Six-figure Antiboycott Penalty Settlement Announced

Last month the Office of Antiboycott Compliance, Bureau of Industry and Security, and York International Corporation settled a civil penalty totaling nearly $141,000. The case involved 122 alleged violations of the antiboycott regulations, 15 C.F.R. 760. In general, the antiboycott regulations prohibit a “U.S. person” from supporting the boycott of Israel sponsored by the Arab League and some countries with significant Muslim populations.

It is important for U.S. and foreign companies and organizations to know that a “U.S. person” includes not only individuals and corporations in the U.S., but also permanent domestic affiliates of foreign parties, as well as U.S. citizens abroad, and “controlled in fact” affiliates of domestic entities. “Controlled in fact” means that the party has the ability to establish company policies and control the daily operations of the foreign affiliate.

This recent settlement should be a wake-up call to companies and organizations of all sizes involved in international business transactions to diligently screen, report, and decline to take actions that violate the antiboycott regulations. York International faced charges that: in 6 instances it engaged in sales involving the sale or transfer of goods or services (including information) from the U.S. to Lebanon, Syria, and the UAE and knowingly refused to do business “with another person” under an agreement with, a requirement or request of a boycotting country; 15 times it engaged in sales or transfers of goods or services from the U.S. to Lebanon, Libya, Kuwait, Oman, Qatar, Syria, Sudan, and the UAE, and supported an unsanctioned boycott by furnishing information about its business relationships with or in the boycotted country; an on 101 occasions, the company failed to report to the Department of Commerce requests to engage in restrictive trade practices or a non-U.S. sanctioned boycott, as required by the regulations.

The settlement agreement shows that 6 violations were based on York International proceeding with transactions that involved documents containing prohibitions or conditions in letters of credit containing language such as: “Under no circumstances may a bank listed in the Arab Israeli boycott blacklist be permitted to negotiate documents under this documentary credit” and “We do not undertake to ship the goods described in this invoice on…vessel…mentioned in the black list of Arab countries…” Invoices and certificates contained statements such as: “We declare that no raw materials of Israeli origin have been used for the production or presentation of the goods mentioned in this invoice.”

The settlement agreement does not disclose the value of the transactions involved, but it will be assumed the overall value was sizeable given the number involved and the size of the penalty. York International voluntarily disclosed to BIS the information concerning the transactions, so the company likely received favorable treatment again demonstrating the importance for companies, non-profits, and other organizations involved in international trade to have a robust export compliance program and the benefits of making a voluntary disclosure.