US ANTI BOYCOTT REGULATIONS

QUERY FROM LTQ

Dear Mr Duc

B/L clause: the ship is not of Israelian flag and will not call any israelian ports water and/or territories and is not entered into black list of arabic countries the issuing bank refuse the docs with the discrepancy: boycott clause (according to U.S law).

Pls give your comment on this case

Thank so much.

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ANSWER FROM MR. OLD MAN

Hi,

The fact that the bill of lading contains such a boycott clause does not make the bill discrepant as UCP does not have any article dealing with “boycott clause”. However, this is a matter of US anti-boycott regulations in accordance with which the following clauses or the like are prohibited to appear on letter of credit or some documents required:

“We hereby certify that the beneficiaries, manufacturers, exporters and transferees of this credit are neither blacklisted nor have any connection with Israel, and that the terms and conditions of this credit in no way contravenes the law pertaining to the boycott of Israel and the decisions issued by the Israel boycott Office."

"Original commercial invoice signed and certified by the beneficiary that the goods supplied are not manufactured by either a company or one of its subsidiary branches who are blacklisted by the Arab boycott of Israel or in which Israeli capital is invested."

"The certificate of origin must contain the following statement: ‘We certify that the goods are neither of Israeli origin no do they contain any Israeli materials."

"On no conditions may a bank listed on the Arab Israeli boycott list be permitted to negotiate this credit."
"We also certify that to the best of our knowledge the beneficiaries have no connection with Israel and that the terms of this credit in no way contravene the regulations issued by the Israel boycott Office or local government regulations."

"Goods of Israeli origin not acceptable."

"The bill of lading shall bear a note that the vessel delivering the cargo is not on the "Black List" and does not call at Israeli ports."
….

If the documents presented contain one of the above clause or similar terms a nominated bank or confirming bank may be exposed to risks that are beyond their control, i.e. they may not be reimbursed by a U.S bank due to U.S sanctions.

Frankly speaking, I am not good at this matter. Therefore, for your information I wish to quote Adulkader Bazara's article "Troublesome LC practices" an excerpt as follows:

“…There are cases where the LC instrument doesn't contain any boycott language but the documents presented do. If identified by a U.S. bank, payment will not be forthcoming to the beneficiary until that language is removed. The problem is exacerbated when the language appears on third party documents e.g. a bill of lading.

Unless a bank has the know how, data and technical facility to quickly identify sanction names and boycott languages, it is better off not to pay, accept, incur deferred payment undertaking, negotiate or confirm LC's containing such restrictive trade clauses / practices”…

Hope this can help you.

Best regards,
Nguyen Huu Duc …