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Washington Report on Middle East Affairs,October 3, 1983, Page 4

Trade and Finance

No Anti-Boycott Relief

U.S. businessmen who were hoping to get some early relief from the anti-Arab boycott provisions of the 1979 Export Administration Act are going to have to wait a long time for it.

This became clear when House and Senate committees agreed to renew the act for at least another two years, without any amendment to its anti-boycott section. This contains regulations which put restrictions on the response by U.S. companies to questions by Arab governments related to the Arab economic boycott of Israel—and requires "prompt" reporting to the Commerce Department of any such questions.

For many years, many U.S. companies doing business in the Mideast have found the restrictions an irritation—since they can be fined even for denying an incorrect accusation, and must report receiving questions even if they do not answer them.

Pro-Israel lobbying organizations in the U.S. continue to give support to the regulations, but pro-Arab groups have long alleged that the main aim of those lobbies is not to counter the boycott but to restrict U.S. trade with Arab countries—since trade can create closer political relations, as well.

For medium- and large-sized companies the fines imposed by Commerce are minor—but during the past year Commerce has used a recently enlarged staff to tighten its enforcement of the anti-boycott provisions, levying far more fines than ever before. The biggest fine during 1983 was $323,000 for Citibank's alleged failure to report "promptly" on 337 boycott-related requests received between January, 1980 and January, 1983 from Kuwait, Oman and Abu Dhabi. Another alleged violation in September involved Xerox, which was fined $17,000 and for six months was denied what Commerce called "export privileges" to Jordan, Lebanon, Kuwait, United Arab Emirates, Bahrain, Libya, Iraq, Oman, Qatar, Saudi Arabia, Syria, North Yemen and South Yemen. Xerox and two of its subsidiaries were accused of furnishing prohibited information about "another person's business relationships with persons blacklisted by the Arab League" between December, 1979 and November, 1982. Also, Xerox was said by Commerce to have furnished the names and nationalities of its stockholders and certified that certain of its products were not of Israeli origin.

In recent months, several business organizations have been trying to arrange discussions with some of the pro-Israel lobbying groups to discuss how the anti-boycott law is hurting U.S. exports to the Middle East—but spokesmen for the groups say the efforts have been unsuccessful.

Of more concern to businessmen than the Export Control Act provisions is the so-called "Ribicoff Amendment" to the 1976 Tax Reform Act of the Internal Revenue Code. This is another anti-boycott provision which punishes violators with denial of tax benefits in three areas: foreign tax credits; tax deferral on the earnings of foreign subsidiaries; and tax deferral on the earnings of Domestic International Sales Corporations (DISC).

Moneywise, the businessman has more to lose by the Treasury Department's anti-boycott provision. While violators of the Commerce Department regulations are fined up to a maximum of $10,000 on each count, the loss of foreign tax credits and deferrals can jump up to a tidy sum for multinationals, depending on the extent of the "boycotted business." Compared to the Commerce Department's collection of just over $1 million in fines during fiscal 1983 (which ended October 1) it is estimated that the Treasury Department has collected about $12 million for the same period for violations of the Ribicoff Amendment.

Many businessmen believe that even if they fail, as they have so far, to get a change of the Ribicoff Amendment in any significant form, it would be helpful to merge that amendment with the Commerce Department's regulations. While presenting the Administration's version of the Export Control Act to Congressional subcommittees earlier this year, International Trade Administration Undersecretary Lionel Olmer acknowledged that there were "inconsistencies and overlaps" between it and the Ribicoff Amendment, and called for a "greater consensus between all interested parties" before a legislative solution could be achieved.