The Export Trading Company Act of 1982 is intended to increase U.S. exports of goods and services by small- and medium-size businesses and encourage the formation of ETC's primarily by removing two impediments: (1) restrictions on trade financing and (2) uncertainty about the application of U.S. antitrust laws to export trade. The Webb-Pomerene Act of 1918 17 permitted U.S. firms to form export associations, but did not include trade in services and did not provide the kind of certainty from antitrust prosecution that encouraged ETC formation. U.S. banking laws have traditionally imposed strict separation between banks and commercial enterprises, thus precluding banking participation in ETC's.

Bank participation

Title II of the ETC Act encourages banking organization participation in ETC's and, thus, the use of bank financial resources while limiting bank investment in such entities. It amends the Bank Holding Company Act to allow bank holding companies and bankers' banks to invest in one or more ETC's which meet the statutory definition under title II, provided the total investments do not exceed 5 percent of consolidated bank capital and surplus. Banks may extend credits to ETC's providing such loans do not exceed 10 percent of the bank's capital and surplus. Banking organizations may own up to 100 percent equity in an ETC. Banks must notify the Federal Reserve Board (FRB) at least 60 days prior to investing and may proceed with the intended investment if the FRB raises no objection within that period.

Banks are generally subject to the collateral requirements in the Federal Reserve Act for loans to the ETC unless the FRB grants a waiver. It may not extend credit to the ETC or the ETC's customers on terms more favorable than those afforded similar borrowers in similar circumstances.

The ETC is intended to provide export trade services, not to be a manufacturer or agricultural producer, except for incidental product modification (e.g., repackaging) necessary to facilitate foreign sales. It cannot act as principal agent or broker on risks located in, or activities performed in, the United States. The ETC must be exclusively engaged in activities related to international trade and organized and operated principally for purposes of exporting U.S. goods and services.

Loan guarantee program

Title II of the ETC Act also establishes a program for loan guarantees by the Export-Import Bank of the United States (Eximbank) to ETC's or other exporters. The objective is to provide access to working capital loans that (1) otherwise would not have been provided without Eximbank assistance, and (2) without which the ETC or exporter would not be able to support exports of products that are unlikely to be sold abroad through other means. Guarantees cover only loans used for a specific export-related activity, are for 90 percent of the principal amount of the loan, and generally have a term of one to twelve months.

17 Public Law 65-126, ch. 50, approved April 10, 1918, 15 U.S.C. 61-65.

Antitrust provisions

Titles III and IV of the ETC Act address the problem of uncertainty about the application of U.S. antitrust laws to export trade, and are applicable to all exporters, not just ETCs. Title III provides certification procedures under which any person engaged in export trade can determine in advance whether proposed export conduct qualifies for specific antitrust protection. Title IV clarifies the jurisdictional reach of the Sherman Antitrust Act 18 and the Federal Trade Commission Act 19 to export trade.

A certification of review is issued by the Secretary of Commerce with the concurrence of the Department of Justice which protects its holder and the members identified in the certificate from private treble damage actions and government criminal and civil suits under U.S. Federal and state antitrust laws for the export conduct specified in the certificate. Any person who has been injured by the certified conduct, however, may bring a suit for actual damages under certain conditions.

To be certified, the proposed export trade, export trade activities, and methods of operation must meet the following four criteria:

1. It cannot result in substantial lessening of competition or restraint of trade in the United States, nor a substantial restraint of the export trade of any competitor;

2. It may not unreasonably enhance, stabilize, or depress prices within the United States;

3. It cannot constitute unfair methods of competition against competitors; and

4. It cannot include any act that may reasonably be expected to result in the sale or resale in the United States of the goods or services exported.

Export Promotion of Goods and Services

THE EXPORT ENHANCEMENT ACT OF 1988

The Export Enhancement Act, enacted under 20 Title XXIII of the Omnibus Trade and Competitiveness Act of 1988, includes provisions which establish in statute the United States and Foreign Commercial Service in the International Trade Administration of the Department of Commerce. The basic purpose of the Service is to promote the export of U.S. goods and services, particularly by small- and medium-sized businesses, and to promote and protect U.S. business interests abroad. Section 2306 requires the Service to make a special effort to encourage U.S. exports of goods and services to Japan, South Korea, and Taiwan.

Section 2303 authorizes the Secretary of Commerce to establish a Market Development Cooperator Program in the International Trade Administration to develop, maintain, and expand foreign markets for U.S. nonagricultural goods and services. The Program is implemented through contracts with nonprofit industry organizations, trade associations, State departments of trade and their re

18 Act of July 2, 1890, ch. 647, 15 U.S.C. 1-7.

19 Public Law 63-203. ch. 311, approved September 26, 1914, 15 U.S.C. 41-51. 20 Public Law 100-418, approved August 23, 1988, 15 U.S.C. 4721 et seq.

gional associations, and private industry firms or groups of firms (all referred to as "cooperators"). The Secretary was also directed to establish, as part of the Program, a partnership program with cooperators under which cooperators may detail individuals to the Service for 1-2 years. This Program is modeled after a similar program established by the Foreign Agricultural Service in the late 1950's to develop overseas commercial market opportunities for American agricultural exports.

In order to facilitate exporting by U.S. businesses, section 2304 requires the Secretary to provide assistance for trade shows in the United States which bring together representatives of U.S. businesses seeking to export goods or services, particularly participation by small businesses, and representatives of foreign companies or governments seeking to buy such U.S. goods or services. Sections 2312 and 2313 added to the Act by Title II of the Export Enhancement Act of 1992 21 expanded export promotion efforts. Section 2312 establishes in statute the Trade Promotion Coordinating Committee (TPCC) and directs it to coordinate the export promotion and export financing activities of the federal government and to develop a government-wide strategic plan for carrying out federal export promotion and financing programs, including establishment of priorities. The Chair of the TPCC must submit an annual report to the Congress on the strategic plan developed. Section 2313 states the U.S. policy to foster the export of U.S. environmental technologies, goods, and services, and establishes the Environmental Trade Promotion Working Group within the TPCC for this purpose.

Fair Trade IN AUTO PARTS Act of 1988

The Fair Trade in Auto Parts Act of 1988, sections 2121-2125 of the Omnibus Trade and Competitiveness Act of 1988,22 requires the Secretary of Commerce to establish an initiative to increase the sale of U.S.-made auto parts and accessories to Japanese markets, including to U.S. subsidiaries of Japanese firms. The Secretary also is required to establish a Special Advisory Committee to advise and assist the Secretary in carrying out the initiative to increase U.S. auto parts sales in Japanese markets. The authorities granted under sections 2121-2125 expire on December 31, 1993.

In response to low sales of U.S. auto parts and accessories to Japanese auto firms based both in Japan and in the United States, Congress adopted the Fair Trade in Auto Parts Act of 1988. This action followed negotiations in 1986-87 between the U.S. and Japanese governments aimed at improving U.S. access to the Japanese auto parts markets. The provision was intended to provide for a longer-term effort to increase data collection, information exchange, and generally improved U.S. market access in the Japanese auto parts sector. 23

21 Public Law 102-429, approved October 21, 1992.

22 Public Law 100-418, approved August 23, 1988, 15 U.S.C. 4701.

23 Market Oriented Sector Specific Talks on Transportation Machinery, initiated on August 26, 1986 and concluded on August 18, 1987.

Chapter 5: AUTHORITIES RELATING TO POLITICAL OR ECONOMIC SECURITY

International Emergency Economic Powers Act

In 1977, Congress passed the International Emergency Economic Powers Act (IEEPA).1 The Act grants the President authority to regulate a comprehensive range of financial and commercial transactions in which foreign parties are involved but allows the President to exercise this authority only in order "to deal with an unusual and extraordinary threat, which has its source in whole or in part outside the United States, to the national security, foreign policy, or economy of the United States, if the President declares a national emergency . . . with respect to such threat."

Background

Public Law 95-223, of which IEEPA constitutes Title II, redefined the President's authorities to regulate international economic transactions in times of national emergency as well as war, until then provided by section 5(b) of the Trading with the Enemy Act (TWEA) (50 App. U.S.C. 5(b)), by eliminating TWEA's applicability to national emergencies 2 and instead providing such authorities in a separate statute of somewhat narrower scope and subject to congressional review.

The authorities granted to the President under IEEPA broadly parallel those contained in section 5(b) of the TWEA but are somewhat fewer and more circumscribed. While under the TWEA the existence of any declared national emergency, whether or not connected with the circumstances requiring emergency action, was used as the basis for such action, the IEEPA allows emergency measures against an external threat only if a national emergency has been declared with respect to the same threat. Furthermore, certain authorities contained in the TWEA and still applicable in times of war are not included in the IEEPA, such as the powers to vest foreign property, to regulate purely domestic transactions, to regulate gold or bullion, or to seize records. Nevertheless, the President's authorities under the IEEPA still remain extensive. The President may "by means of instructions, licenses, or otherwise .. investigate, regulate, prevent, or prohibit" virtually any foreign economic transaction, from import or export of goods and currency to transfer of exchange or credit. The only international transactions exempted from this authority are personal communications not involving a transfer of anything of value, charitable do

1 Public Law 95-223, title II, approved December 28, 1977, 91 Stat. 1626, 50 U.S.C. 1701-1706. 2 Title I of Public Law 95-223 also provides for the continuation in force, through annual Presidential extensions, of certain measures implemented on the basis of national emergencies declared under the TWEA. For further detail, see section on the Trading With the Enemy Act.

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nations of necessities of life to relieve human suffering (except in certain circumstances), or transactions in publications or various other informational materials not otherwise controlled by export control law or prohibited by espionage law.

IEEPA requires the President to consult with Congress, whenever possible before declaring a national emergency, and while it remains in force. Once a national emergency goes into effect, the President must submit to Congress a detailed report explaining and justifying his actions and listing the countries against which such actions are to be taken, and why.

Application

Since its enactment, the authority conferred by the IEEPA has been exercised on several occasions and for different purposes: to impose a variety of economic sanctions on a foreign country, and to continue in force the authority of the Export Administration Act while its statutory extension had not yet been enacted by the time the previous authority expired.

In response to the seizure of the American Embassy and hostages in Teheran, President Carter, using the IEEPA authority, on November 14, 1979, declared a national emergency and ordered the blocking of all property of the Government of Iran and of the Central Bank of Iran within the jurisdiction of the United States.3 The measure and its later amendments were implemented through Iranian Assets Control Regulations (31 CFR 535). Sanctions against Iran were broadened on April 7, 1980,4 and April 17, 1980,5 to constitute eventually an embargo on all commercial, financial, and transportation transactions with Iran, with minimal exceptions. The trade embargo was revoked by President Carter on January 19, 1981, after the release of the Teheran hostages, but the national emergency has remained in effect and has been extended every year since.6

On May 1, 1985, President Reagan, under his IEEPA powers, declared a national emergency because of "Nicaraguan Government's aggressive activities in Central America" and prohibited all imports of Nicaraguan goods and services, all exports to Nicaragua (other than those destined for the organized democratic resistance) and transactions related thereto, and all activities of Nicaraguan ships and aircraft at U.S. sea- and airports. The declaration of emergency and the imposed sanctions were terminated on March 13, 1990.8

IEEPA was also used by President Reagan to declare a national emergency with respect to South Africa because of its "policy and practice of apartheid" and impose, using also several other authori

3 E.O. 12170, November 14, 1979, 44 F.R. 65729.

4 E.O. 12205, April 7, 1980, 45 F.R. 24099.

E.O. 12211, April 27, 1980, 45 F.R. 26685.

6 Following Iranian attacks on U.S.-flag ships in the Iran-Iraq war, an embargo was reimposed on October 29, 1987 (E.O. 12613, 52 F.R. 41940), on imports of goods and services from Iran under the authority of section 505 of the International Security and Development Cooperation Act of 1985 (22 U.S.C. 2349aa-9) and implemented through Iranian Transactions Regulations (31 CFR 560). The embargo is still in force.

7E.O. 12513, May 1, 1985, 50 F.R. 18629. The embargo is implemented by Nicaraguan Trade Control Regulations (31 CFR 540).

E.O. 12707, March 13, 1990, 55 F.R. 9707.