LEGAL AUTHORITY FOR TRADE SANCTIONS AGAINST NICARAGUA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87M00539R001802760035-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 8
• Document Creation Date: December 22, 2016
• Document Release Date: July 23, 2010
• Sequence Number: 35
• Publication Date: March 5, 1985
• Content Type: MEMO

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THE UNITED STATES TRADE REPRESENTATIVE
WASHINGTON
20506
March 5, 1985
Executive Registry
ON FILE USTR RELEASE
INSTRUCTIONS APPLY
Not referred to DOC. Waiver applies.
TO: THE SECRETARY OF STATE
THE SECRETARY OF THE TREASURY
THE SECRETARY OF DEFENSE
THE DIRECTOR OF CENTRAL INTELLIGENCE
SUBJECT: Legal Authority for Trade Sanctions Against
Nicaragua
At the request of Bob McFarlane, I had my staff review the
President's legal authority to impose trade sanctions against
Nicaragua under the International Emergency Economic Powers Act
(IEEPA), section 232 of the Trade Expansion Act of 1962, or
federal health inspection statutes. Two options were reviewed:
(1) a total embargo on all imports from Nicaragua or (2)
selective embargoes on imports from Nicaragua such as bananas,
beef, and shellfish. I believe that the President's authority
under IEEPA to impose a selective import embargo against
Nicaragua is so clear as to be free from doubt. I believe that
section 232 of the Trade Expansion Act of 1962 and section 406 of
the Trade Act of 1974 are inappropriate for the trade sanctions
contemplated here. Finally, I believe that the use of federal
health inspection authority to indirectly embargo imports of
Nicaraguan bananas, shellfish, and beef is likely to invite legal
challenges and may involve a significant element of legal risk.
Section 203 of the International Emergency Economic Powers Act,
50 U.S.C. 1702, provides the President with the appropriate legal
authority for a total or selective import embargo. IEEPA gives
the President broad and plenary authority to proclaim a total or
limited embargo of Nicaragua, including an embargo on the
importation of selected Nicaraguan goods into the United
States. Presidents traditionally have invoked IEEPA, or its
predecessor, section 5 of the Trading with the Enemy Act, to
embargo import and/or export trade with hostile powers during
times of war or national emergency.
In contrast, while section 232 of the Trade Expansion Act of 1962
(19 U.S.C. 1862) authorizes restrictions on imports which
"threaten to impair the national security," the intent of this
provision was to prevent imports from injuring vital defense-
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related industries, rather than to impose trade sanctions.
Section 232 has been used only once, to proclaim global quotas on
oil imports during 1959. It is therefore wholly unclear whether
section 232 would cover imports of non-essential Nicaraguan
foodstuffs. Finally, section 232 may be too cumbersome for the
type of trade sanctions contemplated here, since it requires a
fact-finding investigation and report by the Secretary of
Commerce prior to any action by the President.
The use of federal health inspection authority to exclude
Nicaraguan foodstuffs could be a risky legal proposition, since
absent a public health basis for exclusion, a court potentially
could strike down the embargo as "arbitrary and capricious." If
we decide to go this route, we should bring in an expert in this
area of the law to assess the risks involved.
I enclose a copy of a legal memorandum prepared by my General
Counsel.
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OFFICE OF THE UNITED STATES
TRADE REPRESENTATIVE
EXECUTIVE OFFICE OF THE PRESIDENT
WASHINGTON
20506
March 3, 1985
TO: AMBASSADOR
FROM: C}'ate-G1~g rich
Ge era1/k ounsel
.SUBJECT: Legal Authority for Trade Sanctions Against Nicaragua
As per your request, I have reviewed the President's legal
authority to impose trade sanctions against Nicaragua under the
International Emergency Powers Act, section 232 of the Trade
Expansion Act of 1962, or the federal health inspection
statutes. Two options were reviewed: (1) an embargo on all
imports of Nicaraguan goods and (2) limited embargoes on imports
from Nicaragua such as bananas, shellfish, and beef under federal
health inspection authority.
I believe that section 203 of the International Emergency
Economic Powers Act (IEEPA) provides the President with the
appropriate legal authority to proclaim a total or selective
embargo on imports of Nicaraguan goods. IEEPA was expressly
designed to provide the President with emergency authority to
restrict trade with other nations during times of war or national
.emergency.
In contrast, section 232 of the Trade Expansion Act of 1962
was intended to protect the defense mobilization base of the
United States from being weakened by excessive import
competition. Congress wanted to protect vital defense-related
industries to ensure that the United States would have the
production capacity to fight a war. Accordingly, it is wholly
unclear whether section 232 would cover restrictions on imports
of small quantities of non-essential Nicaraguan foodstuffs.
While I am not an expert in the area of federal health
inspection law, I believe that the imposition of restrictions on
Nicaraguan foodstuffs under federal health inspection authority
is a somewhat risky legal proposition. Absent some valid public
health concern, we run the risk that a court will strike down any
restrictions as "arbitrary and capricious."
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Discussion
I turn now to a more detailed discussion of the various
authorities available to the President.
1. Section 203 of IEEPA
You have asked whether the President's authority under IEEPA
would encompass a non-MFN embargo directed exclusively at imports
from Nicaragua. Section 203(a)(1)(B) of IEEPA gives the
President emergency authority to "investigate, regulate, direct
and compel, nullify, void, prevent or prohibit, . . . importation
or exportation of . . . any property in which any foreign country
or a national thereof has any interest. 50 U.S.C. 1702(a)(1)(B)
(emphasis added). This language gives the President plenary
authority to defend the interests of the United States in times
of national emergency. Section 203 of IEEPA was drawn almost
word for word from section 5 of the Trading with the Enemy Act.
Section 5 was a broad emergency power, one invoked by President
Truman during the Korean war to embargo trade with hostile
Communist nations.
In my judgment, the President's legal authority to proclaim
a selective embargo against certain Nicaraguan products is so
clear as to be free from doubt. With the phrase "any property,"
Congress explicitly indicated that the President could embargo on
all imports or proclaim selective embargoes on specific products,
such as bananas, beef, and shellfish. I note that, after the
lapse of the Export Administration Act, the President relied on
his IEEPA authority to maintain selective export controls on
certain defense-related technologies.
To invoke IEEPA, the President must determine that there is
an "unusual and extraordinary threat" to the "national security,
foreign policy, or economy of the United States" (50 U.S.C.
1701(a)) and proclaim a "national emergency" under section 201 of
the National Emergencies Act (50 U.S.C. 1621(a)). Under IEEPA,
the President could determine that Nicaragua poses a threat to
vital U.S. national security and foreign policy interests in
Central America and that the United States must act to restrict
Nicaragua's access to foreign exchange. This type of
determination is virtually immune from any meaningful scrutiny in
the courts. The courts give substantial deference to the
President's authority in the area of foreign affairs, United
States v. Curtiss Wright Export Corp., 299 U.S. 304 (1936), and
this deference increases when Congress has granted broad
emergency powers to the President, Dames & Moore v. Regan, 453
U.S.654 (1981). Although the National Emergencies Act originally
authorized Congress to override the President's decision through
a joint resolution, the Supreme Court struck down the legislative
veto in Immigration and Naturalization Service v. Chadha, 51
U.S.L.W. 4907 (June 21, 1983). Hence, Congress cannot override
the President's trade sanctions.
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2. Other Authority for Trade Sanctions
I understand that it has been suggested that the President
could also impose trade sanctions under section 232 of the Trade
Expansion Act of 1962 (19 U.S.C. 1862) or section 406 of the
Trade Act of 1974 (19 U.S.C. 2436). I believe, however, that use
of section 232 and section 406 would be inappropriate in the
situation presented here.
Section 232 authorizes the President to restrict imports
which "threaten to impair the national security." The purpose of
section 232 was to prevent imports from vital defense-related
industries. 1955 U.S. Cong. & Adm. News, p. 2103 (1955).
Accordingly, section 232(c) directs the President to consider a
variety of factors, including the defense mobilization
requirements of the United States and the impact of excessive
imports on domestic production. Section 232 has been used only
once -- to impose global quotas on imported oil in 1959.
It is wholly unclear whether section 232 would reach the
Nicaraguan situation. Since the levels of imports from Nicaragua
are small and the bulk of these imports consist of non-essential
foodstuffs, it is difficult to see how these imports pose a
threat to our wartime mobilization capacity. I realize that one
could argue that the foreign exchange earnings derived from such
imports pose an indirect threat to our national security, but
this would represent a new, untested, and potentially
controversial interpretation of section 232.
Section 232 may also be too unwieldy and time-consuming for
the type of trade sanctions contemplated here. Because Congress
assumed that section 232 would focus on the impact of imports on
a U.S. industry, the statute requires a fact-finding
investigation by the Commerce Department as a prerequisite to
action by the President. The Commerce Department must conduct an
investigation, hold public hearings if appropriate, and deliver a
report to the President. The President can then limit or adjust
the quantities of imports entering the U.S.
Section 406 is equally inappropriate. This provision
authorizes the President to apply import restrictions if the U.S.
International Trade Commission (ITC) determines that imports from
a "Communist country" have resulted in "market disruption" in the
U.S. Accordingly, the ITC must complete an investigation and
issue an affirmative finding before the President can act.
Absent an affirmative finding by the ITC, the President has no
authority to restrict imports. Since our imports of Nicaraguan
bananas, shellfish, and beef are quite small, it is highly
unlikely that the ITC would find that imports from Nicaragua have
resulted in market disruption in this country.
EGR
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BECRE-
3. Selective Restrictions on Imported Foodstuffs
You have also asked whether the President could restrict the
importation of Nicaraguan bananas, shellfish, and beef through
application of federal health standards.
While I am not an expert in this area of the law, I believe
that this option is a somewhat risky legal proposition. If we
choose to pursue this approach, we should bring in an expert to
evaluate the legal risks involved.
Section 801 of the Food, Drug, and Cosmetic Act (21 U.S.C.
381) directs the Secretary of Treasury to exclude imported
foodstuffs whenever the Secretary of Health and Human Services
determines that the food was packed in unsanitary conditions, is
adulterated, or misbranded. Under this authority, the Food and
Drug Administration (FDA) selectively samples shipments of
imported food at ports of entry for sanitation, pesticides,
bacteria, etc. This authority could be used to detain and
exclude shipments of Nicaraguan bananas, shellfish, and beef.
Beef imports are subject to additional, independent
regulation by the Department of Agriculture (USDA). USDA
prohibits the importation of beef from certain countries because
of rinderpest or foot-and-mouth disease (19 U.S.C. 1306; 9 CFR
94.2). In addition, under the Federal Meat Inspection Act (21
U.S.C. 601 et seg), USDA certifies meat inspection standards in
foreign countries and maintains lists of countries and firms
ineligible to export beef to the U.S. See 9 C.F.R. 327.2 et
seq.).
As a general proposition,-the courts have been extremely
reluctant to overrule decisions by the FDA or USDA to bar the
imported foodstuffs for public health reasons. See Ganadera
Industrial S.A. v. Block, 727 F.2d 1156 (D.C. Cir. 1984);
Sugarman v. Forbragd, 405 F.2d 1189 (9th Cir. 1969), cert. denied
394 U.S. 1012 (1969). Such decisions normally receive minimal
judicial scrutiny under the "arbitrary and capricious"
standard. Ganadera Industrial S.A. v. Block, supra at 1160.
The use of federal inspection standards to deny entry to
imports from Nicaragua, however, will invite legal challenges in
the U.S. courts by importers or purchasers of Nicaraguan goods.
Even given the minimal level of judicial review available, a
sympathetic court might strike down the inspector's decision if
the court concludes that the health ruling was a mere pretext for
political action against Nicaragua. To be on safe ground, we
would need a valid health and safety rationale for denying entry.
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We could also try to slow the entry of Nicaraguan goods
through intensifed sampling of Nicaraguan products by the FDA,
USDA, or the Customs Service. The FDA currently samples imported
foodstuffs on a selective basis, while Customs Service currently
inspects approximately 10 percent of all imported products (19
U.S.C. 1499). While these percentages could be increased, the
Customs Service would probably face a barrage of lawsuits as the
word leaks out.
4. International Legal Consequences
Given the prior litigiousness of the Nicaraguans, I note
that Nicaragua could try to embarrass us by challenging the
imposition of trade sanctions in the International Court of
Justice under Article XXIV of our FCN treaty (T.I.A.S. 4024),
although the treaty expressly excepts matters which a party deems
"necessary to protect its "essential security interests." In
addition, the Nicaraguans could try to challenge any sanctions
under Article XXIII of the GATT, as they did in 1983 after we
reduced their sugar quota.
Conclusion
In sum, I believe that the President's authority under IEEPA
to impose a selective import embargo against Nicaragua is so
clear as to be free from doubt. I believe that section 232 of
the Trade Expansion Act of 1962 and section 406 of the Trade Act
of 1974 are inappropriate for the trade sanctions contemplated
here. Finally, I believe that the use of federal health
inspection authority to indirectly embargo imports of Nicaraguan
bananas, shellfish, and beef is likely to invite legal challenges
and may involve a significant element of legal risk.
R L u
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