Congressional Probe Looming into Administration of Federal Regulations Against Arab Boycott of U.S.

A Congressional inquiry into the administration of federal regulations against the Arab boycott of American companies engaged in trade with Israel was indicated today following a reported shift in the enforcement of the regulations by the Department of Justice.

Rep. Benjamin Rosenthal (D. NY), chairman of the House government subcommittee on commerce, consumer and monetary affairs, asked for an examination of the circumstances to determine whether the Justice Department’s position results in a weaker enforcement of the anti-boycott regulations.

The matter arose after the Department was seen as retreating from a strong anti-trust stand against the Arab boycott following complaints by multi-national corporations, the Business Roundtable, the U.S. Chamber of Commerce and the State and Commerce Departments. The Commerce Department said it is sympathetic to the concerns of the business groups that the Justice Department stand is incompatible with the Commerce Department’s regulations regarding the boycott.

The State Department declined to comment yesterday on the Justice Department’s position because the case from which the matter stems is still in litigation. But a State Department spokesman said “We would, however, not wish to characterize the Justice (Department’s) action as a retreat. We supported moves to regulate boycott involvement of U.S. firms and believe that a consistent, regulatory framework, which is clear and workable is the best way to promote all the various interests of the U.S. in this field.”

BASIS FOR THE ISSUE

The issue arises from a Justice Department statement of policy in its anti-trust suit against the Bechtel Corporation of San Francisco, one of the nation’s largest construction firms with extensive contracts in the Middle East. Bechtel was accused in January, 1976 of illegal participation in the boycott by serving as a third party to ensure that the Arab market was closed to U.S. suppliers blacklisted by the Arabs. Bechtel and the Justice Department agreed to a settlement last year but the company now says that new anti-boycott regulations should prevail.

In its latest brief on the case, the Justice Department continued to hold Bechtel to its agreement, but in a footnote said its earlier policy statement was retracted because “it may be subject to misinterpretation.” That statement referred to the Department’s stringent enforcement of anti-trust laws concerning boycott-related activities. Bechtel contends that the statement is more stringent than the Commerce Department’s regulations.

The case is in the form of a consent decree that is now in the hands of the U.S. District Court in San Francisco. Douglas E. Rosenthal, chief of the foreign commerce section in the Justice Department’s anti-trust division, said the Department’s position represents “a change of tone.” However, Associate Attorney General Michael J. Eagen said “there’s no question we pulled back. The footnote is intended to indicate to businessmen that while not in every case will we defer to Commerce, we will certainly give considerable heed to their enforcement program.”