Commerce Dept. Warns U.S. Exporters Fine for Boycott Compliance May Rise

American exporters have been put on notice that the U.S. Commerce Department supports increasing fines against companies that participate in the Arab boycott against Israel to $50,000 for each civil violation.

This would put civil penalties, which now cannot exceed $10,000 per violation, at the same $50,000 level for fines for criminal violations. The Commerce Department has rarely sought criminal penalties.

Commerce Secretary Robert Mosbacher voiced support for the five-fold increase Tuesday in an address to some 600 representatives of U.S. exporters attending a conference sponsored by the department’s Bureau of Export Administration. The Office of Anti-Boycott Compliance is part of the bureau.

Until the Arab countries agree to end the boycott, the anti-boycott office “will strictly enforce prohibitions against direct or indirect participation of U.S. companies in the boycott,” Mosbacher pledged.

He also promised to beef up the anti-boycott office to its authorized complement of 30 persons. Critics have charged that the office has not been able to fulfill its duties because it has been understaffed for years.

Since the end of the Persian Gulf War, “administration officials have personally conveyed to Arab leaders this administration’s firm belief that the time is right to abandon both the primary and secondary boycotts of Israel,” Mosbacher said.

“We are convinced that a strong diplomatic effort and the continued commitment of U.S. industry to strictly comply with the anti-boycott program will move the Arab nations to discontinue it,” he said.

DECLINE IN INVESTIGATIONS

The increase in civil penalties is contained in the bill to reauthorize the Export Administration Act, which Congress must pass this year.

The Office of Anti-Boycott Compliance has been criticized for a sharp decline in the number of investigations during the last two years.

One critic, Joe Kamalick, editor of the Boycott Law Bulletin in Houston, attributed the drop to the fact that the office has been chronically understaffed.

He said in a telephone interview Thursday that with a staff of 18, there is “no way” the office could adequately monitor some 5,000 U.S. companies that sell goods abroad.

The office is supposed to check every company that is taken off the Arab League’s official boycott list to see whether the reason is illegal compliance, but it has been unable to do so, Kamalick said.

Kamalick criticized the Commerce Department for failing to seek criminal penalties. And he faulted the department for chiefly going after small- and medium-size companies that have no in-house lawyers to advise them of violations. However, he conceded that some major firms have been fined, including Safeway, Sara Lee and Xerox.

Kamalick said that increasing the maximum civil, penalty would give the anti-boycott office another stick to ensure compliance. He said the office has been reluctant to use the ultimate civil penalty, which would be to revoke a company’s license to export.

Meanwhile, 83 senators have signed a letter to President Bush urging him to press for anti-boycott measures when he goes to London next week for the meeting of the seven major industrialized nations.

“We must implore our trading partners to examine their own policies toward the boycott, and urge them to pass legislation which prohibits private-sector compliance,” said the letter, which was drafted by Sen. Frank Lautenberg (D-N.J.).

The senators emphasized that the United States cannot succeed by itself in getting the Arab nations to end the boycott.

“If the industrialized countries are unified in their approach, the Arab countries can be convinced to end their boycott against businesses that do have economic relations with Israel,” the letter said.

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