Amicus Curiae Brief — Crosby v. National Foreign Trade Council

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reme Court, U. 4

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Feb [4 vo 7000

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No. 99-474

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In the Supreme Court of the United States

ANDREWS. NATSIOS, SECRETARY OF ADMINISTRATION

AND FINANCE OF MASSACHUSETTS, ET AL.,

PETITIONERS

Vv.

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

1 —— EDWIN S. KNEEDLER

— of State Deputy Solicitor General

Washington, D.C. 20520 BARBARA MCDOWELL

NEALS. WoLIN Assistant to the Solicitor

General Counsel General

Department of the MARK B. STERN

Treasury ALISA B. KLEIN

Washington, D.C. 20220 DOUGLAS HALLWARD-DRIEMEIER

ANDREW J. PINCUS Attorneys ,

General Counsel Department of Justice

Department of Commerce Washington, D.C. 20530-0001

Washington, D.C. 20230 202) 514-2217

— — ees

——— —

QUESTIONS PRESENTED

Whether a state procurement statute that seeks to effect

political change in Burma by discriminating in the award of

state contracts against foreign and domestic companies that

do business in Burma and the affiliates of such companies (1)

violates the Foreign Commerce Clause of the Constitution,

(2) is preempted by the federal statutory scheme governing

economic sanctions against Burma, or (3) impermissibly

interferes with the national government’s exclusive power

over foreign affairs.

u——ü( —— —

TABLE OF CONTENTS

Page

Interest of the United States 1

Statement 3

Introduetion and summary of argument 11

Argument:

I. The Massachusetts Burma Act violates the

Foreign Commerce Clause 14

A. The Massachusetts Act discriminates against

foreign commerce 16

B. The Massachusetts Act prevents the United

States from speaking with one voice on

foreign commerce 18

C. The Massachusetts Act is not saved on the

theory that the State is acting simply as

a market participant 21

II. The Massachusetts Burma Act is preempted by

the federal statutory scheme governing eco-

nomic sanctions against Burma 30

III. The Massachusetts Burma Act impermissibly

intrudes into the conduct of foreign affairs 35

Conclusion 39

Appendix la

TABLE OF AUTHORITIES

Cases:

AFL-CIO v. Kahn, 618 F.2d 784 (D.C. Cir.), cert.

denied, 443 U.S. 915 (1979) 21

Allen-Bradley Local No. 1111 v. Wisconsin Employ-

ment Relations Bd., 315 U.S. 740 (1942) 30

Armco, Inc. v. Hardesty, 467 U.S. 638 (1984) 20

Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398

(1964) 32

Barclays Bank PLC v. Franchise Tax Bd., 512

U.S. 298 (1994) 15, 18, 21

(IID

Cases Continued Page

Bethlehem Stee: p. v. Board of Comm x, 80 Cal.

Rptr. 800 (1969) 25

Board of Trustees v. Mayor & City Council,

562 A.2d 720 (Md. 1989), cert. denied, 493 U.S.

1093 (1990) 28-29

Board of Trustees v. United States, 289 U.S. 48

(1933) 11

Boyle v. United Tech. Corp., 487 U.S. 500 (1988) 30

Building & Constr. Trades Council v. Associated

Builders, 507 U.S. 218 (1993) 24, 27

Camps Newfound/Owatonna, Inc. v. Town of

Harrison, 520 U.S. 564 (1997) 17, 22

Chamber of Commerce v. Reich, 74 F.3d 1322

(D.C. Cir. 1996) 21

Commonwealth Edison Co. v. Montana, 453 U.S.

609 (1981) 29

Complete Auto Transit, Inc. v. Brady, 430 U.S.

274 (1977) 15

Container Corp. v. Franchise Tax Bd., 463 U.S. 159

(1983) 18

Contractors Ass'n v. Secretary of Labor, 442 F.2d

159 (3d Cir.), cert. denied, 404 U.S. 854 (1971)

Cooley v. Board of Wardens, 53 U.S. (12 How.)

299 (1851) 17

Dames & Moore v. Regan, 453 U.S. 654 (1981) ................ 32

Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1 (1824) 13

Hines v. Davidowitz, 312 U.S. 52 (1941) 11, 14,

30, 31, 33, 35

Hughes v. Alexandria Scrap Corp., 426 U.S. 794

(1976) 22

Hunt v. Washington State Apple Advertising

Comm un, 432 U.S. 333 (1977) 15

Japan Line, Ltd. v. Los Angeles County, 441 U.S.

434 (1979) 11, 15, 18

—

— —

Uü— — — —

Cases Continued: Page

KS. B. Technical Sales Corp. v. North Jersey Dist.

Water Supply Comm n, 381 A. 2d 774 (NJ. 1977) 25

Kraft Gen. Foods, Inc. v. Iowa Dep't of Revenue,

505 U.S. 71 (1992) 16, 17, 27

Oklahoma Tax Comm'n v. Jefferson Lines, Inc.,

514 U.S. 175 (1995) 27

Oldfield v. Marriott, 51 U.S. (10 How.) 146 (1850) 12

Reeves, Inc. v. Stake, 447 U.S. 429 (1980) 22, 25

San Diego Bldg. & Trades Council v. Garmon, 359

U.S. 236 (1959) 24

South-Central Timber Dev., Inc. v. Wunnicke, 467 U.S.

U.S. 82 (1984) 24, 25, 26

Southern Pac. Co. v. Arizona, 325 U.S. 761

(1945) 14

Trojan Tech., Inc. v. Pennsylvania, 916 F.2d 903

(3d Cir. 1990), cert. denied, 501 U.S. 1212 (1991) ............. 25

United States v. Curtiss-Wright Export Corp., 299

U.S. 304 (1936) 11

United States v. Me Reeve, 131 F.3d 1 (Ist Cir.

1997) 23

United States v. Pink, 315 U.S. 208 (1942) . 11,13

Wisconsin Dep't of Industry, Labor & Human

Relations v. Gould, Inc., 475 U.S. 282

(1986) 23, 24, 26

Zschernig v. Miller, 389 U.S. 429 (1968) 10, 35, 36, 38

Constitution, statutes and regulations:

US. Const.:

Art. I:

§8 11

Cl. 1 12

Cl. 3:

(Foreign Commerce Clause . 10, 12, 13, 14

(Interstate Commerce Clause . 13, 15, 17, 27

Cl. 10 12

Statutes and regulations—Continued:

Cl. 11

910

Art. II:

Art. VI, Cl. 2 (Supremacy Clause)

Federal Burma Act, Pub. L. No. 104-208, 110 Stat.

3009-166:

§ 570, 110 Stat. 3009-166 5, 9a

§ 570(a), 110 Stat. 3009-166 5, 6, 8, 32, 9a

§ 570(b), 110 Stat. 3009-166 5, 10a

§ 570(c), 110 Stat. 3009-166 ............... 5, 19, 33, 34, 37, 10a

§ 570(e), 110 Stat. 3009-167 6, 8, 32, lla

§ 570(f), 110 Stat. 3009-167 33, lla

§ 570(f)(2), 110 Stat. 3009-167 5,8

Federal Property and Administrative Services Act,

40 U.S.C. 486(a) 21

International Emergency Economic Powers Act,

50 U.S.C. 1701 et seq. 4,31

50 U.S.C. 1701(a) 4, 31, 1a

50 U.S.C. 1702(a)(1) 4, 31, 33, la

50 U.S.C. 1703 4, 4a

50 U.S.C. 1706(b) 4, 7a

Mass. Gen. Laws Ann. ch. 7 (West 1998 Supp.):

§ 22G

98 22G-22M

§ 22H(e)

9221

§ 22J

§ 22L

Exec. Order No. 12,170, 3 C. F. R. 487 (1980)

Exec. Order No. 12,532, 3 C.F.R. 181 (1985)

Exec. Order No. 12,543, 3 C. F. R. 181 (1986)

SRR 8 8 4

K K K ODD 34 4

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VII

Regulations Continued: Page

Exec. Order No. 12,724, 3 C. F. R. 297 (1991) 4

Exec. Order No. 13,047, 3 C. F. R. 202 (1998) .. 5, 6, 13a

31 C. F. R. Pt. 537 (1998) 6

Miscellaneous:

Alan Larson, State and Local Sanctions: Remarks

to the Council of State Governments (Dec. 8,

1998) 35

Bureau of Int’! Labor Affairs, U.S. Dep’t of Labor,

Report on Labor Practices in Burma (1998) 2

142 Cong. Rec. (1996):

p. 19,212 32, 34

p. 19,219 34

p. 19,221 32

p. 19,279 33

Constitutionality of South African Divestment

Statutes Enacted by State and Local Governments,

10 Op. Off. Legal Counsel 49 (1986) 29

H.R. Doc. No. 316, 103d Cong., 2d Sess. (1994) . 8, 9

Human Rights in Burma: Hearing Before the Sub-

comm. on International Operations and the Sub-

comm. on Asia and the Pacific of the House Comm.

on International Relations, 105th Cong., 2d Sess.

(1998) 2, 6-7, 34

Jack N. Rakove, The Beginnings of National Politics:

An Interpretive History of the Continental Con-

gress (1979) 12

Letter of Ole Lumby, Chairman of the Panel, to

Ambassadors from the European Union, Japan,

and the United States (Feb. 10, 1999) 9

Letter from William F. Weld, Governor, Common-

wealth of Mass., to Michael Kanlor, U.S. Trade

Rep. (Dec. 3, 1993) 4

President’s Message to Congress Transmitting a 6-

Month Periodic Report on the National Emergency

With Respect to Burman (Dec. 14, 1999) 1

Proclamation No. 6925, 3 C. F. R. 74 (1997) 6

VIII In the Supreme Court of the Gnited States

Miscellaneous—Continued: Page | No. 99-474

The Federalist: | ANDREW S. NATSIOS, SECRETARY OF ADMINISTRATION

No. 3 (John Jay) 13 \ AND FINANCE OF MASSACHUSETTS, ET AL.,

No. 42 (James Madison) PETITIONERS

No. 44 (James Madison) 13

No. 80 (Alexander Hamilton) 13 *

1 The Records of the Federal Convention of 1787 NATIONAL FOREIGN TRADE COUNCIL

(M. Farrand ed. 1966) 13

US. Dep’t of State, 1 Country Reports on Human ON WRIT OF CERTIORARI

Rights Practices for 1998: Report to the Senate TO THE UNITED STATES COURT OF APPEALS

Comm. on Foreign Relations and the House Comm. FOR THE FIRST CIRCUIT

on International Relations (1999) 1

U.S. Policy Toward Burma: Hearing Before the BRIEF FOR THE UNITED STATES

Subcomm. on Foreign Operations of the Senate AS AMICUS CURIAE SUPPORTING AFFIRMANCE

Comm. on Appropriations, 104th Cong., Ist Sess.

(1995) adhd INTEREST OF THE UNITED STATES

The United States has condemned, in the strongest possi-

ble terms, the Burmese government’s violations of human

rights. The President and Congress have crafted a policy

1 See, e., President's Message to Congress Transmitting a 6-Month

Periodic Report on the National Emergency with Respect to Burma 5

(Dec. 14, 1999) (reporting that the Burmese government “has continued to

refuse to negotiate with pro-democracy forces and ethnic groups for a

genuine political settlement to allow a return to the rule of law and respect

for basic human rights”); Remarks by the President to the International

Labor Organization Conference 4 (June 16, 1999) (condemning “the

flagrant violation of human rights” in Burma); U.S. Dep’t of State, 1

Country Reports on Human Rights Practices for 1998: Report to the

Senate Comm. on Foreign Relations and the House Comm. on Inter-

national Relations at xvii (1999) (Assistant Secretary of State Koh

observes that the Burmese military junta in 1998 “continued its highly

repressive policies, targeting all forms of dissent and intensifying its

restrictions of free assembly and association”), id. at 813 (criticizing the

Burmese government’s “longstanding severe repression of human rights,”

| including “extrajudicial killings and rape” by soldiers, “[a}rbitrary arrests

| and detentions for expression of dissenting political views,” “forced unpaid

(1)

toward Burma that includes economic sanctions, restrictions

on U.S. assistance, and coordinated international action to

promote respect for human rights and the democratic pro-

cess in that country. There is thus no disagreement between

the United States and Massachusetts on the need for action

to encourage reform in Burma. The disagreement is only

over whether the State could permissibly take the sort of

action reflected in the Massachusetts Burma Act.

The Constitution assigns to the national government the

exclusive responsibility to direct the United States’ relations

with other countries. Accordingly, while States may speak

out on matters of foreign policy, the ultimate authority to act

on behalf of the United States, and each of its States, in the

international arena resides with the President and Congress

alone. The national government’s ability to exercise that

authority effectively, expeditiously, and flexibly may be un-

civilian labor,” and extensive “restrictions on basic rights of free speech,

press, assembly, and association”); Human Rights in Burma: Hearing

Before the Subcomm. on International Operations and the Subcomm. on

Asia and the Pacific of the House Comm. on International Relations,

105th Cong., 2d Sess. 2 (1998) (Human Rights in Burma) (testimony of

Acting Assistant Secretary of State Smith (Sept. 27, 1998)) (“The people of

Burma continue to live under a highly repressive, authoritarian military

government that is widely condemned for its serious human rights

abuses.”); Bureau of Int'l Labor Affairs, U.S. Dep’t of Labor, Report on

Labor Practices in Burma 2 (1998) (“The Burmese military government

has been widely criticized for human rights abuses,” which include

“arbitrary, extrajudicial and 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 (statement of Deputy Assistant Secretary of State

Marchick) (noting Secretary of State Albright’s expressions of “the United

States outrage at egregious violations of human rights and international

norms in * * * Burma”); U.S. Policy Toward Burma: Hearing Before

the Subcomm. on Foreign Operations of the Senate Comm. on

Appropriations, 104th Cong., Ist Sess. 2 (1995) (U.S. Policy Toward

Burma) (testimony of Assistant Secretary of State Lord (July 24, 1995))

(discussing ſelgregious human rights violations” in Burma).

dermined when States pursue their own foreign-policy objec-

tives in their own ways. That may be so even where, as

here, a state or local government is pursuing an objective

that is also being pursued by the national government.

The Massachusetts Burma Act, while consistent with

United States foreign policy in its ultimate end, seeks to

achieve that end by means that diverge from those chosen

by the President and Congress. The Act imposes sanctions

that are designed to discourage all foreign economic engage-

ment with Burma, and that are applicable to all entities,

both U.S. and foreign, that do business in Burma, including

those whose only connection to Burma is through a parent,

subsidiary, or affiliate. Because the Act discriminates

against foreign commerce beyond what a State may do as a

market participant, departs from the carefully crafted

framework established by Congress and the President for

imposing economic sanctions against Burma, and impermissi-

bly intrudes into 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 advance the cause of democracy and human rights

throughout the world. The United States pursues that

objective through a variety of means, including public

statements by the President and other U. S. officials, private

discussions with foreign le ders, targeted economic assis-

tance, and the threatened or actual imposition of increasingly

severe economic sanctions. In pursuing political reform in

another country, the United States seeks, whenever possi-

ble, to act in concert with other members of the international

community, both to maximize the pressure on that country

and, with respect to sanctions, to minimize the damage to

U.S. competitiveness and to distribute the economic burden

equitably. See, e.g., J. A. 107-108 (statement of then-Under

Secretary of State (now Deputy Secretary of the Treasury)

Eizenstat).

a. The general statutory framework for the President’s

imposition of economic sanctions against foreign govern-

ments is contained in the International Emergency Eco-

nomic Powers Act, 50 U.S.C. 1701 et seg. IEEPA). IEEPA

authorizes the President to impose economic sanctions in

response to “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.” 50 U.S.C. 1701(a). IEEPA broadly

defines the sorts of sanctions the President may impose;

such sanctions are limited to transactions involving persons

or property “subject to the jurisdiction of the United

States.” 50 U.S.C. 1702(a)(1).2 Presidents have imposed

economic sanctions under IEEPA against such nations as

Iran (Exec. Order No. 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. Order No.

12,724, 3 C.F.R. 297 (1991)). As discussed below, with re-

spect to Burma, Congress supplemented IEEPA with a

statute specifically directed at that country.

b. The United States has sought to effect change in

Burma in three areas: democracy, human rights, and narcot-

ics trafficking. The United States has pursued those objec-

tives through both unilateral and multilateral action, in part

because unilateral action alone would not be effective, given

the limited economic relationship between the United States

and Burma.

2 The President is required to consult with, and report to, Congress

with respect to any exercise of his authority under IEEPA. 50 U.S.C.

1703. Congress may terminate any exercise of that authority. 50 U.S.C.

1706(b).

The United States’ policy with respect to Burma is re-

flected in a statute and an executive order. See Pub. L. No.

104-208, § 570, 110 Stat. 3009-166 to 3009-167 (Federal

Burma Act); Exec. Order No. 13,047, 3 C.F.R. 202 (1998)

(Burma Executive Order). The Federal Burma Act, titled

“Policy Toward Burma,” (1) suspends all U.S. economic as-

sistance to Burma with the exception of humanitarian

assistance, “counter-narcotics” and “crop substitution” assis-

tance, and assistance “promoting human rights and democ-

ratic values,” (2) directs U.S. representatives to interna-

tional financial institutions to oppose loans or other assis-

tance to Burma, and (3) provides that no United States visa

should be issued to “any Burmese government official,”

except as required by treaty or to staff the Burmese mission

to the United Nations. Federal Burma Act § 570(a), 110

Stat. 3009-166. The Act also authorizes and directs the

President to prohibit “new investment” in Burma by

“United States persons” if he determines that the Burmese

government has “committed large-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, perform-

ance of, 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 President to “seek to develop, in

coordination with members of [the Association of South East

Asian Nations] and other countries having major trading and

investment interests in Burma, a comprehensive, multilat-

eral strategy to bring democracy to and improve human

rights practices and the quality of life in Burma.” § 570(c),

110 Stat. 3009-166.

The sanctions prescribed under the Federal Burma Act

must remain in effect until “the President determines and

3 The Federal Burma Act and the Burma Executive Order, together

with IEEPA, are reproduced in the Appendix to this Brief.

certifies to Congress that Burma has made measurable and

substantial progress in improving human rights practices

and implementing democratic government.” Federal Burma

Act § 570(a), 110 Stat. 3009-166. In the interim, the Presi-

dent is authorized to waive any of the sanctions, temporarily

or permanently, “if he determines and certifies to Congress

that the application of such sanction would be contrary to the

national security interests of the United States.” § 570(e),

110 Stat. 3009-167.

e. In May 1997, President Clinton, pursuant to the Fed-

eral Burma Act and IEEPA, prohibited “new investment in

Burma by United States persons.” Burma Executive Order

§ 1. That prohibition, consistent with the definition of “new

investment” in the Federal Burma Act, does not extend to

“the entry into, performance of, or financing of a contract to

sell or purchase goods, services, or technology.” Id. § 3. A

“United States person” is defined as “any United States

citizen, permanent resident alien, juridical person organized

under the laws of the United States (including foreign

branches), or any person in the United States.” Id. § 4(c).

See 1 C.F.R. Pt. 537 (1998) (Burmese Sanctions Regula-

tions).

4 The United States has taken other actions as well to press for reform

in Burma. For example, the United States has implemented an arms em-

bargo against Burma, suspended developing-country tariff preferences,

downgraded U.S. representation in Burma from an ambassador to a

charge d' affaires, worked to deny assistance to Burma from the Interna-

tional Monetary Fund, the World Bank, and the Asian Development Bank,

sought strong resolutions concerning human rights in Burma at the

United Nations General Assembly and the United Nations Commission on

Human Rights, worked with the International Labor Organization to

condemn the use of forced labor and lack of freedom of association for

workers in Burma, and suspended the issuance of U.S. entry visas to high-

level Burmese officials and their families. President Clinton, Secretary of

State Albright, and other U.S. officials have repeatedly denounced the

repressive practices of the Burmese regime. See, e. g., Presidential Pro-

clamation No. 6925, 3 C.F.R. 74 (1997) (suspending visas); Human Rights

2. a. In June 1996, several months before the Federal

Burma Act was enacted, Massachusetts enacted a statute

that restricts the ability of state agencies and state authori-

ties to procure goods and services from entities that do

business in Burma. Mass. Gen. Laws Ann. ch. 7, §§ 22G-22M

(West Supp. 1998) (Massachusetts Burma Act). During the

debate in the Massachusetts House of Representatives,

Representative Rushing, the principal sponsor of the Act,

characterized the Act as “foreign policy” legislation with 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 dollars in Massachusetts” to

“stop the violation of human rights” in Burma. J.A. 51.

The Massachusetts Burma Act requires the State to

maintain a “restricted purchase list” identifying all entities

“currently doing business with Burma,” either directly or

through a parent, subsidiary, or a subsidiary of a common

parent. Massachusetts Burma Act §§ 22G, 22J. An entity is

“doing business with Burma” if it is incorporated or head-

quartered in Burma, has operations, leases, franchises, or

distribution agreements there, provides any goods or ser-

vices to the Burmese government, or promotes the importa-

tion 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 purchase list” unless there is no other bid or the

company’s bid is more than 10 percent lower than the lowest

bid from an unlisted company. Id. §§ 22H, 221. If a state

in 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. Policy Toward Burma 3 (testimony of Assistant Secretary of State

Lord) (July 24, 1995) (same).

5 Section 22H(e) contains an exception for companies whose only activ-

ity in Burma is providing medical supplies, reporting news, or supplying

goods or services relating to international communications.

procurement officer should enter into a contract that is proh-

ibited under the Act, the contract is deemed to be “void.” Id.

§ 22L.

b. The restrictions under the Massachusetts Burma Act

depart, in critical respects, from those under the Federal

Burma Act and the Burma Executive Order. First, con-

sistent with the Federal Burma Act’s emphasis on develop-

ing “a coordinated, multilateral strategy” including Burma’s

major trading partners, the federal sanctions are limited to

investment by “United States persons.” Federal Burma Act

§ 570(a), 110 Stat. 3009-166. The state sanctions, in contrast,

reach foreign persons as well. Second, the federal restric-

tions on investment are limited to “new investment,” a term

that does not encompass the continued operation of existing

investment in 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 to new investment. Third, the

federal sanctions terminate when “the President determines

and certifies to Congress that Burma has made measurable

and substantial progress in improving human rights prac-

tices and implementing democratic government.” § 570(a),

110 Stat. 3009-166. The state sanctions contain no termina-

tion mechanism, much less one that may be activated by the

President. Finally, the federal sanctions may be waived by

the President in the interest of national security. § 570(e),

110 Stat. 3009-167. The state sanctions contain no waiver

provision.

e. The Massachusetts Burma Act has generated protests

from a number of U.S. allies and trading partners. For ex-

ample, the European Union and Japan filed complaints

against the United States in the World Trade Organization

(WTO), contending that the Act violates certain provisions of

the Agreement on Government Procurement.’ See J.A. 88-

s H.R. Doc. No. 316, 108d Cong., 2d Sess. 1719 (1994) (Agreement on

Government Procurement) (submitted to Congress in connection with

— —

90, 91-92; see also Pet. App. 10 (noting that the Act has

generated protests from a number of this country’s trading

partners, including Japan, the European Union, and the

Association of Southeast Asian Nations”). The United

States, working with Massachusetts, has responded to those

claims in WTO dispute settlement proceedings.’ Senior

United States officials have acknowledged that the Act and

the consequent protests from U.S. allies have been “an

irritant” that has, among other things, “diverted the United

States’ and Europe’s attention from focussing where it

should be—on Burma.” J.A. 166 (testimony of Deputy

Assistant Secretary of State Marchick). The Act has thus

legislation implementing the Uruguay Round trade agreements). An

annex to the Agreement lists Massachusetts among the “Sub-Central Gov-

ernment Entities which Procure in Accordance With the Provisions of this

Agreement.” Id. at 1991. In 1993, the Governor of Massachusetts

expressed his understanding to the United States Trade Representative

that Massachusetts would be required under the Agreement, when

adopted, to award procurement contracts “on the basis of competitive

procedures consistent with those specified in the [Agreement]” and “not

Ito] discriminate against suppliers, products, and services of foreign

signatories to the [Agreement]. Letter from William F. Weld, Governor,

Commonwealth of Massachusetts, to Michael Kantor, U.S. Trade Rep-

resentative (Dec. 3, 1993).

7 The United States participated in a series of WTO consultations with

the European Union and Japan concerning the Massachusetts Burma Act.

A WTO dispute settlement panel was subsequently established. Before

any substantive arguments were presented to the panel, the proceedings

were suspended, at the request of the European Union and Japan, in light

of the district court’s ruling in this case. See Letter of Ole Lundby, Chair-

man of the Panel, to Ambassadors from the European Union, Japan, and

the United States (Feb. 10, 1999). Pursuant to Article 12.12 of the Under-

standing on Rules and Procedures Governing the Settlement of Disputes,

the panel’s authority automatically lapsed on February 10, 2000, one year

after the proceedings were suspended. See Understanding on Rules and

Procedures Governing the Settlement of Disputes, 33 I. L. M. 1125, 1234

(1994). The European Union and Japan are not precluded from reinstitut-

ing WTO iuspute settlement procedures challenging the Act in the future.

complicated the United States’ efforts to develop a

multilateral strategy toward Burma.

3. a. Respondent National Foreign Trade Council

(NFTC), a trade association whose members include com-

panies that have been effectively precluded by the Massa-

chusetts Burma Act from doing business with the State,

brought suit to challenge the Act. The district court held, on

cross-motions for summary judgment, that the Act “uncon-

stitutionally impinges on the federal government’s exclusive

authority to regulate foreign affairs.” Pet. App. 81. The

court noted that the Act was designed “solely to sanction

Burma] for human rights violations and to change [Burma’s]

domestic policies” and has had a “disruptive impact on

foreign relations,” as reflected in the protests of the

European Union, ASEAN, and Japan. /d. at 81-82.

b. The court of appeals affirmed. Pet. App. 1-73. Apply-

ing this Court’s decision in Zschernig v. Miller, 389 U.S. 429

(1968), the court first held that the Massachusetts Burma

Act has “more than [the] incidental or indirect effect on

foreign relations” that Zschernig suggested would be per-

missible. Pet. App. 23. The court noted that “the design and

intent 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 violates the Foreign Commerce Clause by discri-

minating against commerce with Burma and undermining

national uniformity in the regulation of foreign commerce.

Pet. App. 52-55. The court rejected the State’s contention

that the Foreign Commerce Clause was not implicated be-

cause the State was merely acting as a “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 not even

remotely connected to such companies’ interactions with

Massachusetts.” Id. at 44-45.

Finally, the court of appeals held that the Massachusetts

Burma Act is preempted by the Federal Burma Act. Pet.

App. 60-73. The court observed that the standard for finding

preemption is less stringent where a State legislates in an

area committed to exclusive federal authority rather than in

an area of concurrent federal and state authority. Id. at 64-

70. The court concluded that the Act, which “risks upsetting

Congress’s careful choice of tools and strategy” for achieving

political reform in Burma, impermissibly conflicts with

federal law. Id. at 71.

INTRODUCTION AND SUMMARY OF ARGUMENT

This Court has repeatedly emphasized that “{iJn interna-

tional relations and with respect to foreign intercourse and

trade the people of the United States act through a single

government with unified and adequate national power.”

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) (“Power over external affairs is not shared by

the States; it is vested in the national government exclu-

sively.”); Hines v. Davidowitz, 312 U.S. 52, 63 (1941) (“The

Federal Government * * * is entrusted with full and exclu-

sive responsibility 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 States in the international arena is reflected in

several of the Constitution’s express grants of power to

Congress in Article I, Section 8, and to the President in

Those include Congress’s powers to “provide for the common

Defence * * * of the United States,” “regulate Commerce with foreign

Article II, Sections 2 and 3,° and in several of its express

restrictions on state power in Article I, Section 10.“ The

most significant of those enumerated powers, for present

purposes, is Congress’s power “[t]o regulate 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 Federalist No. 42, at 264 (James Madison)

(quoted in Hines, 312 U.S. at 63 n.11). Under the Articles of

Confederation, the national government’s efforts to engage

in political and commercial relations with other countries had

been undermined by the States." There was even concern

that the United States could not prevent a State from em-

broiling the nation in a war with another country. As Ed-

Nations * * * and with the Indian Tribes,” “define and punish Piracies

and Felonies committed on the high Seas, and Offenses against the Law of

Nations,” and “declare War, grant Letters of Marque and Reprisal, and

make Rules concerning Captures on Land and Water.” U.S. Const. Art. I,

§ 8, Cis. 1, 3, 10, 11.

Those include the President's powers to serve as “Commander in

Chief of 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 and Reprisal,”

Aaylingl any Imposts or Duties on Imports or Exports,” enterſingl into

any Agreement or Compact * with a foreign Power,” and

engaglingl in War.” U.S. Const. Art. I, § 10.

11 For example, several States, in contravention of the Treaty of Paris

ending the War of Independence, acted to prevent British merchants from

collecting their pre-War debts. And, when Britain refused to permit

American trade in the West Indies, the conflicting positions of the States

precluded a coordinated national response. See Jack N. Rakove, The

Beginnings of National Politics: An Interpretive History of the Continen-

tal Congress 342-352 (1979); Oldfield v. Marriott, 51 U.S. (10 How.) 146,

163-165 (1850).

mund Randolph of Virginia observed at the Constitutional

Convention, “particular states might by their conduct pro-

voke war without controul” because, “[i]f a State acts against

a foreign power contrary to the laws of nations or violates a

treaty,” the national government “cannot punish that State,

or compel its obedience to the treaty.” 1 The Records of the

Federal Convention of 1787, at 19, 24-25 (M. Farrand ed.

1966).

That instability and inconsistency caused the Framers to

propose a Constitution that provided for a single national

voice over foreign political and commercial affairs. Propo-

nents of the Constitution perceived that single voice as

essential to preserving “(t]he peace of the whole.” The

Federalist No. 80, at 476 (Alexander Hamilton) (“(TJhe peace

of the WHOLE ought not to be left at the disposal of a

PART. The Union will undoubtedly be answerable to for-

eign powers for the conduct of its members.”); see also The

Federalist No. 3, at 43 (John Jay) (asserting that adherence

to the law of nations “will be more perfectly and punctually

done by one national government than it could be either by

thirteen separate States or by three or four distinct con-

federacies”); The Federalist No. 44, at 281 (James Madison)

(recognizing “the advantage of uniformity in all points which

relate to 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 and political affairs “in the national government

exclusively,” Pink, 315 U.S. at 233, has several implications

for state laws such as the one at issue here.

First, a state law violates the dormant Foreign Commerce

Clause if it discriminates against foreign commerce (include-

ing against commerce with a particular nation), thereby

inviting retaliation against the entire United States, or pre-

vents the United States from speaking with one voice with

respect to foreign commerce. Although, in our view, the

market-participant exception recognized under the dormant

Interstate Commerce Clause extends at least in some mea-

sure to foreign commerce as well, that exception does not

permit a State to do what Massachusetts has done here—

i. e., use its spending power as a means of regulating conduct

beyond the Nation’s borders and beyond the particular

transactions in which the State is involved.

Second, quite aside from the limitations imposed by the

Foreign Commerce Clause of its own force, when a state law

addresses concerns of foreign policy and foreign commerce

that are also addressed by a federal law, the Supremacy

Clause is implicated more strongly than it is in the purely

domestic context. Thus, the state law will more readily be

found to be preempted as “stand[ing] as an obstacle to the

accomplishment and execution of the full purposes and objec-

tives of Congress.” Hines, 312 U.S. at 67. Here, the

Massachusetts Burma Act stands as such an obstacle to the

effectuation of the United States’ multifaceted and multilat-

eral strategy toward Burma, as reflected in the International

Emergency Economic Powers Act, the Federal Burma 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 foreign relations,” rather than a

mere “incidental or indirect” one. Zschernig v. Miller, 389

U.S. 429, 434, 441 (1968). For the reasons stated above, 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 ‘protection from state legislation inimical to the

national commerce [even] where Congress has 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 commerce power to be * greater

than its power over interstate commerce, the Court has

applied heightened scrutiny when “ascertaining the negative

implications of Congress’ power to ‘regulate Commerce with

foreign Nations. Japan Line, 441 U.S. at 448-449. Accord-

ingly, a state law may violate the Foreign 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 Govern-

ment from ‘speaking with one voice when regulating com-

mercial relations with foreign governments, Japan Line,

441 U.S. at 451 (quoting Michelin Tire Corp. v. Wages, 423

U.S. 276, 285 (1976)). The Massachusetts Burma Act

suffers from both infirmities. The Act therefore violates the

Foreign Commerce Clause unless it can be saved on the

theory that the State is acting as a market participant in

penalizing companies that do business in Burma. As we show

in Point C, infra, however, the Act cannot be sustained on

that theory.”

12 A state tax must satisfy additional criteria in order to survive a

challenge under the Foreign or Interstate Commerce Clause. See Bar-

clays, 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 presented here. Nor is there any occasion in this case to consider

the application of the Foreign Commerce Clause to state measures that do

not facially discriminate against foreign commerce or prevent the Nation

from speaking with one voice, but nevertheless are claimed to imper-

missibly burden foreign commerce. Cf. Hunt v. Washington State Apple

Advertising Comm'n, 432 U.S. 333, 352-354 (1977) (invalidating a

“facialfly) neutral[{]” state statute as imposing an undue burden on

interstate commerce).

13 As we have pointed out above (see pp. 11-12 & n.8, supra), the

Foreign Commerce Clause is one of the explicit provisions manifesting the

Constitution’s grant of authority to the national government over foreign

affairs generally. In Zschernig, the Court relied on that general foreign

affairs power to invalidate a state inheritance statute that required deter-

minations regarding the conduct of foreign governments. We explain in

A. The Massachusetts Act Discriminates Against Foreign

Commerce

The Massachusetts Burma Act facially discriminates

against commerce with Burma. The Act penalizes all com-

panies that engage in commerce with Burma, whether di-

rectly or through a corporate parent, affiliate, or subsidiary,

by effectively foreclosing procurement opportunities with

the State. Companies are forced to choose between doing

business in Burma and doing business with Massachusetts.

Such discrimination is not merely an incidental consequence

of the Act. It is the very means that the State has selected

to pursue its foreign-policy objectives with respect to

Burma. See, ¢.g., pp. 7-8, supra, and pp. 36-37, infra.

Contrary to Massachusetts’ assertion (Br. 47), a state

statute that facially discriminates against interstate or for-

eign commerce violates the Commerce Clause, even if the

statute was not “intend[ed] to secure economic advantages

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

Section III of this Brief that the Massachusetts Burma Act also is uncon-

stitutional because it impermissibly intrudes into the conduct of foreign

affairs by the President and Congress. That is so, however, for essentially

the same reasons that the Act is inconsistent with the Foreign Commerce

Clause. We have elected to address the Foreign Commerce Clause first

because this case, unlike Zschernig, involves foreign commerce. In our

view, it would be appropriate for the Court to rest its decision on the

Clause of the Constitution that is specifically applicable to the subject

matter, rather than on the national government’s more general power

over foreign affairs, of which the Foreign Commerce Clause is but one

(albeit significant) exemplification. We will not repeat in detail in Section

III all of the ways in which the Massachusetts Burma Act intrudes upon

the powers of the national government.

14 For example, Massachusetts would be required to discriminate

against a Pennsylvania company that sells office products solely because

the company is owned by a French conglomerate that also owns a Japa-

nese company that sells food products in Burma.

analogous argument that its tax system, which treated

dividends received from foreign subsidiaries less favorably

than dividends received from domestic subsidiaries, did not

violate the Foreign Commerce Clause because “it [did] not

favor local interests.” The Court explained that a state

statute that discriminates against foreign commerce “is

inconsistent with the Commerce Clause even if the State’s

own economy is not a direct beneficiary of the discrimina-

tion.” Id. at 79. “As the absence of local benefit does not

eliminate the international implications of the discrimina-

tion,” the Court said, “it cannot exempt such discrimination

from Commerce Clause prohibitions.” Ibid.

Nor is the Massachusetts Burma Act rendered permissi-

ble, as Massachusetts contends (Br. 47), by the fact that the

Act applies to domestic, as well as foreign, companies that do

business in Burma. A statute may violate the Foreign Com-

merce Clause by discriminating against foreign commerce

(e.g., commerce with a particular foreign nation) as well as by

discriminating against foreign persons.”

That conclusion is compelled by the text of the Foreign

Commerce Clause, which refers to commerce “with foreign

Nations,” and by its principal purpose, which was to prevent

individual States from embroiling this Nation in disputes

with other nations, thereby inviting retaliation that would

harm the United States as a whole. See pp. 12-13, swpra; see

also Kraft Gen. Foods, 505 U.S. at 79; Cooley v. Board of

Wardens, 53 U.S. (12 How.) 299, 317 (1851) (one of the pur-

poses of the Commerce Clause was to eliminate state laws

5 Cf. Camps Newfound/Owatonna, Inc. v. Town of Harrison, 520 U.S.

564, 575-583 (1997) (a state property tax violated the Interstate Commerce

Clause by discriminating between domestic charitable organizations oper-

ated principally for the benefit of state residents and domestic charitable

organizations operated principally for the benefit of non-residents).

that create “discriminations favorable or adverse to com-

merce with particular foreign nations”).

B. The Massachusetts Act Prevents The United States

From Speaking With One Voice On Foreign Commerce

The Massachusetts Burma Act violates the Foreign Com-

merce Clause for an additional, independent reason: It

prevents the United States from “speak[ing] with one voice

when regulating commercial relations with foreign govern-

ments.” Japan Line, 441 U.S. at 449; accord Barclays, 512

U.S. at 320. The Court has explained that a state statute

“will violate the ‘one voice’ standard if it either implicates

foreign policy issues which must be left to the Federal

Government or violates a clear federal directive.” Container

Corp. v. Franchise Tax Bd., 463 U.S. 159, 194 (1983). The

Massachusetts Burma Act not only “implicates foreign policy

issues”—whether economic sanctions should be used to press

for political reform in Burma and, if so, the nature, extent,

and duration of those sanctions—but does so through an

approach that departs, in significant respects, from the

approach chosen by the national government.”

16 Because the Massachusetts Burma Act facially discriminates against

a species of foreign commerce (i e., commerce with Burma), the Act is

unlike the California tax statute that was held to be nondiscriminatory in

Barclays. The California statute, which prescribed the use of the “world-

wide combined reporting” method by multinational corporations, applied

the same method to domestic and foreign corporations. Barclays, 512 U.S.

at 310-311. Indeed, the only claim of discrimination in that case was that

the costs of complying with the statute would be higher for foreign

corporations than for domestic corporations (e. g., because domestic

corporations “already keep most of their records in English, in United

States currency, and in accord with United States accounting principles”).

Id. at 313. The Court concluded that It he factual predicate of [that]

discrimination claim, however, is infirm.” Ibid.

17 Because Congress and the President have spoken for the United

States with respect to sanctions against Burma, there is no occasion to

consider the application of the “one voice” aspect of the dormant Foreign

As explained more extensively below (at 31-35), although

the national government and the State seek the same end

with respect to democratic reform in Burma, they have

chosen to do so through different means.“ The national

government has chosen a carefully calibrated strategy of

penalties and incentives, which are capable of being applied

flexibly by the President in response to the Burmese

regime’s conduct, the actions of the international community,

and other national security considerations. The national

government has elected not to penalize U.S. companies with

existing investments in Burma or to prohibit “the entry into,

performance of, or financing of a contract to sell or purchase

goods, services, or technology.” Federal Burma Act

§ 570(f)(2), 110 Stat. 3009-167. The national government has

also recognized 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 the United

States. § 570(c), 110 Stat. 3009-166.

The State’s approach is inconsistent with the national gov-

ernment’s approach in a number of respects. First, the Mas-

sachusetts Burma Act undermines the President’s flexibility

Commerce Clause to state purchasing restrictions where the national gov-

ernment has not spoken.

18 The Massachusetts Burma Act prevents the United States from

“speaking with one voice” with respect to foreign commerce for essentially

the same reasons that, as set forth in Sections II and III, infra, the Act is

preempted by the federal statutory scheme governing economic sanctions

against Burma (see pp. 30-35, infra) and interferes with the national gov-

ernment’s exclusive authority over foreign affairs (see pp. 35-38, infra).

As explained in this Section, whether or not the Massachusetts Burma Act

is actually preempted by the Federal Burma Act and the Burma Execu-

tive Order, the Act prevents the United States from speaking with one

voice with respect to the regulation of commerce with Burma (and there-

fore violates the Foreign Commerce Clause) because the different federal

strategy embodied in the Federal Burma Act and the Burma Executive

Order is the one voice of the United States on the subject.

in dealing with the Burmese regime. Whereas the sanctions

under the Federal Burma Act and the Burma Executive

Order may be adjusted in response to changing circum-

stances, the sanctions under the Massachusetts Burma Act

are applied inflexibly. See pp. 31-33, infra. Second, the

Massachusetts Burma Act seeks to discourage all business

by U.S. companies in Burma, contrary to Congress’s and the

President’s decision that only “new investment” is to be pro-

hibited. See pp. 33-34, infra. Third, the Massachusetts

Burma Act operates against foreign companies as well as

U.S. companies, which has antagonized U.S. allies and com-

plicated the development of a multilateral strategy toward

Burma. See pp. 34-35, infra. Clearly, then, the Act under-

mines the United States’ ability to “speak with one voice.”

Indeed, if the Massachusetts Burma Act were sustained, a

multitude of different, and differing, state and local mea-

sures sanctioning foreign governments could be expected.

At least 18 local governments have adopted similar, although

not necessarily identical, selective-purchasing statutes di-

rected at Burma. J.A. 155-156. And various state and local

governments have adopted or considered similar selective-

purchasing statutes aimed at other countries, including

China, Cuba, Egypt, Indonesia, Iran, Iraq, Laos, Morocco,

Nigeria, North Korea, Pakistan, Saudi Arabia, Sudan,

Switzerland, Tibet, Turkey, and Vietnam. J.A. 144-156. Cf.

Armco, Inc. v. Hardesty, 467 U.S. 638, 644 (1984) (in deter-

mining whether a state tax discriminates against interstate

commerce, the Court inquires whether the tax is “such that,

if applied by every jurisdiction, there would be no imper-

missible interference with free trade”) (internal quotation

marks omitted).

19 Massachusetts suggests (Br. 19) that Congress has acquiesced in the

Massachusetts Burma Act by declining to preempt it. In Barclays, the

Court explained that Congress’s acquiescence in a state statute that dis-

criminates against foreign commerce must appear with “unmistakable

C. The Massachusetts Act Is Not Saved On The Theory

That The State Is Acting Simply As A Market

Participant

The State contends that the Massachusetts Burma Act

does not violate the Foreign Commerce Clause—whether or

not the Act discriminates against foreign commerce or

undermines national uniformity—because the State is acting

as a “market participant” in refusing to deal with companies

that do business in Burma. The Massachusetts Burma Act

cannot be sustained on that theory.”

clarity,” whereas Congress’s acquiescence in a state statute that under-

mines the United States’ ability to “speak with one voice” on foreign com-

merce need not be as explicit. 512 U.S. at 323. The Court applied only the

latter standard in Barclays because the California tax statute at issue

there, unlike the Massachusetts Burma Act, did not discriminate against

foreign commerce. Moreover, this case does not present the sort of evi-

dence of congressional acquiescence in a state statute that the Court

deemed sufficient in Barclays. Whereas Congress repeatedly declined to

enact legislation that would have precluded the taxing method used by

California (see Barclays, 512 U.S. at 325-328), Congress has not con-

sidered and rejected legislation to preclude state laws such as the

Massachusetts Burma Act, and that Act is in significant tension with the

strategy adopted by Congress and the President for bringing about

reform in Burma.

2 This case presents no question concerning the interpretation of

federal statutes governing the President’s authority in prescribing the

terms for procurement by federal agencies. See Federal Property and

Administrative Services Act, 40 U.S.C. 486(a) (authorizing the President

to “prescribe such policies and directives * * as he hall deem

necessary to effectuate the provisions of [this] Act”); see also AFL-CIO v.

Kahn, 618 F.2d 784, 789 (D.C. Cir.) (en banc) (noting that the Act “grants

the President particularly direct and broad-ranging authority” over fed-

eral 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 procurement authority” 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).

1. This Court has identified a “narrow exception to the

dormant [Interstate] Commerce Clause for States in their

role as market participants.“ Camps Newfouwnd/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-participant exception 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 imposed on state pro-

prietary actions by the ‘foreign commerce’ Clause * * * .

We note, however, that Commerce Clause scrutiny may well

be more rigorous when a restraint on foreign commerce is

alleged.”). It is significant, however, that even in the purely

domestic context, the Court has never extended the market-

participant exception to state action analogous to that at

issue here, e.g., to a state procurement statute that discrimi-

nates against companies that do business in another State in

order to influence that other State’s internal policies.

The market-participant exception originated in two cases

in which the State, as a participant in a commercial activity,

preferred its own citizens over citizens 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,

could prefer local processors over out-of-state processors.

The Court reasoned that the State was not seeking to regu-

late the market for abandoned automobiles; Jilnstead, it

hald] entered into the market itself to bid up their price.“

Id. at 806. The Court then concluded that the Commerce

Clause does not “prohibit{] a State, in the absence of con-

gressional action, from participating in the market and exer-

cising the right to favor its own citizens over others.” Id. at

810. Similarly, in Reeves, the Court held that a State, as the

operator of a cement plant, could choose to sell the cement

only to its own citizens. 447 U.S. at 440-447.

The Court’s subsequent decisions make clear that the

market-participant exception does not exempt all of a State’s

procurement decisions from the constraints of the Commerce

Clause. In White v. Massachusetts Council of Construction

Employers, 460 U.S. 204 (1983), the Court upheld an execu-

tive order issued by the Mayor of Boston that required that

city residents constitute 50 percent of the workforce on

public construction projects funded wholly with city funds.

The Court reasoned that such a preference for city residents

did not violate the Commerce Clause because, “[i)nsofar as

the city expended only its own funds in entering into con-

struction contracts for public projects, it was a market

participant.” Id. at 214-215. The Court acknowledged that

“there are some limits on a state or local government’s

ability to impose restrictions that reach beyond the immedi-

ate parties with which the government transacts business.”

Id. at 211 n.7. The Court found it “unnecessary in this case

to define those limits with precision,” however, because

“fe]veryone affected by the order is, in a substantial if

informal sense, working for the city.” Ibid. Thus, in White,

the Court again sustained a procurement provision that

simply preferred the city’s (and thus the State’s) own

residents in the 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 projects open

to residents and non-residents alike but then disqualify

residents of a particular State based, for example, on the

city’s disapproval of the policies 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 exception in Wisconsin Department of Industry,

Labor & Human Relations v. Gould, Inc., 475 U.S. 282

(1986), which concerned a Wisconsin statute that barred the

State from doing business with companies that had com-

mitted multiple violations of the National Labor Relations

Act (NLRA). The State did not dispute that, if the statute

was “regulatory” in nature, the statute would 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 exer-

cise of the State’s spending power rather than its regulatory

power,” which the Court found to be “a distinction without a

difference, at least in this case, because on its face the debar-

ment statute serves plainly as a means of enforcing the

NLRA.” Gould, 475 U.S. at 287. In other words, given that

“the point of the statute is to deter labor law violations,”

ibid., the statute was regulatory, although the statute in-

volved the exercise of the State’s spending power. The

Court also rejected the State’s related argument that it was

merely acting as a market participant in refusing to deal

with companies that violated the labor laws. The Court

observed that “by flatly prohibiting state purchases from

repeat labor law violators Wisconsin simply is not function-

ing as a private purchaser of services; for all practical

purposes, Wisconsin’s debarment scheme is tantamount to

regulation.” Id. at 289 (internal quotation marks and citation

omitted). The Court has since explained its holding in Gould

on the ground that the state statute in that case “addressed

employer conduct unrelated to the employer’s performance

of contractual obligations to the State” for the purpose of

“deter[ring] NLRA violations.” Building & Constr. Trades

Council 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 con-

cluded that Alaska was not acting as a market participant in

requiring those who purchased timber on state lands to have

the timber processed within the State. Jd. at 93-99 (plurality

opinion of Justice White). The plurality observed that the

market-participant doctrine “is not carte blanche to impose

any conditions that the State has the economic power to dic-

tate, and does not validate any requirement merely because

the State imposes it upon someone with whom it is in con-

tractual privity.” Id. at 97. The plurality concluded that the

market-participant exception was inapplicable because “the

State [was] attempting to govern the private, separate eco-

nomic 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-participant exception applies, at least to some

extent, to foreign as well as domestic commerce. For exam-

ple, 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 absence of a federal

statute or treaty providing otherwise. And the preferences

in Hughes and White for local residents could have been

enforced against residents of other countries as they were

against residents of other States absent a contrary federal

statute or treaty.”

21 This Court has reserved the question whether “Buy American” stat-

utes, which give a preference in a State’s purchases to goods produced in

the United States over goods produced in other countries, violate the

Commerce Clause. See Reeves, 447 U.S. at 437 n.9. The lower courts have

divided on the question. Compare Trojan Techs., Inc. v. Pennsylvania,

916 F.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 u, 381 A.2d 774, 776 (N. J. 1977) (same), with

Bethlehem Steel Corp. v. Board of Comm'rs, 80 Cal. Rptr. 800, 803 (Ct.

App. 1969) (invalidating Buy American statute). A Buy American statute

differs from the state actions at issue in Reeves, Hughes, and White, be-

cause the State is not simply preserving the benefits of its expenditures

for its own citizens as against everyone else, domestic and foreign alike.

The State is singling out suppliers of imported goods for disfavored

treatment. In contrast to the Massachusetts Burma Act, however, a Buy

American statute does not single out particular foreign governments for

disfavored treatment, seek to affect the internal policies of a foreign gov-

ernment, or penalize companies merely because they do business in a

particular country. In considering the validity of such Buy American stat-

utes as applied to goods from particular countries, the Agreement on Gov-

ernment Procurement (see note 6, supra) now would have to be consulted.

There is no occasion in this case, however, to consider the

precise limits of the market-participant exception in —

context of foreign commerce. Whatever those limits migh

be, the Massachusetts Burma Act exceeds them. The Com-

merce 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 pro-

curement power falls outside the market-participant excep-

tion whenever it is “regulatory” in nature.

Here, several characteristics of the Massachusetts Burma

Act make clear that the Act, like the state statutes in Gould

and South-Central Timber, is properly regarded as regula-

tory in nature. First, in contrast to the state action that this

Court has held to come within the market-participant excep-

tion, the Massachusetts Burma Act does not seek to advance

the economic interest of the State or its own citizens through

the State’s participation in the marketplace. Second, the

“point of the statute,” Gould, 475 U.S. at 287, is to deter U.S.

and foreign companies from doing business in Burma, and

thereby to pressure the Burmese regime for political reform.

The Act thus addressſes] [such companies’) conduct unre-

lated 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 (plurality opinion)

(“The limit of the market-participant doctrine must be that it

allows a State to impose burdens on commerce within the

market in which it is a participant, but allows it to go no

further.”). Third, as reflected in the Act’s design, operation,

and scope, the Act seeks to affect the conduct not 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 in Burma, but that merely have a

parent, a subsidiary, or an affiliate that does business in

Burma, the Act regulates conduct even further from a com-

pany’s own “contractual obligations to the State” than did

the statutes in Gould and South-Central Timber. And the

Act ultimately seeks, of course, to affect the conduct of Bur-

mese officials.”

The conclusion that the Massachusetts Burma Act falls

outside the market-participant exception is especially evi-

dent when the analogous question is considered in the con-

text of commerce among the States. If Massachusetts

refused to do business with any companies that do business

in Texas, or their parents, subsidiaries, or affiliates, in order

to induce a change in the internal policies of Texas, there

could be little doubt that Massachusetts would violate the

Commerce Clause. Such a boycott is no more consonant with

that Clause when a State targets another country rather

than another State. The Interstate Commerce Clause was

intended to prevent “economic Balkanization” and retaliation

by one State against another, see Oklahoma Tax Comm iu v.

Jefferson Lines, Inc., 514 U.S. 175, 179-180 (1995), and the

Foreign Commerce Clause was designed to prevent individ-

ual States from embroiling the Nation in disputes with other

nations and triggering retaliation against the United States

as a whole, see Kraft Gen. Foods, 505 U.S. at 79. It would be

inconsistent with those overriding purposes of the Com-

merce Clause to sustain a state statute that singles out com-

panies because they do business in another State or another

nation for the purpose of affecting the internal policies of

that State or nation.

2 That some private companies might engage in boycotts of suppliers

does not mean that Massachusetts’ conduct falls within the market-par-

ticipant exception. As the Court has explained, “[tJhe private actor under

such circumstances would be attempting to ‘regulate’ the suppliers and

would not be acting as a typical proprietor.” Associated Builders, 507

U.S. at 229. But the private actor, unlike the State, would not be subject

to the constraints of the dormant Commerce Clause. See ibid. (“When the

State acts as regulator, it performs a role that is characteristically a

governmental rather than a private role, boycotts notwithstanding.”).

That is not to say that the Constitution leaves no room for

States to take action with respect to another country based

on concerns about its record on human rights or similar

matters. A State may adopt a resolution condemning the

conduct of a repressive foreign regime. A State may petition

Congress and the President to take action against the

regime, including the imposition of economic sanctions, or to

authorize the States themselves to take certain action. A

State may decline to send its own officials on trade missions

to the country so long as the repressive regime remains in

power. And a State may call attention to its concerns in

other ways. Such measures would not involve the State in

any regulation of foreign commerce. They consequently

would not implicate the Foreign Commerce Clause.

Moreover, we are not prepared to say that there would be

no instances in which a State could take action in a com-

mercial setting to express its concerns about violations of

human rights. For example, a state statute that required

state pension funds to divest their holdings in companies

doing business in a particular country would present differ-

ent considerations under the Foreign Commerce Clause than

does a state statute that restricts a State from entering into

procurement contracts with such companies. While a divest-

ment statute might be regarded as regulatory to the extent

that it is perceived to be seeking to affect conduct unrelated

to the companies’ performance in the financial markets, such

a statute might also be regarded as serving only to dis-

associate the State, as an ultimate “owner” of such com-

panies through the pension funds, from any affinity with a

repressive regime 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 a divestment

statute as “simply to ensure that city pension funds would

not be invested in a manner that was morally offensive to

many city residents and many beneficiaries of the pension

funds”), cert. denied, 493 U.S. 1098 (1990).” Nor could such

a statute be expected to have as direct a regulatory effect as

the Massachusetts Burma Act, because stock sold by the

pension fund would be purchased by someone else, and the

transaction would not be conditioned on any conduct by the

purchaser, the company, or the foreign government. It may

be that in appropriate circumstances a State could take other

actions for similar purposes in a commercial setting. There

is no occasion in this case, however, to consider the validity

of state divestment statutes targeted at companies doing

business in a particular country, or to consider the applica-

tion of the market-participation exception to other state

action with respect to foreign commerce. Whatever may be

the precise limits of the market-participant exception, the

Massachusetts Burma Act exceeds them.“

2 See also Constitutionality of South African Divestment Statutes

Enacted by State and Local Governments, 10 Op. Off. Legal Counsel 49,

51-59 (1986) (concluding that state and local divestment statutes come

within the market-participant exception). The Office of Legal Counsel

Opinion assumed that the same analysis would apply to statutes that

prohibit state or local governments from entering into procurement con-

tracts with companies that do business in a particular country. For the

reasons discussed in the text, however, a statute like the Massachusetts

Burma Act does not fall within the market-participant exception. To the

extent that the Office of Legal Counsel Opinion is inconsistent with the

views set forth in this Section or in Sections II and III, it no longer

represents the position of the United States.

24 Even if the Court were to hold that States have the latitude under

the dormant Foreign Commerce Clause to adopt a policy of mandatory

divestment from companies doing business in ancther country, it would

not necessarily follow that States would have the same latitude to adopt a

policy of mandatory divestment from companies doing business in another

State. Whether the dormant Interstate Commerce Clause preserves any

such power for the States would be informed by its purpose “to create an

area of free trade among the several States,” Commonwealth Edison Co.

v. Montana, 453 U.S. 609, 618 (1981), by the reciprocity and mutual

respect owed by the States to one another as coordinate sovereigns under

the plan of the Constitutional Convention, and by the applicability of self-

II. THE MASSACHUSETTS BURMA ACT IS

PREEMPTED BY THE FEDERAL STATUTORY

SCHEME GOVERNING ECONOMIC SANCTIONS

AGAINST BURMA

Because the regulation of foreign commerce and the

conduct of foreign policy are committed to the national gov-

ernment exclusively, and because tension between federal

and state laws in those areas raises unique concerns, the

Supremacy Clause applies with special force to state laws

that deal with foreign commerce and foreign policy. As this

Court has explained, when a state 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 order for 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 “that

touch[es] international relations,” the Court should be “more

ready to conclude that a federal Act * * * supersede(s)

state regulation.” Allen-Bradley Local No. 1111 v. Wis-

consin Employment Relations Bd., 315 U.S. 740, 749 (1942).

In Hines, the Court held that a Pennsylvania alien

registration law was preempted by the subsequently enacted

federal Alien Registration Act, even though the federal Act

did not contain an express preemption provision or impose

inconsistent obligations on aliens. 312 U.S. at 62-74. The

Court explained that, at least in an area that is “so

intimately blended and intertwined with responsibilities of

the national government” over “the exterior relation of this

whole nation with other nations and governments,” id. at 66,

a state law must yield to a federal law on the same subject if

the state law “stands as an obstacle to the accomplishment

and execution of the full purposes and objectives of

Congress,” id. at 67. The Court emphasized that “Congress

executing provisions of the Constitution that embody shared values and

protect fundamental human rights in all of the States.

was trying to steer a middle path” in the Alien Registration

Act, id. at 73, excluding from the final 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 con-

tinued enforcement of the state law, which imposed require-

ments on aliens that were similar to some of those that had

been omitted from the federal law, would undermine Con-

gress’s purpose “to obtain the information deemed to be

desirable in connection with aliens * * * in such a way as to

protect [their] personal liberties.” Id. at 74.

In three respects, the Massachusetts Burma Act similarly

“stands as an obstacle to the accomplishment and execution

of the full purposes and objectives” of the International

Emergency Economic Powers Act, 50 U.S.C. 1701 et seg.

(IEEPA), the Federal Burma Act, and the Burma Executive

Order. That is so even though the ultimate end sought by

the United States and the State is the same: a free and

democratic Burma that fully respects the human rights of its

people.

A. Congress and the President have crafted a policy

toward Burma that emphasizes the President’s flexibility

and discretion to impose, adjust, and suspend economic sanc-

tions to reflect changing circumstances. The Massachusetts

Burma Act, in contrast, undermines the President’s flexibil-

ity and discretion with respect to Burma.

IEEPA “codifies Congress’s intent to confer broad and

flexible power upon the President to impose and enforce

economic sanctions against nations that the President deems

a threat to national security interests.” United States v.

McKeeve, 131 F.3d 1, 10 (Ist Cir. 1997). IEEPA broadly

defines the situations in which the President may impose

economic sanctions, 50 U.S.C. 1701(a), and broadly defines

the sorts of economic sanctions that the President may

impose, 50 U.S.C. 1702(a)(1). IEEPA thus gives the Presi-

dent considerable flexibility with respect to the use of

economic sanctions to seek to influence the conduct of a

foreign government. See Dames & Moore v. Regan, 453 U.S.

654, 673 (1981) (recognizing the importance of sanctions un-

der IEEPA as a “bargaining chip’ to be used by the Presi-

dent when dealing with a hostile country”).

The Federal Burma Act, which authorizes and directs the

President to impose particular economic sanctions to re-

spond to a particular international threat, applies that

flexible approach in the specific context of Burma. The

President is, for example, given broad discretion not only

over whether to impose certain sanctions, but also over

whether to suspend or terminate those sanctions and the

other sanctions imposed under the Act. Federal Burma Act,

§ 570(a) and (e), 110 Stat. 3009-166 to 3009-167. Senator

Cohen, the principal sponsor of the Federal Burma Act,

emphasized the importance of giving “the administration

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 Act as “giv[ing] the President, who,

whether Democrat or Republican, is charged with con-

ducting our Nation’s foreign policy, some flexibility.” Id. at

19,221.

The Massachusetts Burma Act is in tension with Con-

gress’s purpose to assure that the President has extensive

discretion over the taking of economic action directed at a

foreign government and the nature, extent, and duration of

that action. The Act does not acknowledge any authority in

the President to modify, suspend, or terminate its economic

sanctions. As a consequence, the Executive Branch’s

25 Although Congress or the President could expressly preempt state

and local economic sanctions, such action could not, in some instances, be

taken without significant diplomatic (or other) costs. Cf. Banco Nacional

de Cuba v. Sabbatino, 376 U.S. 398, 436 (1964) (recognizing that “[o}ften

the State Department will wish to refrain from taking an official position”

flexibility in dealing with the Burmese regime or in building

international coalitions could be diminished, thereby under-

mining the ultimate goal of both the United States and

Massachusetts.

B. In the Federal Burma Act and the Burma Executive

Order, Congress and the President deliberately chose to

“steer a middle path,” Hines, 312 U.S. at 73, to the extent of

permitting U.S. companies to continue to engage in many

categories of business in Burma. The Federal Burma Act

authorizes the President to prohibit only “new investment”

in Burma by “United States persons,” and excludes from the

scope of federal restrictions the “performance 0. * * * a

contract to sell or purchase goods, services, or technology.”

Federal Burma Act § 570(c) and (f), 110 Stat. 3009-166 to

3009-167.“ The Burma Executive Order, issued pursuant to

the Federal Burma Act and IEEPA, incorporates those re-

strictions. Thus, as one of its co-sponsors observed, the Fed-

eral Burma Act is a means of “strik[ing] a balance between

unilateral sanctions against Burma and unfettered United

States investment in that country.” 142 Cong. Rec. at 19,279

(Sen. Breaux).

The Massachusetts Burma Act is inconsistent with the

choice made by Congress and the President to restrict only

“new investment” in Burma by “United States persons.” It

discriminates against all prospective contractors that do

business in Burma. It extends not only to U.S. companies

but also to foreign companies. It applies not only to com-

panies that do business in Burma themselves, but also to

on whether an act of a foreign government violates international law

because doing so “might be inopportune diplomatically” or might produce

“{ajdverse domestic consequences”).

. IEEPA permits the President to impose economic sanctions broader

than those contained in the Federal Burma Act and the Burma Executive

Order, but only with respect to transactions involving persons or property

“subject to the jurisdiction of the United States.” 50 U.S.C. 1702(a)(1).

companies with a parent, an affiliate, or a subsidiary that

does business in Burma. And it applies not only to com-

panies engaging in “new investment” in Burma, but also to

companies engaging, directly or indirectly, in a wide array of

other economic activity in Burma, even activity that com-

menced before its enactment. The Act thus discourages the

sort of continuing economic activity in Burma by U.S. com-

panies that 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 trading and investment inter-

ests in Burma, a comprehensive, multilateral strategy to

bring democracy to and improve human rights practices and

the quality of life in Burma.” Federal Burma Act § 570(c),

110 Stat. 3009-166. The Senate sponsors of the Act per-

ceived that multilateral action is the most effective means of

achieving those goals. See, e.g., 142 Cong. Rec. at 19,212

(Sen. Cohen) (“(T]o be effective, American policy in Burma

has to be coordinated with our Asian friends and allies.”); id.

at 19,219 (Sen. Feinstein) (“Only a multilateral approach is

likely to be successful.”).””

The Massachusetts Burma Act, by discriminating against

foreign companies as well as U.S. companies that do business

27 As a general matter, the United States pursues its foreign-policy

objectives through multilateral cooperation, whenever possible. See, e. g.,

J.A. 108 (testimony of then-Under Secretary of State Eizenstat) (“Sanc-

tions are much more likely to be effective when they have multilateral

support and participation. Multilateral sanctions maximize international

pressure on the offending state while minimizing damage to U.S. competi-

tiveness and more equitably distributing the sanctions burden across the

international community.“); accord J. A. 162 (testimony of Deputy Assis-

tant Secretary of State Marchick); see also Human Rights in Burma 708

(testimony of Acting Assistant Secretary of State Smith) (Sept. 28, 1998)

(describing the United States’ multilateral strategy with respect to

Burma).

in Burma, “stands as an obstacle to the accomplishment and

execution of the full purposes and objectives of Congress.”

Hines, 312 U.S. at 67. The Act has generated friction be-

tween the United States and its allies because of its applica-

tion to foreign companies, and thereby has distracted atten-

tion from Congress’s purpose of encouraging the develop-

ment of “a comprehensive, multilateral strategy” toward

Burma. See pp. 8-9 & n.7, supra (discussing protests from

the European Union, Japan, and ASEAN). Under Secretary

of State Larson has thus observed that the Act “complicates

efforts to build coalitions with our allies” to encourage de-

mocratic reform in Burma. Alan Larson, State and Local

Sanctions: Remarks to the Council of State Governments 5

(Dec. 8, 1998). He has noted, for example, that “the EU’s

opposition to the Massachusetts law has meant that U.S.

government high level discussions with EU officials often

have focused not on what to do about Burma, but on what to

do about the Massachusetts Burma law.” Id. at 6.“ More

broadly, the Massachusetts Burma Act and other such state

and local statutes have, according to U.S. embassy reports,

raised allies’ concerns about the United States’ credibility in

international negotiations and its ability to deliver on its

international commitments.

III. THE MASSACHUSETTS BURMA ACT IMPER-

MISSIBLY INTRUDES INTO THE CONDUCT OF

FOREIGN AFFAIRS

This Court has recognized that state action may imper-

missibly infringe upon the 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.

3 See also J. A. 115 (testimony of then-Under Secretary of State

Eizenstat) (observing that the Massachusetts Burma Act and similar mea-

sures “risk shifting the focus of the debate with our European Allies away

from the best way to bring pressure against [Burma] to a potential WTO

dispute over [the Act’s] consistency with our international obligations”).

The Massachusetts Burma Act, even if not preempted by

federal law, is nonetheless invalid as inconsistent with the

Constitution’s assignment of the foreign-affairs power to the

national government, not the States.

In Zschernig, the Court struck down a state probate law

that prevented the distribution of an estate to a foreign heir

if the proceeds of the estate were subject to confiscation by

his government. The Court explained that such statutes,

which required state courts to engage in “minute inquiries

concerning the actual administration of foreign law [and] into

the credibility of foreign diplomatic statements,” had a

“great potential for disruption or embarrassment” of the

United States in the international arena. 389 U.S. at 435.

The Court concluded that such statutes therefore had “a

direct impact upon foreign relations,” id. at 441, and not

merely “some incidental or indirect effect,” id. at 434. Ac-

cordingly, even though the state statute involved a subject

“traditionally regulated” by the States and was not affirma-

tively preempted by an Act of Congress, id. at 440-441, the

statute was held to constitute “forbidden state activity,” id.

at 436.

The Massachusetts Burma Act, even more clearly than

the state statute in Zschernig, is an impermissible “intrusion

by the State into the field of foreign affairs which the

Constitution entrusts to the President and the Congress.”

389 U.S. at 432. In its purpose, its operation, and its con-

sequences, the Act has an impact on foreign relations that is

“direct,” not merely “incidental.” Id. at 441, 434.

First, the Massachusetts Burma Act, as its sponsors de-

clared, was designed as “foreign policy” legislation to “stop

the violation of human rights” in Burma. J.A. 39 (statement

of Rep. Rushing); J.A. 51 (statement of Sen. Walsh); see also

29 The tension between the Massachusetts Burma Act and the national

government’s policy toward Burma is addressed more extensively in

Section II, supra.

J.A. 31 (letter of Rep. Rushing). The State acknowledged

earlier in this case that the Act is part of a “growing effort

do apply indirect economic pressure against the Burma

regime for reform.” Pet. App. 9. The Act thus constitutes a

deliberate attempt by a State to conduct its own foreign

policy.

Second, by its structure and design, the Massachusetts

Burma Act operates to apply pressure on the Burmese re-

gime through third parties, i.e., companies, foreign and

domestic alike, that seek to do business with the State,

whether or not their business in Burma bears any relation to

their business with State. Massachusetts does not suggest

that the Act in any way advances its interests in procuring

quality goods at a low price or in dealing only with responsi-

ble contractors; to the contrary, by eliminating qualified low

bidders, the Act impairs the State’s economic interests in

order to advance its foreign-policy interests. Nor does the

Act serve simply to disassociate Massachusetts from a direct

relationship with the Burmese regime. Thus, the scope of

the Act confirms that, as its sponsors stated, the Act is

foreign-policy legislation.

Finally, as explained above (at 8-9, 34-35), the Massachu-

setts Burma Act has adversely affected the United States’

own foreign policy in several respects. Most significantly,

the Act has undermined the development of “a comprehen-

sive, multilateral strategy to bring democracy to and im-

prove human rights practices and the quality of life in

Burma.” Federal Burma Act § 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

implementation of such a multilateral strategy, which the

United States views as the most effective 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 to permit some U.S. economic activity in Burma

(short of “new investment”). The Act also has the potential

to undermine the President’s flexibility to adjust the

economic sanctions against Burma based on the conduct of

the Burmese regime, the actions of the international

community, or other national security concerns.”

In sum, whatever the outer limits of the foreign affairs

doctrine applied in Zschernig, those three characteristics of

the Massachusetts Burma Act render it plainly invalid. The

Act, in its purpose and effect, has implemented a state

foreign policy toward Burma, and the Act has interfered

with the conduct of the United States’ own foreign policy.

The Act thus has the sort of “direct” and detrimental, not

merely “incidental,” impact on the national government’s

foreign-affairs power that renders state action impermissible

under Zschernig. 389 U.S. at 434, 441.

The judgment by the United States condemning the abuses of the

Burmese regime is now formally embodied in the Federal Burma Act and

the Burma Executive Order. Consequently, the Massachusetts Burma

Act does not present the concern, identified in Zschernig, of the States’

making their own independent judgments regarding “the ‘democracy

quotient’ of a foreign regime.” 389 U.S. at 435.

CONCLUSION

The judgment of the court of appeals should be affirmed.

Respectfully submitted.

SETH P. WAXMAN

Solicitor General

DAVID W. OGDEN

Acting Assistant Attorney

nlji EDWIN S. KNEEDLER

NEALS. WOLIN BARBARA MCDOWELL —

pant ie

—— DOUGLAS HALLWARD-DRIEMEIER

Department of Commerce Attorneys

FEBRUARY 2000

The International Emergency Economic Powers Act, 50

U.S.C. 1701-1706, provides:

§ 1701. Unusual and extraordinary threat; declaration

of national emergency; exercise of Presi-

dential authorities

(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.

(b) The authorities granted to the President by section

1702 of this title may only be exercised to deal with an

unusual and extraordinary threat with respect to which a

national emergency has been declared for purposes of this

chapter and may not be exercised for any other purpose.

Any exercise of such authorities to deal with any new threat

shall be based on a new declaration of national emergency

which must be with respect to such threat.

§ 1702. Presidential authorities

(ax) At the times and to the extent specified in section

1701 of this title, the President may, under such regulations

as he may prescribe, by means of instructions, licenses, or

otherwise—

(A) investigate, regulate, or prohibit—

(i) any transactions in foreign exchange,

(la)

(ii) transfers of credit or payments between, by,

through, or to any banking institution, to the extent

that such transfers or payments involve any interest

of 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 or prohibit, any acquisition, holding, with-

holding, use, transfer, withdrawal, transportation, im-

portation or exportation of, or dealing in, or exercising

any right, power, or privilege with respect to, or trans-

actions 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.

(2) In exercising the authorities granted by paragraph

(1), the President may 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 any act or trans-

action referred to in paragraph (1) either before, during, or

after the completion thereof, or relative to any interest in

foreign property, or relative to any property in which any

foreign country or any national thereof has or has had any

interest, or as may be otherwise necessary to enforce the

provisions of such paragraph. In any case in which a report

by a person could be required under this paragraph, the

President may require the 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 under this chapter shall to the extent

thereof be a full acquittance and discharge for all purposes of

the obligation of the person making the same. No person

shall be held liable in any court for or with respect to

anything done or omitted in good faith in connection with the

administration of, or pursuant to and in reliance on, this

chapter, or any regulations, instruction, or direction issued

under this chapter.

(b) The authority granted to the President by this

section does not include the authority to regulate or prohibit,

directly or indirectly—

(1) any postal, telegraphic, telephonic, or other per-

sonal 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 used to relieve human

suffering, except to the extent that the President deter-

mines that such donations (A) would seriously impair his

ability to deal with any national emergency declared

under section 1701 of this title, (B) are in response to

coercion against the proposed recipient or donor, or (C)

would endanger Armed Forces of the United States

which are engaged in hostilities or are in a situation

where imminent involvement in hostilities is clearly

indicated by the circumstances; or

(3) the importation from any country, or the expor-

tation to any country, whether commercial or otherwise,

regardless of format or medium of transmission, of any

information or informational materials, including but not

limited to, publications, films, posters, phonograph re-

1 So in original. The word “or” probably should not appear.

cords, photographs, microfilms, microfiche, tapes, com-

pact disks, CD ROMs, artworks, and news wire feeds.

The exports exempted from regulation or prohibition by

this paragraph do not include those which are otherwise

controlled for export under section 2404 of the Appendix

to this title, or under section 2405 of the Appendix to

this title to the extent that such controls promote the

nonproliferation or antiterrorism policies of the United

States, or with respect to which acts are prohibited by

chapter 37 of title 18; or

(4) any transactions ordinarily incident to travel to

or from any country, including importation of accompa-

nied baggage for personal use, maintenance within any

country including payment of living expenses acquisition

of goods or services for personal use, and arrangement

or facilitation of such travel including nonscheduled air,

sea, or land voyages.

§ 1703 Consultation and reports

(a) Consultation with Congress

The President, in every possible instance, shall consult

with the Congress before exercising any of the authorities

granted by this chapter and shall consult 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 this chapter, he shall immediately transmit to the

Congress a report specifying—

(1) the circumstances which necessitate such exer-

cise of authority;

(2) why the President believes those circumstances

constitute an 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;

(3) the authorities to be exercised and the actions to

be taken in the exercise of those authorities to deal with

those circumstances;

(4) why the President believes such actions are nec-

essary to deal with those circumstances; and

(5) any foreign countries with respect to which such

actions are to be taken and why such actions are to be

taken with respect to those countries.

At least once during each succeeding six-month period

after transmitting a report pursuant to subsection (b) of this

section with respect to an exercise of authorities under this

chapter, the President shall report to the Congress with

respect to the actions taken, since the last such report, in the

exercise of such authorities, and with respect to any changes

which have occurred concerning any information previously

furnished pursuant to paragraphs (1) through (5) of sub-

section (b) of this section.

(d) Supplemental requirements

The requirements of this section are supplemental to

those contained in title IV of the National Emergencies Act

[50 U.S.C. 1641].

§ 1704. Authority to issue regulations

The President may issue such regulations, including

regulations prescribing definitions, as may be necessary for

the exercise of the authorities granted by this chapter.

§ 1705. Penalties

(a) A civil penalty of not to exceed $10,000 may be

imposed on any person who violates any license, order, or

regulation issued under this chapter.

(b) Whoever willfully violates any license, order, or

regulation issued under 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 knowingly

participates in such violation may be punished by a like fine,

imprisonment, or both.

§ 1706. Savings provisions

(a) Termination of national emergencies pursuant to

National Emergencies Act

(1) Except as provided in subsection (b) of this section,

notwithstanding the termination pursuant to the National

Emergencies Act [50 U.S.C. 1601 et seq.] of a national emer-

gency declared for purposes of this chapter, any authorities

granted by this chapter, which are exercised on the date of

such termination on the basis of such national emergency to

prohibit transactions involving property in which a foreign

country or national thereof has any interest, may continue to

be so exercised to prohibit transactions involving that pro-

perty if the President determines that the continuation of

such prohibition with respect to that property is necessary

on account of claims involving such country or its nationals.

— — — — —

(2) Notwithstanding the termination of the authorities

described in section 101(b) of this Act, any such authorities,

which are exercised with respect to a country on the date of

such termination to prohibit transactions involving any prop-

erty in which such country or any national thereof has any

interest, may continue to be exercised to prohibit trans-

actions involving that property if the President determines

that the continuation of such prohibition with respect to that

property is necessary on account of claims involving such

country or its nationals.

(b) Congressional termination of national emergencies by

concurrent resolution

The authorities described in subsection (a)(1) of this sec-

tion may not continued to be exercise under this section if

the national emergency is terminated by the Congress by

concurrent resolution pursuant to section 202 of the National

Emergencies Act [50 U.S.C. 1622] and if the Congress

specifies in such concurrent resolution that such authorities

may not continue to be exercised under this section.

sistent provisions

(1) The provisions of this section are supplemental to the

savings provisions of 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 termina-

tion provisions of section 101(a) [50 U.S.C. 1601(a)] and of

title II [50 U.S.C. 1621 et seq.] of the National Emergencies

Act to the extent that the provisions of this section are

inconsistent with these provisions.

(d) Periodic reports to Congress

If the President uses the authority of this section to con-

tinue prohibitions on transactions involving foreign property

interests, he shall report to the 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 deter-

mines and certifies to Congress that Burma has made meas-

urable and substantial progress in improving human rights

practices and implementing democratic government. The

following sanctions shall be imposed on Burma:

(1) BILATERAL ASSISTANCE.—There shall be no

United States assistance to the Government of Burma,

other than: ö

(A) humanitarian assistance,

(B) subject to the regular notification proce-

dures of the Committees on Appropriations,

counter-narcotics assistance under chapter 8 of part

I of the Foreign Assistance Act of 1961, or crop

substitution assistance, if the Secretary of State

certifies to the appropriate congressional commit-

tees that —

(i) the Government of Burma is fully coop-

erating with United States counter-narcotics

efforts, and

(ii) the programs are fully consistent with

United States human rights concerns in Burma

and serve the United States national interest,

and ‘

democratic values.

10a

(2) MULTILATERAL ASSISTANCE.—The Secretary

of the Treasury shall instruct the United States execu-

tive director of each international financial institution to

vote against any loan or other utilization of funds of the

respective bank to or for Burma.

(3) VISAS.—Except as required by treaty obliga-

tions or to staff the Burmese mission to the United

States, the United States should not grant entry visas

to 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, if the President

determines and certifies to Congress that, after the date of

enactment of this Act, the Government of Burma has

physically harmed, rearrested for political acts, or exiled

Daw Aung San Suu Kyi or has committed large-scale

repression of or violence against the Democratic opposition.

(e) MULTILATERAL STRATEGY.—The President shal!

seek to develop, in coordination with members of the

ASEAN and other countries having major trading and in-

vestment interests in Burma, a comprehensive, multilateral

strategy to bring democracy to and improve human rights

practices and the quality of life in Burma, including the

development of a dialogue between the State Law and Order

Restoration Council (SLORC) and democratic opposition

groups within Burma.

(d) PRESIDENTIAL REPORTS.—Every six months follow-

ing the enactment of this Act, the President shall report to

the Chairmen of the Committee on Foreign Relations, the

Committee on International Relations and the House and

Senate Appropriations Committees on the following:

lla

(1) progress toward democratization in Burma;

(2) progress on improving the quality of life of the

Burmese people, including progress on market reforms,

living standards, iabor standards, use of forced labor in

the tourism industry and environmental quality; and

(3) progress made in developing the strategy re-

ferred to in subsection (c).

(e) WAIVER AUTHORITY.—The President shall have the

authority to waive, temporarily or permanently, and sanc-

tion referred to in subsection (a) or subsection (b) if he dete-

rmines and certifies to Congress that the application of such

sanction would be contrary to the national security interests

of the United States.

(f) DEFINITIONS.—

(1) The term “international financial institutions”

shall include the International Bank for Reconstruction

and Development, the International Development Asso-

ciation, the International Finance Corporation, the

Multilateral Investment Guarantee Agency, the Asian

Development Bank, and the International Monetary

Fund.

(2) The term “new investment” shall mean any of

the following activities if such an activity is undertaken

pursuant to an agreement, or pursuant to the exercise of

rights under such an agreement, that is entered into

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 of resources located

12a

in Burma, or the entry into a contract providing

for the general supervision and guarantee of

another person’s performance of such a contract;

(B) the purchase of a share of ownership,

including an equity interest, in that development;

the participation in royalties, earnings, or profits

in that development, without regard to the form of

the participation:

Provided, That the term “new investment” does not

include the entry into, performance of, or financing of a

contract to sell or purchase goods, services, or technol-

ogy.

— —

—— 2 —

13a

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 Constitu-

tion and the laws of the United States of America, including

section 570 of the Foreign Operations, Export Financing,

and Related Programs Appropriations Act, 1997 (Public Law

104-208) (the “Act”), the International Emergency Economic

Powers Act (50 U.S.C. 1701 et seg.) (IEEPA), the National

Emergencies Act (50 U.S.C. 101 et seg.), and section 301 of

title 3 of the United States Code;

I, WILLIAM J. CLINTON, President of the United States

of America, hereby determine and certify that, for purposes

of section 570(b) of the Act, the Government of Burma has

committed large-scale repression of the democratic opposi-

tion in Burma after September 30, 1996, and further deter-

mine that the actions and policies of the Government of

Burma constitute an unusual and extraordinary threat to the

national security and foreign policy of the 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 con-

formity with section 570 of the Act and pursuant to this

order, I hereby prohibit new investment in Burma by United

States persons.

Sec.2. The following are also prohibited, except to the

extent provided in 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:

14a

(a) any approval or other facilitation by a United States

person, wherever located, of a transaction by a foreign per-

son where the transaction would constitute new investment

in Burma prohibited by this order if engaged in by a United

States person or within the United States; and

(b) any transaction by a United States person or within

the United States that evades or avoids, or has the purpose

of evading or avoiding, or attempts to 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 of this order is for the general supervision and

guarantee of another person’s performance of a contract for

the economic development of resources located in Burma; or

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

or in part, in:

(i) shares of ownership, including an equity inter-

est, in the economic development of resources located in

Burma; or

(ii) participation in royalties, earnings, or profits in

the economic development of resources located in Burma.

Sec.4. For the purpose of this order:

(a) the term “person” means an individual or en-

tity;

— — —

15a

(b) the term “entity” means a partnership, associa-

tion, trust, joint venture, corporation, or other organiza-

tion,

United States citizen, permanent resident alien, judicial

person organized under the laws of the United States

(including foreign branches), or any person in the United

States;

(d) the term “new investment” means any of the

following activities, if such an activity is undertaken pur-

suant to an agreement, or pursuant to the exercise or

rights under such an agreement, that is entered into with

the Government of Burma or a nongovernmental entity

in Burma on or after the effective date of this order:

(i) the entry into a contract that includes the

economic development of resources located in Burma;

(ii) the entry into a contract providing for the

general supervision and guarantee of another per-

son’s performance of a contract that includes the

economic development of resources located in Burma;

(iii) the purchase of a share of ownership, includ-

ing 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 in Burma,

without regard to the form of the participation;

(e) the term “resources located in Burma” means

any resources, including natural, agricultural, commer-

cial, financial, industrial, and human resources, located

16a

within the territory of Burma, including the territorial

sea, or located wit the exclusive economic zone or

continental shelf of Burma;

(f) the term “economic development of resources

located in Burma” shall not be construed to include not-

for-profit educational, health, or other humanitarian

programs or activities.

Sec. 5. I hereby delegate to the Secretary of State the

functions vested in me under section 570(c) and (d) of the

Act, to be exercised in consultation with the heads of other

agencies of the United States Government as appropriate.

Sec.6. The Secretary of the Treasury, in consultation with

the Secretary of State, is hereby authorized to take such

actions, including the promulgation of rules and regulations,

and to employ all powers granted to me by section 570(b) of

the Act and by IEEPA, as may be necessary to carry out the

purposes of this order. The Secretary of the Treasury may

redelegate the authority set forth in this order to other

officers and agencies of the United States Government. All

agencies of the United States Government are hereby di-

rected to take all appropriate measures within their author-

ity to carry out the provisions 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 instru-

mentalities, its officers or employees, or any other person.

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

daylight time, May 21, 1997.

17a

(b) This order shall be transmitted to the Congress and

published in the Federal Register.

/s/ WILLIAMJ, CLINTON

WILLIAM J. CLINTON

THE WHITE HOUSE

May 20, 1997

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.