Order Code RL33961
Arab League Boycott of Israel
April 12, 2007Updated July 3, 2008
Martin A. Weiss
Analyst in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
Arab League Boycott of Israel
Summary
The Arab League, an umbrella organization comprising 23 Middle Eastern and
African countries and entities, has maintained an official boycott of Israeli companies
and Israeli-made goods since the founding of Israel in 1948. The boycott is
administered by the Damascus-based Central Boycott Office, a specialized bureau of
the Arab League.
The boycott has three tiers. The primary boycott prohibits citizens of an Arab
League member from buying, selling, or entering into a business contract with either
the Israeli government or an Israeli citizen. The secondary boycott extends the
primary boycott to any entity world-wide that does business in Israel. A blacklist of
global firms that engage in business with Israel is maintained by the Central Boycott
Office, and disseminated to Arab League members. The tertiary boycott prohibits an
Arab League member and its nationals from doing business with a company that
deals with companies that have been blacklisted by the Arab League.
The U.S. government has often been at the forefront of international efforts to
end the boycott and its enforcement. Despite U.S. efforts, however, many Arab
League countries continue to support the boycott’s enforcement. U.S. legislative
action related to the boycott dates from 1959 and includes multiple statutory
provisions expressing U.S. opposition to the boycott, usually in foreign assistance
legislation. In 1977, Congress passed laws making it illegal for U.S. companies to
cooperate with the boycott and authorizing the imposition of civil and criminal
penalties against U.S. violators. U.S. companies are required to report to the
Department of Commerce any requests to comply with the Arab League Boycott. In
FY2006FY2007, U.S. companies submitted 1,291633 reports on boycott-related requests.
During the same period, penalties for violating U.S. anti-boycott legislation worth
$95,950194,500 were levied on nine companies to settle allegations they violated U.S.
antiboycott provisions, an increase from five cases and $57,000 in FY2005ten companies. This is an increase from FY2006, when
1,291 reports were filed and penalties of $95,950 were assessed on nine companies.
This report provides background information on the boycott and U.S. efforts to
end its enforcement. It will be updated as events warrant. More information on
Israel is contained in CRS Report RL33476, Israel: Background and Relations with
the United States, by Carol Migdalovitz.
Contents
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Current Status of the Boycott . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Impact of the Boycott . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
U.S. Activity to End the Arab League Boycott of Israel . . . . . . . . . . . . . . . . . . . . 4
U.S. Antiboycott Compliance Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Export-Related Antiboycott Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Tax-Related Antiboycott Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
List of Tables
Table 1. FY2006FY2007 Boycott Requests Received by U.S. Companies . . . . . . . . . . . . 6
Arab League Boycott of Israel
Background
The Arab League is an umbrella organization comprising 23 Middle Eastern and
African countries and entities. Arab League members are Egypt, Iraq, Jordan,
Lebanon, Saudi Arabia, Syria, Yemen, Libya, Sudan, Morocco, Tunisia, Kuwait,
Algeria, United Arab Emirates, Bahrain, Qatar, Oman, Mauritania, Somalia,
Palestinian Authority, Djibouti, and Comoros. In 2003, Eritrea joined the Arab
League as an observer.
The Arab League was founded in 1944, and in 1945 began a boycott of Zionist
goods and services in the British controlled mandate territory of Palestine. In 1948,
following the war establishing Israel’s independence, the boycott was formalized
against the state of Israel and broadened to include non-Israelis who maintain
economic relations with Israel or who are perceived to support it. The boycott is
administered by the Damascus-based Central Boycott Office, a specialized bureau of
the Arab League.1
The U.S. government has often been at the forefront of international efforts to
end enforcement of the boycott and to seek the Arab League’s revocation of it. The
U.S. government participates in bilateral and multilateral negotiations with Arab
League members regarding the boycott. U.S. legislative action related to the boycott
dates from 1959 and includes multiple statutory provisions expressing U.S.
opposition to the boycott, usually in foreign assistance legislation. In 1965, Congress
adopted mandatory reporting of any requests for U.S. companies to participate in the
boycott. In 1977, Congress passed laws making it illegal for U.S. companies to
cooperate with the boycott and authorizing the imposition of civil and criminal
penalties against U.S. violators. Lastly, U.S. taxpayers who cooperate with the
boycott are subject to the loss of tax benefits that the U.S. government provides to
exporters. These benefits include, among others, the foreign tax credit, the benefits
for foreign sales corporation (FSC) since repealed, and the tax deferral available to
U.S. shareholders of a controlled foreign corporation (CFC).
Current Status of the Boycott
The boycott has three tiers. The primary boycott prohibits citizens of an Arab
League member from buying, selling, or entering into a business contract with either
the Israeli government or an Israeli citizen. The secondary boycott extends the
primary boycott to any entity world-wide that does business with Israel. A blacklist
of global firms that engage in business with Israel is maintained by the Central
1
Nancy Turck, “The Middle East: The Arab Boycott of Israel,” Foreign Affairs, April 1977.
CRS-2
of global firms that engage in business with Israel is maintained by the Central
Boycott Office, and disseminated to Arab League members. The tertiary boycott
prohibits an Arab League member and its nationals from doing business with a
company that in turn deals with companies that have been blacklisted by the Arab
League. The Boycott also applies to companies that the Arab League identifies as
having “Zionist sympathizers” in executive positions or on the board of the company.
According to one analyst, the “nature and detail of these rules reflect the boycotting
countries’ tolerance for only the most minimal contacts with Israel.”2
The Arab League does not enforce the boycott and boycott regulations are not
binding on member states. However, the regulations have been the model for various
laws implemented by member countries. The League recommends that member
countries demand certificates of origin on all goods acquired from suppliers to ensure
that such goods meet all aspects of the boycott.
Overall enforcement of the boycott by member countries appears sporadic.
Some Arab League members have limited trading relations with Israel. The Arab
League does not formally or publicly state which countries enforce the boycott and
which do not. Some Arab League member governments have maintained that only
the Arab League, as the formal body enforcing the boycott, can revoke the boycott.
However, adherence to the boycott is an individual matter for each Arab League
member and enforcement varies by state.
There are indications that some Arab League countries publicly support the
boycott while continuing to quietly trade with Israel. According to Doron Peskin,
head of research at InfoProd, a consulting firm for foreign and Israeli companies
specializing in trade with Arab states, “the Arab boycott is now just lip service.”3
This sentiment has been echoed by Arab officials, albeit anonymously. One official
commented to the Egyptian newspaper Al-Ahram that, “boycotting Israel is
something that we talk about and include in our official documents but it is not
something that we actually carry out — at least not in most Arab states.”4
Others assert that enforcement of the boycott waxes and wanes with the level
of intensity of the Israeli-Palestinian issue and that currently interest in boycott
enforcement among Arab countries may be increasing due to the ongoing Iraq
conflict. The U.S. Department of Commerce has reported that requests for U.S.
companies to participate in the Arab League Boycott increased in 2006 for many
countries including Bahrain, Lebanon, Qatar, and Iraq. However, the Arab League
has acknowledged that U.S. pressure has affected its ability to maintain the boycott.
In May 2006, the Arab League held its most recent conference on the boycott in
Damascus, Syria. At the meeting, one conference participant reportedly said, “The
2
Howard N. Fenton III, “United States Antiboycott Laws: An Assessment of Their Impact
Ten Years after Adoption,” Hastings International & Comparative Law Review, Vol. 10 ,
1987, cited in Eugene Kontorovich, “The Arab League Boycott and WTO Accession: Can
Foreign Policy Excuse Discriminatory Sanctions,” Chicago Journal of International Law,
Vol. 4 No. 2, Fall 2003.
3
Orly Halpern, “Arab Boycott Largely Reduced to ‘Lip Service,’” Jerusalem Post, February
28, 2006.
4
Dina Ezzat, “Boycott Israel? Not so simple,” Al-Ahram Weekly Online, April 11-17, 2002.
CRS-3
Damascus, Syria. At the meeting, one conference participant reportedly said, “The
majority of Arab countries are evading the boycott, notably the Gulf states and
especially Saudi Arabia,” and that a major reason for these countries bypassing the
boycott is “growing U.S. pressures in the direction of normalization with the Jewish
state.”5
Some states and entities have formally ended the boycott, or at least some
aspects of it. Egypt (1979), the Palestinian Authority (1993), and Jordan (1994)
signed peace treaties or agreements that ended the boycott.6 Mauritania, which never
applied the boycott, established diplomatic relations with Israel in 1999. Algeria,
Morocco, and Tunisia do not enforce the boycott.7 In 1994, the member countries of
the Gulf Cooperation Council (GCC) — Bahrain, Kuwait, Oman, Qatar, Saudi
Arabia, and the United Arab Emirates — announced that they would only enforce the
primary boycott. In 1996, the GCC states recognized that total elimination of the
boycott is a necessary step for peace and economic development in the region.
However, U.S. companies continue to receive requests to cooperate with the boycott
from GCC member countries. Lebanon enforces the primary, secondary, and tertiary
boycotts.8
Impact of the Boycott
Since the boycott is sporadically applied and ambiguously enforced, its impact,
measured by capital or revenue denied to Israel by companies adhering to the boycott,
is difficult to measure. The effect of the primary boycott appears limited since intraregional trade and investment are small. Nonetheless, there is some limited trade
between Israel and its Arab neighbors. In 2004, according to the Manufacturers
Association of Israel (IMA), Israeli exports to Arab countries and entities (mainly
Egypt, Jordan, and the Palestinian Authority) totaled $192 million.9
Enforcement of the secondary and tertiary boycotts have decreased over time,
reducing their effect. A 1996 study by researchers at Tel Aviv University looked at
the effect of the Arab boycott on the Israeli economy through the automobile market.
Following a relaxation of boycott enforcement in the late 1980s through the early
1990s, Asian countries began exporting cars to Israel. The study found that if the
boycott had continued to be enforced, and these cars did not enter the Israeli market,
5
Arabs evading economic boycott of Israel, United Press International, May 16, 2006.
6
Egyptian-Israeli peace treaty, March 26, 1979, Article III, paragraph 3; Treaty of Peace
between the State of Israel and the Hashemite Kingdom of Jordan, October 26, 1994, Article
7, Section 2, paragraph A; Declaration of Principles, September 10, 1993.
7
2007 National Trade Estimate Report on Foreign Trade Barriers, United States Trade
Representative, March 30, 2007.
8
9
Ibid.
“Exports from Israel Up, Up, Up!,” Bridges for Peace, June 27, 2005. U.S. efforts to
increase trade in the region include the Qualified Industrial Zone (QIZ) program, which
allows goods jointly produced by Israel and either Jordan or Egypt to enter the United States
duty free. See CRS Report RS22002, Qualifying Industrial Zones in Jordan and Egypt, by
Mary Jane Bolle, Alfred B. Prados, and Jeremy M. Sharp.
CRS-4
boycott had continued to be enforced, and these cars did not enter the Israeli market,
the Israeli car market would have been 12% smaller leading to a $790 price increase
per car. Total welfare loss for the study year, 1994, would have been an estimated
$89 million.10 Thus, it appears that since intra-regional trade is small, and that the
secondary and primary boycotts are not aggressively enforced, the boycott may not
currently have an extensive effect on the Israeli economy.
Despite the lack of economic impact on either Israeli or Arab economies, the
boycott remains of strong symbolic importance to all parties. Many Arab countries
want to deny normalization with Israel until there is a final resolution to the conflict
in the Palestinian territories. Israel, on the other hand, asserts that it wants to be
accepted in the neighborhood both in political terms and as a source of, and for,
foreign investment.11
U.S. Activity to End the Arab League
Boycott of Israel
The U.S. government officially opposes the boycott and works to end its
enforcement on multiple levels. For many years, language has been included in
successive foreign operations appropriations legislation concerning the boycott.
Section 535 of the Foreign Operations, Export Financing, and Related Programs
635 of the Consolidated Appropriations Act, 20062008 (P.L. 109-102110-161), states that
it is the sense of Congress that
(1) the Arab League boycott is an impediment to
peace in the region and to United
States investment and trade in the region; (2) the
boycott should be revoked and the
Central Boycott Office disbanded; (3) all Arab
League states should normalize
relations with Israel; and (4) the President and the
Secretary of State should continue
to oppose the boycott vigorously and encourage
Arab states to assume normal trading
relations with Israel. The act further states that U.S. embassies and government
officials are to raise the boycott with host country officials, noting the persistence of
illegal boycott requests and the impact on both U.S. firms and on other countries’
ability to expand trade and investment relations with Israel, and (5) the President
should report to Congress annually on specific steps being taken by the United States
to encourage Arab League states to normalize their relations with Israel to bring
about the termination of the boycott.
The U.S. government also works to end the boycott through bilateral and
multilateral trade agreements. During FTA negotiations with Bahrain, Oman, and
the United Arab Emirates, the status of the boycott was an issue of concern and these
countries reaffirmed their position not to comply with the boycott.12 However, the
credibility of their position has been questioned since both countries continue to
support the boycott. In June 2006, an Omani customs official reportedly told The
Jerusalem Post, “Products from Israel are not permitted because of the boycott ... If
10
Chaim Fershtman and Neil Gandal, “The Effect of the Arab Boycott on Israel: The
Automobile Market,” Tel Aviv University, January 1996.
11
Anju S. Bawa, “Israel Embarks on PR Face-lift,” The Washington Times, December 5,
2006.
12
2007 National Trade Estimate, op. cit. For more information, see CRS Report RS21846,
U.S.-Bahrain Free Trade Agreement, by Martin A. Weiss and CRS Report RL32638,
Middle East Free Trade Area: Progress Report, by Mary Jane Bolle.
CRS-5
someone brings products from Israel, they will be confiscated.”13 In reported remarks
before Bahrain’s Chamber of Commerce Bahraini Foreign Minister Sheikh Khalid
bin Ahmed Al Khalifa stated that “relations would be normal with Israel when the
Arab League orders the Arab countries to end the boycott, and until then the
Kingdom was sticking to the boycott.”14
The United States began negotiating an FTA with the United Arab Emirates
(UAE) in 2005 and their enforcement of the boycott has been a contentious issue
during the negotiations. In February 2006, at the height of debate in the United
States over whether to allow Dubai Ports World to have control over six U.S. ports,
Muhammad Rashid a-Din, a staff member of the Dubai Customs Department
reportedly told The Jerusalem Post, “Yes, of course the boycott is still in place and
is still enforced ... if a product contained even some components that were made in
Israel, and you wanted to import it to Dubai, it would be a problem.”15 As of April
2007July
2008, the U.S.-UAE FTA talks are on hold, and reportedly will resume if the
Administration regains fast-track negotiating authorityit is expected that talks will not resume
during the Bush Administration.16
Multilaterally, the United States has used accession to the World Trade
Organization to secure agreement from Saudi Arabia in November 2005 that all
aspects of the boycott would be dismantled. Despite this concession, it appears that
Saudi Arabia’s enforcement of the boycott is ongoing. The Bush Administration
argues in the 2007 National Trade Estimate Report (NTE) that Saudi boycott
violations “appear to reflect out-of-date language in recycled commercial and tender
documents.”17 However, in June 2006, The Jerusalem Post said that Saudi Arabia’s
ambassador to the United States told a luncheon audience at the Brookings Institution
that Saudi Arabia intends to continue enforcing the primary boycott. Reportedly,
Prince Turki Al-Faisel stated that he believed “the primary boycott is an issue of
national sovereignty guaranteed within the makeup of the WTO and its rules.”18
Lastly, concerns have emerged that Iraq has increased its own enforcement of
the Boycott in the past several years, due to increasing frustration with the ongoing
violence.19 In FY2006FY2007, the number of requests from Iraq for U.S. companies to
13
Michael Freund, “Boycott of Israel still in effect, Omani official tells ‘Post’,” The
Jerusalem Post, June 8, 2006.
14
Michael Freund, “Bahrain’s Israel Boycott to Continue,” The Jerusalem Post, May 11,
2006.
15
Michael Freund, “Dubai Ports Firm Enforces Israel Boycott,” The Jerusalem Post,
February 28, 2006.
16
Doug Palmer, “U.S., UAE say still hope to reach free trade deal,” Reuters, March 12,
Safura Rahimi, “US puts UAE free trade deal on ice,” Emirates Business 24/7, December
23, 2007.
17
2007 National Trade Estimate Report on Foreign Trade Barriers, Office of the United
States Trade Representative, p. 17.
18
Michael Freund, “Saudi Ambassador to US admits boycott of Israel still in force,” The
Jerusalem Post, June 22, 2006.
19
“Iraq’s Enforcement of Arab Boycott of Israel Is Concern, ITA Official Tells Iraqis,” The
(continued...)
CRS-6
comply with the boycott increased 287% from FY2005, from 8 to 31 requestswas 72, an increase from 31 in FY2006 and 8 in 2005. The
Commerce Department reports that for all boycott countries, during FY2006FY2007, U.S.
companies submitted 1,291633 reports on boycott-related requests from Arab League
members and other countries that enforced the boycott on Israel (Table 1). For many
countries, the figure increased from FY2005. Requests from Lebanon were up 33%
to 125; from Bahrain, up 32% to 37; and from Qatar, up 32% to 90. The The
United Arab
Emirates remained the largest source of boycott-related requests with 486 requests.
Requests from Saudi Arabia decreased 49% to 42 from 85 in FY2005.
682 requests.20
Table 1. FY2006FY2007 Boycott Requests Received by U.S. Companies
Country
Number of Requests to
Comply with the Secondary
and Tertiary Boycotts
United Arab Emirates (UAE)
486682
Lebanon
125
Qatar
90
Kuwait
73
Syria
49
Saudi Arabia
42
Libya
38
Bahrain
37
Iraq
31
Egypt
5
Jordan
3114
Qatar
94
Syria
79
Iraq
72
Saudi Arabia
65
Kuwait
56
Libya
50
Bahrain
24
Egypt
1
Jordan
0
Other (Algeria, India, Iran, Malaysia, Nigeria,
Oman, Pakistan, Tunisia, and Yemen)
312
1,291396
1,633
Total
Source: Department of Commerce.
U.S. Antiboycott Compliance Legislation
The United States passed antiboycott legislation in the late 1970s to discourage
U.S. individuals from cooperating with the secondary and tertiary boycotts.
Antiboycott laws apply to “U.S. exports and imports, financing, forwarding and
shipping, and certain other transactions that may take place wholly offshore.”21
19
(...continued)
Export Practitioner, March 2007.
20
U.S. Department of Commerce, Bureau of Industry and Security Annual Report Fiscal
Year 2006, Appendix E-3, p. 62.
CRS-7
Antiboycott laws apply to “U.S. exports and imports, financing, forwarding and
shipping, and certain other transactions that may take place wholly offshore.”212007, Appendix E-3, p. 72.
21
Website of the Department of Commerce’s Office of Antiboycott Compliance.
[http://www.bis.doc.gov/AntiboycottCompliance/oacrequirements.html#whatscovered].
CRS-7
Although U.S. legislation and practices were designed to counteract the Arab
League boycott of Israel, in practice, they apply to all non-sanctioned boycotts.
According to the Department of Commerce’s Office of Antiboycott Compliance,
legislation was enacted to “encourage, and in specified cases, require U.S. firms to
refuse to participate in foreign boycotts that the United States does not sanction. They
have the effect of preventing U.S. firms from being used to implement foreign
policies of other nations which run counter to U.S. policy.”22
U.S. regulations define cooperating with the boycott as: (1) agreeing to or
actually refusing to do business in Israel or with a blacklisted company; (2) agreeing
to or actually discriminating against other persons based on race, religion, sex,
national origin, or nationality; (3) agreeing to or actually furnishing information
about business relationships in Israel or with blacklisted companies; and (4) agreeing
to or actually furnishing information about the race, religion, sex, or national origin
of another person.
U.S. antiboycott laws are included in the Export Administration Act of 1979
(EAA) and the Ribicoff Amendment to the Tax Reform Act of 1976 (TRA).23 The
export-related antiboycott provisions are administered by the Department of
Commerce and prohibit U.S. persons from participating in the boycott. The Internal
Revenue Service (IRS) administers tax-related antiboycott regulations that deny tax
benefits to U.S. taxpayers that participate in the boycott.
Export-Related Antiboycott Legislation
Regulations included in section 8 of the EAA prohibit any U.S. person or
company from complying with an unsanctioned foreign boycott and require them to
report requests to comply with a boycott they have received. Such requests must be
reported quarterly to the Department of Commerce’s Office of Antiboycott
Compliance (OAC) in the Bureau of Industry and Security (BIS). These regulations
are implemented in part 760 of the Department of Commerce’s Export
Administration Regulations (EAR).
21
Website of the Department of Commerce’s Office of Antiboycott Compliance.
[http://www.bis.doc.gov/AntiboycottCompliance/oacrequirements.html#whatscovered].
The EAA prescribes penalties that may be imposed for violation of the
antiboycott regulations. Civil penalties for violating the antiboycott provisions are
a maximum fine of $50,000 per violation and a potential loss of export privileges for
a period of time. Particularly egregious cases may be referred to the Department of
22
Website of the Office of Antiboycott Compliance.
AntiboycottCompliance/oacrequirements.html]
23
[http://www.bis.doc.gov/
Section 8 of The Export Administration Act of 1979 (P.L. 96-72; 50 U.S.C. app. §2407)
has expired but its provisions are continued under the authorization granted to the President
in the National Emergencies Act (NEA) (P.L. 94-412; 50 U.S.C. §1601-1651) and the
International Economic Emergency Powers Act (IEEPA) (P.L. 95-223; 50 U.S.C. app.
§2407), most recently under Executive Order 13222 signed August 17, 2001 (66 F.R. 44025,
August 22, 2001). Antiboycott export regulations are at 15 C.F.R. 760.1 et seq. The
Ribicoff Amendment to the Tax Reform Act of 1976 (P.L. 94-455) added section 999 to the
Internal Revenue Code of 1986, as amended (26 U.S.C. §1 et seq). Tax regulations are at
26 C.F.R. §7.999-1.
CRS-8
The EAA prescribes penalties that may be imposed for violation of the
antiboycott regulations. Civil penalties for violating the antiboycott provisions are
a maximum fine of $50,000 per violation and a potential loss of export privileges for
a period of time. Particularly egregious cases may be referred to the Department of
Justice for criminal prosecution. Criminal penalties imposed for each violation can
include a fine of up to $50,000 or five times the value of the exports involved,
whichever is greater, or imprisonment for up to five years, or both. Willful
violations, where the violator has knowledge that the items are also intended for any
country to which exports are restricted for national security or foreign policy
purposes, are punishable by fines up to $250,000 or imprisonment for up to ten years.
In 2006FY2007, according to the Department of Commerce, nineten companies paid
$95,950194,500 to settle allegations that they violated U.S. antiboycott provisions, an
increase from five cases and $57,000 in 2005. However, this is significantly lower
than 1998, when penalties of $380,000 were assessed. In January 2007, the
Department of Commerce fined the New York office of the National Bank of Egypt,
Egypt’s largest bank, $22,500 for boycott violations. Allegedly, the bank provided
four commercial invoices in 2001 and 2002 to the Al Issar Trading Company of
Syria, that declared that the goods had not been manufactured or produced in Israel.24nine cases and $95,950 in FY2006.
In July 2007, BIS amended existing penalty guidelines to introduce a voluntary
disclosure program that could reduce a potential fine levied on an exporter if they
voluntarily disclose their violation of U.S. anti-boycott laws. For the disclosure to
have a mitigating effect, notification must take place prior to BIS learning about the
violation from other sources and commencing an investigation. The new guidelines
also created a new supplement no. 2 to the antiboycott provisions that more clearly
describes how BIS investigates violations of U.S. antiboycott laws and determines
penalty rates.
Tax-Related Antiboycott Legislation
The Ribicoff Amendment to the TRA added section 999 to the Internal Revenue
Code. This section denies various tax benefits normally available to exporters if they
participate in the boycott. In addition, the IRS requires U.S. taxpayers to report
operations in, with, or related to countries that the Treasury Department includes on
its annual list of countries that may require participation in an international boycott,
and with any other country from which they receive a request to participate in a
boycott.2524
Denying tax benefits to U.S. firms that participate in the boycott appears to be
an effective antiboycott strategy. According to one study, U.S. legislation reduces
overall participation in the boycott by U.S. taxpayers by between 15 and 30%.2625
However, the effectiveness of U.S. antiboycott tax legislation may diminish since the
U.S. government is reducing export tax benefits that are available to U.S.-based
companies to comply with World Trade Organization (WTO) rulings.27
24
Alleged boycott violations are disseminated by the Office of Antiboycott Compliance at
[http://efoia.bis.doc.gov/Antiboycott/Violations/TOCAntiboycott.html].
2526
24
The current list is Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, United Arab
Emirates, and Yemen. Iraq is not included in this list, but its status with respect to future
lists remains under review by the Department of the Treasury. “List of the Countries
Requiring Cooperation with an International Boycott, Department of the Treasury,”
Department of the Treasury, 72 F.R. 63, April 3139, July 16, 2007.
2625
James R. Hines, Jr., “Taxed Avoidance: American Participation in Unsanctioned
International Boycotts,” NBER Working Paper 6116, July 1997.
27
See CRS Report RS20746, Export Tax Benefits and the WTO: The Extraterritorial Income
(continued...)
CRS-9
Congressional Action
The recent rise in boycott requests received by U.S. business and statements of
support for the boycott from U.S. trading partners in the region has continued to keep
the boycott an issue of interest for Members of Congress. In addition to legislative
provisions directing U.S. officials to pursue diplomatic negotiations to end the
boycott’s enforcement and those preventing U.S. companies from cooperating with
the boycott, Members of Congress periodically introduce Sense of Congress
legislation related to the boycott. During the 109th Congress Representative Clay
Shaw introduced a concurrent resolution (H.Con.Res. 370) expressing the sense of
Congress that Saudi Arabia, which joined the World Trade Organization (WTO) in
2005, is not living up to its WTO commitments by continuing to support the boycott.
The resolution passed the House unanimously on April 5, 2006. No boycott-specific
legislation has been introduced during the 110th Congress.
27
(...continued)26
See CRS Report RS20746, Export Tax Benefits and the WTO: The Extraterritorial Income
Exclusion and Foreign Sales Corporations, by David L. Brumbaugh.