[Code of Federal Regulations]
[Title 15, Volume 2]
[Revised as of January 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 15CFR760.2]

[Page 453-467]
 
                  TITLE 15--COMMERCE AND FOREIGN TRADE
 
  CHAPTER VII--BUREAU OF EXPORT ADMINISTRATION, DEPARTMENT OF COMMERCE
 
PART 760--RESTRICTIVE TRADE PRACTICES OR BOYCOTTS--Table of Contents
 
Sec. 760.2  Prohibitions.

    (a) Refusals to do business.

               Prohibition Against Refusals To Do Business

    (1) No United States person may: refuse, knowingly agree to refuse, 
require any other person to refuse, or knowingly agree to require any 
other person to refuse, to do business with or in a boycotted country, 
with any business concern organized under the laws of a boycotted 
country, with any national or resident of a boycotted country, or with 
any other person, when such refusal is pursuant to an agreement with the 
boycotting country, or a requirement of the boycotting country, or a 
request from or on behalf of the boycotting country.
    (2) Generally, a refusal to do business under this section consists 
of action that excludes a person or country from a transaction for 
boycott reasons. This includes a situation in which a United States 
person chooses or selects one person over another on a boycott basis or 
takes action to carry out another person's boycott-based selection when 
he knows or has reason to know that the other person's selection is 
boycott-based.
    (3) Refusals to do business which are prohibited by this section 
include not only specific refusals, but also refusals implied by a 
course or pattern of conduct. There need not be a specific offer and 
refusal to constitute a refusal to do business; a refusal may occur when 
a United States person has a financial or commercial opportunity and 
declines for boycott reasons to consider or accept it.
    (4) A United States person's use of either a boycott-based list of 
persons with whom he will not deal (a so-called ``blacklist'') or a 
boycott-based list of persons with whom he will deal (a so-called 
``whitelist'') constitutes a refusal to do business.

[[Page 454]]

    (5) An agreement by a United States person to comply generally with 
the laws of the boycotting country with which it is doing business or an 
agreement that local laws of the boycotting country shall apply or 
govern is not, in and of itself, a refusal to do business. Nor, in and 
of itself, is use of a contractual clause explicitly requiring a person 
to assume the risk of loss of non-delivery of his products a refusal to 
do business with any person who will not or cannot comply with such a 
clause. (But see Sec. 760.4 of this part on ``Evasion.'')
    (6) If, for boycott reasons, a United States general manager chooses 
one supplier over another, or enters into a contract with one supplier 
over another, or advises its client to do so, then the general manager's 
actions constitute a refusal to do business under this section. However, 
it is not a refusal to do business under this section for a United 
States person to provide management, procurement, or other pre-award 
services for another person so long as the provision of such pre-award 
services is customary for that firm (or industry of which the firm is a 
part), without regard to the boycotting or non-boycotting character of 
the countries in which they are performed, and the United States person, 
in providing such services, does not act to exclude a person or country 
from the transaction for boycott reasons, or otherwise take actions that 
are boycott-based. For example, a United States person under contract to 
provide general management services in connection with a construction 
project in a boycotting country may compile lists of qualified bidders 
for the client if that service is a customary one and if persons who are 
qualified are not excluded from that list because they are blacklisted.
    (7) With respect to post-award services, if a client makes a 
boycott-based selection, actions taken by the United States general 
manager or contractor to carry out the client's choice are themselves 
refusals to do business if the United States contractor knows or has 
reason to know that the client's choice was boycott-based. (It is 
irrelevant whether the United States contractor also provided pre-award 
services.) Such actions include entering into a contract with the 
selected supplier, notifying the supplier of the client's choice, 
executing a contract on behalf of the client, arranging for inspection 
and shipment of the supplier's goods, or taking any other action to 
effect the client's choice. (But see Sec. 760.3(d) on ``Compliance with 
Unilateral Selection'' as it may apply to post-award services.)
    (8) An agreement is not a prerequisite to a violation of this 
section since the prohibition extends to actions taken pursuant not only 
to agreements but also to requirements of, and requests from or on 
behalf of, a boycotting country.
    (9) Agreements under this section may be either express or implied 
by a course or pattern of conduct. There need not be a direct request 
from a boycotting country for action by a United States person to have 
been taken pursuant to an agreement with or requirement of a boycotting 
country.
    (10) This prohibition, like all others, applies only with respect to 
a United States person's activities in the interstate or foreign 
commerce of the United States and only when such activities are 
undertaken with intent to comply with, further, or support an 
unsanctioned foreign boycott. The mere absence of a business 
relationship with or in the boycotted country, with any business concern 
organized under the laws of the boycotted country, with national(s) or 
resident(s) of the boycotted country, or with any other person does not 
indicate the existence of the required intent.

      Examples of Refusals and Agreements To Refuse To Do Business

    The following examples are intended to give guidance in determining 
the circumstances in which, in a boycott situation, a refusal to do 
business or an agreement to refuse to do business is prohibited. They 
are illustrative, not comprehensive.

                         Refusals To Do Business

    (i) A, a U.S. manufacturer, receives an order for its products from 
boycotting country Y. To fill that order, A solicits bids from U.S. 
companies B and C, manufacturers of components used in A's products. A 
does not, however, solicit bids from U.S. companies D

[[Page 455]]

or E, which also manufacture such components, because it knows that D 
and E are restricted from doing business in Y and that their products 
are, therefore, not importable into that country.
    Company A may not refuse to solicit bids from D and E for boycott 
reasons, because to do so would constitute a refusal to do business with 
those persons.
    (ii) A, a U.S. exporter, uses company B, a U.S. insurer, to insure 
the shipment of its goods to all its overseas customers. For the first 
time, A receives an order for its products from boycotting country Y. 
Knowing that B is on the blacklist of Y, A arranges with company C, a 
non-blacklisted U.S. insurer, to insure the shipment of its goods to Y.
    A's action constitutes a refusal to do business with B.
    (iii) A, a U.S. exporter, purchases all its liability insurance from 
company B, a U.S. company that does business in boycotted country X. A 
wishes to expand its operations into country Y, the boycotting country. 
Before doing so, A decides to switch from insurer B to insurer C in 
anticipation of a request from Y that A sever its relations with B as a 
condition of doing business in Y.
    A may not switch insurers for this reason, because doing so would 
constitute a refusal to do business with B.
    (iv) U.S. company A exports goods to boycotting country Y. In 
selecting vessels to transport the goods to Y, A chooses only from among 
carriers which call at ports in Y.
    A's action is not a refusal to do business with carriers which do 
not call at ports in Y.
    (v) A, a U.S. bank with a branch office in boycotting country Y, 
sends representatives to boycotted country X to discuss plans for 
opening a branch office in X. Upon learning of these discussions, an 
official of the local boycott office in Y advises A's local branch 
manager that if A opens an office in X it will no longer be allowed to 
do business in Y. As a result of this notification, A decides to abandon 
its plans to open a branch in X.
    Bank A may not abandon its plans to open a branch in X as a result 
of Y's notification, because doing so would constitute a refusal to do 
business in boycotted country X.
    (vi) A, a U.S. company that manufactures office equipment, has been 
restricted from doing business in boycotting country Y because of its 
business dealings with boycotted country X. In an effort to have itself 
removed from Y's blacklist, A ceases its business in X.
    A's action constitutes a refusal to do business in boycotted country 
X.
    (vii) A, a U.S. computer company, does business in boycotting 
country Y. A decides to explore business opportunities in boycotted 
country X. After careful analysis of possible business opportunities in 
X, A decides, solely for business reasons, not to market its products in 
X.
    A's decision not to proceed is not a refusal to do business, because 
it is not based on boycott considerations. A has no affirmative 
obligation to do business in X.
    (viii) A, a U.S. oil company with operations in boycotting country 
Y, has regularly purchased equipment from U.S. petroleum equipment 
suppliers B, C, and D, none of whom is on the blacklist of Y. Because of 
its satisfactory relationship with B, C, and D, A has not dealt with 
other suppliers, including supplier E, who is blacklisted by Y.
    A's failure affirmatively to seek or secure business with 
blacklisted supplier E is not a refusal to do business with E.
    (ix) Same as (viii), except U.S. petroleum equipment supplier E, a 
company on boycotting country Y's blacklist, offers to supply U.S. oil 
company A with goods comparable to those provided by U.S. suppliers B, 
C, and D. A, because it has satisfactorily, established relationships 
with suppliers B, C, and D, does not accept supplier E's offer.
    A's refusal of supplier E's offer is not a refusal to do business, 
because it is based solely on non-boycott considerations. A has no 
affirmative obligation to do business with E.
    (x) A, a U.S. construction company, enters into a contract to build 
an office complex in boycotting country Y. A receives bids from B and C, 
U.S. companies that are equally qualified suppliers of electrical cable 
for the project. A knows that B is blacklisted by Y and that C is not. A 
accepts C's bid, in part because C is as qualified as the other 
potential supplier and in part because C is not blacklisted.
    A's decision to select supplier C instead of blacklisted supplier B 
is a refusal to do business, because the boycott was one of the reasons 
for A's decision.
    (xi) A, a U.S. general contractor, has been retained to construct a 
highway in boycotting country Y. A circulates an invitation to bid to 
U.S. manufacturers of road-building equipment. One of the conditions 
listed in the invitation to bid is that, in order for A to obtain prompt 
service, suppliers will be required to maintain a supply of spare parts 
and a service facility in Y. A includes this condition solely for 
commercial reasons unrelated to the boycott. Because of this condition, 
however, those suppliers on Y's blacklist do not bid, since they would 
be unable to satisfy the parts and services requirements.
    A's action is not a refusal to do business, because the contractual 
condition was included solely for legitimate business reasons and was 
not boycott-based.
    (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

[[Page 456]]

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''.)
    (xiii) A, a U.S. engineering and construction company, contracts 
with a government agency in boycotting country Y to perform a variety of 
services in connection with the construction of a large industrial 
facility in Y. Pursuant to this contract, A analyzes the market of 
prospective suppliers, compiles a suggested bidders list, analyzes the 
bids received, and makes recommendations to the client. The client 
independently selects and awards the contract to supplier C for boycott 
reasons. All of A's services are performed without regard to Y's 
blacklist or any other boycott considerations, and are the type of 
services A provides clients in both boycotting and non-boycotting 
countries.
    A's actions do not constitute a refusal to do business, because, in 
the provision of pre-award services, A has not excluded the other 
bidders and because A customarily provides such services to its clients.
    (xiv) Same as (xiii), except that in compiling a list of prospective 
suppliers, A deletes suppliers he knows his client will refuse to select 
because they are blacklisted. A knows that including the names of 
blacklisted suppliers will neither enhance their chances of being 
selected nor provide his client with a useful service, the function for 
which he has been retained.
    A's actions, which amount to furnishing a so-called ``whitelist'', 
constitute refusals to do business, because A's pre-award services have 
not been furnished without regard to boycott considerations.
    (xv) A, a U.S. construction firm, provides its boycotting country 
client with a permissible list of prospective suppliers, B, C, D, and E. 
The client independently selects and awards the contract to C, for 
boycott reasons, and then requests A to advise C of his selection, 
negotiate the contract with C, arrange for the shipment, and inspect the 
goods upon arrival. A knows that C was chosen by the client for boycott 
reasons.
    A's action in complying with his client's direction is a refusal to 
do business, because A's post-award actions carry out his client's 
boycott-based decision. (Note: Whether A's action comes within the 
unilateral selection exception depends upon factors discussed in 
Sec. 760.3(d) of this part).
    (xvi) Same as (xv), except that A is building the project on a 
turnkey basis and will retain title until completion. The client 
instructs A to contract only with C.
    A's action in contracting with C constitutes a refusal to do 
business, because it is action that excludes blacklisted persons from 
the transaction for boycott reasons. (Note: Whether A's action comes 
within the unilateral selection exception depends upon factors discussed 
in Sec. 760.3(d) of this part).
    (xvii) A, a U.S. exporter of machine tools, receives an order for 
drill presses from boycotting country Y. The cover letter from Y's 
procurement official states that A was selected over other U.S. 
manufacturers in part because A is not on Y's blacklist.
    A's action in filling this order is not a refusal to do business, 
because A has not excluded anyone from the transaction.
    (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.
    (xix) U.S. bank A receives a letter of credit in favor of U.S. 
beneficiary B. The letter of credit requires B to certify that he is not 
blacklisted. B meets all other conditions of the letter of credit but 
refuses to certify as to his blacklist status. A refuses to pay B on the 
letter of credit solely because B refuses to certify as to his blacklist 
status.
    A has refused to do business with another person pursuant to a 
boycott requirement or request.
    (xx) U.S. bank A receives a letter of credit 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 not blacklisted. B seeks payment from A and meets all other 
conditions of the letter of credit but refuses or is unable to provide 
the certification from the steamship line about the vessel's blacklist 
status. A refuses to pay B on the letter of credit solely because B 
cannot or will not provide the certification.
    A has required another person to refuse to do business pursuant to a 
boycott requirement or request by insisting that B obtain such a 
certificate. (Either A or B may request an amendment to the letter of 
credit substituting a certificate of vessel eligibility, however. See 
Example (xxi) below).
    (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

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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''.)
    (xxii) U.S. bank A confirms a letter of credit in favor of U.S. 
beneficiary B. The letter of credit contains a requirement that B 
certify that he is not blacklisted. B presents the letter of credit to 
U.S. bank C, a correspondent of bank A. B does not present the 
certificate of blacklist status to bank C, but, in accordance with these 
rules, bank C pays B, and then presents the letter of credit and 
documentation to bank A for reimbursement. Bank A refuses to reimburse 
bank C because the blacklist certification of B is not included in the 
documentation.
    A has required another person to refuse to do business with a person 
pursuant to a boycott requirement or request by insisting that C obtain 
the certificate from B.
    (xxiii) U.S. bank A receives a letter of credit in favor of U.S. 
beneficiary B. The letter of credit requires B to certify that he is not 
blacklisted. B fails to provide such a certification when he presents 
the documents to A for payment. A notifies B that the certification has 
not been submitted.
    A has not refused to do business with another person pursuant to a 
boycott requirement by notifying B of the omitted certificate. A may not 
refuse to pay on the letter of credit, however, if B states that B will 
not provide such a certificate.
    (xxiv) U.S. bank A receives a letter of credit in favor of U.S. 
beneficiary B from the issuing bank for the purpose of confirmation, 
negotiation or payment. The letter of credit requires B to certify that 
he is not blacklisted. A notifies B that it is contrary to the policy of 
A to handle letters of credit containing this condition and that, unless 
an amendment is obtained deleting this condition, A will not implement 
the letter of credit.
    A has not refused to do business with another person pursuant to a 
boycott requirement, because A has indicated its policy against 
implementing the letter of credit containing the term without regard to 
B's ability or willingness to furnish such a certificate.

                   Agreements To Refuse To Do Business

    (i) A, a U.S. construction firm, is retained by an agency of 
boycotting country Y to build a primary school. The proposed contract 
contains a clause stating that A ``may not use goods or services in the 
project that are produced or provided by any person restricted from 
having a business relationship with country Y by reason of Y's boycott 
against country X''.
    A's action in entering into such a contract would constitute an 
agreement to refuse to do business, because it is an agreement to 
exclude blacklisted persons from the transaction. A may, however, 
renegotiate this clause so that it does not contain terms prohibited by 
this part.
    (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.
    (iii) A, a U.S. construction firm, is offered a contract to perform 
engineering and construction services in connection with a project 
located in boycotting country Y. The contract contains a clause stating 
that, in the event of a contract dispute, the laws of Y will apply.
    A may enter into the contract. Agreement that the laws of boycotting 
country Y will control in resolving a contract dispute is not an 
agreement to refuse to do business.
    (iv) Same as (iii), except that the contract contains a clause that 
A and its employees will comply with the laws of boycotting country Y. A 
knows that Y has a number of boycott laws.
    Such an agreement is not, in and of itself, an agreement to refuse 
to do business. If, however, A subsequently refuses to do business with 
someone because of the laws of Y, A's action would be a refusal 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.
    (vii) A, a U.S. general contractor, is retained to construct a 
pipeline in boycotting country Y. A provision in the proposed contract 
stipulates that in purchasing equipment, supplies, and services A must 
give

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preference to companies located in host country Y.
    A may agree to this contract provision. Agreeing to a ``buy local'' 
contract provision is not an agreement to refuse to do business, because 
A's agreement is not made for boycott reasons.
    (viii) A, a U.S. exporter planning to sell retail goods to customers 
in boycotting country Y, enters into a contract to purchase goods 
wholesale from B, a U.S. appliance manufacturer. A's contract with B 
includes a provision stipulating that B may not use components or 
services of blacklisted companies in the manufacture of its appliances.
    A's contract constitutes a refusal to do business, because it would 
require another person, B, to refuse to do business with other persons 
for boycott reasons. B may not agree to such a contract, because it 
would be agreeing to refuse to do business with other persons for 
boycott reasons.
    (ix) Same as (viii), except that A and B reach an implicit 
understanding that B will not use components or services of blacklisted 
companies in the manufacture of goods to be exported to Y. In the 
manufacture of appliances to be sold to A for export to non-boycotting 
countries, B uses components manufactured by blacklisted companies.
    The actions of both A and B constitute agreement to refuse to do 
business. The agreement is implied by their pattern of conduct.
    (x) Boycotting country Y orders goods from U.S. company B. Y opens a 
letter of credit with foreign bank C in favor of B. The letter of credit 
specifies that negotiation of the letter of credit with a bank that 
appears on the country X boycott blacklist is prohibited. U.S. bank A, 
C's correspondent bank, advises B of the letter of credit. B presents 
documentation to bank A seeking to be paid on the letter of credit, 
without amending or otherwise taking exception to the boycott condition.
    B has agreed to refuse to do business with blacklisted banks 
because, by presenting the letter of credit for payment, B has accepted 
all of its terms and conditions.

    (b) Discriminatory actions.

            Prohibition Against Taking Discriminatory Actions

    (1) No United States person may:
    (i) Refuse to employ or otherwise discriminate against any 
individual who is a United States person on the basis of race, religion, 
sex, or national origin;
    (ii) Discriminate against any corporation or other organization 
which is a United States person on the basis of the race, religion, sex, 
or national origin of any owner, officer, director, or employee of such 
corporation or organization;
    (iii) Knowingly agree to take any of the actions described in 
paragraph (b)(1)(i) and (ii) of this section; or
    (iv) Require or knowingly agree to require any other person to take 
any of the actions described in paragraph (b)(1)(i) and (ii) of this 
section.
    (2) This prohibition shall apply whether the discriminatory action 
is taken by a United States person on its own or in response to an 
agreement with, request from, or requirement of a boycotting country. 
This prohibition, like all others, applies only with respect to a United 
States person's activities in the interstate or foreign commerce of the 
United States and only when such activities are undertaken with intent 
to comply with, further, or support an unsanctioned foreign boycott.
    (3) The section does not supersede or limit the operation of the 
civil rights laws of the United States.

                   Examples of Discriminatory Actions

    The following examples are intended to give guidance in determining 
the circumstances in which the taking of particular discriminatory 
actions is prohibited. They are illustrative, not comprehensive.
    (i) U.S. construction company A is awarded a contract to build an 
office complex in boycotting country Y. A, believing that employees of a 
particular religion will not be permitted to work in Y because of Y's 
boycott against country X, excludes U.S. persons of that religion from 
consideration for employment on the project.
    A's refusal to consider qualified U.S. persons of a particular 
religion for work on the project in Y constitutes a prohibited boycott-
based discriminatory action against U.S. persons on the basis of 
religion.
    (ii) Same as (i), except that a clause in the contract provides that 
``no persons of country X origin are to work on this project.''
    A's agreement constitutes a prohibited boycott-based agreement to 
discriminate against U.S. persons, among others, on the basis of 
national origin.
    (iii) Same as (i), except that a clause in the contract provides 
that ``no persons who are citizens, residents, or nationals of country X 
are to work on this project.''
    A's agreement does not constitute a boycott-based agreement to 
discriminate against U.S. persons on the basis of race, religion, sex, 
or national origin, because the

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clause requires exclusion on the basis of citizenship, residency, and 
nationality only.
    (iv) U.S. construction company A enters into a contract to build a 
school in boycotting country Y. Y's representative orally tells A that 
no persons of country X origin are to work on the project.
    A may not comply, because to do so would constitute discrimination 
on the basis of national origin.
    It makes no difference that A learned of Y's requirement orally. It 
makes no difference how A learns about Y's discriminatory requirement.
    (v) Boycotting country Y tenders an invitation to bid on a 
construction project in Y. The tender requires that the successful 
bidder's personnel will be interviewed and that persons of a particular 
religious faith will not be permitted to work on the project. Y's 
requirement is based on its boycott of country X, the majority of whose 
citizens are of that particular faith.
    Agreement to this provision in the tender document by a U.S. person 
would constitute a prohibited agreement to engage in boycott-based 
discrimination against U.S. persons of a particular religion.
    (vi) Same as (v), except that the tender specifies that ``women will 
not be allowed to work on this project.''
    Agreement to this provision in the tender by a U.S. person does not 
constitute a prohibited agreement to engage in boycott-based 
discrimination, because the restriction against employment of women is 
not boycott-based. Such an agreement may, however, constitute a 
violation of U.S. civil rights laws.
    (vii) A is a U.S. investment banking firm. As a condition of 
participating in an underwriting of securities to be issued by 
boycotting country Y, A is required to exclude investment banks owned by 
persons of a particular faith from participation in the underwriting. 
Y's requirement is based on its boycott of country X, the majority of 
whose citizens are of that particular faith.
    A's agreement to such a provision constitutes a prohibited agreement 
to engage in boycott-based discrimination against U.S. persons on the 
basis of religion. Further, if A requires others to agree to such a 
condition, A would be acting to require another person to engage in such 
discrimination.
    (viii) U.S. company A is asked by boycotting country Y to certify 
that A will not use a six-pointed star on the packaging of its products 
to be imported into Y. The requirement is part of the enforcement effort 
by Y of its boycott against country X.
    A may not so certify. The six-pointed star is a religious symbol, 
and the certification by A that it will not use such a symbol 
constitutes a statement that A will not ship products made or handled by 
persons of that religion.
    (ix) Same as (viii), except that A is asked to certify that no 
symbol of boycotted country X will appear on the packaging of its 
products imported into Y.
    Such a certification conveys no statement about any person's 
religion and, thus, does not come within this prohibition.

    (c) Furnishing information about race, religion, sex, or national 
origin.

Prohibition Against Furnishing Information About Race, Religion, Sex, or 
                             National Origin

    (1) No United States person may:
    (i) Furnish information about the race, religion, sex, or national 
origin of any United States person;
    (ii) Furnish information about the race, religion, sex, or national 
origin of any owner, officer, director, or employee of any corporation 
or other organization which is a United States person;
    (iii) Knowingly agree to furnish information about the race, 
religion, sex, or national origin of any United States person; or
    (iv) Knowingly agree to furnish information about the race, 
religion, sex, or national origin of any owner, officer, director, or 
employee of any corporation or other organization which is a United 
States person.
    (2) This prohibition shall apply whether the information is 
specifically requested or is offered voluntarily by the United States 
person. It shall also apply whether the information requested or 
volunteered is stated in the affirmative or the negative.
    (3) Information about the place of birth of or the nationality of 
the parents of a United States person comes within this prohibition, as 
does information in the form of code words or symbols which could 
identify a United States person's race, religion, sex, or national 
origin.
    (4) This prohibition, like all others, applies only with respect to 
a United States person's activities in the interstate or foreign 
commerce of the United States and only when such activities are 
undertaken with intent to comply with, further, or support an 
unsanctioned foreign boycott.

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     Examples of the Prohibition Against Furnishing Discriminatory 
                               Information

    The following examples are intended to give guidance in determining 
the circumstances in which the furnishing of discriminatory information 
is prohibited. They are illustrative, not comprehensive.
    (i) U.S. company A receives a boycott questionnaire from boycotting 
country Y asking whether it is owned or controlled by persons of a 
particular faith, whether it has any persons on its board of directors 
who are of that faith, and what the national origin of its president is. 
The information is sought for purposes of enforcing Y's boycott against 
country X, and A knows or has reason to know that the information is 
sought for that reason.
    A may not answer the questionnaire, because A would be furnishing 
information about the religion and national origin of U.S. persons for 
purposes of complying with or supporting Y's boycott against X.
    (ii) U.S. company A, located in the United States, is asked by 
boycotting country Y to certify that A has no persons of a particular 
national origin on its board of directors. A knows that Y's purpose in 
asking for the certification is to enforce its boycott against country 
X.
    A may not make such a certification, because A would be furnishing 
information about the national origin of U.S. persons for purposes of 
complying with or supporting Y's boycott against X.
    (iii) U.S. company A believes that boycotting country Y will select 
A's bid over those of other bidders if A volunteers that it has no 
shareholders, officers, or directors of a particular national origin. 
A's belief is based on its knowledge that Y generally refuses, as part 
of its boycott against country X, to do business with companies owned, 
controlled, or managed by persons of this particular national origin.
    A may not volunteer this information, because it would be furnishing 
information about the national origin of U.S. persons for purposes of 
complying with or supporting Y's boycott against X.
    (iv) U.S. company A has a contract to construct an airport in 
boycotting country Y. Before A begins work, A is asked by Y to identify 
the national origin of its employees who will work on the site. A knows 
or has reason to know that Y is seeking this information in order to 
enforce its boycott against X.
    A may not furnish this information, because A would be providing 
information about the national origin of U.S. persons for purposes of 
complying with or supporting Y's boycott against X.
    (v) Same as (iv), except that in order to assemble its work force on 
site in Y, A sends visa forms to its employees and asks that the forms 
be returned to A for transmittal to Y's consulate or embassy. A, itself, 
furnishes no information about its employees, but merely transmits the 
visa forms back and forth.
    In performing the ministerial function of transmitting visa forms, A 
is not furnishing information about any U.S. person's race, religion, 
sex, or national origin.
    (vi) Same as (iv), except that A is asked by Y to certify that none 
of its employees in Y will be women, because Y's laws prohibit women 
from working.
    Such a certification does not constitute a prohibited furnishing of 
information about any U.S. person's sex, since the reason the 
information is sought has nothing to do with Y's boycott of X.
    (vii) U.S. company A is considering establishing an office in 
boycotting country Y. In order to register to do business in Y, A is 
asked to furnish information concerning the nationalities of its 
corporate officers and board of directors.
    A may furnish the information about the nationalities of its 
officers and directors, because in so doing A would not be furnishing 
information about the race, religion, sex, or national origin of any 
U.S. person.

    (d) Furnishing information about business relationships with 
boycotted countries or blacklisted persons.

Prohibition Against Furnishing Information About Business Relationships 
             With Boycotted Countries or Blacklisted Persons

    (1) No United States person may furnish or knowingly agree to 
furnish information concerning his or any other person's past, present 
or proposed business relationships:
    (i) With or in a boycotted country;
    (ii) With any business concern organized under the laws of a 
boycotted country;
    (iii) With any national or resident of a boycotted country; or
    (iv) With any other person who is known or believed to be restricted 
from having any business relationship with or in a boycotting country.
    (2) This prohibition shall apply:
    (i) Whether the information pertains to a business relationship 
involving a sale, purchase, or supply transaction; legal or commercial 
representation; shipping or other transportation transaction; insurance; 
investment; or any other type of business transaction or relationship; 
and

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    (ii) Whether the information is directly or indirectly requested or 
is furnished on the initiative of the United States person.
    (3) This prohibition does not apply to the furnishing of normal 
business information in a commercial context. Normal business 
information may relate to factors such as financial fitness, technical 
competence, or professional experience, and may be found in documents 
normally available to the public such as annual reports, disclosure 
statements concerning securities, catalogs, promotional brochures, and 
trade and business handbooks. Such information may also appear in 
specifications or statements of experience and qualifications.
    (4) Normal business information furnished in a commercial context 
does not cease to be such simply because the party soliciting the 
information may be a boycotting country or a national or resident 
thereof. If the information is of a type which is generally sought for a 
legitimate business purpose (such as determining financial fitness, 
technical competence, or professional experience), the information may 
be furnished even if the information could be used, or without the 
knowledge of the person supplying the information is intended to be 
used, for boycott purposes. However, no information about business 
relationships with blacklisted persons or boycotted countries, their 
residents or nationals, may be furnished in response to a boycott 
request, even if the information is publicly available. Requests for 
such information from a boycott office will be presumed to be boycott-
based.
    (5) This prohibition, like all others, applies only with respect to 
a United States person's activities in the interstate or foreign 
commerce of the United States and only when such activities are 
undertaken with intent to comply with, further, or support an 
unsanctioned foreign boycott.

              Examples Concerning Furnishing of Information

    The following examples are intended to give guidance in determining 
the circumstances in which the furnishing of information is prohibited. 
They are illustrative, not comprehensive.
    (i) U.S. contractor A is considering bidding for a contract to build 
a dam in boycotting country Y. The invitation to bid, which appears in a 
trade journal, specifies that each bidder must state that he does not 
have any offices in boycotted country X. A knows or has reason to know 
that the requirement is boycott-based.
    A may not make this statement, because it constitutes information 
about A's business relationships with X.
    (ii) U.S. contractor A is considering bidding for a contract to 
construct a school in boycotting country Y. Each bidder is required to 
submit copies of its annual report with its bid. Since A's annual report 
describes A's worldwide operations, including the countries in which it 
does business, it necessarily discloses whether A has business relations 
with boycotted country X. A has no reason to know that its report is 
being sought for boycott purposes.
    A, in furnishing its annual report, is supplying ordinary business 
information in a commercial context.
    (iii) Same as (ii), except that accompanying the invitation to bid 
is a questionnaire from country Y's boycott office asking each bidder to 
supply a copy of its annual report.
    A may not furnish the annual report despite its public availability, 
because it would be furnishing information in response to a 
questionnaire from a boycott office.
    (iv) U.S. company A is on boycotting country Y's blacklist. For 
reasons unrelated to the boycott, A terminates its business 
relationships with boycotted country X. In exploring other marketing 
areas, A determines that boycotting country Y offers great potential. A 
is requested to complete a questionnaire from a central boycott office 
which inquires about A's business relations with X.
    A may not furnish the information, because it is information about 
A's business relationships with a boycotted country.
    (v) U.S. exporter A is seeking to sell its products to boycotting 
country Y. A is informed by Y that, as a condition of sale, A must 
certify that it has no salesmen in boycotted country X. A knows or has 
reason to know that the condition is boycott-based.
    A may not furnish the certification, because it is information about 
A's business relationships in a boycotted country.
    (vi) U.S. engineering company A receives an invitation to bid on the 
construction of a dam in boycotting country Y. As a condition of the 
bid, A is asked to certify that it does not have any offices in 
boycotted country X. A is also asked to furnish plans for other dams it 
has designed.
    A may not certify that it has no office in X, because this is 
information about its business relationships in a boycotted country. A 
may submit plans for other dams it has designed, because this is 
furnishing normal

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business information, in a commercial context, relating to A's technical 
competence and professional experience.
    (vii) U.S. company A, in seeking to expand its exports to boycotting 
country Y, sends a sales representative to Y for a one week trip. During 
a meeting in Y with trade association representatives, A's 
representative desires to explain that neither A nor any companies with 
which A deals has any business relationship with boycotted country X. 
The purpose of supplying such information is to ensure that A does not 
get blacklisted.
    A's representative may not volunteer this information even though A, 
for reasons unrelated to the boycott, does not deal with X, because A's 
representative would be volunteering information about A's business 
relationships with X for boycott reasons.
    (viii) U.S. company A is asked by boycotting country Y to furnish 
information concerning its business relationships with boycotted country 
X. A, knowing that Y is seeking the information for boycott purposes, 
refuses to furnish the information asked for directly, but proposes to 
respond by supplying a copy of its annual report which lists the 
countries with which A is presently doing business. A does not happen to 
be doing business with X.
    A may not respond to Y's request by supplying its annual report, 
because A knows that it would be responding to a boycott-based request 
for information about its business relationships with X.
    (ix) U.S. company A receives a letter from a central boycott office 
asking A to ``clarify'' A's operations in boycotted country X. A intends 
to continue its operations in X, but fears that not responding to the 
request will result in its being placed on boycotting country Y's 
blacklist. A knows or has reason to know that the information is sought 
for boycott reasons.
    A may not respond to this request, because the information concerns 
its business relationships with a boycotted country.
    (x) U.S. company A, in the course of negotiating a sale of its goods 
to a buyer in boycotting country Y, is asked to certify that its 
supplier is not on Y's blacklist.
    A may not furnish the information about its supplier's blacklist 
status, because this is information about A's business relationships 
with another person who is believed to be restricted from having any 
business relationship with or in a boycotting country.
    (xi) U.S. company A has a manufacturing plant in boycotted country X 
and is on boycotting country Y's blacklist. A is seeking to establish 
operations in Y, while expanding its operations in X. A applies to Y to 
be removed from Y's blacklist. A is asked, in response, to indicate 
whether it has manufacturing facilities in X.
    A may not supply the requested information, because A would be 
furnishing information about its business relationships in a boycotted 
country.
    (xii) U.S. bank A plans to open a branch office in boycotting 
country Y. In order to do so, A is required to furnish certain 
information about its business operations, including the location of its 
other branch offices. Such information is normally sought in other 
countries where A has opened a branch office, and A does not have reason 
to know that Y is seeking the information for boycott reasons.
    A may furnish this information, even though in furnishing it A would 
disclose information about its business relationships in a boycotted 
country, because it is being furnished in a normal business context and 
A does not have reason to know that it is sought for boycott reasons.
    (xiii) U.S. architectural firm A responds to an invitation to submit 
designs for an office complex in boycotting country Y. The invitation 
states that all bidders must include information concerning similar 
types of buildings they have designed. A has not designed such buildings 
in boycotted country X. Clients frequently seek information of this type 
before engaging an architect.
    A may furnish this information, because this is furnishing normal 
business information, in a commercial context, relating to A's technical 
competence and professional experience.
    (xiv) U.S. oil company A distributes to potential customers 
promotional brochures and catalogs which give background information on 
A's past projects. A does not have business dealings with boycotted 
country X. The brochures, which are identical to those which A uses 
throughout the world, list those countries in which A does or has done 
business. In soliciting potential customers in boycotting country Y, A 
desires to distribute copies of its brochures.
    A may do so, because this is furnishing normal business information, 
in a commercial context, relating to professional experience.
    (xv) U.S. company A is interested in doing business with boycotting 
country Y. A wants to ask Y's Ministry of Trade whether, and if so why, 
A is on Y's blacklist or is otherwise restricted for boycott reasons 
from doing business with Y.
    A may make this limited inquiry, because it does not constitute 
furnishing information.
    (xvi) U.S. company A is asked by boycotting country Y to certify 
that it is not owned by subjects or nationals of boycotted country X and 
that it is not resident in boycotted country X.
    A may not furnish the certification, because it is information about 
A's business relationships with or in a boycotted country, or with 
nationals of a boycotted country.

[[Page 463]]

    (xvii) U.S. company A, a manufacturer of certain patented products, 
desires to register its patents in boycotting country Y. A receives a 
power of attorney form required to register its patents. The form 
contains a question regarding A's business relationships with or in 
boycotted country X. A has no business relationships with X and knows or 
has reason to know that the information is sought for boycott reasons.
    A may not answer the question, because A would be furnishing 
information about its business relationships with or in a boycotted 
country.
    (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.

    (e) Information concerning association with charitable and fraternal 
organizations.

   Prohibition Against Furnishing Information About Associations With 
                 Charitable and Fraternal Organizations

    (1) No United States person may furnish or knowingly agree to 
furnish information about whether any person is a member of, has made 
contributions to, or is otherwise associated with or involved in the 
activities of any charitable or fraternal organization which supports a 
boycotted country.
    (2) This prohibition shall apply whether:
    (i) The information concerns association with or involvement in any 
charitable or fraternal organization which (a) has, as one of its stated 
purposes, the support of a boycotted country through financial 
contributions or other means, or (b) undertakes, as a major 
organizational activity, to offer financial or other support to a 
boycotted country;
    (ii) The information is directly or indirectly requested or is 
furnished on the initiative of the United States person; or
    (iii) The information requested or volunteered concerns membership 
in, financial contributions to, or any other type of association with or 
involvement in the activities of such charitable or fraternal 
organization.
    (3) This prohibition does not prohibit the furnishing of normal 
business information in a commercial context as defined in paragraph (d) 
of this section.
    (4) This prohibition, like all others, applies only with respect to 
a United States person's activities in the interstate or foreign 
commerce of the United States and only when such activities are 
undertaken with intent to comply with, further, or support an 
unsanctioned foreign boycott.

      Examples of Prohibition Against Furnishing Information About 
         Associations With Charitable or Fraternal Organizations

    The following examples are intended to give guidance in determining 
the circumstances in which the furnishing of information concerning 
associations with charitable or fraternal organizations is prohibited. 
They are illustrative, not comprehensive.
    (i) U.S. engineering firm A receives an invitation to bid from 
boycotting country Y. The invitation includes a request to supply 
information concerning any association which A's officers have with 
charitable organization B, an organization which is known by A to 
contribute financial support to boycotted country X. A knows or has 
reason to know that the information is sought for boycott reasons.
    A may not furnish the information.
    (ii) U.S. construction company A, in an effort to establish business 
dealings with boycotting country Y, proposes to furnish information to Y 
showing that no members of its board of directors are in any way 
associated with charitable organizations which support boycotted country 
X. A's purpose is to avoid any possibility of its being blacklisted by 
Y.
    A may not furnish the information, because A's purpose in doing so 
is boycott-based. It makes no difference that no specific request for 
the information has been made by Y.
    (iii) A, a citizen of the United States, is applying for a teaching 
position in a school in boycotting country Y. In connection with his 
application, A furnishes a resume which happens to disclose his 
affiliation with charitable organizations. A does so completely without 
reference to Y's boycott and without knowledge of any boycott 
requirement of Y that pertains to A's application for employment.
    The furnishing of a resume by A is not a boycott-related furnishing 
of information about his association with charitable organizations which 
support boycotted country X.


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    (f) Letters of credit.

Prohibition Against Implementing Letters of Credit Containing Prohibited 
                       Conditions or Requirements

    (1) No United States person may pay, honor, confirm, or otherwise 
implement a letter of credit which contains a condition or requirement 
compliance with which is prohibited by this part, nor shall any United 
States person, as a result of the application of this section, be 
obligated to pay, honor or otherwise implement such a letter of credit.
    (2) For purposes of this section, ``implementing'' a letter of 
credit includes:
    (i) Issuing or opening a letter of credit at the request of a 
customer;
    (ii) Honoring, by accepting as being a valid instrument of credit, 
any letter of credit;
    (iii) Paying, under a letter of credit, a draft or other demand for 
payment by the beneficiary;
    (iv) Confirming a letter of credit by agreeing to be responsible for 
payment to the beneficiary in response to a request by the issuer;
    (v) Negotiating a letter of credit by voluntarily purchasing a draft 
from a beneficiary and presenting such draft for reimbursement to the 
issuer or the confirmer of the letter of credit; and
    (vi) Taking any other action to implement a letter of credit.
    (3) In the standard international letter of credit transaction 
facilitating payment for the export of goods from the United States, a 
bank in a foreign country may be requested by its customer to issue a 
revocable or irrevocable letter of credit in favor of the United States 
exporter. The customer usually requires, and the letter of credit 
provides, that the issuing (or a confirming) bank will make payment to 
the beneficiary against the bank's receipt of the documentation 
specified in the letter of credit. Such documentation usually includes 
commercial and consular invoices, a bill of lading, and evidence of 
insurance, but it may also include other required certifications or 
documentary assurances such as the origin of the goods and information 
relating to the carrier or insurer of the shipment.
    Banks usually will not accept drafts for payment unless the 
documents submitted therewith comply with the terms and conditions of 
the letter of credit.
    (4) A United States person is not prohibited under this section from 
advising a beneficiary of the existence of a letter of credit in his 
favor, or from taking ministerial actions to dispose of a letter of 
credit which it is prohibited from implementing.
    (5) Compliance with this section shall provide an absolute defense 
in any action brought to compel payment of, honoring of, or other 
implementation of a letter of credit, or for damages resulting from 
failure to pay or otherwise honor or implement the letter of credit. 
This section shall not otherwise relieve any person from any obligations 
or other liabilities he may incur under other laws or regulations, 
except as may be explicitly provided in this section.

             Letters of Credit to Which This Section Applies

    (6) This prohibition, like all others, applies only with respect to 
a United States person's activities taken with intent to comply with, 
further, or support an unsanctioned foreign boycott. In addition, it 
applies only when the transaction to which the letter of credit applies 
is in United States commerce and the beneficiary is a United States 
person.

        Implementation of Letters of Credit in the United States

    (7) A letter of credit implemented in the United States by a United 
States person located in the United States, including a permanent United 
States establishment of a foreign bank, will be presumed to apply to a 
transaction in United States commerce and to be in favor of a United 
States beneficiary where the letter of credit specifies a United States 
address for the beneficiary. These presumptions may be rebutted by facts 
which could reasonably lead the bank to conclude that the beneficiary is 
not a United States person or that the underlying transaction is not in 
United States commerce.
    (8) Where a letter of credit implemented in the United States by a

[[Page 465]]

United States person located in the United States does not specify a 
United States address for the beneficiary, the beneficiary will be 
presumed to be other than a United States person. This presumption may 
be rebutted by facts which could reasonably lead the bank to conclude 
that the beneficiary is a United States person despite the foreign 
address.

      Implementation of Letters of Credit Outside the United States

    (9) A letter of credit implemented outside the United States by a 
United States person located outside the United States will be presumed 
to apply to a transaction in United States commerce and to be in favor 
of a United States beneficiary where the letter of credit specifies a 
United States address for the beneficiary and calls for documents 
indicating shipment from the United States or otherwise indicating that 
the goods are of United States origin. These presumptions may be 
rebutted by facts which could reasonably lead the bank to conclude that 
the beneficiary is not a United States person or that the underlying 
transaction is not in United States commerce.
    (10) Where a letter of credit implemented outside the United States 
by a United States person located outside the United States does not 
specify a United States address for the beneficiary, the beneficiary 
will be presumed to be other than a United States person. In addition, 
where such a letter of credit does not call for documents indicating 
shipment from the United States or otherwise indicating that the goods 
are of United States origin, the transaction to which it applies will be 
presumed to be outside United States commerce. The presumption that the 
beneficiary is other than a United States person may be rebutted by 
facts which could reasonably lead the bank to conclude that the 
beneficiary is a United States person. The presumption that the 
transaction to which the letter of credit applies is outside United 
States commerce may be rebutted by facts which could reasonably lead the 
bank to conclude that the underlying transaction is in United States 
commerce.

   Examples of the Prohibition Against Implementing Letters of Credit

    The following examples are intended to give guidance in determining 
the circumstances in which this section applies to the implementation of 
a letter of credit and in which such implementation is prohibited. They 
are illustrative, not comprehensive.

      Implementation of Letters of Credit in United States Commerce

    (i) A, a U.S. bank located in the United States, opens a letter of 
credit in the United States in favor of B, a foreign company located 
outside the United States. The letter of credit specifies a non-U.S. 
address for the beneficiary.
    The beneficiary is presumed to be other than a U.S. person, because 
it does not have a U.S. address. The presumption may be rebutted by 
facts showing that A could reasonably conclude that the beneficiary is a 
U.S. person despite the foreign address.
    (ii) A, a branch of a foreign bank located in the United States, 
opens a letter of credit in favor of B, a foreign company located 
outside the United States. The letter of credit specifies a non-U.S. 
address for the beneficiary.
    The beneficiary is presumed to be other than a U.S.person, because 
it does not have a U.S. address. The presumption may be rebutted by 
facts showing that A could reasonably conclude that the beneficiary is a 
U.S. person despite the foreign address.
    (iii) A, a U.S. bank branch located outside the United States, opens 
a letter of credit in favor of B, a person with a U.S. address. The 
letter of credit calls for documents indicating shipment of goods from 
the United States.
    The letter of credit is presumed to apply to a transaction in U.S. 
commerce and to be in favor of a U.S. beneficiary because the letter of 
credit specifies a U.S. address for the beneficiary and calls for 
documents indicating that the goods will be shipped from the United 
States. These presumptions may be rebutted by facts showing that A could 
reasonably conclude that the beneficiary is not a U.S. person or that 
the underlying transaction is not in U.S. commerce.
    (iv) A, a U.S. bank branch located outside the United States, opens 
a letter of credit which specifies a beneficiary, B, with an address 
outside the United States and calls for documents indicating that the 
goods are of U.S.-origin. A knows or has reason to know that although B 
has an address outside the United States, B is a U.S. person.
    The letter of credit is presumed to apply to a transaction in U.S. 
commerce, because the letter of credit calls for shipment of U.S.-origin 
goods. In addition, the letter of credit is presumed to be in favor of a 
beneficiary who

[[Page 466]]

is a U.S. person, because A knows or has reason to know that the 
beneficiary is a U.S. person despite the foreign address.
    (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

    (i) Boycotting country Y orders goods from U.S. company B. Y opens a 
letter of credit with foreign bank C in favor of B. The letter of credit 
specifies as a condition of payment that B certify that it does not do 
business with boycotted country X. Foreign bank C forwards the letter of 
credit it has opened to U.S. bank A for confirmation.
    A may not confirm or otherwise implement this letter of credit, 
because it contains a condition with which a U.S. person may not comply.
    (ii) Same as (i), except U.S. bank A desires to advise the 
beneficiary, U.S. company B, of the letter of credit.
    A may do so, because advising the beneficiary of the letter of 
credit (including the term which prevents A from implementing it) is not 
implementation of the letter of credit.
    (iii) Same as (i), except foreign bank C sends a telegram to U.S. 
bank A stating the major terms and conditions of the letter of credit. 
The telegram does not reflect the boycott provision. Subsequently, C 
mails to A documents setting forth the terms and conditions of the 
letter of credit, including the prohibited boycott condition.
    A may not further implement the letter of credit after it receives 
the documents, because they reflect the prohibited boycott condition in 
the letter of credit. A may advise the beneficiary and C of the 
existence of the letter of credit (including the boycott term), and may 
perform any essentially ministerial acts necessary to dispose of the 
letter of credit.
    (iv) Same as (iii), except that U.S. company B, based in part on 
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.
    (v) Boycotting country Y requests a foreign bank in Y to open a 
letter of credit to effect payment for goods to be shipped by U.S. 
supplier B, the beneficiary of the letter of credit. The letter of 
credit contains prohibited boycott clauses. The foreign bank forwards a 
copy of the letter of credit to its branch office A, in the United 
States.
    A may advise the beneficiary but may not implement the letter of 
credit, because it contains prohibited boycott conditions.
    (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]
    (viii) B is a foreign bank located outside the United States. B 
maintains an account with U.S. bank A, located in the United States. A 
letter of credit issued by B in favor of a U.S. beneficiary provides 
that any negotiating bank may obtain reimbursement from A by certifying 
that all the terms and conditions of the letter of credit have been met 
and then drawing against B's account. B notifies A by cable of the 
issuance of a letter of credit and the existence of reimbursement 
authorization; A does not receive a copy of the letter of credit.
    A may reimburse any negotiating bank, even when the underlying 
letter of credit contains a prohibited boycott condition, because A does 
not know or have reason to know that the letter of credit contains a 
prohibited boycott condition.
    (ix) Same as (viii), except that foreign bank B forwards a copy of 
the letter of credit to U.S. bank A, which then becomes aware of the 
prohibited boycott clause.
    A may not thereafter reimburse a negotiating bank or in any way 
further implement the letter of credit, because it knows of the 
prohibited boycott condition.
    (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

[[Page 467]]

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.)
    (xi) [Reserved]
    (xii) Boycotting country Y orders goods from U.S. company B. A 
letter of credit which contains a prohibited boycott clause is opened in 
favor of B by a foreign bank in Y. The foreign bank asks U.S. bank A to 
advise and confirm the letter of credit, which it forwards to A.
    A may advise B that it has received the letter of credit (including 
the boycott term), but may not confirm the letter of credit with the 
prohibited clause.
    (xiii) Same as (xii), except U.S. bank A fails to tell B that it 
cannot process the letter of credit. B requests payment.
    A may not pay. If the prohibited language is eliminated or nullified 
as the result of renegotiation, A may then pay or otherwise implement 
the revised letter of credit.
    (xiv) U.S. bank A receives a letter of credit in favor of U.S. 
beneficiary B. The letter of credit requires B to certify that he is not 
blacklisted.
    A may implement such a letter of credit, but it may not insist that 
the certification be furnished, because by so insisting it would be 
refusing to do business with a blacklisted person in compliance with a 
boycott.
    (xv) A, a U.S. bank located in the U.S. opens a letter of credit in 
favor of U.S. beneficiary B for B's sale of goods to boycotting country 
Y. The letter of credit contains no boycott conditions, but A knows that 
Y customarily requires the seller of goods to certify that it has dealt 
with no blacklisted supplier. A, therefore, instructs B that it will not 
make payment under the letter of credit unless B makes such a 
certification.
    A's action in requiring the certification from B constitutes action 
to require another person to refuse to do business with blacklisted 
persons.
    (xvi) A, a U.S. bank located in the U.S., opens a letter of credit 
in favor of U.S. beneficiary B for B's sale of goods to boycotting 
country Y. The letter of credit contains no boycott conditions, but A 
has actual knowledge that B has agreed to supply a certification to Y 
that it has not dealt with blacklisted firms, as a condition of 
receiving the letter of credit in its favor.
    A may not implement the letter of credit, because it knows that an 
implicit condition of the credit is a condition with which B may not 
legally comply.
    (xvii) Boycotting country Y orders goods from U.S. company B. Y 
opens a letter of credit with foreign bank C in favor of B. The letter 
of credit includes the statement, ``Do not negotiate with blacklisted 
banks.'' C forwards the letter of credit it has opened to U.S. bank A 
for confirmation.
    A may not confirm or otherwise implement this letter of credit, 
because it contains a condition with which a U.S. person may not comply.

[61 FR 12862, Mar. 25, 1996, as amended at 65 FR 34945, June 1, 2000]