[Federal Register: March 25, 1996 (Rules and Regulations)]
[Page 12864-12914]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[[pp. 12864-12914]] Export Administration Regulation; Simplification of Export
Administration Regulations
[[Continued from page 12863]]
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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
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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 Sec. 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
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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 this part. 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
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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 is on boycotting country Y's blacklist. In
an attempt to secure its removal from the blacklist, A wishes to
supply to Y information which demonstrates that A does at least as
much business in Y and other countries engaged in a boycott of X as
it does in X. 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 furnish the information, because in doing so it has no
intent to comply with, further, or support Y's boycott.
(x) 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 betaken with intent to comply with Y's
boycott.
(Note: Example (ix) is distinguishable from (x), because in (ix)
A is not responding to any boycott request or requirement. Instead,
on its own initiative, it is supplying information to demonstrate
non-discriminatory conduct as between X and Y without any intent to
comply with, further, or support Y's boycott.)
Sec. 760.2 Prohibitions.
(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 Sec. 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
[[Page 12868]]
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 Sec. 760.3(c) of this part 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,
[[Page 12869]]
because this requirement is imposed on all suppliers whether they
are blacklisted or not. (But see Sec. 760.4 of this part 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 Sec. 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 Sec. 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 list-B, C, and D-because 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 the vessel eligibility certificate is a common
requirement for non-boycott purposes.
(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, and A's bid makes no commitment regarding not dealing
with certain companies. A's bid in response to the tender is
accepted.
At the point when A's bid is accepted, A has agreed to refuse to
do business with blacklisted persons, because the terms of Y's
tender are part of the contract between Y and A.
(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.
[[Page 12870]]
(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.
[[Page 12871]]
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
[[Page 12872]]
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
[[Page 12873]]
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. This interpretation
became effective on June 22, 1978.
(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
[[Page 12874]]
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
U.S.
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
[[Page 12875]]
assist in, this endeavor. A could then pay or otherwise implement
the revised letter of credit, so long as the original prohibited
language 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) On November 1, 1977, 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 implement the letter of credit, but after June 21, 1978,
may accept only a positive certificate of origin as satisfactory
documentation. (See Sec. 760.3(b) of this part on ``Import and
Shipping Document Requirements.'')
(vii) Same as (vi), except that U.S. company B has a contract
with Y to supply a certain quantity of goods each month over a two-
year period. B's contract was entered into on May 15, 1977, and thus
qualifies for grace period treatment until December 31, 1978. Each
month, Y causes a letter of credit to be opened in favor of B in
order to effect payment. Such letters of credit call for negative
certificates of origin.
A may accept negative certificates of origin in fulfillment of
the terms of the letter of credit through December 31, 1978, because
the underlying contract is entitled to a grace period through that
date. (See Sec. 760.8 of this part on ``Grace Period.'')
(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 that paragraph (ix) of this
section does 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.
Sec. 760.3 Exceptions to prohibitions.
(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 Sec. 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
[[Page 12876]]
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. (NOTE: After June 21,
1978, 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 in to 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.
(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 of the carrier;
(iii) The route of the shipment;
(iv) The name of the supplier of the shipment; and
(v) The name of the provider of other services.
(2) After June 21, 1978, all such information must be stated in
positive, non-blacklisting, non-exclusionary terms except for
information with respect to the names 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. The purpose of this delayed effective date, which is
provided by section 4A(a)(2)(B) of the Export Administration Act of
1969, as amended, is to allow time for persons to adjust their
practices to the use of import and shipping documentation stated in
positive rather than negative terms.
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.
Until June 21, 1978, A may comply with such import requirements
in the terms requested. After June 21, 1978, 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) On February 1, 1978, A, a U.S. distributor, enters into a
two-year contract with boycotting country Y to make monthly
shipments of goods to Y. A clause in the contract requires that all
shipments into the
[[Page 12877]]
country must be accompanied by a certification that the goods did
not originate in X, a country boycotted by Y.
A may supply such a negative certification until June 21, 1978.
After that date, A may state the origin of the goods on the shipping
or import documents in positive terms only.
(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.
Until June 21, 1978, A may furnish the information required in
the terms requested. After June 21, 1978, 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.''
Until June 21, 1978, A may furnish the information required in
the terms requested. After June 21, 1978, 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.
Until June 21, 1978, A may furnish the information required in
the terms requested. After June 21, 1978, 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.
(xiii) A, a U.S. exporter, sells some of its products to
boycotting country Y. A foreign bank located in Y opens a letter of
credit to pay for the goods. The letter of credit requires that A
supply documentation certifying that ``the goods are not
manufactured in boycotted country X.''
A may make the required certification until June 21, 1978,
because import and shipping document requirements of a boycotting
country may be reflected in letters of credit.
(d) Compliance with unilateral 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 an insignificant part of the services be performed
within the boycotting country, and 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
uniqueness of design or appearance or 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
[[Page 12878]]
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 goods--goods 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