Washington, D.C., May 1, 1968. Hon. SAM J. ERVIN, Jr., Washington, D.C. DEAR SAM: As Chairman of the Separation of Powers Subcommittee, you will be interested in the attached memo. It concerns the President's imposition of controls over foreign investments by American citizens. It points up a constitutional question as to the ability of the President, by Executive Order, to regulate commerce with foreign nations, which power is given to the Congress in Article I, Section 8 of the Constitution. It would appear that the matter is one that falls within the jurisdiction of the Separation of Powers Subcommittee and should be further explored. It would be appreciated if you would advise me of your reaction to the memo. With kind personal regards, Sincerely, Hon. ROMAN L. HRUSKA, U.S. Senate, Washington, D.C. ROMAN L. HRUSKA, SUBCOMMITTEE ON SEPARATION OF POWERS, May 7, 1968. DEAR ROMAN: Thank you for sending me the memorandum on Executive Order 11387 of January 1, 1968, which imposes strict controls on foreign investments by American citizens. I share your concern over the constitutional issue of the President's exercise of legislative powers through the use of Executive Orders. This Order is not, unfortunately, an isolated occurrence. The Subcommittee has been apprised of a number of other instances which suggest very strongly that the Executive Department is encroaching upon Article I powers. I hope that the Subcommittee will find time, if not this year, then certainly next, to hold hearings on the Executive's utilization of executive orders, administrative guidelines, and implementing regulations. With kindest personal regards. Sincerely, SAM J. ERVIN, Jr., Chairman. MARCH 15, 1968. MEMORANDUM RE FOREIGN DIRECT INVESTMENT REGULATIONS President Johnson's inauguration of a comprehensive scheme of controls over foreign investments by American citizens in his Executive Order1 last January may seriously encroach on the power to regulate commerce with foreign nations given exclusively to the Congress by Article I Section 8 of the Constitution. The foreign direct investment program, as set forth in the Executive Order and Commerce Department regulations, subjects all new business investments by Americans in all foreign countries except Canada to stringent limitations. Overall and individual company targets are established and authorization to exceed them is granted only in exceptional circumstances. § 1000.54. In addition, businesses are required to bring back to the United States substantial proportions of their overseas earnings and business bank balances. § 1000.202, 1000.203. The investment control program is administered by the newly-created Office of Foreign Direct Investment in the Department of Commerce. See 33 Fed. Reg. 4222 (March 6, 1968). This extensive regulation of peacetime commercial activity with friendly foreign nations certainly raises fundamental questions concerning the separation of powers. In my view this action calls for close Congressional scrutiny. One of the distinctive strengths of the American form of government has always been the separation of governmental power into three co-ordinate branches-Executive, Legislative and Judicial. Each branch acts as both a check and a balance upon the power of the other. For nearly two hundred years this system has operated to provide us with a remarkably stable government. 1 No. 11387, January 1, 1968. 233 F.R. 49 et seq., January 3, 1968. Chief Justice Marshall defined it in simple terms when he said "the Legislator makes, the Executor executes, and the Judiciary construes the law." Wayman v. Southard, 10 Wheaton 1, 46 (1825) (emphasis added). It is always necessary, however, to keep the system under close scrutiny to assure that no one branch of the government gains ascendancy over the others and to study carefully any proposal which appears to raise serious questions with respect to the separation and balance of powers.* At the present time there is considerable concern in the Congress, as well as among citizens, that the Executive and Judicial branches of the government are encroaching upon areas properly reserved to the Legislature. The President cited the Trading With the Enemy Act of 1971, 12 U.S.C. § 95 (a) as the basis of his authority to issue the Executive Order leading to the Foreign Direct Investment Regulations. Fully implemented, these regulations will result in a massive interference with the foreign commerce of the United States with friendly nations. That portion of the Trading With the Enemy Act under which the President claims to be acting empowers him, during a validly declared national emergency, to deal with two specific kinds of problems. Section 95 (a) (1) (a) permits the President, during a validly declared national emergency, to regulate "any transactions in foreign exchange." The primary purposes of this section were to prevent a panic outflow of funds and bullion during periods of emergency and keep American dollars out of enemy hands during wartime by prompt Presidential actions. It is stretching credulity to imagine that this section provides a basis for the ongoing regulation of ordinary commercial transactions in foreign commerce in which dealings in foreign exchange and bullion are merely incidental. Section 95 (a) (1) (b) permits the President, during a validly declared period of national emergency, to regulate dealings in "and property in which any foreign country or a national thereof has any interest" and allows the President to direct that such property "shall vest, when, as, and upon the terms, directed by the President." The purpose of this section is to deprive enemy nations of the benefits of trade as well as the fruits of their assets in the United States during time of war. It is a broad and far-reaching provision. It has been invoked by the Preisdent before only during World War II in support of our military objectives. There is no warrant in the legislative history or the traditional application of this statute for the use of this power to invoke comprehensive regulation of normal commerce with friendly nations in time of peace. Standing alone these factors justify and almost demand a careful Congressional investigation of the propriety and validity of the President's action and of the regulations which have been adopted by the Department of Commerce pursuant to the President's Executive Order. But there are other reasons which indicate the need for Congressional scrutiny of the President's order lest an overzealous Executive, with the best of intentions, be allowed to further erode the carefully conceived system of separation of powers. Thus, even if the Trading With the Enemy Act of 1917 gives authority to issue regulations such as the Commerce Department's Foreign Direct Investment Regulations, the statute also provides that this is to be done only during a validly declared national emergency." No one can dispute the fact that we live in a time of great tension both internationally and domestically. However, legally, the national emergency which the President used to justify his action is the one declared by President Truman in 1950 in connection with the Korean conflict.' While technically this emergency declaration has never been terminated by a presidential order, as a practical matter the factual circumstances upon which the declaration is based have long since ended. Just as there is something unseemly in the President ignoring Congress by reverting to a World War I statute, there is something equally unseemly in using this statute by relying on a declaration of emergency eighteen years ago • Montesquieu expounded the notion that Legislative and Executive powers should be separated and that there must be checks and balances because "men entrusted with power tend to abuse it." The Constitution of the United States Analysis and Interpretation, Sen. Doc. 39, 88th Cong., p. 9 (1964). 5 Ex. Ord. No. 9095 (March 11, 1942) (delegating Presidential powers to alien property custodian). Section 95(a) begins "During the time of war or during any other period of national emergency declared by the President. 7 President Johnson's order did not declare that the balance-of-payments problem had resulted in a national emergency, or make any findings of fact to support a national emergency. It stated that it was being issued "in view of the continued existence of the national emergency" declared by President Truman in 1950. which bears no relation to the present problems with respect to our balance-ofpayments. Are not Congress and the American people entitled to a forthright declaration from their President of what circumstances require this action? If the United States is in a state of emergency, the President should have issued in a new declaration of emergency now related to our present situation and not cloaked in legalisms from a dead past. Can it really be contended that the balance-of-payments problem arose suddenly and required such prompt remedial action that there was no time to follow more appropriate channels? Our problems in connection with the balanceof-payments have been growing for some years and the administration has long been aware of the problem. In fact, in 1965 the President requested Congress to give him stand-by authority to deal with balance-of-payments problems by passing legislation enabling bankers to meet to agree on limitations on foreign lending activity. 8 In similar fashion, in 1967 the President urged business to cooperate in a voluntary program of foreign investment restraint. Thus, the very means of regulation invoked under the January 1, 1968, Executive Order were known well in advance and could have been cleared with Congress." It is also significant perhaps that the President has resorted to a technical, legalistic doctrine to promulgate the foreign direct investment regulations and by-pass Congress while a lesser part of his balance-of-payments program, the proposed travel tax, was submitted to Congress. Certainly, if the President believes in his power under 12 U.S.C. § 95 (a) (1) to attack the balance-of-payments problem by means of comprehensive regulation of foreign investment, he cannot be without power to regulate foreign travel for the same end. The power to regulate foreign exchange seems adequate to control spending by travelers in foreign countries. But foreign investment is remote in the lives of most citizens while travel reaches ever-increasing numbers. Thus, the President has left to the Congress the consideration of a small portion of his overall program, but one which bears a heavy political onus. Without consulting Congress, on the other hand, he has established a far-reaching set of investment controls.10 Moreover, as practical matter, the President's foreign direct investment regulations result in the creation of a new regulatory agency without the interposition of any Congressional scrutiny. Thus, the President has created an Office of Foreign Direct Investment in the Commerce Department. This office is seeking to employ at least 200 people and is engaged in detailed regulation of our foreign commerce. This office can tell American investors whether they can or cannot make certain investments in friendly foreign nations." This office can force American investors to declare dividends from foreign subsidiaries and bring them back to the United States." 12 This office has required American investors to file a massive report on their foreign commerce activities on pain of criminal liability.13 Congress has not set any standards to govern the activities of this commission. Congress has not authorized its structure or its powers. Congress has not even had the opportunity to approve the appointment of these new economic czars. 14 This new regulatory agency is empowered to issue regulations which have a discriminatory impact upon American concerns by setting the limits of total foreign investment and controlling the actions of individual investors within the projected total. 8 See Presidential Measures on Balance of Payments Controls, American Enterprise Institute, Washington, D.C., 1968. 9 Public Law 89-175 (Sept. 9, 1965). 10 See Presidential Message on the Balance-of-payments of January 1, 1968, in which the President analogized the Foreign Direct Investment restraints to the voluntary program. 11 See Foreign Direct Investment Regulations §§ 1000.504 (limiting investments to specified percentage of 1965-1966 base period investments) and 1000.801 (a) (permitting applications to Office of Foreign Direct Investment for special authorizations) (33 Fed. Reg. 52-53, Jan. 3, 1968). 12 See Foreign Direct Investment Regulations § 1000.202 (required repatriation of earnings). 13 See Foreign Direct Investment Regulations §§ 1000.602 (requiring reports under oath) and 1000.701 (b)_(criminal penalty for false statements.) 14 All Office of Foreign Direct Investment appointments are now "acting." The division of allowances among Americans has no relation to balance-of-payments objectives.15 Certainly, it is the province of Congress rather than the President to make such choices relating to the basic health of American industry. The foreign investment regulations require American investors in many cases to force their foreign subsidiaries to declare substantial dividends so that these funds can be repatriated. Even apart from the possibility of conflict with foreign shareholders and foreign laws inherent in this requirement, its implementation raises serious constitutional problems. The net effect of this requirement is a radical change in the tax consequences of foreign investment. Such tax measures without congressional approval are inconsistent with the separation of powers doctrine and imply disrespect for the whole legislative process. In sum, the President's investment control program is totally removed from the main thrust of the supposed underlying Congressional authority. This depar ture from legislative warrant, and historical tradition, was not dictated by considerations of emergency or Congressional inability to deal with the balance-of-payments problem. In simple terms, it was a bald invasion of Congress' constitutional role as regulator of foreign commerce as well as its role in the field of taxation." Congress, therefore, should investigate the circumstances which lead to the Foreign Direct Investment Regulations and the method by which these regulations were promulgated to determine whether any Congressional action is necessary or desirable, and whether the proper role of Congress has been circumvented by this action of the Executive. STATEMENT OF HON. JOHN R. RARICK, OF LOUISIANA, IN THE HOUSE OF REPRESENTATIVES, MONDAY, SEPTEMBER 27, 1971-THE STATE OF NATIONAL EMERGENCY AND EXECUTIVE ORDERS Mr. RARICK. Mr. Speaker, the declaration of a state of national emergency by the President of the United States, like a declaration of war, should be an historical event which a free press should be expected to bring to public attention with banner headlines. Yet, the recent declaration of a national emergency proclaimed by President Nixon on August 15, 1971, through proclamation No. 4074 (F.R. vol. 36, No. 159, Aug. 17, 1971) strangely went almost without comment by the Nation's press. In an article entitled "State of National Emergency Legalizes Executive Orders" appearing in the Borger Texas News Herald, Lt. Col. Archibald E. Roberts, AUS, retired, national director of the Committee To Restore the Constitution, points out: "The state of 'national emergency' declared by President Nixon in August 'legalized' the imposition of Executive Orders and other socialist directives under the guise of a 'time of increased tension, and economic and financial crisis.'" The Executive orders of 1962 through 1966 referred to in Roberts' article, with the exception of Executive Order 11051, were among 21 Executive orders and two defense mobilization orders that were consolidated in an all-inclusive Presidential directive, Executive Order 11490, signed by President Nixon on October 28, 1969, entitled "Assigning Emergency Preparedness Functions to Federal Departments and Agencies." (F.R. vol. 34, No. 209, Oct. 30, 1969.) Assignments to departments and agencies were adjusted to conform to changes in organization which occurred subsequent to the issuance of the earlier Execu tive orders and defense mobilization orders. Executive orders effectuated by the President's proclamation of August 15, 1971, would be under Executive Order 11490. Because of the vast powers which, without further congressional approval, Executive Order 11490 places in the hands of the President and his heads of 15 In fact, this division was not even effected by Presidential action but was left instead to the uncontrolled discretion of the Secretary of Commerce. Thus, Executive Order No. 11387 prohibited all direct foreign investment which was not authorized by the Secretary. 16 The basic principle of separation of powers was reaffirmed by the Supreme Court as late as 1952 when it set aside President Truman's order to seize the steel industry. At that time the court said that "the founders of this Nation entrusted the law making power to the Congress alone in both good and bad times." In a concurring opinion Justice Douglas said that to hold otherwise would be to construe the Constitution "as giving the President not only the power to execute the laws, but to make them." Youngstown Sheet and Tube Company v. Sawyer, 343 U.S. 589 (1952). departments and agencies over food supply, money and credit, transportation, communications, public utilities, and other facets of the lives of our people; and in order that our colleagues may have this vital information more readily available for themselves and their constituents, I insert in the RECORD at this point the President's 1971 Proclamation No. 4074, its companion Executive Order 11615, the 1969 Executive Order 11490, and a newsclipping from the Borger Texas News Herald: [From the Federal Register, vol. 36, No. 159, Aug. 17, 1971] "PROCLAMATION 4074: IMPOSITION OF SUPPLEMENTAL DUTY FOR BALANCE-OF-PAYMENTS PURPOSES "(A proclamation by the President of the United States of America) "Whereas, there has been a prolonged decline in the international monetary reserves of the United States, and our trade and international competitive position is seriously threatened and, as a result, our continued ability to assure our security could be impaired ; "Whereas, the balance of payments position of the United States requires the imposition of a surcharge on dutiable imports; "Whereas, pursuant to the authority vested in him by the Constitution and the statutes, including, but not limited to, the Tariff Act of 1930, as amended (hereinafter referred to as 'the Tariff Act'), and the Trade Expansion Act of 1962 (hereinafter referred to as 'the TEA'), the President entered into, and proclaimed tariff rates under, trade agreements with foreign countries; "Whereas, under the Tariff Act, the TEA and other provisions of law, the President may, at any time, modify or terminate, in whole or in part, any proclamation made under his authority; "Now, therefore, I, Richard Nixon, President of the United States of America, acting under the authority vested in me by the Constitution and the statutes, including, but not limited to, the Tariff Act, and the TEA, respectively, do proclaim as follows: "A. I hereby declare a national emergency during which I call upon the public and private sector to make the efforts necessary to strengthen the international economic position of the United States. "B. (1) I hereby terminate in part for such period as may be necessary and modify prior Presidential Proclamations which carry out trade agreements insofar as such proclamations are inconsistent with, or proclaim duties different from, those made effective pursuant to the terms of this Proclamation. "(2) Such proclamations are suspended only insofar as is required to assess a surcharge in the form of a supplemental duty amounting to 10 percent ad valorem. Such supplemental duty shall be imposed on all dutiable articles imported into the customs territory of the United States from outside thereof, which are entered, or withdrawn from warehouse, for consumption after 12:01 a.m., August 16, 1971, provided, however, that if the imposition of an additional duty of 10 percent ad valorem would cause the total duty or charge payable to exceed the total duty or charge payable at the rate prescribed in column 2 of the Tariff Schedules of the United States, then the column 2 rate shall apply. "C. To implement section B of this Proclamation, the following subpart shall be inserted after subpart B of part 2 of the Appendix to the Tariff Schedules of the United States: "SUBPART C-TEMPORARY MODIFICATIONS FOR BALANCE-OF-PAYMENTS PURPOSES "Subpart C headnotes: "1. This subpart contains modifications of the provisions of the tariff schedules proclaimed by the President in Proclamation 4074. "2. Additional duties imposed-The duties provided for in this subpart are cumulative duties which apply in addition to the duties otherwise imposed on the articles involved. The provisions for these duties are effective with respect to articles entered on and after 12:01 a.m., August 16, 1971, and shall continue in effect until modified or terminated by the President or by the Secretary of the Treasury (hereinafter referred to as the Secretary) in accordance with headnote 4 of this subpart. "3. Limitation on additional duties-The additional 10 percent rate of duty specified in rate of duty column numbered 1 of item 948.00 shall in no event |