Legal Bases for Iran Sanctions, Cuba Sanctions, and NAFTA
How easily can the Trump administration change the status quo?
The International Emergency Economic Powers Act (IEEPA), 50 U.S.C §§1701-1707 enacted October 28, 1977, authorizes the US president to broadly regulate international commerce after declaring a national emergency in response to any unusual and extraordinary threat to the United States which has a foreign source. IEEPA is the current legal basis for most US economic sanctions other than the Cuba sanctions for which the legal basis is the Trading with the Enemy Act of 1917, (TWEA) 50 U.S.C. App. §§ 1—44.
Using IEEPA, the president may, under such regulations as he may prescribe, by means of instructions, licenses, or otherwise, investigate, block during the pendency of an investigation, 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 may issue such regulations, including regulations prescribing definitions, as may be necessary.
Economic sanctions begin typically when the president declares a national emergency under IEEPA for a particular foreign situation via an executive order published in the Federal Register. Executive orders (EOs) are legally binding orders issued by the president, acting as the head of the executive branch, to federal administrative agencies. EOs are generally used to direct federal agencies and officials in their execution of congressionally established laws or policies. They do not require congressional approval to take effect but have the same legal weight as laws passed by Congress. The president's source of authority to issue EOs is Article II, Section 1 of the US Constitution, which grants to the president the "executive Power." Section 3 of Article II further directs the president to "take Care that the Laws be faithfully executed."
EOs can be challenged in court, usually on the grounds that the order deviates from "congressional intent" or exceeds the president's constitutional powers. Courts generally have been accepting of presidential EOs made pursuant to a specific grant of authority as stipulated in an act of Congress. No EO declaring an emergency under IEEPA to impose economic sanctions has been voided by the courts. Typically in an IEEPA EO, the president directs the US Treasury Department’s Office of Foreign Assets Control (OFAC) to implement regulations in coordination with other departments to carry out the EO.
On January 16, 2016, President Obama issued EO 13716 which revoked or modified various other Iran-related EO’s that he had previously issued to implement sanctions against Iran, as authorized under IEEPA. No congressional action was required for the issuance of the previous EO’s and likewise none was required for the issuance of EO 13716. To implement EO 13716, OFAC revised its licensing policies toward Iran and relaxed many US sanctions that were in effect until January 15, 2016.
Given that President Obama used EO’s to implement sanctions against Iran and then issued a separate EO to revoke or modify previously issued Iran-related EO’s, it stands to reason that President-elect Donald Trump, upon taking office, can likewise unilaterally amend or revoke EO 13716, issue a new EO to reinstate the EO’s that were revoked or modified by EO 13716, or issue one or more additional EOs under IEEPA to impose new economic sanctions against Iran, both with respect to the activities of US and non-US persons involving Iran.
As of 2017, Cuba is the only country restricted under the TWEA. The Cuba sanctions began before IEEPA was enacted in 1977, and thus TWEA was the main source of statutory authority for Cuban sanctions. TWEA restricts trade with countries hostile to the United States and authorizes the president to restrict trade between the US and its enemies in times of war. IEEPA grants somewhat broader powers to the president and is invoked during states of emergency when the country is not at war.
On October 14, 2016, President Obama issued a Presidential Policy Directive (not an EO) on Cuba which stated in part as follows:
“The United States Government will seek to expand opportunities for US companies to engage with Cuba. The embargo is outdated and should be lifted. My administration has repeatedly called upon the Congress to lift the embargo, and we will continue to work toward that goal. While the embargo remains in place, our role will be to pursue policies that enable authorized US private sector engagement with Cuba's emerging private sector and with state-owned enterprises that provide goods and services to the Cuban people. Law enforcement cooperation will ensure that authorized commerce and authorized travelers move rapidly between the United States and Cuba. Although we recognize the priority given to state-owned enterprises in the Cuban model, we seek to encourage reforms that align these entities with international norms, especially transparency.
“United States regulatory changes have created space for the Cuban government to introduce comparable changes. In tandem with the Department of the Treasury's regulatory change to expand Cuba's access to the US financial system and US dollar transit accounts, the Cuban government announced in early 2016 plans to eliminate the 10 percent penalty on US dollar conversion transactions, subject to improved access to the international banking system. We will sustain private and public efforts to explain our regulatory changes to US firms and banks, Cuban entrepreneurs, and the Cuban government.”
In January 2015, the US government, through amendments to the US Commerce Department’s Export Administration Regulations [EAR] and OFAC’s Cuba regulations, began to liberalize US trade restrictions with Cuba to carry out President Obama’s December 17, 2014, declaration of a new US-Cuba policy. The new rules, issued in separate waves in 2015 and 2016, nonetheless leave the comprehensive US embargo against Cuba largely in effect.
For its part, the Cuban government has reacted very leisurely in revising its own laws and regulations to fully accept and implement within Cuba the limited relaxation that the new US rules authorize.
President-elect Trump can unilaterally amend or revoke any or all of these relaxations in the Cuba sanctions and issue new directives under TWEA restoring the status quo as of December 17, 2014.
Article 2205 of the North America Free Trade Agreement [NAFTA] allows the US to withdraw with six months’ written notice:
“A Party may withdraw from this Agreement six months after it provides written notice of withdrawal to the other Parties. If a Party withdraws, the Agreement shall remain in force for the remaining Parties.”
To whom in the US government does the constitution grant the power to terminate or withdraw from treaties? Arguments may be made that the power belongs to the president alone, the president and Senate, or in Congress. Thus, President-elect Trump can assert that he alone has the authority to withdraw the United States from NAFTA.
Historical practice provides support for all these arguments, and there is no definitive clarity on the question of how a treaty, once ratified, must be terminated. See Goldwater v. Carter, 617 F.2d 697 (D.C. Cir.) (en banc), vacated and remanded, 100 S. Ct. 533, 444 U.S. 996 (1979).