The antiboycott provisions of the U.S. Export Administration Regulations and Ribicoff Amendment to the Tax Reform Act were designed to prevent U.S. individuals and companies from participating in or promoting foreign boycotts that the U.S. does not support.

PRINCIPAL BOYCOTTS

The Arab League Boycott of Israel is the principal foreign economic boycott of concern, however antiboycott laws apply to all boycotts that are unsanctioned by the United States. On the basis of the best information currently available to the Department of the Treasury as of April 7, 2004, the following countries may require participation in, or cooperation with, an international boycott (within the meaning of section 999(b)(3) of the Internal Revenue Code of 1986).

• Bahrain
• Kuwait
• Lebanon
• Libya*
• Oman
• Qatar
• Saudi Arabia
• Syria*
• United Arab Emirates
• Yemen, Republic of

Additional countries of concern that are not in the Federal Register but have had recent reported antiboycott violations include:

• Bangladesh
• Indonesia
• Malaysia

(Note: *Sun does not do business with embargoed countries.)

APPLICABILITY OF BOYCOTT LAWS TO SUN

The antiboycott provisions of the Export Administration Regulations apply to the activities of Sun's U.S. employees (even if resident outside of the U.S.) as well as its worldwide subsidiaries and affiliates with respect to their activities in the interstate or foreign commerce of the United States. Such activities can include the sale, purchase, transfer, and provision of goods and services between the United States and a foreign country as well as transactions that occur entirely outside of the United States.

Most common instances of boycott related requests:

• Requirements to complete questionnaires in connection with trademark application renewal applications that request information for boycott related purposes
• Boycott declarations incorporated into powers of attorney
• Letters of Credit
• Contracts
• Requests for Quotes or Bids
• Purchase orders

Below are examples of activities that are in violation of the antiboycott provisions of the Export Administration Regulations. The list is not exhaustive but it is intended to provide general, practical guidance.

• Providing information about past, present, or future business relationships with or in a boycotted country or with any person known or believed to be restricted from doing business with or in Arab countries that participate in the Arab boycott of Israel
• Agreeing to refuse or actually refusing to conduct business with a boycotted country (blacklisted person)
• Furnishing information about a person's race, religion, sex, or national origin for boycott-related reasons
• Agreeing to terms or conditions in contracts or letters of credit which provide that blacklisted vessels or suppliers will not be used
• Furnishing a certificate of origin which states that a shipment contains no Israeli-made items
• Implementing any letter of credit with terms and conditions that run counter to U.S. antiboycott laws

REPORTING OF ANTIBOYCOTT VIOLATIONS

The Export Adminstration Regulations (EAR) requires U.S. persons to report quarterly any requests they have received to take any action to comply with, further, or support an unsanctioned foreign boycott.

The Tax Reform Act (TRA) requires taxpayers to report "operations" in, with, or related to a boycotting by a country or its nationals and requests received to participate in or cooperate with an international boycott. The Treasury Department publishes a quarterly list of "boycotting countries."

COST OF NON COMPLIANCE

Violations of the antiboycott provisions of the EAR carry the same penalties as those for export control violations. Both criminal and civil penalties may be imposed. The U.S. Department of Commerce, Export Administration may revoke a company's validated export licenses, deny export privileges, impose exclusion from practice, and/or the imposition of heavy fines where the violation of national security export controls are involved.

The 1986 Tax Reform Act applies to all U.S. taxpayers (and their related companies). The TRA's reporting requirements apply to taxpayers' "operations" in, with, or related to boycotting countries or their nationals. Its penalties apply to Sun as a FSC (Foreign Sales Corporation), and because we claim foreign subsidiary deferrals, and foreign tax credit benefits. TRA do not "prohibit" boycott conduct, but denies tax benefits ("penalizes") for certain types of boycott-related agreements. Failure to file necessary anti-boycott documents could potentially constitute tax fraud if Sun unlawfully receives a tax benefit.