The U.S. Department of Commerce has fined Cooper Tools Industrial Limited $27,000 for illegally complying with an Arab boycott of Israel – a violation of the U.S. Antiboycott Act. According to the Department of Commerce, the toolmaker allegedly provided prohibited information about business relationships with Israel to persons in Kuwait and the United Arab Emirates.
The boycott involves certain Arab states asking companies to certify that their products were not manufactured in Israel, do not contain Israeli-made parts, and that the companies do not do business with Israel. To comply with any of these demands or even provide requested information violates United States law.
According to reports, Cooper Tools disclosed its transactions voluntarily when it learned about them and has cooperated in the investigation.
Commentary: Kudos to Cooper for self-reporting this violation to the government and cooperating with the investigation. Perhaps that is why the actual fine imposed was so light ($27,000? You can barely buy a Hyundai for that!).
While this law is fairly high profile and of concern within corporations, proven violations and subsequent fines are quite rare. Why is that?
First of all, it is unlikely that the government will learn of the violation without a company first self-disclosing an infraction.
Secondly, while many Arab governments bluster about not conducting business with Israel, the companies themselves are far less reluctant and tend to ignore the boycott. We have found that a forceful response to a customer’s request that the boycott be honored is usually enough for the request to be dropped – and if you have the superior product that they demand, your organization will get the business regardless if it has the best product or price. However, it can be disconcerting be asked questions such as “are any of your directors or officers Jewish?”
It is a good practice to ensure that all salespeople operating in the Middle East and Northeast Africa, as well as anyone else who would be responding to RFPs from the region, to be familiar with the requirements of the Antiboycott Act through training. Despite the small fine administered in this case, the embarrassment and bad publicity that occur in the event of a violation can be far more economically damaging to the enterprise.
June 20th, 2007 at 3:53 pm
It is relevant to note that the law can be difficult to comply with as it permits a company to say “We abhor the Zionist state” but not “In response to your inquiry we are able to confirm that we have extensive manufacturing activity in Israel and that significant portions of these products in particular were made there.”