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administration of money and property held under the Act (Sections 2330, 32-37, 39-44) appear to be exclusively dependent upon Section 5(b). Although a repeal of Section 5(b) would not seem to prevent the continued operation of other provisions in the Act, the question of the general effectiveness of the Act in the absence of this section is difficult to answer with assurance. The following factors arguably suggest that Section 5(b) is of substantial importance to the effectiveness of the Act as a wartime trade control measure:

A. With the exception of tax regulations issued under Section 36, all other regulations issued under the Act have been promulgated under Section 5.

B. Section 5(b) seems to be the basic "vesting" provision

of the Act.

C. Section 5(b) appears to be the most important provision of the Act for the regulation of foreign commercial transactions.

D. We have been informally advised by the Office of Alien Property, Department of Justice, that virtually all of the money and property held by that Office is held under Section 5(b).

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Summary of Selected Cases Involving Section 5(b) of the Act of October 6, 1917, as amended, 12 U.S.C.A. 95a, 50 U.S.C.A. App.

5(b), the Trading With The Enemy Act (TWEA).

Section 5(b) of the TWEA empowers the President, during time

of war or "any" period of national emergency declared by him, through "any" agency he designates, "or otherwise" and under "any" rules he prescribes, by means of "instructions," "licenses," "or otherwise" to (1) "regulate" or "prohibit" "any" foreign exchange "transactions," credit "transfers" or "payments," "between," "by," "through," or "to" "any" banking institution, and "importing," "exporting", "hoarding," "melting," or "earmarking" gold or silver coin or bullion, currency or securities, and (2) "regulate," "prevent," or "prohibit" the importation or exportation of, or transaction involving "any" property in which "any" foreign country or a national thereof has "any" interest, and provides that the President may in the manner provided take "other and further measures," not inconsistent with the statute for the "enforcement" of the Act. The TWEA authorizes the President to define "any or all" of the terms employed by Congress in section 5(b). Any person who willfully violates the TWEA may, "upon conviction" be fined up to $10,000, or imprisoned for ten years, or both.

Section 5(b) reads in toto as follows:

(b) (1) During the time of war or during any other period of national emergency declared by the President, the President may, through any agency that he may designate, or otherwise, and under

such rules and regulations as he may prescribe, by means of instructions, licenses, or otherwise

(A) investigate, regulate, or prohibit, any transactions in foreign exchange, transfers of credit or payments between, by, through, or to any banking institution, and the importing, exporting, hoarding, melting, or earmarking of gold or silver coin or bullion, currency or securities, and

(B) investigate, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest, by any person, or with respect to any property, subject to the jurisdiction of the United States; and any property or interest of any foreign country or national thereof shall vest, when, as, and upon the terms, directed by the President, in such agency or person as may be designated from time to time by the President, and upon such terms and conditions as the President may prescribe such interest or property shall be held, used, administered, liquidated, sold, or otherwise dealt with in the interest of and for the benefit of the United States, and such designated agency or person may perform any and all acts incident to the accomplishment or furtherance of these purposes; and the President shall, in the manner hereinabove provided, require any person to keep a full record of, and to furnish under oath, in the form of reports or otherwise, complete information relative to any act or transaction referred to in this subdivision either before, during, or after the completion thereof, or relative to any interest in foreign property, or relative to any property in which any foreign country or any national thereof has or has had any interest, or as may be otherwise necessary to enforce the provisions of this subdivision, and in any case in which a report could be required, the President may, in the manner hereinabove provided, require the production, or if necessary to the national security or defense, the seizure, of any books of account, records, contracts, letters, memoranda, or other papers, in the custody or control of such person; and the President may, in the manner hereinabove provided, take other and further measures not inconsistent herewith for the enforcement of this subdivision.

(2) Any payment, conveyance, transfer, assignment, or delivery of property or interest therein, made to or for the account of the United States, or as otherwise directed, pursuant to this subdivision or any rule, regulation, instruction, or direction issued hereunder shall to the extent thereof be a full acquittance and discharge for all purposes of the obligation of the person making the same; and

no person shall be held liable in any court for or in respect to any-
thing done or omitted in good faith in connection with the admin-
istration of, or in pursuance of and in reliance on, this subdivision,
or any rule, regulation, instruction, or direction issued hereunder.

(3) As used in this subdivision the term "United States" means
the United States and any place subject to the jurisdiction thereof:
Provided, however, That the foregoing shall not be construed as a
limitation upon the power of the President, which is hereby con-
ferred, to prescribe from time to time, definitions, not inconsistent
with the purposes of this subdivision, for any or all of the terms used
in this subdivision. Whoever willfully violates any of the provisions
of this subdivision or of any license, order, rule or regulation issued
thereunder, shall, upon conviction, be fined not more than $10,000,
or, if a natural person, may be imprisoned for not more than ten
years, or both; and any officer, director, or agent of any corpora-
tion who knowingly participates in such violation may be punished
by a like fine, imprisonment, or both. As used in this subdivision
the term "person" means an individual, partnership, association, or
corporation.

United States v. Quong, 303 F.2d 499 (6th Cir. 1962). Defendants were convicted of conspiracy as well as the substantive offense of violating the TWEA and implementing Foreign Assets Control Regulations by dealing in Chinese-type drugs. The Regulations prohibited any dealings by persons subject to the jurisdiction of the United States, in any manner, direct or indirect, with Communist China. The purpose of the Regulations was to deprieve the Chinese Communist of all economic advantages accruing from trade with the United States and the availability of the United States dollars. On appeal, the court affirmed/conviction on some of the charges and reversed some others for failure of proof.

Among other things, the defendant-appellants contended that

the indictment did not state and the government did not prove that a foreign national or government had any interest in the proscribed

APPENDIX 4

FEDERAL RESERVE BOARD COMMENTS ON H.R. 1560

Hon. CLEMENT J. ZABLOCKI,

CHAIRMAN OF THE BOARD OF GOVERNORS,

FEDERAL RESERVE SYSTEM,
Washington, D.C., May 4, 1977.

Chairman, Committee on International Relations, House of Representatives, Washington, D.C.

DEAR MR. CHAIRMAN: I am pleased to respond further to your letter of February 7 requesting the Board's comments on H.R. 1560, a bill to repeal section 5(b) of the Trading With the Enemy Act of 1917.

Section 5(b) appears to have considerably more applicability to the departments and agencies within the Executive branch than to the Board. We understand that repeal of this section would jeopardize certain programs, rules and regulations of the Departments of Commerce, Justice, State, and Treasury. Therefore, the Board defers to those departments and the Office of Management and Budget in assessing the general implications of H.R. 1560.

Insofar as the Board is concerned, there seems to have been only one use by a President of the emergency powers conferred by section 5(b) that directly affected our operations. That use was the promulgation of Exectuive Order 8843 in 1941, which authorized the Board to control consumer credit. The Executive Order was ratified by the Congress after World War II with the passage of a statute (12 U.S.C. 249) providing that the Board was not to exercise consumer credit controls except during wartime or national emergencies. The Congress repealed the statute in question last year (Public Law 94-412, 90 Stat. 1255).

Section 5(b) is relied upon as the primary authority of the Secretary of the Treasury to regulate the Nation's banks in the event of an attack upon the United States. This authority has been redelegated to the Board of Governors. The Board's contingency plans to carry out this responsibility were described by Governor Coldwell in testimony before the Joint Committee on Defense Production on June 28, 1976. I have enclosed a copy of his statement.

Section 5(b) also has applicability to the Federal Reserve in its role as fiscal agent for the Treasury. In this connection, it is important to the interests of the United States that the President be authorized to block transactions with foreigners under certain circumstances (such as those specified in section 5(b)). If and when such authority is exercised and the Federal Reserve Banks are asked to act as the Treasury's agents, it is important that the Banks be granted explicit immunity against suit. Section 5 (b) provides such immunity in the case of actions relying upon the Trading With the Enemy Act of 1917 or any implementing Executive Order or agency directive.

I hope that these comments will be helpful to you and your Committee in the further consideration of H.R. 1560.

Sincerely yours,

Enclosure.

ARTHUR F. BURNS.

STATEMENT BY PHILIP E. COLDWELL, MEMBER, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM BEFORE THE JOINT COMMITTEE ON DEFENSE PRODUCTION, JUNE 28, 1976

Madam Chairwoman, I am happy to have this opportunity to describe to the Joint Committee the responsibilities of the Federal Reserve System in the emergency preparedness area, and our plans to carry out those responsibilities if necessary.

Federal Reserve System involvement in contingency planning for an attack on the United States began in the early 1950's. It was formalized in 1956 when the Office of Defense Mobilization issued a Defense Mobilization Order to the

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