On June 9, 2021, the US Department of Commerce (Commerce), Bureau of Industry and Security (BIS), published a notice in the Federal Register amending the Export Administration Regulations (EAR), 15 CFR Part 760, to provide a new interpretation regarding the US antiboycott regime applicable to the United Arab Emirates (UAE). This Commerce action follows the US Department of the Treasury’s (Treasury) similar action earlier this year to remove the UAE from Treasury’s list of countries that require or may require participation in or cooperation with an international boycott not sanctioned by the United States. As a result of Commerce’s action, the UAE is no longer presumed to be a country engaging in an unsanctioned boycott, and the risk of violating the prohibitions and reporting obligations under Part 760 of the EAR have been substantially curtailed, but not wholly eliminated.
The US antiboycott regime counteracts certain secondary and tertiary foreign boycotts against countries not sanctioned by the United States. Although the Arab League boycott of Israel is the most prominent example of such a foreign boycott, the US antiboycott regime applies to any international boycott or restrictive trade practice as defined by section 1773 of the Export Control Reform Act of 2018 or section 999 of the Internal Revenue Code of 1986, as amended.
Treasury implements a tax regime that penalizes certain agreements to participate in an unsanctioned foreign boycott. Treasury also requires taxpayers to report, with their annual tax report, requests to enter into such agreements. Commerce prohibits US persons (as defined) from agreeing to participate and participating in boycott-related actions, taking certain discriminatory actions, and furnishing certain types of information in transactions involving an unsanctioned foreign boycott. Commerce also requires quarterly reporting of requests to take such action.
Certain exceptions may apply so that certain actions of US persons do not constitute substantive violations of the EAR, nor trigger reports to OAC.
Importantly for the most recent BIS notification, Commerce does not maintain a specific list of boycotting countries. Unlike Treasury, which periodically publishes a list of countries determined to be requiring participation in or cooperation with an unsanctioned foreign boycott (currently Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, and Yemen), the EAR’s antiboycott requirements may apply to any country engaging in boycott-related activity.
New Commerce Interpretation Applicable to the UAE
Effective June 8, 2021, BIS promulgated Supplement No. 17 to Part 760 of the EAR, subsequent to the agreement last year between the UAE and Israel establishing full diplomatic and commercial relations and normalization of trade, also known as the “Abraham Accords.” By doing so, BIS recognized that the UAE issued Federal Decree-Law No. 4 of August 16, 2020, which repealed Federal Law No. 15 of 1972, and legally terminated the country’s participation in the Arab League Boycott of Israel. In making this amendment, BIS’s Federal Register notice stated that the US Government has also taken into account actions that the UAE Government has undertaken to implement, in policy and practice, the August 16, 2020 decree.
This new interpretation, which is similar in scope to prior supplements to Part 760 regarding Egypt’s and Jordan’s termination of their boycotts, effectively means that Commerce has determined that the UAE does not impose or foster a boycott against Israel.
Notably, in order to fall within the interpretation, the request from the UAE must be issued after August 16, 2020, so there is no retroactive application before that date. Consequently, a boycott request involving the UAE and received prior to August 16, 2020 may still trigger liability under the EAR.
Supplement No. 17 notes that certain requests to furnish information or take action received from the UAE that were presumed to be boycott-related before August 16, 2020 now are no longer presumed by Commerce to be boycott-related. For example, requests made by UAE Government officials: (1) for an agent (or any person) to certify that a vessel is eligible or allowed to enter the ports of the UAE, or (2) to comply with a directive to furnish the place of birth, i.e., national origin, of employees seeking to enter or visit the UAE, are no longer prohibited or reportable under the EAR, even though such requests issued before August 16, 2020 would have been problematic.
Notwithstanding this regulatory change, which should reduce US antiboycott risks related to the UAE under the Commerce regime, they are not fully eliminated. Persons should be mindful that certain requests that are explicitly boycott-related still can trigger the prohibitions and reporting obligations of Part 760. For instance, requests containing references to “blacklisted companies,” “Israel boycott list,” “non-Israeli goods,” or other phrases or words indicating a boycott purpose would on their face be subject to Commerce’s antiboycott regulations under the EAR. This residual risk for UAE-related transactions should be considered as US persons consider any changes to their US antiboycott compliance policies and procedures as applied to the UAE.