Managing Antiboycott Compliance in Today’s Global Economy

The past several years have seen a significant increase in risk and uncertainty for businesses with operations or supply chains in the Middle East. A recent flare-up in hostilities involving the United States, Israel, and Iran has spilled into neighboring countries and exposed varying degrees of diplomatic support for and against the involved parties.

Economic actors in the region — and globally — may attempt to pressure companies or individuals against transacting with parties connected to the conflict. This practice is commonly referred to as a boycott. The United States maintains laws designed to counteract unsanctioned foreign boycotts.

Although U.S. antiboycott laws apply broadly to foreign boycotts not approved by the U.S. government, one of the most prominent examples is the Arab League’s boycott of Israel. These laws are intended to prevent foreign entities from coercing U.S. businesses, including their subsidiaries and affiliates, into refusing to do business with boycott targets.

U.S. antiboycott laws are administered and enforced by the U.S. Department of Commerce’s Bureau of Industry and Security and the U.S. Department of the Treasury under separate statutory frameworks. While the specific requirements differ, both regimes prohibit U.S. persons — a defined term that includes foreign subsidiaries — from participating in or supporting unsanctioned boycotts. They also require the reporting of certain boycott-related requests, even if the recipient does not comply.

Violations of antiboycott laws enforced by the Bureau of Industry and Security may result in civil penalties, denial of export privileges, or revocation of export licenses. Violations under Treasury-administered provisions may trigger significant adverse tax consequences. Willful violations under either regime can also result in criminal penalties, including fines and imprisonment.

Companies should closely review contracts, purchase orders, letters of credit, and similar documents, with particular scrutiny to those involving counterparties located in jurisdictions identified on the Bureau of Industry and Security’s Boycott Requester List.

Antiboycott compliance is fact-specific and often intersects with export controls, sanctions, and international trade regulations. DeWitt’s attorneys regularly advise businesses on:

• Contract review and negotiation involving international counterparties
• Compliance with U.S. export controls and trade regulations
• Risk mitigation strategies for global supply chains
• Internal policy development and training

If your business operates internationally or is encountering unfamiliar contractual provisions tied to geopolitical developments, early review is critical. Please contact a member of DeWitt’s Corporate or International Trade team to discuss your specific situation.