a third country to Cuba, the goods must be produced in the third country; they must be nonstrategic in nature; and no U.S. origin technical data, other than service and operation data, may be transferred. Furthermore, the export transactions may not involve any U.S. dollar accounts, or financing provided by a U.S.-owned or controlled firm, except for normal short-term financing. If the goods to be exported to Cuba contain U.S. origin parts or components, the transaction must first be licensed by the Department of Commerce.

The new section also permits U.S.-owned or controlled firms in third countries to import Cuban products. The sole requirement to qualify for a specific license in such cases is that the U.S. firm be located in the importing country."

I-7.4 TRANSACTION CONTROL REGULATIONS

These Regulations "9 were issued on June 29, 1953, to supplement the export controls imposed by the Department of Commerce over direct exports from the United States to certain countries.

51

The Transaction Control Regulations prohibit a person within the United States 50 from participating in any transactions involving the shipment of certain strategic goods 1 located abroad to any of the following countries: Albania, Bulgaria, People's Republic of China, Cambodia, Czechoslovakia, German Democratic Republic and East Berlin, Hungary, North Korea, Outer Mongolia, Poland and Danzig, Romania, the Soviet Union, North Vietnam, and South Vietnam.52 A general license, however, has been issued that authorizes such transactions by U.S. citizens and firms where the shipment is from, and licensed by, a COCOM country, to any of the listed countries except Cambodia, North Korea, North Vietnam, or South Vietnam. Any shipment that contains component parts of U.S. origin must also be licensed by the Commerce Department."

63

I-7.5 FOREIGN FUNDS CONTROL REGULATIONS

The Foreign Funds Control Regulations have little current importance in East-West trade. They continue World War II blocking controls with respect to the assets in the United States of certain countries, or nationals of those countries, that were wholly blocked during the war.

57

56

The Foreign Funds Control Regulations now apply to World War II blocked assets of Czechoslovakia, Estonia, the German Democratic Republic, Latvia, Lithuania, and their nationals. The current purpose of these Regulations is to keep intact blocked assets until such time as claims settlement agreements are reached, settling private U.S. claims for uncompensated expropriations.

I-7.6 RHODESIAN SANCTIONS REGULATIONS

58

The Rhodesian Sanctions Regulations were issued on July 29, 1968, in accordance with United National Security Council Resolution No. 232 of 1966, and No. 253 of 1968, which called upon member states to impose economic sanctions against Rhodesia." The Regulations were promulgated under Section 5 of the United Nations Participation Act of 1945. which provides authority for the President to implement decisions of the U.N. Security Council.

The Rhodesian Sanctions Regulations are basically similar to the Foreign Assets Control Regulations and Cuban Assets Regulations. However, there are some significant differences. For example, the Rhodesian Sanctions Regulations

48 31 C.F.R. § 515.559 (a) (3) (1975).

49 Id. pt. 505 (1975).

50 Id. 505.10 (1975).

$1 The U.S. index of strategic materials is enumerated in the Commodity Control List. 15 C.F.R. pt. 399 (1975). See Part I, § 5.4 for a discussion of the Commodity Control List. 52 34 C.F.R. § 505.10 Schedule (1975). Cambodia and South Vietnam were added to the list in 1976. 41 Fed. Reg. 16556 (1976).

53 31 C.F.R. & 505.34 (a) (1975): COCOM is currently comprised of all the NATO countries. (except Iceland) and Japan. COCOM export controls are discussed at Part I, § 5.5. 51 31 C.F.R. § 505.34 (a) (1975).

55 Id. pt. 520 (1975).

56 Exec. Order No. 8389, 3 C.F.R. 645 (Cum. Supp. 1938-1943); Exec. Order No. 44281, 3 C.F.R. 546 (Cum. Supp. 1966-1970).

87 34 C.F.R. § 520.404 (1975).

58 Id. pt. 530 (1975).

59 U.N. doc. s/Res. 232 and Corr. 1 (1966) (s/Res. 762/Rev. 1, as amended); U.N. doc. s/Res. 253 (1968).

60 22 U.S.C. § 287c (1970).

61 See Part I, §§ 7.2-.3.

do not prohibit transfers of property within Rhodesia by persons subject to the jurisdiction of the United States to any other person if the property is not related to the conduct of those business activities prohibited by the Regulations (such as most imports to and exports from Rhodesia or the shipment or carriage of merchandise to or from Rhodesia).""

63

62

The scope of application of the Rhodesian Sanctions Regulations is also more limited than that of the Foreign or Cuban Assets Control Regulations. The Rhodesian Sanctions Regulations do not apply to U.S. subsidiaries operating in third countries. The Regulations, however, do apply to U.S. firms located in Rhodesia or in the United States. Furthermore, the Regulations prohibit the U.S. officers and directors of any foreign firm or U.S. subsidiary in a third country from permitting or authorizing trade with Rhodesia."

The treatment applied to Rhodesian accounts in the United States under the Regulations differs somewhat from that applied to accounts under the various other Regulations. Since Rhodesian accounts are blocked only for purposes of preventing trade between the United States and Rhodesia, fewer restrictions are imposed on Rhodesian accounts than on accounts blocked under the other Regulations.5

The Rhodesian Sanction Regulations provide that specific licenses may be issued authorizing certain transactions. For example, a specific license may be granted authorizing the shipment from any foreign country to Rhodesia of medical supplies, educational supplies, news materials, and foodstuffs." Also, a general license has been issued in connection with the enactment of the "Byrd Amendment," authorizing the importation into the United States of certain Rhodesian materials determined to be strategic and critical under the Strategic and Critical materials Stockpiling Act; 67 chief among them are chromium ore or concentrates.s

BIBLIOGRAPHY

Editors' Note: The outstanding or the especially thorough authorities are marked with an asterisk.

* Bayar, Charles H., "The Blocked Chinese Assets: Present Status and Future Disposition," 15 Va. J. Int'l L. 959 (1975).

* Bishop, Joseph W., "Judicial Construction of the Trading With the Enemy Act," 62 Harv. L. Rev. 721 (1949).

Comment, "Blocked Assets and Private Claims: The Initial Barriers to Trade Negotiations Between the United States and China," 3 Ga. J. Int'l & Comp. L., 449, 451 (1973).

Craig, William L., "Application of the Trading With the Enemy Act to Foreign Corporation Owned by Americans: Reflections on Fruehauf v. Massardy,” 83 Harv. L. Rev. 579 (1970).

Denny, David L., and Daniel D. Stein, "Recent Developments in Trade Between the U.S. and the P.R.C.: A Legal and Economic Perspective," 39 L. & Contemp. Prob. 260, 260–66 (1974).

* Goodman, Carl F., "United States Government Foreign Property Controls," 52 Geo. L.J. 767 (1961).

McNair, Sir Arnold Duncan, The Legal Effects of War (1966).

Miller, "Statutory and Constitutional Difficulties with the Foreign Assets Control Regulations" in China Trade Prospects and United States Policy (A. Eckstein ed. 1971).

Note, "The United States and the People's Republic of China: The Blocked Assets Claims Problem," 8 Cornell Int'l L.J. 253 (1975).

Reeves, William H., "Rights of Parties to an Unlicensed Transaction in Blocked Property," 6 Syrc. L. Rev. 1 (1954).

* Reeves, William H., "The Control of Foreign Funds by the United States Treasury," 11 L. & Contemp. Prob. 17 (1945).

530.307 (1975).

6 Id. 530.404 (1975).

65 Id. $$ 530.211-.312 (1975).

6 Id. § 530.506 (1975). Similarly, specific licenses may be issued authorizing remittances to persons in Rhodesia for medical, humanitarian, or educational purposes, 34 C.F.R. 530.508 (1975).

0750 U.S.C. §§ 98-98h (1970).

68 34 C.F.R. § 530.548 (1975).

Sommerfield, Stanley L., Treasury East-West Trade Control Regulations, Mar. 10, 1967 (unpublished paper available from the Office of Foreign Assets Control). Sommerfield, Stanley L., Treasury Regulations Affecting Trade with Cuba, May 6, 1976 (unpublished paper available from the Office of Foreign Assets Control).

*Sommerfield, Stanley L., "Treasury Regulations Affecting Trade with the Sino-Soviet Bloc and Cuba," 19 Bus. Law. 861 (1961).

APPENDIX 3

JUSTICE DEPARTMENT MEMORANDUM ON SECTION 5(b) OF THE
TRADING WITH THE ENEMY ACT

[From the Congressional Record, Oct. 7, 1974]

DEPARTMENT OF JUSTICE,

May 21, 1973.

MEMORANDUM FOR THE SPECIAL COMMITTEE ON THE TERMINATION

OF THE NATIONAL EMERGENCY

Re: Emergency power under § 5(b) of the Trading With the Enemy Act During the course of hearings held by the Committee frequent mention has been made of the Trading with the Enemy Act ("the Act"). Section 5(b) of the Act has been the statutory foundation for control of domestic as well as international financial transactions and is not restricted to "trading with the enemy." Its use over the years provides an interesting study in the evolution of a statute as a result of continuing interplay between the Executive and Congress. Of all the emergency statutes under study by the Committee, it has the most complex and varied history. This paper does not make any recommendations or draw any conclusions but presents a short legal chronology of § 5(b) to assist the Committee in understanding its background and present status.

I. ORIGINAL ENACTMENT-WORLD WAR I

The Act was passed in 1917 to "define, regulate, and punish trading with the enemy." 40 Stat. 415. Section 5(b) gave the President power to regulate transactions in foreign exchange, the export or hoarding of gold or silver coin or bullion or currency and transfers of credit in any form "between the United States and any foreign country, whether enemy, ally of enemy, or otherwise," 40 Stat. 415 (1917) as amended by 40 Stat. 966 (1918). Section 5(b), at that time, exempted "transactions to be executed wholly within the United States," thus appearing to limit its use as a basis for domestic controls. It did not include a provision permitting use of the Act during periods of national emergency nor was its use restricted by its terms to the duration of the First World War or any specified term after the end of the War. A law passed in 1921 terminating certain war powers specifically exempted the Act from termination because of the large amount of property held under the Act by the Alien Property Custodian at that time. See Ellingwood, The Legality of the National Bank Moratorium, 27 Nw. U.L. Rev. 923, 925-26 (1933).

II. DEPRESSION BANKING EMERGENCY

Upon taking office in March 1933 President Roosevelt was pressed to deal promptly with a nationwide panic that threatened to drain the liquid resources of most of the banks in the country. The Public Papers and Addresses of Franklin D. Roosevelt, pp. 24-29 (1933) [hereinafter "Roosevelt Papers"]. He therefore invoked the "forgotten provisions" of § 5(b) on March 6, 1933 to declare a bank holiday and control the export of gold. Schlesinger, The Coming of the New Deal 4 (1959). The bank holiday proclamation noted that there had been "heavy and unwarranted withdrawals of gold and currency from our banking institutions for the purpose of hoarding" and that increasing speculation abroad in foreign exchange had resulted in severe drain on domestic gold supplies, thus creating a "national emergency." Therefore it was "in the best interests of all bank depositors that a period of respite be provided with a view to preventing further hoarding of coin, bullion or currency or speculation in foreign exchange." In order to prevent export or hoarding of bullion or currency a bank holiday was

therefore proclaimed from March 6 through March 9, 1933. Executive Proclamation No. 2039. March 6, 1933, 48 Stat. (Part 2) 1698.

By invoking § 5(b) as authority, President Roosevelt was, of course, using that provision for a different purpose than the one for which it was enacted in 1917. However, as one writer noted, closing the banks was "one of the surest and quickest ways" to prevent transactions in foreign exchange and the exportation of gold and silver coin, bullion and currency. Section 5(b) had, as noted, given the President power to regulate such matters. Ellingwood, The Legality of the National Bank Moratorium, 27 Nw. U.L. Rev. 923, 925 (1933).

Congress was called into session within days of the Proclamation. Roosevelt Papers 17. As soon as Congress was convened on March 9, 1933, it approved the bank holiday by passing the so-called Emergency Banking Act or Bank Conservation Act. 48 Stat. 1. That Act provided that the actions and proclamations "heretofore or hereafter taken . . . or issued by the President of the United States... since March 4, 1933, pursuant to the authority conferred by subdivision (b) of section 5 of the Act of October 6, 1917, as amended, are hereby approved and confirmed." (48 Stat. 1; 12 U.S.C. 95b (1970)). Congress thus "spread its protective approval over executive acts the legality of which was uncertain." Ellingwood, op. cit. supra at 27 Nw. U.L. Rev. 929 (1933). Congress also amended Section 5(b) to provide, among other things, that "[d]uring time of war or during any other period of national emergency declared by the President, the President may . . . regulate, under such rules and regulations as he may prescribe . . . transfers of credit between or payments by banking institutions as defined by the President. . . ." 48 Stat. 1. In the enactment clause Congress declared "that a serious emergency exists." 48 Stat. 1. The exclusion of domestic transactions, formerly found in the Act, was deleted from § 5(b) at this time.

The legislative history of the Emergency Banking Act is short; only eight hours elapsed from the time the bill was introduced until it was signed into law. There were no committee reports. Indeed, the bill was not even in print at the time it was passed. 77 Cong. Rec. 76, 80 (1933); Schlesinger, The Coming of the New Deal 8.

The abbreviated history shows Congress recognized that the powers conferred on the President by the Act were great. In the debate preceding the bill's passage those supporting it made such remarks as:

"... in time of storm there can only be one pilot. In my judgment, the House of Representatives realize that the pilot in this case must be the President of the United States, and they will steer their course by him (Rep. Goldsborough, 77 Cong. Rec. 81).

"It is a dictatorship over finance in the United States. It is complete control over the banking system in the United States. (Rep. McFadden, 77 Cong. Rec. 80). "I realize that in time of peace we have perhaps never been called upon to vest such transcendent powers in the Executive as are provided for in this bill. . . . It is an emergency which can be adequately dealt with only by the strong arm of Executive power, and therefore I expect to vote for the bill, though it contains grants of powers which I never before thought I would approve in time of peace." (Sen. Connally, 77 Cong. Rec. 65).

The courts later upheld the validity of the bank holiday under the Act as amended, E.g., Smith v. Witherow, 102 F.2d 638, 641 (3d Cir., 1939); Hardee v. Washington Loan & Trust Co., 91 F.2d 314 (D.C. Cir. 1937). Because of the prompt action taken by Congress in ratifying the March 6 proclamation, no judicial decisions were rendered on the question of whether the President's action, if taken alone, would have been lawful.

Subsequently in 1933-34, acting under $5(b), President Roosevelt issued a series of orders which prohibted the hoarding of gold and directed that all gold bullion certificates be deposited with the Federal Reserve Banks and which regulated transactions in foreign exchange:

(1) Executive Order 6073 of March 10, 1933, prohibited the export or removal of gold from the United States, except as authorized by the Secretary of the Treasury, and banks were prohibited from making transfers with certain described transactions. This order did not specifically refer to a national emergency.

(2) Executive Order 6102 of April 5, 1933, generally required holders of gold coin, gold bullion, and gold certificates to surrender their holdings to Federal Reserve Banks. This Order stated "By virtue of the authority vested in me by