"Is any of this stuff made in Israel?"
June 27, 2003 (dated but timeless!) A Missouri company has been fined $6,000 for not reporting a customer's question to the federal government. The question that's punished by law is: Are any of these products made in Israel, or made of Israeli materials?
The Kansas City Star reports:
The anti-boycott provisions bar U.S. companies from providing information about their business relationships with Israel. They also require that receipt of boycott requests be reported to the Bureau of Industry and Security, formerly known as the Bureau of Export Administration.
We ask: Why is this question forbidden? Why is any question forbidden?
It sounds more like the USSR than the USA, to punish people for asking a forbidden question, or for not immediately reporting to the government that someone else asked a forbidden question.
Only a few years ago, during South Africa's apartheid era, it was considered the height of good moral backbone to ask whether a product came from that country. Today, many Americans are asking such questions about products they suspect came from France, after the French government declined to join "Operation Iraqi Freedom."
The newspaper's article doesn't make it clear whether these restrictions apply only to US companies selling stuff outside the US, or whether the law applies to everyone. Either way, it's reprehensible.
Editor's note: Here's what the US Office of Antiboycott Compliance says: "The antiboycott provisions of the Export Administration Regulations (EAR) apply to all "U.S. persons," defined to include individuals and companies located in the United States and their foreign affiliates. ..."
And here's a press release from the US Department of Commerce: "Commerce Under Secretary for Industry and Security Kenneth I. Juster today reiterated to U.S. companies that the Department will vigorously enforce its regulations prohibiting U.S. persons from taking any action in support of foreign government boycotts against Israel. ..."
If K-Mart is having a sale on cheap plastic chess sets and we ask the clerk whether the board or pieces were made in Israel, is the clerk allowed to answer? Must the store promptly file a form with the Bureau of Industry and Security reporting that we asked?
* * *
Well, we'll be asking the forbidden question in every store we enter. Not because we're boycotting Israel — we're not. Heck, if we were boycotting products from countries whose policies are abhorrent, we'd start by boycotting anything marked "made in USA."
We'll be asking the forbidden question because we believe in freedom. In a free society, the government doesn't tell people what questions they can ask, and what questions they can't, and what questions must be promptly reported to the authorities.
We had heard of this law before — banning people from even asking about boycotting Israeli products — but we had foolishly assumed it wasn't often enforced.
According to the article, though, "more than $26 million in fines" have been levied for violations of this law, suggesting that enforcement of the Forbidden Question Law is not at all uncommon. The fine in this case was $6,000, so assuming that's average and doing the math, more than 4,000 Americans or American companies have been fined — for asking the forbidden question, or failure to report that someone else asked the forbidden question.
North Kansas City company settles charge
related to boycott of Israel
by Dan Margolies, Kansas City Star June 25, 2003
Cook Composites and Polymers Co. has agreed to pay a $6,000 fine to settle charges that it violated Commerce Department regulations aimed at countering the Arab boycott of Israel.
The department's Bureau of Industry and Security had charged that, in response to a request from a customer in Bahrain, Cook had furnished information stating that the goods being shipped were not of Israeli origin and did not contain Israeli materials.
The bureau also charged that Cook had failed to report its receipt of the request.
Cook, of North Kansas City, neither admitted nor denied the allegations, but agreed to pay the $6,000 civil penalty.
The antiboycott provisions bar U.S. companies from providing information about their business relationships with Israel. They also require that receipt of boycott requests be reported to the Bureau of Industry and Security, formerly known as the Bureau of Export Administration.
Cook's chief executive, Charles Bennett, was in Paris this week and unavailable for comment. A spokeswoman for the company, Rita Durocher, said the fine marked the first time Cook has had a run-in with a federal agency.
"If you go back and look at our record, we've been flawless with other government agencies," she said.
Cook makes polyester gels and other coating resins. It operates plants throughout North America.
The settlement with the Commerce Department came after the Bush administration in November warned U.S. companies not to heed calls to boycott Israeli goods and services. The warning followed a call by the 22-member Arab League to reactivate its decades-long boycott of Israel.
In a statement released at the time by the department, Commerce Undersecretary for Industry and Security Kenneth Juster reminded American companies that the "U.S. government is strongly opposed to restrictive trade practices or boycotts targeted against Israel."
Knowing violators of the anti-boycott provisions face fines of up to $50,000, or five times the value of the exports at issue, and possible imprisonment. Offenders can also be denied export privileges.
The Bureau of Industry and Security says it has imposed more than $26 million in fines for violations of the provisions.
More than a decade ago, the Commerce Department sent compliance officers to Kansas City to check out tips that Marion Merrell Dow Inc. and Marley Cooling Tower Co. may have cooperated with the Arab boycott. Nothing came of the investigation, and no penalties were imposed.
In Cook's case, the Bureau of Industry and Security charged that Cook failed to report a letter of credit it received on Dec. 1, 1997, from ABN AMRO Bank in Manama, Bahrain. The letter asked it to confirm that the goods being shipped "are not of Israeli origin nor do they contain any Israeli"material.
The bureau also charged that on Jan. 20, 1998, Cook, through its freight forwarder, provided a U.S. bank with a copy of a commercial invoice confirming that the goods were not of Israeli origin and did not contain Israeli material.
Cook, with 558 employees overall and 120 employees locally, is one of North Kansas City's biggest employers. The company bills itself as the No. 1 producer of gel coats in the world and, together with affiliated companies, the No. 2 producer of resins.
Since 1990, Cook has had a joint venture relationship with the chemicals division of TotalFinaElf, a multibillion-dollar petrochemicals giant based in Paris.
The Kansas City Star
* * *
Here's the official Q&A about this law, as found at the federal government's
Office of Antiboycott Compliance website
During the mid-1970's the United States adopted two laws that seek to counteract the participation of U.S. citizens in other nation's economic boycotts or embargoes. These "antiboycott" laws are the 1977 amendments to the Export Administration Act (EAA) and the Ribicoff Amendment to the 1976 Tax Reform Act (TRA).
The antiboycott laws were adopted 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.
The Arab League boycott of Israel is the principal foreign economic boycott that U.S. companies must be concerned with today. The antiboycott laws, however, apply to all boycotts imposed by foreign countries that are unsanctioned by the United States.
The antiboycott provisions of the Export Administration Regulations (EAR) apply to all "U.S. persons," defined to include individuals and companies located in the United States and their foreign affiliates. These persons are subject to the law when their activities relate to the sale, purchase, or transfer of goods or services (including information) within the United States or between the U.S. and a foreign country. This covers U.S. exports and imports, financing, forwarding and shipping, and certain other transactions that may take place wholly offshore.
Generally, the TRA applies to all U.S. taxpayers (and their related companies). The TRA's reporting requirements apply to taxpayers' "operations" in, with, or related to boycotting countries or their nationals. Its penalties apply to those taxpayers with foreign tax credit, foreign subsidiary deferral, FSC (Foreign Sales Corporation), and IC-DISC (Interest Charge-Domestic International Sales Corporation) benefits.
Conduct that may be penalized under the TRA and/or prohibited under the EAR includes:
- Agreements to refuse or actual refusal to do business with or in Israel or with blacklisted companies.
- Agreements to discriminate or actual discrimination against other persons based on race, religion, sex, national origin or nationality.
- Agreements to furnish or actual furnishing of information about business relationships with or in Israel or with blacklisted companies.
- Agreements to furnish or actual furnishing of information about the race, religion, sex, or national origin of another person.
Implementing letters of credit containing prohibited boycott terms or conditions.
The TRA does not "prohibit" conduct, but denies tax benefits ("penalizes") for certain types of boycott-related agreements.
The EAR requires U.S. persons to report quarterly requests they have received to take certain actions to comply with, further, or support an unsanctioned foreign boycott.
The TRA requires taxpayers to report "operations" in, with, or related to a boycotting country or its nationals and requests received to participate in or cooperate with an international boycott. The Treasury Department publishes a quarterly list of "boycotting countries."
EAR reports are filed quarterly on form BIS 621-P for single requests or BIS 6051-P for multiple requests available from the Department of Commerce’s Office of Antiboycott Compliance (OAC) in Washington, D.C. To obtain these forms, telephone OAC’s Reports Processing Unit at (202) 482-2448. TRA reports are filed with tax returns on IRS Form 5713. This form is available from local IRS offices.
The EAR prescribe the penalties for violations of the Antiboycott Regulations as well as export control violations. These can include:
The penalties imposed for each "knowing" violation can be a fine of up to $50,000 or five times the value of the exports involved, whichever is greater, and imprisonment of up to five years. During periods when the EAR are continued in effect by an Executive Order issued pursuant to the International Emergency Economic Powers Act, the criminal penalties for each "willful" violation can be a fine of up to $50,000 and imprisonment for up to ten years.
For each violation of the EAR any or all of the following may be imposed:
Boycott agreements under the TRA involve the denial of all or part of the foreign tax benefits discussed above.
The $10,000 maximum per violation specified in the EAA is adjusted periodically pursuant to law for inflation. The maximum civil penalty for any violation committed from October 23, 1996 through November 1, 2000 is $11,000 per violation. The maximum civil penalty for any violation committed after November 1, 2000 is $12,000 per violation. ...
Top of Page