In September 2020, the United Arab Emirates, Israel and the United States signed the Abrahamic Accords, establishing diplomatic and trade relations between the United Arab Emirates and Israel. In August 2020, the UAE enacted Federal Legislative Decree No. 4 of 2020, officially ending its participation in the Arab boycott of Israel. As a result, the United States Department of Commerce’s Bureau of Industry and Safety recently amended the anti-boycott provisions set out in Part 760 of the Export Administration Regulations (EAR). Supplement No. 17 to Part 760, published on June 9, 2021, sets out the Commerce Department’s position that, as a result of these actions by the United Arab Emirates, certain requests for information, action or agreement from the United Arab Emirates, which were suspected boycott-related before August 16, 2020, are no longer presumed boycott-related if carried out after August 16, 2020, and therefore are no longer prohibited or reported under Part 760 of the AEOI.
Notably, the US Treasury Department also removed the United Arab Emirates from its list of “boycotting countries” as published in the Federal Register on April 8, 2021. This action by the Treasury Department has both substantive and substantive implications. report under the anti-toycott provisions set out in Section 999 of the Tax Code (Code).
United States Anti-Boycott Laws
For your information, there are two US anti-boycott laws – Part 760 of the AEOI and Section 999 of the Code. Each was enacted in the 1970s to prohibit or penalize certain forms of participation or cooperation in unauthorized foreign boycotts by American persons, including their foreign affiliates and American taxpayers, including members of their “controlled groups. “(within the meaning of Article 993 (a) (3) of the Code). While the two US anti-toycott laws apply to any foreign boycott not sanctioned by US law, the objective of both laws was the boycott of Israel by certain countries in the Middle East, which remains the only boycott of practical significance. today.
The two US anti-boycott laws are very technical and somewhat obscure. The two laws, although enacted around the same time, contain significant differences and inconsistencies and can be a trap for the unwary. Failure to comply with these laws can subject U.S. individuals and taxpayers to civil and criminal penalties under the AEOI, severe tax penalties under Section 999 of the Code, as well as negative publicity. and damage to reputation.
Precautions are always necessary for transactions in the United Arab Emirates
Recent revisions to the two anti-boycott laws affecting the United Arab Emirates do not mean that American companies and individuals doing business in the United Arab Emirates no longer need to heed any possible boycott demands. Such requests can always be received for a variety of reasons including error, use of outdated forms or an overzealous Emirati official. A boycott request received from the UAE government or entity could still have both substantial and reported consequences under both of the United States’ anti-toycott laws.
Country still on the Treasury’s list of “boycott countries”
In addition, the Treasury Department still lists Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria and Yemen as “boycott countries”. Therefore, companies doing or seeking to do business in one of these countries, or whose controlled foreign affiliates or members of the controlled group do so, should always be vigilant in the face of boycott demands from these countries. Such requests could violate the AEOIs, result in penalties under Section 999 of the Code, and trigger reporting obligations under both of the United States’ anti-toycott laws. In addition, any commercial “transaction” or attempt to do business in any of these “boycott countries” must be reported annually to the Internal Revenue Service on Form 5713, regardless of whether a boycott request has been received. or not and that the “transaction” did not produce any income.
To avoid substantial and reported violations or penalties under the two United States anti-toycott laws, companies doing business internationally must establish and maintain an effective anti-toycott compliance program. Having such a compliance program will enable them to identify banned, sanctioned and reportable boycott requests in a timely manner, eliminate or negotiate acceptable changes to problematic boycott provisions or requirements, and comply with reporting requirements of these US laws.