ABOVE:Port of Fujairah

Eugene Cotilli is the Media/Congressional Liason at the Department of Commerce and is the listed contact for inquiries relating to the Bureau of Industry and Security (“BIS”). Josh Lederman of the Associated Press contacted him to ask him whether the boycott against Qatar by Saudi Arabia, Bahrain, Egypt and the U.A.E. is an unsanctioned foreign boycott for purposes of the BIS anti-boycott rules that prohibit U.S. companies from complying with unsanctioned foreign boycotts. This blog has previously discussed this issue in this post.

This is a perfectly legitimate question. It is an important question because if the rules do apply and a U.S. company accepts a purchase order with an impermissible boycott clause, it is subject to a fine of $284,582 or twice the value of the transaction, whichever is greater. If the order with the impermissible clause is for $1 million worth of goods, the company accepting that order is liable for a civil penalty of $2 million dollars.

So, given the serious consequences of such a violation, Mr. Cotilli certainly provided useful guidance on this simple question, right? Here is his response: no comment. Right, he declined to answer Lederer’s simple and legitimate question. He didn’t even say,  “I’ll find out and get back to you.”

Part of the purpose of this post is to shame bad government. But there’s another purpose as well. It’s to encourage you to download and save a copy of Josh Lederman’s article and put it in your files. Although the safe play with respect to the Qatar boycott is to treat it as an unsanctioned foreign boycott, as my previous post thought was the case, you might still get caught up in a violation because BIS’s antiboycott rules are ridiculously complex, profoundly unclear and preposterously confusing. You could, even with the best of intentions, run afoul of them because of some clause buried in a letter of credit. Cotilli’s refusal to answer a simple and direct question as to whether the Qatar boycott is covered by these rules may turn out to be your best defense.

You’re welcome.

ABOVE:Port of Fujairah

As you probably know, various Arab countries, including Saudi Arabia, the U.A.E. and Egypt have imposed a boycott on Qatar, allegedly because of remarks that appeared on the Qatar News Agency’s website where Qatar emir Sheikh Tamim bin Hamad Al Thani called Iran an “Islamic power” and, even worse, said Qatar has “good” relations with Israel. Qatar claims that the Sheikh never said this and that the QNA website was hacked. U.S. intelligence officials have said that this was likely the work of Vladimir Putin and his band of merry hackers, who were hoping to create a rift among the United States and its Arab allies — something the hack may well have accomplished.

What you may not know is that the Port of Fujairah, in the United Arab Emirates, has just banned from the port all maritime traffic coming from or headed to Qatar. Now, how many of you immediately thought of the Bureau of Industry and Security’s Anti-Boycott rules when you (just) heard this? “Pshaw,” you say, “those rules only apply to the Arab League Boycott of Israel.” But in fact the Anti-Boycott Rules never even mention that boycott. By their terms, they apply to any “unsanctioned foreign boycott.” Even though the rules go into excruciating details on all matter of things,  the term “unsanctioned foreign boycott” on which the whole byzantine edifice is constructed, is, oddly, never defined.  Even so, you can be pretty sure that the boycott against U.S. ally Qatar is one of those “unsanctioned foreign boycotts.”

That being said, consider the following scenario. A customer in Fujairah, UAE, wants to buy from you $2 million worth of fidget spinners. The purchase order contains the following clause:

The shipping terms for the purchased goods are DDP Port of Fujairah (INCOTERMS 2010). The good may not be shipped on a Qatari-flagged vessel or on a vessel that visited, or is destined to visit, Qatar.

Can you accept the order?

The Anti-Boycott rules do provide some limited exceptions to permit compliance with shipping instructions of boycotting countries. Section 760.3(b)(1)(i) permits a U.S. person to comply with a prohibition of shipping the goods on a Qatari-flagged vessel. In addition, section 760.3(b)(2)(i) permits a U.S. person to agree not to ship the goods through Qatar. However, the exceptions only apply to requirements for “shipping goods to the boycotting country.” Any restrictions on where the ship calls after that shipment is complete and the goods are delivered to Fujairah would be a violation of the rules.

So there’s something else for you to worry about. You’re welcome.

The best job at the Bureau of Industry and Security is, without question, working at the Office of Antiboycott Compliance (“OAC”) because all their cases are pretty much the exact same thing, leaving plenty of time to finish the daily crossword puzzle and read the sports pages. If you don’t believe me that they are all the same, just look at the latest enforcement action from OAC against McWane International, an Alabama company that manufacturers water pipes. McWane agreed to a $7,000 fine for providing a certificate that a ship was “allowed by Arab authorities to call at Arabian ports” and failing to report documentary requirements in a letter of credit for a certificate from the “owner, carrier or captain of the vessel or their agent” that the ship could call in Arab ports.

Regular readers of this blog, which obviously did not include anyone at McWane, will immediately see the problems with these certifications. Under BIS rules such certifications can only be made by the “owner, charterer, or master” of the ship. It can’t be made by McWane (which was none of the above) or by an “agent” of the “owner, charterer, or master.” We’ve talked about this identical issue at length here and here.

Fortunately the fine is only $7,000, well below an amount that might lead anyone to challenge the dubious statutory authority of the Office of Antiboycott Compliance to even exist. Disagreements over the antiboycott provisions in the Export Administration Act were one of the reasons that the act lapsed. Whether in that context the existence of the Arab boycott is a national emergency authorizing the President to extend the antiboycott provisions under the International Economic Emergency Powers Act (“IEEPA”) is highly questionable.