Compliance Risk Amid Turkey-Israel Trade Suspension and Regional Conflicts

Compliance Risk Amid Turkey-Israel Trade Suspension and Regional Conflicts

A Fenwick client alert addresses the recent suspension of Turkey-Israel trade relations and its implications for U.S. antiboycott compliance amid the Israel-Hamas conflict. U.S. companies with operations in the region must be vigilant about the Arab League Boycott of Israel (ALB) and sanctions on Iran, Syria, and terrorist groups like Hamas and Hezbollah.

The U.S. federal law, established in 1977, prohibits U.S. persons from participating in any boycott of Israel, including the ALB. The Bureau of Industry and Security (BIS) and the Internal Revenue Service (IRS) enforce these antiboycott regulations. Companies must avoid actions such as refusing to do business with blacklisted entities, discriminating based on race, religion, sex, or national origin, providing information about business relations with boycotted countries, and implementing prohibited terms in letters of credit. Non-compliance can result in severe penalties and loss of foreign tax credits.

Turkey’s recent trade ban with Israel, announced in May 2024, emphasizes the need for companies to be aware of their U.S. legal obligations, as cooperation with such bans might trigger reporting requirements under BIS and IRS rules.

Additionally, the alert stresses the importance of adhering to U.S. sanctions against Iran, Syria, Hamas, and Hezbollah. Companies must be cautious of illicit diversion tactics and ensure compliance through rigorous screening and controls, especially when dealing with high-risk regions or parties.

Finally, companies exporting defense-related items to Israel must comply with stringent U.S. export regulations and Israeli import controls. Items like body armor, helmets, and other military-grade equipment require proper authorization for export to ensure adherence to both U.S. and Israeli laws.