9. What is the significance of boycotts between foreign countries?
The US issues restrictions on international business relationships through embargoes and targeted business sanctions. The US is not currently a part of an official boycott of countries or individuals. In fact, the US recognizes two prohibitions against US companies taking part in unsanctioned boycotts. These prohibitions are issued by the Department of Commerce or the Department of Treasury.
• Department of Commerce (DOC) – The DOC prohibits US companies from participating in any unsanctioned boycott of other countries or its citizens. This rule specifically prohibits US companies from maintaining lists of countries with which they will not do business based upon a non-US sanctioned boycott. The DOC also prohibits discrimination in carrying on business based upon an individual’s race, religion, sex or national origin.
⁃ Note: Companies who receive specific requests to take action, such as not carrying on business pursuant to a boycott, must report that request to the DOC.
• Department of Treasury (DOT) – The DOT prohibits companies from participating in unsanctioned boycotts. Specifically, the DOT requires a US tax-reporting company to report on its income tax return all business activity with or in countries that actively participate in a non-sanctioned boycott of other countries, races, religions, ethnicities, etc. Carrying on business with these countries (or otherwise participating in the boycott activity) can result in the loss of certain foreign tax benefits.
⁃ Note: The DOT publishes a list of countries actively participating in non-sanctioned boycotts.
• Discussion: Why do you think the US does not participate in current boycotts? Why do you think the US prohibits US companies from participating in boycotts or, in some cases, doing business with companies that participate in boycotts? Are these restrictions appropriate?
• Practice Question: ABC Corp has had very bad experiences in its business dealings in Turkey. ABC puts out a company-wide memo that it will not do business with any Turkish company or any company with direct ties to Turkey. Is there a legal problem with this stance?