No. 99-474: Natsios v. Nat'l Foreign Trade Council




No. 99-474


In the Supreme Court of the United States

ANDREW S. NATSIOS, SECRETARY OF ADMINISTRATION AND FINANCE OF MASSACHUSETTS,ET AL., PETITIONERS
v.
NATIONAL FOREIGN TRADE COUNCIL

ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

BRIEF FOR THE UNITED STATES
AS AMICUS CURIAE SUPPORTING AFFIRMANCE


SETH P. WAXMAN
Solicitor General
Counsel of Record
DAVID W. OGDEN
Acting Assistant Attorney
General
EDWIN S. KNEEDLER
Deputy Solicitor General
BARBARA MCDOWELL
Assistant to the Solicitor
General
MARK B. STERN
ALISA B. KLEIN
DOUGLAS HALLWARD-DRIEMEIER
Attorneys
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217

DAVID R. ANDREWS
Legal Adviser
Department of State
Washington, D.C. 20520

NEAL S. WOLIN
General Counsel
Department of the
Treasury
Washington, D.C. 20220

ANDREW J. PINCUS
General Counsel
Department of Commerce
Washington, D.C. 20230



QUESTIONS PRESENTED

Whether a state procurement statute that seeks to effect political changein Burma by discriminating in the award of state contracts against foreignand domestic companies that do business in Burma and the affiliates of suchcompanies (1) violates the Foreign Commerce Clause of the Constitution,(2) is preempted by the federal statutory scheme governing economic sanctionsagainst Burma, or (3) impermissibly interferes with the national government'sexclusive power over foreign affairs.



In the Supreme Court of the United States

No. 99-474

ANDREW S. NATSIOS, SECRETARY OF ADMINISTRATION AND FINANCE OF MASSACHUSETTS,ET AL., PETITIONERS
v.
NATIONAL FOREIGN TRADE COUNCIL

ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

BRIEF FOR THE UNITED STATES
AS AMICUS CURIAE SUPPORTING AFFIRMANCE



INTEREST OF THE UNITED STATES

The United States has condemned, in the strongest possible terms, the Burmesegovernment's violations of human rights.1 The President and Congress havecrafted a policy toward Burma that includes economic sanctions, restrictionson U.S. assistance, and coordinated international action to promote respectfor human rights and the democratic process in that country. There is thusno disagreement between the United States and Massachusetts on the needfor action to encourage reform in Burma. The disagreement is only over whetherthe State could permissibly take the sort of action reflected in the MassachusettsBurma Act.

The Constitution assigns to the national government the exclusive responsibilityto direct the United States' relations with other countries. Accordingly,while States may speak out on matters of foreign policy, the ultimate authorityto act on behalf of the United States, and each of its States, in the internationalarena resides with the President and Congress alone. The national government'sability to exercise that authority effectively, expeditiously, and flexiblymay be undermined when States pursue their own foreign-policy objectivesin their own ways. That may be so even where, as here, a state or localgovernment is pursuing an objective that is also being pursued by the nationalgovernment.

The Massachusetts Burma Act, while consistent with United States foreignpolicy in its ultimate end, seeks to achieve that end by means that divergefrom those chosen by the President and Congress. The Act imposes sanctionsthat are designed to discourage all foreign economic engagement with Burma,and that are applicable to all entities, both U.S. and foreign, that dobusiness in Burma, including those whose only connection to Burma is througha parent, subsidiary, or affiliate. Because the Act discriminates againstforeign commerce beyond what a State may do as a market participant, departsfrom the carefully crafted framework established by Congress and the Presidentfor imposing economic sanctions against Burma, and impermissibly intrudesinto the national government's exclusive authority over foreign affairs,the United States has a substantial interest in this case.

STATEMENT

1. It is a principal objective of United States foreign policy to advancethe cause of democracy and human rights throughout the world. The UnitedStates pursues that objective through a variety of means, including publicstatements by the President and other U.S. officials, private discussionswith foreign leaders, targeted economic assistance, and the threatened oractual imposition of increasingly severe economic sanctions. In pursuingpolitical reform in another country, the United States seeks, whenever possible,to act in concert with other members of the international community, bothto maximize the pressure on that country and, with respect to sanctions,to minimize the damage to U.S. competitiveness and to distribute the economicburden equitably. See, e.g., J.A. 107-108 (statement of then-Under Secretaryof State (now Deputy Secretary of the Treasury) Eizenstat).

a. The general statutory framework for the President's imposition of economicsanctions against foreign governments is contained in the InternationalEmergency Economic Powers Act, 50 U.S.C. 1701 et seq. (IEEPA). IEEPA authorizesthe President to impose economic sanctions in response to "any unusualand extraordinary threat which has its source in whole or substantial partoutside the United States, to the national security, foreign policy, oreconomy of the United States." 50 U.S.C. 1701(a). IEEPA broadly definesthe sorts of sanctions the President may impose; such sanctions are limitedto transactions involving persons or property "subject to the jurisdictionof the United States." 50 U.S.C. 1702(a)(1).2 Presidents have imposedeconomic sanctions under IEEPA against such nations as Iran (Exec. OrderNo. 12,170, 3 C.F.R. 487 (1980); see Dames & Moore v. Regan, 453 U.S.654 (1981)), South Africa (Exec. Order No. 12,532, 3 C.F.R. 181 (1986)),Libya (Exec. Order No. 12,543, 3 C.F.R. 181 (1987)), and Iraq (Exec. OrderNo. 12,724, 3 C.F.R. 297 (1991)). As discussed below, with respect to Burma,Congress supplemented IEEPA with a statute specifically directed at thatcountry.

b. The United States has sought to effect change in Burma in three areas:democracy, human rights, and narcotics trafficking. The United States haspursued those objectives through both unilateral and multilateral action,in part because unilateral action alone would not be effective, given thelimited economic relationship between the United States and Burma.

The United States' policy with respect to Burma is reflected in a statuteand an executive order. See Pub. L. No. 104-208, § 570, 110 Stat. 3009-166to 3009-167 (Federal Burma Act); Exec. Order No. 13,047, 3 C.F.R. 202 (1998)(Burma Executive Order).3 The Federal Burma Act, titled "Policy TowardBurma," (1) suspends all U.S. economic assistance to Burma with theexception of humanitarian assistance, "counter-narcotics" and"crop substitution" assistance, and assistance "promotinghuman rights and democratic values," (2) directs U.S. representativesto international financial institutions to oppose loans or other assistanceto Burma, and (3) provides that no United States visa should be issued to"any Burmese government official," except as required by treatyor to staff the Burmese mission to the United Nations. Federal Burma Act§ 570(a), 110 Stat. 3009-166. The Act also authorizes and directs thePresident to prohibit "new investment" in Burma by "UnitedStates persons" if he determines that the Burmese government has "committedlarge-scale repression of or violence against the Democratic opposition."§ 570(b), 110 Stat. 3009-166. The Act specifically provides, however,that "new investment" does not include "the entry into, performanceof, or financing a contract to sell or purchase goods, services, or technology."§ 570(f)(2), 110 Stat. 3009-167. In addition, the Act directs the Presidentto "seek to develop, in coordination with members of [the Associationof South East Asian Nations] and other countries having major trading andinvestment interests in Burma, a comprehensive, multilateral strategy tobring democracy to and improve human rights practices and the quality oflife in Burma." § 570(c), 110 Stat. 3009-166.

The sanctions prescribed under the Federal Burma Act must remain in effectuntil "the President determines and certifies to Congress that Burmahas made measurable and substantial progress in improving human rights practicesand implementing democratic government." Federal Burma Act § 570(a),110 Stat. 3009-166. In the interim, the President is authorized to waiveany of the sanctions, temporarily or permanently, "if he determinesand certifies to Congress that the application of such sanction would becontrary to the national security interests of the United States."§ 570(e), 110 Stat. 3009-167.

c. In May 1997, President Clinton, pursuant to the Federal Burma Act andIEEPA, prohibited "new investment in Burma by United States persons."Burma Executive Order § 1. That prohibition, consistent with the definitionof "new investment" in the Federal Burma Act, does not extendto "the entry into, performance of, or financing of a contract to sellor purchase goods, services, or technology." Id. § 3. A "UnitedStates person" is defined as "any United States citizen, permanentresident alien, juridical person organized under the laws of the UnitedStates (including foreign branches), or any person in the United States."Id. § 4(c). See 31 C.F.R. Pt. 537 (1998) (Burmese Sanctions Regulations).4

2. a. In June 1996, several months before the Federal Burma Act was enacted,Massachusetts enacted a statute that restricts the ability of state agenciesand state authorities to procure goods and services from entities that dobusiness in Burma. Mass. Gen. Laws Ann. ch. 7, §§ 22G-22M (WestSupp. 1998) (Massachusetts Burma Act). During the debate in the MassachusettsHouse of Representatives, Representative Rushing, the principal sponsorof the Act, characterized the Act as "foreign policy" legislationwith the "identifiable goal [of] free democratic elections in Burma."J.A. 39-40. During the subsequent debate in the State Senate, Senator Walsh,a sponsor of the Act, described the Act as an effort to use "tax dollarsin Massachusetts" to "stop the violation of human rights"in Burma. J.A. 51.

The Massachusetts Burma Act requires the State to maintain a "restrictedpurchase list" identifying all entities "currently doing businesswith Burma," either directly or through a parent, subsidiary, or asubsidiary of a common parent. Massachusetts Burma Act §§ 22G,22J. An entity is "doing business with Burma" if it is incorporatedor headquartered in Burma, has operations, leases, franchises, or distributionagreements there, provides any goods or services to the Burmese government,or promotes the importation or sale of certain Burmese products. Id. §22G. No state agency or state authority may purchase goods or services,other than medical supplies, from a company on the "restricted purchaselist" unless there is no other bid or the company's bid is more than10 percent lower than the lowest bid from an unlisted company. Id. §§22H, 22I.5 If a state procurement officer should enter into a contract thatis prohibited under the Act, the contract is deemed to be "void."Id. § 22L.

b. The restrictions under the Massachusetts Burma Act depart, in criticalrespects, from those under the Federal Burma Act and the Burma ExecutiveOrder. First, consistent with the Federal Burma Act's emphasis on developing"a coordinated, multilateral strategy" including Burma's majortrading partners, the federal sanctions are limited to investment by "UnitedStates persons." Federal Burma Act § 570(a), 110 Stat. 3009-166.The state sanctions, in contrast, reach foreign persons as well. Second,the federal restrictions on investment are limited to "new investment,"a term that does not encompass the continued operation of existing investmentin Burma or the purchase or sale of goods or services. § 570(f)(2),110 Stat. 3009-167. The state sanctions, in contrast, are not limited tonew investment. Third, the federal sanctions terminate when "the Presidentdetermines and certifies to Congress that Burma has made measurable andsubstantial progress in improving human rights practices and implementingdemocratic government." § 570(a), 110 Stat. 3009-166. The statesanctions contain no termination mechanism, much less one that may be activatedby the President. Finally, the federal sanctions may be waived by the Presidentin the interest of national security. § 570(e), 110 Stat. 3009-167.The state sanctions contain no waiver provision.

c. The Massachusetts Burma Act has generated protests from a number of U.S.allies and trading partners. For example, the European Union and Japan filedcomplaints against the United States in the World Trade Organization (WTO),contending that the Act violates certain provisions of the Agreement onGovernment Procurement.6 See J.A. 88-90, 91-92; see also Pet. App. 10 (notingthat the Act "has generated protests from a number of this country'strading partners, including Japan, the European Union, and the Associationof Southeast Asian Nations"). The United States, working with Massachusetts,has responded to those claims in WTO dispute settlement proceedings.7 SeniorUnited States officials have acknowledged that the Act and the consequentprotests from U.S. allies have been "an irritant" that has, amongother things, "diverted the United States' and Europe's attention fromfocussing where it should be-on Burma." J.A. 166 (testimony of DeputyAssistant Secretary of State Marchick). The Act has thus complicated theUnited States' efforts to develop a multilateral strategy toward Burma.

3. a. Respondent National Foreign Trade Council (NFTC), a trade associationwhose members include companies that have been effectively precluded bythe Massachusetts Burma Act from doing business with the State, broughtsuit to challenge the Act. The district court held, on cross-motions forsummary judgment, that the Act "unconstitutionally impinges on thefederal government's exclusive authority to regulate foreign affairs."Pet. App. 81. The court noted that the Act was designed "solely tosanction [Burma] for human rights violations and to change [Burma's] domesticpolicies" and has had a "disruptive impact on foreign relations,"as reflected in the protests of the European Union, ASEAN, and Japan. Id.at 81-82.

b. The court of appeals affirmed. Pet. App. 1-73. Applying this Court'sdecision in Zschernig v. Miller, 389 U.S. 429 (1968), the court first heldthat the Massachusetts Burma Act has "more than [the] incidental orindirect effect on foreign relations" that Zschernig suggested wouldbe permissible. Pet. App. 23. The court noted that "the design andintent of the [Act] is to affect the affairs of a foreign country,"that the Act "diverge[s] in at least five ways from the federal law,thus raising the prospect of embarrassment for the country," and that"the law has resulted in serious protests from other countries, ASEAN,and the European Union." Ibid.

The court of appeals further held that the Massachusetts Burma Act violatesthe Foreign Commerce Clause by discriminating against commerce with Burmaand undermining national uniformity in the regulation of foreign commerce.Pet. App. 52-55. The court rejected the State's contention that the ForeignCommerce Clause was not implicated because the State was merely acting asa "market participant." The court reasoned that the State had"crossed over the line from market participant to market regulator"by imposing on its suppliers "conditions that apply to activities noteven remotely connected to such companies' interactions with Massachusetts."Id. at 44-45.

Finally, the court of appeals held that the Massachusetts Burma Act is preemptedby the Federal Burma Act. Pet. App. 60-73. The court observed that the standardfor finding preemption is less stringent where a State legislates in anarea committed to exclusive federal authority rather than in an area ofconcurrent federal and state authority. Id. at 64-70. The court concludedthat the Act, which "risks upsetting Congress's careful choice of toolsand strategy" for achieving political reform in Burma, impermissiblyconflicts with federal law. Id. at 71.

INTRODUCTION AND SUMMARY OF ARGUMENT

This Court has repeatedly emphasized that "[i]n international relationsand with respect to foreign intercourse and trade the people of the UnitedStates act through a single government with unified and adequate nationalpower." Japan Line, Ltd. v. County of Los Angeles, 441 U.S. 434, 448(1979) (quoting Board of Trustees v. United States, 289 U.S. 48, 59 (1933));see also, e.g., United States v. Pink, 315 U.S. 203, 233 (1942) ("Powerover external affairs is not shared by the States; it is vested in the nationalgovernment exclusively."); Hines v. Davidowitz, 312 U.S. 52, 63 (1941)("The Federal Government * * * is entrusted with full and exclusiveresponsibility for the conduct of affairs with foreign sovereignties.");United States v. Curtiss-Wright Export Corp., 299 U.S. 304, 316-322 (1936).

The national government's preeminent role in acting for the United Statesin the international arena is reflected in several of the Constitution'sexpress grants of power to Congress in Article I, Section 8,8 and to thePresident in Article II, Sections 2 and 3,9 and in several of its expressrestrictions on state power in Article I, Section 10.10 The most significantof those enumerated powers, for present purposes, is Congress's power "[t]oregulate Commerce with foreign Nations." U.S. Const. Art. I, §8, Cl. 3.

The Framers understood that "[i]f we are to be one nation in any respect,it clearly ought to be in respect to other nations." The FederalistNo. 42, at 264 (James Madison) (quoted in Hines, 312 U.S. at 63 n.11). Underthe Articles of Confederation, the national government's efforts to engagein political and commercial relations with other countries had been underminedby the States.11 There was even concern that the United States could notprevent a State from embroiling the nation in a war with another country.As Edmund Randolph of Virginia observed at the Constitutional Convention,"particular states might by their conduct provoke war without controul"because, "[i]f a State acts against a foreign power contrary to thelaws of nations or violates a treaty," the national government "cannotpunish that State, or compel its obedience to the treaty." 1 The Recordsof the Federal Convention of 1787, at 19, 24-25 (M. Farrand ed. 1966).

That instability and inconsistency caused the Framers to propose a Constitutionthat provided for a single national voice over foreign political and commercialaffairs. Proponents of the Constitution perceived that single voice as essentialto preserving "[t]he peace of the whole." The Federalist No. 80,at 476 (Alexander Hamilton) ("[T]he peace of the WHOLE ought not tobe left at the disposal of a PART. The Union will undoubtedly be answerableto foreign powers for the conduct of its members."); see also The FederalistNo. 3, at 43 (John Jay) (asserting that adherence to the law of nations"will be more perfectly and punctually done by one national governmentthan it could be either by thirteen separate States or by three or fourdistinct confederacies"); The Federalist No. 44, at 281 (James Madison)(recognizing "the advantage of uniformity in all points which relateto foreign powers"); Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 228-229(1824) (Johnson, J., concurring).

The Framers' decision to vest responsibility for foreign commercial andpolitical affairs "in the national government exclusively," Pink,315 U.S. at 233, has several implications for state laws such as the oneat issue here.

First, a state law violates the dormant Foreign Commerce Clause if it discriminatesagainst foreign commerce (includeing against commerce with a particularnation), thereby inviting retaliation against the entire United States,or prevents the United States from speaking with one voice with respectto foreign commerce. Although, in our view, the market-participant exceptionrecognized under the dormant Interstate Commerce Clause extends at leastin some measure to foreign commerce as well, that exception does not permita State to do what Massachusetts has done here- i.e., use its spending poweras a means of regulating conduct beyond the Nation's borders and beyondthe particular transactions in which the State is involved.

Second, quite aside from the limitations imposed by the Foreign CommerceClause of its own force, when a state law addresses concerns of foreignpolicy and foreign commerce that are also addressed by a federal law, theSupremacy Clause is implicated more strongly than it is in the purely domesticcontext. Thus, the state law will more readily be found to be preemptedas "stand[ing] as an obstacle to the accomplishment and execution ofthe full purposes and objectives of Congress." Hines, 312 U.S. at 67.Here, the Massachusetts Burma Act stands as such an obstacle to the effectuationof the United States' multifaceted and multilateral strategy toward Burma,as reflected in the International Emergency Economic Powers Act, the FederalBurma Act, and the Burma Executive Order.

Third, even absent preemption by an Act of Congress or an order of the President,a state law will be struck down if it has "a direct impact upon foreignrelations," rather than a mere "incidental or indirect" one.Zschernig v. Miller, 389 U.S. 429, 434, 441 (1968). For the reasons statedabove, the Massachusetts Burma Act is invalid on that ground as well.

ARGUMENT

I. THE MASSACHUSETTS BURMA ACT VIOLATES THE FOREIGN COMMERCE CLAUSE

The Commerce Clause "has long been understood * * * to provide 'protectionfrom state legislation inimical to the national commerce [even] where Congresshas not acted.'" Barclays Bank PLC v. Franchise Tax Bd., 512 U.S. 298,310 (1994) (quoting Southern Pac. Co. v. Arizona, 325 U.S. 761, 769 (1945)).Because "the Founders intended the scope of [Congress's] foreign commercepower to be * * * greater" than its power over interstate commerce,the Court has applied heightened scrutiny when "ascertaining the negativeimplications of Congress' power to 'regulate Commerce with foreign Nations.'"Japan Line, 441 U.S. at 448-449. Accordingly, a state law may violate theForeign Commerce Clause, even in the absence of a superseding federal law,if the state law either discriminates against foreign commerce, Barclays,512 U.S. at 311, 312-314, or "prevents the Federal Government from'speaking with one voice when regulating commercial relations with foreigngovernments,'" Japan Line, 441 U.S. at 451 (quoting Michelin Tire Corp.v. Wages, 423 U.S. 276, 285 (1976)).12 The Massachusetts Burma Act suffersfrom both infirmities. The Act therefore violates the Foreign Commerce Clauseunless it can be saved on the theory that the State is acting as a marketparticipant in penalizing companies that do business in Burma. As we showin Point C, infra, however, the Act cannot be sustained on that theory.13

A. The Massachusetts Act Discriminates Against Foreign Commerce

The Massachusetts Burma Act facially discriminates against commerce withBurma. The Act penalizes all companies that engage in commerce with Burma,whether directly or through a corporate parent, affiliate, or subsidiary,by effectively foreclosing procurement opportunities with the State.14 Companiesare forced to choose between doing business in Burma and doing businesswith Massachusetts. Such discrimination is not merely an incidental consequenceof the Act. It is the very means that the State has selected to pursue itsforeign-policy objectives with respect to Burma. See, e.g., pp. 7-8, supra,and pp. 36-37, infra.

Contrary to Massachusetts' assertion (Br. 47), a state statute that faciallydiscriminates against interstate or foreign commerce violates the CommerceClause, even if the statute was not "intend[ed] to secure economicadvantages for local businesses at the expense of businesses situated elsewhere."In Kraft General Foods v. Iowa Department of Revenue, 505 U.S. 71, 78 (1992),this Court rejected a State's analogous argument that its tax system, whichtreated dividends received from foreign subsidiaries less favorably thandividends received from domestic subsidiaries, did not violate the ForeignCommerce Clause because "it [did] not favor local interests."The Court explained that a state statute that discriminates against foreigncommerce "is inconsistent with the Commerce Clause even if the State'sown economy is not a direct beneficiary of the discrimination." Id.at 79. "As the absence of local benefit does not eliminate the internationalimplications of the discrimination," the Court said, "it cannotexempt such discrimination from Commerce Clause prohibitions." Ibid.

Nor is the Massachusetts Burma Act rendered permissible, as Massachusettscontends (Br. 47), by the fact that the Act applies to domestic, as wellas foreign, companies that do business in Burma. A statute may violate theForeign Commerce Clause by discriminating against foreign commerce (e.g.,commerce with a particular foreign nation) as well as by discriminatingagainst foreign persons.15

That conclusion is compelled by the text of the Foreign Commerce Clause,which refers to commerce "with foreign Nations," and by its principalpurpose, which was to prevent individual States from embroiling this Nationin disputes with other nations, thereby inviting retaliation that wouldharm the United States as a whole. See pp. 12-13, supra; see also KraftGen. Foods, 505 U.S. at 79; Cooley v. Board of Wardens, 53 U.S. (12 How.)299, 317 (1851) (one of the purposes of the Commerce Clause was to eliminatestate laws that create "discriminations favorable or adverse to commercewith particular foreign nations").16

B. The Massachusetts Act Prevents The United States From Speaking With OneVoice On Foreign Commerce

The Massachusetts Burma Act violates the Foreign Commerce Clause for anadditional, independent reason: It prevents the United States from "speak[ing]with one voice when regulating commercial relations with foreign governments."Japan Line, 441 U.S. at 449; accord Barclays, 512 U.S. at 320. The Courthas explained that a state statute "will violate the 'one voice' standardif it either implicates foreign policy issues which must be left to theFederal Government or violates a clear federal directive." ContainerCorp. v. Franchise Tax Bd., 463 U.S. 159, 194 (1983). The MassachusettsBurma Act not only "implicates foreign policy issues"-whethereconomic sanctions should be used to press for political reform in Burmaand, if so, the nature, extent, and duration of those sanctions-but doesso through an approach that departs, in significant respects, from the approachchosen by the national government.17

As explained more extensively below (at 31-35), although the national governmentand the State seek the same end with respect to democratic reform in Burma,they have chosen to do so through different means.18 The national governmenthas chosen a carefully calibrated strategy of penalties and incentives,which are capable of being applied flexibly by the President in responseto the Burmese regime's conduct, the actions of the international community,and other national security considerations. The national government haselected not to penalize U.S. companies with existing investments in Burmaor to prohibit "the entry into, performance of, or financing of a contractto sell or purchase goods, services, or technology." Federal BurmaAct § 570(f)(2), 110 Stat. 3009-167. The national government has alsorecognized that the most effective means to achieve reform in Burma is through"a comprehensive, multilateral strategy" that involves those nations,primarily in Asia, that have stronger economic ties to Burma than has theUnited States. § 570(c), 110 Stat. 3009-166.

The State's approach is inconsistent with the national government's approachin a number of respects. First, the Massachusetts Burma Act undermines thePresident's flexibility in dealing with the Burmese regime. Whereas thesanctions under the Federal Burma Act and the Burma Executive Order maybe adjusted in response to changing circumstances, the sanctions under theMassachusetts Burma Act are applied inflexibly. See pp. 31-33, infra. Second,the Massachusetts Burma Act seeks to discourage all business by U.S. companiesin Burma, contrary to Congress's and the President's decision that only"new investment" is to be prohibited. See pp. 33-34, infra. Third,the Massachusetts Burma Act operates against foreign companies as well asU.S. companies, which has antagonized U.S. allies and complicated the developmentof a multilateral strategy toward Burma. See pp. 34-35, infra. Clearly,then, the Act undermines the United States' ability to "speak withone voice."

Indeed, if the Massachusetts Burma Act were sustained, a multitude of different,and differing, state and local measures sanctioning foreign governmentscould be expected. At least 18 local governments have adopted similar, althoughnot necessarily identical, selective-purchasing statutes directed at Burma.J.A. 155-156. And various state and local governments have adopted or consideredsimilar selective-purchasing statutes aimed at other countries, includingChina, Cuba, Egypt, Indonesia, Iran, Iraq, Laos, Morocco, Nigeria, NorthKorea, Pakistan, Saudi Arabia, Sudan, Switzerland, Tibet, Turkey, and Vietnam.J.A. 144-156. Cf. Armco, Inc. v. Hardesty, 467 U.S. 638, 644 (1984) (indetermining whether a state tax discriminates against interstate commerce,the Court inquires whether the tax is "such that, if applied by everyjurisdiction, there would be no impermissible interference with free trade")(internal quotation marks omitted).19

C. The Massachusetts Act Is Not Saved On The Theory That The State Is ActingSimply As A Market Participant

The State contends that the Massachusetts Burma Act does not violate theForeign Commerce Clause-whether or not the Act discriminates against foreigncommerce or undermines national uniformity-because the State is acting asa "market participant" in refusing to deal with companies thatdo business in Burma. The Massachusetts Burma Act cannot be sustained onthat theory.20

1. This Court has identified a "narrow exception to the dormant [Interstate]Commerce Clause for States in their role as 'market participants.'"Camps Newfound/Owatonna, Inc. v. Town of Harrison, 520 U.S. 564, 589 (1997).The Court has not yet decided whether, or to what extent, the market-participantexception applies to foreign commerce. See Reeves, Inc. v. Stake, 447 U.S.429, 438 n.9 (1980) ("We have no occasion to explore the limits imposedon state proprietary actions by the 'foreign commerce' Clause * * * . Wenote, however, that Commerce Clause scrutiny may well be more rigorous whena restraint on foreign commerce is alleged."). It is significant, however,that even in the purely domestic context, the Court has never extended themarket-participant exception to state action analogous to that at issuehere, e.g., to a state procurement statute that discriminates against companiesthat do business in another State in order to influence that other State'sinternal policies.

The market-participant exception originated in two cases in which the State,as a participant in a commercial activity, preferred its own citizens overcitizens of other States. In Hughes v. Alexandria Scrap Corp., 426 U.S.794 (1976), the Court held that a State, in paying a "bounty"to encourage the processing of abandoned automobiles into scrap metal, couldprefer local processors over out-of-state processors. The Court reasonedthat the State was not seeking to regulate the market for abandoned automobiles;"[i]nstead, it ha[d] entered into the market itself to bid up theirprice." Id. at 806. The Court then concluded that the Commerce Clausedoes not "prohibit[] a State, in the absence of congressional action,from participating in the market and exercising the right to favor its owncitizens over others." Id. at 810. Similarly, in Reeves, the Courtheld that a State, as the operator of a cement plant, could choose to sellthe cement only to its own citizens. 447 U.S. at 440-447.

The Court's subsequent decisions make clear that the market-participantexception does not exempt all of a State's procurement decisions from theconstraints of the Commerce Clause. In White v. Massachusetts Council ofConstruction Employers, 460 U.S. 204 (1983), the Court upheld an executiveorder issued by the Mayor of Boston that required that city residents constitute50 percent of the workforce on public construction projects funded whollywith city funds. The Court reasoned that such a preference for city residentsdid not violate the Commerce Clause because, "[i]nsofar as the cityexpended only its own funds in entering into construction contracts forpublic projects, it was a market participant." Id. at 214-215. TheCourt acknowledged that "there are some limits on a state or localgovernment's ability to impose restrictions that reach beyond the immediateparties with which the government transacts business." Id. at 211 n.7.The Court found it "unnecessary in this case to define those limitswith precision," however, because "[e]veryone affected by theorder is, in a substantial if informal sense, working for the city."Ibid. Thus, in White, the Court again sustained a procurement provisionthat simply preferred the city's (and thus the State's) own residents inthe expenditure of the city's own funds on the city's own construction projects.The city did not broadly make employment on city-funded construction projectsopen to residents and non-residents alike but then disqualify residentsof a particular State based, for example, on the city's disapproval of thepolicies of that State. Nor did the city seek to influence the contractors'actions aside from their work for the city itself.

The Court addressed some of the limits on the market-participant exceptionin Wisconsin Department of Industry, Labor & Human Relations v. Gould,Inc., 475 U.S. 282 (1986), which concerned a Wisconsin statute that barredthe State from doing business with companies that had committed multipleviolations of the National Labor Relations Act (NLRA). The State did notdispute that, if the statute was "regulatory" in nature, the statutewould be preempted under San Diego Building & Trades Council v. Garmon,359 U.S. 236 (1959). The Court rejected the State's argument that the statute"escapes pre-emption because it is an exercise of the State's spendingpower rather than its regulatory power," which the Court found to be"a distinction without a difference, at least in this case, becauseon its face the debarment statute serves plainly as a means of enforcingthe NLRA." Gould, 475 U.S. at 287. In other words, given that "thepoint of the statute is to deter labor law violations," ibid., thestatute was regulatory, although the statute involved the exercise of theState's spending power. The Court also rejected the State's related argumentthat it was merely acting as a market participant in refusing to deal withcompanies that violated the labor laws. The Court observed that "byflatly prohibiting state purchases from repeat labor law violators Wisconsinsimply is not functioning as a private purchaser of services; for all practicalpurposes, Wisconsin's debarment scheme is tantamount to regulation."Id. at 289 (internal quotation marks and citation omitted). The Court hassince explained its holding in Gould on the ground that the state statutein that case "addressed employer conduct unrelated to the employer'sperformance of contractual obligations to the State" for the purposeof "deter[ring] NLRA violations." Building & Constr. TradesCouncil v. Associated Builders, 507 U.S. 218, 228-229 (1993).

Similarly, in South-Central Timber Development, Inc. v. Wunnicke, 467 U.S.82 (1984), a plurality of the Court concluded that Alaska was not actingas a market participant in requiring those who purchased timber on statelands to have the timber processed within the State. Id. at 93-99 (pluralityopinion of Justice White). The plurality observed that the market-participantdoctrine "is not carte blanche to impose any conditions that the Statehas the economic power to dictate, and does not validate any requirementmerely because the State imposes it upon someone with whom it is in contractualprivity." Id. at 97. The plurality concluded that the market-participantexception was inapplicable because "the State [was] attempting to governthe private, separate economic relationships of its trading partners"in a market in which the State was not a participant. Id. at 99.

2. We do not disagree with the State's submission that the market-participantexception applies, at least to some extent, to foreign as well as domesticcommerce. For example, South Dakota, in selling cement from its cement plant,could prefer its own citizens not only over a would-be purchaser from Wyoming,as in Reeves, but also over a would-be purchaser from Canada, in the absenceof a federal statute or treaty providing otherwise. And the preferencesin Hughes and White for local residents could have been enforced againstresidents of other countries as they were against residents of other Statesabsent a contrary federal statute or treaty.21

There is no occasion in this case, however, to consider the precise limitsof the market-participant exception in the context of foreign commerce.Whatever those limits might be, the Massachusetts Burma Act exceeds them.The Commerce Clause confers on Congress, not the States, the power to "regulate"commerce "with foreign Nations, and among the several States."Accordingly, an exercise of a State's procurement power falls outside themarket-participant exception whenever it is "regulatory" in nature.

Here, several characteristics of the Massachusetts Burma Act make clearthat the Act, like the state statutes in Gould and South-Central Timber,is properly regarded as regulatory in nature. First, in contrast to thestate action that this Court has held to come within the market-participantexception, the Massachusetts Burma Act does not seek to advance the economicinterest of the State or its own citizens through the State's participationin the marketplace. Second, the "point of the statute," Gould,475 U.S. at 287, is to deter U.S. and foreign companies from doing businessin Burma, and thereby to pressure the Burmese regime for political reform.The Act thus "address[es] [such companies'] conduct unrelated to [their]performance of contractual obligations to the State." Associated Builders,507 U.S. at 228-229; accord South-Central Timber, 467 U.S. at 97 (pluralityopinion) ("The limit of the market-participant doctrine must be thatit allows a State to impose burdens on commerce within the market in whichit is a participant, but allows it to go no further."). Third, as reflectedin the Act's design, operation, and scope, the Act seeks to affect the conductnot only of the State's own contracting partners, but also of third parties-and, indeed, the conduct of those third parties outside the United States.Because the Act penalizes companies that do not themselves do business inBurma, but that merely have a parent, a subsidiary, or an affiliate thatdoes business in Burma, the Act regulates conduct even further from a company'sown "contractual obligations to the State" than did the statutesin Gould and South-Central Timber. And the Act ultimately seeks, of course,to affect the conduct of Burmese officials.22

The conclusion that the Massachusetts Burma Act falls outside the market-participantexception is especially evident when the analogous question is consideredin the context of commerce among the States. If Massachusetts refused todo business with any companies that do business in Texas, or their parents,subsidiaries, or affiliates, in order to induce a change in the internalpolicies of Texas, there could be little doubt that Massachusetts wouldviolate the Commerce Clause. Such a boycott is no more consonant with thatClause when a State targets another country rather than another State. TheInterstate Commerce Clause was intended to prevent "economic Balkanization"and retaliation by one State against another, see Oklahoma Tax Comm'n v.Jefferson Lines, Inc., 514 U.S. 175, 179-180 (1995), and the Foreign CommerceClause was designed to prevent individual States from embroiling the Nationin disputes with other nations and triggering retaliation against the UnitedStates as a whole, see Kraft Gen. Foods, 505 U.S. at 79. It would be inconsistentwith those overriding purposes of the Commerce Clause to sustain a statestatute that singles out companies because they do business in another Stateor another nation for the purpose of affecting the internal policies ofthat State or nation.

That is not to say that the Constitution leaves no room for States to takeaction with respect to another country based on concerns about its recordon human rights or similar matters. A State may adopt a resolution condemningthe conduct of a repressive foreign regime. A State may petition Congressand the President to take action against the regime, including the impositionof economic sanctions, or to authorize the States themselves to take certainaction. A State may decline to send its own officials on trade missionsto the country so long as the repressive regime remains in power. And aState may call attention to its concerns in other ways. Such measures wouldnot involve the State in any regulation of foreign commerce. They consequentlywould not implicate the Foreign Commerce Clause.

Moreover, we are not prepared to say that there would be no instances inwhich a State could take action in a commercial setting to express its concernsabout violations of human rights. For example, a state statute that requiredstate pension funds to divest their holdings in companies doing businessin a particular country would present different considerations under theForeign Commerce Clause than does a state statute that restricts a Statefrom entering into procurement contracts with such companies. While a divestmentstatute might be regarded as regulatory to the extent that it is perceivedto be seeking to affect conduct unrelated to the companies' performancein the financial markets, such a statute might also be regarded as servingonly to disassociate the State, as an ultimate "owner" of suchcompanies through the pension funds, from any affinity with a repressiveregime that results from stock ownership, not to regulate the companies'conduct with respect to that regime. See Board of Trustees v. Mayor &City Council, 562 A.2d 720, 746 (Md. 1989) (describing the purpose of adivestment statute as "simply to ensure that city pension funds wouldnot be invested in a manner that was morally offensive to many city residentsand many beneficiaries of the pension funds"), cert. denied, 493 U.S.1093 (1990).23 Nor could such a statute be expected to have as direct aregulatory effect as the Massachusetts Burma Act, because stock sold bythe pension fund would be purchased by someone else, and the transactionwould not be conditioned on any conduct by the purchaser, the company, orthe foreign government. It may be that in appropriate circumstances a Statecould take other actions for similar purposes in a commercial setting. Thereis no occasion in this case, however, to consider the validity of statedivestment statutes targeted at companies doing business in a particularcountry, or to consider the application of the market-participation exceptionto other state action with respect to foreign commerce. Whatever may bethe precise limits of the market-participant exception, the MassachusettsBurma Act exceeds them.24

II. THE MASSACHUSETTS BURMA ACT IS PREEMPTED BY THE FEDERAL STATUTORY SCHEMEGOVERNING ECONOMIC SANCTIONS AGAINST BURMA

Because the regulation of foreign commerce and the conduct of foreign policyare committed to the national government exclusively, and because tensionbetween federal and state laws in those areas raises unique concerns, theSupremacy Clause applies with special force to state laws that deal withforeign commerce and foreign policy. As this Court has explained, when astate law operates in a field of "uniquely federal interest,"as opposed to "a field which the States have traditionally occupied,"the "conflict with federal policy need not be as sharp" in orderfor the state law to be preempted. Boyle v. United Techs. Corp., 487 U.S.500, 507 (1988). Accordingly, when a State legislates in an area "thattouch[es] international relations," the Court should be "moreready to conclude that a federal Act * * * supersede[s] state regulation."Allen-Bradley Local No. 1111 v. Wisconsin Employment Relations Bd., 315U.S. 740, 749 (1942).

In Hines, the Court held that a Pennsylvania alien registration law waspreempted by the subsequently enacted federal Alien Registration Act, eventhough the federal Act did not contain an express preemption provision orimpose inconsistent obligations on aliens. 312 U.S. at 62-74. The Courtexplained that, at least in an area that is "so intimately blendedand intertwined with responsibilities of the national government" over"the exterior relation of this whole nation with other nations andgovernments," id. at 66, a state law must yield to a federal law onthe same subject if the state law "stands as an obstacle to the accomplishmentand execution of the full purposes and objectives of Congress," id.at 67. The Court emphasized that "Congress was trying to steer a middlepath" in the Alien Registration Act, id. at 73, excluding from thefinal version various provisions that had been criticized as unduly harsh,such as a requirement that aliens carry identification cards at all times,id. at 71-73 & n.32. The Court found that the continued enforcementof the state law, which imposed requirements on aliens that were similarto some of those that had been omitted from the federal law, would undermineCongress's purpose "to obtain the information deemed to be desirablein connection with aliens * * * in such a way as to protect [their] personalliberties." Id. at 74.

In three respects, the Massachusetts Burma Act similarly "stands asan obstacle to the accomplishment and execution of the full purposes andobjectives" of the International Emergency Economic Powers Act, 50U.S.C. 1701 et seq. (IEEPA), the Federal Burma Act, and the Burma ExecutiveOrder. That is so even though the ultimate end sought by the United Statesand the State is the same: a free and democratic Burma that fully respectsthe human rights of its people.

A. Congress and the President have crafted a policy toward Burma that emphasizesthe President's flexibility and discretion to impose, adjust, and suspendeconomic sanctions to reflect changing circumstances. The MassachusettsBurma Act, in contrast, undermines the President's flexibility and discretionwith respect to Burma.

IEEPA "codifies Congress's intent to confer broad and flexible powerupon the President to impose and enforce economic sanctions against nationsthat the President deems a threat to national security interests."United States v. McKeeve, 131 F.3d 1, 10 (1st Cir. 1997). IEEPA broadlydefines the situations in which the President may impose economic sanctions,50 U.S.C. 1701(a), and broadly defines the sorts of economic sanctions thatthe President may impose, 50 U.S.C. 1702(a)(1). IEEPA thus gives the Presidentconsiderable flexibility with respect to the use of economic sanctions toseek to influence the conduct of a foreign government. See Dames & Moorev. Regan, 453 U.S. 654, 673 (1981) (recognizing the importance of sanctionsunder IEEPA as a "'bargaining chip' to be used by the President whendealing with a hostile country").

The Federal Burma Act, which authorizes and directs the President to imposeparticular economic sanctions to respond to a particular international threat,applies that flexible approach in the specific context of Burma. The Presidentis, for example, given broad discretion not only over whether to imposecertain sanctions, but also over whether to suspend or terminate those sanctionsand the other sanctions imposed under the Act. Federal Burma Act, §570(a) and (e), 110 Stat. 3009-166 to 3009-167. Senator Cohen, the principalsponsor of the Federal Burma Act, emphasized the importance of giving "theadministration flexibility in reacting to changes, both positive and negative,with respect to the behavior of the [Burmese regime]." 142 Cong. Rec.19,212 (1996). Similarly, Senator McCain, a co-sponsor, described the Actas "giv[ing] the President, who, whether Democrat or Republican, ischarged with conducting our Nation's foreign policy, some flexibility."Id. at 19,221.

The Massachusetts Burma Act is in tension with Congress's purpose to assurethat the President has extensive discretion over the taking of economicaction directed at a foreign government and the nature, extent, and durationof that action. The Act does not acknowledge any authority in the Presidentto modify, suspend, or terminate its economic sanctions.25 As a consequence,the Executive Branch's flexibility in dealing with the Burmese regime orin building international coalitions could be diminished, thereby underminingthe ultimate goal of both the United States and Massachusetts.

B. In the Federal Burma Act and the Burma Executive Order, Congress andthe President deliberately chose to "steer a middle path," Hines,312 U.S. at 73, to the extent of permitting U.S. companies to continue toengage in many categories of business in Burma. The Federal Burma Act authorizesthe President to prohibit only "new investment" in Burma by "UnitedStates persons," and excludes from the scope of federal restrictionsthe "performance of * * * a contract to sell or purchase goods, services,or technology." Federal Burma Act § 570(c) and (f), 110 Stat.3009-166 to 3009-167.26 The Burma Executive Order, issued pursuant to theFederal Burma Act and IEEPA, incorporates those restrictions. Thus, as oneof its co-sponsors observed, the Federal Burma Act is a means of "strik[ing]a balance between unilateral sanctions against Burma and unfettered UnitedStates investment in that country." 142 Cong. Rec. at 19,279 (Sen.Breaux).

The Massachusetts Burma Act is inconsistent with the choice made by Congressand the President to restrict only "new investment" in Burma by"United States persons." It discriminates against all prospectivecontractors that do business in Burma. It extends not only to U.S. companiesbut also to foreign companies. It applies not only to companies that dobusiness in Burma themselves, but also to companies with a parent, an affiliate,or a subsidiary that does business in Burma. And it applies not only tocompanies engaging in "new investment" in Burma, but also to companiesengaging, directly or indirectly, in a wide array of other economic activityin Burma, even activity that commenced before its enactment. The Act thusdiscourages the sort of continuing economic activity in Burma by U.S. companiesthat Congress and the President chose not to prohibit.

C. The Federal Burma Act directs the President to "seek to develop,in coordination with members of ASEAN and other countries having major tradingand investment interests in Burma, a comprehensive, multilateral strategyto bring democracy to and improve human rights practices and the qualityof life in Burma." Federal Burma Act § 570(c), 110 Stat. 3009-166.The Senate sponsors of the Act perceived that multilateral action is themost effective means of achieving those goals. See, e.g., 142 Cong. Rec.at 19,212 (Sen. Cohen) ("[T]o be effective, American policy in Burmahas to be coordinated with our Asian friends and allies."); id. at19,219 (Sen. Feinstein) ("Only a multilateral approach is likely tobe successful.").27

The Massachusetts Burma Act, by discriminating against foreign companiesas well as U.S. companies that do business in Burma, "stands as anobstacle to the accomplishment and execution of the full purposes and objectivesof Congress." Hines, 312 U.S. at 67. The Act has generated frictionbetween the United States and its allies because of its application to foreigncompanies, and thereby has distracted attention from Congress's purposeof encouraging the development of "a comprehensive, multilateral strategy"toward Burma. See pp. 8-9 & n.7, supra (discussing protests from theEuropean Union, Japan, and ASEAN). Under Secretary of State Larson has thusobserved that the Act "complicates efforts to build coalitions withour allies" to encourage democratic reform in Burma. Alan Larson, Stateand Local Sanctions: Remarks to the Council of State Governments 5 (Dec.8, 1998). He has noted, for example, that "the EU's opposition to theMassachusetts law has meant that U.S. government high level discussionswith EU officials often have focused not on what to do about Burma, buton what to do about the Massachusetts Burma law." Id. at 6.28 Morebroadly, the Massachusetts Burma Act and other such state and local statuteshave, according to U.S. embassy reports, raised allies' concerns about theUnited States' credibility in international negotiations and its abilityto deliver on its international commitments.

III. THE MASSACHUSETTS BURMA ACT IMPERMISSIBLY INTRUDES INTO THE CONDUCTOF FOREIGN AFFAIRS

This Court has recognized that state action may impermissibly infringe uponthe national government's exclusive authority to conduct foreign affairs"even in [the] absence of a treaty" or an Act of Congress. Zschernig,389 U.S. at 441. The Massachusetts Burma Act, even if not preempted by federallaw, is nonetheless invalid as inconsistent with the Constitution's assignmentof the foreign-affairs power to the national government, not the States.

In Zschernig, the Court struck down a state probate law that prevented thedistribution of an estate to a foreign heir if the proceeds of the estatewere subject to confiscation by his government. The Court explained thatsuch statutes, which required state courts to engage in "minute inquiriesconcerning the actual administration of foreign law [and] into the credibilityof foreign diplomatic statements," had a "great potential fordisruption or embarrassment" of the United States in the internationalarena. 389 U.S. at 435. The Court concluded that such statutes thereforehad "a direct impact upon foreign relations," id. at 441, andnot merely "some incidental or indirect effect," id. at 434. Accordingly,even though the state statute involved a subject "traditionally regulated"by the States and was not affirmatively preempted by an Act of Congress,id. at 440-441, the statute was held to constitute "forbidden stateactivity," id. at 436.

The Massachusetts Burma Act, even more clearly than the state statute inZschernig, is an impermissible "intrusion by the State into the fieldof foreign affairs which the Constitution entrusts to the President andthe Congress." 389 U.S. at 432. In its purpose, its operation, andits consequences, the Act has an impact on foreign relations that is "direct,"not merely "incidental." Id. at 441, 434.29

First, the Massachusetts Burma Act, as its sponsors declared, was designedas "foreign policy" legislation to "stop the violation ofhuman rights" in Burma. J.A. 39 (statement of Rep. Rushing); J.A. 51(statement of Sen. Walsh); see also J.A. 31 (letter of Rep. Rushing). TheState acknowledged earlier in this case that the Act is part of a "growingeffort . . . to apply indirect economic pressure against the Burma regimefor reform." Pet. App. 9. The Act thus constitutes a deliberate attemptby a State to conduct its own foreign policy.

Second, by its structure and design, the Massachusetts Burma Act operatesto apply pressure on the Burmese regime through third parties, i.e., companies,foreign and domestic alike, that seek to do business with the State, whetheror not their business in Burma bears any relation to their business withState. Massachusetts does not suggest that the Act in any way advances itsinterests in procuring quality goods at a low price or in dealing only withresponsible contractors; to the contrary, by eliminating qualified low bidders,the Act impairs the State's economic interests in order to advance its foreign-policyinterests. Nor does the Act serve simply to disassociate Massachusetts froma direct relationship with the Burmese regime. Thus, the scope of the Actconfirms that, as its sponsors stated, the Act is foreign-policy legislation.

Finally, as explained above (at 8-9, 34-35), the Massachusetts Burma Acthas adversely affected the United States' own foreign policy in severalrespects. Most significantly, the Act has undermined the development of"a comprehensive, multilateral strategy to bring democracy to and improvehuman rights practices and the quality of life in Burma." Federal BurmaAct § 570(c), 110 Stat. 3009-166. As senior U.S. officials have stated,the Massachusetts Burma Act, by antagonizing U.S. allies and trading partners,has diverted attention from Burma itself and complicated the implementationof such a multilateral strategy, which the United States views as the mosteffective means to seek reform in Burma. See pp. 9, 34-35, supra. In addition,the Act is inconsistent with the choice of Congress and the President topermit some U.S. economic activity in Burma (short of "new investment").The Act also has the potential to undermine the President's flexibilityto adjust the economic sanctions against Burma based on the conduct of theBurmese regime, the actions of the international community, or other nationalsecurity concerns.30

In sum, whatever the outer limits of the foreign affairs doctrine appliedin Zschernig, those three characteristics of the Massachusetts Burma Actrender it plainly invalid. The Act, in its purpose and effect, has implementeda state foreign policy toward Burma, and the Act has interfered with theconduct of the United States' own foreign policy. The Act thus has the sortof "direct" and detrimental, not merely "incidental,"impact on the national government's foreign-affairs power that renders stateaction impermissible under Zschernig. 389 U.S. at 434, 441.

CONCLUSION

The judgment of the court of appeals should be affirmed.

Respectfully submitted.


SETH P. WAXMAN
Solicitor General
DAVID W. OGDEN
Acting Assistant Attorney
General
EDWIN S. KNEEDLER
Deputy Solicitor General
BARBARA MCDOWELL
Assistant to the Solicitor
General
MARK B. STERN
ALISA B. KLEIN
DOUGLAS HALLWARD-DRIEMEIER
Attorneys


DAVID R. ANDREWS
Legal Adviser
Department of State

NEAL S. WOLIN
General Counsel
Department of the
Treasury

ANDREW J. PINCUS
General Counsel
Department of Commerce


FEBRUARY 2000



1 See, e.g., President's Message to Congress Transmitting a 6-Month PeriodicReport on the National Emergency with Respect to Burma 5 (Dec. 14, 1999)(reporting that the Burmese government "has continued to refuse tonegotiate with pro-democracy forces and ethnic groups for a genuine politicalsettlement to allow a return to the rule of law and respect for basic humanrights"); Remarks by the President to the International Labor OrganizationConference 4 (June 16, 1999) (condemning "the flagrant violation ofhuman rights" in Burma); U.S. Dep't of State, 1 Country Reports onHuman Rights Practices for 1998: Report to the Senate Comm. on Foreign Relationsand the House Comm. on International Relations at xvii (1999) (AssistantSecretary of State Koh observes that the Burmese military junta in 1998"continued its highly repressive policies, targeting all forms of dissentand intensifying its restrictions of free assembly and association");id. at 813 (criticizing the Burmese government's "longstanding severerepression of human rights," including "extrajudicial killingsand rape" by soldiers, "[a]rbitrary arrests and detentions forexpression of dissenting political views," "forced unpaid civilianlabor," and extensive "restrictions on basic rights of free speech,press, assembly, and association"); Human Rights in Burma: HearingBefore the Subcomm. on International Operations and the Subcomm. on Asiaand the Pacific of the House Comm. on International Relations, 105th Cong.,2d Sess. 2 (1998) (Human Rights in Burma) (testimony of Acting AssistantSecretary of State Smith (Sept. 27, 1998)) ("The people of Burma continueto live under a highly repressive, authoritarian military government thatis widely condemned for its serious human rights abuses."); Bureauof Int'l Labor Affairs, U.S. Dep't of Labor, Report on Labor Practices inBurma 2 (1998) ("The Burmese military government has been widely criticizedfor human rights abuses," which include "arbitrary, extrajudicialand summary executions, torture, rape, arbitrary arrests and imprisonment,the imposition of forced labor on large sections of the population * * *, forced relocations and confiscation of property."); J.A. 134 (statementof Deputy Assistant Secretary of State Marchick) (noting Secretary of StateAlbright's expressions of "the United States outrage at egregious violationsof human rights and international norms in * * * Burma"); U.S. PolicyToward Burma: Hearing Before the Subcomm. on Foreign Operations of the SenateComm. on Appropriations, 104th Cong., 1st Sess. 2 (1995) (U.S. Policy TowardBurma) (testimony of Assistant Secretary of State Lord (July 24, 1995))(discussing "[e]gregious human rights violations" in Burma).

2 The President is required to consult with, and report to, Congress withrespect to any exercise of his authority under IEEPA. 50 U.S.C. 1703. Congressmay terminate any exercise of that authority. 50 U.S.C. 1706(b).

3 The Federal Burma Act and the Burma Executive Order, together with IEEPA,are reproduced in the Appendix to this Brief.

4 The United States has taken other actions as well to press for reformin Burma. For example, the United States has implemented an arms embargoagainst Burma, suspended developing-country tariff preferences, downgradedU.S. representation in Burma from an ambassador to a charge d'affaires,worked to deny assistance to Burma from the International Monetary Fund,the World Bank, and the Asian Development Bank, sought strong resolutionsconcerning human rights in Burma at the United Nations General Assemblyand the United Nations Commission on Human Rights, worked with the InternationalLabor Organization to condemn the use of forced labor and lack of freedomof association for workers in Burma, and suspended the issuance of U.S.entry visas to high-level Burmese officials and their families. PresidentClinton, Secretary of State Albright, and other U.S. officials have repeatedlydenounced the repressive practices of the Burmese regime. See, e.g., PresidentialProclamation No. 6925, 3 C.F.R. 74 (1997) (suspending visas); Human Rightsin Burma 8-9 (testimony of Acting Assistant Secretary of State Smith) (Sept.27, 1998) (describing other U.S. actions with respect to Burma); U.S. PolicyToward Burma 3 (testimony of Assistant Secretary of State Lord) (July 24,1995) (same).

5 Section 22H(e) contains an exception for companies whose only activityin Burma is providing medical supplies, reporting news, or supplying goodsor services relating to international communications.

6 H.R. Doc. No. 316, 103d Cong., 2d Sess. 1719 (1994) (Agreement on GovernmentProcurement) (submitted to Congress in connection with legislation implementingthe Uruguay Round trade agreements). An annex to the Agreement lists Massachusettsamong the "Sub-Central Government Entities which Procure in AccordanceWith the Provisions of this Agreement." Id. at 1991. In 1993, the Governorof Massachusetts expressed his understanding to the United States TradeRepresentative that Massachusetts would be required under the Agreement,when adopted, to award procurement contracts "on the basis of competitiveprocedures consistent with those specified in the [Agreement]" and"not [to] discriminate against suppliers, products, and services offoreign signatories to the [Agreement]." Letter from William F. Weld,Governor, Commonwealth of Massachusetts, to Michael Kantor, U.S. Trade Representative(Dec. 3, 1993).

7 The United States participated in a series of WTO consultations with theEuropean Union and Japan concerning the Massachusetts Burma Act. A WTO disputesettlement panel was subsequently established. Before any substantive argumentswere presented to the panel, the proceedings were suspended, at the requestof the European Union and Japan, in light of the district court's rulingin this case. See Letter of Ole Lundby, Chairman of the Panel, to Ambassadorsfrom the European Union, Japan, and the United States (Feb. 10, 1999). Pursuantto Article 12.12 of the Understanding on Rules and Procedures Governingthe Settlement of Disputes, the panel's authority automatically lapsed onFebruary 10, 2000, one year after the proceedings were suspended. See Understandingon Rules and Procedures Governing the Settlement of Disputes, 33 I.L.M.1125, 1234 (1994). The European Union and Japan are not precluded from reinstitutingWTO dispute settlement procedures challenging the Act in the future.

8 Those include Congress's powers to "provide for the common Defence* * * of the United States," "regulate Commerce with foreign Nations* * * and with the Indian Tribes," "define and punish Piraciesand Felonies committed on the high Seas, and Offenses against the Law ofNations," and "declare War, grant Letters of Marque and Reprisal,and make Rules concerning Captures on Land and Water." U.S. Const.Art. I, § 8, Cls. 1, 3, 10, 11.

9 Those include the President's powers to serve as "Commander in Chiefof the Army and Navy of the United States," "make Treaties"and "appoint Ambassadors [and] other public Ministers and Consuls"with the advice and consent of the Senate, and "receive Ambassadors."U.S. Const. Art. II, §§ 2, 3.

10 Those include restrictions on the States' "enter[ing] into any Treaty,Alliance, or Confederation," "grant[ing] Letters of Marque andReprisal," "lay[ing] any Imposts or Duties on Imports or Exports,""enter[ing] into any Agreement or Compact * * * with a foreign Power,"and "engag[ing] in War." U.S. Const. Art. I, § 10.

11 For example, several States, in contravention of the Treaty of Parisending the War of Independence, acted to prevent British merchants fromcollecting their pre-War debts. And, when Britain refused to permit Americantrade in the West Indies, the conflicting positions of the States precludeda coordinated national response. See Jack N. Rakove, The Beginnings of NationalPolitics: An Interpretive History of the Continental Congress 342-352 (1979);Oldfield v. Marriott, 51 U.S. (10 How.) 146, 163-165 (1850).

12 A state tax must satisfy additional criteria in order to survive a challengeunder the Foreign or Interstate Commerce Clause. See Barclays, 512 U.S.at 310-311 (citing Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 279(1977)). Questions concerning the validity of state taxes are not presentedhere. Nor is there any occasion in this case to consider the applicationof the Foreign Commerce Clause to state measures that do not facially discriminateagainst foreign commerce or prevent the Nation from speaking with one voice,but nevertheless are claimed to impermissibly burden foreign commerce. Cf.Hunt v. Washington State Apple Advertising Comm'n, 432 U.S. 333, 352-354(1977) (invalidating a "facial[ly] neutral[]" state statute asimposing an undue burden on interstate commerce).

13 As we have pointed out above (see pp. 11-12 & n.8, supra), the ForeignCommerce Clause is one of the explicit provisions manifesting the Constitution'sgrant of authority to the national government over foreign affairs generally.In Zschernig, the Court relied on that general foreign affairs power toinvalidate a state inheritance statute that required determinations regardingthe conduct of foreign governments. We explain in Section III of this Briefthat the Massachusetts Burma Act also is unconstitutional because it impermissiblyintrudes into the conduct of foreign affairs by the President and Congress.That is so, however, for essentially the same reasons that the Act is inconsistentwith the Foreign Commerce Clause. We have elected to address the ForeignCommerce Clause first because this case, unlike Zschernig, involves foreigncommerce. In our view, it would be appropriate for the Court to rest itsdecision on the Clause of the Constitution that is specifically applicableto the subject matter, rather than on the national government's more generalpower over foreign affairs, of which the Foreign Commerce Clause is butone (albeit significant) exemplification. We will not repeat in detail inSection III all of the ways in which the Massachusetts Burma Act intrudesupon the powers of the national government.

14 For example, Massachusetts would be required to discriminate againsta Pennsylvania company that sells office products solely because the companyis owned by a French conglomerate that also owns a Japanese company thatsells food products in Burma.

15 Cf. Camps Newfound/Owatonna, Inc. v. Town of Harrison, 520 U.S. 564,575-583 (1997) (a state property tax violated the Interstate Commerce Clauseby discriminating between domestic charitable organizations operated principallyfor the benefit of state residents and domestic charitable organizationsoperated principally for the benefit of non-residents).

16 Because the Massachusetts Burma Act facially discriminates against aspecies of foreign commerce (i.e., commerce with Burma), the Act is unlikethe California tax statute that was held to be nondiscriminatory in Barclays.The California statute, which prescribed the use of the "worldwidecombined reporting" method by multinational corporations, applied thesame method to domestic and foreign corporations. Barclays, 512 U.S. at310-311. Indeed, the only claim of discrimination in that case was thatthe costs of complying with the statute would be higher for foreign corporationsthan for domestic corporations (e.g., because domestic corporations "alreadykeep most of their records in English, in United States currency, and inaccord with United States accounting principles"). Id. at 313. TheCourt concluded that "[t]he factual predicate of [that] discriminationclaim, however, is infirm." Ibid.

17 Because Congress and the President have spoken for the United Stateswith respect to sanctions against Burma, there is no occasion to considerthe application of the "one voice" aspect of the dormant ForeignCommerce Clause to state purchasing restrictions where the national governmenthas not spoken.

18 The Massachusetts Burma Act prevents the United States from "speakingwith one voice" with respect to foreign commerce for essentially thesame reasons that, as set forth in Sections II and III, infra, the Act ispreempted by the federal statutory scheme governing economic sanctions againstBurma (see pp. 30-35, infra) and interferes with the national government'sexclusive authority over foreign affairs (see pp. 35-38, infra). As explainedin this Section, whether or not the Massachusetts Burma Act is actuallypreempted by the Federal Burma Act and the Burma Executive Order, the Actprevents the United States from speaking with one voice with respect tothe regulation of commerce with Burma (and therefore violates the ForeignCommerce Clause) because the different federal strategy embodied in theFederal Burma Act and the Burma Executive Order is the one voice of theUnited States on the subject.

19 Massachusetts suggests (Br. 19) that Congress has acquiesced in the MassachusettsBurma Act by declining to preempt it. In Barclays, the Court explained thatCongress's acquiescence in a state statute that discriminates against foreigncommerce must appear with "unmistakable clarity," whereas Congress'sacquiescence in a state statute that undermines the United States' abilityto "speak with one voice" on foreign commerce need not be as explicit.512 U.S. at 323. The Court applied only the latter standard in Barclaysbecause the California tax statute at issue there, unlike the MassachusettsBurma Act, did not discriminate against foreign commerce. Moreover, thiscase does not present the sort of evidence of congressional acquiescencein a state statute that the Court deemed sufficient in Barclays. WhereasCongress repeatedly declined to enact legislation that would have precludedthe taxing method used by California (see Barclays, 512 U.S. at 325-328),Congress has not considered and rejected legislation to preclude state lawssuch as the Massachusetts Burma Act, and that Act is in significant tensionwith the strategy adopted by Congress and the President for bringing aboutreform in Burma.

20 This case presents no question concerning the interpretation of federalstatutes governing the President's authority in prescribing the terms forprocurement by federal agencies. See Federal Property and AdministrativeServices Act, 40 U.S.C. 486(a) (authorizing the President to "prescribesuch policies and directives * * * as he shall deem necessary to effectuatethe provisions of [this] Act"); see also AFL-CIO v. Kahn, 618 F.2d784, 789 (D.C. Cir.) (en banc) (noting that the Act "grants the Presidentparticularly direct and broad-ranging authority" over federal procurement),cert. denied, 443 U.S. 915 (1979); Contractors Ass'n v. Secretary of Labor,442 F.2d 159, 170 (3d Cir.) (noting the Act's "broad grant of procurementauthority" to the President), cert. denied, 404 U.S. 854 (1971); cf.Chamber of Commerce v. Reich, 74 F.3d 1322, 1333-1339 (D.C. Cir. 1996).

21 This Court has reserved the question whether "Buy American"statutes, which give a preference in a State's purchases to goods producedin the United States over goods produced in other countries, violate theCommerce Clause. See Reeves, 447 U.S. at 437 n.9. The lower courts havedivided on the question. Compare Trojan Techs., Inc. v. Pennsylvania, 916F.2d 903 (3d Cir. 1990) (sustaining Buy American statute), cert. denied,501 U.S. 1212 (1991), and K.S.B. Tech. Sales Corp. v. North Jersey Dist.Water Supply Comm'n, 381 A.2d 774, 776 (N.J. 1977) (same), with BethlehemSteel Corp. v. Board of Comm'rs, 80 Cal. Rptr. 800, 803 (Ct. App. 1969)(invalidating Buy American statute). A Buy American statute differs fromthe state actions at issue in Reeves, Hughes, and White, because the Stateis not simply preserving the benefits of its expenditures for its own citizensas against everyone else, domestic and foreign alike. The State is singlingout suppliers of imported goods for disfavored treatment. In contrast tothe Massachusetts Burma Act, however, a Buy American statute does not singleout particular foreign governments for disfavored treatment, seek to affectthe internal policies of a foreign government, or penalize companies merelybecause they do business in a particular country. In considering the validityof such Buy American statutes as applied to goods from particular countries,the Agreement on Government Procurement (see note 6, supra) now would haveto be consulted.

22 That some private companies might engage in boycotts of suppliers doesnot mean that Massachusetts' conduct falls within the market-participantexception. As the Court has explained, "[t]he private actor under suchcircumstances would be attempting to 'regulate' the suppliers and wouldnot be acting as a typical proprietor." Associated Builders, 507 U.S.at 229. But the private actor, unlike the State, would not be subject tothe constraints of the dormant Commerce Clause. See ibid. ("When theState acts as regulator, it performs a role that is characteristically agovernmental rather than a private role, boycotts notwithstanding.").

23 See also Constitutionality of South African Divestment Statutes Enactedby State and Local Governments, 10 Op. Off. Legal Counsel 49, 51-59 (1986)(concluding that state and local divestment statutes come within the market-participantexception). The Office of Legal Counsel Opinion assumed that the same analysiswould apply to statutes that prohibit state or local governments from enteringinto procurement contracts with companies that do business in a particularcountry. For the reasons discussed in the text, however, a statute likethe Massachusetts Burma Act does not fall within the market-participantexception. To the extent that the Office of Legal Counsel Opinion is inconsistentwith the views set forth in this Section or in Sections II and III, it nolonger represents the position of the United States.

24 Even if the Court were to hold that States have the latitude under thedormant Foreign Commerce Clause to adopt a policy of mandatory divestmentfrom companies doing business in another country, it would not necessarilyfollow that States would have the same latitude to adopt a policy of mandatorydivestment from companies doing business in another State. Whether the dormantInterstate Commerce Clause preserves any such power for the States wouldbe informed by its purpose "to create an area of free trade among theseveral States," Commonwealth Edison Co. v. Montana, 453 U.S. 609,618 (1981), by the reciprocity and mutual respect owed by the States toone another as coordinate sovereigns under the plan of the ConstitutionalConvention, and by the applicability of self-executing provisions of theConstitution that embody shared values and protect fundamental human rightsin all of the States.

25 Although Congress or the President could expressly preempt state andlocal economic sanctions, such action could not, in some instances, be takenwithout significant diplomatic (or other) costs. Cf. Banco Nacional de Cubav. Sabbatino, 376 U.S. 398, 436 (1964) (recognizing that "[o]ften theState Department will wish to refrain from taking an official position"on whether an act of a foreign government violates international law becausedoing so "might be inopportune diplomatically" or might produce"[a]dverse domestic consequences").

26 IEEPA permits the President to impose economic sanctions broader thanthose contained in the Federal Burma Act and the Burma Executive Order,but only with respect to transactions involving persons or property "subjectto the jurisdiction of the United States." 50 U.S.C. 1702(a)(1).

27 As a general matter, the United States pursues its foreign-policy objectivesthrough multilateral cooperation, whenever possible. See, e.g., J.A. 108(testimony of then-Under Secretary of State Eizenstat) ("Sanctionsare much more likely to be effective when they have multilateral supportand participation. Multilateral sanctions maximize international pressureon the offending state while minimizing damage to U.S. competitiveness andmore equitably distributing the sanctions burden across the internationalcommunity."); accord J.A. 162 (testimony of Deputy Assistant Secretaryof State Marchick); see also Human Rights in Burma 708 (testimony of ActingAssistant Secretary of State Smith) (Sept. 28, 1998) (describing the UnitedStates' multilateral strategy with respect to Burma).

28 See also J.A. 115 (testimony of then-Under Secretary of State Eizenstat)(observing that the Massachusetts Burma Act and similar measures "riskshifting the focus of the debate with our European Allies away from thebest way to bring pressure against [Burma] to a potential WTO dispute over[the Act's] consistency with our international obligations").

29 The tension between the Massachusetts Burma Act and the national government'spolicy toward Burma is addressed more extensively in Section II, supra.

30 The judgment by the United States condemning the abuses of the Burmeseregime is now formally embodied in the Federal Burma Act and the Burma ExecutiveOrder. Consequently, the Massachusetts Burma Act does not present the concern,identified in Zschernig, of the States' making their own independent judgmentsregarding "the 'democracy quotient' of a foreign regime." 389U.S. at 435.

 




APPENDIX




The International Emergency Economic Powers Act, 50 U.S.C. 1701-1706, provides:

§ 1701. Unusual and extraordinary threat; declaration of national emergency;exercise of Presidential authorities

(a) Any authority granted to the President by section 1702 of this titlemay be exercised to deal with any unusual and extraordinary threat, whichhas its source in whole or substantial part outside the United States, tothe national security, foreign policy, or economy of the United States,if the President declares a national emergency with respect to such threat.

(b) The authorities granted to the President by section 1702 of this titlemay only be exercised to deal with an unusual and extraordinary threat withrespect to which a national emergency has been declared for purposes ofthis chapter and may not be exercised for any other purpose. Any exerciseof such authorities to deal with any new threat shall be based on a newdeclaration of national emergency which must be with respect to such threat.

§ 1702. Presidential authorities

(a)(1) At the times and to the extent specified in section 1701 of thistitle, the President may, under such regulations as he may prescribe, bymeans of instructions, licenses, or otherwise-

(A) investigate, regulate, or prohibit-

(i) any transactions in foreign exchange,

(ii) transfers of credit or payments between, by, through, or to any bankinginstitution, to the extent that such transfers or payments involve any interestof any foreign country or a national thereof,

(iii) the importing or exporting of currency or securities; and

(B) investigate, regulate, direct and compel, nullify, void, prevent orprohibit, any acquisition, holding, withholding, use, transfer, withdrawal,transportation, importation or exportation of, or dealing in, or exercisingany right, power, or privilege with respect to, or transactions involving,any property in which any foreign country or a national thereof has anyinterest;

by any person, or with respect to any property, subject to the jurisdictionof the United States.

(2) In exercising the authorities granted by paragraph (1), the Presidentmay 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 anyact or transaction referred to in paragraph (1) either before, during, orafter the completion thereof, or relative to any interest in foreign property,or relative to any property in which any foreign country or any nationalthereof has or has had any interest, or as may be otherwise necessary toenforce the provisions of such paragraph. In any case in which a reportby a person could be required under this paragraph, the President may requirethe production of any books of account, records, contracts, letters, memoranda,or other papers, in the custody or control of such person.

(3) Compliance with any regulation, instruction, or direction issued underthis chapter shall to the extent thereof be a full acquittance and dischargefor all purposes of the obligation of the person making the same. No personshall be held liable in any court for or with respect to anything done oromitted in good faith in connection with the administration of, or pursuantto and in reliance on, this chapter, or any regulations, instruction, ordirection issued under this chapter.

(b) The authority granted to the President by this section does not includethe authority to regulate or prohibit, directly or indirectly-

(1) any postal, telegraphic, telephonic, or other personal communication,which does not involve a transfer of anything of value;

(2) donations, by persons subject to the jurisdiction of the United States,of articles, such as foods, clothing, and medicine, intended to be usedto relieve human suffering, except to the extent that the President determinesthat such donations (A) would seriously impair his ability to deal withany national emergency declared under section 1701 of this title, (B) arein response to coercion against the proposed recipient or donor, or (C)would endanger Armed Forces of the United States which are engaged in hostilitiesor are in a situation where imminent involvement in hostilities is clearlyindicated by the circumstances; or1

(3) the importation from any country, or the exportation to any country,whether commercial or otherwise, regardless of format or medium of transmission,of any information or informational materials, including but not limitedto, publications, films, posters, phonograph records, photographs, microfilms,microfiche, tapes, compact disks, CD ROMs, artworks, and news wire feeds.The exports exempted from regulation or prohibition by this paragraph donot include those which are otherwise controlled for export under section2404 of the Appendix to this title, or under section 2405 of the Appendixto this title to the extent that such controls promote the nonproliferationor antiterrorism policies of the United States, or with respect to whichacts are prohibited by chapter 37 of title 18; or

(4) any transactions ordinarily incident to travel to or from any country,including importation of accompanied baggage for personal use, maintenancewithin any country including payment of living expenses acquisition of goodsor services for personal use, and arrangement or facilitation of such travelincluding nonscheduled air, sea, or land voyages.

§ 1703 Consultation and reports

(a) Consultation with Congress

The President, in every possible instance, shall consult with the Congressbefore exercising any of the authorities granted by this chapter and shallconsult regularly with the Congress so long as such authorities are exercised.

(b) Report to Congress upon exercise of Presidential authorities

Whenever the President exercises any of the authorities granted by thischapter, he shall immediately transmit to the Congress a report specifying-

(1) the circumstances which necessitate such exercise of authority;

(2) why the President believes those circumstances constitute an unusualand extraordinary threat, which has its source in whole or substantial partoutside the United States, to the national security, foreign policy, oreconomy of the United States;

(3) the authorities to be exercised and the actions to be taken in the exerciseof those authorities to deal with those circumstances;

(4) why the President believes such actions are necessary to deal with thosecircumstances; and

(5) any foreign countries with respect to which such actions are to be takenand why such actions are to be taken with respect to those countries.

(c) Periodic follow-up reports

At least once during each succeeding six-month period after transmittinga report pursuant to subsection (b) of this section with respect to an exerciseof authorities under this chapter, the President shall report to the Congresswith respect to the actions taken, since the last such report, in the exerciseof such authorities, and with respect to any changes which have occurredconcerning any information previously furnished pursuant to paragraphs (1)through (5) of subsection (b) of this section.

(d) Supplemental requirements

The requirements of this section are supplemental to those contained intitle IV of the National Emergencies Act [50 U.S.C. 1641].

§ 1704. Authority to issue regulations

The President may issue such regulations, including regulations prescribingdefinitions, as may be necessary for the exercise of the authorities grantedby this chapter.

§ 1705. Penalties

(a) A civil penalty of not to exceed $10,000 may be imposed on any personwho violates any license, order, or regulation issued under this chapter.

(b) Whoever willfully violates any license, order, or regulation issuedunder this chapter shall, upon conviction, be fined not more than $50,000,or, if a natural person, may be imprisoned for not more than ten years,or both; and any officer, director, or agent of any corporation who knowinglyparticipates in such violation may be punished by a like fine, imprisonment,or both.

§ 1706. Savings provisions

(a) Termination of national emergencies pursuant to National EmergenciesAct

(1) Except as provided in subsection (b) of this section, notwithstandingthe termination pursuant to the National Emergencies Act [50 U.S.C. 1601et seq.] of a national emergency declared for purposes of this chapter,any authorities granted by this chapter, which are exercised on the dateof such termination on the basis of such national emergency to prohibittransactions involving property in which a foreign country or national thereofhas any interest, may continue to be so exercised to prohibit transactionsinvolving that property if the President determines that the continuationof such prohibition with respect to that property is necessary on accountof claims involving such country or its nationals.

(2) Notwithstanding the termination of the authorities described in section101(b) of this Act, any such authorities, which are exercised with respectto a country on the date of such termination to prohibit transactions involvingany property in which such country or any national thereof has any interest,may continue to be exercised to prohibit transactions involving that propertyif the President determines that the continuation of such prohibition withrespect to that property is necessary on account of claims involving suchcountry or its nationals.

(b) Congressional termination of national emergencies by concurrent resolution

The authorities described in subsection (a)(1) of this section may not continuedto be exercise under this section if the national emergency is terminatedby the Congress by concurrent resolution pursuant to section 202 of theNational Emergencies Act [50 U.S.C. 1622] and if the Congress specifiesin such concurrent resolution that such authorities may not continue tobe exercised under this section.

(c) Supplemental savings provisions; supersedure of inconsistent provisions

(1) The provisions of this section are supplemental to the savings provisionsof paragraphs (1), (2), and (3) of section 101(a) [50 U.S.C. 1601(a)(1),(2), (3)] and of paragraphs (A), (B), and (C)] of Section 202(a) [50 U.S.C.1622(a)(A), (B), and (C)] of the National Emergencies Act.

(2) The provisions of this section supersede the termination provisionsof section 101(a) [50 U.S.C. 1601(a)] and of title II [50 U.S.C. 1621 etseq.] of the National Emergencies Act to the extent that the provisionsof this section are inconsistent with these provisions.

(d) Periodic reports to Congress

If the President uses the authority of this section to continue prohibitionson transactions involving foreign property interests, he shall report tothe Congress every six months on the use of such authority.


The Federal Burma Act, Pub. L. No. 104-208, § 570, 110 Stat. 3009-166,provides:

POLICY TOWARD BURMA

SEC. 570. (a) Until such time as the President determines and certifiesto Congress that Burma has made measurable and substantial progress in improvinghuman rights practices and implementing democratic government. The followingsanctions shall be imposed on Burma:

(1) BILATERAL ASSISTANCE.-There shall be no United States assistance tothe Government of Burma, other than:

(A) humanitarian assistance,

(B) subject to the regular notification procedures of the Committees onAppropriations, counter-narcotics assistance under chapter 8 of part I ofthe Foreign Assistance Act of 1961, or crop substitution assistance, ifthe Secretary of State certifies to the appropriate congressional committeesthat -

(i) the Government of Burma is fully cooperating with United States counter-narcoticsefforts, and

(ii) the programs are fully consistent with United States human rights concernsin Burma and serve the United States national interest, and

(C) assistance promoting human rights and democratic values.

(2) MULTILATERAL ASSISTANCE.-The Secretary of the Treasury shall instructthe United States executive director of each international financial institutionto vote against any loan or other utilization of funds of the respectivebank to or for Burma.

(3) VISAS.-Except as required by treaty obligations or to staff the Burmesemission to the United States, the United States should not grant entry visasto any Burmese government official.

(b) CONDITIONAL SANCTIONS.-The President is hereby authorized to prohibit,and shall prohibit United States persons from new investment in Burma, ifthe President determines and certifies to Congress that, after the dateof enactment of this Act, the Government of Burma has physically harmed,rearrested for political acts, or exiled Daw Aung San Suu Kyi or has committedlarge-scale repression of or violence against the Democratic opposition.

(c) MULTILATERAL STRATEGY.-The President shall seek to develop, in coordinationwith members of the ASEAN and other countries having major trading and investmentinterests in Burma, a comprehensive, multilateral strategy to bring democracyto and improve human rights practices and the quality of life in Burma,including the development of a dialogue between the State Law and OrderRestoration Council (SLORC) and democratic opposition groups within Burma.

(d) PRESIDENTIAL REPORTS.-Every six months following the enactment of thisAct, the President shall report to the Chairmen of the Committee on ForeignRelations, the Committee on International Relations and the House and SenateAppropriations Committees on the following:

(1) progress toward democratization in Burma;

(2) progress on improving the quality of life of the Burmese people, includingprogress on market reforms, living standards, labor standards, use of forcedlabor in the tourism industry and environmental quality; and

(3) progress made in developing the strategy referred to in subsection (c).

(e) WAIVER AUTHORITY.-The President shall have the authority to waive, temporarilyor permanently, and sanction referred to in subsection (a) or subsection(b) if he determines and certifies to Congress that the application of suchsanction would be contrary to the national security interests of the UnitedStates.

(f) DEFINITIONS.-

(1) The term "international financial institutions" shall includethe International Bank for Reconstruction and Development, the InternationalDevelopment Association, the International Finance Corporation, the MultilateralInvestment Guarantee Agency, the Asian Development Bank, and the InternationalMonetary Fund.

(2) The term "new investment" shall mean any of the followingactivities if such an activity is undertaken pursuant to an agreement, orpursuant to the exercise of rights under such an agreement, that is enteredinto with the Government of Burma or a nongovernmental entity in Burma,on or after the date of the certification under subsection (b):

(A) the entry into a contract that includes the economical development ofresources located in Burma, or the entry into a contract providing for thegeneral supervision and guarantee of another person's performance of sucha contract;

(B) the purchase of a share of ownership, including an equity interest,in that development;

(C) the entry into a contract providing for the participation in royalties,earnings, or profits in that development, without regard to the form ofthe participation:

Provided, That the term "new investment" does not include theentry into, performance of, or financing of a contract to sell or purchasegoods, services, or technology.

The Burma Executive Order, Exec. Order No. 13,047, 3 C.F.R. 202 (1998),provides:

Prohibiting New Investment in Burma

By the authority vested in me as President by the Constitution and the lawsof the United States of America, including section 570 of the Foreign Operations,Export Financing, and Related Programs Appropriations Act, 1997 (PublicLaw 104-208) (the "Act"), the International Emergency EconomicPowers Act (50 U.S.C. 1701 et seq.) (IEEPA), the National Emergencies Act(50 U.S.C. 101 et seq.), and section 301 of title 3 of the United StatesCode;

I, WILLIAM J. CLINTON, President of the United States of America, herebydetermine and certify that, for purposes of section 570(b) of the Act, theGovernment of Burma has committed large-scale repression of the democraticopposition in Burma after September 30, 1996, and further determine thatthe actions and policies of the Government of Burma constitute an unusualand extraordinary threat to the national security and foreign policy ofthe United States and declare a national emergency to deal with that threat.

Section 1. Except to the extent provided in regulations, orders, directives,or licenses that may be issued in conformity with section 570 of the Actand pursuant to this order, I hereby prohibit new investment in Burma byUnited States persons.

Sec. 2. The following are also prohibited, except to the extent providedin section 203(b) of IEEPA (50 U.S.C. 1702(b)) or in regulations, orders,directives, or licenses that may be issued pursuant to this order:

(a) any approval or other facilitation by a United States person, whereverlocated, of a transaction by a foreign person where the transaction wouldconstitute new investment in Burma prohibited by this order if engaged inby a United States person or within the United States; and

(b) any transaction by a United States person or within the United Statesthat evades or avoids, or has the purpose of evading or avoiding, or attemptsto violate, any of the prohibitions set forth in this order.

Sec. 3. Nothing in this order shall be construed to prohibit the entry into,performance of, or financing of a contract to sell or purchase goods, services,or technology, except:

(a) where the entry into such contract on or after the effective date ofthis order is for the general supervision and guarantee of another person'sperformance of a contract for the economic development of resources locatedin Burma; or

(b) where such contract provides for payment, in whole or in part, in:

(i) shares of ownership, including an equity interest, in the economic developmentof resources located in Burma; or

(ii) participation in royalties, earnings, or profits in the economic developmentof resources located in Burma.

Sec. 4. For the purpose of this order:

(a) the term "person" means an individual or entity;

(b) the term "entity" means a partnership, association, trust,joint venture, corporation, or other organization;

(c) the term "United States person" means any United States citizen,permanent resident alien, judicial person organized under the laws of theUnited States (including foreign branches), or any person in the UnitedStates;

(d) the term "new investment" means any of the following activities,if such an activity is undertaken pursuant to an agreement, or pursuantto the exercise or rights under such an agreement, that is entered intowith the Government of Burma or a nongovernmental entity in Burma on orafter the effective date of this order:

(i) the entry into a contract that includes the economic development ofresources located in Burma;

(ii) the entry into a contract providing for the general supervision andguarantee of another person's performance of a contract that includes theeconomic development of resources located in Burma;

(iii) the purchase of a share of ownership, including an equity interest,in the economic development of resources located in Burma; or

(iv) the entry into a contract providing for the participation in royalties,earnings, or profits in the economic development of resources located inBurma, without regard to the form of the participation;

(e) the term "resources located in Burma" means any resources,including natural, agricultural, commercial, financial, industrial, andhuman resources, located within the territory of Burma, including the territorialsea, or located within the exclusive economic zone or continental shelfof Burma;

(f) the term "economic development of resources located in Burma"shall not be construed to include not-for-profit educational, health, orother humanitarian programs or activities.

Sec. 5. I hereby delegate to the Secretary of State the functions vestedin me under section 570(c) and (d) of the Act, to be exercised in consultationwith the heads of other agencies of the United States Government as appropriate.

Sec. 6. The Secretary of the Treasury, in consultation with the Secretaryof State, is hereby authorized to take such actions, including the promulgationof rules and regulations, and to employ all powers granted to me by section570(b) of the Act and by IEEPA, as may be necessary to carry out the purposesof this order. The Secretary of the Treasury may redelegate the authorityset forth in this order to other officers and agencies of the United StatesGovernment. All agencies of the United States Government are hereby directedto take all appropriate measures within their authority to carry out theprovisions of this order.

Sec. 7. Nothing contained in this order shall create any right or benefit,substantive or procedural, enforceable by any party against the United States,its agencies or instrumentalities, its officers or employees, or any otherperson.

Sec. 8. (a) This order shall take effect at 12:01 a.m., eastern daylighttime, May 21, 1997.

(b) This order shall be transmitted to the Congress and published in theFederal Register.

/s/ WILLIAM J. CLINTON

WILLIAM J. CLINTON
THE WHITE HOUSE

May 20, 1997
1 So in original. The word "or" probably should not appear.

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