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III. SANCTIONS PURSUANT TO AUTHORITY TO RESTRICT IMPORTS OR EXPORTS OF PARTICULAR GOODS

A. Arms Export Control Act, as amended ("AECA"),
Pub. L. 90-629, c. 1, 82 Stat. 1321 (October 22, 1968), as amended, 22 U.S.C.A. § 2751 et seq. (West 1990 & Supp. 1996)

This Act governs exports and imports of defense articles and services. Controlled items are designated on the U.S. Munitions List, which is maintained and regulated by the Department of State through the International Traffic in Arms Regulations.

Section 35 prohibits certain sales and financing of defense articles and services by the U.S. Government to economically less developed countries found by the President to be diverting development assistance, or other resources, to certain military expenditures.

Section 40 prohibits exports of munitions and the provision of U.S. Government assistance for the purchase of munitions to countries designated as supporting acts of international terrorism. These countries are currently Cuba, Iran, Iraq, Libya, North Korea, Sudan and Syria.

Under Section 38 of this Act, export licensing determinations under the International Traffic in Arms Regulations are to be made in consideration of certain foreign policy goals, including the possibility of escalating conflict and human rights violations. It is currently the policy of the State Department to deny licenses with respect to the following countries:

Further restrictions on exports of chemical and biological weapons items, missile technology items and nuclear items, and sanctions against foreign persons and countries with respect to those items, have been added to the AECA by other legislation (see section II.E.)

B. Export Administration Act, as amended ("EAA")39 ,
Pub. L. 96-72, 93 Stat. 513 (September 29, 1979), as amended, 50 U.S.C.A. App. §§ 2405 and 2410a (West 1991 & Supp. 1996)

This Act authorizes the President to control the export of "dual-use" (i.e., having civilian and potential military application) goods and technology, and certain services related to those items. Controlled items are regulated by the Department of Commerce through the Export Administration Regulations ("EAR").

Under Section 6(j), the Act requires a license for export to a country designated as supporting acts of terrorism of goods or technology that could make a significant contribution to its military or terrorist capabilities. The designated 6(j) countries are Cuba, Iran, Iraq, Libya, North Korea, Sudan and Syria40. Section 6(a) of the Act authorizes the President to restrict exports in order to further the foreign policy of the United States. Such controls may only be imposed for one year, but may be extended by the President, in accordance with certain criteria. Among other things, the President must determine that such controls are likely to achieve the intended foreign policy purpose, and must consult with the relevant industry and Congress. Under this section, economic sanctions have been imposed against Iran, Sudan and Syria. The sanctions include denial of civilian airliners and certain highway trucks (except to civilians for civilian end-uses in Sudan and Syria) made anywhere in the world if they contain more than 10 percent U.S.-origin parts and components.

Under Section 11A, sanctions against foreign persons who violate certain multilateral export controls contained in the EAR for critical technologies are mandatory in certain circumstances. These sanctions are a ban on imports from the foreign person, and a prohibition on participation in U.S. Government contracts for a period of two to five years. These sanctions were applied against the Toshiba Machine Company and the Kongsberg Trading Company in 1988. See Exec. Order No. 12661 (12/28/88).

Restrictions on exports of chemical and biological weapons items and missile technology items, and sanctions against foreign persons and countries who export, or deal in, those items, have been added to the EAA by other legislation (see section II.E.).

IV. RESTRICTIONS UNDER THE FOREIGN ASSISTANCE ACT

The provisions of this Act prohibit U.S. foreign assistance to particular countries and certain groups of countries41. These include:

U.S. representatives in international financial institutions are required to vote against the provision of funds or other assistance to countries that have expropriated property of U.S. persons without adequate compensation. See Pub. L. 103-236, Title V, § 527 (4/30/94).

Under Section 620E, assistance to Pakistan is prohibited, unless the President certifies that Pakistan does not possess a nuclear explosive device, and that furnishing assistance to Pakistan will reduce the risk that Pakistan will possess such a device. This section was recently amended to prohibit only military assistance in the absence of certification. Foreign Operations, Export Financing, and Related Programs Appropriations Act, 1996, Pub. L. 104-107, §559, 110 Stat. 742, (2/12/96).

Under Section 307, no funds made available under this Act can be used towards the U.S. proportionate share in international organizations for programs for Burma, Iraq, North Korea, Syria, Iran, Cuba or the Palestine Liberation Organization ("PLO").

Under Section 498A43, the Act prohibits certain assistance to any of the New Independent States of the former Soviet Union that:

Under Sections 231A and 239, the Act prohibits the Overseas Private Investment Corporation ("OPIC") from operating in countries that do not take steps to implement certain worker rights or that have engaged in gross violations of human rights. Determinations regarding worker rights are made in two ways. OPIC will not operate in countries that have been suspended from the Generalized System of Preferences ("GSP") Program (see section VI.B. below) for failing to implement worker rights. With respect to countries that are not in the GSP Program, OPIC holds an annual public hearing during which petitions are accepted from the public on this issue. Determinations by OPIC as to countries which engage in gross violations of human rights are made pursuant to State Department policy44.

Under Section 620I, no assistance may be furnished under this Act to a country if it is made known to the President that the government is restricting the transport/delivery of U.S. humanitarian aid. This prohibition may be waived by the President for national security reasons. See 1997 Omnibus Appropriations Act, Pub. L. 104-208,, §559 (9/30/96).

V. RESTRICTIONS ON FAVORABLE TRADE STATUS

A. Trade Act of 1974, as amended,
Pub. L. 93-618, Title IV, §§ 402-403, 88 Stat. 2060 (January 3, 1975), as amended, 19 U.S.C.A. § 2432 (West 1980 & Supp. 1996)

This Act denies certain trade benefits to nonmarket economy countries in order to foster emigration and the return of missing U.S. soldiers.

Under section 403, the "Jackson-Vanik Amendment", the Act prohibits extension of Most-Favored-Nation status ("MFN"), eligibility for credit extension or investment guarantees, and commercial agreements with respect to such countries, unless the President determines that the country does not deny, or impose certain financial restrictions on, emigration.

The President is authorized to waive the application of this provision where such waiver will substantially promote the objectives of this section of the Act, and there are assurances that the emigration practices of the particular country will thereafter promote the objectives of this section of the Act. In order for a country to keep MFN status under the waiver provision, the waiver must be renewed by the President every 12 months.

Section 403 of the Act authorizes the President to deny Most-Favored-Nation treatment, eligibility for credits extensions and investment guarantees, and entrance into commercial agreements with nonmarket economy countries that do not cooperate in identifying and returning missing U.S. soldiers.

B. Generalized System of Preferences Renewal Act, as amended,
Pub. L. 98-573, Title V, §§ 502-503, 98 Stat. 3019 (October 30, 1984), as amended, 19 U.S.C.A. §§ 2461-65 (West 1980 & Supp. 1996)

This Act prohibits extension of the benefits under the Generalized System of Preferences Program45 to certain countries including:

The President may waive the application of the last four prohibitions described above in the national interest. The following are some of the countries that are suspended from the GSP Program under this section of the Act (all for workers rights issues):

C. Caribbean Basin Economic Recovery Act, as amended,
Pub. L. 98-67, Title II, §§ 211-212, 97 Stat. 384 (August 5, 1993), 19 U.S.C. §§ 2701-2702 (1980 & Supp. 1996)

D. Andean Trade Preference Act, as amended,
Pub.L. 102-182, Title II, §§ 202-203, 105 Stat. 1236 (December 4, 1991), 19 U.S.C.A. §§ 3201-3202 (West 1980 & Supp. 1996)

These Acts prohibit the extension of benefits under their respective tariff programs46 to certain countries including:

The President may waive all of the above prohibitions in designating a country for benefits under this Act, if it is in the national economic or security interest.

VI. RESTRICTIONS ON ACTIVITY OF FINANCIAL INSTITUTIONS

A. Multilateral Banks

Under Section 701 of this Act, the U.S. executive directors of the International Bank for Reconstruction and Development, the International Development Association, the International Finance Corporation, the Inter-American Development Bank, the African Development Fund, the Asian Development Bank, the African Development Bank, the European Bank for Reconstruction and Development, and the International Monetary Fund are required to oppose loans and financial and technical assistance to countries whose governments engage in gross violations of human rights or provide refuge to individuals committing acts of terrorism by hijacking aircraft. This requirement does not apply to funds directed to the basic human needs of a country's citizens.

Under Section 1621, these directors also are required to vote against the use of funds for the State Department designated terrorist supporting countries.

Sections 21 and 22 of this Act require the U.S. executive director of this bank to vote against loans or any other use of funds for the benefit of any country that has:

Sections 12 and 13 of this Act require the U.S. executive directors of the International Bank of Reconstruction and Development and the International Development Association to vote against loans or any other use of funds for the benefit of any country that has:

The U.S. executive director of the IMF is required to "work in opposition" to financial or technical assistance to a country which supports or harbors persons who commit terrorist acts or which fail to take appropriate measures to prevent such persons from committing such acts outside the territory of such country.

B. Export-Import Bank Act, as amended47,
Act of July 31, 1945, c. 341, §§ 2 and 11, 59 Stat. 526, as amended, 12 U.S.C.A. § 635, 635i-5 (West 1990 & 1996 Supp.)

Section 2 of this Act prohibits the extension of guarantees, insurance or credits by the Bank with respect to:

  1. "Marxist-Leninist countries". These are listed in the statute as Cambodia, N. Korea, Afghanistan, Laos, China, Cuba, the Federal Republic of Yugoslavia, Vietnam and Tibet. The President is authorized to determine that a country is no longer "Marxist-Leninist", and may waive this prohibition if provision of guarantees, insurance or credits to a particular country would be in the "national interest".

    • The President determined that Afghanistan is no longer a "Marxist-Leninist" country. 57 Fed. Reg. 47557 (10/7/92).

    • China has received a national interest waiver. 45 Fed. Reg. 26017 (4/2/80).

    • The Federal Republic of Yugoslavia received a national interest waiver in 1968. 114 Cong. Rec. 13036 (5/7/68).

  2. Countries that have been determined by the State Department to have violated International Atomic Energy Agency safeguards or the terms of certain bilateral U.S. agreements regarding nuclear energy.

  3. Non-nuclear weapons states that have detonated nuclear explosive devices. As amended by the Nuclear Proliferation Prevention Act of 1994 (discussion at II.E.2.), the Act also prohibits Bank funding for countries aiding/abetting a non-nuclear weapon state in acquiring certain nuclear devices or materials.

    • The State Department considered imposing this sanction against China, between February and May of 1996, due to reports that China had shipped ring magnets to Pakistan (in support of its nuclear weapons program).

  4. Angola, unless the President certifies that there have been certain political changes in their government.

  5. Certain defense articles and services destined for uncertified drug producing/transit countries under the Narcotics Control Trade Act (discussion at II.B.2.)42.

The Bank is also authorized to deny applications for credit where the President determines that withholding such financing would further U.S. policy goals, including anti-terrorism, nuclear non-proliferation, environmental and human rights concerns.

Under section 11 of the Act, the Bank is authorized to withhold financing for environmental reasons, pursuant to certain guidelines established by the Bank. The Act requires the Bank to establish procedures to take into account the potential environmental effects of exports, where a project requires long term support of over $10 million, for which the Bank's support is "critical", and which may have significant environmental effects on the global commons or upon any country not participating in the project.

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