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National Lawmaking Powers and the Regulation of U.S. Trade

National Lawmaking Powers and the Regulation of U.S. Trade

Chapter 8

© 2002 West/Thomson Learning

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Trade Law and Foreign Policy?Trade Law and Foreign Policy?

Trade law governs trade relations with foreign countries including export and import laws

Trade law reflects not only economic policy but foreign policy as well

Examples: Cuba Embargo, Soviet Grain embargo, China, North Korea, Libya, Iran, Myanmar

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Regulation of US TradeRegulation of US Trade

Allocation of power between Congress to regulate commerce with foreign nations and among states (Article I) and President (Article II).

Trend of Increasing Presidential Power Delegated Power by Congress Need for Flexibility

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Legislative Power

Article I: Congress has “all legislative powers” Article I, Sec. 8: commerce

clause – power to regulate foreign commerce

Delegate Power to President Senate: Ratify Treaties by 2/3

vote

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Presidential PowerPresidential Power

Power to negotiate treaties Power to appoint ambassadors Commander in chief Inherent executive powers:

sole- executive agreements Powers delegated by Congress

Congressional – Executive Agreement authority granted by statute, joint resolution or treaty

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Youngstown Sheet & Tube v. Sawyer Limits to Presidential Power: Truman’s Seizure of Steel Mills during

Korean War Inherent Executive Power Power as Commander in Chief

Seizure Here Not Authorized by Statute Selective Service Act Defense Production Act

President Not Executing Congressional Policy – So Act Not within Executive Power

Justice Jackson: Concurring Opinion: Presidential Power At Maximum when Acts Pursuant to Express or Implied

Authorization by Congress In Absence of Congressional Grant: Must Rely on Inherent Powers Acting in Ways Incompatible with Express or Implied Will of

Congress – Power “At Lowest Ebb” Congressional Provisions on Seizure of Private Property Limit

Presidential Action Commander in Chief Power Does Not Supersede Representative

Government of Internal Affairs Congressional Limits on Using Army to Execute General Laws

When “Turned Outward” – Wide Latitude When “Turned Inward” – No Latitude

Presidential Seizure of Steel Mills was Unconstitutional

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Treaty Power

Article II, Sec. 2: President has power to negotiate treaties “With advice and consent of

Senate” Senate: Ratify Treaties by 2/3

vote Domestic Effect of Treaties

Self-executing: Become law once ratified

Non-Self-executing: Require Act of Congress or President to have legal effect

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McNamara v. Korean Air Lines (3rd Cir. 1988) Facts: M dismissed by KAL as part of

reorganization KAL replaced American managers with younger

Koreans M sued KAL for employment discrimination

under Title VII and the ADEA Trial court held that FCN treaty permitted

conduct; M appealed Issue: Was KAL subject to US EEO law or did FCN

treaty apply? Decision: CA remands to consider if

discrimination was intentional Reasons: Art. VIII of FCN doesn’t shield KAL from

liability for intentional discrimination But FCN does shield from liability for disparate

impact discrimination CA relied on Sumitomo v. Avagliano (SC 1982)

holding that FCN did not apply to US subsidiary of foreign corporation

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Are all agreements treaties? Dole v. Carter (D.Kan. 1977)Are all agreements treaties? Dole v. Carter (D.Kan. 1977)

Facts: President Carter made an agreement to return historic regalia to Hungary.

Issue: Did the President exceed his authority under the Constitution by entering into a treaty with Hungary without the advice and consent of the Senate?

Decision: No. Reasons: This was not a treaty but an

executive agreement made pursuant to the President’s Constitutional inherent executive authority. Agt. here lacks the magnitude of agts.

Concluded in treaty form Action here of limited duration in time:

no on-going commitment

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Trade agreementsTrade agreements

Trade agreements are classic examples of congressional - executive delegated power

Star-Kist v. United States (Cust. & Pat. App. 1959): delegation of authority to president to amend import duties held constitutional

Congress set out sufficiently discernable standard to guide exercise of delegated power

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Examples of Delegated Power

GATT Fast Track Negotiating

Authority – NAFTA and CAFTA Emergency powers Trading with the Enemy Act International Emergency

Economic Powers Act (IEEPA) 1977- basis of economic sanctions

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President’s Emergency Powers

Trading with the Enemy Act: repealed in 1977

National Emergencies Act: requires Congressional approval of state of emergency declarations after 1 year

Int. Emergency Economic Powers Act: grants wide discretion to control int. financial transactions Freeze assets, impose embargos, or

other sanctions Usually implemented by Treasury Dept.

USA Patriot Act: antiterrorism powers Seizure of property, financial

transactions reporting Some provisions recently held

unconstitutional

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Fast Track Negotiating Authority Instituted by Trade Reform Act of

1974 Process: “Trade Promotion

Autnority” President notifies Congress of

intent to enter agt. Congress authorizes President to

negotiate Agreement submitted to

Congress within specified time Congress must vote to accept or

reject within a specified time period (usually 60 or 90 days)

Congress can’t amend agreement

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Preemption of Trade Law: State- Federal Conflict

Supremacy Clause: federal law pre-empts state law

1996: Mass. law banned business with Myanmar

1997: Federal Executive order placing restrictions on investing in Myanmar

Crosby v. National Foreign Trade Council (US 2000): Supreme Court strikes down Mass. law on basis of preemption

Import – Export Clause Commerce Clause

Japan Line, Ltd. V. County of Los Angeles (US 1979): state tax on property used exclusively in foreign commerce violates commerce clause and is unconstitutional

Prohibits state restrictions on exports or and limits restrictions on imports

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Federal Agencies Involved in Trade

Federal Agencies Involved in Trade Dept. of Commerce

International Trade Administration (ITA) U.S. Commercial Service U.S. Bureau of Industry and Security

Dept. of Homeland Security Border and Transportation Security

Customs & Border Protection Immigration and Customs Enforcement Citizenship & Immigration Services Transportation Security Administration Secret Service Federal Emergency Management Agency U.S. Coast Guard

24 Hour Rule: Advance Notice of Shipments to US U.S. Trade Representative International Trade Commission (ITC): bipartisan, investigate

trade disputes

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Court of International Trade Hears cases on trade and tariff

law Jurisdiction over actions

against the U.S. involving: revenue from imports or tonnage tariffs, duties, fees or taxes on

imports embargoes or quantitative

restriction (other than for health and safety reasons)

Administration or enforcement of customs laws.

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Foreign Corrupt Practices Act

Passed in 1977, amended in 1999 to reflect OECD Convention

Prohibits bribery of foreign officials

Requires firms to establish internal accounting and record keeping mechanisms to detect bribery

Criminal provisions not vigorously enforced

OECD and EU adopted similar provisions

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FCPA: Anti-bribery Provisions Anti-bribery provision:

prohibits US firms from “corruptly” paying foreign official for assistance in obtaining or retaining business Prohibits payment to agent if firm

knows portion of payment will go to public official

Payment must be knowing Excepts payment of “facilitating

payments” for routine government action

Penalties: fines up to $2 million for firms; fines of $100,000 and up to 5 years in jail for individuals

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FCPA: Accounting Provisions Firms required to keep records

and accounts that accurately reflect transactions and dispositions of assets

Firms must devise and maintain internal accounting controls to provide reasonable assurances that transactions are authorized and access to assets is tracked

No concept of materiality – relative scale of payments to be tracked

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FCPA –Review Opinion Procedure Release 10-01

DoJ review of opinion request Firm required to hire individuals, at least one is

foreign official, to construct and work at facility Firm will pay $5k per month for one year Individual’s position and services at facility are

separate from role as foreign officer Individual will not perform services on behalf of firm

or make decisions affecting firm DoJ will not take any enforcement action

Individual is being hired pursuant to agreement btwn. US Govt. Agency and the foreign government

Individual not in position to affect firm – neither procurement nor contracting decisions

Opinion relates only to specific facts of request and has no binding application to any other party or request

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SEC v. Siemens Aktiengesellschaft(SEC Litigation release,

12/15/08) Siemens violated FCPA by systematic bribery of foreign

officials to obtain business Created elaborate payment schemes to conceal bribery

payments Inadequate internal controls allowed corrupt practices At least 4283 payments used to pay government officials –

total of $1.4 billion Kickbacks to Iraqi ministries for work under UN Oil for Food

program – made $1.1 billion profit At least 1185 additional payments to third parties for illicit

purposes - $391 million Siemen’s Board failed to implement and maintain controls

required by German adoption of OECD anti-bribery convention and by US FCPA

Corporate culture tolerated and rewarded bribery Siemens began reforms in Nov. 2006

Siemens agreed to pay $1.6 billion in fines and disgorgement - $350 million to SEC and $450 to DoJ, $854 to German prosecutors

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Soleimany v. Soliemany(U.K. – Ct. of Appeal, Civil Div. 1998)

P arranged export of carpets from Iran in violation of Iranian law

Dispute arose between partners, and they signed arbitration agreement before Beth Din under Jewish law

Beth Din disregarded illegality because it had no effect on rights under Jewish law

Beth Din awarded £ 576,574 to P P sought to have award enforced as arbitration

award Trial court enforced award D appealed

Appeals Court refused to enforce award Carpets illegally smuggled out of Iran English courts would refuse to enforce contract

indicating intent to commit illegal act Arbitrator has no authority to award damages on

illegal contract

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Adler v. Fed. Rep. of Nigeria (9th Cir. 2000)

Facts: A, US citizen, controls Mexican firm Firm offered $60 million contract with Nigerian

oil company Required to make payments to officials in

return for contract – paid officials $5 million Firm never got contract A sues for recovery of payments to officials Trial court refuses to allow recovery – “clean

hands” rule Issue: Can A recover payments to officials Decision: No; clean hands rule bars recovery Reasons: Person seeking relief must have acted

without fraud or deceit A attempted to bribe officials to get contract A was party to scheme to steal $60 million

from Nigerian treasury Won’t let A sue for “failed bribe”