[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 particular carrier has been made.
    (iv) A, a U.S. exporter shipping goods ordered by boycotting 
country Y, is provided by Y with a list of eligible U.S. insurers 
from which A may choose in insuring the shipment of its goods. A 
knows or has reason to know that the list was compiled on a boycott 
basis.
    A may not comply or agree to comply with Y's request that A 
choose from among the eligible insurers, because no specific 
selection of any particular insurer has been made.
    (v) A, a U.S. aircraft manufacturer, is negotiating to sell 
aircraft to boycotting country Y. During the negotiations, Y asks A

[[Page 12879]]
to identify the company which normally manufactures the engines for 
the aircraft. A responds that they are normally manufactured by U.S. 
engine manufacturer B. B is blacklisted by Y. In making the 
purchase, Y specifies that the engines for the aircraft should be 
supplied by U.S. engine manufacturer C.
    A may comply or agree to comply with Y's selection of C, because 
Y's selection is unilateral and specific.
    (vi) A, a U.S. construction firm, is retained by an agency of 
boycotting country Y to build a pipeline. Y requests A to suggest 
qualified engineering firms to be used on-site in the construction 
of the pipeline. It is customary for A, regardless of where it 
conducts its operations, to identify qualified engineering firms to 
its customers so that its customers may make their own selection of 
the firm to be engaged. Choice of engineering firm is customarily a 
prerogative of the customer. A provides a list of five engineering 
firms, B-F, excluding no firm because it may be blacklisted, and 
then confers with and gives its recommendations to Y. A recommends 
C, because C is the best qualified. Y then selects B, because C is 
blacklisted.
    A may comply with Y's selection of B, because the boycott-based 
decision is made by Y and is unilateral and specific. Since A's pre-
award services are of the kind customarily provided in these 
situations, and since they are provided without reference to the 
boycott, they do not destroy the unilateral character of Y's 
selection.
    (vii) A, a U.S. aircraft manufacturer, has an order to supply a 
certain number of planes to boycotting country Y. In connection with 
the order, Y asks A to supply it with a list of qualified aircraft 
tire manufacturers so that Y can select the tires to be placed on 
the planes. This is a highly unusual request, since, in A's 
worldwide business operations, choice of tires is customarily made 
by the manufacturer, not the customer. Nonetheless, A supplies a 
list of tire manufacturers, B, C, D, and E. Y chooses tire 
manufacturer B because B is not blacklisted. Had A, as is customary, 
selected the tires, company C would have been chosen. C happens to 
be blacklisted, and A knows that C's blacklist status was the reason 
for Y's selection of B.
    A's provision of a list of tire manufacturers for Y to choose 
from destroys the unilateral character of Y's selection, because 
such a pre-selection service is not customary in A's worldwide 
business operations.
    (viii) A, a U.S. aircraft manufacturer, receives an order from 
U.S. company C, which is located in the United States, for the sale 
of aircraft to company D, a U.S. affiliate of C. D is a bona fide 
resident of boycotting country Y. C instructs A that ``in order to 
avoid boycott problems,'' A must use engines that are manufactured 
by company B, a company that is not blacklisted by Y. Engines built 
by B are unique in design and also bear B's trade name.
    Since A has reason to know that the selection is boycott-based, 
he must inquire of C whether the selection was in fact made by D. If 
C informs A that the selection was made by D, A may comply.
    (ix) Same as (viii), except that C initially states that the 
designation was unilaterally and specifically made by D.
    A may accept C's statement without further investigation and may 
comply with the selection, because C merely transmitted D's 
unilateral and specific selection.
    (x) Same as (ix), except that C informs A that it, C, has 
selected B on behalf of or as an agent of its affiliated company 
resident in the boycotting country.
    A may not comply with this selection, because the decision was 
not made by a resident of the boycotting country.
    (xi) A, a U.S. management consulting firm, is advising 
boycotting country Y on the selection of a contracting firm to 
construct a plant for the manufacture of agricultural chemicals. As 
is customary in its business, A compiles a list of potential 
contractors on the basis of its evaluation of the capabilities of 
the respective candidates to perform the job. A has knowledge that 
company B is blacklisted, but provides Y with the names of companies 
B, C, D, and E, listing them in order of their qualifications. Y 
instructs A to negotiate with C.
    A may comply with Y's instruction, because Y's selection is 
unilateral and specific.
    (xii) A, a U.S. exporter, is asked by boycotting country Y not 
to ship goods on carriers B, C, or D, which are owned by nationals 
of and are registered in country P, a country not boycotted by Y.
    A may comply or agree to comply with Y's request even though the 
selection is not specific, because A does not know or have reason to 
know that the request is boycott-based.

(Note: In example (xii), A has violated no prohibition, because it 
does not know or have reason to know that Y's instruction is 
boycott-based. Therefore, A could not act with the requisite intent 
to comply with the boycott.)

    (xiii) A, a U.S. construction company, receives a contract to 
construct a hotel in boycotting country Y. As part of the contract, 
A is required to furnish Y with lists of qualified suppliers of 
various specifically identifiable items. A compiles lists of various 
qualified suppliers wholly without reference to the boycott, and 
thereafter Y instructs A to negotiate with, enter into contracts 
with, and arrange for delivery from each of the suppliers which Y 
designates. A knows that Y's choices are made on a boycott basis.
    A may comply with Y's selections and carry out these post-award 
services for Y, because Y's selections were unilateral and specific 
and A's pre-award services were provided without reference to Y's 
boycott.

Examples of Boycotting Country Buyer

(The factors in determining whether a United States person is a 
``bona fide resident'' of a boycotting country are the same as in 
paragraph (g) of this section on ``Compliance with Local Law.'' See 
also the examples in that section.)

    (i) A, a U.S. exporter, is asked by B, a U.S. person who is a 
bona fide resident of boycotting country Y, to ship goods on U.S. 
carrier C. C is not blacklisted by Y, and A knows that B has chosen 
on a boycott basis in order to comply with Y's boycott laws.
    A may comply or agree to comply with B's request, because B is a 
bona fide resident of Y.
    (ii) A is a U.S. computer company whose subsidiary, B, is a bona 
fide resident of boycotting country Y. A receives an order from B 
for specific, identifiable products manufactured by company C in 
connection with a computer which B is installing in Y.
    A may comply or agree to comply with B's unilateral and specific 
selection, so long as the discretion was in fact exercised by B, not 
A.

(Note: Unilateral selection transactions involving related United 
States persons will be scrutinized carefully to ensure that the 
selection was in fact made by the bona fide resident of the 
boycotting country.)

    (iii) A, a U.S. engineering firm, has chief engineer B as its 
resident engineer on a dam construction site in boycotting country 
Y. B's presence at the site is necessary in order to ensure proper 
supervision of the project. In order to comply with local law, B 
selects equipment supplier C rather than D, who is blacklisted, and 
directs A to purchase certain specific equipment from C for use in 
the project.
    A may comply with this unilateral selection, because the 
decision was made by a bona fide resident of Y.

(As noted above, unilateral selections involving related United 
States persons will be scrutinized carefully to ensure that the 
selection was in fact made by the bona fide resident of the 
boycotting country.)

    (iv) B, a branch of U.S. bank A, is located in boycotting 
country Y. B is in need of office supplies and asks the home office 
in New York to make the necessary purchases. A contacts C, a U.S. 
company in the office supply business, and instructs C to purchase 
various items from certain specific companies and ship them directly 
to B. In order to avoid any difficulties for B with respect to Y's 
boycott laws, A is careful to specify only non-blacklisted companies 
or suppliers. C knows that that was A's purpose. C may not comply 
with A's instruction, because the selection of suppliers was not 
made by a resident of a boycotting country.
    (v) Same as (iv), except that A has given standing instructions 
to B that whenever it needs office supplies, it should specify 
certain suppliers designated by A. To avoid running afoul of Y's 
boycott laws, A's designations consist exclusively of non-
blacklisted firms. A receives an order from B with the suppliers 
designated in accordance with A's instructions.
    A may not comply with B's selection, because the selection was 
not in fact made by a bona fide resident of the boycotting country, 
but by a person located in the United States.

Examples of Suppliers of Services

    (i) A, a U.S. manufacturer, is asked by boycotting country Y to 
ship goods to Y on U.S. vessel B, a carrier which is not blacklisted 
by Y.
    A may comply or agree to comply with Y's request, because 
compliance with the unilateral and specific selection of carriers is 
expressly permitted under this exception.

[[Page 12880]]

    (ii) A, a U.S. exporter shipping goods ordered by C, a national 
of boycotting country Y, is asked by C to insure the shipment 
through U.S. insurer B.
    A may comply or agree to comply with C's request, because 
compliance with the unilateral and specific selection of an insurer 
is expressly permitted under this exception.
    (iii) A, a U.S. construction company, is hired by C, an agency 
of the government of boycotting country Y, to build a power plant in 
Y. C specifies that A should subcontract the foundation work to U.S. 
contractor B. Part of the foundation design work will be done by B 
in the United States.
    A may comply or agree to comply with Y's designation, because a 
necessary and not insignificant part of B's services are to be 
performed within the boycotting country, and such services are 
customarily performed on-site.
    (iv) A, a U.S. contractor, is engaged by boycotting country Y to 
build a power plant. Y specifies that U.S. architectural firm B 
should be retained by A to design the plant. In order to design the 
plant, it is essential that B's personnel visit and become familiar 
with the site, although the bulk of the design and drawing work will 
be done in the United States.
    A may comply or agree to comply with Y's unilateral and specific 
selection of architectural firm B, because a necessary and not 
insignificant part of B's services are to be performed within Y, and 
such on-site work is customarily involved in the provision of 
architectural services. The fact that the bulk of the actual work 
may be performed in the United States is irrelevant since the part 
to be performed within Y is necessary to B's effective performance.
    (v) Same as (iv), except that Y specifies that the turbine for 
the power plant should be designed by U.S. engineer C. It is neither 
customary nor necessary for C to visit the site in order to do any 
of his work, but C has informed A that he would probably want to 
visit the site in Y if he were selected for the job.
    A may not comply or agree to comply with Y's request, because, 
in the normal course of business, it is neither customary nor 
necessary for engineer C's services to be performed in Y.
    (vi) A, a U.S. aircraft manufacturer, receives a contract from 
boycotting country Y to manufacture jet engines for Y's use. Y 
specifies that the engines should be designed by U.S. industrial 
engineering firm B.
    A may not comply or agree to comply with Y's request, because, 
in the normal course of business, the services will not be performed 
in Y.
    (vii) U.S. company A has a contract to supply specially designed 
road graders to boycotting country Y. Y has instructed A that it 
should engage engineering firm B in the design work rather than 
engineering firm C, which A normally uses, because C is blacklisted. 
When A contacts B, B informs A that one of B's personnel customarily 
visits the location in which any equipment B designs is used after 
it is in use, in order to determine how good a design job B has 
done. Such visits are necessary from B's point of view to provide a 
check on the quality of its work, and they are necessary from Y's 
point of view because they make it possible for Y to discuss 
possible design changes should deficiencies be detected.
    A may not comply with Y's selection of B, because the services 
which B would perform in Y are an insignificant part of the total 
services to be performed by B.

Examples of Specifically Identifiable Goods

(The test of what constitutes ``specifically identifiable goods'' 
under this exception also applies to the term ``specifically 
identifiable goods'' as used in paragraph (g) of this section on 
``Compliance with Local Law.'')

    (i) A, a U.S. contractor, is constructing an apartment complex, 
on a turnkey basis, for boycotting country Y. Y instructs A to use 
only kitchen appliances manufactured by U.S. company B in completing 
the project. The appliances normally bear the manufacturer's name 
and trademark.
    A may comply with Y's selection of B, because Y's unilateral and 
specific selection is of goods identifiable as to source or origin 
in the normal course of business at the time of their entry into Y.
    (ii) Same as (i), except that Y directs A to use lumber 
manufactured only by U.S. company C. In the normal course of 
business, C neither stamps its name on the lumber nor identifies 
itself as the manufacturer on the packaging. In addition, normal 
export packaging does not identify the manufacturer.
    A may not comply with Y's selection, because the goods selected 
are not identifiable by source or origin in the normal course of 
business at the time of their entry into Y.
    (iii) B, a U.S. contractor who is a bona fide resident of 
boycotting country Y, is engaged in building roads. B retains the 
services of A, a U.S. engineering firm, to assist it in procuring 
construction equipment. B directs A to purchase road graders only 
from manufacturer C because other road grader manufacturers which A 
might use are blacklisted. C's road graders normally bear C's 
insignia.
    A may comply with B's selection of C, because the goods selected 
are identifiable by source or origin in the normal course of 
business at the time of their entry into Y.
    (iv) A, a U.S. company, manufactures computer-operated machine 
tools. The computers are mounted on a separate bracket on the side 
of the equipment and are readily identifiable by brand name 
imprinted on the equipment. There are five or six U.S. manufacturers 
of such computers which will function interchangeably to operate the 
machine tools manufactured by A. B, a resident of boycotting country 
Y, contracts to buy the machine tools manufactured by A on the 
condition that A incorporate, as the computer drive, a computer 
manufactured by U.S. company C. B's designation of C is made to 
avoid boycott problems which could be caused if computers 
manufactured by some other company were used.
    A may comply with B's designation of C, because the goods 
selected are identifiable by source or origin in the normal course 
of business at the time of their entry into Y.
    (v) A, a U.S. wholesaler of electronic equipment, receives an 
order from B, a U.S. manufacturer of radio equipment, who is a bona 
fide resident of boycotting country Y. B orders a variety of 
electrical components and specifies that all transistors must be 
purchased from company C, which is not blacklisted by Y. The 
transistors requested by B do not normally bear the name of the 
manufacturer; however, they are typically shipped in cartons, and 
C's name and logo appear on the cartons.
    A may comply with B's selection, because the goods selected by B 
are identifiable as to source or origin in the normal course of 
business at the time of their entry into Y by virtue of the 
containers or packaging used.
    (vi) A, a U.S. computer manufacturer, receives an order for a 
computer from B, a university in boycotting country Y. B specifies 
that certain integrated circuits incorporated in the computer must 
be supplied by U.S. electronics company C. These circuits are 
incorporated into the computer and are not visible without 
disassembling the computer.
    A may not comply or agree to comply with B's specific selection 
of these components, because they are not identifiable as to their 
source or origin in the normal course of business at the time of 
their entry into Y.
    (vii) A, a U.S. clothing manufacturer, receives an order for 
shirts from B, a retailer resident in boycotting country Y. B 
specifies that the shirts are to be manufactured from cotton 
produced by U.S. farming cooperative C. Such shirts will not 
identify C or the source of the cotton.
    A may not comply or agree to comply with B's designation, 
because the cotton is not identifiable as to source or origin in the 
normal course of business at the time of entry into Y.
    (viii) A, a U.S. contractor, is retained by B, a construction 
firm located in and wholly-owned by boycotting country Y, to assist 
B in procuring construction materials. B directs A to purchase a 
range of materials, including hardware, tools, and trucks, all of 
which bear the name of the manufacturer stamped on the item. In 
addition, B directs A to purchase steel beams manufactured by U.S. 
company C. The name of manufacturer C normally does not appear on 
the steel itself or on its export packaging.
    A may comply with B's selection of the hardware, tools, and 
trucks, because they are identifiable as to source or origin in the 
normal course of business at the time of entry into Y. A may not 
comply with B's selection of steel beams, because the goods are not 
identifiable as to source or origin by trade name, trademark, 
uniqueness or packaging at the time of their entry into Y.

Examples of Discrimination on Basis of Race, Religion, Sex, or National 
Origin

    (i) A, a U.S. paper manufacturer, is asked by boycotting country 
Y to ship goods to Y on U.S. vessel B. Y states that the reason for 
its choice of B is that, unlike U.S. vessel C, B is not owned by 
persons of a particular faith.
    A may not comply or agree to comply with Y's request, because A 
has reason to know that the purpose of the selection is to effect 
religious discrimination against a United States person.


[[Page 12881]]

    (e) Shipment and transshipment of exports pursuant to a boycotting 
country's requirements.

Compliance With a Boycotting Country's Requirements Regarding Shipment 
and Transshipment of Exports

    (1) A United States person may comply or agree to comply with the 
export requirements of a boycotting country with respect to shipments 
or transshipments of exports to:
    (i) A boycotted country;
    (ii) Any business concern of a boycotted country;
    (iii) Any business concern organized under the laws of a boycotted 
country; or
    (iv) Any national or resident of a boycotted country.
    (2) This exception permits compliance with restrictions which a 
boycotting country may place on direct exports to a boycotted country; 
on indirect exports to a boycotted country (i.e., those that pass via 
third parties); and on exports to residents, nationals, or business 
concerns of, or organized under the laws of, a boycotted country, 
including those located in third countries.
    (3) This exception also permits compliance with restrictions which 
a boycotting country may place on the route of export shipments when 
the restrictions are reasonably related to preventing the export 
shipments from coming into contact with or under the jurisdiction of 
the boycotted country. This exception applies whether a boycotting 
country or the vendor of the shipment:
    (i) Explicitly states that the shipment should not pass through the 
boycotted country enroute to its final destination; or
    (ii) Affirmatively describes a route of shipment that does not 
include the boycotted country.
    (4) A United States person may not, under this exception, refuse on 
an across-the-board basis to do business with a boycotted country or a 
national or resident of a boycotted country.

Examples of Compliance With a Boycotting Country's Requirements 
Regarding Shipment or Transshipment of Exports

    The following examples are intended to give guidance in 
determining the circumstances in which compliance with the export 
requirements of a boycotting country is permissible. They are 
illustrative, not comprehensive.
    (i) A, a U.S. petroleum company, exports petroleum products to 
20 countries, including the United States, from boycotting country 
Y. Country Y's export regulations require that products not be 
exported from Y to boycotted country X.
    A may agree to and comply with Y's regulations with respect to 
the export of goods from Y to X.
    (ii) Same as (i), except that Y's export regulations require 
that goods not be exported from boycotting country Y to any business 
concern organized under the laws of boycotted country X.
    A may agree to and comply with Y's regulations with respect to 
the export of goods from Y to a business concern organized under the 
laws of X, even if such concern is located in a country not involved 
in Y's boycott of X.
    (iii) B, the operator of a storage facility in country M, 
contracts with A, a U.S. carrier, for the shipment of certain goods 
manufactured in boycotting country Y. A's contract with B contains a 
provision stating that the goods to be transported may not be 
shipped or transshipped to boycotted country X. B informs A that 
this provision is a requirement of C, the manufacturer of goods who 
is a resident of boycotting country Y. Country M is not boycotted by 
Y.
    A may agree to and comply with this provision, because such a 
provision is required by the export regulations of boycotting 
country Y in order to prevent shipment of Y-origin goods to a 
country boycotted by Y.
    (iv) A, a U.S. petroleum refiner located in the United States, 
purchases crude oil from boycotting country Y. A has a branch 
operation in boycotted country X. Y requires, as a condition of 
sale, that A agree not to ship or transship the crude oil or 
products refined in Y to A's branch in X.
    A may agree to and comply with these requirements, because they 
are export requirements of Y designed to prevent Y-origin products 
from being shipped to a boycotted country.
    (v) A, a U.S. company, has a petrochemical plant in boycotting 
country Y. As a condition of securing an export license from Y, A 
must agree that it will not ship or permit transshipment of any of 
its output from the plant in Y to any companies which Y lists as 
being owned by nationals of boycotted country X.
    A may agree to this condition, because it is a restriction 
designed to prevent Y-origin products from being exported to a 
business concern of boycotted country X or to nationals of boycotted 
country X.
    (vi) Same as (v), except that the condition imposed on A is that 
Y-origin goods may not be shipped or permitted to be transshipped to 
any companies which Y lists as being owned by persons whose national 
origin is X.
    A may not agree to this condition, because it is a restriction 
designed to prevent Y-origin goods from being exported to persons of 
a particular national origin rather than to residents or nationals 
of a particular boycotted country.
    (vii) A, a U.S. petroleum company, exports petroleum products to 
20 countries, including the United States, from boycotting country 
Y. Y requires, as a condition of sale, that A not ship the products 
to be exported from Y to or through boycotted country X.
    A may agree to and comply with this requirement because it is an 
export requirement of Y designed to prevent Y-origin products from 
coming into contact with or under the jurisdiction of a boycotted 
country.
    (viii) Same as (vii), except that boycotting country Y's export 
regulations require that products to be exported from Y not pass 
through a port of boycotted country X.
    A may agree to and comply with Y's regulations prohibiting Y-
origin exports from passing through a port at boycotted country X, 
because they are export requirements of Y designed to prevent Y-
origin products from coming into contact with or under the 
jurisdiction of a boycotted country.
    (ix) Same as (vii), except that Y's export regulations require 
that A not transship the exported products ``in or at'' boycotted 
country X.
    A may agree to and comply with Y's regulations with respect to 
the transshipment of goods ``in or at'' X, because they are export 
requirements of Y designed to prevent Y-origin products from coming 
into contact with or under the jurisdiction of a boycotted country.

    (f) Immigration, passport, visa, or employment requirements of a 
boycotting country.

Compliance With Immigration, Passport, Visa, or Employment Requirements 
of a Boycotting Country

    (1) A United States individual may comply or agree to comply with 
the immigration, passport, visa, or employment requirements of a 
boycotting country, and with requests for information from a boycotting 
country made to ascertain whether such individual meets requirements 
for employment within the boycotting country, provided that he 
furnishes information only about himself or a member of his family, and 
not about any other United States individual, including his employees, 
employers, or co-workers.
    (2) For purposes of this section, a United States individual means 
a person who is a resident or national of the United States. Family 
means immediate family members, including parents, siblings, spouse, 
children, and other dependents living in the individual's home.
    (3) A United States person may not furnish information about its 
employees or executives, but may allow any individual to respond on his 
own to any request for information relating to immigration, passport, 
visa, or employment requirements. A United States person may also 
perform any ministerial acts to expedite processing of applications by 
individuals. These include informing employees of boycotting country 
visa requirements at an appropriate time; typing, translation, 
messenger and similar services; and assisting in or arranging for the 
expeditious processing of applications.

[[Page 12882]]
All such actions must be undertaken on a non-discriminatory basis.
    (4) A United States person may proceed with a project in a 
boycotting country even if certain of its employees or other 
prospective participants in a transaction are denied entry for boycott 
reasons. But no employees or other participants may be selected in 
advance in a manner designed to comply with a boycott.

Examples of Compliance With Immigration, Passport, Visa, or Employment 
Requirements of a Boycotting Country

    The following examples are intended to give guidance in 
determining the circumstances in which compliance with immigration, 
passport, visa, or employment requirements is permissible. They are 
illustrative, not comprehensive.
    (i) A, a U.S. individual employed by B, a U.S. manufacturer of 
sporting goods with a plant in boycotting country Y, wishes to 
obtain a work visa so that he may transfer to the plant in Y. 
Country Y's immigration laws specify that anyone wishing to enter 
the country or obtain a visa to work in the country must supply 
information about his religion. This information is required for 
boycott purposes.
    A may furnish such information, because it is required by Y's 
immigration laws.
    (ii) Same as (i), except that A is asked to supply such 
information about other employees of B.
    A may not supply this information, because it is not information 
about himself or his family.
    (iii) A, a U.S. building contractor, has been awarded a 
construction contract to be performed in boycotting country Y. Y's 
immigration laws require that individuals applying for visas must 
indicate race, religion, and place of birth. The information is 
sought for boycott purposes. To avoid repeated rejections of 
applications for work visas by A's employees, A desires to furnish 
to country Y a list of its prospective and current employees and 
required information about each so that Y can make an initial 
screening.
    A may not furnish such a list, because A would be furnishing 
information about the race, religion, and national origin of its 
employees.
    (iv) Same as (iii), except that A selects for work on the 
project those of its current employees whom it believes will be 
granted work visas from boycotting country Y.
    A may not make a selection from among its employees in a manner 
designed to comply with the boycott-based visa requirements of Y, 
but must allow all eligible employees to apply for visas. A may 
later substitute an employee who obtains the necessary visa for one 
who has had his application rejected.
    (v) Same as (iii), except that A selects employees for the 
project and then allows each employee individually to apply for his 
own visa. Two employees' applications are rejected, and A then 
substitutes two other employees who, in turn, submit their own visa 
applications.
    A may take such action, because in so doing A is not acting in 
contravention of any prohibition of this part.
    (vi) Same as (v), except that A arranges for the translation, 
typing and processing of its employees' applications, and transmits 
all the applications to the consulate of boycotting country Y.
    A may take such ministerial actions, because in so doing A is 
not itself furnishing information with respect to race, religion, 
sex, or national origin, but is merely transmitting information 
furnished by its individual employees.
    (vii) A, a U.S. contractor, selects U.S. subcontractor B to 
perform certain engineering services in connection with A's project 
in boycotting country Y. The work visa application submitted by the 
employee B has proposed as chief engineer of this project is 
rejected by Y because his national origin is of boycotted country X. 
Subcontractor B thereupon withdraws.
    A may continue with the project and select another 
subcontractor, because A is not acting in contravention of any 
prohibition of this part.

    (g) Compliance with local law.
    (1) This exception contains two parts. The first covers compliance 
with local law with respect to a United States person's activities 
exclusively within a foreign country; the second covers compliance with 
local import laws by United States persons resident in a foreign 
country. Under both parts of this exception, local laws are laws of the 
host country, whether derived from statutes, regulations, decrees, or 
other official sources having the effect of law in the host country. 
This exception is not available for compliance with presumed policies 
or understandings of policies unless those policies are reflected in 
official sources having the effect of law.
    (2) Both parts of this exception apply only to United States 
persons resident in a foreign country. For purposes of this exception, 
a United States person will be considered to be a resident of a foreign 
country only if he is a bona fide resident. A United States person may 
be a bona fide resident of a foreign country even if such person's 
residency is temporary.
    (3)(i) Factors that will be considered in determining whether a 
United States person is a bona fide resident of a foreign country 
include:
    (A) Physical presence in the country;
    (B) Whether residence is needed for legitimate business reasons;
    (C) Continuity of the residency;
    (D) Intent to maintain the residency;
    (E) Prior residence in the country;
    (F) Size and nature of presence in the country;
    (G) Whether the person is registered to do business or incorporated 
in the country;
    (H) Whether the person has a valid work visa; and
    (I) Whether the person has a similar presence in both boycotting 
and non-boycotting foreign countries in connection with similar 
business activities.
    (ii) No one of the factors in paragraph (g)(3) of this section is 
dispositive. All the circumstances involved will be closely examined to 
ascertain whether there is, in fact, bona fide residency. Residency 
established solely for purposes of avoidance of the application of this 
part, unrelated to legitimate business needs, does not constitute bona 
fide residency.

Examples of Bona Fide Residency

    The following examples are intended to give guidance in 
determining the circumstances in which a United States person may be 
a bona fide resident of a foreign country. For purposes of 
illustration, each example discusses only one or two factors, 
instead of all relevant factors. They are illustrative, not 
comprehensive.
    (i) A, a U.S. radio manufacturer located in the United States, 
receives a tender to bid on a contract to supply radios for a hotel 
to be built in boycotting country Y. After examining the proposal, A 
sends a bid from its New York office to Y.
    A is not a resident of Y, because it is not physically present 
in Y.
    (ii) Same as (i), except that after receiving the tender, A 
sends its sales representative to Y. A does not usually have sales 
representatives in countries when it bids from the United States, 
and this particular person's presence in Y is not necessary to 
enable A to make the bid.
    A is not a bona fide resident of Y, because it has no legitimate 
business reasons for having its sales representative resident in Y.
    (iii) A, a U.S. bank, wishes to establish a branch office in 
boycotting country Y. In pursuit of that objective, A's personnel 
visit Y to make the necessary arrangements. A intends to establish a 
permanent branch office in Y after the necessary arrangements are 
made.
    A's personnel in Y are not bona fide residents of Y, because A 
does not yet have a permanent business operation in Y.
    (iv) Same as (iii), except A's personnel are required by Y's 
laws to furnish certain non-discriminatory boycott information in 
order to establish a branch in Y.
    In these limited circumstances, A's personnel may furnish the 
non-discriminatory boycott information necessary to establish 
residency to the same extent a U.S. person who is a bona fide 
resident in that country could. If this information could not be 
furnished in such limited circumstances, the exception would be 
available only to firms resident in a boycotting country before the 
effective date of this part.
    (v) A, a U.S. construction company, receives an invitation to 
build a power plant in boycotting country Y. After receipt of the 
invitation, A's personnel visit Y in order to

[[Page 12883]]
survey the site and make necessary analyses in preparation for 
submitting a bid. The invitation requires that otherwise prohibited 
boycott information be furnished with the bid.
    A's personnel in Y are not bona fide residents of Y, because A 
has no permanent business operation in Y. Therefore, A's personnel 
may not furnish the prohibited information.
    (vi) Same as (v), except that A is considering establishing an 
office in boycotting country Y. A's personnel visit Y in order to 
register A to do business in that country. A intends to establish 
ongoing construction operations in Y. A's personnel are required by 
Y's laws to furnish certain non-discriminatory boycott information 
in order to register A to do business or incorporate a subsidiary in 
Y.
    In these limited circumstances, A's personnel may furnish non-
discriminatory boycott information necessary to establish residency 
to the same extent a U.S. person who is a bona fide resident in that 
country could. If this information could not be furnished in such 
limited circumstances, the exception would be available only to 
firms resident in a boycotting country before the effective date of 
this part.
    (vii) A, a subsidiary of U.S. oil company B, is located in 
boycotting country Y. A has been engaged in oil explorations in Y 
for a number of years.
    A is a bona fide resident of Y, because of its pre-existing 
continuous presence in Y for legitimate business reasons.
    (viii) Same as (vii), except that A has just been established in 
Y and has not yet begun operations.
    A is a bona fide resident of Y, because it is present in Y for 
legitimate business reasons and it intends to reside continuously.
    (ix) U.S. company A is a manufacturer of prefabricated homes. A 
builds a plant in boycotting country Y for purposes of assembling 
components made by A in the United States and shipped to Y.
    A's personnel in Y are bona fide residents of Y, because A's 
plant in Y is established for legitimate business reasons, and it 
intends to reside continuously.
    (x) U.S. company A has its principal place of business in the 
United States. A's sales agent visits boycotting country Y from time 
to time for purposes of soliciting orders.
    A's sales agent is not a bona fide resident of Y, because such 
periodic visits to Y are insufficient to establish a bona fide 
residency.
    (xi) A, a branch office of U.S. construction company B, is 
located in boycotting country Y. The branch office has been in 
existence for a number of years and has been performing various 
management services in connection with B's construction operations 
in Y.
    A is a bona fide resident of Y, because of its longstanding 
presence in Y and its conduct of ongoing operations in Y.
    (xii) U.S. construction company A has never done any business in 
boycotting country Y. It is awarded a contract to construct a 
hospital in Y, and preparatory to beginning construction, sends its 
personnel to Y to set up operations.
    A's personnel are bona fide residents of Y, because they are 
present in Y for the purposes of carrying out A's legitimate 
business purposes; they intend to reside continuously; and residency 
is necessary to conduct their business.
    (xiii) U.S. company A manufactures furniture. All its sales in 
foreign countries are conducted from its offices in the United 
States. From time to time A has considered opening sales offices 
abroad, but it has concluded that it is more efficient to conduct 
sales operations from the United States. Shortly after the effective 
date of this part, A sends a sales representative to boycotting 
country Y to open an office in and solicit orders from Y. It is more 
costly to conduct operations from that office than to sell directly 
from the United States, but A believes that if it establishes a 
residence in Y, it will be in a better position to avoid conflicts 
with U.S. law in its sales to Y.
    A's sales representative is not a bona fide resident of Y, 
because the residency was established to avoid the application of 
this part and not for legitimate business reasons.
    (xiv) Same as (xiii), except that it is in fact more efficient 
to have a sales office in Y. In fact, without a sales office in Y, A 
would find it difficult to explore business opportunities in Y. A is 
aware, however, that residency in Y would permit its sales 
representative to comply with Y's boycott laws.
    A's sales representative is a bona fide resident of Y, because A 
has a legitimate business reason for establishing a sales office in 
Y.
    (xv) U.S. company B is a computer manufacturer. B sells 
computers and related programming services tailored to the needs of 
individual clients. Because of the complex nature of the product, B 
must have sales representatives in any country where sales are made. 
B has a sales representative, A, in boycotting country Y. A spends 
two months of the year in Y, and the rest of the year in other 
countries. B has a permanent sales office from which A operates 
while in Y, and the sales office is stocked with brochures and other 
sales materials.
    A is a bona fide resident of Y, because his presence in Y is 
necessary to carry out B's legitimate business purposes; B maintains 
a permanent office in Y; and B intends to continue doing business in 
Y in the future.
    (xvi) A, a U.S. construction engineering company, is engaged by 
B, a U.S. general contracting company, to provide services in 
connection with B's contract to construct a hospital complex in 
boycotting country Y. In order to perform those services, A's 
engineers set up a temporary office in a trailer on the construction 
site in Y. A's work is expected to be completed within six months.
    A's personnel in Y are bona fide residents of Y, because A's on-
site office is necessary to the performance of its services for B, 
and because A's personnel are continuously there.
    (xvii) A, a U.S. company, sends one of its representatives to 
boycotting country Y to explore new sales possibilities for its line 
of transistor radios. After spending several weeks in Y, A's 
representative rents a post office box in Y, to which all persons 
interested in A's products are directed to make inquiry.
    A is not a bona fide resident of Y, because rental of a post 
office box is not a sufficient presence in Y to constitute 
residency.
    (xviii) A, a U.S. computer company, has a patent and trademark 
registered in the United States. In order to obtain registration of 
its patent and trademark in boycotting country Y, A is required to 
furnish certain non-discriminatory boycott information.
    A may not furnish the information, because A is not a bona fide 
resident of Y.

    (h) Activities exclusively within a foreign country.
    (1) Any United States person who is a bona fide resident of a 
foreign country, including a boycotting country, may comply or agree to 
comply with the laws of that country with respect to his activities 
exclusively within that country. These activities include:
    (i) Entering into contracts which provide that local law applies or 
governs, or that the parties will comply with such laws;
    (ii) Employing residents of the host country;
    (iii) Retaining local contractors to perform work within the host 
country;
    (iv) Purchasing or selling goods or services from or to residents 
of the host country; and
    (v) Furnishing information within the host country.
    (2) Activities exclusively within the country do not include 
importing goods or services from outside the host country, and, 
therefore, this part of the exception does not apply to compliance with 
import laws in connection with importing goods or services.

Examples of Permissible Compliance With Local Law With Respect to 
Activities Exclusively Within a Foreign Country

    The following examples are intended to give guidance in 
determining the circumstances in which compliance with local law is 
permissible. They are illustrative, not comprehensive.

Activities Exclusively Within a Foreign Country

    (i) U.S. construction company A, a bona fide resident of 
boycotting country Y, has a contract to build a school complex in Y. 
Pursuant to Y's boycott laws, the contract requires A to refuse to 
purchase supplies from certain local merchants. While Y permits such 
merchants to operate within Y, their freedom of action in Y is 
constrained because of their relationship with boycotted country X.
    A may enter into the contract, because dealings with local 
merchants are activities exclusively within Y.
    (ii) A, a banking subsidiary of U.S. bank B, is a bona fide 
resident of boycotting country Y. From time to time, A purchases 
office supplies from the United States.
    A's purchase of office supplies is not an activity exclusively 
within Y, because it involves the import of goods from abroad.
    (iii) A, a branch of U.S. bank B, is a bona fide resident of 
boycotting country Y. Under

[[Page 12884]]
Y's boycott laws, A is required to supply information about whether 
A has any dealings with boycotted country X. A compiles and 
furnishes the information within Y and does so of its own knowledge.
    A may comply with that requirement, because in compiling and 
furnishing the information within Y, based on its own knowledge, A 
is engaging in an activity exclusively within Y.
    (iv) Same as (iii), except that A is required to supply 
information about B's dealings with X. From its own knowledge and 
without making any inquiry of B, A compiles and furnishes the 
information.
    A may comply with that requirement, because in compiling and 
furnishing the information within Y, based on its own knowledge, A 
is engaging in an activity exclusively within Y.
    (v) Same as (iv), except that in making its responses, A asks B 
to compile some of the information.
    A may not comply, because the gathering of the necessary 
information takes place partially outside Y.
    (vi) U.S. company A has applied for a license to establish a 
permanent manufacturing facility in boycotting country Y. Under Y's 
boycott law, A must agree, as a condition of the license, that it 
will not sell any of its output to blacklisted foreign firms.
    A may not comply, because the agreement would govern activities 
of A which are not exclusively within Y.

Discrimination Against United States Persons

    (i) A, a subsidiary of U.S. company B, is a bona fide resident 
of boycotting country Y. A manufactures air conditioners in its 
plant in Y. Under Y's boycott laws, A must agree not to hire 
nationals of boycotted country X.
    A may agree to the restriction and may abide by it with respect 
to its recruitment of individuals within Y, because the recruitment 
of such individuals is an activity exclusively within Y. However, A 
cannot abide by this restriction with respect to its recruitment of 
individuals outside Y, because this is not an activity exclusively 
within Y.
    (ii) Same as (i), except that pursuant to Y's boycott laws, A 
must agree not to hire anyone who is of a designated religion.
    A may not agree to this restriction, because the agreement calls 
for discrimination against U.S. persons on the basis of religion. It 
makes no difference whether the recruitment of the U.S. persons 
occurs within or without Y.

(Note: The exception for compliance with local law does not apply to 
boycott-based refusals to employ U.S. persons on the basis of race, 
religion, sex, or national origin even if the activity is 
exclusively within the boycotting country.)

    (i) Compliance with local import law.
    (1) Any United States person who is a bona fide resident of a 
foreign country, including a boycotting country, may, in importing 
goods, materials or components into that country, comply or agree to 
comply with the import laws of that country, provided that:
    (i) The items are for his own use or for his use in performing 
contractual services within that country; and
    (ii) In the normal course of business, the items are identifiable 
as to their source or origin at the time of their entry into the 
foreign country by:
    (a) Uniqueness of design or appearance; or
    (b) Trademark, trade name, or other identification normally on the 
items themselves, including their packaging.
    (2) The factors that will be considered in determining whether a 
United States person is a bona fide resident of a foreign country are 
those set forth in paragraph (g) of this section. Bona fide residence 
of a United States company's subsidiary, affiliate, or other permanent 
establishment in a foreign country does not confer such residence on 
such United States company. Likewise, bona fide residence of a United 
States company's employee in a foreign country does not confer such 
residence on the entire company.
    (3) A United States person who is a bona fide resident of a foreign 
country may take action under this exception through an agent outside 
the country, but the agent must act at the direction of the resident 
and not exercise his own discretion. Therefore, if a United States 
person resident in a boycotting country takes action to comply with a 
boycotting country's import law with respect to the importation of 
qualified goods, he may direct his agent in the United States on the 
action to be taken, but the United States agent himself may not 
exercise any discretion.
    (4) For purposes of this exception, the test that governs whether 
goods or components of goods are specifically identifiable is identical 
to the test applied in paragraph (c) of this section on ``Compliance 
With Unilateral Selection'' to determine whether they are identifiable 
as to their source or origin in the normal course of business.
    (5) The availability of this exception for the import of goods 
depends on whether the goods are intended for the United States 
person's own use at the time they are imported. It does not depend upon 
who has title to the goods at the time of importation into a foreign 
country.
    (6) Goods are for the United States person's own use (including the 
performance of contractual services within the foreign country) if:
    (i) They are to be consumed by the United States person;
    (ii) They are to remain in the United States person's possession 
and to be used by that person;
    (iii) They are to be used by the United States person in performing 
contractual services for another;
    (iv) They are to be further manufactured, incorporated into, 
refined into, or reprocessed into another product to be manufactured 
for another; or
    (v) They are to be incorporated into, or permanently affixed as a 
functional part of, a project to be constructed for another.
    (7) Goods acquired to fill an order for such goods from another are 
not for the United States person's own use. Goods procured for another 
are not for one's own use, even if the furnishing of procurement 
services is the business in which the United States person is 
customarily engaged. Nor are goods obtained for simple resale acquired 
for one's own use, even if the United States person is engaged in the 
retail business. Likewise, goods obtained for inclusion in a turnkey 
project are not for one's own use if they are not customarily 
incorporated into, or do not customarily become permanently affixed as 
a functional part of the project.
    (8) This part of the local law exception does not apply to the 
import of services, even when the United States person importing such 
services is a bona fide resident of a boycotting country and is 
importing them for his own use. In addition, this exception is 
available for a United States person who is a bona fide resident of a 
foreign country only when the individual or entity actually present 
within that country takes action through the exercise of his own 
discretion.
    (9) Use of this exception will be monitored and continually 
reviewed to determine whether its continued availability is consistent 
with the national interest. Its availability may be limited or 
withdrawn as appropriate. In reviewing the continued availability of 
this exception, the effect that the inability to comply with local 
import laws would have on the economic and other relations of the 
United States with boycotting countries will be considered.
    (10) A United States person who is a bona fide resident of a 
foreign country may comply or agree to comply with the host country's 
import laws even if he knows or has reason to know that particular laws 
are boycott-related. However, no United States person may comply or 
agree to comply with any host country law which would require him to 
discriminate against any United States person on the basis of race, 
religion, sex, or national origin, or to supply information about any 
United States person's race, religion, sex, or national origin.

[[Page 12885]]


Examples of Permissible Compliance With Local Import Law

    The following examples are intended to give guidance in 
determining the circumstances in which compliance with local import 
law is permissible. They are illustrative, not comprehensive.

Compliance by a Bona Fide Resident

    (i) A, a subsidiary of U.S. company B, is a bona fide resident 
of boycotting country Y and is engaged in oil drilling operations in 
Y. In acquiring certain large, specifically identifiable products 
for carrying out its operations in Y, A chooses only from non-
blacklisted firms because Y's import laws prohibit the importation 
of goods from blacklisted firms. However, with respect to smaller 
items, B makes the selection on behalf of A and sends them to A in 
Y.
    A may choose from non-blacklisted firms, because it is a U.S. 
person who is a bona fide resident in Y. However, because B is not 
resident in Y, B cannot make boycott-based selections to conform 
with Y's import laws prohibiting the importation of goods from 
blacklisted firms.
    (ii) Same as (i), except that after making its choices on the 
larger items, A directs B to carry out its instructions by entering 
into appropriate contracts and making necessary shipping 
arrangements.
    B may carry out A's instructions provided that A, a bona fide 
resident of Y, has in fact made the choice and B is exercising no 
discretion, but is acting only as A's agent.
    (Note: Such transactions between related companies will be 
scrutinized carefully. A must in fact exercise the discretion and 
make the selections. If the discretion is exercised by B, B would be 
in violation of this part.)

    (iii) U.S. construction company A has a contract to build a 
school in boycotting country Y. A's employees set up operations in Y 
for purposes of commencing construction. A's employees in Y advise 
A's headquarters in the United States that Y's import laws prohibit 
importation of goods manufactured by blacklisted firms. A's 
headquarters then issues invitations to bid only to non-blacklisted 
firms for certain specifically identifiable goods.
    A's headquarters' choice of non-blacklisted suppliers is not a 
choice made by a U.S. person who is a bona fide resident of Y, 
because the discretion in issuing the bids was exercised in the 
United States, not in Y.
    (iv) Same as (iii), except that A's employees in Y actually make 
the decision regarding to whom the bids should be issued.
    The choices made by A's employees are choices made by U.S. 
persons who are bona fide residents of Y, because the discretion in 
choosing was exercised solely in Y.

(Note: Choices purportedly made by employees of U.S. companies who 
are resident in boycotting countries will be carefully scrutinized 
to ensure that the discretion was exercised entirely in the 
boycotting country.)

Specifically Identifiable Goods

    The test and examples as to what constitutes specifically 
identifiable goods are identical to those applicable under paragraph 
(d) of this section on ``Compliance With Unilateral Selection.''

Imports for U.S. Person's Own Use

    (i) A, a subsidiary of U.S. company B, is a bona fide resident 
of boycotting country Y. A plans to import computer operated machine 
tools to be installed in its automobile plant in boycotting country 
Y. The computers are mounted on a separate bracket on the side of 
the equipment and are readily identifiable by brand name. A orders 
the tools from U.S. supplier C and specifies that C must incorporate 
computers manufactured by D, a non-blacklisted company. A would have 
chosen computers manufactured by E, except that E is blacklisted, 
and Y's import laws prohibit the importation of goods manufactured 
by blacklisted firms.
    A may refuse to purchase E's computers, because A is importing 
the computers for its own use in its manufacturing operations in Y.
    (ii) A, a subsidiary of U.S. company B, is a bona fide resident 
of boycotting country Y. To meet the needs of its employees in Y, A 
imports certain specifically identifiable commissary items for sale, 
such as cosmetics; and canteen items, such as candy. In selecting 
such items for importation into Y, A chooses items made only by non-
blacklisted firms, because Y's import laws prohibit importation of 
goods from blacklisted firms.
    A may import these items only from non-blacklisted firms, 
because the importation of goods for consumption by A's employees is 
an importation for A's own use.
    (iii) A, a U.S. construction company which is a bona fide 
resident of boycotting country Y, has a contract to build a hospital 
complex for the Ministry of Health in Y. Under the contract, A will 
be general manager of the project with discretion to choose all 
subcontractors and suppliers. The complex is to be built on a 
turnkey basis, with A retaining title to the property and bearing 
all financial risk until the complex is conveyed to Y. In choosing 
specifically identifiable goods for import, such as central air 
conditioning units and plate glass, A excludes blacklisted suppliers 
in order to comply with Y's import laws. These goods are customarily 
incorporated into, or permanently affixed as a functional part of, 
the project.
    A may refuse to deal with blacklisted suppliers of specifically 
identifiable goods, because importation of goods by a general 
contractor to be incorporated into a construction project in Y is an 
importation of goods for A's own use.
    (iv) Same as (iii), except that, in addition, in choosing U.S. 
architects and engineers to work on the project, A excludes 
blacklisted firms, because Y's import laws prohibit the use of 
services rendered by blacklisted persons.
    A may not refuse to deal with blacklisted architectural or 
engineering firms, because this exception does not apply to the 
import of services. It is irrelevant that, at some stage, the 
architectural or engineering drawings or plans may be brought to the 
site in Y. This factor is insufficient to transform such services 
into ``goods'' for purposes of this exception.
    (v) Same as (iii), except that the project is to be completed on 
a ``cost plus'' basis, with Y making progress payments to A at 
various stages of completion.
    A may refuse to deal with blacklisted suppliers of specifically 
identifiable goods, because the importation of goods by A to be 
incorporated in a project A is under contract to complete is an 
importation of goods for its own use. The terms of payment are 
irrelevant.
    (vi) A, a U.S. construction company which is a bona fide 
resident of boycotting country Y, has a contract for the 
construction of an office building in Y on a turnkey basis. In 
choosing goods to be used or included in the office complex, A 
orders wallboard, office partitions, and lighting fixtures from non-
blacklisted manufacturers. A likewise orders desks, office chairs, 
typewriters, and office supplies from non-blacklisted manufacturers.
    Because they are customarily incorporated into or permanently 
affixed as a functional part of an office building, the wallboard, 
office partitions, and lighting fixtures are for A's own use, and A 
may select non-blacklisted suppliers of these goods in order to 
comply with Y's import laws. Because they are not customarily 
incorporated into or permanently affixed to the project, the desks, 
office chairs, typewriters, and office supplies are not for A's own 
use, and A may not make boycott-based selections of the suppliers of 
these goods.
    (vii) A, a U.S. company engaged in the business of selling 
automobiles, is a bona fide resident of boycotting country Y. In 
ordering automobiles from time to time for purposes of stocking its 
inventory, A purchases from U.S. manufacturer B, but not U.S. 
manufacturer C, because C is blacklisted. Retail sales are 
subsequently made from this inventory.
    A's import of automobiles from B is not an import for A's own 
use, because the importation of items for general inventory in a 
retail sales operation is not an importation for one's own use.
    (viii) A, a U.S. company engaged in the manufacture of 
pharmaceutical products, is a bona fide resident of boycotting 
country Y. In importing chemicals for incorporation into the 
pharmaceutical products, A purchases from U.S. supplier B, but not 
U.S. supplier C, because C is blacklisted.
    A may import chemicals from B rather than C, because the 
importation of specifically identifiable items for incorporation 
into another product is an importation for one's own use.
    (ix) A, a U.S. management company which is a bona fide resident 
of boycotting country Y, has a contract with the Ministry of 
Education in Y to purchase supplies for Y's school system. From time 
to time, A purchases goods from abroad for delivery to various 
schools in Y.
    A's purchase of goods for Y's school system does not constitute 
an importation of goods for A's own use, because A is acting as a 
procurement agent for another. A, therefore, cannot make boycott-
based selections of suppliers of such school supplies.

[[Page 12886]]

    (x) A, a U.S. company which is a bona fide resident of 
boycotting country Y, has a contract to make purchases for Y in 
connection with a construction project in Y. A is not engaged in the 
construction of, or in any other activity in connection with, the 
project. A's role is merely to purchase goods for Y and arrange for 
their delivery to Y.
    A is not purchasing goods for its own use, because A is acting 
as a procurement agent for Y. A, therefore, cannot make boycott 
selections of suppliers of such goods.
    (xi) A, a U.S. company which is a bona fide resident of 
boycotting country Y, imports specifically identifiable goods into Y 
for exhibit by A at a trade fair in Y. In selecting goods for 
exhibit, A excludes items made by blacklisted firms.
    A's import of goods for its exhibit at a trade fair constitutes 
an import for A's own use. However, A may not sell in Y those goods 
it imported for exhibit.

For Use Within Boycotting Country

    A is a bona fide resident of boycotting countries Y and Z. In 
compliance with Y's boycott laws, A chooses specifically 
identifiable goods for its oil drilling operations in Y and Z by 
excluding blacklisted suppliers. The goods are first imported into 
Y. Those purchased for A's use in Z are then transshipped to Z.
    In selecting those goods for importation into Y, A is making an 
import selection for its own use, even though A may use some of the 
imported goods in Z. Further, the subsequent shipment from Y to Z of 
those goods purchased for use in Z is an import into Z for A's own 
use.


Sec. 760.4  Evasion.

    (a) No United States person may engage in any transaction or take 
any other action, either independently or through any other person, 
with intent to evade the provisions of this part. Nor may any United 
States person assist another United States person to violate or evade 
the provisions of this part.
    (b) The exceptions set forth in Sec. 760.3(a) through (g) of this 
part do not permit activities or agreements (express or implied by a 
course of conduct, including a pattern of responses) which are 
otherwise prohibited by this part and which are not within the intent 
of such exceptions. However, activities within the coverage and intent 
of the exceptions set forth in this part do not constitute evasion 
regardless of how often such exceptions are utilized.
    (c) Use of any artifice, device or scheme which is intended to 
place a person at a commercial disadvantage or impose on him special 
burdens because he is blacklisted or otherwise restricted for boycott 
reasons from having a business relationship with or in a boycotting 
country will be regarded as evasion for purposes of this part.
    (d) Unless permitted under one of the exceptions, use of risk of 
loss provisions that expressly impose a financial risk on another 
because of the import laws of a boycotting country may constitute 
evasion. If they are introduced after January 21, 1978, their use will 
be presumed to constitute evasion. This presumption may be rebutted by 
a showing that such a provision is in customary usage without 
distinction between boycotting and non-boycotting countries and that 
there is a legitimate non-boycott reason for its use. On the other 
hand, use of such a provision by a United States person subsequent to 
January 21, 1978 is presumed not to constitute evasion if the provision 
had been customarily used by that person prior to January 21, 1978.
    (e) Use of dummy corporations or other devices to mask prohibited 
activity will also be regarded as evasion. Similarly, it is evasion 
under this part to divert specific boycotting country orders from a 
United States parent to a foreign subsidiary for purposes of complying 
with prohibited boycott requirements. However, alteration of a person's 
structure or method of doing business will not constitute evasion so 
long as the alteration is based on legitimate business considerations 
and is not undertaken solely to avoid the application of the 
prohibitions of this part. The facts and circumstances of an 
arrangement or transaction will be carefully scrutinized to see whether 
appearances conform to reality.

Examples

    The following examples are intended to give guidance to persons 
in determining circumstances in which this section will apply. They 
are illustrative, not comprehensive.
    (i) A, a U.S. insurance company, receives a request from 
boycotting country Y asking whether it does business in boycotted 
country X. Because furnishing such information is prohibited, A 
declines to answer and as a result is placed on Y's blacklist. The 
following year, A's annual report contains new information about A's 
worldwide operations, including a list of all countries in which A 
does business. A then mails a copy of its annual report, which has 
never before contained such information, to officials of the 
government of country Y.
    Absent some business justification unrelated to the boycott for 
changing the annual report in this fashion, A's action constitutes 
evasion of this part.
    (ii) A, a U.S. construction firm resident in boycotting country 
Y, orders lumber from U.S. company B. A unilaterally selects B in 
part because U.S. lumber producer C is blacklisted by Y and C's 
products are therefore not importable. In placing its order with B, 
A requests that B stamp its name or logo on the lumber so that A 
``can be certain that it is, in fact, receiving B's products.'' B 
does not normally so stamp its lumber, and A's purpose in making the 
request is to appear to fit within the unilateral selection 
exception of this part.
    Absent additional facts justifying A's action, A's action 
constitutes evasion of this part.
    (iii) A, a U.S. company, has been selling sewing machines to 
boycotting country Y for a number of years and routinely supplying 
negative certificates of origin. A is aware that the furnishing of 
negative certificates of origin will be prohibited after June 21, 
1978 and, therefore, arranges to have all future shipments run 
through a foreign corporation in a third country which will affix 
the necessary certification before forwarding the machines on to Y.
    A's action constitutes evasion of this part, because it is a 
device to mask prohibited activity carried out on A's behalf.
    (iv) A, a U.S. company, has been selling hand calculators to 
boycotting country Y for a number of years and routinely supplies 
negative certificates of origin. A is aware that the furnishing of 
such negative certificates will be prohibited after June 21, 1978. A 
thereupon ceases all direct sales to Y, and instead arranges to make 
all future sales to distributor B in a third country. A knows B will 
step in and make the sales to Y which A would otherwise have made 
directly. B will make the necessary negative certifications. A's 
warranty, which it will continue to honor, runs to the purchaser in 
Y.
    A's action constitutes evasion, because the diverting of orders 
to B is a device to mask prohibited activity carried out on A's 
behalf.
    (v) A, a U.S. company, is negotiating a long-term contract with 
boycotting country Y to meet all Y's medical supply needs. Y informs 
A that before such a contract can be concluded, A must complete Y's 
boycott questionnaire. A knows that it is prohibited from answering 
the questionnaire so it arranges for a local agent in Y to supply 
the necessary information.
    A's action constitutes evasion of this part, because it is a 
device to mask prohibited activity carried out on A's behalf.
    (vi) A, a U.S. contractor which has not previously dealt with 
boycotting country Y, is awarded a construction contract by Y. 
Because it is customary in the construction industry for a 
contractor to establish an on-site facility for the duration of the 
project, A establishes such an office, which satisfies the 
requirements for bona fide residency. Thereafter, A's office in Y 
takes a number of actions permitted under the compliance with local 
law exception.
    A's actions do not constitute evasion, because A's facility in Y 
was established for legitimate business reasons.
    (vii) A, a controlled foreign subsidiary of U.S. company B, is 
located in non-boycotting country M. A and B both make machine tools 
for sale in their respective marketing regions. B's marketing region 
includes boycotting country Y. After assessing the requirements of 
this part, B decides that it can no longer make machines for sale in 
Y. Instead, A decides to expand its facilities in M in order to 
service the Y market.
    The actions of A and B do not constitute evasion, because there 
is a legitimate business reason for their actions. It is irrelevant 
that the effect may be to place sales which would otherwise have 
been subject to this part beyond the reach of this part.

[[Page 12887]]

    (viii) A, a U.S. manufacturer, from time to time receives 
purchase orders from boycotting country Y which A fills from its 
plant in the United States. A knows that it is about to receive an 
order from Y which contains a request for a certification which A is 
prohibited from furnishing under this part. In order to permit the 
certification to be made, A diverts the purchase order to its 
foreign subsidiary.
    A's diversion of the purchase order constitutes evasion of this 
part, because it is a device to mask prohibited activity carried out 
on A's behalf.
    (ix) A, a U.S. company, is engaged in assembling drilling rigs 
for shipment to boycotting country Y. Because of potential 
difficulties in securing entry into Y of materials supplied by 
blacklisted firms, A insists that blacklisted firms take a 15 
percent discount on all materials which they supply to A. As a 
result, no blacklisted firms are willing to transact with A.
    A's insistence on the discount for materials supplied by 
blacklisted firms constitutes evasion of this part, because it is a 
device or scheme which is intended to place a special burden on 
blacklisted firms because of Y's boycott.
    (x) Same as (ix), except that shortly after the effective date 
of this part, A insists that its suppliers sign contracts which 
provide that even after title passes from the supplier to A, the 
supplier will bear the risk of loss and indemnify A if goods which 
the supplier has furnished are denied entry into Y for boycott 
reasons.
    A's action constitutes evasion of this part, because it is a 
device or scheme which is intended to place a special burden on 
blacklisted persons because of Y's boycott.
    (xi) Same as (x), except that A customarily insisted on such an 
arrangement with its supplier prior to the effective date of this 
part.
    A's action is presumed not to constitute evasion, because use of 
this contractual arrangement was customary for A prior to the 
effective date of this part.
    (xii) A, a U.S. company, has a contract to supply automobile 
sub-assembly units to boycotting country Y. Shortly after the 
effective date of this part, A insists that its suppliers sign 
contracts which provide that even after title passes to A, the 
supplier will bear the risk of loss and indemnify A if goods which 
the supplier has furnished are denied entry into boycotting country 
Y for whatever reason.
    A's insistence on this arrangement is presumed to constitute 
evasion, because it is a device which is intended to place a special 
burden on blacklisted firms because of Y's boycott. The presumption 
may be rebutted by competent evidence showing that use of such an 
arrangement is customary without regard to the boycotting or non-
boycotting character of the country to which it relates and that 
there is a legitimate non-boycott business reason for its use.
    (xiii) Same as (vii), except that A requires that all suppliers 
make in-country delivery.
    A's action does not constitute evasion, because it is an 
ordinary commercial practice to require in-country delivery of 
goods.
    (xiv) Same as (xii), except that A requires that title remain 
with the supplier until delivery in Y has been made.
    A's action does not constitute evasion, because it is ordinary 
commercial practice to require that title remain with the supplier 
until delivery has been made. This example is distinguishable from 
example (xii), because in example (xii) A had insisted on an 
extraordinary arrangement designed to require that the risk of loss 
remain with the supplier even after title had passed to A.
    (xv) U.S. bank A is contacted by U.S. company B to finance B's 
transaction with boycotting country Y. Payment will be effected 
through a letter of credit in favor of B at its U.S. address. A 
knows that the letter of credit will contain restrictive boycott 
conditions which would bar its implementation by A if the 
beneficiary were a U.S. person. A suggests to B that the beneficiary 
should be changed to C, a shell corporation in non-boycotting 
country M. The beneficiary is changed accordingly.
    A's action constitutes evasion of this part, because the 
arrangement is a device to mask prohibited activity on A's part.
    (xvi) Same as (xv), except that U.S. company B, the beneficiary 
of the letter of credit, arranges to change the beneficiary to B's 
foreign subsidiary so that A can implement the letter of credit. A 
knows that this has been done.
    A's implementation of the letter of credit in the face of its 
knowledge of B's action constitutes evasion of this part, because 
its action is part of a device to mask prohibited activity on A's 
part.
    (xvii) U.S. bank A, located in the United States, is contacted 
by foreign company B to finance B's transaction with boycotting 
country Y. B is a controlled subsidiary of a U.S. company. The 
transaction which is to be financed with a letter of credit payable 
to B at its foreign address, requires B to certify that none of its 
board members are of a particular religious faith. Since B cannot 
legally furnish the certificate, it asks A to convey the necessary 
information to Y through A's bank branch in Y. Such information 
would be furnished wholly outside the letter of credit transaction.
    A's action constitutes evasion of this part, because it is 
undertaken to assist B's violation of this part.
    (xviii) U.S. bank A is asked by foreign corporation B to 
implement a letter of credit in favor of B so that B might perform 
under its long-term contract with boycotting country Y. Under the 
terms of the letter of credit, B is required to certify that none of 
its suppliers is blacklisted. A knows that it cannot implement a 
letter of credit with this condition, so it tells B to negotiate the 
elimination of this requirement from the letter of credit and 
instead supply the certification to Y directly.
    A's suggestion to B that it provide the negative certification 
to Y directly constitutes evasion of this part, because A is taking 
an action through another person to mask prohibited activity on A's 
part.


Sec. 760.5  Reporting requirements.

    (a) Scope of reporting requirements.
    (1) A United States person who receives a request to take any 
action which has the effect of furthering or supporting a restrictive 
trade practice or boycott fostered or imposed by a foreign country 
against a country friendly to the United States or against any United 
States person must report such request to the Department of Commerce in 
accordance with the requirements of this section. Such a request may be 
either written or oral and may include a request to furnish information 
or enter into or implement an agreement. It may also include a 
solicitation, directive, legend or instruction that asks for 
information or that asks that a United States person take or refrain 
from taking a particular action. Such a request shall be reported 
regardless of whether the action requested is prohibited or permissible 
under this part, except as otherwise provided by this section.
    (2) For purposes of this section, a request received by a United 
States person is reportable if he knows or has reason to know that the 
purpose of the request is to enforce, implement, or otherwise further, 
support, or secure compliance with an unsanctioned foreign boycott or 
restrictive trade practice.
    (i) A request received by a United States person located in the 
United States is reportable if it is received in connection with a 
transaction or activity in the interstate or foreign commerce of the 
United States, as determined under Sec. 760.1(d)(1) through (5) and 
(18) of this part.
    (ii) A request received by a United States person located outside 
the United States (that is, a foreign subsidiary, partnership, 
affiliate, branch, office, or other permanent foreign establishment 
which is controlled in fact by any domestic concern, as determined 
under Sec. 760.1(c) of this part) is reportable if it is received in 
connection with a transaction or activity in the interstate or foreign 
commerce of the United States, as determined under Sec. 760.1(d)(6) 
through (17) and (19) of this part.
    (iii) A request such as a boycott questionnaire, unrelated to a 
particular transaction or activity, received by any United States 
person is reportable when such person has or anticipates a business 
relationship with or in a boycotting country involving the sale, 
purchase or transfer of goods or services (including information) in 
the interstate or foreign commerce of the United States, as determined 
under Sec. 760.1(d) of this part.
    (3) These reporting requirements apply to all United States 
persons. They apply whether the United States person receiving the 
request is an exporter, bank or other financial institution,

[[Page 12888]]
insurer, freight forwarder, manufacturer, or any other United States 
person subject to this part.
    (4) The acquisition of information about a boycotting country's 
boycott requirements through the receipt or review of books, pamphlets, 
legal texts, exporters' guidebooks and other similar publications does 
not constitute receipt of a reportable request for purposes of this 
section. In addition, a United States person who receives an 
unsolicited invitation to bid, or similar proposal, containing a 
boycott request has not received a reportable request for purposes of 
this section where he does not respond to the invitation to bid or 
other proposal.
    (5) Because of the use of certain terms for boycott and non-boycott 
purposes; because of Congressional mandates to provide clear and 
precise guidelines in areas of inherent uncertainty; and because of the 
Department's commitment to minimize paperwork and reduce the cost of 
reporting where it will not impair the Department's ability to continue 
to monitor foreign boycotts, the following specific requests are not 
reportable:
    (i) A request to refrain from shipping goods on a carrier which 
flies the flag of a particular country or which is owned, chartered, 
leased or operated by a particular country or by nationals or residents 
of a particular country, or a request to certify to that effect.
    (ii) A request to ship goods via a prescribed route, or a request 
to refrain from shipping goods via a proscribed route, or a request to 
certify to either effect.
    (iii) A request to supply an affirmative statement or certification 
regarding the country of origin of goods.
    (iv) A request to supply an affirmative statement or certification 
regarding the name of the supplier or manufacturer of the goods shipped 
or the name of the provider of services.
    (v) A request to comply with the laws of another country except 
where the request expressly requires compliance with that country's 
boycott laws.
    (vi) A request to an individual to supply information about himself 
or a member of his family for immigration, passport, visa, or 
employment purposes.
    (vii) A request to supply an affirmative statement or certification 
indicating the destination of exports or confirming or otherwise 
indicating that such cargo will be unloaded or discharged at a 
particular destination.
    (viii) A request to supply a certificate by the owner, master, 
charterer, or any employee thereof, that a vessel, aircraft, truck or 
any other mode of transportation is eligible, otherwise eligible, 
permitted, or allowed to enter, or not restricted from entering, a 
particular port, country, or group of countries pursuant to the laws, 
rules, or regulations of that port, country, or group of countries.
    (ix) A request to supply a certificate from an insurance company 
stating that the insurance company has a duly authorized agent or 
representative within a boycotting country and/or the name and address 
of such agent.
    (x) A request to comply with a term or condition of a transaction 
that provides that the vendor bear the risk of loss and indemnify the 
purchaser if the vendor's goods are denied entry into a country for any 
reason (``risk of loss clause'') if such clause was in use by the 
purchaser prior to January 18, 1978.
    (6) No United States person may engage in any transaction or take 
any other action, either independently or through any other person, 
with intent to evade the provisions of this part.
    (7) From time to time the Department will survey domestic concerns 
for purposes of determining the worldwide scope of boycott requests 
received by their controlled foreign subsidiaries and affiliates with 
respect to their activities outside United States commerce. This 
pertains to requests which would be reportable under this section but 
for the fact that the activities to which the requests relate are 
outside United States commerce. The information requested will include 
the number and nature of non-reportable boycott requests received, the 
action(s) requested, the actions(s) taken in response and the countries 
in which the requests originate. The results of such surveys, including 
the names of those surveyed, will be made public.
    (b) Manner of reporting. (1) Each reportable request must be 
reported. However, if more than one document (such as an invitation to 
bid, purchase order, or letter of credit) containing the same boycott 
request is received as part of the same transaction, only the first 
such request need be reported. Individual shipments against the same 
purchase order or letter of credit are to be treated as part of the 
same transaction. Each different boycott request associated with a 
given transaction must be reported, regardless of how or when the 
request is received.
    (2) Each United States person actually receiving a reportable 
request must report that request. However, such person may designate 
someone else to report on his behalf. For example, a United States 
company, if authorized, may report on behalf of its controlled foreign 
subsidiary or affiliates; a freight forwarder, if authorized, may 
report on behalf of the exporter; and a bank, if authorized, may report 
on behalf of the beneficiary of a letter of credit. If a person 
designated to report a request received by another receives an 
identical request directed to him in connection with the same 
transaction, he may file one report on behalf of himself and the other 
person.
    (3) Where a person is designated to report on behalf of another, 
the person receiving the request remains liable for any failure to 
report or for any representations made on his behalf. Further, anyone 
reporting on behalf of another is not relieved of his own 
responsibility for reporting any boycott request which he receives, 
even if it is an identical request in connection with the same 
transaction.
    (4) Reports must be submitted in duplicate to: Report Processing 
Staff, Office of Antiboycott Compliance, U.S. Department of Commerce, 
Room 6099C, Washington, D.C. 20230. Each submission must be made in 
accordance with the following requirements:
    (i) Where the person receiving the request is a United States 
person located in the United States, each report of requests received 
through June 30, 1979, must be postmarked by the last day of the month 
following the month in which the request was received. Thereafter, each 
submission must be postmarked by the last day of the month following 
the calendar quarter in which the request was received (e.g., April 30 
for the quarter consisting of January, February, and March).
    (ii) Where the person receiving the request is a United States 
person located outside the United States, each report of requests 
received through June 30, 1979, must be postmarked by the last day of 
the second month following the month in which the request was received. 
Thereafter, each submission must be postmarked by the last day of the 
second month following the calendar quarter in which the request was 
received (e.g., May 31 for the quarter consisting of January, February, 
and March).
    (5) At the reporting person's option, reports may be submitted on 
either a single transaction form (Form BXA-621P, Report of Restrictive 
Trade Practice or Boycott Request Single Transaction (revised 10-89)) 
or on a multiple transaction form (Form BXA-6051P, Report of Request 
for Restrictive Trade Practice or Boycott Multiple Transactions 
(revised 10-89)). Use of the multiple transaction form permits the 
reporting person to provide on one form all required information 
relating to as many as 75 reportable requests

[[Page 12889]]
received within any single reporting period.
    (6) Reports, whether submitted on the single transaction form or on 
the multiple transaction form, must contain entries for every 
applicable item on the form, including whether the reporting person 
intends to take or has taken the action requested. If the reporting 
person has not decided what action he will take by the time the report 
is required to be filed, he must later report the action he decides to 
take within 10 business days after deciding. In addition, anyone filing 
a report on behalf of another must so indicate and identify that other 
person.
    (7) Each report of a boycott request must be accompanied by two 
copies of the relevant page(s) of any document(s) in which the request 
appears. Reports may also be accompanied by any additional information 
relating to the request as the reporting person desires to provide 
concerning his response to the request.
    (8) Records containing information relating to a reportable boycott 
request, including a copy of any document(s) in which the request 
appears, must be maintained by the recipient for a five-year period 
after receipt of the request. The Department may require that these 
materials be submitted to it or that it have access to them at any time 
within that period. (See part 762 of the EAR for additional 
recordkeeping requirements.)
    (c) Disclosure of information. (1) Reports of requests received on 
or after October 7, 1976, as well as any accompanying documents filed 
with the reports, have been and will continue to be made available for 
public inspection and copying, except for certain proprietary 
information. With respect to reports of requests received on or after 
August 1, 1978, if the person making the report certifies that a United 
States person to whom the report relates would be placed at a 
competitive disadvantage because of the disclosure of information 
regarding the quantity, description, or value of any articles, 
materials, and supplies, including related technical data and other 
information, whether contained in a report or in any accompanying 
document(s), such information will not be publicly disclosed except 
upon failure by the reporting entity to edit the public inspection copy 
of the accompanying document(s) as provided by paragraph (c)(2) of this 
section, unless the Secretary of Commerce determines that the 
disclosure would not place the United States person involved at a 
competitive disadvantage or that it would be contrary to the national 
interest to withhold the information. In the event the Secretary of 
Commerce considers making such a determination concerning competitive 
disadvantage, appropriate notice and an opportunity for comment will be 
given before any such proprietary information is publicly disclosed. In 
no event will requests of reporting persons to withhold any information 
contained in the report other than that specified in this paragraph be 
honored.
    (2) Because a copy of any document(s) accompanying the report will 
be made available for public inspection and copying, one copy must be 
submitted intact and another copy must be edited by the reporting 
entity to delete the same information which it certified in the report 
would place a United States person at a competitive disadvantage if 
disclosed. In addition, the reporting entity may delete from this copy 
information that is considered confidential and that is not required to 
be contained in the report (e.g., information related to foreign 
consignee). This copy should be conspicuously marked with the legend 
``Public Inspection Copy.'' With respect to documents accompanying 
reports received by the Department on or after July 1, 1979, the public 
inspection copy will be made available as submitted whether or not it 
has been appropriately edited by the reporting entity as provided by 
this paragraph.
    (3) Reports and accompanying documents which are available to the 
public for inspection and copying are located in the BXA Freedom of 
Information Records Inspection Facility, Room 4525, Department of 
Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C. 
20230. Requests to inspect such documents should be addressed to that 
facility.
    (4) The Secretary of Commerce will periodically transmit summaries 
of the information contained in the reports to the Secretary of State 
for such action as the Secretary of State, in consultation with the 
Secretary of Commerce, may deem appropriate for carrying out the 
policies in section 8(b)(2) of the Export Administration Act of 1979.

Examples

    The following examples are intended to give guidance in 
determining what is reportable. They are illustrative, not 
comprehensive.
    (i) A, a U.S. manufacturer, is shipping goods to boycotting 
country Y and is asked by Y to certify that it is not blacklisted by 
Y's boycott office.
    The request to A is reportable, because it is a request to A to 
comply with Y's boycott requirements.
    (ii) A, a U.S. manufacturing company, receives an order for 
tractors from boycotting country Y. Y's order specifies that the 
tires on the tractors be made by B, another U.S. company. A believes 
Y has specified B as the tire supplier because otherwise A would 
have used tires made by C, a blacklisted company, and Y will not 
take shipment of tractors containing tires made by blacklisted 
companies.
    A must report Y's request for tires made by B, because A has 
reason to know that B was chosen for boycott reasons.
    (iii) Same as (ii), except A knows that Y's request has nothing 
to do with the boycott but simply reflects Y's preference for tires 
made by B.
    Y's request is not reportable, because it is unrelated to Y's 
boycott.
    (iv) Same as (ii), except A neither knows nor has reason to know 
why Y has chosen B.
    Y's request is not reportable, because A neither knows nor has 
reason to know that Y's request is based on Y's boycott.
    (v) A, a controlled foreign subsidiary of U.S. company B, is a 
resident of boycotting country Y. A is a general contractor. After 
being supplied by A with a list of competent subcontractors, A's 
customer instructs A to use subcontractor C on the project. A 
believes that C was chosen because, among other things, the other 
listed subcontractors are blacklisted.
    The instruction to A by its customer that C be used on the 
project is reportable, because it is a request to comply with Y's 
boycott requirements.
    (vi) A, a controlled foreign subsidiary of U.S. company B, is 
located in non-boycotting country P. A receives an order for washing 
machines from boycotting country Y. Y instructs A that a negative 
certificate of origin must accompany the shipment. The washing 
machines are made wholly in P, without U.S. components.
    Y's instruction to A regarding the negative certificate of 
origin is not reportable, because the transaction to which it 
relates is not in U.S. commerce.
    (vii) Same as (vi), except that A obtains components from the 
United States for the purpose of filling the order from Y. Y's 
instruction to A regarding the negative certificate of origin is 
reportable, because the transaction to which it relates is in U.S. 
commerce.
    (viii) A, a U.S. construction company, receives in the mail an 
unsolicited invitation to bid on a construction project in 
boycotting country Y. The invitation to bid requires those who 
respond to certify that they do not have any plants or branch 
offices in boycotted country X. A does not respond.
    A's receipt of the unsolicited invitation to bid is not 
reportable, because the request does not relate to any present or 
anticipated business of A with or in Y.
    (ix) Same as (viii), except that A receives a boycott 
questionnaire from a central boycott office. A does not do business 
in any of the boycotting countries involved, and does not anticipate 
doing any business in those countries. A does not respond.
    A's receipt of the boycott questionnaire is not reportable, 
because it does not relate to any present or anticipated business by 
A with or in a boycotting country.
    (x) A, a U.S. manufacturer, is seeking markets in which to 
expand its exports. A

[[Page 12890]]
sends a representative to boycotting country Y to explore Y's 
potential as a market for A's products. A's representative discusses 
its products but does not enter into any contracts on that trip. A 
does, however, hope that sales will materialize in the future. 
Subsequently, A receives a boycott questionnaire from Y.
    A's receipt of the boycott questionnaire is reportable, because 
the request relates to A's anticipated business with or in a 
boycotting country. For purposes of determining whether a report is 
required, it makes no difference whether A responds to the 
questionnaire, and it makes no difference that actual sales 
contracts are not in existence or do not materialize.
    (xi) Same as (x), except that A's representative enters into a 
contract to sell A's products to a buyer in boycotting country Y. 
Subsequently, A receives a boycott questionnaire from Y.
    A's receipt of the boycott questionnaire is reportable, because 
it relates to A's present business with or in a boycotting country. 
For purposes of determining whether a report is required, it makes 
no difference whether A responds to the questionnaire.
    (xii) A, a U.S. freight forwarder, purchases an exporter's 
guidebook which includes the import requirements of boycotting 
country Y. The guidebook contains descriptions of actions which U.S. 
exporters must take in order to make delivery of goods to Y.
    A's acquisition of the guidebook is not reportable, because he 
has not received a request from anyone.
    (xiii) A, a U.S. freight forwarder, is arranging for the 
shipment of goods to boycotting country Y at the request of B, a 
U.S. exporter. B asks A to assume responsibility to assure that the 
documentation accompanying the shipment is in compliance with Y's 
import requirements. A examines an exporters' guidebook, determines 
that Y's import regulations require a certification that the insurer 
of the goods is not blacklisted and asks U.S. insurer C for such a 
certification.
    B's request to A is reportable by A, because it constitutes a 
request to comply with Y's boycott as of the time A takes action to 
comply with Y's boycott requirements in response to the request. A's 
request to C is reportable by C.
    (xiv) A, a U.S. freight forwarder, is arranging for the shipment 
of U.S. goods to boycotting country Y. The manufacturer supplies A 
with all the necessary documentation to accompany the shipment. 
Among the documents supplied by the manufacturer is his certificate 
that he himself is not blacklisted. A transmits the documentation 
supplied by the manufacturer.
    A's action in merely transmitting documents received from the 
manufacturer is not reportable, because A has received no request to 
comply with Y's boycott.
    (xv) Same as (xiv), except that A is asked by U.S. exporter B to 
assume the responsibility to assure that the necessary documentation 
accompanies the shipment whatever that documentation might be. B 
forwards to A a letter of credit which requires that a negative 
certificate of origin accompany the bill of lading. A supplies a 
positive certificate of origin.
    Both A and B must report receipt of the letter of credit, 
because it contains a request to both of them to comply with Y's 
boycott.
    (xvi) Same as (xiv), except that the manufacturer fails to 
supply a required negative certificate of origin, and A is 
subsequently asked by a consular official of Y to see to it that the 
certificate is supplied. A supplies a positive certificate of 
origin.
    The consular official's request to A is reportable by A, because 
A was asked to comply with Y's boycott requirements by supplying the 
negative certificate of origin.
    (xvii) A, a U.S. manufacturer, is shipping goods to boycotting 
country Y. Arrangements have been made for freight forwarder B to 
handle the shipment and secure all necessary shipping 
certifications. B notes that the letter of credit requires that the 
manufacturer supply a negative certificate of origin and B asks A to 
do so. A supplies a positive certificate of origin.
    B's request to A is reportable by A, because A is asked to 
comply with Y's boycott requirements by providing the negative 
certificate.
    (xviii) A, a controlled foreign subsidiary of U.S. company B, is 
a resident of boycotting country Y. A is engaged in oil exploration 
and drilling operations in Y. In placing orders for drilling 
equipment to be shipped from the United States, A, in compliance 
with Y's laws, selects only those suppliers who are not blacklisted.
    A's action in choosing non-blacklisted suppliers is not 
reportable, because A has not received a request to comply with Y's 
boycott in making these selections.
    (xix) A, a controlled foreign subsidiary of U.S. company B, is 
seeking permission to do business in boycotting country Y. Before 
being granted such permission, A is asked to sign an agreement to 
comply with Y's boycott laws.
    The request to A is reportable, because it is a request that 
expressly requires compliance with Y's boycott law and is received 
in connection with A's anticipated business in Y.
    (xx) A, a U.S. bank, is asked by a firm in boycotting country Y 
to confirm a letter of credit in favor of B, a U.S. company. The 
letter of credit calls for a certificate from B that the goods to be 
supplied are not produced by a firm blacklisted by Y. A informs B of 
the letter of credit, including its certification condition, and 
sends B a copy.
    B must report the certification request contained in the letter 
of credit, and A must report the request to confirm the letter of 
credit containing the boycott condition, because both are being 
asked to comply with Y's boycott.
    (xxi) Same as (xx), except that the letter of credit calls for a 
certificate from the beneficiary that the goods will not be shipped 
on a vessel that will call at a port in boycotted country X before 
making delivery in Y.
    The request is not reportable, because it is a request of a type 
deemed by this section to be in common use for non-boycott purposes.
    (xxii) A, a U.S. company, receives a letter of credit from 
boycotting country Y stating that on no condition may a bank 
blacklisted by Y be permitted to negotiate the credit.
    A's receipt of the letter of credit is reportable, because it 
contains a request to A to comply with Y's boycott requirements.
    (xxiii) A, a U.S. bank, receives a demand draft from B, a U.S. 
company, in connection with B's shipment of goods to boycotting 
country Y. The draft contains a directive that it is valid in all 
countries except boycotted country X.
    A's receipt of the demand draft is reportable, because it 
contains a request to A to comply with Y's boycott requirements.
    (xxiv) A, a U.S. exporter, receives an order from boycotting 
country Y. On the order is a legend that A's goods, invoices, and 
packaging must not bear a six-pointed star or other symbol of 
boycotted country X.
    A's receipt of the order is reportable, because it contains a 
request to comply with Y's boycott requirements.
    (xxv) Same as (xxiv), except the order contains a statement that 
goods exported must not represent part of war reparations to 
boycotted country X.
    A's receipt of the order is reportable, because it contains a 
request to A to comply with Y's boycott requirements.
    (xxvi) A, a U.S. contractor, is negotiating with boycotting 
country Y to build a school in Y. During the course of the 
negotiations, Y suggests that one of the terms of the construction 
contract be that A agree not to import materials produced in 
boycotted country X. It is A's company policy not to agree to such a 
contractual clause, and A suggests that instead it agree that all of 
the necessary materials will be obtained from U.S. suppliers. Y 
agrees to A's suggestion and a contract is executed.
    A has received a reportable request, but, for purposes of 
reporting, the request is deemed to be received when the contract is 
executed.
    (xxvii) Same as (xxvi), except Y does not accept A's suggested 
alternative clause and negotiations break off.
    A's receipt of Y's request is reportable. For purposes of 
reporting, it makes no difference that A was not successful in the 
negotiations. The request is deemed to be received at the time the 
negotiations break off.
    (xxviii) A, a U.S. insurance company, is insuring the shipment 
of drilling equipment to boycotting country Y. The transaction is 
being financed by a letter of credit which requires that A certify 
that it is not blacklisted by Y. Freight forwarder B asks A to 
supply the certification in order to satisfy the requirements of the 
letter of credit.
    The request to A is reportable by A, because it is a request to 
comply with Y's boycott requirements.
    (xxix) A, a U.S. manufacturer, is engaged from time-to-time in 
supplying drilling rigs to company B in boycotting country Y. B 
insists that its suppliers sign contracts which provide that, even 
after title passes from the supplier to B, the supplier will bear 
the risk of loss and indemnify B if goods which the supplier has 
furnished are denied entry into Y for whatever reason. A knows or 
has reason to know that this contractual provision is required by B 
because of Y's boycott, and that B has been using the provision 
since 1977. A receives an order from B which contains such a clause.

[[Page 12891]]

    B's request is not reportable by A, because the request is 
deemed to be not reportable by these regulations if the provision 
was in use by B prior to the effective date of the regulations, 
January 18, 1978.
    (xxx) Same as (xxix), except that A does not know when B began 
using the provision.
    Unless A receives information from B that B introduced the term 
prior to the effective date of the regulations, January 18, 1978, A 
must report receipt of the request.
    (xxxi) A, a U.S. citizen, is a shipping clerk for B, a U.S. 
manufacturing company. In the course of his employment, A receives 
an order for goods from boycotting country Y. The order specifies 
that none of the components of the goods is to be furnished by 
blacklisted firms.
    B must report the request received by its employee, A, acting in 
the scope of his employment. Although A is a U.S. person, such an 
individual does not have a separate obligation to report requests 
received by him in his capacity as an employee of B.
    (xxxii) U.S. exporter A is negotiating a transaction with 
boycotting country Y. A knows that at the conclusion of the 
negotiations he will be asked by Y to supply certain boycott-related 
information and that such a request is reportable. In an effort to 
forestall the request and thereby avoid having to file a report, A 
supplies the information in advance.
    A is deemed to have received a reportable request.
    (xxxiii) A, a controlled foreign affiliate of U.S. company B, 
receives an order for computers from boycotting country Y and 
obtains components from the United States for the purpose of filling 
the order. Y instructs A that a negative certificate of origin must 
accompany the shipment.
    Y's instruction to A regarding the negative certificate of 
origin is reportable by A. Moreover, A may designate B or any other 
person to report on its behalf. However, A remains liable for any 
failure to report or for any representations made on its behalf.
    (xxxiv) U.S. exporter A, in shipping goods to boycotting country 
Y, receives a request from the customer in Y to state on the bill of 
lading that the vessel is allowed to enter Y's ports. The request 
further states that a certificate from the owner or master of the 
vessel to that effect is acceptable.
    The request A received from his customer in Y is not reportable 
if it was received after January 21, 1978, because it is a request 
of a type deemed to be not reportable by these regulations. (A may 
not make such a statement on the bill of lading himself, if he knows 
or has reason to know it is requested for a boycott purpose.
    (xxxv) U.S. exporter A, in shipping goods to boycotting country 
Y, receives a request from the customer in Y to furnish a 
certificate from the owner of the vessel that the vessel is 
permitted to call at Y's ports.
    The request A received from his customer in Y is not reportable 
if it was received after the effective date of these rules, because 
it is a request of a type deemed to be not reportable by these 
regulations.
    (xxxvi) U.S. exporter A, in shipping goods to boycotting country 
Y, receives a request from the customer in Y to furnish a 
certificate from the insurance company indicating that the company 
has a duly authorized representative in country Y and giving the 
name of that representative.
    The request A received from his customer in Y is not reportable 
if it was received after the effective date of these rules, because 
it is a request of a type deemed to be not reportable by these 
regulations.

Supplement No. 1 to Part 760--Interpretations

    It has come to the Department's attention that some U.S. persons 
are being or may be asked to comply with new boycotting country 
requirements with respect to shipping and insurance certifications 
and certificates of origin. It has also come to the Department's 
attention that some U.S. persons are being or may be asked to agree 
to new contractual provisions in connection with certain foreign 
government or foreign government agency contracts. In order to 
maximize its guidance with respect to section 8 of the Export 
Administration Act of 1979, as amended (50 U.S.C. app. 2407) and 
part 760 of the EAR, the Department hereby sets forth its views on 
these certifications and contractual clauses.<SUP>1

    \1\  The Department originally issued this interpretation 
pursuant to the Export Administration Amendments Act of 1979 (Public 
Law 95-52) and the regulations on restrictive trade practices and 
boycotts (15 CFR part 369) published on January 25, 1978 (43 FR 
3508) and contained in the 15 CFR edition revised as of January 1, 
1979.
---------------------------------------------------------------------------

I. Certifications

    Sec. 760.2(d) of this part prohibits a U.S. person from 
furnishing or knowingly agreeing to furnish:
    ``Information concerning his or any other person's past, present 
or proposed business relationships:
    (i) With or in a boycotted country;
    (ii) With any business concern organized under the laws of a 
boycotted country;
    (iii) With any national or resident of a boycotted country; or
    (iv) With any other person who is known or believed to be 
restricted from having any business relationship with or in a 
boycotting country.''
    This prohibition, like all others under part 760, applies only 
with respect to a U.S. person's activities in the interstate or 
foreign commerce of the United States and only when such activities 
are undertaken with intent to comply with, further, or support an 
unsanctioned foreign boycott. (Sec. 760.2(d)(5) of this part.)
    This prohibition does not apply to the furnishing of normal 
business information in a commercial context. ( Sec. 760.2(d)(3) of 
this part). Normal business information furnished in a commercial 
context does not cease to be such simply because the party 
soliciting the information may be a boycotting country or a national 
or resident thereof. If the information is of a type which is 
generally sought for a legitimate business purpose (such as 
determining financial fitness, technical competence, or professional 
experience), the information may be furnished even if the 
information could be used, or without the knowledge of the person 
supplying the information is intended to be used, for boycott 
purposes. (Sec. 760.2(d)(4) of this part).
    The new certification requirements and the Department's 
interpretation of the applicability of part 760 thereto are as 
follows:
    A. Certificate of origin. A certificate of origin is to be 
issued by the supplier or exporting company and authenticated by the 
exporting country, attesting that the goods exported to the 
boycotting country are of purely indigenous origin, and stating the 
name of the factory or the manufacturing company. To the extent that 
the goods as described on the certificate of origin are not solely 
and exclusively products of their country of origin indicated 
thereon, a declaration must be appended to the certificate of origin 
giving the name of the supplier/manufacturer and declaring:
    ``The undersigned, ____________, does hereby declare on behalf 
of the above-named supplier/manufacturer, that certain parts or 
components of the goods described in the attached certificate of 
origin are the products of such country or countries, other than the 
country named therein as specifically indicated hereunder:

Country of Origin and Percentage of Value of Parts or Components 
Relative to Total Shipment

1.---------------------------------------------------------------------
2.---------------------------------------------------------------------
3.---------------------------------------------------------------------
Dated:-----------------------------------------------------------------
Signature--------------------------------------------------------------
    Sworn to before me, this ________ day of ____________, 19 ____. 
Notary Seal.''

Interpretation

    It is the Department's position that furnishing a positive 
certificate of origin, such as the one set out above, falls within 
the exception contained in Sec. 760.3(c) of this part for compliance 
with the import and shipping document requirements of a boycotting 
country. See Sec. 760.3(c) of this part and examples (i) and (ii) 
thereunder.
    B. Shipping certificate. A certificate must be appended to the 
bill of lading stating: (1) Name of vessel; (2) Nationality of 
vessel; and (3) Owner of vessel, and declaring:
    ``The undersigned does hereby declare on behalf of the owner, 
master, or agent of the above-named vessel that said vessel is not 
registered in the boycotted country or owned by nationals or 
residents of the boycotted country and will not call at or pass 
through any boycotted country port enroute to its boycotting country 
destination.
    ``The undersigned further declares that said vessel is otherwise 
eligible to enter into the ports of the boycotting country in 
conformity with its laws and regulations.
    Sworn to before me, this ________ day of __________, 19 ____. 
Notary Seal.''

Interpretation

    It is the Department's position that furnishing a certificate, 
such as the one set out above, stating: (1) The name of the vessel, 
(2) The nationality of the vessel, and (3) The owner of the vessel 
and further declaring that the vessel: (a) Is not registered in a 
boycotted country, (b) Is not owned by nationals or

[[Page 12892]]
residents of a boycotted country, and (c) Will not call at or pass 
through a boycotted country port enroute to its destination in a 
boycotting country falls within the exception contained in 
Sec. 760.3(b) of this part for compliance with the import and 
shipping document requirements of a boycotting country. See 
Sec. 760.3(b) of this part and examples (vii), (viii), and (ix) 
thereunder.
    It is also the Department's position that the owner, charterer, 
or master of a vessel may certify that the vessel is ``eligible'' or 
``otherwise eligible'' to enter into the ports of a boycotting 
country in conformity with its laws and regulations. Furnishing such 
a statement pertaining to one's own eligibility offends no 
prohibition under part 760. See Sec. 760.2(f) of this part, example 
(xiv).
    On the other hand, where a boycott is in force, a declaration 
that a vessel is ``eligible'' or ``otherwise eligible'' to enter the 
ports of the boycotting country necessarily conveys the information 
that the vessel is not blacklisted or otherwise restricted from 
having a business relationship with the boycotting country. See 
Sec. 760.3(b) of this part, examples (vi), (xi), and (xii). Where a 
person other than the vessel's owner, charterer, or master furnishes 
such a statement, that is tantamount to his furnishing a statement 
that he is not doing business with a blacklisted person or is doing 
business only with nonblacklisted persons. Therefore, it is the 
Department's position that furnishing such a certification (which 
does not reflect customary international commercial practice) by 
anyone other than the owner, charterer, or master of a vessel would 
fall within the prohibition set forth in Sec. 760.2(d) of this part 
unless it is clear from all the facts and circumstances that the 
certification is not required for a boycott reason. See 
Sec. 760.2(d)(3) and (4) of this part. However, in accordance with 
the exception contained in Sec. 760.3(c) of this part for compliance 
with the import and shipping document requirements of a boycotting 
country, such a United States person may furnish such a 
certification until June 21, 1978.
    C. Insurance certificate. A certificate must be appended to the 
insurance policy stating: (1) Name of insurance company; (2) Address 
of its principal office; and (3) Country of its incorporation, and 
declaring:
    ``The undersigned, ________________, does hereby certify on 
behalf of the above-named insurance company that the said company 
has a duly qualified and appointed agent or representative in the 
boycotting country whose name and address appear below:
    Name of agent/representative and address in the boycotting 
country.
    Sworn to before me this ________ day of ____________, 19____. 
Notary Seal.''

Interpretation

    It is the Department's position that furnishing the name of the 
insurance company falls within the exception contained in 
Sec. 760.3(c) of this part for compliance with the import and 
shipping document requirements of a boycotting country. See 
Sec. 760.3(c)(1)(v) of this part and examples (v) and (x) 
thereunder. In addition, it is the Department's position that 
furnishing a certificate, such as the one set out above, stating the 
address of the insurance company's principal office and its country 
of incorporation offends no prohibition under part 760 unless the 
U.S. person furnishing the certificate knows or has reason to know 
that the information is sought for the purpose of determining that 
the insurance company is neither headquartered nor incorporated in a 
boycotted country. See Sec. 760.2(d)(1)(i) of this part.
    It is also the Department's position that the insurer, himself, 
may certify that he has a duly qualified and appointed agent or 
representative in the boycotting country and may furnish the name 
and address of his agent or representative. Furnishing such a 
statement pertaining to one's own status offends no prohibition 
under part 760. See Sec. 760.2(f) of this part, example (xiv).
    On the other hand, where a boycott is in force, a declaration 
that an insurer ``has a duly qualified and appointed agent or 
representative'' in the boycotting country necessarily conveys the 
information that the insurer is not blacklisted or otherwise 
restricted from having a business relationship with the boycotting 
country. See Sec. 760.3(c) of this part, example (v). Therefore, it 
is the Department's position that furnishing such a certification by 
anyone other than the insurer would fall within the prohibition set 
forth in Sec. 760.2(d) of this part unless it is clear from all the 
facts and circumstances that the certification is not required for a 
boycott reason. See Sec. 760.2(d) (3) and (4) of this part. However, 
in accordance with the exception contained in Sec. 760.3(c) of this 
part for compliance with the import and shipping document 
requirements of a boycotting country, such a U.S. person may furnish 
such a certification until June 21, 1978.

II. Contractual Clauses

    The new contractual requirements and the Department's 
interpretation of the applicability of part 760 thereto are as 
follows:
    A. Contractual clause regarding import laws of boycotting 
country. ``In connection with the performance of this contract the 
Contractor/Supplier acknowledges that the import and customs laws 
and regulations of the boycotting country shall apply to the 
furnishing and shipment of any products or components thereof to the 
boycotting country. The Contractor/Supplier specifically 
acknowledges that the aforementioned import and customs laws and 
regulations of the boycotting country prohibit, among other things, 
the importation into the boycotting country of products or 
components thereof: (1) Originating in the boycotted country; (2) 
Manufactured, produced, or furnished by companies organized under 
the laws of the boycotted country; and (3) Manufactured, produced, 
or furnished by nationals or residents of the boycotted country.''

Interpretation

    It is the Department's position that an agreement, such as the 
one set out in the first sentence above, that the import and customs 
requirements of a boycotting country shall apply to the performance 
of a contract does not, in and of itself, offend any prohibition 
under Part 760. See Sec. 760.2(a)(5) of this part and example (iii) 
under ``Examples of Agreements To Refuse To Do Business.'' It is 
also the Department's position that an agreement to comply generally 
with the import and customs requirements of a boycotting country 
does not, in and of itself, offend any prohibition under part 760 of 
this part. See Sec. 760.2(a)(5) of this part and examples (iv) and 
(v) under ``Examples of Agreements To Refuse To Do Business.'' In 
addition, it is the Department's position that an agreement, such as 
the one set out in the second sentence above, to comply with the 
boycotting country's import and customs requirements prohibiting the 
importation of products or components: (1) Originating in the 
boycotted country; (2) Manufactured, produced, or furnished by 
companies organized under the laws of the boycotted country; or (3) 
Manufactured, produced, or furnished by nationals or residents of 
the boycotted country falls within the exception contained in 
Sec. 760.3(a) of this part for compliance with the import 
requirements of a boycotting country. See Sec. 760.3(a) of this part 
and example (ii) thereunder.
    The Department notes that, after June 21, 1978, a United States 
person may not furnish a negative certification regarding the origin 
of goods or their components even though the certification is 
furnished in response to the import and shipping document 
requirements of the boycotting country. See Sec. 760.3(c) of this 
part and examples (i), (ii), and (iii) thereunder, and Sec. 760.3(a) 
of this part and example (ii) thereunder.
    B. Contractual clause regarding unilateral and specific 
selection. ``The Government of the boycotting country (or the First 
Party), in its exclusive power, reserves its right to make the final 
unilateral and specific selection of any proposed carriers, 
insurers, suppliers of services to be performed within the 
boycotting country, or of specific goods to be furnished in 
accordance with the terms and conditions of this contract.''

Interpretation

    It is the Department's position that an agreement, such as the 
one set out above, falls within the exception contained in 
Sec. 760.3(d) of this part for compliance with unilateral 
selections. However, the Department notes that whether a U.S. person 
may subsequently comply or agree to comply with any particular 
selection depends upon whether that selection meets all the 
requirements contained in Sec. 760.3(d) of this part for compliance 
with unilateral selections. For example, the particular selection 
must be unilateral and specific, particular goods must be 
specifically identifiable as to their source or origin at the time 
of their entry into the boycotting country, and all other 
requirements contained in Sec. 760.3(d) of this part must be 
observed.

Supplement No. 2 to Part 760--Interpretation

    The Department hereby sets forth its views on whether the 
furnishing of certain shipping and insurance certificates in 
compliance with boycotting country requirements violates the 
provisions of section 8 of the Export

[[Page 12893]]
Administration Act of 1979, as amended (50 U.S.C. app. 2407) and 
part 760 of the EAR,<SUP>1 as follows:

    \1\ The Department originally issued this interpretation on 
April 21, 1978 (43 FR 16969) pursuant to the Export Administration 
Amendments Act of 1977 (Public Law 95-52) and the regulations on 
restrictive trade practices and boycotts (15 CFR part 369) published 
on January 25, 1978 (43 FR 3508) and contained in the 15 CFR edition 
revised as of January 1, 1979.
---------------------------------------------------------------------------

    (i) ``The owner, charterer or master of a vessel may certify 
that the vessel is `eligible' or `otherwise eligible' to enter into 
the ports of a boycotting country in conformity with its laws and 
regulations;''
    (ii) ``The insurer, himself, may certify that he has a duly 
qualified and appointed agent or representative in the boycotting 
country and may furnish the name and address of his agent or 
representative.''
    Furnishing such certifications by anyone other than:
    (i) The owner, charterer or master of a vessel, or
    (ii) The insurer would fall within the prohibition set forth in 
Sec. 760.2(d) of this part, ``unless it is clear from all the facts 
and circumstances that these certifications are not required for a 
boycott reason.'' See Sec. 760.2(d) (3) and (4) of this part.
    The Department has received from the Kingdom of Saudi Arabia a 
clarification that the shipping and insurance certifications are 
required by Saudi Arabia in order to:
    (i) Demonstrate that there are no applicable restrictions under 
Saudi laws or regulations pertaining to maritime matters such as the 
age of the ship, the condition of the ship, and similar matters that 
would bar entry of the vessel into Saudi ports; and
    (ii) Facilitate dealings with insurers by Saudi Arabian 
importers whose ability to secure expeditious payments in the event 
of damage to insured goods may be adversely affected by the absence 
of a qualified agent or representative of the insurer in Saudi 
Arabia. In the Department's judgment, this clarification constitutes 
sufficient facts and circumstances to demonstrate that the 
certifications are not required by Saudi Arabia for boycott reasons.
    On the basis of this clarification, it is the Department's 
position that any United States person may furnish such shipping and 
insurance certificates required by Saudi Arabia without violating 
Sec. 760.2(d) of this part. Moreover, under these circumstances, 
receipt of requests for such shipping and insurance certificates 
from Saudi Arabia is not reportable.
    It is still the Department's position that furnishing such a 
certificate pertaining to one's own eligibility offends no 
prohibition under part 760. See Sec. 760.2(f) of this part, example 
(xiv). However, absent facts and circumstances clearly indicating 
that the certifications are required for ordinary commercial reasons 
as demonstrated by the Saudi clarification, furnishing 
certifications about the eligibility or blacklist status of any 
other person would fall within the prohibition set forth in 
Sec. 760.2(d) of this part, and receipt of requests for such 
certifications is reportable.
    It also remains the Department's position that where a United 
States person asks an insurer or carrier of the exporter's goods to 
self-certify, such request offends no prohibition under this part. 
However, where a United States person asks anyone other than an 
insurer or carrier of the exporter's goods to self-certify, such 
requests will be considered by the Department as evidence of the 
requesting person's refusal to do business with those persons who 
cannot or will not furnish such a self-certification. For example, 
if an exporter-beneficiary of a letter of credit asks his component 
suppliers to self-certify, such a request will be considered as 
evidence of his refusal to do business with those component 
suppliers who cannot or will not furnish such a self-certification.
    The Department wishes to emphasize that notwithstanding the fact 
that self-certifications are permissible, it will closely scrutinize 
the activities of all United States persons who provide such self-
certifications, including insurers and carriers, to determine that 
such persons have not taken any prohibited actions or entered into 
any prohibited agreements in order to be able to furnish such 
certifications.

Supplement No. 3 to Part 760--Interpretation

    Pursuant to Article 2, Annex II of the Peace Treaty between 
Egypt and Israel, Egypt's participation in the Arab economic boycott 
of Israel was formally terminated on January 25, 1980. On the basis 
of this action, it is the Department's position that certain 
requests for information, action or agreement which were considered 
boycott-related by implication now cannot be presumed boycott-
related and thus would not be prohibited or reportable under the 
Regulations. For example, a request that an exporter certify that 
the vessel on which it is shipping its goods is eligible to enter 
Arab Republic of Egypt ports has been considered a boycott-related 
request that the exporter could not comply with because Egypt has a 
boycott in force against Israel (see 43 FR 16969, April 21, 1978 or 
the 15 CFR edition revised as of January 1, 1979). Such a request 
after January 25, 1980 would not be presumed boycott-related because 
the underlying boycott requirement/basis for the certification has 
been eliminated. Similarly, a U.S. company would not be prohibited 
from complying with a request received from Egyptian government 
officials to furnish the place of birth of employees the company is 
seeking to take to Egypt, because there is no underlying boycott law 
or policy that would give rise to a presumption that the request was 
boycott-related.
    U.S. persons are reminded that requests that are on their face 
boycott-related or that are for action obviously in furtherance or 
support of an unsanctioned foreign boycott are subject to the 
Regulations, irrespective of the country or origin. For example, 
requests containing references to ``blacklisted companies'', 
``Israel boycott list'', ``non-Israeli goods'' or other phrases or 
words indicating boycott purpose would be subject to the appropriate 
provisions of the Department's antiboycott regulations.

Supplement No. 4 to Part 760--Interpretation

    The question has arisen how the definition of U.S. commerce in 
the antiboycott regulations (15 CFR part 760) applies to a shipment 
of foreign-made goods when U.S.-origin spare parts are included in 
the shipment. Specifically, if the shipment of foreign goods falls 
outside the definition of U.S. commerce, will the inclusion of U.S.-
origin spare parts bring the entire transaction into U.S. commerce?
    Section 760.1(d)(12) of this part provides the general 
guidelines for determining when U.S.-origin goods shipped from a 
controlled in fact foreign subsidiary are outside U.S. commerce. The 
two key tests of that provision are that the goods were (1) acquired 
without reference to a specific order, and (2) further manufactured, 
incorporated or reprocessed into another product. Because the 
application of these two tests to spare parts does not conclusively 
answer the U.S. commerce question, the Department is presenting this 
clarification.
    In the cases brought to the Department's attention, an order for 
foreign-origin goods was placed with a controlled in fact foreign 
subsidiary of a United States company. The foreign goods contained 
components manufactured in the United States and in other countries, 
and the order included a request for extras of the U.S. manufactured 
components (spare parts) to allow the customer to repair the item. 
Both the foreign manufactured product and the U.S. spare parts were 
to be shipped from the general inventory of the foreign subsidiary. 
Since the spare parts, if shipped by themselves, would be in U.S. 
commerce as that term is defined in the Regulations, the question 
was whether including them with the foreign manufactured item would 
bring the entire shipment into U.S. commerce. The Department has 
decided that it will not and presents the following specific 
guidance.
    As used above, the term ``spare parts'' refers to parts of the 
quantities and types normally and customarily ordered with a product 
and kept on hand in the event they are needed to assure prompt 
repair of the product. Parts, components or accessories that improve 
or change the basic operations or design characteristics, for 
example, as to accuracy, capability or productivity, are not spare 
parts under this definition.
    Inclusion of U.S.-origin spare parts in a shipment of products 
which is otherwise outside U.S. commerce will not bring the 
transaction into U.S. commerce if the following conditions are met:
    (I) The parts included in the shipment are acquired from the 
United States by the controlled in fact foreign subsidiary without 
reference to a specific order from or transaction with a person 
outside the United States;
    (II) The parts are identical to the corresponding United States-
origin parts which have been manufactured, incorporated into or 
reprocessed into the completed product;
    (III) The parts are of the quantity and type normally and 
customarily ordered with the completed product and kept on hand by 
the

[[Page 12894]]
firm or industry of which the firm is a part to assure prompt repair 
of the product; and
    (IV) The parts are covered by the same order as the completed 
product and are shipped with or at the same time as the original 
product.
    The Department emphasizes that unless each of the above 
conditions is met, the inclusion of United States-origin spare parts 
in an order for a foreign-manufactured or assembled product will 
bring the entire transaction into the interstate or foreign commerce 
of the United States for purposes of part 760.

Supplement No. 5 to Part 760--Interpretation

A. Permissible Furnishing of Information

    The information outlined below may be furnished in response to 
boycott-related requests from boycotting countries or others. This 
information is, in the view of the Department, not prohibited by the 
Regulations. Thus, a person does not have to qualify under any of 
the exceptions to be able to make the following statements. Such 
statements can be made, however, only by the person indicated and 
under the circumstances described. These statements should not be 
used as a point of departure or analogy for determining the 
permissibility of other types of statements. The Department's view 
that these statements are not contrary to the prohibitions contained 
in antiboycott provisions of the Regulations is limited to the 
specific statement in the specific context indicated.
    1. A U.S. person may always provide its own name, address, place 
of incorporation (``nationality''), and nature of business.
    2. A U.S. person may state that it is not on a blacklist, or 
restricted from doing business in a boycotting country. A company 
may not make that statement about its subsidiaries or affiliates--
only about itself. A U.S. person may not say that there is no reason 
for it to be blacklisted. To make that statement would provide 
directly or by implication information that may not be provided. A 
U.S. person may inquire about the reasons it is blacklisted if it 
learns that it is on a blacklist (see Sec. 760.2(d) of this part 
example (xv)).
    3. A U.S. person may describe in detail its past dealings with 
boycotting countries; may state in which boycotting countries its 
trademarks are registered; and may specify in which boycotting 
countries it is registered or qualified to do business. In general, 
a U.S. person is free to furnish any information it wishes about the 
nature and extent of its commercial dealings with boycotting 
countries.
    4. A U.S. person may state that many U.S. firms or individuals 
have similar names and that it believes that it may be confused with 
a similarly named entity. A U.S. person may not state that it does 
or does not have an affiliation or relationship with such similarly 
named entity.
    5. A U.S. person may state that the information requested is a 
matter of public record in the United States. However, the person 
may not direct the inquirer to the location of that information, nor 
may the U.S. person provide or cause to be provided such 
information.

B. Availability of the Compliance With Local Law Exception to 
Establish a Foreign Branch

    Section 760.3(f) of this part, the Compliance With Local Law 
exception, permits U.S. persons, who are bona fide residents of a 
boycotting country, to take certain limited, but otherwise 
prohibited, actions, if they are required to do so in order to 
comply with local law.
    Among these actions is the furnishing of non-discriminatory 
information. Examples (iv) through (vi) under ``Examples of Bona 
Fide Residency'' indicate that a company seeking to become a bona 
fide resident within a boycotting country may take advantage of the 
exception for the limited purpose of furnishing information required 
by local law to obtain resident status. Exactly when and how this 
exception is available has been the subject of a number of 
inquiries. It is the Department's view that the following conditions 
must be met for a non-resident company to be permitted to furnish 
otherwise prohibited information for the limited purpose of seeking 
to become a bona fide resident:
    1. The company must have a legitimate business reason for 
seeking to establish a branch or other resident operation in the 
boycotting country. (Removal from the blacklist does not constitute 
such a reason.)
    2. The local operation it seeks to establish must be similar or 
comparable in nature and operation to ones the company operates in 
other parts of the world, unless local law or custom dictates a 
significantly different form.
    3. The person who visits the boycotting country to furnish the 
information must be the official whose responsibility ordinarily 
includes the creation and registration of foreign operations (i.e., 
the chairman of the board cannot be flown in to answer boycott 
questions unless the chairman of the board is the corporate official 
who ordinarily goes into a country to handle foreign registrations).
    4. The information provided must be that which is ordinarily 
known to the person establishing the foreign branch. Obviously, at 
the time of establishment, the foreign branch will have no 
information of its own knowledge. Rather, the information should be 
that which the responsible person has of his own knowledge, or that 
he would have with him as incidental and necessary to the 
registration and establishment process. As a general rule, such 
information would not include such things as copies of agreements 
with boycotted country concerns or detailed information about the 
person's dealings with blacklisted concerns.
    5. It is not necessary that documents prepared in compliance 
with this exception be drafted or executed within the boycotting 
country. The restrictions on the type of information which may be 
provided and on who may provide it apply regardless of where the 
papers are prepared or signed.

Supplement No. 6 to Part 760--Interpretation

    The antiboycott regulations prohibit knowing agreements to 
comply with certain prohibited requests and requirements of 
boycotting countries, regardless of how these terms are stated. 
Similarly, the reporting rules require that a boycott related 
``solicitation, directive, legend or instruction that asks for 
information or that asks that a United States person take or refrain 
from taking a particular action'' be reported. Questions have 
frequently arisen about how particular requirements in the form of 
directive or instructions are viewed under the antiboycott 
regulations, and we believe that it will add clarity to the 
regulations to provide a written interpretation of how three of 
these terms are treated under the law. The terms in question appear 
frequently in letters of credit, but may also be found on purchase 
orders or other shipping or sale documents. They have been brought 
to the attention of the Department by numerous persons. The terms 
are, or are similar to, the following: (1) Goods of boycotted 
country origin are prohibited; (2) No six-pointed stars may be used 
on the goods, packing or cases; (3) Neither goods nor packing shall 
bear any symbols prohibited in the boycotting country.
    (a) Goods of boycotted country origin prohibited. This term is 
very common in letters of credit from Kuwait and may also appear 
from time-to-time in invitations to bid, contracts, or other trade 
documents. It imposes a condition or requirement compliance with 
which is prohibited, but permitted by an exception under the 
Regulations (see Sec. 760.2(a) and Sec. 760.3(b) of this part). It 
is reportable by those parties to the letter of credit or other 
transaction that are required to take or refrain from taking some 
boycott related action by the request. Thus the bank must report the 
request because it is a term or condition of the letter of credit 
that it is handling, and the exporter-beneficiary must report the 
request because the exporter determines the origin of the goods. The 
freight forwarder does not have to report this request because the 
forwarder has no role or obligation in this part of the transaction. 
See Sec. 760.5, examples (xiii)-(xv) of this part.
    (b) No six-pointed stars may be used on the goods, packing or 
cases. This term appears from time-to-time on documents from a 
variety of countries. The Department has taken the position that the 
six-pointed star is a religious symbol. See Sec. 760.2(b), example 
(viii) of this part. Agreeing to this term is prohibited by the 
Regulations and not excepted because it constitutes an agreement to 
furnish information about the religion of a U.S. person. See 
Sec. 760.2(c) of this part. If a person proceeds with a transaction 
in which this is a condition at any stage of the transaction, that 
person has agreed to the condition in violation of the Regulations. 
It is not enough to ignore the condition. Exception must 
affirmatively be taken to this term or it must be stricken from the 
documents of the transaction. It is reportable by all parties to the 
transaction that are restricted by it. For example, unlike the 
situation described in (a) above, the freight forwarder would have 
to report this request because his role in the transaction would 
involve preparation of the packing and cases. The bank and exporter 
would both have to report, of course, if it were a term in a letter 
of credit. Each party would be obligated affirmatively to seek an 
amendment or deletion of the term.

[[Page 12895]]

    (c) Neither goods nor packaging shall bear any symbols 
prohibited in the boycotting country. This term appears from time-
to-time in letters of credit and shipping documents from Saudi 
Arabia. In our view, it is neither prohibited, nor reportable 
because it is not boycott-related. There is a wide range of symbols 
that are prohibited in Saudi Arabia for a variety of reasons, many 
having to do with that nation's cultural and religious beliefs. On 
this basis, we do not interpret the term to be boycott related. See 
Sec. 760.2(a)(5) and Sec. 760.5(a)(5)(v) of this part.

Supplement No. 7 to Part 760--Interpretation

Prohibited Refusal To Do Business

    When a boycotting country rejects for boycott-related reasons a 
shipment of goods sold by a United States person, the United States 
person selling the goods may return them to its inventory or may re-
ship them to other markets (the United States person may not return 
them to the original supplier and demand restitution). The U.S. 
person may then make a non-boycott based selection of another 
supplier and provide the goods necessary to meet its obligations to 
the boycotting customer in that particular transaction without 
violating Sec. 760.2(a) of this part. If the United States person 
receives another order from the same boycotting country for similar 
goods, the Department has determined that a boycott-based refusal by 
a United States person to ship goods from the supplier whose goods 
were previously rejected would constitute a prohibited refusal to do 
business under Sec. 760.2(a) of this part. The Department will 
presume that filling such an order with alternative goods is 
evidence of the person's refusal to deal with the original supplier.
    The Department recognizes the limitations this places on future 
transactions with a boycotting country once a shipment of goods has 
been rejected. Because of this, the Department wishes to point out 
that, when faced with a boycotting country's refusal to permit entry 
of the particular goods, a United States person may state its 
obligation to abide by the requirements of United States law and 
indicate its readiness to comply with the unilateral and specific 
selection of goods by the boycotting country in accordance with 
Sec. 760.3(c) of this part. That section provides, in pertinent 
part, as follows:
    A United States person may comply or agree to comply in the 
normal course of business with the unilateral and specific selection 
by a boycotting country ________ of ________ specific goods, 
________ provided that ________ with respect to goods, the items, in 
the normal course of business, are identifiable as to their source 
or origin at the time of their entry into the boycotting country by 
(a) uniqueness of design or appearance or (b) trademark, trade name, 
or other identification normally on the items themselves, including 
their packaging.
    The United States person may also provide certain services in 
advance of the unilateral selection by the boycotting country, such 
as the compilation of lists of qualified suppliers, so long as such 
services are customary to the type of business the United States 
person is engaged in, and the services rendered are completely non-
exclusionary in character (i.e., the list of qualified suppliers 
would have to include the supplier whose goods had previously been 
rejected by the boycotting country, if they were fully qualified). 
See Sec. 760.2(a)(6) of this part for a discussion of the 
requirements for the provision of these services.
    The Department wishes to emphasize that the unilateral selection 
exception in Sec. 760.3(d) of this part will be construed narrowly, 
and that all its requirements and conditions must be met, including 
the following:

--Discretion for the selection must be exercised by a boycotting 
country; or by a national or resident of a boycotting country;
--The selection must be stated in the affirmative specifying a 
particular supplier of goods;
--While a permissible selection may be boycott based, if the United 
States person knows or has reason to know that the purpose of the 
selection is to effect discrimination against any United States 
person on the basis of race, religion, sex, or national origin, the 
person may not comply under any circumstances.

    The Department cautions United States persons confronted with 
the problem or concern over the boycott-based rejection of goods 
shipped to a boycotting country that the adoption of devices such as 
``risk of loss'' clauses, or conditions that make the supplier 
financially liable if his or her goods are rejected by the 
boycotting country for boycott reasons are presumed by the 
Department to be evasion of the statute and regulations, and as such 
are prohibited by Sec. 760.4 of this part, unless adopted prior to 
January 18, 1978. See Sec. 760.4(d) of this part.

Supplement No. 8 to Part 760--Interpretation

Definition of Interstate or Foreign Commerce of the United States

    When United States persons (as defined by the antiboycott 
regulations) located within the United States purchase or sell goods 
or services located outside the United States, they have engaged in 
an activity within the foreign commerce of the United States. 
Although the goods or services may never physically come within the 
geographic boundaries of the several states or territories of the 
United States, legal ownership or title is transferred from a 
foreign nation to the United States person who is located in the 
United States. In the case of a purchase, subsequent resale would 
also be within United States commerce.
    It is the Department's view that the terms ``sale'' and 
``purchase'' as used in the regulations are not limited to those 
circumstances where the goods or services are physically transferred 
to the person who acquires title. The EAR define the activities that 
serve as the transactional basis for U.S. commerce as those 
involving the ``sale, purchase, or transfer'' of goods or services. 
In the Department's view, as used in the antiboycott regulations, 
``transfer'' contemplates physical movement of the goods or services 
between the several states or territories and a foreign country, 
while ``sale'' and ``purchase'' relate to the movement of ownership 
or title.
    This interpretation applies only to those circumstances in which 
the person located within the United States buys or sells goods or 
services for its own account. Where the United States person is 
engaged in the brokerage of foreign goods, i.e., bringing foreign 
buyers and sellers together and assisting in the transfer of the 
goods, the sale or purchase itself would not ordinarily be 
considered to be within U.S. commerce. The brokerage service, 
however, would be a service provided from the United States to the 
parties and thus an activity within U.S. commerce and subject to the 
antiboycott laws. See Sec. 760.1(d)(13) of this part.
    The Department cautions that United States persons who alter 
their normal pattern of dealing to eliminate the passage of 
ownership of the goods or services to or from the several states or 
territories of the United States in order to avoid the application 
of the antiboycott regulations would be in violation of Sec. 760.4 
of this part.

Supplement No. 9 to Part 760--Interpretation

Activities Exclusively Within a Boycotting Country--Furnishing 
Information

    Sec. 760.3(h) of this part provides that a United States person 
who is a bona fide resident of a boycotting country may comply with 
the laws of that country with respect to his or her activities 
exclusively within the boycotting country. Among the types of 
conduct permitted by this exception is ``furnishing information 
within the host country'' Sec. 760.3(h)(1)(v) of this part. For 
purposes of the discussion which follows, the Department is assuming 
that the person in question is a bona fide resident of the 
boycotting country as defined in Sec. 760.3(f) of this part, and 
that the information to be provided is required by the laws or 
regulations of the boycotting country, as also defined in 
Sec. 760.3(g) of this part. The only issue this interpretation 
addresses is under what circumstances the provision of information 
is ``an activity exclusively within the boycotting country.''
    The activity of ``furnishing information'' consists of two 
parts, the acquisition of the information and its subsequent 
transmittal. Under the terms of this exception, the information may 
not be acquired outside the country for the purpose of responding to 
the requirement for information imposed by the boycotting country. 
Thus, if an American company which is a bona fide resident of a 
boycotting country is required to provide information about its 
dealings with other U.S. firms, the company may not ask its parent 
corporation in the United States for that information, or make any 
other inquiry outside the boundaries of the boycotting country. The 
information must be provided to the boycotting country authorities 
based on information or knowledge available to the company and its 
personnel located within the boycotting country at the time the 
inquiry is received. See Sec. 760.3, (h) of this part, examples 
(iii), (iv), and (v). Much of the information in the company's 
possession (transaction and corporate records) may have

[[Page 12896]]
actually originated outside the boycotting country, and much of the 
information known to the employees may have been acquired outside 
the boycotting country. This will not cause the information to fall 
outside the coverage of this exception, if the information was sent 
to the boycotting country or acquired by the individuals in normal 
commercial context prior to and unrelated to a boycott inquiry or 
purpose. It should be noted that if prohibited information (about 
business relations with a boycotted country, for example) has been 
forwarded to the affiliate in the boycotting country in anticipation 
of a possible boycott inquiry from the boycotting country 
government, the Department will not regard this as information 
within the knowledge of the bona fide resident under the terms of 
the exception. However, if the bona fide resident possesses the 
information prior to receipt of a boycott-related inquiry and 
obtained it in a normal commercial context, the information can be 
provided pursuant to this exception notwithstanding the fact that, 
at some point, the information came into the boycotting country from 
the outside.
    The second part of the analysis of ``furnishing information'' 
deals with the limitation on the transmittal of the information. It 
can only be provided within the boundaries of the boycotting 
country. The bona fide resident may only provide the information to 
the party that the boycotting country law requires (directly or 
through an agent or representative within the country) so long as 
that party is located within the boycotting country. This 
application of the exception is somewhat easier, since it is 
relatively simple to determine if the information is to be given to 
somebody within the country.
    Note that in discussing what constitutes furnishing information 
``exclusively within'' the boycotting country, the Department does 
not address the nature of the transaction or activity that the 
information relates to. It is the Department's position that the 
nature of the transaction, including the inception or completion of 
the transaction, is not material in analyzing the availability of 
this exception.
    For example, if a shipment of goods imported into a boycotting 
country is held up at the time of entry, and information from the 
bona fide resident within that country is legally required to free 
those goods, the fact that the information may relate to a 
transaction that began outside the boycotting country is not 
material. The availability of the exception will be judged based on 
the activity of the bona fide resident within the country. If the 
resident provides that information of his or her own knowledge, and 
provides it to appropriate parties located exclusively within the 
country, the exception permits the information to be furnished.
    Factual variations may raise questions about the application of 
this exception and the effect of this interpretation. In an effort 
to anticipate some of these, the Department has set forth below a 
number of questions and answers. They are incorporated as a part of 
this interpretation.
    1. Q. Under this exception, can a company which is a U.S. person 
and a bona fide resident of the boycotting country provide 
information to the local boycott office?
    A. Yes, if local law requires the company to provide this 
information to the boycott office and all the other requirements are 
met.
    2. Q. If the company knows that the local boycott office will 
forward the information to the Central Boycott Office, may it still 
provide the information to the local boycott office?
    A. Yes, if it is required by local law to furnish the 
information to the local boycott office and all the other 
requirements are met. The company has no control over what happens 
to the information after it is provided to the proper authorities. 
(There is obvious potential for evasion here, and the Department 
will examine such occurrences closely.)
    3. Q. Can a U.S. person who is a bona fide resident of Syria 
furnish information to the Central Boycott Office in Damascus?
    A. No, unless the law in Syria specifically requires information 
to be provided to the Central Boycott Office the exception will not 
apply. Syria has a local boycott office responsible for enforcing 
the boycott in that country.
    4. Q. If a company which is a U.S. person and a bona fide 
resident of the boycotting country has an import shipment held up in 
customs of the boycotting country, and is required to provide 
information about the shipment to get it out of customs, may the 
company do so?
    A. Yes, assuming all other requirements are met. The act of 
furnishing the information is the activity taking place exclusively 
within the boycotting country. The fact that the information is 
provided corollary to a transaction that originates or terminates 
outside the boycotting country is not material.
    5. Q. If the U.S. person and bona fide resident of the 
boycotting country is shipping goods out of the boycotting country, 
and is required to certify to customs officials of the country at 
the time of export that the goods are not of Israeli origin, may he 
do so even though the certification relates to an export 
transaction?
    A. Yes, assuming all other requirements are met. See number 4 
above.

Supplement No. 10 to Part 760--Interpretation

    (a) The words ``Persian Gulf'' cannot appear on the document.
    This term is common in letters of credit from Kuwait and may be 
found in letters of credit from Bahrain. Although more commonly 
appearing in letters of credit, the term may also appear in other 
trade documents.
    It is the Department's view that this term reflects a historical 
dispute between the Arabs and the Iranians over geographic place 
names which in no way relates to existing economic boycotts. Thus, 
the term is neither prohibited nor reportable under the Regulations.
    (b) Certify that goods are of U.S.A. origin and contain no 
foreign parts.
    This term appears periodically on documents from a number of 
Arab countries. It is the Department's position that the statement 
is a positive certification of origin and, as such, falls within the 
exception contained in Sec. 760.3(c) of this part for compliance 
with the import and shipping document requirements of a boycotting 
country. Even though a negative phrase is contained within the 
positive clause, the phrase is a non exclusionary, non blacklisting 
statement. In the Department's view, the additional phrase does not 
affect the permissible status of the positive certificate, nor does 
it make the request reportable Sec. 760.5(a)(5)(iii) of this part.
    (c) Legalization of documents by any Arab consulate except 
Egyptian Consulate permitted.
    This term appears from time to time in letters of credit but 
also may appear in various other trade documents requiring 
legalization and thus is not prohibited, and a request to comply 
with the statement is not reportable. Because a number of Arab 
states do not have formal diplomatic relations with Egypt, they do 
not recognize Egyptian embassy actions. The absence of diplomatic 
relations is the reason for the requirement. In the Department's 
view this does not constitute an unsanctioned foreign boycott or 
embargo against Egypt under the terms of the Export Administration 
Act. Thus the term is not prohibited, and a request to comply with 
the statement is not reportable.

Supplement No. 11 to Part 760--Interpretation

Definition of Unsolicited Invitation to Bid

    Sec. 760.5(a)(4) of this part states in part:
    In addition, a United States person who receives an unsolicited 
invitation to bid, or similar proposal, containing a boycott request 
has not received a reportable request for purposes of this section 
where he does not respond to the invitation to bid or other 
proposal.
    The Regulations do not define ``unsolicited'' in this context. 
Based on review of numerous situations, the Department has developed 
certain criteria that it applies in determining if an invitation to 
bid or other proposal received by a U.S. person is in fact 
unsolicited.
    The invitation is not unsolicited if, during a commercially 
reasonable period of time preceding the issuance of the invitation, 
a representative of the U.S. person contacted the company or agency 
involved for the purpose of promoting business on behalf of the 
company.
    The invitation is not unsolicited if the U.S. person has 
advertised the product or line of products that are the subject of 
the invitation in periodicals or publications that ordinarily 
circulate to the country issuing the invitation during a 
commercially reasonable period of time preceding the issuance of the 
invitation.
    The invitation is not unsolicited if the U.S. person has sold 
the same or similar products to the company or agency issuing the 
invitation within a commercially reasonable period of time before 
the issuance of the current invitation.
    The invitation is not unsolicited if the U.S. person has 
participated in a trade mission to or trade fair in the country 
issuing the invitation within a commercially reasonable

[[Page 12897]]
period of time before the issuance of the invitation.
    Under Sec. 760.5(a)(4) of this part, the invitation is regarded 
as not reportable if the U.S. person receiving it does not respond. 
The Department has determined that a simple acknowledgment of the 
invitation does not constitute a response for purposes of this rule. 
However, an acknowledgment that requests inclusion for future 
invitations will be considered a response, and a report is required.
    Where the person in receipt of an invitation containing a 
boycott term or condition is undecided about a response by the time 
a report would be required to be filed under the regulations, it is 
the Department's view that the person must file a report as called 
for in the Regulations. The person filing the report may indicate at 
the time of filing that he has not made a decision on the boycott 
request but must file a supplemental report as called for in the 
regulations at the time a decision is made (Sec. 760.5(a)(6) of this 
part).

Supplement No. 12 to Part 760--Interpretation

    The Department has taken the position that a U.S. person as 
defined by Sec. 760.1(b) of this part may not make use of an agent 
to furnish information that the U.S. person is prohibited from 
furnishing pursuant to Sec. 760.2(d) of this part.
    Example (v) under Sec. 760.4 of this part (Evasion) provides:
    A, a U.S. company, is negotiating a long-term contract with 
boycotting country Y to meet all of Y's medical supply needs. Y 
informs A that before such a contract can be concluded, A must 
complete Y's boycott questionnaire. A knows that it is prohibited 
from answering the questionnaire so it arranges for a local agent in 
Y to supply the necessary information.
    A's action constitutes evasion of this part, because it is a 
device to mask prohibited activity carried out on A's behalf.
    This interpretation deals with the application of the 
Regulations to a commercial agent registration requirement recently 
imposed by the government of Saudi Arabia. The requirement provides 
that nationals of Saudi Arabia seeking to register in Saudi Arabia 
as commercial agents or representatives of foreign concerns must 
furnish certain boycott-related information about the foreign 
concern prior to obtaining approval of the registration.
    The requirement has been imposed by the Ministry of Commerce of 
Saudi Arabia, which is the government agency responsible for 
regulation of commercial agents and foreign commercial 
registrations. The Ministry requires the agent or representative to 
state the following:
    Declaration: I, the undersigned, hereby declare, in my capacity 
as (blank) that (name and address of foreign principal) is not 
presently on the blacklist of the Office for the Boycott of Israel 
and that it and all its branches, if any, are bound by the decisions 
issued by the Boycott Office and do not (1) participate in the 
capital of, (2) license the manufacture of any products or grant 
trademarks or tradeware license to, (3) give experience or technical 
advice to, or (4) have any other relationship with other companies 
which are prohibited to be dealt with by the Boycott Office. Signed 
(name of commercial agent/representative/distributor).
    It is the Department's view that under the circumstances 
specifically outlined in this interpretation relating to the nature 
of the requirement, a U.S. person will not be held responsible for a 
violation of this part when such statements are provided by its 
commercial agent or representative, even when such statements are 
made with the full knowledge of the U.S. person.
    Nature of the requirement. For a boycott-related commercial 
registration requirement to fall within the coverage of this 
interpretation it must have the following characteristics:
    1. The requirement for information imposed by the boycotting 
country applies to a national or other subject of the boycotting 
country qualified under the local laws of that country to function 
as a commercial representative within that country;
    2. The registration requirement relates to the registration of 
the commercial agent's or representative's authority to sell or 
distribute goods within the boycotting country acquired from the 
foreign concern;
    3. The requirement is a routine part of the registration process 
and is not applied selectively based on boycott-related criteria;
    4. The requirement applies only to a commercial agent or 
representative in the boycotting country and does not apply to the 
foreign concern itself; and
    5. The requirement is imposed by the agency of the boycotting 
country responsible for regulating commercial agencies.
    The U.S. person whose agent is complying with the registration 
requirement continues to be subject to all the terms of the 
Regulations, and may not provide any prohibited information to the 
agent for purposes of the agent's compliance with the requirement.
    In addition, the authority granted to the commercial agent or 
representative by the U.S. person must be consistent with standard 
commercial practices and not involve any grants of authority beyond 
those incidental to the commercial sales and distributorship 
responsibilities of the agent.
    Because the requirement does not apply to the U.S. person, no 
reporting obligation under Sec. 760.5 of this part would arise.
    This interpretation, like all others issued by the Department 
discussing applications of the antiboycott provisions of the Export 
Administration Regulations, should be read narrowly. Circumstances 
that differ in any material way from those discussed in this notice 
will be considered under the applicable provisions of the 
Regulations. Persons are particularly advised not to seek to apply 
this interpretation to circumstances in which U.S. principals seek 
to use agents to deal with boycott-related or potential blacklisting 
situations.

Supplement No. 13 to Part 760--Interpretation

Summary

    This interpretation considers boycott-based contractual language 
dealing with the selection of suppliers and subcontractors. While 
this language borrows terms from the ``unilateral and specific 
selection'' exception contained in Sec. 760.3(c) of this part, it 
fails to meet the requirements of that exception. Compliance with 
the requirements of the language constitutes a violation of the 
regulatory prohibition of boycott-based refusals to do business.

Regulatory Background

    Section 760.2(a) of this part prohibits U.S. persons from 
refusing or knowingly agreeing to refuse to do business with other 
persons when such refusal is pursuant to an agreement with, 
requirement of, or request of a boycotting country. That prohibition 
does not extend to the performance of management, procurement or 
other pre-award services, however, notwithstanding knowledge that 
the ultimate selection may be boycott-based. To be permissible such 
services: (1) Must be customary for the firm or industry involved 
and (2) must not exclude others from the transaction or involve 
other actions based on the boycott. See Sec. 760.2(a)(6) of this 
part, ``Refusals to Do Business'', and example (xiii).
    A specific exception is also made in the Regulations for 
compliance (and agreements to comply) with a unilateral and specific 
selection of suppliers or subcontractors by a boycotting country 
buyer. See Sec. 760.3(d) of this part. In Supplement No. 1 to part 
760, the following form of contractual language was said to fall 
within that exception for compliance with unilateral and specific 
selection:
    The Government of the boycotting country (or the First Party), 
in its exclusive power, reserves its right to make the final 
unilateral and specific selection of any proposed carriers, 
insurers, suppliers of services to be performed within the 
boycotting country, or of specific goods to be furnished in 
accordance with the terms and conditions of this contract.
    The Department noted that the actual steps necessary to comply 
with any selection made under this agreement would also have to meet 
the requirements of Sec. 760.3(c) of this part to claim the benefit 
of that exception. In other words, the discretion in selecting would 
have to be exercised exclusively by the boycotting country customer 
and the selection would have to be stated in the affirmative, naming 
a particular supplier. See Sec. 760.3(d) (4) and (5) of this part.

Analysis of the New Contractual Language

    The Office of Antiboycott Compliance has learned of the 
introduction of a new contractual clause into tender documents 
issued by boycotting country governments. This clause is, in many 
respects, similar to that dealt with in Supplement No. 1 to part 
760, but several critical differences exist.
    The clause states:

Boycott of Boycotted Country

    In connection with the performance of this Agreement, Contractor 
acknowledges that the import and customs laws and regulations of 
boycotting country apply to the furnishing and shipment of any 
products or components thereof to boycotting country. The Contractor 
specifically acknowledges that the

[[Page 12898]]
aforementioned import and customs laws and regulations of boycotting 
country prohibit, among other things, the importation into 
boycotting country of products or components thereof: (A) 
Originating in boycotted country; (B) Manufactured, produced and 
furnish by companies organized under the laws of boycotted country; 
and (C) Manufactured, produced or furnished by Nationals or 
Residents of boycotted country.
    The Government, in its exclusive power, reserves its right to 
make the final unilateral and specific selection of any proposed 
Carriers, Insurers, Suppliers of Services to be performed within 
boycotting country or of specific goods to be furnished in 
accordance with the terms and conditions of this Contract.
    To assist the Government in exercising its right under the 
preceding paragraph, Contractor further agrees to provide a complete 
list of names and addresses of all his Sub-Contractors, Suppliers, 
Vendors and Consultants and any other suppliers of the service for 
the project.
    The title of this clause makes clear that its provisions are 
intended to be boycott-related. The first paragraph acknowledges the 
applicability of certain boycott-related requirements of the 
boycotting country's laws in language reviewed in part 760, 
Supplement No. 1, Part II.B. and found to constitute a permissible 
agreement under the exception contained in Sec. 760.3(a) of this 
part for compliance with the import requirements of a boycotting 
country. The second and third paragraphs together deal with the 
procedure for selecting subcontractors and suppliers of services and 
goods and, in the context of the clause as a whole, must be regarded 
as motivated by boycott considerations and intended to enable the 
boycotting country government to make boycott-based selections, 
including the elimination of blacklisted subcontractors and 
suppliers.
    The question is whether the incorporation into these paragraphs 
of some language from the ``unilateral and specific selection'' 
clause approved in Supplement No. 1 to part 760 suffices to take the 
language outside Sec. 760.2(a) of this part's prohibition on 
boycott-based agreements to refuse to do business. While the first 
sentence of this clause is consistent with the language discussed in 
Supplement No. 1 to part 760, the second sentence significantly 
alters the effect of this clause. The effect is to draw the 
contractor into the decision-making process, thereby destroying the 
unilateral character of the selection by the buyer. By agreeing to 
submit the names of the suppliers it plans to use, the contractor is 
agreeing to give the boycotting country buyer, who has retained the 
right of final selection, the ability to reject, for boycott-related 
reasons, any supplier the contractor has already chosen. Because the 
requirement appears in the contractual provision dealing with the 
boycott, the buyer's rejection of any supplier whose name is given 
to the buyer pursuant to this provision would be presumed to be 
boycott-based. By signing the contract, and thereby agreeing to 
comply with all of its provisions, the contractor must either accept 
the buyer's rejection of any supplier, which is presumed to be 
boycott-based because of the context of this provision, or breach 
the contract.
    In these circumstances, the contractor's method of choosing its 
subcontractors and suppliers, in anticipation of the buyer's 
boycott-based review, cannot be considered a permissible pre-award 
service because of the presumed intrusion of boycott-based criteria 
into the selection process. Thus, assuming all other jurisdictional 
requirements necessary to establish a violation of part 760 are met, 
the signing of the contract by the contractor constitutes a 
violation of Sec. 760.2(a) of this part because he is agreeing to 
refuse to do business for boycott reasons.
    The apparent attempt to bring this language within the exception 
for compliance with unilateral and specific selections is 
ineffective. The language does not place the discretion to choose 
suppliers in the hands of the boycotting country buyer but divides 
this discretion between the buyer and his principal contractor. 
Knowing that the buyer will not accept a boycotted company as 
supplier or subcontractor, the contractor is asked to use his 
discretion in selecting a single supplier or subcontractor for each 
element of the contract. The boycotting country buyer exercises 
discretion only through accepting or rejecting the selected supplier 
or contractor as its boycott policies require. In these 
circumstances it cannot be said that the buyer is exercising right 
of unilateral and specific selection which meets the criteria of 
Sec. 760.3(c) of this part. For this reason, agreement to the 
contractual language discussed here would constitute an agreement to 
refuse to do business with any person rejected by the buyer and 
would violate Sec. 760.2(a) of this part.

Supplement No. 14 to Part 760--Interpretation

    (a) Contractual clause concerning import, customs and boycott 
laws of a boycotting country.
    The following language has appeared in tender documents issued 
by a boycotting country:
    Supplier declares his knowledge of the fact that the import, 
Customs and boycott laws, rules and regulations of [name of 
boycotting country] apply in importing to [name of boycotting 
country].
    Supplier declares his knowledge of the fact that under these 
laws, rules and regulations, it is prohibited to import into [name 
of the boycotting country] any products or parts thereof that 
originated in [name of boycotted country]; were manufactured, 
produced or imported by companies formed under the laws of [name of 
boycotted country]; or were manufactured, produced or imported by 
nationals or residents of [name of boycotted country].
    Agreeing to the above contractual language is a prohibited 
agreement to refuse to do business, under Sec. 760.2(a) of this 
part. The first paragraph requires broad acknowledgment of the 
application of the boycotting country's boycott laws, rules and 
regulations. Unless this language is qualified to apply only to 
boycott restrictions with which U.S. persons may comply, agreement 
to it is prohibited. See Sec. 760.2(a) of this part, examples (v) 
and (vi) under ``Agreement to Refuse to Do Business.''
    The second paragraph does not limit the scope of the boycott 
restrictions referenced in the first paragraph. It states that the 
boycott laws include restrictions on goods originating in the 
boycotted country; manufactured, produced or supplied by companies 
organized under the laws of the boycotted country; or manufactured, 
produced or supplied by nationals or residents of the boycotted 
country. Each of these restrictions is within the exception for 
compliance with the import requirements of the boycotting country 
(Sec. 760.3(a) of this part). However, the second paragraph's list 
of restrictions is not exclusive. Since the boycott laws generally 
include more than what is listed and permissible under the 
antiboycott law, U.S. persons may not agree to the quoted clause. 
For example, a country's boycott laws may prohibit imports of goods 
manufactured by blacklisted firms. Except as provided by 
Sec. 760.3(g) of this part, agreement to and compliance with this 
boycott restriction would be prohibited under the antiboycott law.
    The above contractual language is distinguished from the 
contract clause determined to be permissible in supplement 1, Part 
II, A, by its acknowledgment that the boycott requirements of the 
boycotting country apply. Although the first sentence of the 
Supplement 1 clause does not exclude the possible application of 
boycott laws, it refers only to the import and customs laws of the 
boycotting country without mentioning the boycott laws as well. As 
discussed fully in Supplement No. 1 to part 760, compliance with or 
agreement to the clause quoted there is, therefore, permissible.
    The contract clause quoted above, as well as the clause dealt 
with in Supplement No. 1 to part 760, part II, A, is reportable 
under Sec. 760.6(a)(1) of this part.
    (b) Letter of credit terms removing blacklist certificate 
requirement if specified vessels used.
    The following terms frequently appear on letters of credit 
covering shipment to Iraq:
    Shipment to be effected by Iraqi State Enterprise for Maritime 
Transport Vessels or by United Arab Shipping Company (SAB) vessels, 
if available.
    If shipment is effected by any of the above company's [sic] 
vessels, black list certificate or evidence to that effect is not 
required.
    These terms are not reportable and compliance with them is 
permissible.
    The first sentence, a directive to use Iraqi State Enterprise 
for Maritime Transport or United Arab Shipping vessels, is neither 
reportable nor prohibited because it is not considered by the 
Department to be boycott-related. The apparent reason for the 
directive is Iraq's preference to have cargo shipped on its own 
vessels (or, as in the case of United Arab Shipping, on vessels 
owned by a company in part established and owned by the Iraqi 
government). Such ``cargo preference'' requirements, calling for the 
use of an importing or exporting country's own ships, are common 
throughout the world and are imposed for non-boycott reasons. (See 
Sec. 760.2(a) of this part, example (vii)

[[Page 12899]]
AGREEMENTS TO REFUSE TO DO BUSINESS.)
    In contrast, if the letter of credit contains a list of vessels 
or carriers that appears to constitute a boycott-related whitelist, 
a directive to select a vessel from that list would be both 
reportable and prohibited. When such a directive appears in 
conjunction with a term removing the blacklist certificate 
requirement if these vessels are used, the Department will presume 
that beneficiaries, banks and any other U.S. person receiving the 
letter of credit know that there is a boycott-related purpose for 
the directive.
    The second sentence of the letter of credit language quoted 
above does not, by itself, call for a blacklist certificate and is 
not therefore, reportable. If a term elsewhere on the letter of 
credit imposes a blacklist certificate requirement, then that other 
term would be reportable.
    (c) Information not related to a particular transaction in U.S. 
commerce.
    Under Sec. 760.2 (c), (d) and (e), of this part U.S. persons are 
prohibited, with respect to their activities in U.S. commerce, from 
furnishing certain information. It is the Department's position that 
the required nexus with U.S. commerce is established when the 
furnishing of information itself occurs in U.S. commerce. Even when 
the furnishing of information is not itself in U.S. commerce, 
however, the necessary relationship to U.S. commerce will be 
established if the furnishing of information relates to particular 
transactions in U.S. commerce or to anticipated transactions in U.S. 
commerce. See, e.g. Sec. 760.2(d), examples (vii), (ix) and (xii) of 
this part.
    The simplest situation occurs where a U.S. person located in the 
United States furnishes information to a boycotting country. The 
transfer of information from the United States to a foreign country 
is itself an activity in U.S. commerce. See Sec. 760.1(d)(1)(iv) of 
this part. In some circumstances, the furnishing of information by a 
U.S. person located outside the United States may also be an 
activity in U.S. commerce. For example, the controlled foreign 
subsidiary of a domestic concern might furnish to a boycotting 
country information the subsidiary obtained from the U.S.-located 
parent for that purpose. The subsidiary's furnishing would, in these 
circumstances, constitute an activity in U.S. commerce. See 
Sec. 760.1(d)(8) of this part.
    Where the furnishing of information is not itself in U.S. 
commerce, the U.S. commerce requirement may be satisfied by the fact 
that the furnishing is related to an activity in U.S. foreign or 
domestic commerce. For example, if a shipment of goods by a 
controlled-in-fact foreign subsidiary of a U.S. company to a 
boycotting country gives rise to an inquiry from the boycotting 
country concerning the subsidiary's relationship with another firm, 
the Department regards any responsive furnishing of information by 
the subsidiary as related to the shipment giving rise to the 
inquiry. If the shipment is in U.S. foreign or domestic commerce, as 
defined by the regulations, then the Department regards the 
furnishing to be related to an activity in U.S. commerce and subject 
to the antiboycott regulations, whether or not the furnishing itself 
is in U.S. commerce.
    In some circumstances, the Department may regard a furnishing of 
information as related to a broader category of present and 
prospective transactions. For example, if a controlled-in-fact 
foreign subsidiary of a U.S. company is requested to furnish 
information about its commercial dealings and it appears that 
failure to respond will result in its blacklisting, any responsive 
furnishing of information will be regarded by the Department as 
relating to all of the subsidiary's present and anticipated business 
activities with the inquiring boycotting country. Accordingly, if 
any of these present or anticipated business activities are in U.S. 
commerce, the Department will regard the furnishing as related to an 
activity in U.S. commerce and subject to the antiboycott 
regulations.
    In deciding whether anticipated business activities will be in 
U.S. commerce, the Department will consider all of the surrounding 
circumstances. Particular attention will be given to the history of 
the U.S. person's business activities with the boycotting country 
and others, the nature of any activities occurring after a 
furnishing of information occurs and any relevant economic or 
commercial factors which may affect these activities.
    For example, if a U.S. person has no activities with the 
boycotting country at present but all of its other international 
activities are in U.S. commerce, as defined by the Regulations, then 
the Department is likely to regard any furnishing of information by 
that person for the purpose of securing entry into the boycotting 
country's market as relating to anticipated activities in U.S. 
commerce and subject to the antiboycott regulations. Similarly, if 
subsequent to the furnishing of information to the boycotting 
country for the purpose of securing entry into its markets, the U.S. 
person engages in transactions with that country which are in U.S. 
commerce, the Department is likely to regard the furnishing as 
related to an activity in U.S. commerce and subject to the 
antiboycott regulations.

Supplement No. 15 to Part 760--Interpretation

    Section 760.2 (c), (d), and (e) of this part prohibits United 
States persons from furnishing certain types of information with 
intent to comply with, further, or support an unsanctioned foreign 
boycott against a country friendly to the United States. The 
Department has been asked whether prohibited information may be 
transmitted--that is, passed to others by a United States person who 
has not directly or indirectly authored the information--without 
such transmission constituting a furnishing of information in 
violation of Sec. 760.2 (c), (d), and (e) of this part. Throughout 
this interpretation, ``transmission'' is defined as the passing on 
by one person of information initially authored by another. The 
Department believes that there is no distinction in the EAR between 
transmitting (as defined above) and furnishing prohibited 
information under the EAR and that the transmission of prohibited 
information with the requisite boycott intent is a furnishing of 
information violative of the EAR. At the same time, however, the 
circumstances relating to the transmitting party's involvement will 
be carefully considered in determining whether that party intended 
to comply with, further, or support an unsanctioned foreign boycott.
    The EAR does not deal specifically with the relationship between 
transmitting and furnishing. However, the restrictions in the EAR on 
responses to boycott-related conditions, both by direct and indirect 
actions and whether by primary parties or intermediaries, indicate 
that U.S. persons who simply transmit prohibited information are to 
be treated the same under the EAR as those who both author and 
furnish prohibited information. This has been the Department's 
position in enforcement actions it has brought.
    The few references in the EAR to the transmission of information 
by third parties are consistent with this position. Two examples, 
both relating to the prohibition against the furnishing of 
information about U.S. persons' race, religion, sex, or national 
origin (Sec. 760.2(c) of this part), deal explicitly with 
transmitting information. These examples (Sec. 760.2(c) of this 
part, example (v), and Sec. 760.3(f) of this part, example (vi)) 
show that, in certain cases, when furnishing certain information is 
permissible, either because it is not within a prohibition or is 
excepted from a prohibition, transmitting it is also permissible. 
These examples concern information that may be furnished by 
individuals about themselves or their families. The examples show 
that employers may transmit to a boycotting country visa 
applications or forms containing information about an employee's 
race, religion, sex, or national origin if that employee is the 
source of the information and authorizes its transmission. In other 
words, within the limits of ministerial action set forth in these 
examples, employees' actions in transmitting information are 
protected by the exception available to the employee. The 
distinction between permissible and prohibited behavior rests not on 
the definitional distinction between furnishing and transmitting, 
but on the excepted nature of the information furnished by the 
employee. The information originating from the employee does not 
lose its excepted character because it is transmitted by the 
employer.
    The Department's position regarding the furnishing and 
transmission of certificates of one's own blacklist status rests on 
a similar basis and does not support the contention that third 
parties may transmit prohibited information authored by another. 
Such self-certifications do not violate any prohibitions in the EAR 
(see Supplement Nos. 1(I)(B), 2, and 5(A)(2); Sec. 760.2(f), example 
(xiv)). It is the Department's position that it is not prohibited 
for U.S. persons to transmit such self-certifications completed by 
others. Once again, because furnishing the self-certification is not 
prohibited, third parties who transmit the self-certifications 
offend no prohibition. On the other hand, if a third party authored 
information about another's blacklist status, the act of 
transmitting that information would be prohibited.
    A third example in the EAR (Sec. 760.5, example (xiv) of this 
part), which also concerns a permissible transmission of

[[Page 12900]]
boycott-related information, does not support the theory that one may 
transmit prohibited information authored by another. This example deals 
with the reporting requirements in Sec. 760.5 of this part--not the 
prohibitions--and merely illustrates that a person who receives and 
transmits a self-certification has not received a reportable request.
    It is also the Department's position that a U.S. person violates 
the prohibitions against furnishing information by transmitting 
prohibited information even if that person has received no 
reportable request in the transaction. For example, where documents 
accompanying a letter of credit contain prohibited information, a 
negotiating bank that transmits the documents, with the requisite 
boycott intent, to an issuing bank has not received a reportable 
request, but has furnished prohibited information.
    While the Department does not regard the suggested distinction 
between transmitting and furnishing information as meaningful, the 
facts relating to the third party's involvement may be important in 
determining whether that party furnished information with the 
required intent to comply with, further, or support an unsanctioned 
foreign boycott. For example, if it is a standard business practice 
for one participant in a transaction to obtain and pass on, without 
examination, documents prepared by another party, it might be 
difficult to maintain that the first participant intended to comply 
with a boycott by passing on information contained in the unexamined 
documents. Resolution of such intent questions, however, depends 
upon an analysis of the individual facts and circumstances of the 
transaction and the Department will continue to engage in such 
analysis on a case-by-case basis.
    This interpretation, like all others issued by the Department 
discussing applications of the antiboycott provisions of the EAR, 
should be read narrowly. Circumstances that differ in any material 
way from those discussed in this interpretation will be considered 
under the applicable provisions of the Regulations.

Supplement No. 16 to Part 760--Interpretation

    Pursuant to Articles 5, 7, and 26 of the Treaty of Peace between 
the State of Israel and the Hashemite Kingdom of Jordan and 
implementing legislation enacted by Jordan, Jordan's participation 
in the Arab economic boycott of Israel was formally terminated on 
August 16, 1995.
    On the basis of this action, it is the Department's position 
that certain requests for information, action or agreement from 
Jordan which were considered boycott-related by implication now 
cannot be presumed boycott-related and thus would not be prohibited 
or reportable under the regulations. For example, a request that an 
exporter certify that the vessel on which it is shipping its goods 
is eligible to enter Hashemite Kingdom of Jordan ports has been 
considered a boycott-related request that the exporter could not 
comply with because Jordan has had a boycott in force against 
Israel. Such a request from Jordan after August 16, 1995 would not 
be presumed boycott-related because the underlying boycott 
requirement/basis for the certification has been eliminated. 
Similarly, a U.S. company would not be prohibited from complying 
with a request received from Jordanian government officials to 
furnish the place of birth of employees the company is seeking to 
take to Jordan because there is no underlying boycott law or policy 
that would give rise to a presumption that the request was boycott-
related.
    U.S. persons are reminded that requests that are on their face 
boycott-related or that are for action obviously in furtherance or 
support of an unsanctioned foreign boycott are subject to the 
regulations, irrespective of the country of origin. For example, 
requests containing references to ``blacklisted companies'', 
``Israel boycott list'', ``non-Israeli goods'' or other phrases or 
words indicating boycott purpose would be subject to the appropriate 
provisions of the Department's antiboycott regulations.

PART 762--RECORDKEEPING

Sec.
762.1  Scope.
762.2  Records to be retained.
762.3  Records exempt from recordkeeping requirements.
762.4  Original records required.
762.5  Reproduction of original records.
762.6  Period of retention.
762.7  Producing and inspecting records.

    Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 
E.O. 12924, 3 CFR, 1994 Comp., p. 917; Notice of August 15, 1995 (60 
FR 42767, August 17, 1995).


Sec. 762.1  Scope.

    In this part, references to the EAR are references to 15 CFR 
chapter VII, subchapter C.
    (a) Transactions subject to this part. The recordkeeping provisions 
of this part apply to the following transactions:
    (1) Transactions involving restrictive trade practices or boycotts 
described in part 760 of the EAR;
    (2) Exports of commodities, software, or technology from the United 
States and any known reexports, transshipment, or diversions of items 
exported from the United States;
    (3) Exports to Canada, if, at any stage in the transaction, it 
appears that a person in a country other than the United States or 
Canada has an interest therein, or that the item involved is to be 
reexported, transshipped, or diverted from Canada to another foreign 
country; or
    (4) Any other transactions subject to the EAR, including, but not 
limited to, the prohibitions against servicing, forwarding and other 
actions for or on behalf of end-users of proliferation concern 
contained in Secs. 734.2(b)(7) and 744.6 of the EAR. This part also 
applies to all negotiations connected with those transactions, except 
that for export control matters a mere preliminary inquiry or offer to 
do business and negative response thereto shall not constitute 
negotiations, unless the inquiry or offer to do business proposes a 
transaction that a reasonably prudent exporter would believe likely to 
lead to a violation of the EAA, the EAR or any order, license or 
authorization issued thereunder.
    (b) Persons subject to this part. Any person subject to the 
jurisdiction of the United States who, as principal or agent (including 
a forwarding agent), participates in any transaction described in 
paragraph (a) of this section, and any person in the United States or 
abroad who is required to make and maintain records under any provision 
of the EAR, shall keep and maintain all records described in Sec. 762.2 
of this part that are made or obtained by that person and shall produce 
them in a manner provided by Sec. 762.6 of this part.


Sec. 762.2  Records to be retained.

    (a) Records required to be retained. The records required to be 
retained under this part 762 include the following:
    (1) Export control documents, as defined in part 772 of the EAR;
    (2) Memoranda;
    (3) Notes;
    (4) Correspondence;
    (5) Contracts;
    (6) Invitations to bid;
    (7) Books of account;
    (8) Financial records;
    (9) Restrictive trade practice or boycott documents and reports, 
and
    (10) Other records pertaining to the types of transactions 
described in Sec. 762.1(a) of this part, which are made or obtained by 
a person described in Sec. 762.1(b) of this part.
    (b) Records retention references. Paragraph (a) of this section 
describes records that are required to be retained. Other parts, 
sections, or supplements of the EAR which require the retention of 
records or contain recordkeeping provisions, include, but are not 
limited to the following:
    (1) Part 736, General Prohibitions;
    (2) Sec. 732.6, Steps for other requirements;
    (3) Sec. 740.1, Introduction (to License Exceptions);
    (4) Sec. 742.12(a)(3), High Performance Computers;
    (5) Supplement No. 3 to part 742 High Performance Computers, 
Safeguards and Related Information;
    (6) Sec. 740.7, Humanitarian donations (NEED);
    (7) Sec. 748.4(a), Disclosure and substantiation of facts on 
license applications;

[[Page 12901]]

    (8) Sec. 748.6, General instructions for license applications;
    (9) Sec. 748.9, Support documents for license applications;
    (10) Sec. 748.10, Import and End-user Certificates;
    (11) Sec. 748.11, Statement by Ultimate Consignee and Purchaser;
    (12) Sec. 748.13, Delivery Verification (DV);
    (13) Sec. 748.2(c), Obtaining forms; mailing addresses;
    (14) Sec. 750.7, Issuance of license;
    (15) Sec. 750.8, Revocation or suspension of license;
    (16) Sec. 750.9, Duplicate licenses;
    (17) Sec. 750.10, Transfer of licenses for export;
    (18) Sec. 752.7, Direct shipment to customers;
    (19) Sec. 752.9, Action on SCL applications;
    (20) Sec. 752.10, Changes to the SCL;
    (21) Sec. 752.11, Internal Control Programs;
    (22) Sec. 752.12, Recordkeeping requirements;
    (23) Sec. 752.13, Inspection of records;
    (24) Sec. 752.14, System reviews;
    (25) Sec. 752.15, Export clearance;
    (26) Sec. 754.4, Unprocessed western red cedar;
    (27) Sec. 758.1(b)(3), Record and proof of agent's authority;
    (28) Sec. 758.3, Shipper's Export Declaration;
    (29) Sec. 758.6, Destination control statements;
    (30) Sec. 760.6, Restrictive Trade Practices and Boycotts;
    (31) Sec. 762.2, Records to be retained;
    (32) Sec. 764.2, Violations;
    (33) Sec. 764.5, Voluntary self-disclosure; and
    (34) Sec. 766.10, Subpoenas.


Sec. 762.3  Records exempt from recordkeeping requirements.

    (a) The following types of records have been determined to be 
exempt from the recordkeeping requirement procedures:
    (1) Export information page;
    (2) Special export file list;
    (3) Vessel log from freight forwarder;
    (4) Inspection certificate;
    (5) Warranty certificate;
    (6) Guarantee certificate;
    (7) Parking material certificate;
    (8) Goods quality certificate;
    (9) Notification to customer of advance meeting;
    (10) Letter of indemnity;
    (11) Financial release form;
    (12) Financial hold form;
    (13) Export parts shipping problem form;
    (14) Draft number log;
    (15) Expense invoice mailing log;
    (16) Financial status report;
    (17) Bank release of guarantees;
    (18) Cash sheet;
    (19) Commission payment back-up;
    (20) Commissions payable worksheet;
    (21) Commissions payable control;
    (22) Check request forms;
    (23) Accounts receivable correction form;
    (24) Check request register;
    (25) Commission payment printout;
    (26) Engineering fees invoice;
    (27) Foreign tax receipt;
    (28) Individual customer credit status;
    (29) Request for export customers code forms;
    (30) Acknowledgement for receipt of funds;
    (31) Escalation development form;
    (32) Summary quote;
    (33) Purchase order review form;
    (34) Proposal extensions;
    (35) Financial proposal to export customers;
and
    (36) Sales summaries.
    (b) [Reserved]


Sec. 762.4   Original records required.

    The regulated person must maintain the original records in the form 
in which that person receives or creates them unless that person meets 
all of the conditions of Sec. 762.5 of this part relating to 
reproduction of records. If the original record does not meet the 
standards of legibility and readability described in Sec. 762.5 of this 
part and the regulated person intends to rely on that record to meet 
the recordkeeping requirements of the EAR, that person must retain the 
original record.


Sec. 762.5   Reproduction of original records.

    (a) The regulated person may maintain reproductions instead of the 
original records provided all of the requirements of paragraph (b) of 
this section are met.
    (b) In order to maintain the records required by Sec. 762.2 of this 
part, the regulated persons defined in Sec. 762.1 of this part may use 
any photographic, photostatic, miniature photographic, micrographic, 
automated archival storage, or other process that completely, 
accurately, legibly and durably reproduces the original records 
(whether on paper, microfilm, or through electronic digital storage 
techniques). The process must meet all of the following requirements, 
which are applicable to all systems:
    (1) The system must be capable of reproducing all records on paper.
    (2) The system must record and be able to reproduce all marks, 
information, and other characteristics of the original record, 
including both obverse and reverse sides of paper documents in legible 
form.
    (3) When displayed on a viewer, monitor, or reproduced on paper, 
the records must exhibit a high degree of legibility and readability. 
(For purposes of this section, legible and legibility mean the quality 
of a letter or numeral that enable the observer to identify it 
positively and quickly to the exclusion of all other letters or 
numerals. Readable and readability mean the quality of a group of 
letters or numerals being recognized as complete words or numbers.)
    (4) The system must preserve the initial image (including both 
obverse and reverse sides of paper documents) and record all changes, 
who made them and when they were made. This information must be stored 
in such a manner that none of it may be altered once it is initially 
recorded.
    (5) The regulated person must establish written procedures to 
identify the individuals who are responsible for the operation, use and 
maintenance of the system.
    (6) The regulated person must establish written procedures for 
inspection and quality assurance of records in the system and document 
the implementation of those procedures.
    (7) The system must be complete and contain all records required to 
be kept by this part or the regulated person must provide a method for 
correlating, identifying and locating records relating to the same 
transaction(s) that are kept in other record keeping systems.
    (8) The regulated person must keep a record of where, when, by 
whom, and on what equipment the records and other information were 
entered into the system.
    (9) Upon request by the Office of Export Enforcement, the Office of 
Antiboycott Compliance, or any other agency of competent jurisdiction, 
the regulated person must furnish, at the examination site, the 
records, the equipment and, if necessary, knowledgeable personnel for 
locating, reading, and reproducing any record in the system.
    (c) Requirements applicable to systems based on the storage of 
digital images. For systems based on the storage of digital images, the 
system must provide accessibility to any digital image in the system. 
With respect to records of transactions, including those involving 
restrictive trade practices or boycott requirements or requests. The 
system must be able to locate and reproduce all records relating to a 
particular transaction based on any one of the following criteria:

[[Page 12902]]

    (1) The name(s) of the parties to the transaction;
    (2) Any country(ies) connected with the transaction; or
    (3) A document reference number that was on any original document.
    (d) Requirements applicable to a system based on photographic 
processes. For systems based on photographic, photostatic, or miniature 
photographic processes, the regulated person must maintain a detailed 
index of all records in the system that is arranged in such a manner as 
to allow immediate location of any particular record in the system.


Sec. 762.6  Period of retention.

    (a) Five year retention period. All records required to be kept by 
the EAR must be retained for five years from the latest of the 
following times:
    (1) The export from the United States of the item involved in the 
transaction to which the records pertain or the provision of financing, 
transporting or other service for or on behalf of end-users of 
proliferation concern as described in Secs. 736.2(b)(7) and 744.6 of 
the EAR;
    (2) Any known reexport, transshipment, or diversion of such item;
    (3) Any other termination of the transaction, whether formally in 
writing or by any other means; or
    (4) In the case of records of pertaining to transactions involving 
restrictive trade practices or boycotts described in part 760 of the 
EAR, the date the regulated person receives the boycott-related request 
or requirement.
    (b) Destruction or disposal of records. If the Bureau of Export 
Administration or any other government agency makes a formal or 
informal request for a certain record or records, such record or 
records may not be destroyed or disposed of without the written 
authorization of the agency concerned. This prohibition applies to 
records pertaining to voluntary disclosures made to BXA in accordance 
with Sec. 765.5(c)(4)(ii) and other records even if such records have 
been retained for a period of time exceeding that required by paragraph 
(a) of this section.


Sec. 762.7  Producing and inspecting records.

    (a) Persons located in the United States. Persons located in the 
United States may be asked to produce records that are required to be 
kept by any provision of the EAR, or any license, order, or 
authorization issued thereunder and to make them available for 
inspection and copying by any authorized agent, official, or employee 
of the Bureau of Export Administration, the U.S. Customs Service, or 
any other agency of the U.S. Government, without any charge or expense 
to such agent, official, or employee. The Office of Export Enforcement 
and the Office of Antiboycott Compliance encourage voluntary 
cooperation with such requests. When voluntary cooperation is not 
forthcoming, the Office of Export Enforcement and the Office of 
Antiboycott Compliance are authorized to issue subpoenas for books, 
records, and other writings. In instances where a person does not 
comply with a subpoena, the Department of Commerce may petition a 
district court to have a subpoena enforced.
    (b) Persons located outside of the United States. Persons located 
outside of the United States that are required to keep records by any 
provision of the EAR or by any license, order, or authorization issued 
thereunder shall produce all records or reproductions of records 
required to be kept, and make them available for inspection and copying 
upon request by an authorized agent, official, or employee of the 
Bureau of Export Administration, the U.S. Customs Service, or a Foreign 
Service post, or by any other accredited representative of the U.S. 
Government, without any charge or expense to such agent, official or 
employee.

PART 764--ENFORCEMENT AND PROTECTIVE MEASURES

Sec.
764.1  Introduction.
764.2  Violations.
764.3  Sanctions.
764.4  Reporting of violations.
764.5  Voluntary self-disclosure.
764.6  Protective administrative measures.

Supplement No. 1 to Part 764--Standard Terms of Orders Denying Export 
Privileges

Supplement No. 2 to Part 764--Denied Persons List

    Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 
E.O. 12924, 3 CFR, 1994 Comp., p. 917; Notice of August 15, 1995 (60 
FR 42767, August 17, 1995).


Sec. 764.1  Introduction.

    In this part, references to the EAR are references to 15 CFR 
chapter VII, subchapter C. This part specifies conduct that constitutes 
a violation of the Export Administration Act (EAA) and/or the Export 
Administration Regulations (EAR) and the sanctions that may be imposed 
for such violations. Antiboycott violations are described in part 760 
of the EAR, and the violations and sanctions specified in part 764 also 
apply to conduct relating to part 760, unless otherwise stated. This 
part describes administrative sanctions that may be imposed by the 
Bureau of Export Administration (BXA). This part also describes 
criminal sanctions that may be imposed by a United States court and 
other sanctions that are neither administrative nor criminal. 
Information is provided on how to report and disclose violations. 
Finally, this part identifies protective administrative measures that 
BXA may take in the exercise of its regulatory authority.


Sec. 764.2  Violations.

    (a) Engaging in prohibited conduct. No person may engage in any 
conduct prohibited by or contrary to, or refrain from engaging in any 
conduct required by, the EAA, the EAR, or any order, license or 
authorization issued thereunder.
    (b) Causing, aiding, or abetting a violation. No person may cause 
or aid, abet, counsel, command, induce, procure, or permit the doing of 
any act prohibited, or the omission of any act required, by the EAA, 
the EAR, or any order, license or authorization issued thereunder.
    (c) Solicitation and attempt. No person may solicit or attempt a 
violation of the EAA, the EAR, or any order, license or authorization 
issued thereunder.
    (d) Conspiracy. No person may conspire or act in concert with one 
or more persons in any manner or for any purpose to bring about or to 
do any act that constitutes a violation of the EAA, the EAR, or any 
order, license or authorization issued thereunder.
    (e) Acting with knowledge of a violation. No person may order, buy, 
remove, conceal, store, use, sell, loan, dispose of, transfer, 
transport, finance, forward, or otherwise service, in whole or in part, 
any item exported or to be exported from the United States, or that is 
otherwise subject to the EAR, with knowledge that a violation of the 
EAA, the EAR, or any order, license or authorization issued thereunder, 
has occurred, is about to occur, or is intended to occur in connection 
with the item.
    (f) Possession with intent to export illegally. No person may 
possess any item controlled for national security or foreign policy 
reasons under sections 5 or 6 of the EAA:
    (1) With intent to export such item in violation of the EAA, the 
EAR, or any order, license or authorization issued thereunder; or
    (2) With knowledge or reason to believe that the item would be so 
exported.
    (g) Misrepresentation and concealment of facts. (1) No person may 
make any false or misleading representation, statement, or

[[Page 12903]]
certification, or falsify or conceal any material fact, either directly 
to BXA, the United States Customs Service, or an official of any other 
United States agency, or indirectly through any other person:
    (i) In the course of an investigation or other action subject to 
the EAR; or
    (ii) In connection with the preparation, submission, issuance, use, 
or maintenance of any export control document or restrictive trade 
practice or boycott request report, as defined in Sec. 760.6 of the 
EAR; or
    (iii) For the purpose of or in connection with effecting an export, 
reexport or other activity subject to the EAR.
    (2) All representations, statements, and certifications made by any 
person are deemed to be continuing in effect. Every person who has made 
any representation, statement, or certification must notify BXA and any 
other relevant agency, in writing, of any change of any material fact 
or intention from that previously represented, stated, or certified, 
immediately upon receipt of any information that would lead a 
reasonably prudent person to know that a change of material fact or 
intention has occurred or may occur in the future.
    (h) Evasion. No person may engage in any transaction or take any 
other action with intent to evade the provisions of the EAA, the EAR, 
or any order, license or authorization issued thereunder.
    (i) Failure to comply with reporting, recordkeeping requirements. 
No person may fail or refuse to comply with any reporting or 
recordkeeping requirement of the EAR or of any order, license or 
authorization issued thereunder.
    (j) License alteration. Except as specifically authorized in the 
EAR or in writing by BXA, no person may alter any license, 
authorization, export control document, or order issued under the EAR.
    (k) Acting contrary to the terms of a denial order. No person may 
take any action that is prohibited by a denial order. See 
Sec. 764.3(a)(2) of this part.


Sec. 764.3  Sanctions.

    (a) Administrative.\1\ Violations of the EAA, the EAR, or any 
order, license or authorization issued thereunder are subject to the 
administrative sanctions described in this section and to any other 
liability, sanction, or penalty available under law. The protective 
administrative measures that are described in Sec. 764.6 of this part 
are distinct from administrative sanctions.

    \1\ In the event that any part of the EAR is not under the 
authority of the EAA, sanctions shall be limited to those provided 
for by such other authority, but the provisions of this part and of 
part 766 of the EAR shall apply insofar as not inconsistent with 
that other authority.
---------------------------------------------------------------------------

    (1) Civil penalty. (i) A civil penalty not to exceed $10,000 may be 
imposed for each violation, except that a civil penalty not to exceed 
$100,000 may be imposed for each violation involving national security 
controls imposed under section 5 of the EAA.
    (ii) The payment of any civil penalty may be made a condition, for 
a period not exceeding one year after the imposition of such penalty, 
to the granting, restoration, or continuing validity of any export 
license, License Exception, permission, or privilege granted or to be 
granted to the person upon whom such penalty is imposed.
    (iii) The payment of any civil penalty may be deferred or suspended 
in whole or in part during any probation period that may be imposed. 
Such deferral or suspension shall not bar the collection of the penalty 
if the conditions of the deferral, suspension, or probation are not 
fulfilled.
    (2) Denial of export privileges. An order may be issued that 
restricts the ability of the named persons to engage in export and 
reexport transactions involving items subject to the EAR, or that 
restricts access by named persons to items subject to the EAR. An order 
denying export privileges may be imposed either as a sanction for a 
violation specified in this part or as a protective administrative 
measure described in Sec. 764.6(c) or (d) of this part. An order 
denying export privileges may suspend or revoke any or all outstanding 
licenses issued under the EAR to a person named in the denial order or 
in which such person has an interest, may deny or restrict exports and 
reexports by or to such person of any item subject to the EAR, and may 
restrict dealings in which that person may benefit from any export or 
reexport of such items. The standard terms of a denial order are set 
forth in Supplement No. 1 to this part. A non-standard denial order, 
narrower in scope, may be issued. Authorization to engage in actions 
otherwise prohibited by a denial order may be given by the Office of 
Exporter Services, in consultation with the Office of Export 
Enforcement, following application by a person named in the denial 
order or by a person seeking permission to deal with a named person.
    (3) Exclusion from practice. Any person acting as an attorney, 
accountant, consultant, freight forwarder, or in any other 
representative capacity for any license application or other matter 
before BXA may be excluded by order from any or all such activities 
before BXA.
    (b) Criminal.\2\ (1) General. Except as provided in paragraph 
(b)(2) of this section, whoever knowingly violates or conspires to or 
attempts to violate the EAA, the EAR, or any order or license issued 
thereunder, shall be fined not more than five times the value of the 
exports involved or $50,000, whichever is greater, or imprisoned not 
more than five years, or both.

    \2\ In the event that any part of the EAR is not under the 
authority of the EAA, sanctions shall be limited to those provided 
for by such other authority or by 18 U.S.C. 3571, a criminal code 
provision that establishes a maximum criminal fine for a felony that 
is the greater of the amount provided by the statute that was 
violated, or an amount not more than $500,000 for an organization. 
The Federal Sentencing Guidelines found in Sec. 2M5.1 of Appendix 4 
to Title 18 of the United States Code apply, to the extent followed 
by the court, to sentencing for convictions for violating the EAA.
---------------------------------------------------------------------------

    (2) Willful violations. (i) Whoever willfully violates or conspires 
to or attempts to violate any provision of the EAA, the EAR, or any 
order or license issued thereunder, with knowledge that the exports 
involved will be used for the benefit of, or that the destination or 
intended destination of the items involved is, any controlled country 
or any country to which exports are controlled for foreign policy 
purposes, except in the case of an individual, shall be fined not more 
than five times the value of the export involved or $1,000,000, 
whichever is greater; and, in the case of an individual, shall be fined 
not more than $250,000, or imprisoned not more than 10 years, or both.
    (ii) Any person who is issued a license under the EAA or the EAR 
for the export of any items to a controlled country and who, with 
knowledge that such export is being used by such controlled country for 
military or intelligence gathering purposes contrary to the conditions 
under which the license was issued, willfully fails to report such use 
to the Secretary of Defense, except in the case of an individual, shall 
be fined not more than five times the value of the exports involved or 
$1,000,000, whichever is greater; and, in the case of an individual, 
shall be fined not more than $250,000, or imprisoned not more than five 
years, or both.
    (iii) Any person who possesses any item with intent to export such 
item in violation of an export control imposed under sections 5 or 6 of 
the EAA, the EAR, or any order or license issued thereunder, or knowing 
or having reason to believe that the item would be so exported, shall, 
in the case of a violation of an export control imposed under section 5 
of the EAA (or the EAR, or any order or license issued

[[Page 12904]]
thereunder with respect to such control), be subject to the penalties 
set forth in paragraph (b)(2)(i) of this section and shall, in the case 
of a violation of an export control imposed under section 6 of the EAA 
(or the EAR, or any order or license issued thereunder with respect to 
such control), be subject to the penalties set forth in paragraph 
(b)(1) of this section.
    (iv) Any person who takes any action with intent to evade the 
provisions of the EAA, the EAR, or any order or license issued 
thereunder, shall be subject to the penalties set forth in paragraph 
(b)(1) of this section, except that in the case of an evasion of an 
export control imposed under sections 5 or 6 of the EAA (or the EAR, or 
any order or license issued thereunder with respect to such control), 
such person shall be subject to the penalties set forth in paragraph 
(b)(2)(i) of this section.
    (3) Other criminal sanctions. Conduct that constitutes a violation 
of the EAA, the EAR, or any order, license or authorization issued 
thereunder, or that occurs in connection with such a violation, may 
also be prosecuted under other provisions of law, including 18 U.S.C. 
371 (conspiracy), 18 U.S.C. 1001 (false statements), 18 U.S.C. 1341, 
1343, and 1346 (mail and wire fraud), and 18 U.S.C. 1956 and 1957 
(money laundering).
    (c) Other sanctions. Conduct that violates the EAA, the EAR, or any 
order, license or authorization issued thereunder, and other conduct 
specified in the EAA may be subject to sanctions or other measures in 
addition to criminal and administrative sanctions under the EAA or EAR. 
These include, but are not limited to, the following:
    (1) Statutory sanctions. Statutorily-mandated sanctions may be 
imposed on account of specified conduct related to weapons 
proliferation. Such statutory sanctions are not civil or criminal 
penalties, but restrict imports and procurement (See section 11A of the 
EAA, Multilateral Export Control Violations, and section 11C of the 
EAA, Chemical and Biological Weapons Proliferation), or restrict export 
licenses (See section 11B of the EAA, Missile Proliferation Violations, 
and the Iran-Iraq Arms Non-Proliferation Act of 1992).
    (2) Other sanctions and measures. (i) Seizure and forfeiture. Items 
that have been, are being, or are intended to be, exported or shipped 
from or taken out of the United States in violation of the EAA, the 
EAR, or any order, license or authorization issued thereunder, are 
subject to being seized and detained as are the vessels, vehicles, and 
aircraft carrying such items. Seized items are subject to forfeiture. 
(50 U.S.C. app. 2411(g); 22 U.S.C. 401.)
    (ii) Cross-debarment. (A) The Department of State may deny licenses 
or approvals for the export or reexport of defense articles and defense 
services controlled under the Arms Export Control Act to persons 
indicted or convicted of specified criminal offenses, including 
violations of the EAA, or to persons denied export privileges by BXA or 
another agency. (22 CFR 126.7(a) and 127.11(a).)
    (B) The Department of Defense, among other agencies, may suspend 
the right of any person to contract with the United States Government 
based on export control violations. (Federal Acquisition Regulations 
9.407-2.)


Sec. 764.4  Reporting of violations.

    (a) Where to report. If a person learns that an export control 
violation of the EAR has occurred or may occur, that person may notify:

Office of Export Enforcement, Bureau of Export Administration,U.S. 
Department of Commerce, 14th Street and Constitution Avenue, N.W., Room 
H-4520, Washington, D.C. 20230, Tel: (202) 482-1208, Facsimile: (202) 
482-0964

or, for violations of part 760 of the EAR:

Office of Antiboycott Compliance, Bureau of Export Administration, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, N.W., Room 
H-6099C, Washington, D.C. 20230, Tel: (202) 482-2381, Facsimile: (202) 
482-0913.
    (b) Failure to report violations. Failure to report potential 
violations may result in the unwarranted issuance of licenses or 
exports without the required licenses to the detriment of the interests 
of the United States.
    (c) Reporting requirement distinguished. The reporting provisions 
in paragraph (a) of this section are not ``reporting requirements'' 
within the meaning of Sec. 764.2(i) of this part.


Sec. 764.5  Voluntary self-disclosure.

    (a) General policy. BXA strongly encourages disclosure to OEE if 
you believe that you may have violated the EAR, or any order, license 
or authorization issued thereunder. Voluntary self-disclosure is a 
mitigating factor in determining what administrative sanctions, if any, 
will be sought by OEE.
    (b) Limitations.
    (1) The provisions of this section do not apply to disclosures of 
violations relating to part 760 of the EAR.
    (2) The provisions of this section apply only when information is 
provided to OEE for its review in determining whether to take 
administrative action under part 766 of the EAR for violations of the 
export control provisions of the EAR.
    (3) The provisions of this section apply only when information is 
received by OEE for review prior to the time that OEE, or any other 
agency of the United States Government, has learned the same or 
substantially similar information from another source and has commenced 
an investigation or inquiry in connection with that information.
    (4) While voluntary self-disclosure is a mitigating factor in 
determining what administrative sanctions, if any, will be sought by 
OEE, it is a factor that is considered together with all other factors 
in a case. The weight given to voluntary self-disclosure is solely 
within the discretion of OEE, and the mitigating effect of voluntary 
self-disclosure may be outweighed by aggravating factors. Voluntary 
self-disclosure does not prevent transactions from being referred to 
the Department of Justice for criminal prosecution. In such a case, OEE 
would notify the Department of Justice of the voluntary self-
disclosure, but the consideration of that factor is within the 
discretion of the Department of Justice.
    (5) A firm will not be deemed to have made a disclosure under this 
section unless the individual making the disclosure did so with the 
full knowledge and authorization of the firm's senior management.
    (6) The provisions of this section do not, nor should they be 
relied on to, create, confer, or grant any rights, benefits, 
privileges, or protection enforceable at law or in equity by any 
person, business, or entity in any civil, criminal, administrative, or 
other matter.
    (c) Information to be provided.
    (1) General. Any person wanting to disclose information that 
constitutes a voluntary self-disclosure should, in the manner outlined 
below, initially notify OEE as soon as possible after violations are 
discovered, and then conduct a thorough review of all export-related 
transactions where violations are suspected.
    (2) Initial notification. 
    (i) The initial notification should be in writing and be sent to 
one of the addresses in Sec. 764.5(c)(7) of this part. The notification 
should include the name of the person making the disclosure and a brief 
description of the suspected violations. The notification should 
describe the general nature and extent of the violations. If the person 
making the disclosure subsequently

[[Page 12905]]
completes the narrative account required by Sec. 764.5(c)(3) of this 
part, the disclosure will be deemed to have been made on the date of 
the initial notification for purposes of Sec. 764.5(b)(3) of this part.
    (ii) OEE recognizes that there may be situations where it will not 
be practical to make an initial notification in writing. For example, 
written notification may not be practical if a shipment leaves the 
United States without the required license, yet there is still an 
opportunity to prevent acquisition of the items by unauthorized 
persons. In such situations, OEE should be contacted promptly at one of 
the offices listed in Sec. 764.5(c)(7) of this part.
    (3) Narrative account. After the initial notification, a thorough 
review should be conducted of all export-related transactions where 
possible violations are suspected. OEE recommends that the review cover 
a period of five years prior to the date of the initial notification. 
If your review goes back less than five years, you risk failing to 
discover violations that may later become the subject of an 
investigation. Any violations not voluntarily disclosed do not receive 
consideration under this section. However, the failure to make such 
disclosures will not be treated as a separate violation unless some 
other section of the EAR or other provision of law requires disclosure. 
Upon completion of the review, OEE should be furnished with a narrative 
account that sufficiently describes the suspected violations so that 
their nature and gravity can be assessed. The narrative account should 
also describe the nature of the review conducted and measures that may 
have been taken to minimize the likelihood that violations will occur 
in the future. The narrative account should include:
    (i) The kind of violation involved, for example, a shipment without 
the required license or dealing with a party denied export privileges;
    (ii) An explanation of when and how the violations occurred;
    (iii) The complete identities and addresses of all individuals and 
organizations, whether foreign or domestic, involved in the activities 
giving rise to the violations;
    (iv) License numbers;
    (v) The description, quantity, value in U.S. dollars and ECCN or 
other classification of the items involved; and
    (vi) A description of any mitigating circumstances.
    (4) Supporting documentation.
    (i) The narrative account should be accompanied by copies of 
documents that explain and support it, including:
    (A) Licensing documents such as licenses, license applications, 
import certificates and end-user statements;
    (B) Shipping documents such as Shipper's Export Declarations, air 
waybills and bills of lading; and
    (C) Other documents such as letters, facsimiles, telexes and other 
evidence of written or oral communications, internal memoranda, 
purchase orders, invoices, letters of credit and brochures.
    (ii) Any relevant documents not attached to the narrative account 
must be retained by the person making the disclosure until OEE requests 
them, or until a final decision on the disclosed information has been 
made. After a final decision, the documents should be handled in 
accordance with the recordkeeping rules in part 762 of the EAR.
    (5) Certification. A certification must be submitted stating that 
all of the representations made in connection with the voluntary self-
disclosure are true and correct to the best of that person's knowledge 
and belief. Certifications made by a corporation or other organization 
should be signed by an official of the corporation or other 
organization with the authority to do so. Section 764.2(g) of this 
part, relating to false or misleading representations, applies in 
connection with the disclosure of information under this section.
    (6) Oral presentations. OEE believes that oral presentations are 
generally not necessary to augment the written narrative account and 
supporting documentation. If the person making the disclosure believes 
otherwise, a request for a meeting should be included with the 
disclosure.
    (7) Where to make voluntary self-disclosures. The information 
constituting a voluntary self-disclosure or any other correspondence 
pertaining to a voluntary self-disclosure may be submitted to:

Office of Export Enforcement, Director, Intelligence Division, U.S. 
Department of Commerce, P.O. Box 70, Washington, D.C. 20044
Office of Export Enforcement, Director, Intelligence Division, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, N.W., Room 
H-4520,Washington, D.C. 20230, Tel: (202) 482-1208, Facsimile: (202) 
482-0964,

or to any of the following field offices:

Special Agent in Charge, Boston Field Office, Office of Export 
Enforcement, New Boston Federal Building, 10 Causeway Street, Room 350, 
Boston, Massachusetts 02222, Tel: (617) 565-6030, Facsimile: (617) 835-
6039
Special Agent in Charge, Chicago Field Office, Office of Export 
Enforcement, 2400 East Devon, Suite 300, Des Plaines, Illinois 60018, 
Tel: (312) 353-6640, Facsimile: (312) 353-8008
Special Agent in Charge, Dallas Field Office, Office of Export 
Enforcement, 525 Griffin Street, Room 622, Dallas, Texas 75202, Tel: 
(214) 767-9294, Facsimile: (214) 729-9299
Special Agent in Charge, Los Angeles Field Office, Office of Export 
Enforcement, 2601 Main Street, Suite 310, Irvine, California 92714-
6299, Tel: (714) 251-9001, Facsimile: (714) 791-9103
Special Agent in Charge, Miami Field Office, Office of Export 
Enforcement, 200 East Las Olas Boulevard, Suite 1260, Fort Lauderdale, 
Florida 33301, Tel: (954) 356-7540, Facsimile: (954) 356-7549
Special Agent in Charge, New York Field Office, Office of Export 
Enforcement, Teleport II, 2 Teleport Drive, Staten Island, New York 
10311-1001, Tel: (718) 370-0070, Facsimile: (718) 370-8226
Special Agent in Charge, San Jose Field Office, Office of Export 
Enforcement, 96 North 3rd Street, Suite 250, San Jose, California 
95112-5572, Tel: (408) 291-4204, Facsimile: (408) 291-4320
Special Agent in Charge, Washington, D.C. Field Office, Office of 
Export Enforcement, 8001 Forbes Place, Room 201, Springfield, Virginia 
22151-0838, Tel: (703) 487-4950, Facsimile: (703) 487-4955.

    (d) Action by the Office of Export Enforcement. After OEE has been 
provided with the required narrative and supporting documentation, it 
will acknowledge the disclosure by letter, provide the person making 
the disclosure with a point of contact, and take whatever additional 
action, including further investigation, it deems appropriate. As 
quickly as the facts and circumstances of a given case permit, OEE may 
take any of the following actions:
    (1) Inform the person making the disclosure that, based on the 
facts disclosed, it plans to take no action;
    (2) Issue a warning letter;
    (3) Issue a proposed charging letter pursuant to Sec. 766.18 of the 
EAR and attempt to settle the matter;
    (4) Issue a charging letter pursuant to Sec. 766.3 of the EAR if a 
settlement is not reached; and/or
    (5) Refer the matter to the Department of Justice for criminal 
prosecution.
    (e) Criteria. For purposes of determining what administrative 
action to take and what sanctions, if any, to

[[Page 12906]]
seek, the fact that a voluntary self-disclosure has been made will be a 
mitigating factor. OEE will take that factor into account along with 
other mitigating and aggravating factors when determining what, if any, 
administrative sanctions should be imposed. The factors that OEE will 
consider are in its sole discretion, but may include:
    (1) The extent to which the purpose of the control is undermined by 
the transaction;
    (2) Whether the transaction would have been authorized had proper 
application been made;
    (3) The quantity and value of the items involved;
    (4) Why the violations occurred. For example, OEE may consider 
whether the violations were intentional or inadvertent; the degree to 
which the person responsible for the violation making the disclosure 
was familiar with the EAR; and whether the violator has been the 
subject of prior administrative or criminal action under the EAA or the 
EAR;
    (5) Whether, as a result of the information provided, OEE is able 
to prevent any items exported illegally from reaching unauthorized 
persons or destinations;
    (6) The degree of cooperation with the ensuing investigation;
    (7) Whether the person has instituted or improved an internal 
compliance program to reduce the likelihood of future violations.
    (f) Treatment of unlawfully exported items after voluntary self-
disclosure.
    (1) Any person taking certain actions with knowledge that a 
violation of the EAA or the EAR has occurred has violated Sec. 764.2(e) 
of this part. Any person who has made a voluntary self-disclosure knows 
that a violation may have occurred. Therefore, at the time that a 
voluntary self-disclosure is made, the person making the disclosure may 
request permission from BXA to engage in the activities described in 
Sec. 764.2(e) of this part that would otherwise be prohibited. If the 
request is granted by the Office of Exporter Services in consultation 
with OEE, future activities with respect to those items that would 
otherwise violate Sec. 764.2(e) of this part will not constitute 
violations. However, even if permission is granted, the person making 
the voluntary self-disclosure is not absolved from liability for any 
violations disclosed nor relieved of the obligation to obtain any 
required reexport authorizations.
    (2) A license to reexport items that are the subject of a voluntary 
self-disclosure, and that have been exported contrary to the provisions 
of the EAA or the EAR, may be requested from BXA in accordance with the 
provisions of part 748 of the EAR. If the applicant for reexport 
authorization knows that the items are the subject of a voluntary self-
disclosure, the request should state that a voluntary self-disclosure 
was made in connection with the export of the commodities for which 
reexport authorization is sought.


Sec. 764.6  Protective administrative measures.

    (a) License Exception limitation. As provided in Sec. 740.2(b) of 
the EAR , all License Exceptions are subject to revision, suspension, 
or revocation.
    (b) Revocation or suspension of licenses. As provided in Sec. 750.8 
of the EAR, all licenses are subject to revision, suspension, or 
revocation.
    (c) Temporary denial orders. BXA may, in accordance with 
Sec. 766.24 of the EAR, issue an order temporarily denying export 
privileges when such an order is necessary in the public interest to 
prevent the occurrence of an imminent violation.
    (d) Denial based on criminal conviction. BXA may, in accordance 
with Sec. 766.25 of the EAR, issue an order denying the export 
privileges of any person who has been convicted of an offense specified 
in Sec. 11(h) of the EAA.

Supplement No. 1 To Part 764--Standard Terms of Orders Denying Export 
Privileges

    (a) General. Orders denying export privileges may be ``standard'' 
or ``non-standard.'' This Supplement specifies terms of the standard 
order denying export privileges. All denial orders are published in the 
Federal Register. The failure by any person to comply with any denial 
order is a violation of the Export Administration Regulations (EAR). 
(See General Prohibition Four at Sec. 736.2(b)(4) of the EAR; 
Sec. 764.2(k) of this part.) All persons whose export privileges are 
denied by any form of denial order are identified on the Denied Persons 
List (Supplement No. 2 to this part), with an indication of whether an 
order is standard or non-standard denoted in the ``Terms of order'' 
column. The Denied Persons List also tells you where each denial order 
can be found in the Federal Register. Reference should be made to the 
text of the denial order, as published in the Federal Register, to 
learn the scope of any denial order, including any non-standard denial 
order.
    Denial orders issued prior to March 25, 1996, are to be construed, 
insofar as possible, as having the same scope and effect as the 
standard denial order.
    The introduction to each denial order shall be specific to that 
order, and shall include: (1) The name and address of any denied 
persons and any related persons subject to the denial order; (2) the 
basis for the denial order, such as final decision following charges of 
violation, settlement agreement, Sec. 11(h) of the EAA, or temporary 
denial order request; (3) the period of denial, the effective date of 
the order, whether and for how long any portion of the denial of export 
privileges is suspended, and any conditions of probation; and (4) 
whether any or all outstanding licenses issued under the EAR to the 
person(s) named in the denial order or in which such person(s) has an 
interest, are suspended or revoked.
    (b) Standard text.
    The standard denial order shall provide:
    ``It is therefore ordered:
    First, that [the denied person(s)] may not, directly or indirectly, 
participate in any way in any transaction involving any commodity, 
software or technology (hereinafter collectively referred to as 
``item'') exported or to be exported from the United States that is 
subject to the Export Administration Regulations (EAR), or in any other 
activity subject to the EAR, including, but not limited to:
    A. Applying for, obtaining, or using any license, License 
Exception, or export control document;
    B. Carrying on negotiations concerning, or ordering, buying, 
receiving, using, selling, delivering, storing, disposing of, 
forwarding, transporting, financing, or otherwise servicing in any way, 
any transaction involving any item exported or to be exported from the 
United States that is subject to the EAR, or in any other activity 
subject to the EAR; or
    C. Benefiting in any way from any transaction involving any item 
exported or to be exported from the United States that is subject to 
the EAR, or in any other activity subject to the EAR.
    Second, that no person may, directly or indirectly, do any of the 
following:
    A. Export or reexport to or on behalf of the denied person any item 
subject to the EAR;
    B. Take any action that facilitates the acquisition or attempted 
acquisition by a denied person of the ownership, possession, or control 
of any item subject to the EAR that has been or will be exported from 
the United States, including financing or other support activities 
related to a transaction whereby a denied person acquires or attempts 
to acquire such ownership, possession or control;
    C. Take any action to acquire from or to facilitate the acquisition 
or attempted acquisition from the denied person of

[[Page 12907]]
any item subject to the EAR that has been exported from the United 
States;
    D. Obtain from the denied person in the United States any item 
subject to the EAR with knowledge or reason to know that the item will 
be, or is intended to be, exported from the United States; or
    E. Engage in any transaction to service any item subject to the EAR 
that has been or will be exported from the United States and which is 
owned, possessed or controlled by a denied person, or service any item, 
of whatever origin, that is owned, possessed or controlled by a denied 
person if such service involves the use of any item subject to the EAR 
that has been or will be exported from the United States. For purposes 
of this paragraph, servicing means installation, maintenance, repair, 
modification or testing.
    Third, that, after notice and opportunity for comment as provided 
in Sec. 766.23 of the EAR, any person, firm, corporation, or business 
organization related to the denied person by affiliation, ownership, 
control, or position of responsibility in the conduct of trade or 
related services may also be made subject to the provisions of this 
order.
    Fourth, that this order does not prohibit any export, reexport, or 
other transaction subject to the EAR where the only items involved that 
are subject to the EAR are the foreign-produced direct product of U.S.-
origin technology.
    This order, which constitutes the final agency action in this 
matter, is effective immediately.''

Supplement No. 2 To Part 764--Denied Persons List

    (a) General.
    (1) The Denied Persons List identifies those persons denied export 
privileges by the Bureau of Export Administration (BXA) pursuant to the 
terms of an order. Part A of the Denied Persons List lists all denied 
persons in alphabetical order and provides supplementary information, 
while Part B lists all denied persons by geographic area. Part A of the 
Denied Persons List is organized into five columns, including the name 
and address of the denied person, the effective and expiration dates of 
the order, a brief description of the terms of the order, and a 
citation to the Federal Register where the terms of the order can be 
located. Reference should always be made to the text of a denial order 
when using the Denied Persons List.
    (2) Denial orders issued subsequent to March 25, 1996, shall be 
identified in part A as being standard or non-standard, and denial 
orders issued prior to March 25, 1996, shall be construed, insofar as 
possible, as having the same scope and effect as the standard denial 
order. Non-standard orders are denoted by the phrase ``non-standard'' 
in the ``Terms of order'' column in part A, standard orders are denoted 
by the word ``standard,'' and orders issued prior to March 25, 1996, 
are denoted by the same brief description entered at the time of 
issuance. Standard orders denying export privileges contain the 
standard terms set forth in Supplement No. 1 to part 764.
    (3) You are responsible for ensuring that you take no action 
involving items subject to the Export Administration Regulations (EAR) 
that is contrary to the terms of a denial order.
    (b) Related persons. Related persons who are denied export 
privileges subsequent to [the effective date of the interim EAR] shall 
appear in part A of the Denied Persons List with a note identifying the 
denied persons to whom they are related in the column entitled ``Terms 
of order.''
    (c) Publication. New and amended denial orders are published in the 
Federal Register as they are issued. This publication constitutes 
official notice to the public.
    (d) Updates and availability.
    (1) As a convenience for the public, issuance of denial orders is 
announced in Export Administration Bulletins. Part A of the Denied 
Persons List is also available electronically on two bulletin boards of 
Department of Commerce agencies, Fedworld (National Technical 
Information Service) and the Economic Bulletin Board (Economics and 
Statistics Administration).

PART 766--ADMINISTRATIVE ENFORCEMENT PROCEEDINGS

Sec.
766.1  Scope.
766.2  Definitions.
766.3  Institution of administrative enforcement proceedings.
766.4  Representation.
766.5  Filing and service of papers other than charging letter.
766.6  Answer and demand for hearing.
766.7  Default.
766.8  Summary decision.
766.9  Discovery.
766.10  Subpoenas.
766.11  Matter protected against disclosure.
766.12  Prehearing conference.
766.13  Hearings.
766.14  Interlocutory review of rulings.
766.15  Proceeding without a hearing.
766.16  Procedural stipulations; extension of time.
766.17  Decision of the administrative law judge.
766.18  Settlement.
766.19  Reopening.
766.20  Record for decision and availability of documents.
766.21  Appeals.
766.22  Review by Under Secretary.
766.23  Related persons.
766.24  Temporary denials.
766.25  Administrative action denying permission to apply for or use 
export licenses.

    Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 
E.O. 12924, 3 CFR, 1994 Comp., p. 917; Notice of August 15, 1995 (60 
FR 42767, August 17, 1995).


Sec. 766.1 Scope.

    In this part, references to the EAR are references to 15 CFR 
chapter VII, subchapter C. This part describes the procedures for 
imposing administrative sanctions for violations of the Export 
Administration Act of 1979, as amended (the EAA), the Export 
Administration Regulations (EAR), or any order, license or 
authorization issued thereunder. Parts 760 and 764 of the EAR specify 
those actions that constitute violations, and part 764 describes the 
sanctions that apply. In addition to describing the procedures for 
imposing sanctions, this part describes the procedures for imposing 
temporary denial orders to prevent imminent violations of the EAA, the 
EAR, or any order, license or authorization issued thereunder. This 
part also describes the procedures for taking the discretionary 
protective administrative action of denying the export privileges of 
persons who have been convicted of violating any of the statutes, 
including the EAA, listed in section 11(h) of the EAA. Nothing in this 
part shall be construed as applying to or limiting other administrative 
or enforcement action relating to the EAA or the EAR, including the 
exercise of any investigative authorities conferred by the EAA. This 
part does not confer any procedural rights or impose any requirements 
based on the Administrative Procedure Act for proceedings charging 
violations under the EAA, except as expressly provided for in this 
part.


Sec. 766.2  Definitions.

    As used in this part, the following definitions apply:
    Administrative law judge. The person authorized to conduct hearings 
in administrative enforcement proceedings brought under the EAA or to 
hear appeals from the imposition of temporary denial orders. The term 
``judge'' may be used for brevity when it is clear that the reference 
is to the administrative law judge.
    Assistant Secretary. The Assistant Secretary for Export 
Enforcement, Bureau of Export Administration.
    Bureau of Export Administration (BXA). Bureau of Export 
Administration, United States

[[Page 12908]]
Department of Commerce, and all of its component units, including, in 
particular for purposes of this part, the Office of Antiboycott 
Compliance, the Office of Export Enforcement, and the Office of 
Exporter Services.
    Final decision. A decision or order assessing a civil penalty, 
denial of export privileges or other sanction, or otherwise disposing 
of or dismissing a case, which is not subject to further review under 
this part, but which is subject to collection proceedings or judicial 
review in an appropriate Federal district court as authorized by law.
    Initial decision. A decision of the administrative law judge in 
proceedings involving violations relating to part 760 of the EAR, which 
is subject to appellate review by the Under Secretary for Export 
Administration, but which becomes the final decision in the absence of 
such an appeal.
    Party. BXA and any person named as a respondent under this part.
    Recommended decision. A decision of the administrative law judge in 
proceedings involving violations other than those relating to part 760 
of the EAR, which is subject to review by the Under Secretary of 
Commerce for Export Administration, who issues a written order 
affirming, modifying or vacating the recommended decision.
    Respondent. Any person named as the subject of a charging letter, 
proposed charging letter, temporary denial order, or other order 
proposed or issued under this part.
    Under Secretary. The Under Secretary for Export Administration, 
United States Department of Commerce.


Sec. 766.3  Institution of administrative enforcement proceedings.

    (a) Charging letters. The Director of the Office of Export 
Enforcement <SUP>1 (OEE) or the Director of the Office of Antiboycott 
Compliance (OAC), as appropriate, may begin administrative enforcement 
proceedings under this part by issuing a charging letter in the name of 
BXA. The charging letter shall constitute the formal complaint and will 
state that there is reason to believe that a violation of the EAA, the 
EAR, or any order, license or authorization issued thereunder, has 
occurred. It will set forth the essential facts about the alleged 
violation, refer to the specific regulatory or other provisions 
involved, and give notice of the sanctions available under part 764 of 
the EAR. The charging letter will inform the respondent that failure to 
answer the charges as provided in Sec. 766.6 of this part will be 
treated as a default under Sec. 766.7 of this part, that the respondent 
is entitled to a hearing if a written demand for one is requested with 
the answer, and that the respondent may be represented by counsel, or 
by other authorized representative who has a power of attorney to 
represent the respondent. A copy of the charging letter shall be filed 
with the administrative law judge, which filing shall toll the running 
of the applicable statute of limitations. Charging letters may be 
amended or supplemented at any time before an answer is filed, or, with 
permission of the administrative law judge, afterwards. BXA may 
unilaterally withdraw charging letters at any time, by notifying the 
respondent and the administrative law judge.

    \1\ By agreement with the Director of the Office of Strategic 
Industries and Economic Resource Administration, the Director of the 
Office of Export Enforcement enforces short supply controls imposed 
under section 7 of the EAA.
---------------------------------------------------------------------------

    (b) Notice of issuance of charging letter instituting 
administrative enforcement proceeding. A respondent shall be notified 
of the issuance of a charging letter, or any amendment or supplement 
thereto:
    (1) By mailing a copy by registered or certified mail addressed to 
the respondent at the respondent's last known address;
    (2) By leaving a copy with the respondent or with an officer, a 
managing or general agent, or any other agent authorized by appointment 
or by law to receive service of process for the respondent; or
    (3) By leaving a copy with a person of suitable age and discretion 
who resides at the respondent's last known dwelling.
    (4) Delivery of a copy of the charging letter, if made in the 
manner described in paragraph (b)(2) or (3) of this section, shall be 
evidenced by a certificate of service signed by the person making such 
service, stating the method of service and the identity of the person 
with whom the charging letter was left. The certificate of service 
shall be filed with the administrative law judge.
    (c) Date. The date of service of notice of the issuance of a 
charging letter instituting an administrative enforcement proceeding, 
or service of notice of the issuance of a supplement or amendment to a 
charging letter, is the date of its delivery, or of its attempted 
delivery if delivery is refused.


Sec. 766.4  Representation.

    A respondent individual may appear and participate in person, a 
corporation by a duly authorized officer or employee, and a partnership 
by a partner. If a respondent is represented by counsel, counsel shall 
be a member in good standing of the bar of any State, Commonwealth or 
Territory of the United States, or of the District of Columbia, or be 
licensed to practice law in the country in which counsel resides if not 
the United States. A respondent personally, or through counsel or other 
representative, shall file a notice of appearance with the 
administrative law judge. BXA will be represented by the Office of 
Chief Counsel for Export Administration, U.S. Department of Commerce.


Sec. 766.5  Filing and service of papers other than charging letter.

    (a) Filing. All papers to be filed shall be addressed to ``EAR 
Administrative Enforcement Proceedings,'' U.S. Department of Commerce, 
Room H-6716, 14th Street and Constitution Avenue, N.W., Washington, 
D.C. 20230, or such other place as the administrative law judge may 
designate. Filing by United States mail, first class postage prepaid, 
by express or equivalent parcel delivery service, or by hand delivery, 
is acceptable. Filing by mail from a foreign country shall be by 
airmail. In addition, the administrative law judge may authorize filing 
of papers by facsimile or other electronic means, provided that a hard 
copy of any such paper is subsequently filed. A copy of each paper 
filed shall be simultaneously served on each party.
    (b) Service. Service shall be made by personal delivery or by 
mailing one copy of each paper to each party in the proceeding. Service 
by delivery service or facsimile, in the manner set forth in paragraph 
(a) of this section, is acceptable. Service on BXA shall be addressed 
to the Chief Counsel for Export Administration, Room H-3839, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, N.W., 
Washington, D.C. 20230. Service on a respondent shall be to the address 
to which the charging letter was sent or to such other address as 
respondent may provide. When a party has appeared by counsel or other 
representative, service on counsel or other representative shall 
constitute service on that party.
    (c) Date. The date of filing or service is the day when the papers 
are deposited in the mail or are delivered in person, by delivery 
service, or by facsimile.
    (d) Certificate of service. A certificate of service signed by the 
party making service, stating the date and manner of service, shall 
accompany every paper, other than the charging letter, filed and served 
on parties.
    (e) Computing period of time. In computing any period of time 
prescribed or allowed by this part or by

[[Page 12909]]
order of the administrative law judge or the Under Secretary, the day 
of the act, event, or default from which the designated period of time 
begins to run is not to be included. The last day of the period so 
computed is to be included unless it is a Saturday, a Sunday, or a 
legal holiday (as defined in Rule 6(a) of the Federal Rules of Civil 
Procedure), in which case the period runs until the end of the next day 
which is neither a Saturday, a Sunday, nor a legal holiday. 
Intermediate Saturdays, Sundays, and legal holidays are excluded from 
the computation when the period of time prescribed or allowed is seven 
days or less.


Sec. 766.6  Answer and demand for hearing.

    (a) When to answer. The respondent must answer the charging letter 
within 30 days after being served with notice of the issuance of a 
charging letter instituting an administrative enforcement proceeding, 
or within 30 days of notice of any supplement or amendment to a 
charging letter, unless time is extended under Sec. 766.16 of this 
part.
    (b) Contents of answer. The answer must be responsive to the 
charging letter and must fully set forth the nature of the respondent's 
defense or defenses. The answer must admit or deny specifically each 
separate allegation of the charging letter; if the respondent is 
without knowledge, the answer must so state and will operate as a 
denial. Failure to deny or controvert a particular allegation will be 
deemed an admission of that allegation. The answer must also set forth 
any additional or new matter the respondent believes supports a defense 
or claim of mitigation. Any defense or partial defense not specifically 
set forth in the answer shall be deemed waived, and evidence thereon 
may be refused, except for good cause shown.
    (c) Demand for hearing. If the respondent desires a hearing, a 
written demand for one must be submitted with the answer. Any demand by 
BXA for a hearing must be filed with the administrative law judge 
within 30 days after service of the answer. Failure to make a timely 
written demand for a hearing shall be deemed a waiver of the party's 
right to a hearing, except for good cause shown. If no party demands a 
hearing, the matter will go forward in accordance with the procedures 
set forth in Sec. 766.15 of this part.
    (d) English language required. The answer, all other papers, and 
all documentary evidence must be submitted in English, or translations 
into English must be filed and served at the same time.


Sec. 766.7  Default.

    (a) General. Failure of the respondent to file an answer within the 
time provided constitutes a waiver of the respondent's right to appear 
and contest the allegations in the charging letter. In such event, the 
administrative law judge, on BXA's motion and without further notice to 
the respondent, shall find the facts to be as alleged in the charging 
letter and render an initial or recommended decision containing 
findings of fact and appropriate conclusions of law and issue or 
recommend an order imposing appropriate sanctions. The decision and 
order shall be subject to review by the Under Secretary in accordance 
with the applicable procedures set forth in Sec. 766.21 or Sec. 766.22 
of this part.
    (b) Petition to set aside default. (1) Procedure. Upon petition 
filed by a respondent against whom a default order has been issued, 
which petition is accompanied by an answer meeting the requirements of 
Sec. 766.6(b) of this part, the Under Secretary may, after giving all 
parties an opportunity to comment, and for good cause shown, set aside 
the default and vacate the order entered thereon and remand the matter 
to the administrative law judge for further proceedings.
    (2) Time limits. A petition under this section must be made within 
one year of the date of entry of the order which the petition seeks to 
have vacated.


Sec. 766.8  Summary decision.

    At any time after a proceeding has been initiated, a party may move 
for a summary decision disposing of some or all of the issues. The 
administrative law judge may render an initial or recommended decision 
and issue or recommend an order if the entire record shows, as to the 
issue(s) under consideration:
    (a) That there is no genuine issue as to any material fact; and
    (b) That the moving party is entitled to a summary decision as a 
matter of law.


Sec. 766.9  Discovery.

    (a) General. The parties are encouraged to engage in voluntary 
discovery regarding any matter, not privileged, which is relevant to 
the subject matter of the pending proceeding. The provisions of the 
Federal Rules of Civil Procedure relating to discovery apply to the 
extent consistent with this part and except as otherwise provided by 
the administrative law judge or by waiver or agreement of the parties. 
The administrative law judge may make any order which justice requires 
to protect a party or person from annoyance, embarrassment, oppression, 
or undue burden or expense. These orders may include limitations on the 
scope, method, time and place of discovery, and provisions for 
protecting the confidentiality of classified or otherwise sensitive 
information.
    (b) Interrogatories and requests for admission or production of 
documents. A party may serve on any party interrogatories, requests for 
admission, or requests for production of documents for inspection and 
copying, and a party concerned may apply to the administrative law 
judge for such enforcement or protective order as that party deems 
warranted with respect to such discovery. The service of a discovery 
request shall be made at least 20 days before the scheduled date of the 
hearing unless the administrative law judge specifies a shorter time 
period. Copies of interrogatories, requests for admission and requests 
for production of documents and responses thereto shall be served on 
all parties, and a copy of the certificate of service shall be filed 
with the administrative law judge. Matters of fact or law of which 
admission is requested shall be deemed admitted unless, within a period 
designated in the request (at least 10 days after service, or within 
such additional time as the administrative law judge may allow), the 
party to whom the request is directed serves upon the requesting party 
a sworn statement either denying specifically the matters of which 
admission is requested or setting forth in detail the reasons why the 
party to whom the request is directed cannot truthfully either admit or 
deny such matters.
    (c) Depositions. Upon application of a party and for good cause 
shown, the administrative law judge may order the taking of the 
testimony of any person by deposition and the production of specified 
documents or materials by the person at the deposition. The application 
shall state the purpose of the deposition and set forth the facts 
sought to be established through the deposition.
    (d) Enforcement. The administrative law judge may order a party to 
answer designated questions, to produce specified documents or things 
or to take any other action in response to a proper discovery request. 
If a party does not comply with such an order, the administrative law 
judge may make a determination or enter any order in the proceeding as 
the judge deems reasonable and appropriate. The judge may strike 
related charges or defenses in whole or in part or may take particular 
facts relating to the discovery request to

[[Page 12910]]
which the party failed or refused to respond as being established for 
purposes of the proceeding in accordance with the contentions of the 
party seeking discovery. In addition, enforcement by a district court 
of the United States may be sought under section 12(a) of the EAA.


Sec. 766.10  Subpoenas.

    (a) Issuance. Upon the application of any party, supported by a 
satisfactory showing that there is substantial reason to believe that 
the evidence would not otherwise be available, the administrative law 
judge will issue subpoenas requiring the attendance and testimony of 
witnesses and the production of such books, records or other 
documentary or physical evidence for the purpose of the hearing, as the 
judge deems relevant and material to the proceedings, and reasonable in 
scope.
    (b) Service. Subpoenas issued by the administrative law judge may 
be served in any of the methods set forth in Sec. 766.5(b) of this 
part.
    (c) Timing. Applications for subpoenas must be submitted at least 
10 days before the scheduled hearing or deposition, unless the 
administrative law judge determines, for good cause shown, that 
extraordinary circumstances warrant a shorter time.


Sec. 766.11  Matter protected against disclosure.

    (a) Protective measures. It is often necessary for BXA to receive 
and consider information and documents that are sensitive from the 
standpoint of national security, foreign policy, business 
confidentiality, or investigative concern, and that are to be protected 
against disclosure. Accordingly, and without limiting the discretion of 
the administrative law judge to give effect to any other applicable 
privilege, it is proper for the administrative law judge to limit 
discovery or introduction of evidence or to issue such protective or 
other orders as in the judge's judgment may be consistent with the 
objective of preventing undue disclosure of the sensitive documents or 
information. Where the administrative law judge determines that 
documents containing the sensitive matter need to be made available to 
a respondent to avoid prejudice, the judge may direct BXA to prepare an 
unclassified and nonsensitive summary or extract of the documents. The 
administrative law judge may compare the extract or summary with the 
original to ensure that it is supported by the source document and that 
it omits only so much as must remain classified or undisclosed. The 
summary or extract may be admitted as evidence in the record.
    (b) Arrangements for access. If the administrative law judge 
determines that this procedure is unsatisfactory and that classified or 
otherwise sensitive matter must form part of the record in order to 
avoid prejudice to a party, the judge may provide the parties 
opportunity to make arrangements that permit a party or a 
representative to have access to such matter without compromising 
sensitive information. Such arrangements may include obtaining security 
clearances, obtaining a national interest determination under section 
12(c) of the EAA, or giving counsel for a party access to sensitive 
information and documents subject to assurances against further 
disclosure, including a protective order, if necessary.


Sec. 766.12  Prehearing conference.

    (a) The administrative law judge, on the judge's own motion or on 
request of a party, may direct the parties to participate in a 
prehearing conference, either in person or by telephone, to consider:
    (1) Simplification of issues;
    (2) The necessity or desirability of amendments to pleadings;
    (3) Obtaining stipulations of fact and of documents to avoid 
unnecessary proof; or
    (4) Such other matters as may expedite the disposition of the 
proceedings.
    (b) The administrative law judge may order the conference 
proceedings to be recorded electronically or taken by a reporter, 
transcribed and filed with the judge.
    (c) If a prehearing conference is impracticable, the administrative 
law judge may direct the parties to correspond with the judge to 
achieve the purposes of such a conference.
    (d) The administrative law judge will prepare a summary of any 
actions agreed on or taken pursuant to this section. The summary will 
include any written stipulations or agreements made by the parties.


Sec. 766.13  Hearings.

    (a) Scheduling. The administrative law judge, by agreement with the 
parties or upon notice to all parties of not less than 30 days, will 
schedule a hearing. All hearings will be held in Washington, D.C., 
unless the administrative law judge determines, for good cause shown, 
that another location would better serve the interests of justice.
    (b) Hearing procedure. Hearings will be conducted in a fair and 
impartial manner by the administrative law judge, who may limit 
attendance at any hearing or portion thereof to the parties, their 
representatives and witnesses if the judge deems this necessary or 
advisable in order to protect sensitive matter (see Sec. 766.11 of this 
part) from improper disclosure. The rules of evidence prevailing in 
courts of law do not apply, and all evidentiary material deemed by the 
administrative law judge to be relevant and material to the proceeding 
and not unduly repetitious will be received and given appropriate 
weight.
    (c) Testimony and record. Witnesses will testify under oath or 
affirmation. A verbatim record of the hearing and of any other oral 
proceedings will be taken by reporter or by electronic recording, 
transcribed and filed with the administrative law judge. A respondent 
may examine the transcript and may obtain a copy by paying any 
applicable costs. Upon such terms as the administrative law judge deems 
just, the judge may direct that the testimony of any person be taken by 
deposition and may admit an affidavit or declaration as evidence, 
provided that any affidavits or declarations have been filed and served 
on the parties sufficiently in advance of the hearing to permit a party 
to file and serve an objection thereto on the grounds that it is 
necessary that the affiant or declarant testify at the hearing and be 
subject to cross-examination.
    (d) Failure to appear. If a party fails to appear in person or by 
counsel at a scheduled hearing, the hearing may nevertheless proceed, 
and that party's failure to appear will not affect the validity of the 
hearing or any proceedings or action taken thereafter.


Sec. 766.14  Interlocutory review of rulings.

    (a) At the request of a party, or on the judge's own initiative, 
the administrative law judge may certify to the Under Secretary for 
review a ruling that does not finally dispose of a proceeding, if the 
administrative law judge determines that immediate review may hasten or 
facilitate the final disposition of the matter.
    (b) Upon certification to the Under Secretary of the interlocutory 
ruling for review, the parties will have 10 days to file and serve 
briefs stating their positions, and five days to file and serve 
replies, following which the Under Secretary will decide the matter 
promptly.


Sec. 766.15  Proceeding without a hearing.

    If the parties have waived a hearing, the case will be decided on 
the record by the administrative law judge. Proceeding without a 
hearing does not relieve the parties from the necessity of

[[Page 12911]]
proving the facts supporting their charges or defenses. Affidavits or 
declarations, depositions, admissions, answers to interrogatories and 
stipulations may supplement other documentary evidence in the record. 
The administrative law judge will give each party reasonable 
opportunity to file rebuttal evidence.


Sec. 766.16  Procedural stipulations; extension of time.

    (a) Procedural stipulations. Unless otherwise ordered, a written 
stipulation agreed to by all parties and filed with the administrative 
law judge will modify any procedures established by this part.
    (b) Extension of time. (1) The parties may extend any applicable 
time limitation, by stipulation filed with the administrative law judge 
before the time limitation expires.
    (2) The administrative law judge may, on the judge's own initiative 
or upon application by any party, either before or after the expiration 
of any applicable time limitation, extend the time within which to file 
and serve an answer to a charging letter or do any other act required 
by this part.


Sec. 766.17  Decision of the administrative law judge.

    (a) Predecisional matters. Except for default proceedings under 
Sec. 766.7 of this part, the administrative law judge will give the 
parties reasonable opportunity to submit the following, which will be 
made a part of the record:
    (1) Exceptions to any ruling by the judge or to the admissibility 
of evidence proffered at the hearing;
    (2) Proposed findings of fact and conclusions of law;
    (3) Supporting legal arguments for the exceptions and proposed 
findings and conclusions submitted; and
    (4) A proposed order.
    (b) Decision and order. After considering the entire record in the 
proceeding, the administrative law judge will issue a written decision.
    (1) Initial decision. For proceedings charging violations relating 
to part 760 of the EAR, the decision rendered shall be an initial 
decision. The decision will include findings of fact, conclusions of 
law, and findings as to whether there has been a violation of the EAA, 
the EAR, or any order, license or authorization issued thereunder. If 
the administrative law judge finds that the evidence of record is 
insufficient to sustain a finding that a violation has occurred with 
respect to one or more charges, the judge shall order dismissal of the 
charges in whole or in part, as appropriate. If the administrative law 
judge finds that one or more violations have been committed, the judge 
may issue an order imposing administrative sanctions, as provided in 
part 764 of the EAR. The decision and order shall be served on each 
party, and shall become effective as the final decision of the 
Department 30 days after service, unless an appeal is filed in 
accordance with Sec. 766.21 of this part.
    (2) Recommended decision. For proceedings not involving violations 
relating to part 760 of the EAR, the decision rendered shall be a 
recommended decision. The decision will include recommended findings of 
fact, conclusions of law, and findings as to whether there has been a 
violation of the EAA, the EAR or any order, license or authorization 
issued thereunder. If the administrative law judge finds that the 
evidence of record is insufficient to sustain a recommended finding 
that a violation has occurred with respect to one or more charges, the 
judge shall recommend dismissal of any such charge. If the 
administrative law judge finds that one or more violations have been 
committed, the judge shall recommend an order imposing administrative 
sanctions, as provided in part 764 of the EAR, or such other action as 
the judge deems appropriate. The administrative law judge shall 
immediately certify the record, including the original copy of the 
recommended decision and order, to the Under Secretary for review in 
accordance with Sec. 766.22 of this part. The administrative law judge 
shall also immediately serve the recommended decision on all parties. 
Because of the time limits established in the EAA for review by the 
Under Secretary, service upon parties shall be by personal delivery, 
express mail or other overnight carrier.
    (c) Suspension of sanctions. Any order imposing administrative 
sanctions may provide for the suspension of the sanction imposed, in 
whole or in part and on such terms of probation or other conditions as 
the administrative law judge or the Under Secretary may specify. Any 
suspension order may be modified or revoked by the signing official 
upon application of BXA showing a violation of the probationary terms 
or other conditions, after service on the respondent of notice of the 
application in accordance with the service provisions of Sec. 766.3 of 
this part, and with such opportunity for response as the responsible 
signing official in his/her discretion may allow. A copy of any order 
modifying or revoking the suspension shall also be served on the 
respondent in accordance with the provisions of Sec. 766.3 of this 
part.
    (d) Time for decision. Administrative enforcement proceedings not 
involving violations relating to part 760 of the EAR shall be 
concluded, including review by the Under Secretary under Sec. 766.22 of 
this part, within one year of the submission of a charging letter, 
unless the administrative law judge, for good cause shown, extends such 
period. The charging letter will be deemed to have been submitted to 
the administrative law judge on the date the respondent files an answer 
or on the date BXA files a motion for a default order pursuant to 
Sec. 766.7(a) of this part, whichever occurs first.


Sec. 766.18  Settlement.

    (a) Cases may be settled before service of a charging letter. In 
cases in which settlement is reached before service of a charging 
letter, a proposed charging letter will be prepared, and a settlement 
proposal consisting of a settlement agreement and order will be 
submitted to the Assistant Secretary for approval and signature. If the 
Assistant Secretary does not approve the proposal, he/she will notify 
the parties and the case will proceed as though no settlement proposal 
had been made. If the Assistant Secretary approves the proposal, he/she 
will issue an appropriate order, and no action will be required by the 
administrative law judge.
    (b) Cases may also be settled after service of a charging letter. 
(1) If the case is pending before the administrative law judge, the 
judge shall stay the proceedings for a reasonable period of time, 
usually not to exceed 30 days, upon notification by the parties that 
they have entered into good faith settlement negotiations. The 
administrative law judge may, in his/her discretion, grant additional 
stays. If settlement is reached, a proposal will be submitted to the 
Assistant Secretary for approval and signature. If the Assistant 
Secretary approves the proposal, he/she will issue an appropriate 
order, and notify the administrative law judge that the case is 
withdrawn from adjudication. If the Assistant Secretary does not 
approve the proposal, he/she will notify the parties and the case will 
proceed to adjudication by the administrative law judge as though no 
settlement proposal had been made.
    (2) If the case is pending before the Under Secretary under 
Sec. 766.21 or Sec. 766.22 of this part, the parties may submit a 
settlement proposal to the Under Secretary for approval and signature. 
If the Under Secretary approves the proposal, he/she will issue an 
appropriate order. If the Under Secretary does not approve the 
proposal, the case will proceed to final

[[Page 12912]]
decision in accordance with Sec. 766.21 or Sec. 766.22 of this part, as 
appropriate.
    (c) Any order disposing of a case by settlement may suspend the 
administrative sanction imposed, in whole or in part, on such terms of 
probation or other conditions as the signing official may specify. Any 
such suspension may be modified or revoked by the signing official, in 
accordance with the procedures set forth in Sec. 766.17(c) of this 
part.
    (d) Any respondent who agrees to an order imposing any 
administrative sanction does so solely for the purpose of resolving the 
claims in the administrative enforcement proceeding brought under this 
part. This reflects the fact that BXA has neither the authority nor the 
responsibility for instituting, conducting, settling, or otherwise 
disposing of criminal proceedings. That authority and responsibility 
are vested in the Attorney General and the Department of Justice.
    (e) Cases that are settled may not be reopened or appealed.


Sec. 766.19  Reopening.

    The respondent may petition the administrative law judge within one 
year of the date of the final decision, except where the decision 
arises from a default judgment or from a settlement, to reopen an 
administrative enforcement proceeding to receive any relevant and 
material evidence which was unknown or unobtainable at the time the 
proceeding was held. The petition must include a summary of such 
evidence, the reasons why it is deemed relevant and material, and the 
reasons why it could not have been presented at the time the 
proceedings were held. The administrative law judge will grant or deny 
the petition after providing other parties reasonable opportunity to 
comment. If the proceeding is reopened, the administrative law judge 
may make such arrangements as the judge deems appropriate for receiving 
the new evidence and completing the record. The administrative law 
judge will then issue a new initial or recommended decision and order, 
and the case will proceed to final decision and order in accordance 
with Sec. 766.21 or Sec. 766.22 of this part, as appropriate.


Sec. 766.20  Record for decision and availability of documents.

    (a) General. The transcript of hearings, exhibits, rulings, orders, 
all papers and requests filed in the proceedings and, for purposes of 
any appeal under Sec. 766.21 of this part or review under Sec. 766.22 
of this part, the decision of the administrative law judge and such 
submissions as are provided for by Secs. 766.21 and 766.22 of this 
part, will constitute the record and the exclusive basis for decision. 
When a case is settled after the service of a charging letter, the 
record will consist of any and all of the foregoing, as well as the 
settlement agreement and the order. When a case is settled before 
service of a charging letter, the record will consist of the proposed 
charging letter, the settlement agreement and the order.
    (b) Restricted access. On the judge's own motion, or on the motion 
of any party, the administrative law judge may direct that there be a 
restricted access portion of the record for any material in the record 
to which public access is restricted by law or by the terms of a 
protective order entered in the proceedings. A party seeking to 
restrict access to any portion of the record is responsible for 
submitting, at the time specified in Sec. 766.20(c)(2) of this part, a 
version of the document proposed for public availability that reflects 
the requested deletion. The restricted access portion of the record 
will be placed in a separate file and the file will be clearly marked 
to avoid improper disclosure and to identify it as a portion of the 
official record in the proceedings. The administrative law judge may 
act at any time to permit material that becomes declassified or 
unrestricted through passage of time to be transferred to the 
unrestricted access portion of the record.
    (c) Availability of documents. (1) Scope. (i) For proceedings 
started on or after October 12, 1979, all charging letters, answers, 
initial and recommended decisions, and orders disposing of a case will 
be made available for public inspection in the BXA Freedom of 
Information Records Inspection Facility, U.S. Department of Commerce, 
Room H-6624, 14th Street and Pennsylvania Avenue, N.W., Washington, 
D.C. 20230. The complete record for decision, as defined in paragraphs 
(a) and (b) of this section will be made available on request. In 
addition, all decisions of the Under Secretary on appeal pursuant to 
Sec. 766.22 of this part and those final orders providing for denial, 
suspension or revocation of export privileges shall be published in the 
Federal Register.
    (ii) For proceedings started before October 12, 1979, the public 
availability of the record for decision will be governed by the 
applicable regulations in effect when the proceedings were begun.
    (2) Timing. (i) Antiboycott cases. For matters relating to part 760 
of the EAR, documents are available immediately upon filing, except for 
any portion of the record for which a request for segregation is made. 
Parties that seek to restrict access to any portion of the record under 
paragraph (b) of this section must make such a request, together with 
the reasons supporting the claim of confidentiality, simultaneously 
with the submission of material for the record.
    (ii) Other cases. In all other cases, documents will be available 
only after the final administrative disposition of the case. In these 
cases, parties desiring to restrict access to any portion of the record 
under paragraph (b) of this section must assert their claim of 
confidentiality, together with the reasons for supporting the claim, 
before the close of the proceeding.


Sec. 766.21  Appeals.

    (a) Grounds. For proceedings charging violations relating to part 
760 of the EAR, a party may appeal to the Under Secretary from an order 
disposing of a proceeding or an order denying a petition to set aside a 
default or a petition for reopening, on the grounds:
    (1) That a necessary finding of fact is omitted, erroneous or 
unsupported by substantial evidence of record;
    (2) That a necessary legal conclusion or finding is contrary to 
law;
    (3) That prejudicial procedural error occurred, or
    (4) That the decision or the extent of sanctions is arbitrary, 
capricious or an abuse of discretion. The appeal must specify the 
grounds on which the appeal is based and the provisions of the order 
from which the appeal is taken.
    (b) Filing of appeal. An appeal from an order must be filed with 
the Office of the Under Secretary for Export Administration, Bureau of 
Export Administration, U.S. Department of Commerce, Room H-3898, 14th 
Street and Constitution Avenue, N.W., Washington, D.C. 20230, within 30 
days after service of the order appealed from. If the Under Secretary 
cannot act on an appeal for any reason, the Under Secretary will 
designate another Department of Commerce official to receive and act on 
the appeal.
    (c) Effect of appeal. The filing of an appeal shall not stay the 
operation of any order, unless the order by its express terms so 
provides or unless the Under Secretary, upon application by a party and 
with opportunity for response, grants a stay.
    (d) Appeal procedure. The Under Secretary normally will not hold 
hearings or entertain oral argument on appeals. A full written 
statement in support of the appeal must be filed with the appeal and be 
simultaneously served on all parties, who shall have 30 days from 
service to file a reply. At his/

[[Page 12913]]
her discretion, the Under Secretary may accept new submissions, but 
will not ordinarily accept those submissions filed more than 30 days 
after the filing of the reply to the appellant's first submission.
    (e) Decisions. The decision will be in writing and will be 
accompanied by an order signed by the Under Secretary giving effect to 
the decision. The order may either dispose of the case by affirming, 
modifying or reversing the order of the administrative law judge or may 
refer the case back to the administrative law judge for further 
proceedings.


Sec. 766.22  Review by Under Secretary.

    (a) Recommended decision. For proceedings not involving violations 
relating to part 760 of the EAR, the administrative law judge shall 
immediately refer the recommended decision and order to the Under 
Secretary. Because of the time limits provided under the EAA for review 
by the Under Secretary, service of the recommended decision and order 
on the parties, all papers filed by the parties in response, and the 
final decision of the Under Secretary must be by personal delivery, 
facsimile, express mail or other overnight carrier. If the Under 
Secretary cannot act on a recommended decision and order for any 
reason, the Under Secretary will designate another Department of 
Commerce official to receive and act on the recommendation.
    (b) Submissions by parties. Parties shall have 12 days from the 
date of issuance of the recommended decision and order in which to 
submit simultaneous responses. Parties thereafter shall have eight days 
from receipt of any response(s) in which to submit replies. Any 
response or reply must be received within the time specified by the 
Under Secretary.
    (c) Final decision. Within 30 days after receipt of the recommended 
decision and order, the Under Secretary shall issue a written order 
affirming, modifying or vacating the recommended decision and order of 
the administrative law judge. If he/she vacates the recommended 
decision and order, the Under Secretary may refer the case back to the 
administrative law judge for further proceedings. Because of the time 
limits, the Under Secretary's review will ordinarily be limited to the 
written record for decision, including the transcript of any hearing, 
and any submissions by the parties concerning the recommended decision.
    (d) Delivery. The final decision and implementing order shall be 
served on the parties and will be publicly available in accordance with 
Sec. 766.20 of this part.
    (e) Appeals. The charged party may appeal the Under Secretary's 
written order within 15 days to the United States Court of Appeals for 
the District of Columbia pursuant to 50 U.S.C. app. Sec. 2412(c)(3).


Sec. 766.23  Related persons.

    (a) General. In order to prevent evasion, certain types of orders 
under this part may be made applicable not only to the respondent, but 
also to other persons then or thereafter related to the respondent by 
ownership, control, position of responsibility, affiliation, or other 
connection in the conduct of trade or business. Orders that may be made 
applicable to related persons include those that deny or affect export 
privileges, including temporary denial orders, and those that exclude a 
respondent from practice before BXA.
    (b) Procedures. If BXA has reason to believe that a person is 
related to the respondent and that an order that is being sought or 
that has been issued should be made applicable to that person in order 
to prevent evasion of the order, BXA shall, except in an ex parte 
proceeding under Sec. 766.24(a) of this part, give that person notice 
in accordance with Sec. 766.5(b) of this part and an opportunity to 
oppose such action. If the official authorized to issue the order 
against the respondent finds that the order should be made applicable 
to that person in order to prevent evasion of the order that official 
shall issue or amend the order accordingly.
    (c) Appeals. Any person named by BXA in an order as related to the 
respondent may file an appeal with the administrative law judge. The 
sole issues to be raised and ruled on in any such appeal are whether 
the person so named is related to the respondent and whether the order 
is justified in order to prevent evasion. The recommended decision and 
order of the administrative law judge shall be reviewed by the Under 
Secretary in accordance with the procedures set forth in Sec. 766.22 of 
this part.


Sec. 766.24  Temporary denials.

    (a) General. The procedures in this section apply to temporary 
denial orders issued on or after July 12, 1985. For temporary denial 
orders issued on or before July 11, 1985, the proceedings will be 
governed by the applicable regulations in effect at the time the 
temporary denial orders were issued. Without limiting any other action 
BXA may take under the EAR with respect to any application, order, 
license or authorization issued under the EAA, BXA may ask the 
Assistant Secretary to issue a temporary denial order on an ex parte 
basis to prevent an imminent violation, as defined in this section, of 
the EAA, the EAR, or any order, license or authorization issued 
thereunder. The temporary denial order will deny export privileges to 
any person named in the order as provided for in Sec. 764.3(a)(2) of 
the EAR.
    (b) Issuance. (1) The Assistant Secretary may issue an order 
temporarily denying to a person any or all of the export privileges 
described in part 764 of the EAR upon a showing by BXA that the order 
is necessary in the public interest to prevent an imminent violation of 
the EAA, the EAR, or any order, license or authorization issued 
thereunder.
    (2) The temporary denial order shall define the imminent violation 
and state why it was issued without a hearing. Because all denial 
orders are public, the description of the imminent violation and the 
reasons for proceeding on an ex parte basis set forth therein shall be 
stated in a manner that is consistent with national security, foreign 
policy, business confidentiality, and investigative concerns.
    (3) A violation may be ``imminent'' either in time or in degree of 
likelihood. To establish grounds for the temporary denial order, BXA 
may show either that a violation is about to occur, or that the general 
circumstances of the matter under investigation or case under criminal 
or administrative charges demonstrate a likelihood of future 
violations. To indicate the likelihood of future violations, BXA may 
show that the violation under investigation or charges is significant, 
deliberate, covert and/or likely to occur again, rather than technical 
or negligent, and that it is appropriate to give notice to companies in 
the United States and abroad to cease dealing with the person in U.S.-
origin items in order to reduce the likelihood that a person under 
investigation or charges continues to export or acquire abroad such 
items, risking subsequent disposition contrary to export control 
requirements. Lack of information establishing the precise time a 
violation may occur does not preclude a finding that a violation is 
imminent, so long as there is sufficient reason to believe the 
likelihood of a violation.
    (4) The temporary denial order will be issued for a period not 
exceeding 180 days.
    (5) Notice of the issuance of a temporary denial order on an ex 
parte basis shall be given in accordance with Sec. 766.5(b) of this 
part upon issuance.


[[Continued on page 12914]]