Today the US Department of the Treasury (Treasury) published a notice in the Federal Register, 17 Fed. Reg. 49864, adding Iraq to its list of countries that require or may require participation in, or cooperation with, an international boycott as defined under section 999 of the Internal Revenue Code of 1986, as amended (Code). Iraq now joins Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, the United Arab Emirates, and Yemen on Treasury’s list.
The subject list changes infrequently, and Treasury’s notice does not provide an explanation why Iraq has been added. For several years, Iraq had not been formally included on the list, but its status had been under review by Treasury. Recent media reports suggest that the Iraqi Patent Office is requiring that patent applicants sign a boycott declaration directed against Israel, or certain patent rights could be abandoned, which may in part explain Treasury’s decision to add Iraq to the list.
Any person or a member of its controlled group that has operations in or related to a country on the Treasury list can be penalized under the Code for agreeing to participate in or cooperate with an international boycott not sanctioned by the United States, subject to certain limited exceptions. Furthermore, if any such person knows or has reason to know that it has received a request requiring participation in or cooperation with an international boycott when doing business within any country (including but not limited to those on Treasury’s list) or with the government, a company, or a national of such country, then that person must report receipt of such request on Form 5713 included as part of an annual tax return filed with the Internal Revenue Service.
The US Department of Commerce, Office of Antiboycott Compliance, which administers separate antiboycott regulations under 15 C.F.R. Part 760 of the Export Administration Regulations (EAR), does not publish a list of countries that support a restrictive trade practice or boycott against a country friendly to the United States. Although the US Government first published these antiboycott regulations in response to the Arab League countries’ boycott against Israel, it is important to note that boycott-related requests can be directed against countries other than Israel. Where a US person and interstate or foreign commerce of the United States is involved in a transaction, the EAR prohibit, and also impose reporting requirements on, such persons participating in or cooperating with foreign boycotts or restrictive trade practices against a third country that the US Government does not sanction, subject to certain exceptions.