[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]]

[[Page 12864]]

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