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.
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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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