v) and examples (v) and (x) thereunder. In

addition, it is the Department's position that furnishing a certificate,

such as the one set out above, stating the address of the insurance

company's principal office and its country of incorporation offends no

prohibition under this part 760 unless the U.S. person furnishing the

certificate knows or has reason to know that the information is sought for

the purpose of determining that the insurance company is neither

headquartered nor incorporated in a boycotted country. See

760.2(d)(1)(i).

It is also the Department's position that the insurer, himself, may

certify that he has a duly qualified and appointed agent or representative

in the boycotting country and may furnish the name and address of his

agent or representative. Furnishing such a statement pertaining to one's

own status offends no prohibition under this part 760. See 760.2(f),

example (xiv).

On the other hand, where a boycott is in force, a declaration that an

insurer has a duly qualified and appointed agent or representative in

the boycotting country necessarily conveys the information that the

insurer is not blacklisted or otherwise restricted from having a business

relationship with the boycotting country. See 760.3(c), example (v).

Therefore, it is the Department's position that furnishing such a

certification by anyone other than the insurer would fall within the

prohibition set forth in 760.2(d) unless it is clear from all the facts

and circumstances that the certification is not required for a boycott

reason. See 760.2(d)(3) and (4).

II. Contractual Clauses

The new contractual requirements and the Department's interpretation of

the applicability of part 760 thereto are as follows:

A. Contractual clause regarding import laws of boycotting country. In

connection with the performance of this contract the Contractor/Supplier

acknowledges that the import and customs laws and regulations of the

boycotting country shall apply to the furnishing and shipment of any

products or components thereof to the boycotting country. The

Contractor/Supplier specifically acknowledges that the aforementioned

import and customs laws and regulations of the boycotting country

prohibit, among other things, the importation into the boycotting country

of products or components thereof: (1) Originating in the boycotted

country; (2) Manufactured, produced, or furnished by companies organized

under the laws of the boycotted country; and (3) Manufactured, produced,

or furnished by nationals or residents of the boycotted country.

Interpretation

It is the Department's position that an agreement, such as the one set out

in the first sentence above, that the import and customs requirements of a

boycotting country shall apply to the performance of a contract does not,

in and of itself, offend any prohibition under this part 760. See

760.2(a)(5) and example (iii) under Examples of Agreements To Refuse To

Do Business. It is also the Department's position that an agreement to

comply generally with the import and customs requirements of a boycotting

country does not, in and of itself, offend any prohibition under this part

760. See 760.2(a)(5) and examples (iv) and (v) under Examples of

Agreements To Refuse To Do Business. In addition, it is the Department's

position that an agreement, such as the one set out in the second sentence

above, to comply with the boycotting country's import and customs

requirements prohibiting the importation of products or components: (1)

Originating in the boycotted country; (2) Manufactured, produced, or

furnished by companies organized under the laws of the boycotted country;

or (3) Manufactured, produced, or furnished by nationals or residents of

the boycotted country falls within the exception contained in 760.3(a)

for compliance with the import requirements of a boycotting country. See

760.3(a) and example (ii) thereunder.

The Department notes that a United States person may not furnish a

negative certification regarding the origin of goods or their components

even though the certification is furnished in response to the import and

shipping document requirements of the boycotting country. See 760.3(c)

and examples (i) and (ii) thereunder, and 760.3(a) and example (ii)

thereunder.

B. Contractual clause regarding unilateral and specific selection. The

Government of the boycotting country (or the First Party), in its

exclusive power, reserves its right to make the final unilateral and

specific selection of any proposed carriers, insurers, suppliers of

services to be performed within the boycotting country, or of specific

goods to be furnished in accordance with the terms and conditions of this

contract.

Interpretation

It is the Department's position that an agreement, such as the one set out

above, falls within the exception contained in 760.3(d) of this part for

compliance with unilateral selections. However, the Department notes that

whether a U.S. person may subsequently comply or agree to comply with any

particular selection depends upon whether that selection meets all the

requirements contained in 760.3(d) of this part for compliance with

unilateral selections. For example, the particular selection must be

unilateral and specific, particular goods must be specifically

identifiable as to their source or origin at the time of their entry into

the boycotting country, and all other requirements contained in 760.3(d)

of this part must be observed.

[61 FR 12862, Mar. 25, 1996, as amended at 65 FR 34948, June 1, 2000]

Supplement No. 2 to Part 760Interpretation

top

The Department hereby sets forth its views on whether the furnishing of

certain shipping and insurance certificates in compliance with boycotting

country requirements violates the provisions of section 8 of the Export

Administration Act of 1979, as amended (50 U.S.C. app. 2407) and part 760

of the EAR,1 as follows:

1 The Department originally issued this interpretation on April 21, 1978

(43 FR 16969) pursuant to the Export Administration Amendments Act of 1977

(Public Law 9552) and the regulations on restrictive trade practices and

boycotts (15 CFR part 369) published on January 25, 1978 (43 FR 3508) and

contained in the 15 CFR edition revised as of January 1, 1979.

(i) The owner, charterer or master of a vessel may certify that the

vessel is eligible or otherwise eligible to enter into the ports of a

boycotting country in conformity with its laws and regulations;

(ii) The insurer, himself, may certify that he has a duly qualified and

appointed agent or representative in the boycotting country and may

furnish the name and address of his agent or representative.

Furnishing such certifications by anyone other than:

(i) The owner, charterer or master of a vessel, or

(ii) The insurer would fall within the prohibition set forth in 760.2(d)

of this part, unless it is clear from all the facts and circumstances

that these certifications are not required for a boycott reason. See

760.2(d) (3) and (4) of this part.

The Department has received from the Kingdom of Saudi Arabia a

clarification that the shipping and insurance certifications are required

by Saudi Arabia in order to:

(i) Demonstrate that there are no applicable restrictions under Saudi laws

or regulations pertaining to maritime matters such as the age of the ship,

the condition of the ship, and similar matters that would bar entry of the

vessel into Saudi ports; and

(ii) Facilitate dealings with insurers by Saudi Arabian importers whose

ability to secure expeditious payments in the event of damage to insured

goods may be adversely affected by the absence of a qualified agent or

representative of the insurer in Saudi Arabia. In the Department's

judgment, this clarification constitutes sufficient facts and

circumstances to demonstrate that the certifications are not required by

Saudi Arabia for boycott reasons.

On the basis of this clarification, it is the Department's position that

any United States person may furnish such shipping and insurance

certificates required by Saudi Arabia without violating 760.2(d) of this

part. Moreover, under these circumstances, receipts of requests for such

shipping and insurance certificates from Saudi Arabia are not reportable.

It is still the Department's position that furnishing such a certificate

pertaining to one's own eligibility offends no prohibition under part 760.

See 760.2(f) of this part, example (xiv). However, absent facts and

circumstances clearly indicating that the certifications are required for

ordinary commercial reasons as demonstrated by the Saudi clarification,

furnishing certifications about the eligibility or blacklist status of any

other person would fall within the prohibition set forth in 760.2(d) of

this part, and receipts of requests for such certifications are

reportable.

It also remains the Department's position that where a United States

person asks an insurer or carrier of the exporter's goods to self-certify,

such request offends no prohibition under this part. However, where a

United States person asks anyone other than an insurer or carrier of the

exporter's goods to self-certify, such requests will be considered by the

Department as evidence of the requesting person's refusal to do business

with those persons who cannot or will not furnish such a

self-certification. For example, if an exporter-beneficiary of a letter of

credit asks his component suppliers to self-certify, such a request will

be considered as evidence of his refusal to do business with those

component suppliers who cannot or will not furnish such a

self-certification.

The Department wishes to emphasize that notwithstanding the fact that

self-certifications are permissible, it will closely scrutinize the

activities of all United States persons who provide such

self-certifications, including insurers and carriers, to determine that

such persons have not taken any prohibited actions or entered into any

prohibited agreements in order to be able to furnish such certifications.

[61 FR 12862, Mar. 25, 1996, as amended at 65 FR 34949, June 1, 2000]

Supplement No. 3 to Part 760Interpretation

top

Pursuant to Article 2, Annex II of the Peace Treaty between Egypt and

Israel, Egypt's participation in the Arab economic boycott of Israel was

formally terminated on January 25, 1980. On the basis of this action, it

is the Department's position that certain requests for information, action

or agreement which were considered boycott-related by implication now

cannot be presumed boycott-related and thus would not be prohibited or

reportable under the Regulations. For example, a request that an exporter

certify that the vessel on which it is shipping its goods is eligible to

enter Arab Republic of Egypt ports has been considered a boycott-related

request that the exporter could not comply with because Egypt has a

boycott in force against Israel (see 43 FR 16969, April 21, 1978 or the 15

CFR edition revised as of January 1, 1979). Such a request after January

25, 1980 would not be presumed boycott-related because the underlying

boycott requirement/basis for the certification has been eliminated.

Similarly, a U.S. company would not be prohibited from complying with a

request received from Egyptian government officials to furnish the place

of birth of employees the company is seeking to take to Egypt, because

there is no underlying boycott law or policy that would give rise to a

presumption that the request was boycott-related.

U.S. persons are reminded that requests that are on their face

boycott-related or that are for action obviously in furtherance or support

of an unsanctioned foreign boycott are subject to the Regulations,

irrespective of the country or origin. For example, requests containing

references to blacklisted companies, Israel boycott list, non-Israeli

goods or other phrases or words indicating boycott purpose would be

subject to the appropriate provisions of the Department's antiboycott

regulations.

Supplement No. 4 to Part 760Interpretation

top

The question has arisen how the definition of U.S. commerce in the

antiboycott regulations (15 CFR part 760) applies to a shipment of

foreign-made goods when U.S.-origin spare parts are included in the

shipment. Specifically, if the shipment of foreign goods falls outside the

definition of U.S. commerce, will the inclusion of U.S.-origin spare parts

bring the entire transaction into U.S. commerce?

Section 760.1(d)(12) provides the general guidelines for determining when

U.S.-origin goods shipped from a controlled in fact foreign subsidiary are

outside U.S. commerce. The two key tests of that provision are that the

goods were (i) * * * acquired without reference to a specific order

from or transaction with a person outside the United States; and (ii) *

* * further manufactured, incorporated into, refined into, or reprocessed

into another product. Because the application of these two tests to spare

parts does not conclusively answer the U.S. commerce question, the

Department is presenting this clarification.

In the cases brought to the Department's attention, an order for

foreign-origin goods was placed with a controlled in fact foreign

subsidiary of a United States company. The foreign goods contained

components manufactured in the United States and in other countries, and

the order included a request for extras of the U.S. manufactured

components (spare parts) to allow the customer to repair the item. Both

the foreign manufactured product and the U.S. spare parts were to be

shipped from the general inventory of the foreign subsidiary. Since the

spare parts, if shipped by themselves, would be in U.S. commerce as that

term is defined in the Regulations, the question was whether including

them with the foreign manufactured item would bring the entire shipment

into U.S. commerce. The Department has decided that it will not and

presents the following specific guidance.

As used above, the term spare parts refers to parts of the quantities

and types normally and customarily ordered with a product and kept on hand

in the event they are needed to assure prompt repair of the product.

Parts, components or accessories that improve or change the basic

operations or design characteristics, for example, as to accuracy,

capability or productivity, are not spare parts under this definition.

Inclusion of U.S.-origin spare parts in a shipment of products which is

otherwise outside U.S. commerce will not bring the transaction into U.S.

commerce if the following conditions are met:

(I) The parts included in the shipment are acquired from the United States

by the controlled in fact foreign subsidiary without reference to a

specific order from or transaction with a person outside the United

States;

(II) The parts are identical to the corresponding United States-origin

parts which have been manufactured, incorporated into or reprocessed into

the completed product;

(III) The parts are of the quantity and type normally and customarily

ordered with the completed product and kept on hand by the firm or

industry of which the firm is a part to assure prompt repair of the

product; and

(IV) The parts are covered by the same order as the completed product and

are shipped with or at the same time as the original product.

The Department emphasizes that unless each of the above conditions is met,

the inclusion of United States-origin spare parts in an order for a

foreign-manufactured or assembled product will bring the entire

transaction into the interstate or foreign commerce of the United States

for purposes of part 760.

[61 FR 12862, Mar. 25, 1996, as amended at 65 FR 34949, June 1, 2000]

Supplement No. 5 to Part 760Interpretation

top

A. Permissible Furnishing of Information

The information outlined below may be furnished in response to

boycott-related requests from boycotting countries or others. This

information is, in the view of the Department, not prohibited by the

Regulations. Thus, a person does not have to qualify under any of the

exceptions to be able to make the following statements. Such statements

can be made, however, only by the person indicated and under the

circumstances described. These statements should not be used as a point of

departure or analogy for determining the permissibility of other types of

statements. The Department's view that these statements are not contrary

to the prohibitions contained in antiboycott provisions of the Regulations

is limited to the specific statement in the specific context indicated.

1. A U.S. person may always provide its own name, address, place of

incorporation (nationality), and nature of business.

2. A U.S. person may state that it is not on a blacklist, or restricted

from doing business in a boycotting country. A company may not make that

statement about its subsidiaries or affiliatesonly about itself. A U.S.

person may not say that there is no reason for it to be blacklisted. To

make that statement would provide directly or by implication information

that may not be provided. A U.S. person may inquire about the reasons it

is blacklisted if it learns that it is on a blacklist (see 760.2(d) of

this part example (xv)).

3. A U.S. person may describe in detail its past dealings with boycotting

countries; may state in which boycotting countries its trademarks are

registered; and may specify in which boycotting countries it is registered

or qualified to do business. In general, a U.S. person is free to furnish

any information it wishes about the nature and extent of its commercial

dealings with boycotting countries.

4. A U.S. person may state that many U.S. firms or individuals have

similar names and that it believes that it may be confused with a

similarly named entity. A U.S. person may not state that it does or does

not have an affiliation or relationship with such similarly named entity.

5. A U.S. person may state that the information requested is a matter of

public record in the United States. However, the person may not direct the

inquirer to the location of that information, nor may the U.S. person

provide or cause to be provided such information.

B. Availability of the Compliance With Local Law Exception To Establish a

Foreign Branch

Section 760.3(g), the Compliance With Local Law exception, permits U.S.

persons, who are bona fide residents of a boycotting country, to take

certain limited, but otherwise prohibited, actions, if they are required

to do so in order to comply with local law.

Among these actions is the furnishing of non-discriminatory information.

Examples (iv) through (vi) under Examples of Bona Fide Residency

indicate that a company seeking to become a bona fide resident within a

boycotting country may take advantage of the exception for the limited

purpose of furnishing information required by local law to obtain resident

status. Exactly when and how this exception is available has been the

subject of a number of inquiries. It is the Department's view that the

following conditions must be met for a non-resident company to be

permitted to furnish otherwise prohibited information for the limited

purpose of seeking to become a bona fide resident:

1. The company must have a legitimate business reason for seeking to

establish a branch or other resident operation in the boycotting country.

(Removal from the blacklist does not constitute such a reason.)

2. The local operation it seeks to establish must be similar or comparable

in nature and operation to ones the company operates in other parts of the

world, unless local law or custom dictates a significantly different form.

3. The person who visits the boycotting country to furnish the information

must be the official whose responsibility ordinarily includes the creation

and registration of foreign operations (i.e., the chairman of the board

cannot be flown in to answer boycott questions unless the chairman of the

board is the corporate official who ordinarily goes into a country to

handle foreign registrations).

4. The information provided must be that which is ordinarily known to the

person establishing the foreign branch. Obviously, at the time of

establishment, the foreign branch will have no information of its own

knowledge. Rather, the information should be that which the responsible

person has of his own knowledge, or that he would have with him as

incidental and necessary to the registration and establishment process. As

a general rule, such information would not include such things as copies

of agreements with boycotted country concerns or detailed information

about the person's dealings with blacklisted concerns.

5. It is not necessary that documents prepared in compliance with this

exception be drafted or executed within the boycotting country. The

restrictions on the type of information which may be provided and on who

may provide it apply regardless of where the papers are prepared or

signed.

[61 FR 12862, Mar. 25, 1996, as amended at 65 FR 34949, June 1, 2000]

Supplement No. 6 to Part 760Interpretation

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The antiboycott regulations prohibit knowing agreements to comply with

certain prohibited requests and requirements of boycotting countries,

regardless of how these terms are stated. Similarly, the reporting rules

require that a boycott related solicitation, directive, legend or

instruction that asks for information or that asks that a United States

person take or refrain from taking a particular action be reported.

Questions have frequently arisen about how particular requirements in the

form of directive or instructions are viewed under the antiboycott

regulations, and we believe that it will add clarity to the regulations to

provide a written interpretation of how three of these terms are treated

under the law. The terms in question appear frequently in letters of

credit, but may also be found on purchase orders or other shipping or sale

documents. They have been brought to the attention of the Department by

numerous persons. The terms are, or are similar to, the following: (1)

Goods of boycotted country origin are prohibited; (2) No six-pointed stars

may be used on the goods, packing or cases; (3) Neither goods nor packing

shall bear any symbols prohibited in the boycotting country.

(a) Goods of boycotted country origin prohibited. This term is very common

in letters of credit from Kuwait and may also appear from time-to-time in

invitations to bid, contracts, or other trade documents. It imposes a

condition or requirement compliance with which is prohibited, but

permitted by an exception under the Regulations (see 760.2(a) and

760.3(a)). It is reportable by those parties to the letter of credit or

other transaction that are required to take or refrain from taking some

boycott related action by the request. Thus the bank must report the

request because it is a term or condition of the letter of credit that it

is handling, and the exporter-beneficiary must report the request because

the exporter determines the origin of the goods. The freight forwarder

does not have to report this request because the forwarder has no role or

obligation in selecting the goods. However, the freight forwarder would

have to report a request to furnish a certificate that the goods do not

originate in or contain components from a boycotted country. See 760.5,

examples (xii)(xvii).

(b) No six-pointed stars may be used on the goods, packing or cases. This

term appears from time-to-time on documents from a variety of countries.

The Department has taken the position that the six-pointed star is a

religious symbol. See 760.2(b), example (viii) of this part. Agreeing to

this term is prohibited by the Regulations and not excepted because it

constitutes an agreement to furnish information about the religion of a

U.S. person. See 760.2(c) of this part. If a person proceeds with a

transaction in which this is a condition at any stage of the transaction,

that person has agreed to the condition in violation of the Regulations.

It is not enough to ignore the condition. Exception must affirmatively be

taken to this term or it must be stricken from the documents of the

transaction. It is reportable by all parties to the transaction that are

restricted by it. For example, unlike the situation described in (a)

above, the freight forwarder would have to report this request because his

role in the transaction would involve preparation of the packing and

cases. The bank and exporter would both have to report, of course, if it

were a term in a letter of credit. Each party would be obligated

affirmatively to seek an amendment or deletion of the term.

(c) Neither goods nor packaging shall bear any symbols prohibited in the

boycotting country. This term appears from time-to-time in letters of

credit and shipping documents from Saudi Arabia. In our view, it is

neither prohibited, nor reportable because it is not boycott-related.

There is a wide range of symbols that are prohibited in Saudi Arabia for a

variety of reasons, many having to do with that nation's cultural and

religious beliefs. On this basis, we do not interpret the term to be

boycott related. See 760.2(a)(5) and 760.5(a)(5)(v) of this part.

[61 FR 12862, Mar. 25, 1996, as amended at 65 FR 34949, June 1, 2000]

Supplement No. 7 to Part 760Interpretation

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Prohibited Refusal To Do Business

When a boycotting country rejects for boycott-related reasons a shipment

of goods sold by a United States person, the United States person selling

the goods may return them to its inventory or may re-ship them to other

markets (the United States person may not return them to the original

supplier and demand restitution). The U.S. person may then make a

non-boycott based selection of another supplier and provide the goods

necessary to meet its obligations to the boycotting customer in that

particular transaction without violating 760.2(a) of this part. If the

United States person receives another order from the same boycotting

country for similar goods, the Department has determined that a

boycott-based refusal by a United States person to ship goods from the

supplier whose goods were previously rejected would constitute a

prohibited refusal to do business under 760.2(a) of this part. The

Department will presume that filling such an order with alternative goods

is evidence of the person's refusal to deal with the original supplier.

The Department recognizes the limitations this places on future

transactions with a boycotting country once a shipment of goods has been

rejected. Because of this, the Department wishes to point out that, when

faced with a boycotting country's refusal to permit entry of the

particular goods, a United States person may state its obligation to abide

by the requirements of United States law and indicate its readiness to

comply with the unilateral and specific selection of goods by the

boycotting country in accordance with 760.3(d). That section provides, in

pertinent part, as follows:

A United States person may comply or agree to comply in the normal course

of business with the unilateral and specific selection by a boycotting

country * * * of * * * specific goods, * * * provided that * *

* with respect to goods, the items, in the normal course of business, are

identifiable as to their source or origin at the time of their entry into

the boycotting country by (a) uniqueness of design or appearance or (b)

trademark, trade name, or other identification normally on the items

themselves, including their packaging.

The Department wishes to emphasize that the unilateral selection exception

in 760.3(d) of this part will be construed narrowly, and that all its

requirements and conditions must be met, including the following:

Discretion for the selection must be exercised by a boycotting country;

or by a national or resident of a boycotting country;

The selection must be stated in the affirmative specifying a particular

supplier of goods;

While a permissible selection may be boycott based, if the United States

person knows or has reason to know that the purpose of the selection is to

effect discrimination against any United States person on the basis of

race, religion, sex, or national origin, the person may not comply under

any circumstances.

The Department cautions United States persons confronted with the problem

or concern over the boycott-based rejection of goods shipped to a

boycotting country that the adoption of devices such as risk of loss

clauses, or conditions that make the supplier financially liable if his or

her goods are rejected by the boycotting country for boycott reasons are

presumed by the Department to be evasion of the statute and regulations,

and as such are prohibited by 760.4 of this part, unless adopted prior to

January 18, 1978. See 760.4(d) of this part.

[61 FR 12862, Mar. 25, 1996, as amended at 65 FR 34949, June 1, 2000]

Supplement No. 8 to Part 760Interpretation

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Definition of Interstate or Foreign Commerce of the United States

When United States persons (as defined by the antiboycott regulations)

located within the United States purchase or sell goods or services

located outside the United States, they have engaged in an activity within

the foreign commerce of the United States. Although the goods or services

may never physically come within the geographic boundaries of the several

states or territories of the United States, legal ownership or title is

transferred from a foreign nation to the United States person who is

located in the United States. In the case of a purchase, subsequent resale

would also be within United States commerce.

It is the Department's view that the terms sale and purchase as used

in the regulations are not limited to those circumstances where the goods

or services are physically transferred to the person who acquires title.

The EAR define the activities that serve as the transactional basis for

U.S. commerce as those involving the sale, purchase, or transfer of

goods or services. In the Department's view, as used in the antiboycott

regulations, transfer contemplates physical movement of the goods or

services between the several states or territories and a foreign country,

while sale and purchase relate to the movement of ownership or title.

This interpretation applies only to those circumstances in which the

person located within the United States buys or sells goods or services

for its own account. Where the United States person is engaged in the

brokerage of foreign goods, i.e., bringing foreign buyers and sellers

together and assisting in the transfer of the goods, the sale or purchase

itself would not ordinarily be considered to be within U.S. commerce. The

brokerage service, however, would be a service provided from the United

States to the parties and thus an activity within U.S. commerce and

subject to the antiboycott laws. See 760.1(d)(3).

The Department cautions that United States persons who alter their normal

pattern of dealing to eliminate the passage of ownership of the goods or

services to or from the several states or territories of the United States

in order to avoid the application of the antiboycott regulations would be

in violation of 760.4 of this part.

[61 FR 12862, Mar. 25, 1996, as amended at 65 FR 34950, June 1, 2000]

Supplement No. 9 to Part 760Interpretation

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Activities Exclusively Within a Boycotting CountryFurnishing Information

760.3(h) of this part provides that a United States person who is a bona

fide resident of a boycotting country may comply with the laws of that

country with respect to his or her activities exclusively within the

boycotting country. Among the types of conduct permitted by this exception

is furnishing information within the host country 760.3(h)(1)(v) of

this part. For purposes of the discussion which follows, the Department is

assuming that the person in question is a bona fide resident of the

boycotting country as defined in 760.3(g), and that the information to be

provided is required by the laws or regulations of the boycotting country,

as also defined in 760.3(g) of this part. The only issue this

interpretation addresses is under what circumstances the provision of

information is an activity exclusively within the boycotting country.

The activity of furnishing information consists of two parts, the

acquisition of the information and its subsequent transmittal. Under the

terms of this exception, the information may not be acquired outside the

country for the purpose of responding to the requirement for information

imposed by the boycotting country. Thus, if an American company which is a

bona fide resident of a boycotting country is required to provide

information about its dealings with other U.S. firms, the company may not

ask its parent corporation in the United States for that information, or

make any other inquiry outside the boundaries of the boycotting country.

The information must be provided to the boycotting country authorities

based on information or knowledge available to the company and its

personnel located within the boycotting country at the time the inquiry is

received. See 760.3, (h) of this part, examples (iii), (iv), and (v).

Much of the information in the company's possession (transaction and

corporate records) may have actually originated outside the boycotting

country, and much of the information known to the employees may have been

acquired outside the boycotting country. This will not cause the

information to fall outside the coverage of this exception, if the

information was sent to the boycotting country or acquired by the

individuals in normal commercial context prior to and unrelated to a

boycott inquiry or purpose. It should be noted that if prohibited

information (about business relations with a boycotted country, for

example) has been forwarded to the affiliate in the boycotting country in

anticipation of a possible boycott inquiry from the boycotting country

government, the Department will not regard this as information within the

knowledge of the bona fide resident under the terms of the exception.

However, if the bona fide resident possesses the information prior to

receipt of a boycott-related inquiry and obtained it in a normal

commercial context, the information can be provided pursuant to this

exception notwithstanding the fact that, at some point, the information

came into the boycotting country from the outside.

The second part of the analysis of furnishing information deals with the

limitation on the transmittal of the information. It can only be provided

within the boundaries of the boycotting country. The bona fide resident

may only provide the information to the party that the boycotting country

law requires (directly or through an agent or representative within the

country) so long as that party is located within the boycotting country.

This application of the exception is somewhat easier, since it is

relatively simple to determine if the information is to be given to

somebody within the country.

Note that in discussing what constitutes furnishing information

exclusively within the boycotting country, the Department does not

address the nature of the transaction or activity that the information

relates to. It is the Department's position that the nature of the

transaction, including the inception or completion of the transaction, is

not material in analyzing the availability of this exception.

For example, if a shipment of goods imported into a boycotting country is

held up at the time of entry, and information from the bona fide resident

within that country is legally required to free those goods, the fact that

the information may relate to a transaction that began outside the

boycotting country is not material. The availability of the exception will

be judged based on the activity of the bona fide resident within the

country. If the resident provides that information of his or her own

knowledge, and provides it to appropriate parties located exclusively

within the country, the exception permits the information to be furnished.

Factual variations may raise questions about the application of this

exception and the effect of this interpretation. In an effort to

anticipate some of these, the Department has set forth below a number of

questions and answers. They are incorporated as a part of this

interpretation.

1. Q. Under this exception, can a company which is a U.S. person and a

bona fide resident of the boycotting country provide information to the

local boycott office?

A. Yes, if local law requires the company to provide this information to

the boycott office and all the other requirements are met.

2. Q. If the company knows that the local boycott office will forward the

information to the Central Boycott Office, may it still provide the

information to the local boycott office?

A. Yes, if it is required by local law to furnish the information to the

local boycott office and all the other requirements are met. The company

has no control over what happens to the information after it is provided

to the proper authorities. (There is obvious potential for evasion here,

and the Department will examine such occurrences closely.)

3. Q. Can a U.S. person who is a bona fide resident of Syria furnish

information to the Central Boycott Office in Damascus?

A. No, unless the law in Syria specifically requires information to be

provided to the Central Boycott Office the exception will not apply. Syria

has a local boycott office responsible for enforcing the boycott in that

country.

4. Q. If a company which is a U.S. person and a bona fide resident of the

boycotting country has an import shipment held up in customs of the

boycotting country, and is required to provide information about the

shipment to get it out of customs, may the company do so?

A. Yes, assuming all other requirements are met. The act of furnishing the

information is the activity taking place exclusively within the boycotting

country. The fact that the information is provided corollary to a

transaction that originates or terminates outside the boycotting country

is not material.

5. Q. If the U.S. person and bona fide resident of the boycotting country

is shipping goods out of the boycotting country, and is required to

certify to customs officials of the country at the time of export that the

goods are not of Israeli origin, may he do so even though the

certification relates to an export transaction?

A. Yes, assuming all other requirements are met. See number 4 above.

[61 FR 12862, Mar. 25, 1996, as amended at 65 FR 34950, June 1, 2000]

Supplement No. 10 to Part 760Interpretation

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(a) The words Persian Gulf cannot appear on the document.

This term is common in letters of credit from Kuwait and may be found in

letters of credit from Bahrain. Although more commonly appearing in

letters of credit, the term may also appear in other trade documents.

It is the Department's view that this term reflects a historical dispute

between the Arabs and the Iranians over geographic place names which in no

way relates to existing economic boycotts. Thus, the term is neither

prohibited nor reportable under the Regulations.

(b) Certify that goods are of U.S.A. origin and contain no foreign parts.

This term appears periodically on documents from a number of Arab

countries. It is the Department's position that the statement is a

positive certification of origin and, as such, falls within the exception

contained in 760.3(c) of this part for compliance with the import and

shipping document requirements of a boycotting country. Even though a

negative phrase is contained within the positive clause, the phrase is a

non-exclusionary, non-blacklisting statement. In the Department's view,

the additional phrase does not affect the permissible status of the

positive certificate, nor does it make the request reportable

760.5(a)(5)(iii) of this part.

(c) Legalization of documents by any Arab consulate except Egyptian

Consulate permitted.

This term appears from time to time in letters of credit but also may

appear in various other trade documents requiring legalization and thus is

not prohibited, and a request to comply with the statement is not

reportable. Because a number of Arab states do not have formal diplomatic

relations with Egypt, they do not recognize Egyptian embassy actions. The

absence of diplomatic relations is the reason for the requirement. In the

Department's view this does not constitute an unsanctioned foreign boycott

or embargo against Egypt under the terms of the Export Administration Act.

Thus the term is not prohibited, and a request to comply with the

statement is not reportable.

[61 FR 12862, Mar. 25, 1996, as amended at 65 FR 34950, June 1, 2000]

Supplement No. 11 to Part 760Interpretation

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Definition of Unsolicited Invitation To Bid

760.5(a)(4) of this part states in part:

In addition, a United States person who receives an unsolicited

invitation to bid, or similar proposal, containing a boycott request has

not received a reportable request for purposes of this section where he

does not respond to the invitation to bid or other proposal.

The Regulations do not define unsolicited in this context. Based on

review of numerous situations, the Department has developed certain

criteria that it applies in determining if an invitation to bid or other

proposal received by a U.S. person is in fact unsolicited.

The invitation is not unsolicited if, during a commercially reasonable

period of time preceding the issuance of the invitation, a representative

of the U.S. person contacted the company or agency involved for the

purpose of promoting business on behalf of the company.

The invitation is not unsolicited if the U.S. person has advertised the

product or line of products that are the subject of the invitation in

periodicals or publications that ordinarily circulate to the country

issuing the invitation during a commercially reasonable period of time

preceding the issuance of the invitation.

The invitation is not unsolicited if the U.S. person has sold the same or

similar products to the company or agency issuing the invitation within a

commercially reasonable period of time before the issuance of the current

invitation.

The invitation is not unsolicited if the U.S. person has participated in a

trade mission to or trade fair in the country issuing the invitation

within a commercially reasonable period of time before the issuance of the

invitation.

Under 760.5(a)(4) of this part, the invitation is regarded as not

reportable if the U.S. person receiving it does not respond. The

Department has determined that a simple acknowledgment of the invitation

does not constitute a response for purposes of this rule. However, an

acknowledgment that requests inclusion for future invitations will be

considered a response, and a report is required.

Where the person in receipt of an invitation containing a boycott term or

condition is undecided about a response by the time a report would be

required to be filed under the regulations, it is the Department's view

that the person must file a report as called for in the Regulations. The

person filing the report may indicate at the time of filing that he has

not made a decision on the boycott request but must file a supplemental

report as called for in the regulations at the time a decision is made

(760.5(b)(6)).

[61 FR 12862, Mar. 25, 1996, as amended at 65 FR 34950, June 1, 2000]

Supplement No. 12 to Part 760Interpretation

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The Department has taken the position that a U.S. person as defined by

760.1(b) of this part may not make use of an agent to furnish information

that the U.S. person is prohibited from furnishing pursuant to 760.2(d)

of this part.

Example (v) under 760.4 of this part (Evasion) provides:

A, a U.S. company, is negotiating a long-term contract with boycotting

country Y to meet all of Y's medical supply needs. Y informs A that before

such a contract can be concluded, A must complete Y's boycott

questionnaire. A knows that it is prohibited from answering the

questionnaire so it arranges for a local agent in Y to supply the

necessary information.

A's action constitutes evasion of this part, because it is a device to

mask prohibited activity carried out on A's behalf.

This interpretation deals with the application of the Regulations to a

commercial agent registration requirement imposed by the government of

Saudi Arabia. The requirement provides that nationals of Saudi Arabia

seeking to register in Saudi Arabia as commercial agents or

representatives of foreign concerns must furnish certain boycott-related

information about the foreign concern prior to obtaining approval of the

registration.

The requirement has been imposed by the Ministry of Commerce of Saudi

Arabia, which is the government agency responsible for regulation of

commercial agents and foreign commercial registrations. The Ministry

requires the agent or representative to state the following:

Declaration: I, the undersigned, hereby declare, in my capacity as

(blank) that (name and address of foreign principal) is not presently on

the blacklist of the Office for the Boycott of Israel and that it and all

its branches, if any, are bound by the decisions issued by the Boycott

Office and do not (1) participate in the capital of, (2) license the

manufacture of any products or grant trademarks or tradeware license to,

(3) give experience or technical advice to, or (4) have any other

relationship with other companies which are prohibited to be dealt with by

the Boycott Office. Signed (name of commercial

agent/representative/distributor).

It is the Department's view that under the circumstances specifically

outlined in this interpretation relating to the nature of the requirement,

a U.S. person will not be held responsible for a violation of this part

when such statements are provided by its commercial agent or

representative, even when such statements are made with the full knowledge

of the U.S. person.

Nature of the requirement. For a boycott-related commercial registration

requirement to fall within the coverage of this interpretation it must

have the following characteristics:

1. The requirement for information imposed by the boycotting country

applies to a national or other subject of the boycotting country qualified

under the local laws of that country to function as a commercial

representative within that country;

2. The registration requirement relates to the registration of the

commercial agent's or representative's authority to sell or distribute

goods within the boycotting country acquired from the foreign concern;

3. The requirement is a routine part of the registration process and is

not applied selectively based on boycott-related criteria;

4. The requirement applies only to a commercial agent or representative in

the boycotting country and does not apply to the foreign concern itself;

and

5. The requirement is imposed by the agency of the boycotting country

responsible for regulating commercial agencies.

The U.S. person whose agent is complying with the registration requirement

continues to be subject to all the terms of the Regulations, and may not

provide any prohibited information to the agent for purposes of the

agent's compliance with the requirement.

In addition, the authority granted to the commercial agent or

representative by the U.S. person must be consistent with standard

commercial practices and not involve any grants of authority beyond those

incidental to the commercial sales and distributorship responsibilities of

the agent.

Because the requirement does not apply to the U.S. person, no reporting

obligation under 760.5 of this part would arise.

This interpretation, like all others issued by the Department discussing

applications of the antiboycott provisions of the Export Administration

Regulations, should be read narrowly. Circumstances that differ in any

material way from those discussed in this notice will be considered under

the applicable provisions of the Regulations. Persons are particularly

advised not to seek to apply this interpretation to circumstances in which

U.S. principals seek to use agents to deal with boycott-related or

potential blacklisting situations.

[61 FR 12862, Mar. 25, 1996, as amended at 65 FR 34950, June 1, 2000]

Supplement No. 13 to Part 760Interpretation

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Summary

This interpretation considers boycott-based contractual language dealing

with the selection of suppliers and subcontractors. While this language

borrows terms from the unilateral and specific selection exception

contained in 760.3(d), it fails to meet the requirements of that

exception. Compliance with the requirements of the language constitutes a

violation of the regulatory prohibition of boycott-based refusals to do

business.

Regulatory Background

Section 760.2(a) of this part prohibits U.S. persons from refusing or

knowingly agreeing to refuse to do business with other persons when such

refusal is pursuant to an agreement with, requirement of, or request of a

boycotting country. That prohibition does not extend to the performance of

management, procurement or other pre-award services, however,

notwithstanding knowledge that the ultimate selection may be

boycott-based. To be permissible such services: (1) Must be customary for

the firm or industry involved and (2) must not exclude others from the

transaction or involve other actions based on the boycott. See

760.2(a)(6) of this part, Refusals to Do Business, and example (xiii).

A specific exception is also made in the Regulations for compliance (and

agreements to comply) with a unilateral and specific selection of

suppliers or subcontractors by a boycotting country buyer. See 760.3(d)

of this part. In Supplement No. 1 to part 760, the following form of

contractual language was said to fall within that exception for compliance

with unilateral and specific selection:

The Government of the boycotting country (or the First Party), in its

exclusive power, reserves its right to make the final unilateral and

specific selection of any proposed carriers, insurers, suppliers of

services to be performed within the boycotting country, or of specific

goods to be furnished in accordance with the terms and conditions of this

contract.

The Department noted that the actual steps necessary to comply with any

selection made under this agreement would also have to meet the

requirements of 760.3(d) to claim the benefit of that exception. In other

words, the discretion in selecting would have to be exercised exclusively

by the boycotting country customer and the selection would have to be

stated in the affirmative, naming a particular supplier. See 760.3(d) (4)

and (5) of this part.

Analysis of Additional Contractual Language

The Office of Antiboycott Compliance has learned of the introduction of a

contractual clause into tender documents issued by boycotting country

governments. This clause is, in many respects, similar to that dealt with

in Supplement No. 1 to part 760, but several critical differences exist.

The clause states:

Boycott of [Name of Boycotted Country]

In connection with the performance of this Agreement, Contractor

acknowledges that the import and customs laws and regulations of

boycotting country apply to the furnishing and shipment of any products or

components thereof to boycotting country. The Contractor specifically

acknowledges that the aforementioned import and customs laws and

regulations of boycotting country prohibit, among other things, the

importation into boycotting country of products or components thereof: (A)

Originating in boycotted country; (B) Manufactured, produced and furnish

by companies organized under the laws of boycotted country; and (C)

Manufactured, produced or furnished by Nationals or Residents of boycotted

country.

The Government, in its exclusive power, reserves its right to make the

final unilateral and specific selection of any proposed Carriers,

Insurers, Suppliers of Services to be performed within boycotting country

or of specific goods to be furnished in accordance with the terms and

conditions of this Contract.

To assist the Government in exercising its right under the preceding

paragraph, Contractor further agrees to provide a complete list of names

and addresses of all his Sub-Contractors, Suppliers, Vendors and

Consultants and any other suppliers of the service for the project.

The title of this clause makes clear that its provisions are intended to

be boycott-related. The first paragraph acknowledges the applicability of

certain boycott-related requirements of the boycotting country's laws in

language reviewed in part 760, Supplement No. 1, Part II.B. and found to

constitute a permissible agreement under the exception contained in

760.3(a) of this part for compliance with the import requirements of a

boycotting country. The second and third paragraphs together deal with the

procedure for selecting subcontractors and suppliers of services and goods

and, in the context of the clause as a whole, must be regarded as

motivated by boycott considerations and intended to enable the boycotting

country government to make boycott-based selections, including the

elimination of blacklisted subcontractors and suppliers.

The question is whether the incorporation into these paragraphs of some

language from the unilateral and specific selection clause approved in

Supplement No. 1 to part 760 suffices to take the language outside

760.2(a) of this part's prohibition on boycott-based agreements to refuse

to do business. While the first sentence of this clause is consistent with

the language discussed in Supplement No. 1 to part 760, the second

sentence significantly alters the effect of this clause. The effect is to

draw the contractor into the decision-making process, thereby destroying

the unilateral character of the selection by the buyer. By agreeing to

submit the names of the suppliers it plans to use, the contractor is

agreeing to give the boycotting country buyer, who has retained the right

of final selection, the ability to reject, for boycott-related reasons,

any supplier the contractor has already chosen. Because the requirement

appears in the contractual provision dealing with the boycott, the buyer's

rejection of any supplier whose name is given to the buyer pursuant to

this provision would be presumed to be boycott-based. By signing the

contract, and thereby agreeing to comply with all of its provisions, the

contractor must either accept the buyer's rejection of any supplier, which

is presumed to be boycott-based because of the context of this provision,

or breach the contract.

In these circumstances, the contractor's method of choosing its

subcontractors and suppliers, in anticipation of the buyer's boycott-based

review, cannot be considered a permissible pre-award service because of

the presumed intrusion of boycott-based criteria into the selection

process. Thus, assuming all other jurisdictional requirements necessary to

establish a violation of part 760 are met, the signing of the contract by

the contractor constitutes a violation of 760.2(a) of this part because

he is agreeing to refuse to do business for boycott reasons.

The apparent attempt to bring this language within the exception for

compliance with unilateral and specific selections is ineffective. The

language does not place the discretion to choose suppliers in the hands of

the boycotting country buyer but divides this discretion between the buyer

and his principal contractor. Knowing that the buyer will not accept a

boycotted company as supplier or subcontractor, the contractor is asked to

use his discretion in selecting a single supplier or subcontractor for

each element of the contract. The boycotting country buyer exercises

discretion only through accepting or rejecting the selected supplier or

contractor as its boycott policies require. In these circumstances it

cannot be said that the buyer is exercising right of unilateral and

specific selection which meets the criteria of 760.3(d). For this reason,

agreement to the contractual language discussed here would constitute an

agreement to refuse to do business with any person rejected by the buyer

and would violate 760.2(a) of this part.

[61 FR 12862, Mar. 25, 1996, as amended at 65 FR 34950, June 1, 2000]

Supplement No. 14 to Part 760Interpretation

top

(a) Contractual clause concerning import, customs and boycott laws of a

boycotting country . The following language has appeared in tender

documents issued by a boycotting country:

Supplier declares his knowledge of the fact that the import, Customs and

boycott laws, rules and regulations of [name of boycotting country] apply

in importing to [name of boycotting country].

Supplier declares his knowledge of the fact that under these laws, rules

and regulations, it is prohibited to import into [name of the boycotting

country] any products or parts thereof that originated in [name of

boycotted country]; were manufactured, produced or imported by companies

formed under the laws of [name of boycotted country]; or were

manufactured, produced or imported by nationals or residents of [name of

boycotted country].

Agreeing to the above contractual language is a prohibited agreement to

refuse to do business, under 760.2(a) of this part. The first paragraph

requires broad acknowledgment of the application of the boycotting

country's boycott laws, rules and regulations. Unless this language is

qualified to apply only to boycott restrictions with which U.S. persons

may comply, agreement to it is prohibited. See 760.2(a) of this part,

examples (v) and (vi) under Agreements to Refuse to Do Business.

The second paragraph does not limit the scope of the boycott restrictions

referenced in the first paragraph. It states that the boycott laws include

restrictions on goods originating in the boycotted country; manufactured,

produced or supplied by companies organized under the laws of the

boycotted country; or manufactured, produced or supplied by nationals or

residents of the boycotted country. Each of these restrictions is within

the exception for compliance with the import requirements of the

boycotting country (760.3(a) of this part). However, the second

paragraph's list of restrictions is not exclusive. Since the boycott laws

generally include more than what is listed and permissible under the

antiboycott law, U.S. persons may not agree to the quoted clause. For

example, a country's boycott laws may prohibit imports of goods

manufactured by blacklisted firms. Except as provided by 760.3(g) of this

part, agreement to and compliance with this boycott restriction would be

prohibited under the antiboycott law.

The above contractual language is distinguished from the contract clause

determined to be permissible in supplement 1, Part II, A, by its

acknowledgment that the boycott requirements of the boycotting country

apply. Although the first sentence of the Supplement 1 clause does not

exclude the possible application of boycott laws, it refers only to the

import and customs laws of the boycotting country without mentioning the

boycott laws as well. As discussed fully in Supplement No. 1 to part 760,

compliance with or agreement to the clause quoted there is, therefore,

permissible.

The contract clause quoted above, as well as the clause dealt with in

Supplement No. 1 to part 760, part II, A, is reportable under 760.5(a)(1)

of this part.

(b) Letter of credit terms removing blacklist certificate requirement if

specified vessels used. The following terms frequently appear on letters

of credit covering shipment to Iraq:

Shipment to be effected by Iraqi State Enterprise for Maritime Transport

Vessels or by United Arab Shipping Company (SAB) vessels, if available.

If shipment is effected by any of the above company's [sic] vessels,

black list certificate or evidence to that effect is not required.

These terms are not reportable and compliance with them is permissible.

The first sentence, a directive to use Iraqi State Enterprise for Maritime

Transport or United Arab Shipping vessels, is neither reportable nor

prohibited because it is not considered by the Department to be

boycott-related. The apparent reason for the directive is Iraq's

preference to have cargo shipped on its own vessels (or, as in the case of

United Arab Shipping, on vessels owned by a company in part established

and owned by the Iraqi government). Such cargo preference requirements,

calling for the use of an importing or exporting country's own ships, are

common throughout the world and are imposed for non-boycott reasons. (See

760.2(a) of this part, example (vii) AGREEMENTS TO REFUSE TO DO

BUSINESS.)

In contrast, if the letter of credit contains a list of vessels or

carriers that appears to constitute a boycott-related whitelist, a

directive to select a vessel from that list would be both reportable and

prohibited. When such a directive appears in conjunction with a term

removing the blacklist certificate requirement if these vessels are used,

the Department will presume that beneficiaries, banks and any other U.S.

person receiving the letter of credit know that there is a boycott-related

purpose for the directive.

The second sentence of the letter of credit language quoted above does

not, by itself, call for a blacklist certificate and is not therefore,

reportable. If a term elsewhere on the letter of credit imposes a

blacklist certificate requirement, then that other term would be

reportable.

(c) Information not related to a particular transaction in U.S. commerce.

Under 760.2 (c), (d) and (e), of this part U.S. persons are prohibited,

with respect to their activities in U.S. commerce, from furnishing certain

information. It is the Department's position that the required nexus with

U.S. commerce is established when the furnishing of information itself

occurs in U.S. commerce. Even when the furnishing of information is not

itself in U.S. commerce, however, the necessary relationship to U.S.

commerce will be established if the furnishing of information relates to

particular transactions in U.S. commerce or to anticipated transactions in

U.S. commerce. See, e.g. 760.2(d), examples (vii), (ix) and (xii) of this

part.

The simplest situation occurs where a U.S. person located in the United

States furnishes information to a boycotting country. The transfer of

information from the United States to a foreign country is itself an

activity in U.S. commerce. See 760.1(d)(1)(iv) of this part. In some

circumstances, the furnishing of information by a U.S. person located

outside the United States may also be an activity in U.S. commerce. For

example, the controlled foreign subsidiary of a domestic concern might

furnish to a boycotting country information the subsidiary obtained from

the U.S.-located parent for that purpose. The subsidiary's furnishing

would, in these circumstances, constitute an activity in U.S. commerce.

See 760.1(d)(8) of this part.

Where the furnishing of information is not itself in U.S. commerce, the

U.S. commerce requirement may be satisfied by the fact that the furnishing

is related to an activity in U.S. foreign or domestic commerce. For

example, if a shipment of goods by a controlled-in-fact foreign subsidiary

of a U.S. company to a boycotting country gives rise to an inquiry from

the boycotting country concerning the subsidiary's relationship with

another firm, the Department regards any responsive furnishing of

information by the subsidiary as related to the shipment giving rise to

the inquiry. If the shipment is in U.S. foreign or domestic commerce, as

defined by the regulations, then the Department regards the furnishing to

be related to an activity in U.S. commerce and subject to the antiboycott

regulations, whether or not the furnishing itself is in U.S. commerce.

In some circumstances, the Department may regard a furnishing of

information as related to a broader category of present and prospective

transactions. For example, if a controlled-in-fact foreign subsidiary of a

U.S. company is requested to furnish information about its commercial

dealings and it appears that failure to respond will result in its

blacklisting, any responsive furnishing of information will be regarded by

the Department as relating to all of the subsidiary's present and

anticipated business activities with the inquiring boycotting country.

Accordingly, if any of these present or anticipated business activities

are in U.S. commerce, the Department will regard the furnishing as related

to an activity in U.S. commerce and subject to the antiboycott

regulations.

In deciding whether anticipated business activities will be in U.S.

commerce, the Department will consider all of the surrounding

circumstances. Particular attention will be given to the history of the

U.S. person's business activities with the boycotting country and others,

the nature of any activities occurring after a furnishing of information

occurs and any relevant economic or commercial factors which may affect

these activities.

For example, if a U.S. person has no activities with the boycotting

country at present but all of its other international activities are in

U.S. commerce, as defined by the Regulations, then the Department is

likely to regard any furnishing of information by that person for the

purpose of securing entry into the boycotting country's market as relating

to anticipated activities in U.S. commerce and subject to the antiboycott

regulations. Similarly, if subsequent to the furnishing of information to

the boycotting country for the purpose of securing entry into its markets,

the U.S. person engages in transactions with that country which are in

U.S. commerce, the Department is likely to regard the furnishing as

related to an activity in U.S. commerce and subject to the antiboycott

regulations.

[61 FR 12862, Mar. 25, 1996, as amended at 65 FR 34950, June 1, 2000]

Supplement No. 15 to Part 760Interpretation

top

Section 760.2 (c), (d), and (e) of this part prohibits United States

persons from furnishing certain types of information with intent to comply

with, further, or support an unsanctioned foreign boycott against a

country friendly to the United States. The Department has been asked

whether prohibited information may be transmittedthat is, passed to

others by a United States person who has not directly or indirectly

authored the informationwithout such transmission constituting a

furnishing of information in violation of 760.2 (c), (d), and (e) of this

part. Throughout this interpretation, transmission is defined as the

passing on by one person of information initially authored by another. The

Department believes that there is no distinction in the EAR between

transmitting (as defined above) and furnishing prohibited information

under the EAR and that the transmission of prohibited information with the

requisite boycott intent is a furnishing of information violative of the

EAR. At the same time, however, the circumstances relating to the

transmitting party's involvement will be carefully considered in

determining whether that party intended to comply with, further, or

support an unsanctioned foreign boycott.

The EAR does not deal specifically with the relationship between

transmitting and furnishing. However, the restrictions in the EAR on

responses to boycott-related conditions, both by direct and indirect

actions and whether by primary parties or intermediaries, indicate that

U.S. persons who simply transmit prohibited information are to be treated

the same under the EAR as those who both author and furnish prohibited

information. This has been the Department's position in enforcement

actions it has brought.

The few references in the EAR to the transmission of information by third

parties are consistent with this position. Two examples, both relating to

the prohibition against the furnishing of information about U.S. persons'

race, religion, sex, or national origin (760.2(c) of this part), deal

explicitly with transmitting information. These examples (760.2(c) of

this part, example (v), and 760.3(f) of this part, example (vi)) show

that, in certain cases, when furnishing certain information is

permissible, either because it is not within a prohibition or is excepted

from a prohibition, transmitting it is also permissible. These examples

concern information that may be furnished by individuals about themselves

or their families. The examples show that employers may transmit to a

boycotting country visa applications or forms containing information about

an employee's race, religion, sex, or national origin if that employee is

the source of the information and authorizes its transmission. In other

words, within the limits of ministerial action set forth in these

examples, employees' actions in transmitting information are protected by

the exception available to the employee. The distinction between

permissible and prohibited behavior rests not on the definitional

distinction between furnishing and transmitting, but on the excepted

nature of the information furnished by the employee. The information

originating from the employee does not lose its excepted character because

it is transmitted by the employer.

The Department's position regarding the furnishing and transmission of

certificates of one's own blacklist status rests on a similar basis and

does not support the contention that third parties may transmit prohibited

information authored by another. Such self-certifications do not violate

any prohibitions in the EAR (see Supplement Nos. 1(I)(B), 2, and 5(A)(2);

760.2(f), example (xiv)). It is the Department's position that it is not

prohibited for U.S. persons to transmit such self-certifications completed

by others. Once again, because furnishing the self-certification is not

prohibited, third parties who transmit the self-certifications offend no

prohibition. On the other hand, if a third party authored information

about another's blacklist status, the act of transmitting that information

would be prohibited.

A third example in the EAR (760.5, example (xiv) of this part), which

also concerns a permissible transmission of boycott-related information,

does not support the theory that one may transmit prohibited information

authored by another. This example deals with the reporting requirements in

760.5 of this partnot the prohibitionsand merely illustrates that a

person who receives and transmits a self-certification has not received a

reportable request.

It is also the Department's position that a U.S. person violates the

prohibitions against furnishing information by transmitting prohibited

information even if that person has received no reportable request in the

transaction. For example, where documents accompanying a letter of credit

contain prohibited information, a negotiating bank that transmits the

documents, with the requisite boycott intent, to an issuing bank has not

received a reportable request, but has furnished prohibited information.

While the Department does not regard the suggested distinction between

transmitting and furnishing information as meaningful, the facts relating

to the third party's involvement may be important in determining whether

that party furnished information with the required intent to comply with,

further, or support an unsanctioned foreign boycott. For example, if it is

a standard business practice for one participant in a transaction to

obtain and pass on, without examination, documents prepared by another

party, it might be difficult to maintain that the first participant

intended to comply with a boycott by passing on information contained in

the unexamined documents. Resolution of such intent questions, however,

depends upon an analysis of the individual facts and circumstances of the

transaction and the Department will continue to engage in such analysis on

a case-by-case basis.

This interpretation, like all others issued by the Department discussing

applications of the antiboycott provisions of the EAR, should be read

narrowly. Circumstances that differ in any material way from those

discussed in this interpretation will be considered under the applicable

provisions of the Regulations.

Supplement No. 16 to Part 760Interpretation

top

Pursuant to Articles 5, 7, and 26 of the Treaty of Peace between the State

of Israel and the Hashemite Kingdom of Jordan and implementing legislation

enacted by Jordan, Jordan's participation in the Arab economic boycott of

Israel was formally terminated on August 16, 1995.

On the basis of this action, it is the Department's position that certain

requests for information, action or agreement from Jordan which were

considered boycott-related by implication now cannot be presumed

boycott-related and thus would not be prohibited or reportable under the

regulations. For example, a request that an exporter certify that the

vessel on which it is shipping its goods is eligible to enter Hashemite

Kingdom of Jordan ports has been considered a boycott-related request that

the exporter could not comply with because Jordan has had a boycott in

force against Israel. Such a request from Jordan after August 16, 1995

would not be presumed boycott-related because the underlying boycott

requirement/basis for the certification has been eliminated. Similarly, a

U.S. company would not be prohibited from complying with a request

received from Jordanian government officials to furnish the place of birth

of employees the company is seeking to take to Jordan because there is no

underlying boycott law or policy that would give rise to a presumption

that the request was boycott-related.

U.S. persons are reminded that requests that are on their face

boycott-related or that are for action obviously in furtherance or support

of an unsanctioned foreign boycott are subject to the regulations,

irrespective of the country of origin. For example, requests containing

references to blacklisted companies, Israel boycott list, non-Israeli

goods or other phrases or words indicating boycott purpose would be

subject to the appropriate provisions of the Department's antiboycott

regulations.

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