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Posted on Sustainabilitank.info on February 8th, 2013
by Pincas Jawetz (PJ@SustainabiliTank.com)

Any normalization of relations in the Middle East will have to include in its first batch of proposals the Cancellation of the Boycott.
Thus it is important to see what this Boycott entails today. The CRS has just fulfilled an important mission by releasing the following report.

Arab League Boycott of Israel
Congressional Research Service


Summary
The Arab League, an umbrella organization comprising 22 Middle Eastern and African countries
and entities, has maintained an official boycott of Israeli companies and Israeli-made goods since
the founding of Israel in 1948. The boycott is administered by the Damascus-based Central
Boycott Office, a specialized bureau of the Arab League.

The boycott has three tiers. The primary boycott prohibits citizens of an Arab League member
from buying from, selling to, or entering into a business contract with either the Israeli
government or an Israeli citizen. The secondary boycott extends the primary boycott to any entity
world-wide that does business in Israel. A blacklist of global firms that engage in business with
Israel is maintained by the Central Boycott Office, and disseminated to Arab League members.
The tertiary boycott prohibits an Arab League member and its nationals from doing business with
a company that deals with companies that have been blacklisted by the Arab League.

The U.S. government has often been at the forefront of international efforts to end the boycott and
its enforcement. Despite U.S. efforts, however, many Arab League countries continue to support
the boycott’s enforcement. U.S. legislative action related to the boycott dates from 1959 and
includes multiple statutory provisions expressing U.S. opposition to the boycott, usually in
foreign assistance legislation. In 1977, Congress passed laws making it illegal for U.S. companies
to cooperate with the boycott and authorizing the imposition of civil and criminal penalties
against U.S. violators. U.S. companies are required to report to the Department of Commerce any
requests to comply with the Arab League Boycott.

This report provides background information on the boycott and U.S. efforts to end its
enforcement.

More information on Israel is contained in CRS Report RL33476, Israel:
Background and U.S. Relations, by Jim Zanotti.

——————————-

CSR Report for Congress
Prepared for Members and Committees of Congress
Arab League Boycott of Israel
Martin A. Weiss
Specialist in International Trade and Finance

January 17, 2013
Congressional Research Service

7-5700
 www.bis.doc.gov/complianceandenfo….

————————————-

Current Status of the Boycott
The boycott has three tiers. The primary boycott prohibits citizens of an Arab League member
from buying from, selling to, or entering into a business contract with either the Israeli
government or an Israeli citizen. The secondary boycott extends the primary boycott to any entity
world-wide that does business with Israel. A blacklist of global firms that engage in business with
Israel is maintained by the Central Boycott Office, and disseminated to Arab League members.
The tertiary boycott prohibits an Arab League member and its nationals from doing business with
a company that in turn deals with companies that have been blacklisted by the Arab League. The
boycott also applies to companies that the Arab League identifies as having “Zionist
sympathizers” in executive positions or on the board of the company. According to one analyst,
the “nature and detail of these rules reflect the boycotting countries’ tolerance for only the most
minimal contacts with Israel.”5
The Arab League does not enforce the boycott and boycott regulations are not binding on member
states. However, the regulations have been the model for various laws implemented by member
countries. The League recommends that member countries demand certificates of origin on all
goods acquired from suppliers to ensure that such goods meet all aspects of the boycott.
Overall enforcement of the boycott by member countries appears sporadic. Some Arab League
members have limited trading relations with Israel. The Arab League does not formally or
publicly state which countries enforce the boycott and which do not. Some Arab League member
governments have maintained that only the Arab League, as the formal body enforcing the
boycott, can revoke the boycott. However, adherence to the boycott is an individual matter for
each Arab League member and enforcement varies by state.
There are indications that some Arab League countries publicly support the boycott while
continuing to quietly trade with Israel. According to Doron Peskin, head of research at InfoProd, a
consulting firm for foreign and Israeli companies specializing in trade with Arab states, “the Arab
boycott is now just lip service.”6 This sentiment has been echoed by Arab officials, albeit
anonymously. One official commented to the Egyptian newspaper Al-Ahram that, “boycotting
Israel is something that we talk about and include in our official documents but it is not
something that we actually carry out—at least not in most Arab states.”7
Others assert that enforcement of the boycott waxes and wanes with the level of intensity of the
Israeli-Palestinian issue. However, the Arab League has acknowledged that U.S. pressure has
affected its ability to maintain the boycott. At the May 2006 Arab League conference on the
boycott, one conference participant reportedly said, “The majority of Arab countries are evading
the boycott, notably the Gulf states and especially Saudi Arabia.”8 He added that a major reason

5 Howard N. Fenton III, “United States Antiboycott Laws: An Assessment of Their Impact Ten Years after Adoption,”
Hastings International & Comparative Law Review, Vol. 10 , 1987, cited in Eugene Kontorovich, “The Arab League
Boycott and WTO Accession: Can Foreign Policy Excuse Discriminatory Sanctions,” Chicago Journal of International
Law, Vol. 4 No. 2, Fall 2003.
6 Orly Halpern, “Arab Boycott Largely Reduced to ‘Lip Service,’” Jerusalem Post, February 28, 2006.
7 Dina Ezzat, “Boycott Israel? Not so simple,” Al-Ahram Weekly Online, April 11-17, 2002.
8 “Arabs evading economic boycott of Israel,” United Press International, May 16, 2006.


Arab League Boycott of Israel Congressional Research Service 3
for these countries bypassing the boycott is “growing U.S. pressures in the direction of
normalization with the Jewish state.”9
Some states and entities have formally ended the boycott, or at least some aspects of it. Egypt
(1979), the Palestinian Authority (1993), and Jordan (1994) signed peace treaties or agreements
that ended the boycott.10 Mauritania, which never applied the boycott, established diplomatic
relations with Israel in 1999. Algeria, Morocco, and Tunisia do not enforce the boycott.11 In 1994,
the member countries of the Gulf Cooperation Council (GCC)—Bahrain, Kuwait, Oman, Qatar,
Saudi Arabia, and the United Arab Emirates—announced that they would only enforce the
primary boycott. In 1996, the GCC states recognized that total elimination of the boycott is a
necessary step for peace and economic development in the region. However, U.S. companies
continue to receive requests to cooperate with the boycott from GCC member countries. Lebanon
enforces the primary, secondary, and tertiary boycotts.12
Impact of the Boycott
Since the boycott is sporadically applied and ambiguously enforced, its impact, measured by
capital or revenue denied to Israel by companies adhering to the boycott, is difficult to measure.
The effect of the primary boycott appears limited since intra-regional trade and investment are
small. Nonetheless, there is some limited trade between Israel and its Arab neighbors. In 2004,
according to the Manufacturers Association of Israel (IMA), Israeli exports to Arab countries and
entities (mainly Egypt, Jordan, and the Palestinian Authority) totaled $192 million.13
Enforcement of the secondary and tertiary boycotts has decreased over time, reducing their effect.
A 1996 study by researchers at Tel Aviv University looked at the effect of the Arab boycott on the
Israeli economy through the automobile market. Following a relaxation of boycott enforcement in
the late 1980s through the early 1990s, Asian countries began exporting cars to Israel. The study
found that if the boycott had continued to be enforced, and these cars did not enter the Israeli
market, the Israeli car market would have been 12% smaller—leading to a $790 price increase per
car. Total welfare loss for the study year, 1994, would have been an estimated $89 million.14
Thus, it appears that since intra-regional trade is small, and that the secondary and tertiary
boycotts are not aggressively enforced, the boycott may not currently have an extensive effect on
the Israeli economy.

9 Ibid.
10 Egyptian-Israeli peace treaty, March 26, 1979, Article III, paragraph 3; Treaty of Peace between the State of Israel
and the Hashemite Kingdom of Jordan, October 26, 1994, Article 7, Section 2, paragraph A; Declaration of Principles,
September 10, 1993.
11 2007 National Trade Estimate Report on Foreign Trade Barriers, United States Trade Representative, March 30,
2007.
12 Ibid.
13 “Exports from Israel Up, Up, Up!,” Bridges for Peace, June 27, 2005. U.S. efforts to increase trade in the region
include the Qualified Industrial Zone (QIZ) program, which allows goods jointly produced by Israel and either Jordan
or Egypt to enter the United States duty free. See CRS Report RS22002, Qualifying Industrial Zones in
Jordan and Egypt, by Mary Jane Bolle, Jeremy M. Sharp, and Alfred B. Prados.
14 Chaim Fershtman and Neil Gandal, “The Effect of the Arab Boycott on Israel: The Automobile Market,” Tel Aviv
University, January 1996.


Arab League Boycott of Israel Congressional Research Service 4
Despite the lack of economic impact on either Israeli or Arab economies, the boycott remains of
strong symbolic importance to all parties. Many Arab countries want to deny normalization with
Israel until there is a final resolution to the conflict in the Palestinian territories. Israel, on the
other hand, asserts that it wants to be accepted in the neighborhood both in political terms and as
a source of, and target for, foreign investment.15


U.S. Activity to End the Arab League Boycott of Israel
The U.S. government officially opposes the boycott and works to end its enforcement on multiple
levels. For many years, language has been included in successive foreign operations
appropriations legislation concerning the boycott. For example, Section 7035 of the Consolidated
Appropriations Act, FY2012 (P.L. 112-74) states that it is the sense of Congress that
1. the Arab League boycott of Israel, and the secondary boycott of American firms
that have commercial ties with Israel, is an impediment to peace in the region and
to United States investment and trade in the Middle East and North Africa;
2. the Arab League boycott, which was regrettably reinstated in 1997, should be
immediately and publicly terminated, and the Central Office for the Boycott of
Israel immediately disbanded;
3. all Arab League states should normalize relations with their neighbor Israel;
4. the President and the Secretary of State should continue to vigorously oppose the
Arab League boycott of Israel and find concrete steps to demonstrate that
opposition by, for example, taking into consideration the participation of any
recipient country in the boycott when determining to sell weapons to said
country; and
5. the President should report to Congress annually on specific steps being taken by
the United States to encourage Arab League states to normalize their relations
with Israel to bring about the termination of the Arab League boycott of Israel,
including those to encourage allies and trading partners of the United States to
enact laws prohibiting businesses from complying with the boycott and
penalizing businesses that do comply.
U.S. Antiboycott Compliance Legislation
The United States passed antiboycott legislation in the late 1970s to discourage U.S. individuals
from cooperating with the secondary and tertiary boycotts. Antiboycott laws apply to “U.S.
exports and imports, financing, forwarding and shipping, and certain other transactions that may
take place wholly offshore.”16

15 Anju S. Bawa, “Israel Embarks on PR Face-lift,” The Washington Times, December 5, 2006.
16 Website of the Department of Commerce’s Office of Antiboycott Compliance. www.bis.doc.gov/
AntiboycottCompliance/oacrequirements.html#whatscovered.


Arab League Boycott of Israel Congressional Research Service 5
Although U.S. legislation and practices were designed to counteract the Arab League boycott of
Israel, in practice, they apply to all non-sanctioned boycotts. According to the Department of
Commerce’s Office of Antiboycott Compliance, the legislation was enacted 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 [the legislation] 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.”17
U.S. regulations define cooperating with the boycott as (1) agreeing to refuse or actually refusing
to do business in Israel or with a blacklisted company; (2) agreeing to discriminate or actually
discriminating against other persons based on race, religion, sex, national origin, or nationality;
(3) agreeing to furnish or actually furnishing information about business relationships in Israel or
with blacklisted companies; and (4) agreeing to furnish or actually furnishing information about
the race, religion, sex, or national origin of another person.
U.S. antiboycott laws are included in the Export Administration Act of 1979 (EAA) and the
Ribicoff Amendment to the Tax Reform Act of 1976 (TRA).18 The export-related antiboycott
provisions are administered by the Department of Commerce and prohibit U.S. persons from
participating in the boycott. The Internal Revenue Service (IRS) administers tax-related
antiboycott regulations that deny tax benefits to U.S. taxpayers that participate in the boycott.
Export-Related Antiboycott Legislation
Regulations promulgated under Section 8 of the EAA prohibit any U.S. person or company from
complying with an unsanctioned foreign boycott and require them to report requests they have
received to comply with a boycott. Such requests must be reported quarterly to the Department of
Commerce’s Office of Antiboycott Compliance (OAC) in the Bureau of Industry and Security
(BIS). These regulations are implemented in part 760 of the Department of Commerce’s Export
Administration Regulations (EAR).
The EAA prescribes penalties that may be imposed for violation of the antiboycott regulations.
Civil penalties for violating the antiboycott provisions are a maximum fine of $50,000 per
violation and a potential loss of export privileges for a period of time. Particularly egregious cases
may be referred to the Department of Justice for criminal prosecution. Criminal penalties imposed
for each violation can include a fine of up to $50,000 or five times the value of the exports
involved, whichever is greater, or imprisonment for up to five years, or both. Willful violations,
where the violator has knowledge that the items are also intended for any country to which
exports are restricted for national security or foreign policy purposes, are punishable by fines up
to $250,000 or imprisonment for up to 10 years.

17 Website of the Office of Antiboycott Compliance. www.bis.doc.gov/AntiboycottCompli…
oacrequirements.html
18 Section 8 of The Export Administration Act of 1979 (P.L. 96-72; 50 U.S.C. app. §2407) has expired but its
provisions are continued under the authorization granted to the President in the National Emergencies Act (NEA) (P.L.
94-412; 50 U.S.C. §1601-1651) and the International Economic Emergency Powers Act (IEEPA) (P.L. 95-223; 50
U.S.C. app. §2407), most recently under Executive Order 13222 signed August 17, 2001 (66 F.R. 44025, August 22,
2001). Antiboycott export regulations are at 15 C.F.R. 760.1 et seq. The Ribicoff Amendment to the Tax Reform Act of
1976 (P.L. 94-455) added Section 999 to the Internal Revenue Code of 1986, as amended (26 U.S.C. §1 et seq). Tax
regulations are at 26 C.F.R. §7.999-1.


Arab League Boycott of Israel Congressional Research Service 6
In July 2007, BIS amended existing penalty guidelines to introduce a voluntary disclosure
program that could reduce a potential fine levied on an exporter if it voluntarily discloses its
violation of U.S. antiboycott laws. For the disclosure to have a mitigating effect, notification must
take place prior to BIS learning about the violation from other sources and commencing an
investigation. The new guidelines also created a new supplement no. 2 to the antiboycott
provisions that more clearly describes how BIS investigates violations of U.S. antiboycott laws
and determines penalty rates.
Tax-Related Antiboycott Legislation
The Ribicoff Amendment to the TRA added Section 999 to the Internal Revenue Code. This
section denies various tax benefits normally available to exporters if they participate in the
boycott. In addition, the IRS requires U.S. taxpayers to report operations in, with, or related to
countries that the Treasury Department includes on its annual list of countries that may require
participation in an international boycott, and with any other country from which they receive a
request to participate in a boycott.19
Denying tax benefits to U.S. firms that participate in the boycott appears to be an effective
antiboycott strategy. According to one study, U.S. legislation reduces overall participation in the
boycott by U.S. taxpayers by between 15% and 30%.20 However, the effectiveness of U.S.
antiboycott tax legislation may diminish since the U.S. government is reducing export tax
benefits that are available to U.S.-based companies to comply with World Trade Organization
(WTO) rulings.21

———————————–
Author Contact Information
Martin A. Weiss
Specialist in International Trade and Finance
 mweiss at crs.loc.gov, 7-5407

———————————-

19 The current list of countries that request U.S. companies to participate or agree to participate in boycotts prohibited
under U.S. law includes Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, United Arab Emirates, and Yemen.

“List of the Countries Requiring Cooperation with an International Boycott, Department of the Treasury,” Department
of the Treasury, 77 F.R. 160, August 17, 2012.
20 James R. Hines, Jr., “Taxed Avoidance: American Participation in Unsanctioned International Boycotts,” NBER
Working Paper 6116, July 1997.
21 See CRS Report RS20746, Export Tax Benefits and the WTO: The Extraterritorial Income Exclusion and Foreign
Sales Corporations, by David L. Brumbaugh.


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