BIS issued the first anti-boycott penalty of the year last week to the National Bank of Egypt (warning: linked Bank web site has migraine-inducing animated gifs). As a result, BIS wrangled a settlement agreement and payment of $22,500 from the Bank. True to BIS form, the charging letter, the settlement agreement and the order provide minimal detail about the alleged violation, but still enough that something smells fishy, and it’s not a Nile Perch.

The charging letter notes that NBE has a branch in New York and then alleges that the bank “engaged in transactions involving the sale and/or transfer of goods or services (including information) from the United States to Syria.” Specifically, the charging letter references four commercial invoices either to or from Al Issar Trading Company which contained language certifying that no Israeli goods were “used for the production or preparation of the goods mentioned in this invoice.”

I think it is safe to say that the NBE in branch in New York was neither selling goods nor buying goods from Al Issar Trading Company. More likely, indeed almost certainly, what was involved here was that the Bank was issuing or confirming a letter of credit relating to that transaction. In a typical instance, a commercial invoice would be one of the documents to be presented for payment of the credit and would be used to determine the amount payed. The issuing or confirming bank would not read all the terms and conditions of the invoice, including any warranties relating to the country of origin of the goods or their component parts.

This is not unlike BIS’s penalizing a freight forwarder for a prohibited boycott term buried in the shipping documents, which we have complained about before. EAR § 760.1(e)(3) makes clear that intent is required for each anti-boycott violation and not merely the intent to perform the act that constituted the violation but also the “intent to comply with, further, or support an unsanctioned foreign boycott.” Since the Bank likely did not read the entire commercial invoice, it almost certainly didn’t have the requisite intent. Nor does there seem to be any sound policy basis to force banks to read every word of all customer export documents to ferret out anti-boycott violations.

The BIS website recently listed an anti-boycott settlement agreement involving freight forwarder and customs broker International Specialist, Inc., located in Boston, Massachusetts. The charging letter provided this significant bit of information about the alleged violation:

In connection with the transaction described above, on or about August 29, 2003, you provided to a customer in Oman, AEA Technology commercial invoice #102075, Order #CO133795, which contained the following information:

“NO ISRAELI COMPONENTS USED.”

Note that this is not an allegation that the freight forwarded actively provided the proscribed information about Israeli components; rather the freight forwarder merely provided the information passively by delivering shipping documents that contained a statement from its customer that provided the proscribed information.

The freight forwarder was charged with a violation of EAR § 760.2(d) which prohibits any U.S. person from providing information about that person’s or a third party’s business relationships with a boycotted country. Significantly, however, EAR § 760.1(e)(3) makes clear that intent is required for each anti-boycott violation and not merely the intent to perform the act that constituted the violation but also the “intent to comply with, further, or support an unsanctioned foreign boycott.”

This high-standard of intent is inconsistent with what looks like an effort by BIS to impose absolute liability on freight forwarders for forwarding commercial documents with proscribed information. Perhaps International Freight actually read every word of the customer’s invoice to the recipient in Oman and therefore had the requisite intent. But BIS doesn’t allege that and, frankly, it seems unlikely that International Freight bothered to scour all the terms of AEA’s invoice before forwarding it along with the shipped goods.

An article in today’s Jerusalem Post reports that the Arab Boycott of Israel, often thought to be on the wane, is alive and well and perhaps on the rise:

According to material compiled by the US Commerce Department’s Bureau of Industry and Security, a copy of which was obtained by the Post, Arab states made a total of 201 boycott-related requests in all of 2005, or fewer than 17 per month.

By contrast, US firms have reported receiving 120 boycott-related requests in just the first six months of this year, for an average of 20 per month, marking an increase of nearly 20 percent over the rate recorded last year.

The Jerusalem Post refers to this as a “sharp increase” although given the small number of data points here the difference between these figures may not be a statistically significant indicator of an increase. Additionally, these numbers still reflect a reduction from the 295 and 297 reports in 2003 and 2002 respectively. Even so, the numbers are high enough that exporters should realize that the Arab boycott is not a thing of the past.

The Post article is also interesting for its indication of which Arab countries appear to have generated the most anti-boycott reports by American companies:

Based on the material compiled by the Commerce Department, it appears that at least seven Arab countries, including ostensible US allies such as Bahrain, the United Arab Emirates (UAE), Kuwait and Iraq, are enforcing the terms of the Arab boycott more energetically this year than in 2005.

At the top of the list is the UAE, which made 40 boycott-related requests during the period of January to June, followed by Syria, with 20.

The prominence of the UAE on the list is not surprising since it has, at least for the past few years, led the list. That, however, may be short-lived. The United States and the UAE are negotiating a Free Trade Agreement, and the U.S. has made the UAE’s participation in the boycott an issue in the negotiations.