Background

The Trading With the Enemy Act was passed in 1917 "to define, regulate, and punish trading with the enemy." The Act was designed to provide a set of authorities for use by the President in time of war declared by Congress. In its original 19 sections, the TWEA provided general prohibitions against trading with the enemy; authorized the President to regulate and prohibit international economic transactions by means of license or otherwise; established an office to administer U.S.-held foreign property; and set up procedures for claims to such property by non-enemy persons, among other provisions. The original 1917 Act appeared not to authorize the control of domestic transactions and limited its use to wartime exigencies.

Over the years, through use and amendment of section 5(b), the basic authorizing provision, the scope of Presidential actions under the TWEA was greatly expanded. First, the Act was expanded to control domestic as well as international transactions. Second, the authorities of the Act were used to apply to presidentially declared periods of "national emergency" as well as war declared by Congress. From 1933, when Congress retroactively approved President Roosevelt's declaration of a national banking emergency by expanding the use of section 5(b) to include national emergencies, until 1977, when Congress amended section 5(b) by passage of title I of Pub. L. 95-223, the President was authorized in time of war or national emergency to:

-regulate or prohibit any transaction in foreign exchange, any banking transfer, and the importing or exporting of money or securities; -prohibit the withdrawal from the United States of any property in which any foreign country or national has an interest; -vest, or take title to, any such property; and

use such property in the interest and for the benefit of the United States.

The Trading With the Enemy Act did not provide a statement of findings and standards to guide the administration of section 5(b). There was no provision in the Act for congressional participation or review or for Presidential reporting at specified periods for actions undertaken under section 5(b). There was no fixed time period for terminating a state of emergency. Nor was there any practical constraint on limiting actions taken under emergency authority to measures related to the emergency.

Application

By 1977 a state of national emergency had been declared by the President on four occasions and left un rescinded. In 1933 President Roosevelt declared a national emergency to close the banks temporarily and to issue emergency banking regulations. In 1950 President Truman declared a national emergency in connection with the Korean conflict. President Nixon declared a national emergency in 1970 to deal with the Post Office strike and another in 1971 based on the balance-of-payment crisis. As one measure to remedy this crisis, President Nixon at the same time imposed an import surcharge without specifically referring to section 5(b), but later did

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take recourse to it as an additional authority when the action was challenged in court. 25

Based on these states of emergency, Presidents have used the powers of section 5(b) to deal with a number of varied events. In 1940 and 1941, President Roosevelt used section 5(b) to freeze the U.S.-held assets of the Axis powers and countries occupied by them to prevent their falling into the hands of the enemy powers. In August 1941, President Roosevelt, under section 5(b) authority, ordered the imposition of consumer credit controls by the Federal Reserve Board as an anti-inflationary measure. These executive uses by President Roosevelt were retroactively ratified by Congress.

The 1950 Korean emergency has been used in conjunction with section 5(b) powers for a wide range of controls among them the imposition of a total embargo on transactions with China and North Korea in December 1950 which was extended to North Vietnam in May 1964 and to Cambodia and South Vietnam in April 1975.26 In 1968, President Johnson, citing the authority of section 5(b) and the continued existence of the 1950 emergency, imposed foreign direct investment controls on U.S. investors. These controls remained in effect until they were eliminated by legislation in 1974. During the period 1969 through 1976, Presidents have invoked the 1950 and 1971 emergencies to extend temporarily export control regulations.

Four sets of regulations controlling international transactions with specific countries, imposed under the former national emergency authority of section 5(b) and during the Korean national emergency, by now rescinded emergencies declared thereunder, are at present in effect pursuant to the one-year extension authority of Title I of Public Law 95-223. First, under the Foreign Assets Čontrol Regulations, 27 all transactions between the United States and North Korea, Vietnam, and Cambodia are prohibited unless licensed by the Department of the Treasury. The regulations also block all assets of those countries held in the United States.

Second, the Cuban Assets Control Regulations, 28 based on section 5(b) as well as on foreign assistance legislation, impose a similar ban on virtually all transactions with Cuba.

Third, Transaction Control Regulations, 29 prohibiting any person within the United States 30 from engaging in any trade or tradefinancing transaction involving transfer of strategic commodities from a foreign country to a Communist country, are also based on section 5(b) of the Trading With the Enemy Act.

Fourth, the wartime anti-Axis Foreign Funds Control Regulations, 31 issued under the authority of section 5(b), are still in effect.

25 In mid-1974, the U.S. Customs Court found the President's action unconstitutional with respect to all invoked authorities, but this decision was later reversed on appeal with respect to section 5(b). U.S. v. Yoshida International, 526, F.2d 560 (C.C.P.A. 1975). The surcharge was terminated after having been in force for somewhat over 4 months, long before the lower court's decision.

26 In mid-1971, trade embargo on China was in practice lifted, and on January 31, 1980, the applicability of any restrictive measures imposed under section 5(b) was terminated with respect to China (45 F.R. 7224).

27 31 CFR Part 500.

28 31 CFR Part 515.

29 31 CFR Part 505.

30 Any "person within the United States" includes foreign subsidiaries of U.S. firms.

31 31 CFR Part 520.

The regulations continue to block the assets of East Germany, Estonia, Latvia, and Lithuania pending the settlement of claims by U.S. citizens for compensation of property confiscated after the war by the governments of those countries.

Narcotics Control Trade Act

The Drug Enforcement, Education, and Control Act of 1986 32 contains a number of measures to respond to the serious problem of illegal drug smuggling into the United States and the growing threat of foreign sourced drug production. Among these measures are revisions to many basic customs laws to deter illegal drug imports and to increase enforcement capabilities of the U.S. Customs Service against drug traffic.

Title IX of the Act amended the Trade Act of 1974 by adding Title VIII, entitled the "Narcotics Control Trade Act," to create new authority for the President to take appropriate trade actions as of March 1 of each year against uncooperative major drug-producing or drug-transit countries. Section 806 of the Foreign Relations Authorization Act, Fiscal Years 1988 and 1989,33 and section 4408 of the Anti-Drug Abuse Act of 1988 34 expanded the sanctions available and the critieria for determining and certifying that a country has cooperated fully with the United States. Similar criteria apply under the Foreign Assistance Act of 1961 for denying foreign aid to uncooperative countries.

For every major drug-producing or drug-transit country, the President is required to deny to any or all of its products preferential tariff treatment under the Generalized System of Preferences (GSP), the Caribbean Basin Initiative (CBI), or any other law; to raise or impose duties of up to 50 percent ad valorem on any or all of its products; to suspend air carrier transportation to or from the United States and the country and to terminate any air service agreement with the country; to withdraw U.S. personnel and resources from participating in any arrangement with the country for customs preclearance; or to take any combination of these actions considered necessary to achieve the objectives of the Act.

Such sanctions do not apply if the President determines and certifies to the Congress, at the time the annual report required by section 481(e) of the Foreign Assistance Act of 1961 is submitted, that during the previous year the country has cooperated fully with the United States or has taken adequate steps on its own (1) in satisfying goals agreed to in a bilateral or multilateral narcotics agreement with the United States; (2) in preventing illegal drugs from being sold illegally to U.S. Government personnel or their dependents or from being transported into the United States; (3) in preventing and punishing the laundering of drug-related profits or monies; and (4) in preventing and punishing bribery and other public corruption which facilitate production, processing, or shipment of illegal drugs.

A country that would not otherwise qualify for certification may be exempted from sanctions if the President determines and certi

32 Public Law 99-570, approved October 27, 1986.

33 Public Law 100-204, approved December 22, 1987, 19 U.S.C. 2492. 34 Public Law 100-690, approved November 18, 1988.

fies to the Congress that the vital national interests of the United States require that sanctions not be applied. A country designated as a major drug-producing or drug-transit country in the previous year may not be determined to be cooperating fully unless it has in place a bilateral or multilateral narcotics agreement.

The Congress may disapprove the President's determination and sanctions be required through enactment of a joint resolution within 45 legislative days. Actions remain in effect until the President submits a certification of cooperation and Congress does not enact a joint resolution of disapproval within 45 legislative days.

In addition, section 803 prohibits the President from allocating any quota for imports of sugar to any country which has a government involved in illegal drug trade or which is failing to cooperate with the United States in narcotics enforcement activities.

The Urgent Assistance for Democracy in Panama Act of 1990 35 deemed the conditions under the Narcotics Control Trade Act to have been satisfied by Panama, because of U.S. vital national interests and because the Endara Government had indicated its willingness and was taking steps to cooperate fully with the United States to control narcotics production, trafficking, and money laundering. Consequently, GSP and CBI trade benefits removed under the Noriega regime by Presidential proclamation on March 23, 1988 were restored to the new Government of Panama.

Iraq Sanctions Act

The Iraq Sanctions Act of 1990 was enacted as part of the Foreign Assistance and Related Program Appropriations Act for fiscal year 1991,36 in response to Iraq's invasion of Kuwait on August 2, 1990. The Act makes a number of declarations concerning Iraq's invasion of Kuwait and requires the President to consult with the Congress on U.S. actions taken in response.

Section 586C enacts into law the trade embargo and other economic sanctions imposed on Iraq by Presidential executive order under authority of the International Emergency Economic Powers Act and the National Emergencies Act.37 Those sanctions entailed a near-total prohibition on transactions between the United States and Iraq, including a ban on: imports and exports; most travel and fulfillment of contracts; and credits and loans. The executive orders also froze all assets of the Governments of Iraq and Kuwait. Section 586C requires the President to notify Congress at least 15 days before the termination of any of the above sanctions. Section 586E imposes civil and criminal penalties on persons violating the executive orders.

The Iraq Sanctions Act also imposes sanctions on Iraq beyond those imposed by executive order. Section 586G imposes a wide range of sanctions, including a ban on the following transactions: arms sales; exports of certain goods and technology, including nuclear technology and equipment; U.S. Government credits and credit guarantees; and other forms of assistance. Those sanctions

35 Public Law 101-243, approved February 14, 1990; section 103.

36 Public Law 101-513, approved November 5, 1990; sections 586 through 586J.

37 Executive Orders 12724 and 12725 (August 9, 1990), and, to the extent that they were still in effect on the date of enactment, Executive Orders 12722 and 12723 (August 2, 1990).

may be waived by the President if he makes a certification of fundamental changes in Iraqi leadership, policies, or actions, under criteria set forth in Section 586H.

The Act contains provisions aimed at increasing compliance by third countries with United Nations Security Council sanctions against Iraq. Section 586D denies assistance under the Foreign Assistance Act of 1961 or the Arms Export Control Act to any country not in compliance with the U.N. sanctions, subject to certain exceptions. It also authorizes the President to ban imports into the United States from any country that has not imposed a ban on trade with Iraq, if he considers that such action would promote the effectiveness of the U.N. and U.S. sanctions against Iraq. Section 5861 denies export licenses for super-computer exports to any country the President determines is assisting Iraq to improve its capabilities in rocket technology or chemical, biological, or nuclear

weapons.

Finally, the Iraq Sanctions Act mandates a number of studies and reports to Congress concerning international exports to Iraq of nuclear, biological, chemical and ballistic missile technology; Iraq's offensive military capability; and third country sanctions against Iraq.