Ajcongress Challenges Ruling by California Official Allowing Banks to Issue Certificates

An opinion by California’s Attorney General on the state’s new anti-boycott law has been challenged by the American Jewish Congress as serving to “extend, condone and validate acts of collaboration with the Arab boycott of Israel.”

Last month, Attorney General Evelle J. Younger issued an opinion that Chapter 1247 of the California Statutes, which became effective Jan. 1, did not prohibit California banks from issuing negative certificates of origin. These are statements that goods sold to Arab buyers do not contain material of Israeli origin.

“The mere demand by banks for negative certificates of origin as a prerequisite to payment on certain letters of credit inevitably aids and abets the Arab boycott and embroils American financial institutions in active collaboration with boycott activities.” Phil Baum, associate executive director of the AJ Congress wrote to Younger. The California official’s interpretation of the anti-boycott law. Baum said, would “defeat the legislative intention” of the statute.

Prior to the Attorney-General’s opinion, the Bank of California instructed its branches in the state and in 44 countries abroad to stop handling documents containing boycott-related provisions. Similar announcements were made by other California banks. Since Younger’s opinion, however, Baum said, “the banks have indicated a measure of uncertainty on how to proceed.”

CITES COMMERCE DEP’T. RULING

Baum cited an opinion by J.T. Smith, general counsel of the U.S. Department of Commerce last Nov, 5 that the mere furnishing of boycott-related information “is in itself an act of compliance with the boycott…which contravenes the policy of the United States.” Smith said that “it has been the policy of the United States for 11 years to encourage and request American firms to refuse to take any action, including the furnishing of simple certificates of origin” that has “the effect of furnishing or supporting the Arab boycott of Israel.”

The AJ Congress spokesman also cited a statement by the Board of Governors of the Federal Reserve System that “the participation of a U.S. bank, even passively,” in efforts to effect the boycott was “a misuse of the privileges and benefits conferred upon banking institutions.” The issuance of letters of credit containing boycott clauses, the Federal Reserve said in a letter to member banks on Dec. 12, 1975, “was beyond normal commercial conditions” and was “unjustifiable.”