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III. Legislative Bases of U.S. Unilateral Economic Sanctions Regulations

Economic sanctions remain an essential element of U.S. foreign policy and a mechanism to address international security challenges.44 In 2011, former Secretary of State Hillary Clinton explicated: “We are committed to raising the economic cost of unacceptable behavior [of states that threaten global security or its own people] and denying the resources that make it possible.”45 The U.S. also uses economic sanctions as unilateral self-help counter measures.46 Unilateral economic sanction is defined as

36. Tom C.W. Lin, Financial Weapons of War, 100 MINN. L. REV. 1377, 1405 (2016) (citing Julie Hirschfeld Davis, Enforcer at Treasury is First Line of Attack Against ISIS, N.Y. TIMES, Oct. 21, 2014).

37 50 U.S.C. § 1702 (2004).

38 50 U.S.C. § 2401 (2004).

39. Lobsinger, supra note 21, at 110.

40. Sarah H. Cleveland, Human Rights Sanctions and International Trade: A Theory of Compatibility, 5 J. INT’L ECON. L. 133, 143-44 (2002).

41. Cleveland, supra note 27, at 39.

42. Sarah P. Schuette, U.S. Economic Sanctions Regarding the Proliferation of Nuclear Weapons: A Call for Reform of the Arms Export Control Act Sanctions, 35 CORNELL INT. L. J. 231, 234-35 (2001).

43. Hoe Lim, Trade and Human Rights: What’s at Issue? 35 (Apr. 10, 2001) (unpublished working paper) (SSRN: https://ssrn.com/abstract=1682245).

44. Doraev, supra note 1, 381.

45. See Secretary of State Hillary Rodham Clinton, Remarks on Economic Statecraft, Speech at Economic Club of New York (Oct. 14, 2011), available at https://2009- 2017.state.gov/secretary/20092013clinton/rm/2011/10/175552.htm.

46. Alexander, supra note 29, at 58.

“any unilateral restriction or condition on economic activity with respect to a foreign country or foreign entity that is imposed by the United States for reasons of foreign policy or national security.”47

The U.S. believes that foreign trade is a matter of national sovereignty and there are no restrictions on the state’s sovereign right to regulate its trade relations with other nations under international law.48 Currently, the U.S. is indirectly enforcing several sanctions against various countries and regions independently of the U.N. Security Council.49 There are several statutory regulations, some of which reflect congressional concerns defining which sanctions are applied, and others that are more general and authorize executive actions.50

There are two types of U.S. unilateral economic sanctions—countryspecific and activity-based.51 Country-specific sanctions fall into two categories, comprehensive and entity-based. Comprehensive sanctions restrict the activities of U.S. persons with nationalities of the target country. Entitybased sanctions restrict the activities of U.S persons with designated nationals who engage in the activities subject to sanctions. Entity-based sanctions are also known as list-based sanctions based on Specially Designated Nationals (SDNs) lists.52

A. Country-Specific Sanctions

Country-specific sanctions are the most common form of U.S. sanctions. 53 The list of countries subject to U.S economic sanctions is adjusted regularly as the Treasury Department’s Office of Foreign Assets Control (OFAC)54 adds or repeals regulations based on the target country and its relations with the U.S.55

47. Overview and Analysis of Current U.S. Unilateral Economic Sanctions, No. 332- 391, USITC Pub. 3124 (Aug, 1988).

48. Doraev, supra note 1, at 381.

49. See generally Office of Foreign Assets Control (OFAC), U.S. DEP’T OF TREASURY, Sanctions Programs and Country Information, available at http://www.treasury.gov/resourcecenter/sanctions/Programs/Pages/Programs.aspx.

50. 17.04 General Operation of U.S Sanctions, 17 U.S. Economic Sanctions¸ in INTERNATIONAL TRADE LAWS OF THE UNITED STATES (Mark K. Neville ed. 2020) (WL 5356750) [hereinafter U.S. Economic Sanctions].

51. Id.

52. Id.

53. Id.

54. See Office of Foreign Assets Control (OFAC), U.S. DEP’T OF TREASURY, Specially Designated Nationals and Blocked Persons List (Mar. 31, 2021), available at https://home.treasury.gov/policy-issues/financial-sanctions/specially-designated-nationalsand-blocked-persons-list-sdn-human-readable-lists.

55. U.S. Economic Sanctions, supra note 50.

Unless the U.S. government grants a license permitting otherwise, comprehensive country-based sanctions limit most economic interactions with those specified countries. U.S. persons are generally prohibited from participating or facilitating, directly or indirectly, any transaction involving a sanctioned country, government, or agent of that government.56 There may also be prohibitions on dealings with any national of the sanctioned country.57 Under these sanctions, shipments of goods, providing services, or other dealings with sanctioned countries or with restricted individuals in those countries cannot take place without a license.58 Assets of sanctioned organizations that are under the control of U.S. persons must be held in blocked bank accounts to prevent owners from accessing them.59 The sanctions also prohibit other transactions, such as imports, exports, contracts, financial transactions, and other economic relations with the sanctioned country, government, and nationals.60

Under the entity-based or list-based sanctions program, the Treasury Department designates individuals, entities, banks, vessels, and organizations that are owned, controlled, or acting on behalf of sanctions targets (i.e., targeted governments) and places them on the SDN list.61 Accordingly, U.S. persons are prohibited from doing business, directly or indirectly, with such designated entities.62

B. Activity-Based Sanctions

Activity-based sanctions are intended restrict to certain illegal activities such as terrorism, drug trafficking, and proliferation of weapons of mass destruction.63 Unlike country-specific sanctions, activity-based sanctions do not seek to target a specific country but instead target designated persons or organizations, regardless of their country of residence. An exception to activity-based sanctions involve certain governments that are considered to promote the restricted activities, such as government sponsored terrorism.64 The primary mechanism for enforcing activity-based sanctions is identification of individuals and organizations engaged in the restricted activities and

56. Id.

57. Id.

58. Id.

59. Id.

60. Id.

61. Alan F. Enslen et. al., *Balancing Free Trade with International Security: What Every Alabama Attorney Should Know about International Trade Controls, *74 Ala Law. 97, 100 (2013).

62. Id.

63. U.S. Economic Sanctions, supra note 50.

64. Id.

the prohibition of any financial transaction with them.65 Hence, these kind of sanctions, known as “smart sanctions,” may be directed at specific foreign officials or governmental functions without having a direct adverse impact on the economy of the foreign nation state as a whole and its people.66 This is in stark contrast to conventional nation-wide sanctions which impact the economy of whole nation and its population rather than the specific entities that sponsor or support terrorism.67

Following the September 11 attacks, the Bush Administration introduced new legislation extending U.S. counter-terrorism sanctions policy against individuals and organizations on the list of specially designated terrorist (SDTs) and foreign terrorist organizations (FTOs).68 Moreover, in order to develop broad international cooperation in the War on Terror, the U.S. stated its readiness to lift sanctions against previously targeted states.69 OFAC, as the financial intelligence and enforcement agency within the Department of the Treasury, is responsible for administering and regulating economic sanctions against targeted adverse countries for the purpose of advancing U.S. national security and foreign policy.70 The authority of OFAC to enforce sanctions is primarily set out in ten statutes:

1 TWEA (The Trading with the Enemy Act)71 addresses political concerns and was the basisfor Cuban and, formerly, North Korean sanctions. The TWEA is seldom used today because of a congressional joint resolution in October 1951, which restricted TWEA’s applicability to only periods of war or national emergencies. The International Emergency Economic Powers Act (IEEPA) expanded this restriction by excluding the applicability of TWEA from national emergencies.72

2 IEEPA (The International Emergency Economic Powers Act)73 was enacted in 1977 and is the legislative basis for sanctions against Burma, Iran, Sudan, and Zimbabwe as well as sanctions against the diamond trade, terrorism, narcotics, and nonproliferation sanctions.74 After preparing a report for Congress on circumstances constituting an “unusual and extraordinary threat,” the President can use IEEPA to recommend the necessary measures to deal with the situation.75 Following the September 11 attacks, Congress enacted the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the USA Patriot Act),76which expanded the powers of the President and his designees by granting the President the authority to block transactions involving properties within the jurisdiction of the U.S. during the investigation.77

65. Id.

66. Doraev, supra note 1, at 385.

67. Id.

68. Id. at 386.

69. See Gary Clyde Hufbauer et al., ECONOMIC SANCTIONS RECONSIDERED: HISTORY AND CURRENT POLICY, 171-172 (3d ed. 2009).

70. See John Crabb, OFAC Designation of Russian Bank a Warning to Maduro’s Supporters, INTR’L FINANCIAL L. REV. N. Page (2013).

71. 50 U.S.C. § 4301.

72. 50 U.S.C. §§ 1701-07.

73. Id.

3 ISA (The Iraqi Sanctions Act) 78 isthe basis for the former Iraqisanctions in response to the Iraq attacks on Kuwait. It has largely been replaced by the Iraqi Sanctions Regulations, generally issued under the authority of IEEPA.79

4 UNPA (The United Nations Participation Act)80 is the basis for the sanctions against Iraq and the diamond Trade81 . The Act grants to the President the authority to implement mandatory provisions of United Nations Security Council Resolutions and authorizes the President to align U.S. foreign policy with UN Security Council resolutions, including civil and criminal sanctions.82 Under this Act, any funds or properties involved in any violation of the President’s regulations under will be forfeited to the U.S.83

74. Id. at § 1701(a) (“Any authority granted to the President by section 1702 of this title may be exercised to deal with any unusual and extraordinary threat, which has its source in whole or substantial 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.”).

75. Id.

76. Patriot Act, supra note 15, at 115.

77. Id.

78. See 17.03 Statutory Bases For Sanctions Regulations¸ in INTERNATIONAL TRADE LAWS OF THE UNITED STATES (Mark K. Neville Jr. ed. 2020) (WL 5356752) [hereinafter Statutory Bases].

79. Id.

80. 22 U.S.C. § 287c.

81. Exec. Order No. 13312, Fed. Reg. 45151 (July 29, 2003).

82. See 22 U.S.C. § 287c.

83. § 546.701 Penalties., 31 C.F.R. § 546.701.

5 ISDCA (The International Security and Development Cooperation Act)84 was the basis of certain sanctions imposed on Iran. The Act also provides a ban on the import of goods and services from any country that supports terrorism. While Iran wasthe target of this Act, it can be extended to trade with any country thatsupports terrorism.85

6 CDA (The Cuban Democracy Act of 1992) was partially the other basis for Cuban sanctions. 86 The Act states that blocked funds could not be used to exports goods to Cuba.87 The Act also decreased Cuba’s restrictions on receiving food and humanitarian donations by allowing non-governmental organizations and individuals in Cuba to assist without requiring a particular license.88 Exports of medicines and medical supplies from the U.S. to Cuba are also permitted, but such exports must be authorized through licenses from Bureau of Industry and Security (BIS).89

7 LIBERTAD (The Cuban Liberty and Democratic Solidarity Act)90 remains a partial basis for Cuban sanctions. The Act is also known as the Helms-Burton Act, which codifies the Cuban Assets Control Regulations and imposes some extraterritorial limits on the activities of foreign persons.91 The Act was used to refuse visas to foreign executives entering the U.S.92

8 AEDPA (The Antiterrorism and Effective Death Penalty Act) 93 was enacted in 1996 and is the basis for sanctions against Cuba, Iran, Iraq, Sudan, and Syria. It discusses circumstances in which U.S. citizens’ who support or participate in financial transactions with governments of the stated countries can be perceived as supporting international terrorism.

84. International Security and Development Cooperation Act of 1985, Pub. L. No. 99 -83. (99 Stat. 190). Now codified in 22 U.S.C. § 2349aa-9.

85. Statutory Bases, supra note 78.

86. Cuban Democracy Act of 1992, Pub. L. No. 102-484 (106 Stat. 2575). Remaining provisions codified in 22 U.S.C. §§ 6001-6010.

87. Statutory Bases, supra note 78.

88. Cuban Democracy Act of 1992, supra note 86.

89. Statutory Bases, supra note 78.

90. Cuban Liberty and Democratic Solidarity Act of 1996, Pub. L. No. 104-114 (110 Stat. 785). Remaining provisions codified in 22 U.S.C. §§ 6021-6091,

91. Id.

92. 22 U.S.C. § 6091.

93. Antiterrorism and Effective Death Penalty Act of 1996, Pub. L. No. 104-132 (110 Stat. 1214). Remaining provisions codified in 18 U.S.C §§2339B & § 2332d.

9 Kingpin Act (The Foreign Narcotics Kingpin Designation Act)94is the basis for restrictions against narcotics trafficking. The purpose of the Act is to deny significant foreign narcotic traffickers, their organizations, and agents access to the U.S. financial system and prohibit all trade and transactions between U.S. corporations and individuals.95 It also seeks to block the property in which designated narcotic dealers and specially designated narcotic traffickers are involved.96

10 CISADA (The Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010)97 is the basis of the Iranian Transactions and Sanctions Regulations, the Iranian Financial Sanctions Regulations, and the Iranian Human Rights Abuses Sanctions Regulations.98 CISADA amended the provisions of the previous Iran Sanctions Act to: (1) broaden U.S. sanctions against third-country entities; (2) allow additional sanctions to be imposed on Iran; (3) codify existing sanctions against Iran; and (4) establish new due diligence obligations for financial institutions.99 It also amended the Iran Sanctions Act by Requiring the President to initiate an investigation into imposing possible sanctions on person who contribute to Iran’s supply of refined petroleum, increase the possible sanctions the U.S. government can impose, and extending coverage of the sanctions to any persons or entity worldwide. 100 Coverage can extend to parent companies of subsidiaries who knew or should have known of the sanctionable activity.101

These ten laws cover the entire legal structure of OFAC enforcement actions, but they are not the only applicable authorities. By passing new laws, Congress frequently imposes new sanctions or modifies existing ones.

IEEPA is the basis for most of the current sanctions imposed today because it is based on a declaration by the President of a “national emergency”

94. See Intelligence Authorization Act for Fiscal Year 2000, Pub. L. No. 106-120 (113 Stat. 1606). Codified in 21 U.S.C. §1902-1908 (Westlaw through 116-259).

95. Press Release, THE WHITE HOUSE, Fact Sheet: Overview of the Foreign Narcotics Kingpin Designation Act (Apr. 15, 2009), https://obamawhitehouse.archives.gov/the-pressoffice/fact-sheet-overview-foreign-narcotics-kingpin-designation-act.

96. Statutory Bases, supra note 78.

97. Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, Pub. L. No. 111-195 (124 Stat. 1312). Codified in 22 U.S.C §§ 8501 -8551.

98. Statutory Bases, supra note 78.

99. Id.

100. Id.

101. Id.

situation.102 Upon the declaration of “national emergency,” IEEPA authorized the president to take the following actions:103

[I]nvestigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States . . . . 104

IEEPA permits the confiscation of any property of a foreign individual who has “planned, authorized, aided, or engaged” in hostilities against the U.S.105

Sanctions and export controls are the top priorities of the U.S. government.106 The Department of Justice (DOJ) launched a comprehensive National Counter-Proliferation Initiative on October 11, 2007, which includes coordination between the DOJ and special agents of the BIS Office for Export Enforcement, Immigration and Customs Enforcement (ICE), Customs and Border Protection (CBP), and the Federal Bureau of Investigation (FBI) to target export controls and sanctions violations.107 The sharp focus on enforcement increases the risks to businesses and companies potentially impacted by the regulations.108 Risks are increased because the sanctions’ regulations bring the compilation of international transactions under scrutiny.109 Contracts, financial transactions, letters of credit, and intellectual property rights registered in sanctioned countries, and insurance, liens on property, travel, and transactions with subsidiaries dealing with the sanctioned country are all subject to restrictions.110 The scope of the sanctions and the vast

102. Christopher A. Casey et al., CONG. RES. SERV., R45618, The International Emergency Economic Powers Act: Origins, Evolution, and Use 5 (2020), available at https://fas.org/sgp/crs/natsec/R45618.pdf.

103. 50 U.S.C. § 1701.

104. Id. § 1702.

105. Id; see also Exec. Order No. 13290, 69 Fed. Reg. 46055 (Mar. 24, 2003).

106. Statutory Bases, supra note 78.

107. Press Release, U.S. DEP’T OF JUST., Justice Department and Partner Agencies Launch National Counter-Proliferation Initiative (Oct. 11, 2007), https://www.justice.gov/archive/opa/pr/2007/October/07_nsd_806.html.

108. Statutory Bases, supra note 78.

109. Id.

110. Id.

shadow of the OFAC over foreign transactions make it important to understand the essence of sanctions and to know how to enter into safe transactions.111

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