July 22, 2020 | Insight

Amazon Pays a Fine for Crimea Business, but Occupied-Territories Policy Remains Murky

July 22, 2020 Insight

Amazon Pays a Fine for Crimea Business, but Occupied-Territories Policy Remains Murky

Amazon.com, Inc., settled with the U.S. Department of the Treasury earlier this month for violating U.S. sanctions by delivering products to Crimea, a region of Ukraine under Russian occupation, and several sanctioned countries. Treasury was justified in targeting Amazon: The U.S. sanctions, which date back to Russia’s invasion of Crimea in 2014, prohibit trade and investment in the occupied territory.

Amazon is worth $1.5 trillion, so it can afford to pay a small fine – a paltry $135,000. But, in some ways, the tech juggernaut was the victim of a system that makes little sense.

America’s trade policies pertaining to territories under Russian occupation are wildly inconsistent. In addition to Crimea, Russia illegally occupies four other territories: Donbas in Ukraine, Transnistria in Moldova, and South Ossetia and Abkhazia in Georgia. Remarkably, there is no explicit U.S. prohibition on trade with these regions, even though their status under U.S. and international law is identical to Crimea’s: They are territories under Russian foreign occupation.

U.S. policy on certificates of origin and labeling of consumer goods from these regions is also a hot mess. Following the Russian invasion of Crimea and prior to the imposition of full U.S. sanctions on trade and investment in Crimea, U.S. Customs and Border Protection (CBP) published an explicit directive demanding a Ukrainian export stamp on goods produced in Crimea and imported to the United States. The policy was designed to ensure that consumers understand when products they buy were produced in occupied Crimea, and to potentially prevent Russia from benefiting from trade through the occupied territory. For all the other regions under Russian occupation, however, there is no requirement for an export stamp from the legal sovereign.

U.S. trade policy on other disputed territories is a similar mishmash. CBP issued explicit guidelines requiring that goods produced in the West Bank be explicitly marked as such. The labels cannot contain the words “Israel,” “Made in Israel,” “Occupied Territories-Israel,” or words of similar meaning. In 2016, CBP issued additional guidance reaffirming this rule: “Goods that are erroneously marked as products of Israel will be subject to an enforcement action carried out by U.S. Customs and Border Protection.”

But the laser focus on Israel was curious given that goods produced in Armenian settlements in the occupied territories of Azerbaijan enter the United States unhindered. Despite U.S. recognition of Nagorno-Karabakh and the surrounding regions as the legal territory of Azerbaijan, CBP has not clarified that goods from these territories should be labeled as such.

It would appear, then, that some disputed territories are more disputable than others. But the U.S. government has never bothered to explain why.

Taking their lead from the muddled policies in Washington, American companies also lack consistency in their business dealings with territories under occupation. In cases where U.S. sanctions explicitly bar trade, large U.S. businesses usually comply for fear of fines meted out by Treasury’s Office of Foreign Assets Control and the accompanying reputational damage that often occurs. In fact, Amazon was a rare case of non-compliance. However, in occupation zones where the United States does not explicitly outlaw transactions, American and other international businesses operate unhindered. This includes Moroccan-occupied Western Sahara, Turkish-occupied Northern Cyprus, the aforementioned Russian-occupied territories, Armenian-occupied Nagorno-Karabakh, and more.

Recently, some companies have come under fire for operating in Israeli settlements in the West Bank. Activists seeking to promote the Boycott, Divestment, and Sanctions (BDS) campaign against Israel for its presence in the West Bank are promoting this trend. Some American businesses have actually caved to the pressure. The most prominent example was Airbnb, the online travel accommodations company, which in 2018 halted advertisements for Jewish businesses in the West Bank and East Jerusalem. This cessation was short-lived, however, after the company was hit with legal challenges for discrimination.

Airbnb, it should be noted, operates in most other occupied territories, such as Western Sahara and Nagorno-Karabakh. It never issued policy guidance or halted services in those regions. And the BDS activists have not expressed interest in those other disputes, either.

Government and corporate consistency would be useful not only to avoid the perception of bias. Consistency can also offer real benefits for the United States. Occupying states are likely to take Washington’s calls to end their occupations more seriously if policies are applied across the board, not just in cases that have captured the attention of the U.S. policy community or of vociferous activists.

As policymakers look ahead to the reopening and reintegration of U.S. trade after the coronavirus pandemic, there are clear opportunities for the United States to gain leverage over its adversaries. The hit-and-miss approach to disputed territories has run its course. It’s time for a trade policy overhaul.

Brenda Shaffer is senior advisor for energy at the Foundation for Defense of Democracies (FDD), where Jonathan Schanzer is senior vice president for research. Both contribute to FDD’s Center on Economic and Financial Power (CEFP). For more analysis from Brenda, Jonathan, and CEFP, please subscribe HERE. Follow Brenda and Jonathan on Twitter @ProfBShaffer and @JSchanzer. Follow FDD on Twitter @FDD and @FDD_CEFP. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.

Issues:

Israel Lawfare Russia Sanctions and Illicit Finance