[Federal Register Volume 65, Number 106 (Thursday, June 1, 2000)]
[Rules and Regulations]
[Pages 34942-34950]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-13251]


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DEPARTMENT OF COMMERCE

Bureau of Export Administration

15 CFR Part 760

[Docket No. 000424111-0111-01]
RIN 0694-AA11


Restrictive Trade Practices or Boycotts

AGENCY: Bureau of Export Administration, Commerce.

ACTION: Final rule.

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SUMMARY: The Bureau of Export Administration is amending the Export 
Administration Regulations (EAR) to make certain editorial revisions 
and

[[Page 34943]]

clarifications to the antiboycott provisions of the EAR.

DATES: This rule is effective June 1, 2000.

FOR FURTHER INFORMATION CONTACT: Robert A. Diamond, Director, 
Compliance Policy Division, Office of Antiboycott Compliance, Bureau of 
Export Administration, Telephone: (202) 482-2381.

SUPPLEMENTARY INFORMATION: The Bureau of Export Administration's (BXA) 
Office of Antiboycott Compliance is responsible for the enforcement of 
the antiboycott provisions of the Export Administration Act (the Act), 
as amended. The Act encourages, and in some cases requires, U.S. 
persons to refuse to participate in foreign boycotts that the United 
States does not sanction. U.S. persons are also required to report 
receipt of boycott-related requests. The antiboycott provisions of the 
Act are implemented in part 760 of the Export Administration 
Regulations (EAR). Examples accompany the text of the regulations to 
aid in their interpretation.
    The antiboycott provisions of the EAR became effective on January 
18, 1978 and provided for a six-month grace period ending June 21, 
1978, when enforcement of certain of the sections of the regulations 
commenced. The purpose of the delayed effective date, which was 
provided by Section 4A(a)(2)(B) of the Export Administration Act of 
1977, as amended, was to allow the regulated public time to adjust 
their practices to the new regulations.
    This rule removes all references to the 1978 grace period, 
including deletions of language in the text of the regulations and the 
interpretative examples that no longer apply. In some cases, new text 
has been added to preserve the substantive meaning of the regulation or 
example. The rule also removes the phrase ``effective date of this 
part'' and replaces it with the January 18, 1978 date of publication of 
the original rule. In addition, this rule corrects paragraph 
references, particularly in the interpretative Supplements. It also 
provides clarifying language in instances where the original text was 
unclear, as well as making typographical corrections, as appropriate.
    This rule also addresses issues raised by a proposed rule published 
by the Department on September 26, 1989 (54 FR 39415). The proposed 
rule contained revisions and clarifications to the antiboycott 
provisions of the EAR that, at the time, the Department found ``[were] 
still debated or confusing.''
    Since 1989, the Department has had an additional ten years of 
experience in implementing the antiboycott provisions of the EAR and 
has concluded that some of the changes proposed in 1989 rule remain 
useful. These have been incorporated into the final rule. In some 
cases, proposed changes are incorporated with additional revisions or 
clarifying language as appropriate. Other proposed changes addressed 
issues which the Department no longer considers ``debated or 
confusing'' and have not been adopted in the final rule.
    The 1989 Proposed Rule addressed the following issues:
    (1) The intent provision to the reporting requirement;
    (2) The jurisdictional requirements relating to the implementation 
of letters of credit;
    (3) The furnishing information prohibitions about the nationality 
of directors and blacklisted persons;
    (4) The shipping requirement exception to refusals to use 
blacklisted vessels; and
    (5) The import and shipping document exception to information about 
the nationality of carriers and residence of manufacturers or 
suppliers.
    At the end of the 30-day comment period, three comments were 
received. Two additional comments were received after the comment 
period closed. All five comments were taken into account in developing 
this final rule. Having reviewed the comments received on this proposed 
rule, BXA is now issuing this rule in final form.
    Readers should note that part 769 was redesignated as part 760 on 
March 25, 1996. All comments were received prior to that date refer to 
part 769. Accordingly, in the following discussion, all references by 
commenters to part 769 have been changed to part 760 and its 
corresponding sections.

The Intent Provision to the Reporting Requirement

    One commenter contended that the two proposed changes to the intent 
provisions fail to clarify the applicable standards of intent. The 
Department's proposal removed example (ix) and the accompanying Note 
following example (x) to Sec. 760.1(e). The commenter believed that 
elimination of this example would expand the scope of the prohibitions, 
because the example is an illustration of situations where the 
prohibitions of Sec. 760.2(d) may not apply because either there is no 
intent to violate the regulations, or the information supplied is of a 
type generally used for a legitimate business purpose.
    Example (ix) would permit U.S. company A to furnish information 
``demonstrat[ing] that A does at least as much business in [boycotting 
country] Y and other countries engaged in a boycott of [boycotted 
country X] as it does in X.'' By furnishing this information relating 
to country X, A would be violating Sec. 760.2(d)(1) which prohibits a 
U.S. person from furnishing information concerning ``his . . . past, 
present or proposed business relationships . . . with or in a boycotted 
country. . . .'' By stating that A could furnish this information, the 
example can lead to unnecessary confusion concerning the meaning of the 
intent requirement. The commenter's suggestion was not adopted, and 
example (ix) and the accompanying Note following example (x) were 
deleted.
    The commenter also contended that the Department's proposed 
revision to Sec. 760.1(e)(3), which would remove the intent as an 
element of the reporting requirement, implied that a failure to comply 
with the reporting requirements would be a strict liability offense.
    The intent requirement is set forth in section 8(a) of the Export 
Administration Act (Act). The obligation to report, however, arises 
from section 8(b)(2). In addition, Sec. 760.1(e)(3) of the regulations 
was adopted when part 760 included only the prohibitions in Sec. 760.2. 
When the reporting requirements in Sec. 760.5 were later revised to 
reflect the requirements of the 1977 amendments to the Export 
Administration Act, the language of Sec. 760.1(e)(3) was apparently 
overlooked and not changed. The proposed rule would revise the general 
statement in paragraph (e)(3) to make it clear that intent is an 
element only of a violation of the prohibitions set forth in Sec. 760.2 
of the regulations.
    Furthermore, Sec. 760.5(a)(2) provides that requests are reportable 
if the U.S. person ``knows or has reason to know'' that the purpose of 
the request is to further a boycott or restrictive trade practice. 
Thus, it is clear that failure to report is not a strict liability 
violation, and the proposed rule is adopted by incorporating the change 
proposed to be made in Sec. 760.1(e)(3).

Jurisdictional Requirements Relating to the Implementation of 
Letters of Credit

    One commenter opposed the proposed revision of Sec. 760.1(d)(20), 
which replaced the language ``by this part'' with the phrase ``by the 
prohibition of Sec. 760.2(f).'' The commenter contended that the effect 
of this revision would be to subject the implementation of letters of 
credit to the other prohibitions contained in part

[[Page 34944]]

760, not only to the prohibition of Sec. 760.2(f), which specifically 
addresses the implementation of letters of credit. The final rule makes 
no change to Sec. 760.1(d)(20) because the Department has concluded 
that the issue is no longer debated or confusing.
    One commenter suggested that an additional example be included in 
the regulations concerning a contract with a form of a letter of credit 
that contains a number of preprinted provisions. These provisions would 
include a stipulation that documents covering goods of Israeli origin 
are not acceptable. However, the letter of credit would simultaneously 
contain a provision imposing the requirement that the documents must 
certify that the goods are 100 percent of U.S. origin. This additional 
example was not adopted because the Department believes it is not of 
general interest.

Furnishing Information About the Nationality of Directors and About 
Blacklisted Persons

    The proposed rule would have changed example (vii) to 
Sec. 760.2(c), relating to Furnishing Information about Race, Religion, 
Sex or National Origin. The proposed revision stated that furnishing 
permissible information about the nationalities of directors or 
corporate officers would not violate Sec. 760.2(c) but ``would violate 
Sec. 760.2(d)--the prohibition on furnishing information about business 
relationships.'' Two commenters pointed out that the proposed revision 
to example (vii) is in conflict with other provisions of the 
regulations and with the Act's legislative history.
    One of the two commenters further contended that furnishing 
information on the nationality of officers, directors, or employees 
should be presumed to be normal commercial information sought for 
legitimate business purposes, unless there are reasons or facts 
available to the exporter indicating otherwise. Information sought 
about an employment relationship should not be considered to be 
information about a business relationship as that term is commonly 
understood.
    The final rule makes no change to example (vii) because the 
Department has concluded after ten years of additional experience that 
furnishing information concerning nationalities of officers, directors, 
or employees has not been confused with violations of Sec. 760.2(d), 
furnishing information about business relationships.

The Shipping Requirement Exception to Refusals To Use Blacklisted 
Vessels

    The proposed rule added example (vi) to Sec. 760.3(b) relating to 
Examples of Compliance with the Shipping Requirements of a Boycotting 
Country. The Department received no comments on example (vi), and the 
final rule adopts this example.

Import and Shipping Document Exception to Information About the 
Nationality of Carriers and Residence of Manufacturers or Suppliers

    The proposed rule revised subparagraphs (ii), (iv), and (v) of the 
text of Sec. 760.3(c)(1) by adding a reference to the ``nationality'' 
of the carrier, and a reference to the ``residence'' of the supplier of 
the shipment and the provider of other services, with respect to 
compliance with import and shipping document requirements. No comments 
were received on these revisions. The final rule adopts the proposed 
revision to subparagraph (ii), and adds the word ``address'' to 
subparagraphs (iv) and (v). The Department believes that ``address'' is 
a more commonly used term than ``residence'' in import and shipping 
documents.
    One commenter suggested that Sec. 760.3(c)(2) be revised to provide 
that not only the names, but the nationalities, ``of carriers or routes 
of shipments'' may be stated ``in negative terms in conjunction with 
shipments to a boycotting country. . . .'' The final rule adopts this 
suggestion. The Department has long taken the position that furnishing 
information about the nationality of a carrier may be supplied in 
negative terms. This information relates to requirements protecting 
against war risks or confiscation.
    Although the Export Administration Act (EAA) expired on August 20, 
1994, the President invoked the International Emergency Economic Powers 
Act and continued in effect the EAR, and to the extent permitted by 
law, the provisions of the EAA, as amended, in Executive Order 12924 of 
August 19, 1994, as extended by the President's notices of August 15, 
1995 (60 FR 42767), August 14, 1996 (61 FR 42527), August 13, 1997 (62 
FR 43629), August 13, 1998 (63 FR 44121) and August 13, 1999 (64 FR 
44101).

Rule Making Requirements

    1. This final rule has been determined to be not significant for 
purposes of E.O. 12866.
    2. Notwithstanding any other provision of law, no person is 
required to respond to nor be subject to a penalty for failure to 
comply with a collection of information, subject to the requirements of 
the Paperwork Reduction Act, unless that collection of information 
displays a current valid OMB Control Number. This rule involves 
collection of information subject to the Paperwork Reduction Act of 
1980 (44 U.S.C. 3501 et seq.). This collection has been approved by the 
Office of Management and Budget under control number 0694-0012. There 
are neither additions nor subtractions to this collection due to this 
rule.
    3. This rule does not contain policies with Federalism implications 
sufficient to warrant preparation of a Federalism assessment under 
Executive Order 13132.
    4. The provisions of the Administrative Procedure Act (5 U.S.C. 
553) requiring notice of proposed rulemaking, the opportunity for 
public participation, and a delay in effective date, are inapplicable 
because this regulation involves a military and foreign affairs 
function of the United States (5 U.S.C. 553(a)(1)). Further, no other 
law requires that a notice of proposed rulemaking and an opportunity 
for public comment be given for this final rule. Because a notice of 
proposed rulemaking and an opportunity for public comment are not 
required to be given for this rule under the Administrative Procedure 
Act or by any other law, the analytical requirements of the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.) are not applicable. Therefore, 
this regulation is issued in final form. Although there is no formal 
comment period, public comments on this regulation are welcome on a 
continuing basis. Comments should be submitted to Kirsten Mortimer, 
Office of Exporter Services, Bureau of Export Administration, 
Department of Commerce, P.O. Box 273, Washington, D.C. 20044.

List of Subjects in 15 CFR Part 760

    Boycotts, Exports, Foreign trade, Reporting and recordkeeping 
requirements.

    Accordingly, part 760 of the Export Administration Regulations (15 
CFR Parts 730 through 799) is amended as follows:
    1. The authority citation for 15 CFR Part 760 is revised to read as 
follows:

    Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 
E.O. 12924, 59 FR 43437, 3 CFR, 1994 Comp., p. 917; Notice of August 
10, 1999, 64 FR 44101, 3 CFR, 1999 Comp., p. 302.

[[Page 34945]]

PART 760--[AMENDED]


Sec. 760.1  [Amended]

    2. Section 760.1 is amended:
    a. By revising the phrase ``of any violation of this part'' to read 
``of any violation of any of the prohibitions under Sec. 760.2 '' in 
paragraph (e)(3);
    b. By removing example (ix) and the Note that follows example (x) 
in paragraph (e)(7) under the heading ``Examples of `Intent' '';
    c. By redesignating example (x) as example (ix) in paragraph (e)(7) 
under the heading ``Examples of `Intent' ''; and
    d. By revising the phrase ``would betaken'' to read ``would be 
taken'' in the newly designated example (ix) in paragraph (e)(7) under 
the heading ``Examples of `Intent' ''.

    3. Section 760.2 is amended:
    a. By revising the phrase ``see Sec. 760.3(c) of this part'' to 
read ``see Sec. 760.3(d)'' in paragraph (a)(7);
    b. By revising examples (xii), (xviii), and (xxi) in paragraph 
(a)(10) under the heading ``Refusals To Do Business'';
    c. By revising examples (ii), (v), and (vi) in paragraph (a)(10) 
under the heading ``Agreements To Refuse To Do Business'';
    d. By revising example (xviii) in paragraph (d)(5) under the 
heading ``Examples Concerning Furnishing of Information'';
    e. By revising example (v) in paragraph (f)(10) under the heading 
``Implementation of Letters of Credit in United States Commerce''; and
    f. By revising examples (iv), (vi), and (x), and removing and 
reserving example (vii), in paragraph (f)(10) under the heading 
``Prohibition Against Implementing Letters of Credit'', as follows:


Sec. 760.2  Prohibitions.

    (a) * * *
    (10) * * *
Refusals To Do Business
* * * * *
    (xii) Company A, a U.S. oil company, purchases drill bits from U.S. 
suppliers for export to boycotting country Y. In its purchase orders, A 
includes a provision requiring the supplier to make delivery to A's 
facilities in Y and providing that title to the goods does not pass 
until delivery has been made. As is customary under such an 
arrangement, the supplier bears all risks of loss, including loss from 
fire, theft, perils of the sea, and inability to clear customs, until 
title passes.
    Insistence on such an arrangement does not constitute a refusal to 
do business, because this requirement is imposed on all suppliers 
whether they are blacklisted or not. (But see Sec. 760.4 on 
``Evasion''.)
* * * * *
    (xviii) A, a U.S. engineering firm under contract to construct a 
dam in boycotting country Y, compiles, on a non-boycott basis, a list 
of potential heavy equipment suppliers, including information on their 
qualifications and prior experience. A then solicits bids from the top 
three firms on its list--B, C, and D--because they are the best 
qualified. None of them happens to be blacklisted. A does not solicit 
bids from E, F, or G, the next three firms on the list, one of whom is 
on Y's blacklist.
    A's decision to solicit bids from only B, C, and D, is not a 
refusal to do business with any person, because the solicited bidders 
were not selected for boycott reasons.
* * * * *
    (xxi) U.S. bank A receives a letter of credit from a bank in 
boycotting country Y in favor of U.S. beneficiary B. The letter of 
credit requires B to provide a certification from the steamship line 
that the vessel carrying the goods is eligible to enter the ports in Y. 
B seeks payment from A and meets all other conditions of the letter of 
credit. A refuses to pay B solely because B cannot or will not provide 
the certification.
    A has neither refused, nor required another person to refuse, to do 
business with another person pursuant to a boycott requirement or 
request because a request for a vessel eligibility certificate to be 
furnished by the steamship line is not a prohibited condition. (See 
Supplement No. 1 to this part, paragraph (I)(B), ``Shipping 
Certificate''.)
* * * * *
Agreements To Refuse To Do Business
* * * * *
    (ii) A, a U.S. manufacturer of commercial refrigerators and 
freezers, receives an invitation to bid from boycotting country Y. The 
tender states that the bidder must agree not to deal with companies on 
Y's blacklist. A does not know which companies are on the blacklist; 
however, A submits a bid without taking exception to the boycott 
conditions. A's bid makes no commitment regarding not dealing with 
certain companies.
    At the point when A submits its bid without taking exception to the 
boycott request in Y's tender, A has agreed to refuse to do business 
with blacklisted persons, because the terms of Y's tender require A to 
agree to refuse to do business.
* * * * *
    (v) Same as (iv), except that the contract contains a clause that A 
and its employees will comply with the laws of boycotting country Y, 
``including boycott laws.''
    A's agreeing, without qualification, to comply with local boycott 
laws constitutes an agreement to refuse to do business.
    (vi) Same as (v), except that A inserts a proviso ``except insofar 
as Y's laws conflict with U.S. laws,'' or words to that effect.
    Such an agreement is not an agreement to refuse to do business.
* * * * *
    (d) * * *
    (5) * * *
Examples Concerning Furnishing of Information
* * * * *
    (xviii) U.S. company A is asked by boycotting country Y to certify 
that it is not the mother company, sister company, subsidiary, or 
branch of any blacklisted company, and that it is not in any way 
affiliated with any blacklisted company.
    A may not furnish the certification, because it is information 
about whether A has a business relationship with another person who is 
known or believed to be restricted from having any business 
relationship with or in a boycotting country.
* * * * *
    (f) * * *
    (10) * * *
Implementation of Letters of Credit in United States Commerce
* * * * *
    (v) A, a U.S. bank branch located outside the United States, opens 
a letter of credit which specifies a beneficiary with a U.S. address. 
The letter of credit calls for documents indicating shipment of 
foreign-origin goods.
    The letter of credit is presumed to be in favor of a U.S. 
beneficiary but to apply to a transaction outside U.S. commerce, 
because it calls for documents indicating shipment of foreign-origin 
goods. The presumption of non-U.S. commerce may be rebutted by facts 
showing that A could reasonably conclude that the underlying 
transaction involves shipment of U.S.-origin goods or goods from the 
United States.
* * * * *
Prohibition Against Implementing Letters of Credit
* * * * *
    (iv) Same as (iii), except that U.S. company B, based in part on

[[Page 34946]]

information received from U.S. bank A, desires to obtain an amendment 
to the letter of credit which would eliminate or nullify the language 
in the letter of credit which prevents A from paying or otherwise 
implementing it.
    Either company B or bank A may undertake, and the other may 
cooperate and assist in, this endeavor. A could then pay or otherwise 
implement the revised letter of credit, so long as the original 
prohibited boycott condition is of no force or effect.
* * * * *
    (vi) Boycotting country Y orders goods from U.S. company B. U.S. 
bank A is asked to implement, for the benefit of B, a letter of credit 
which contains a clause requiring documentation that the goods shipped 
are not of boycotted country X origin.
    A may not implement the letter of credit with a prohibited 
condition, and may accept only a positive certificate of origin as 
satisfactory documentation. (See Sec. 760.3(c) on ``Import and Shipping 
Document Requirements.'')
    (vii) [Reserved]
* * * * *
    (x) Boycotting country Y orders goods from U.S. exporter B and 
requests a foreign bank in Y to open a letter of credit in favor of B 
to cover the cost. The letter of credit contains a prohibited boycott 
clause. The foreign bank asks U.S. bank A to advise and confirm the 
letter of credit. Through inadvertence, A does not notice the 
prohibited clause and confirms the letter of credit. A thereafter 
notices the clause and then refuses to honor B's draft against the 
letter of credit. B sues bank A for payment.
    A has an absolute defense against the obligation to make payment 
under this letter of credit. (Note: Examples (ix) and (x) do not alter 
any other obligations or liabilities of the parties under appropriate 
law.)
* * * * *

    4. Section 760.3 is amended:
    a. By revising examples (i), (ii), and (iii) in paragraph (a)(3) 
under the heading ``Examples of Compliance with Import Requirements of 
a Boycotting Country'';
    b. By adding example (vi) in paragraph (b)(3) under the heading 
``Examples of Compliance with the Shipping Requirements of a Boycotting 
Country'';
    c. By revising paragraphs (c)(1)(ii), (iv) and (v);
    d. By revising paragraph (c)(2) introductory text;
    e. By revising examples (i), (iv), (v), and (vi), and by removing 
and reserving example (iii), and removing example (xiii), in paragraph 
(c)(2) under the heading ``Examples of Compliance With Import and 
Shipping Document Requirements'';
    f. By revising paragraph heading (d) and paragraph (d)(1);
    g. By revising the last example heading ``Examples of 
Discrimination on Basis of Race, Religion, Sex or National Origin'' in 
paragraph (d)(18) to read ``Example of Discrimination on Basis of Race, 
Religion, Sex or National Origin'';
    h. By revising example (vii) in paragraph (f)(4) under the heading 
``Examples of Compliance With Immigration, Passport, Visa, or 
Employment Requirements of a Boycotting Country'';
    i. By revising examples (iv) and (vi) in paragraph (g)(3) under the 
heading ``Examples of Bona Fide Residency'';
    j. By revising paragraph (i)(4);
    k. By revising the example heading ``Imports for U.S. Person's Own 
Use'' in paragraph (i)(10) to read ``Imports for U.S. Person's Own Use 
Within Boycotting Country''; and
    l. By removing the example heading ``For Use Within Boycotting 
Country'' in paragraph (i)(10) and by designating the example following 
this newly removed heading as (xii), as follows:


Sec. 760.3  Exceptions to prohibitions.

    (a) * * *
    (3) * * *
Examples of Compliance With Import Requirements of a Boycotting Country
    (i) A, a U.S. manufacturer, receives an order from boycotting 
country Y for its products. Country X is boycotted by country Y, and 
the import laws of Y prohibit the importation of goods produced or 
manufactured in X. In filling this type of order, A would usually 
include some component parts produced in X.
    For the purpose of filling this order, A may substitute comparable 
component parts in place of parts produced in X, because the import 
laws of Y prohibit the importation of goods manufactured in X.
    (ii) Same as (i), except that A's contract with Y expressly 
provides that in fulfilling the contract A ``may not include parts or 
components produced or manufactured in boycotted country X.''
    A may agree to and comply with this contract provision, because Y 
prohibits the importation of goods from X. However, A may not furnish 
negative certifications regarding the origin of components in response 
to import and shipping document requirements.
    (iii) A, a U.S. building contractor, is awarded a contract to 
construct a plant in boycotting country Y. A accepts bids on goods 
required under the contract, and the lowest bid is made by B, a 
business concern organized under the laws of X, a country boycotted by 
Y. Y prohibits the import of goods produced by companies organized 
under the laws of X.
    For purposes of this contract, A may reject B's bid and accept 
another, because B's goods would be refused entry into Y because of Y's 
boycott against X.
* * * * *
    (b) * * *
    (3) * * *
Examples of Compliance With the Shipping Requirements of a Boycotting 
Country
* * * * *
    (vi) Boycotting country Y orders goods from A, a U.S. manufacturer. 
The order specifies that goods shipped by A ``must not be shipped on 
vessels blacklisted by country Y''.
    A may not agree to comply with this condition because it is not a 
restriction limited to the use of carriers of the boycotted country.
    (c) * * *
    (1) * * *
    (ii) The name and nationality of the carrier;
    (iii) * * *
    (iv) The name, residence, or address of the supplier of the 
shipment;
    (v) The name, residence, or address of the provider of other 
services.
    (2) Such information must be stated in positive, non-blacklisting, 
non-exclusionary terms except for information with respect to the names 
or nationalities of carriers or routes of shipment, which may continue 
to be stated in negative terms in conjunction with shipments to a 
boycotting country, in order to comply with precautionary requirements 
protecting against war risks or confiscation.
Examples of Compliance With Import and Shipping Document Requirements
    (i) Boycotting country Y contracts with A, a U.S. petroleum 
equipment manufacturer, for certain equipment. Y requires that goods 
being imported into Y must be accompanied by a certification that the 
goods being supplied did not originate in boycotted country X.
    A may not supply such a certification in negative terms but may 
identify instead the country of origin of the goods in positive terms 
only.
* * * * *
    (iii) [Reserved]
    (iv) A, a U.S. apparel manufacturer, has contracted to sell certain 
of its

[[Page 34947]]

products to B, a national of boycotting country Y. The form that must 
be submitted to customs officials of Y requires the shipper to certify 
that the goods contained in the shipment have not been supplied by 
``blacklisted'' persons.
    A may not furnish the information in negative terms but may 
certify, in positive terms only, the name of the supplier of the goods.
    (v) Same as (iv), except the customs form requires certification 
that the insurer and freight forwarder used are not ``blacklisted.''
    A may not comply with the request but may supply a certification 
stating, in positive terms only, the names of the insurer and freight 
forwarder.
    (vi) A, a U.S. petrochemical manufacturer, executes a sales 
contract with B, a resident of boycotting country Y. A provision of A's 
contract with B requires that the bill of lading and other shipping 
documents contain certifications that the goods have not been shipped 
on a ``blacklisted'' carrier.
    A may not agree to supply a certification that the carrier is not 
``blacklisted'' but may certify the name of the carrier in positive 
terms only.
* * * * *
    (d) Unilateral and specific selection.
Compliance with Unilateral and Specific Selection
    (1) A United States person may comply or agree to comply in the 
normal course of business with the unilateral and specific selection by 
a boycotting country, a national of a boycotting country, or a resident 
of a boycotting country (including a United States person who is a bona 
fide resident of a boycotting country) of carriers, insurers, suppliers 
of services to be performed within the boycotting country, or specific 
goods, provided that with respect to services, it is necessary and 
customary that a not insignificant part of the services be performed 
within the boycotting country. With respect to goods, the items, in the 
normal course of business, must be identifiable as to their source or 
origin at the time of their entry into the boycotting country by (a) 
uniqueness of design or appearance or (b) trademark, trade name, or 
other identification normally on the items themselves, including their 
packaging.
* * * * *
    (f) * * *
    (4) * * *
    (vii) A, a U.S. contractor, selects U.S. subcontractor B to perform 
certain engineering services in connection with A's project in 
boycotting country Y. The work visa application submitted by the 
employee whom B has proposed as chief engineer of this project is 
rejected by Y because his national origin is of boycotted country X. 
Subcontractor B thereupon withdraws.
    A may continue with the project and select another subcontractor, 
because A is not acting in contravention of any prohibition of this 
part.
    (g) * * *
    (3) * * *
Examples of Bona Fide Residency
* * * * *
    (iv) Same as (iii), except A's personnel are required by Y's laws 
to furnish certain non-discriminatory boycott information in order to 
establish a branch in Y.
    In these limited circumstances, A's personnel may furnish the non-
discriminatory boycott information necessary to establish residency to 
the same extent a U.S. person who is a bona fide resident in that 
country could. If this information could not be furnished in such 
limited circumstances, the exception would be available only to firms 
resident in a boycotting country before January 18, 1978.
* * * * *
    (vi) Same as (v), except that A is considering establishing an 
office in boycotting country Y. A's personnel visit Y in order to 
register A to do business in that country. A intends to establish 
ongoing construction operations in Y. A's personnel are required by Y's 
laws to furnish certain non-discriminatory boycott information in order 
to register A to do business or incorporate a subsidiary in Y.
    In these limited circumstances, A's personnel may furnish non-
discriminatory boycott information necessary to establish residency to 
the same extent a U.S. person who is a bona fide resident in that 
country could. If this information could not be furnished in such 
limited circumstances, the exception would be available only to firms 
resident in a boycotting country before January 18, 1978.
* * * * *
    (i) * * *
    (4) For purposes of this exception, the test that governs whether 
goods or components of goods are specifically identifiable is identical 
to the test applied in paragraph (d) of this section on ``Compliance 
With Unilateral and Specific Selection'' to determine whether they are 
identifiable as to their source or origin in the normal course of 
business.
* * * * *

    5. Section 760.4 is amended:
    a. By revising the phrase ``Sec. 760.3(a) through (g) of this 
part'' to read ``Sec. 760.3(a) through (i)'' in paragraph (b);
    b. By revising the phrase ``January 21, 1978'' to read ``January 
18, 1978'' in paragraph (d); and
    c. By revising examples (iii), (iv), (x), (xi), (xii), (xv), and 
(xvi) in paragraph (e) under the heading ``Examples'', as follows:


Sec. 760.4  Evasion.

* * * * *
    (e) * * *
Examples
* * * * *
    (iii) A, a U.S. company, has been selling sewing machines to 
boycotting country Y for a number of years. A receives a request for a 
negative certificate of origin from a new customer. A is aware that 
furnishing such certificates are prohibited; therefore, A arranges to 
have all future shipments run through a foreign corporation in a third 
country which will affix the necessary negative certificate before 
forwarding the machines on to Y.
    A's action constitutes evasion of this part, because it is a device 
to mask prohibited activity carried out on A's behalf.
    (iv) A, a U.S. company, has been selling calculators to distributor 
B in country C for a number of years and routinely supplies positive 
certificates of origin. A receives an order from country Y which 
requires negative certificates of origin. A arranges to make all future 
sales to distributor B in country C. A knows B will step in and make 
the sales to Y which A would otherwise have made directly. B will make 
the necessary negative certifications. A's warranty, which it will 
continue to honor, runs to the purchaser in Y.
    A's action constitutes evasion, because the diverting of orders to 
B is a device to mask prohibited activity carried out on A's behalf.
* * * * *
    (x) Same as (ix), except that shortly after January 18, 1978, A, a 
U.S. company, insists that its suppliers sign contracts which provide 
that even after title passes from the supplier to A, the supplier will 
bear the risk of loss and indemnify A if goods which the supplier has 
furnished are denied entry into Y for boycott reasons.
    A's action constitutes evasion of this part, because it is a device 
or scheme which is intended to place a special burden on blacklisted 
persons because of Y's boycott.

[[Page 34948]]

    (xi) Same as (x), except that A customarily insisted on such an 
arrangement with its supplier prior to January 18, 1978.
    A's action is presumed not to constitute evasion, because use of 
this contractual arrangement was customary for A prior to January 18, 
1978.
    (xii) A, a U.S. company, has a contract to supply automobile sub-
assembly units to boycotting country Y. Shortly after January 18, 1978, 
A insists that its suppliers sign contracts which provide that even 
after title passes to A, the supplier will bear the risk of loss and 
indemnify A if goods which the supplier has furnished are denied entry 
into boycotting country Y for any reason.
    A's insistence on this arrangement is presumed to constitute 
evasion, because it is a device which is intended to place a special 
burden on blacklisted firms because of Y's boycott. The presumption may 
be rebutted by competent evidence showing that use of such an 
arrangement is customary without regard to the boycotting or non-
boycotting character of the country to which it relates and that there 
is a legitimate non-boycott business reason for its use.
* * * * *
    (xv) U.S. bank A is contacted by U.S. company B to finance B's 
transaction with boycotting country Y. Payment will be effected through 
a letter of credit in favor of B at its U.S. address. A knows that the 
letter of credit will contain restrictive boycott conditions which 
would bar its implementation by A if the beneficiary were a U.S. 
person. A advises B of the boycott condition and suggests to B that the 
beneficiary should be changed to C, a shell corporation in non-
boycotting country M. The beneficiary is changed accordingly.
    The actions of both A and B constitute evasion of this part, 
because the arrangement is a device to mask prohibited activities.
    (xvi) Same as (xv), except that U.S. company B, the beneficiary of 
the letter of credit, arranges to change the beneficiary to B's foreign 
subsidiary so that A can implement the letter of credit. A knows that 
this has been done.
    A's implementation of the letter of credit in the face of its 
knowledge of B's action constitutes evasion of this part, because A's 
action is part of a device to mask prohibited activity by both parties.
* * * * *

    6. Section 760.5 is amended:
    a. By revising the phrase ``Room 6099C'' in paragraph (b)(4) to 
read ``Room 6098'';
    b. By revising paragraphs (b)(4)(i) and (b)(4)(ii); and
    c. By revising examples (xxix), (xxx), (xxxiv), and (xxxv) in 
paragraph (c)(4) under the heading ``Examples'', to read as follows:


Sec. 760.5  Reporting requirements.

* * * * *
    (b) * * *
    (4) * * *
    (i) Where the person receiving the request is a United States 
person located in the United States, each report of requests must be 
postmarked by the last day of the month following the calendar quarter 
in which the request was received (e.g., April 30 for the quarter 
consisting of January, February, and March).
    (ii) Where the person receiving the request is a United States 
person located outside the United States, each report of requests must 
be postmarked by the last day of the second month following the 
calendar quarter in which the request was received (e.g., May 31 for 
the quarter consisting of January, February, and March).
* * * * *
    (c) * * *
    (4) * * *
Examples
* * * * *
    (xxix) A, a U.S. manufacturer, is engaged from time-to-time in 
supplying drilling rigs to company B in boycotting country Y. B insists 
that its suppliers sign contracts which provide that, even after title 
passes from the supplier to B, the supplier will bear the risk of loss 
and indemnify B if goods which the supplier has furnished are denied 
entry into Y for whatever reason. A knows or has reason to know that 
this contractual provision is required by B because of Y's boycott, and 
that B has been using the provision since 1977. A receives an order 
from B which contains such a clause.
    B's request is not reportable by A, because the request is deemed 
to be not reportable by these regulations if the provision was in use 
by B prior to January 18, 1978.
    (xxx) Same as (xxix), except that A does not know when B began 
using the provision.
    Unless A receives information from B that B introduced the term 
prior to January 18, 1978, A must report receipt of the request.
* * * * *
    (xxxiv) U.S. exporter A, in shipping goods to boycotting country Y, 
receives a request from the customer in Y to state on the bill of 
lading that the vessel is allowed to enter Y's ports. The request 
further states that a certificate from the owner or master of the 
vessel to that effect is acceptable.
    The request A received from his customer in Y is not reportable 
because it is a request of a type deemed to be not reportable by these 
regulations. (A may not make such a statement on the bill of lading 
himself, if he knows or has reason to know it is requested for a 
boycott purpose.)
    (xxxv) U.S. exporter A, in shipping goods to boycotting country Y, 
receives a request from the customer in Y to furnish a certificate from 
the owner of the vessel that the vessel is permitted to call at Y's 
ports.
    The request A received from his customer in Y is not reportable 
because it is a request of a type deemed to be not reportable by these 
regulations.
* * * * *

    7. Supplement No. 1 to Part 760 is amended:
    a. By revising the ``Interpretation'' under the heading ``B. 
Shipping certificate.'' in section ``I. Certifications'';
    b. By revising the ``Interpretation'' under the heading ``C: 
Insurance certificate.'' in section ``I. Certifications''; and
    c. By revising the ``Interpretation'' under the heading ``A. 
Contractual clause regarding import laws of boycotting country.'' in 
section ``II. Contractual Clauses'', as follows:

Supplement No. 1 to Part 760--Interpretations

* * * * *

I. Certifications

* * * * *
    B. Shipping certificate * * *

Interpretation

    It is the Department's position that furnishing a certificate, 
such as the one set out above, stating: (1) The name of the vessel, 
(2) The nationality of the vessel, and (3) The owner of the vessel 
and further declaring that the vessel: (a) Is not registered in a 
boycotted country, (b) Is not owned by nationals or residents of a 
boycotted country, and (c) Will not call at or pass through a 
boycotted country port enroute to its destination in a boycotting 
country falls within the exception contained in Sec. 760.3(c) for 
compliance with the import and shipping document requirements of a 
boycotting country. See Sec. 760.3(c) and examples (vii), (viii), 
and (ix) thereunder.
    It is also the Department's position that the owner, charterer, 
or master of a vessel may certify that the vessel is ``eligible'' or 
``otherwise eligible'' to enter into the ports of a boycotting 
country in conformity with its laws and regulations. Furnishing such 
a statement pertaining to one's own eligibility offends no 
prohibition under this part 760. See Sec. 760.2(f), example (xiv).
    On the other hand, where a boycott is in force, a declaration 
that a vessel is ``eligible''

[[Page 34949]]

or ``otherwise eligible'' to enter the ports of the boycotting 
country necessarily conveys the information that the vessel is not 
blacklisted or otherwise restricted from having a business 
relationship with the boycotting country. See Sec. 760.3(c) examples 
(vi), (xi), and (xii). Where a person other than the vessel's owner, 
charterer, or master furnishes such a statement, that is tantamount 
to his furnishing a statement that he is not doing business with a 
blacklisted person or is doing business only with non-blacklisted 
persons. Therefore, it is the Department's position that furnishing 
such a certification (which does not reflect customary international 
commercial practice) by anyone other than the owner, charterer, or 
master of a vessel would fall within the prohibition set forth in 
Sec. 760.2(d) unless it is clear from all the facts and 
circumstances that the certification is not required for a boycott 
reason. See Sec. 760.2(d)(3) and (4). See also part A., 
``Permissible Furnishing of Information,'' of Supplement No. 5 to 
this part.
    C. Insurance certificate. * * *

Interpretation

    It is the Department's position that furnishing the name of the 
insurance company falls within the exception contained in 
Sec. 760.3(c) for compliance with the import and shipping document 
requirements of a boycotting country. See Sec. 760.3(c)(1)(v) and 
examples (v) and (x) thereunder. In addition, it is the Department's 
position that furnishing a certificate, such as the one set out 
above, stating the address of the insurance company's principal 
office and its country of incorporation offends no prohibition under 
this part 760 unless the U.S. person furnishing the certificate 
knows or has reason to know that the information is sought for the 
purpose of determining that the insurance company is neither 
headquartered nor incorporated in a boycotted country. See 
Sec. 760.2(d)(1)(i).
    It is also the Department's position that the insurer, himself, 
may certify that he has a duly qualified and appointed agent or 
representative in the boycotting country and may furnish the name 
and address of his agent or representative. Furnishing such a 
statement pertaining to one's own status offends no prohibition 
under this part 760. See Sec. 760.2(f), example (xiv).
    On the other hand, where a boycott is in force, a declaration 
that an insurer ``has a duly qualified and appointed agent or 
representative'' in the boycotting country necessarily conveys the 
information that the insurer is not blacklisted or otherwise 
restricted from having a business relationship with the boycotting 
country. See Sec. 760.3(c), example (v). Therefore, it is the 
Department's position that furnishing such a certification by anyone 
other than the insurer would fall within the prohibition set forth 
in Sec. 760.2(d) unless it is clear from all the facts and 
circumstances that the certification is not required for a boycott 
reason. See Sec. 760.2(d)(3) and (4).
* * * * *

II. Contractual Clauses

* * * * *
    A. Contractual clause regarding import laws of boycotting 
country. * * *

Interpretation

    It is the Department's position that an agreement, such as the 
one set out in the first sentence above, that the import and customs 
requirements of a boycotting country shall apply to the performance 
of a contract does not, in and of itself, offend any prohibition 
under this part 760. See Sec. 760.2(a)(5) and example (iii) under 
``Examples of Agreements To Refuse To Do Business.'' It is also the 
Department's position that an agreement to comply generally with the 
import and customs requirements of a boycotting country does not, in 
and of itself, offend any prohibition under this part 760. See 
Sec. 760.2(a)(5) and examples (iv) and (v) under ``Examples of 
Agreements To Refuse To Do Business.'' In addition, it is the 
Department's position that an agreement, such as the one set out in 
the second sentence above, to comply with the boycotting country's 
import and customs requirements prohibiting the importation of 
products or components: (1) Originating in the boycotted country; 
(2) Manufactured, produced, or furnished by companies organized 
under the laws of the boycotted country; or (3) Manufactured, 
produced, or furnished by nationals or residents of the boycotted 
country falls within the exception contained in Sec. 760.3(a) for 
compliance with the import requirements of a boycotting country. See 
Sec. 760.3(a) and example (ii) thereunder.
    The Department notes that a United States person may not furnish 
a negative certification regarding the origin of goods or their 
components even though the certification is furnished in response to 
the import and shipping document requirements of the boycotting 
country. See Sec. 760.3(c) and examples (i) and (ii) thereunder, and 
Sec. 760.3(a) and example (ii) thereunder.

* * * * *

    8. Supplement No. 2 to Part 760 is amended:
    a. By revising the phrase ``receipt of requests for such shipping 
and insurance certificates from Saudi Arabia is not reportable'' to 
read ``receipts of requests for such shipping and insurance 
certificates from Saudi Arabia are not reportable'' in the undesignated 
paragraph which begins with the phrase ``On the basis of this 
clarification''; and
    b. By revising the phrase ``receipt of requests for such 
certifications is reportable'' to read ``receipts of requests for such 
certifications are reportable'' in the undesignated paragraph which 
begins with the phrase ``It is still the Department's position''.

    9. Supplement No. 4 to Part 760 is amended by revising the second 
undesignated paragraph as follows:

Supplement No. 4 to Part 760--Interpretation

* * * * *
    Section 760.1(d)(12) provides the general guidelines for 
determining when U.S.-origin goods shipped from a controlled in fact 
foreign subsidiary are outside U.S. commerce. The two key tests of 
that provision are that the goods were ``(i) * * * acquired without 
reference to a specific order from or transaction with a person 
outside the United States; and (ii) * * * further manufactured, 
incorporated into, refined into, or reprocessed into another 
product.'' Because the application of these two tests to spare parts 
does not conclusively answer the U.S. commerce question, the 
Department is presenting this clarification.
* * * * *

    10. Supplement No. 5 to part 760 is amended by revising the phrase 
``Section 760.3(f) of this part'' to read ``Section 760.3(g)'' in the 
undesignated paragraph following the heading ``B. Availability of the 
Compliance with Local Law Exception to Establish a Foreign Branch''.
    11. Supplement No. 6 to part 760 is amended by revising paragraph 
(a) as follows:

Supplement No. 6 to Part 760--Interpretation

* * * * *

    (a) * * *
    This term is very common in letters of credit from Kuwait and may 
also appear from time-to-time in invitations to bid, contracts, or 
other trade documents. It imposes a condition or requirement compliance 
with which is prohibited, but permitted by an exception under the 
Regulations (see Sec. 760.2(a) and Sec. 760.3(a)). It is reportable by 
those parties to the letter of credit or other transaction that are 
required to take or refrain from taking some boycott related action by 
the request. Thus the bank must report the request because it is a term 
or condition of the letter of credit that it is handling, and the 
exporter-beneficiary must report the request because the exporter 
determines the origin of the goods. The freight forwarder does not have 
to report this request because the forwarder has no role or obligation 
in selecting the goods. However, the freight forwarder would have to 
report a request to furnish a certificate that the goods do not 
originate in or contain components from a boycotted country. See 
Sec. 760.5, examples (xii)-(xvii).
* * * * *
    12. Supplement No. 7 to part 760 is amended:

    a. By revising the phrase ``Sec. 760.3(c) of this part'' to read 
``Sec. 760.3(d)'' in the second undesignated paragraph; and
    b. By revising the third undesignated paragraph as follows:

Supplement No. 7 to Part 760--Interpretation

* * * * *

[[Page 34950]]

    ``A United States person may comply or agree to comply in the 
normal course of business with the unilateral and specific selection 
by a boycotting country * * * of * * * specific goods, * * * 
provided that * * * with respect to goods, the items, in the normal 
course of business, are identifiable as to their source or origin at 
the time of their entry into the boycotting country by (a) 
uniqueness of design or appearance or (b) trademark, trade name, or 
other identification normally on the items themselves, including 
their packaging.''
* * * * *

    13. Supplement No. 8 to part 760 is amended by revising the phrase 
``Sec. 760.1(d)(13) of this part'' to read ``Sec. 760.1(d)(3)'' in the 
third undesignated paragraph.

    14. Supplement No. 9 to part 760 is amended by revising the phrase 
``Sec. 760.3(f) of this part'' to read ``Sec. 760.3(g)'' the first 
undesignated paragraph.

    15. Supplement No. 10 to part 760 is amended by revising the phrase 
``non exclusionary, non blacklisting statement'' to read ``non-
exclusionary, non-blacklisting statement'' in the undesignated 
paragraph that follows paragraph heading (b).

    16. Supplement No. 11 to part 760 is amended:
    a. By placing quotation marks around the undesignated paragraph 
that follows the phrase ``Sec. 760.5(a)(4) of this part status in 
part''; and
    b. By revising the parenthetical phrase ``(Sec. 760.5(a)(6) of this 
part)'' to read ``(Sec. 760.5(b)(6)'' in the last undesignated 
paragraph.

    17. Supplement No. 12 to part 760 is amended:
    a. By placing beginning and ending quotation marks around the first 
and second undesignated paragraphs, respectively, that follow the 
phrase ``Example (v) under Sec. 760.4 of this part (Evasion) 
provides:''
    b. By revising the phrase ``recently imposed by the government'' to 
read ``imposed by the government'' in the undesignated paragraph that 
begins with the phrase ``This interpretation deals with''; and
    c. By placing quotation marks around the undesignated paragraph 
that begins with the phrase ``Declaration: I, the undersigned''.

    18. Supplement No. 13 to part 760 is amended:
    a. By revising the phrase ``Sec. 760.3(c) of this part'' to read 
``Sec. 760.3(d)'' in the undesignated paragraph following the heading 
``Summary'';
    b. By placing quotation marks around the third undesignated 
paragraph following the heading ``Regulatory Background'';
    c. By revising the phrase ``Sec. 760.3(c)'' part'' to read 
``Sec. 760.3(d)'' in the fourth undesignated paragraph following the 
heading ``Regulatory Background'';
    d. By revising the heading ``Analysis of the New Contractual 
Language'' to read ``Analysis of Additional Contractual Language'';
    e. By revising the phrase ``of a new contractual clause'' to read 
``of a contractual clause'' in the undesignated paragraph following the 
newly revised heading ``Analysis of the New Contractual Language'';
    f. By revising the heading ``Boycott of Boycotted Country'' to read 
``Boycott of [Name of Boycotted Country]'';
    g. By revising the phrase ``Sec. 760.3(c) of this part'' to read 
``Sec. 760.3(d)'' in the last undesignated paragraph of this 
supplement.

    19. Supplement No. 14 to part 760 is amended:
    a. By placing beginning and ending quotation marks around the first 
and second undesignated paragraphs, respectively, following the 
sentence ``The following language has appeared in tender documents 
issued by a boycotting country:'' in paragraph (a);
    b. By revising the phrase ``Agreement to Refuse to Do Business'' to 
read ``Agreements to Refuse to Do Business'' in the last sentence of 
the third undesignated paragraph following the sentence ``The following 
language has appeared in tender documents issued by a boycotting 
country:'' in paragraph (a);
    c. By revising the phrase ``Sec. 760.6(a)(1) of this part'' to read 
``Sec. 760.5(a)(1) of this part'' in the last undesignated paragraph 
following the sentence ``The following language has appeared in tender 
documents issued by a boycotting country:'' in paragraph (a); and
    d. By placing beginning and ending quotation marks around the first 
and second undesignated paragraphs, respectively, that follow the 
sentence ``The following terms frequently appear on letters of credit 
covering shipment to Iraq:'' in paragraph (b).

    Dated: May 18, 2000.
R. Roger Majak,
Assistant Secretary for Export Administration.
[FR Doc. 00-13251 Filed 5-31-00; 8:45 am]
BILLING CODE 3510-33-P