The Qatar Blockade & American Businesses: A Comprehensive Guide to Navigating the Gulf Crisis

Executive Summary (Click Here to Download PDF)

The economic and social blockade by Saudi Arabia, the UAE, Bahrain, and Egypt against Qatar has catalyzed a hostile political climate in the Gulf region and instigated rumors of an impending Secondary Boycott campaign.

Secondary Boycotts in the context of international commerce refers to an attempt by a foreign government (A) to influence the actions of a company operating in another country (B) by exerting economic or political pressure for that company to cease business operations with or within a third country (C).

In the ongoing Gulf Crisis, this scenario refers to foreign governments attempting to exert pressure on American companies to cease business operations with Qatar or Qatari-owned businesses. Secondary Boycotts are against US law, and failure to report Secondary Boycott requests may result in significant civil/criminal penalties.

Mission

This White Paper serves to educate and inform US businesses on:

  • The vital US-Qatar trade relationship
  • Current US anti-boycott laws and applications for the Gulf Crisis
  • Navigating potential Secondary Boycott requests
  • Reporting and disclosure regimes and penalties
  • Applicable resources and assistance for US businesses

The US-Qatar Trade Relationship

As Qatar’s largest foreign investor and its single largest source of imports, the United States has developed a robust trade relationship with Qatar, with over 120 US companies operating in-country.

US exports to Qatar include aircraft, machinery, vehicles, optical and medical instruments, and agricultural products. US imports from Qatar include liquefied natural gas, aluminum, fertilizers, and sulfur. The United States and Qatar have signed a trade and investment framework agreement (TIFA) and host annual bilateral Economic and Investment Dialogues.

Qatar plans to invest $45 billion of its sovereign wealth fund in the United States by 2021. In 2016, Qatar’s purchase of $12 billion in F-15 fighters was approved by Congress and Qatar announced an $18 billion of Boeing commercial jets.

US Anti-Boycott Laws Summary

US anti-boycott laws establish the principle that US businesses should not participate in foreign boycotts that are not sanctioned by the United States. The laws prevent US companies from engendering themselves to foreign policy objectives that run counter to American interests abroad.

Originally enacted in the 1970’s, the laws were designed to protect American companies and were kept unspecific— using generic language that applies to all countries.

US businesses that participate, intentionally or in some cases unintentionally, may face a host of civil or criminal penalties. Additionally, failure by US businesses to report to the jurisdictional federal agency requests by foreign entities to comply with an unsanctioned boycott, is itself a crime and may carry civil or criminal penalties as well. Penalties include:

  • Civil penalties of up to $11,000 per violation
  • Criminal penalties
  • Denial of exporting privileges
  • Tax consequences for businesses
 

US Anti-Boycott Laws Detailed

The Export Administration Act (EAA) specifies penalties for violations of the Antiboycott Regulations as well as export control violations.

  • Criminal: 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.
  • Administrative: For each violation of the EAR any or all of the following may be imposed: General denial of export privileges; The imposition of fines of up to $11,000 per violation; and/or Exclusion from practice.

Section 8 of the Export Administration Act of 1979, as amended, 50 USC. app. §§ 2401 – 2420 (2000), International Emergency Economic Powers Act, 50 USC. §§ 1701-1707 (2000)

  • Applies to: US persons, including individuals who are US residents and nationals, businesses, and “controlled in fact” foreign subsidiaries, with respect to activities in the interstate or foreign commerce of the US
  • Reporting: Required to report receipt of boycott related requests on a quarterly basis on BIS Form 621-P.
  • Penalties: Failure to report can lead to imposition of sanctions (even if there is no violation of law’s prohibitions). Criminal and civil penalties (up to $11,000 per violation) and/or denial of export privileges.

“Ribicoff Amendment” to the Tax Reform Act of 1976, adding § 999 to the Internal Revenue Code.

  • Applies to: Any US taxpayer or member of a controlled group which includes such taxpayer. Also includes US shareholders of foreign companies. Not limited to activities in US commerce.
  • Reporting: On IRS Form 5713, required to report annually operations in, with, or related to boycotting countries and any boycott related requests and agreements. Plus operations and requests of entire controlled group in, with, or related to boycotting countries.
  • Penalties: Denial of tax benefits such as foreign tax credit and foreign subsidiary deferral benefits. If the US taxpayer has no such tax benefits, there is no sanction – but still has to report. Failure to report can subject a taxpayer to fines and criminal proceedings.

US Businesses, Anti-Boycott Laws, & Qatar

The recent economic boycott of the State of Qatar has highlighted the relevance of US anti-boycott laws in 2017. There have been rumors circulating that the embargoing bloc will attempt to pressure US businesses to diminish or cease operations with Qatar or Qatari-owned businesses.

Secondary Boycott demands may not be in the form of enacted laws, but rather in the form of private conversations between foreign business persons and their corresponding US counterpart. They may also be referred to directly or indirectly via purchase orders and other export/import forms or requirements.

US law requires American business operators to report such requests to the Department of Commerce’s Bureau of Industry and Security’s Office of Antiboycott Compliance (OAC). USQBC will be in discussion with relevant government agencies to ensure companies have the right resources for reporting secondary boycott requirements.

US Government Support & Information for Companies in the Context of the Current Crisis 

Without concrete directives in place from foreign governments explicitly requiring American companies to cease business with Qatar, the US government cannot necessarily intervene. Further, without explicit trade agreements between the US and any of the aforementioned countries, there is likely little the US government can do in the way of promoting free trade.

The best way to move forward is to encourage American companies to report any secondary boycott requests levied against them (whether directly or indirectly) to the US Department of Commerce. With concrete evidence of American businesses and American jobs being hurt, the US government may be more inclined to take action.

Report anti-boycott law violations:

Department of Commerce’s Bureau of Industry and Security’s Office of Antiboycott Compliance (OAC) — (https://www.bis.doc.gov/index.php/enforcement/oac?id=300)



EVENTS

December 19, 2017 - December 19, 2017

Webinar — Business Opportunities in Qatar ()

March 11, 2018 - March 13, 2018

Doha International Maritime Defense Exhibition & Conference (Doha, Qatar)

October 28, 2018 - October 30, 2018

Milipol Qatar — 12th International Exhibition of Homeland Security (Doha, Qatar)