International Law Advisory - EAR Anti-boycott Rules Not Triggered by Commercial Boycotts Over Cartoons

In a delayed, but growing, reaction to the Danish newspaper Jyllandsposten's September 2005 publication of cartoon caricatures of the prophet Mohammed, reports of boycotts of Danish businesses are on the rise.  For example, Danish-Swedish dairy giant Arla Foods has reported a near-complete halt to its sales in Saudi Arabia and elsewhere in the Middle East.  Media reports and the official website of Denmark indicate that the Islamic cultural organization, ISESCO, has encouraged its 51 members to boycott Denmark.  These reports have raised the question of whether this growing grassroots boycott may trigger U.S. anti-boycott compliance risks.

U.S. anti-boycott rules (implemented in Part 760 of the Export Administration Regulations (“EAR”) and Section 999 of the Internal Revenue Code) prohibit “U.S. persons” (including U.S. companies and certain of their foreign subsidiaries) from undertaking various activities in support of foreign boycotts that are not approved by the U.S. government.  Typically, when companies think of compliance with U.S. anti-boycott rules, the focus is on being alert to boycott requests involving various Arab countries’ boycotts of Israel.

The anti-boycott rules, however, can apply to any foreign boycott that is not endorsed by the United States.  In recent discussions with OAC, we learned that OAC does not currently view the existing boycott activities involving Denmark as formal foreign sanctions against that country which would trigger application of the existing U.S. anti-boycott regulations.  In the language of the underlying Export Administration Act, the activity is not currently perceived as “fostered” or “imposed” by a foreign government so as to come within the ambit of the U.S. regulatory regime.  We understand OAC to be actively monitoring the situation. 

If you need additional information on the application of the anti-boycott rules, please contact Ed Krauland at 202-429-8083 or Julia Court Ryan at 202-429-6418.