First National Bank opened a letter of credit in favor of ABC Co., a U.S. company, for ABC's sale of goods to Country X, a foreign country that participates in a boycott. The letter of credit contains no boycott provisions, but First National Bank knows that ABC Co. has agreed to supply a certification to Country X that ABC has not dealt with any blacklisted firms as a condition of receiving the letter of credit in its favor. What should First National Bank do?
First National Bank should not implement the letter of credit. While the letter of credit itself does not explicitly mention the boycott, the bank is aware that ABC Co. has agreed to certify non-dealings with blacklisted firms, which is a condition related to the boycott. U.S. laws and regulations generally prohibit participation in or support of unsanctioned international boycotts, and implementing the letter of credit in this case could be seen as a tacit endorsement of the boycott. Therefore, not proceeding with the letter of credit ensures compliance with U.S. legal standards regarding boycotts.
The correct answer is C. Not implement the letter of credit. Even though the letter of credit itself does not contain boycott language, First National Bank's awareness that ABC Co. has agreed to comply with a boycott condition as part of the transaction requires the bank to adhere to U.S. laws and regulations concerning participation in or support of international boycotts not sanctioned by the U.S. government. Implementing the letter of credit under these circumstances could be seen as facilitating the boycott indirectly.