[House Document 104-101]
[From the U.S. Government Publishing Office]





        104th Congress, 1st Session - - - - - - - - - House Document 
104-101


                   ACTIONS AND EXPENSES RELATED TO THE
 
   NATIONAL EMERGENCY WITH RESPECT TO THE FEDERAL REPUBLIC OF YUGOSLAVIA

                         (SERBIA AND MONTENEGRO)

                               __________

                                MESSAGE

                                  from

                   THE PRESIDENT OF THE UNITED STATES

                              transmitting

 A REPORT ON ACTIONS AND EXPENSES DIRECTLY RELATED TO THE EXERCISE OF 
   POWERS AND AUTHORITIES CONFERRED BY THE DECLARATION OF A NATIONAL 
 EMERGENCY IN EXECUTIVE ORDER NO. 12808 AND EXECUTIVE ORDER NO. 12934 
 AND TO EXPANDED SANCTIONS AGAINST THE FEDERAL REPUBLIC OF YUGOSLAVIA 
  (SERBIA AND MONTENEGRO) (THE ``FRY (S/M)'') AND THE BOSNIAN SERBS, 
               PURSUANT TO 50 U.S.C. 1641(c) AND 1703(c)




    July 18, 1995.--Message and accompanying papers referred to the 
     Committee on International Relations and ordered to be printed

To the Congress of the United States:
    On May 30, 1992, in Executive Order No. 12808, the 
President declared a national emergency to deal with the threat 
to the national security, foreign policy, and economy of the 
United States arising from actions and policies of the 
Governments of Serbia and Montenegro, acting under the name of 
the Socialist Federal Republic of Yugoslavia or the Federal 
Republic of Yugoslavia, in their involvement in and support for 
groups attempting to seize territory in Croatia and the 
Republic of Bosnia and Herzegovina by force and violence 
utilizing, in part, the forces of the so-called Yugoslav 
National Army (57 FR 23299, June 2, 1992). I expanded the 
national emergency in Executive Order No. 12934 of October 25, 
1994, to address the actions and policies of the Bosnian Serb 
forces and the authorities in the territory of the Republic of 
Bosnia and Herzegovina that they control. The present report is 
submitted pursuant to 50 U.S.C. 1641(c) and 1703(c). It 
discusses Administration actions and expenses directly related 
to the exercise of powers and authorities conferred by the 
declaration of a national emergency in Executive Order No. 
12808 and Executive Order No. 12934 and to expanded sanctions 
against the Federal Republic of Yugoslavia (Serbia and 
Montenegro) (the ``FRY (S/M)'') and the Bosnian Serbs contained 
in Executive Order No. 12810 of June 5, 1992 (57 FR 24347, June 
9, 1992), Executive Order No. 12831 of January 15, 1993 (58 FR 
5253, Jan 21, 1993), Executive Order No. 12846 of April 25, 
1993 (58 FR 25771, April 27, 1993), and Executive Order No. 
12934 of October 25, 1994 (59 FR 54117, October 27, 1994).
    1. Executive Order No. 12808 blocked all property and 
interests in property of the Government of Serbia and 
Montenegro, or held in the name of the former Government of the 
Socialist Federal Republic of Yugoslavia or the Government of 
the Federal Republic of Yugoslavia, then or thereafter located 
in the United States or within the possession or control of 
U.S. persons, including their overseas branches.
    Subsequently, Executive Order No. 12810 expanded U.S. 
actions to implement in the United States the United Nations 
sanctions against the FRY (S/M) adopted in United Nations 
Security Council (``UNSC'') Resolution 757 of May 30, 1992. In 
addition to reaffirming the blocking of FRY (S/M) Government 
property, this order prohibited transactions with respect to 
the FRY (S/M) involving imports, exports, dealing in FRY-origin 
property, air and sea transportation, contract performance, 
funds transfers, activity promoting importation or exportation 
or dealings in property, and official sports, scientific, 
technical, or other cultural representation of, or sponsorship 
by, the FRY (S/M) in the United States.
    Executive Order No. 12810 exempted from trade restrictions 
(1) transshipments through the FRY (S/M), and (2) activities 
related to the United Nations Protection Force (``UNPROFOR''), 
the Conference on Yugoslavia, or the European Community Monitor 
Mission.
    On January 15, 1993, Presidents Bush issued Executive Order 
No. 12831 to implement new sanctions contained in U.N. Security 
Council Resolution 787 of November 16, 1992. The order revoked 
the exemption for transshipments through the FRY (S/M) 
contained in Executive Order No. 12810, prohibited transactions 
within the United States or by a U.S. person relating to FRY 
(S/M) vessels and vessels in which a majority or controlling 
interest is held by a person or entity in, or operating from, 
the FRY (S/M), and stated that all such vessels shall be 
considered as vessels of the FRY (S/M), regardless of the flag 
under which they sail.
    On April 25, 1993, I issued Executive Order No. 12846 to 
implement in the United States the sanctions adopted in UNSC 
Resolution 820 of April 17, 1993. That resolution called on the 
Bosnian Serbs to accept the Vance-Owen peace plan for the 
Republic of Bosnia and Herzegovina and, if they failed to do so 
by April 26, called on member states to take additional 
measures to tighten the embargo against the FRY (S/M) and 
Serbian controlled areas of the Republic of Bosnia and 
Herzegovina and the United Nations Protected Areas in Croatia. 
Effective April 26, 1993, the order blocked all property and 
interests in property of commercial, industrial, or public 
utility undertakings or entities organized or located in the 
FRY (S/M), including property and interests in property of 
entities (wherever organized or located) owned or controlled by 
such undertakings or entities, that are or thereafter come 
within the possession or control of U.S. persons.
    On October 25, 1994, in view of UNSC Resolution 942 of 
September 23, 1994, I issued Executive Order No. 12934 in order 
to take additional steps with respect to the crisis in the 
former Yugoslavia. (59 FR 54117, October 27, 1994.) Executive 
Order No. 12934 expands the scope of the national emergency 
declared in Executive Order No. 12808 to address the unusual 
and extraordinary threat to the national security, foreign 
policy, and economy of the United States posed by the actions 
and policies of the Bosnian Serb forces and the authorities in 
the territory in the Republic of Bosnia and Herzegovina that 
they control, including their refusal to accept the proposed 
territorial settlement of the conflict in the Republic of 
Bosnia and Herzegovina.
    The Executive order blocks all property and interests in 
property that are in the United States, that hereafter come 
within the United States, or that are or hereafter come within 
the possession or control of United States persons (including 
their overseas branches) of: (1) the Bosnian Serb military and 
paramilitary forces and the authorities in areas of the 
Republic of Bosnia and Herzegovina under the control of those 
forces; (2) any entity, including any commercial, industrial, 
or public utility undertaking, organized or located in those 
areas of the Republic of Bosnia and Herzegovina under the 
control of Bosnian Serb forces; (3) any entity, wherever 
organized or located, which is owned or controlled directly or 
indirectly by any person in, or resident in, those areas of the 
Republic of Bosnia and Herzegovina under the control of Bosnian 
Serb forces; and (4) any person acting for or on behalf of any 
person within the scope of the above definitions.
    The Executive order also prohibits the provision or 
exportation of services to those areas of the Republic of 
Bosnia and Herzegovina under the control of Bosnian Serb 
forces, or to any person for the purpose of any business 
carried on in those areas, either from the United States or by 
a U.S. person. The order also prohibits the entry of any U.S.-
flagged vessel, other than a U.S. naval vessel, into the 
riverine ports of those areas of the Republic of Bosnia and 
Herzegovina under the control of Bosnia Serb forces. Finally, 
any transaction by any U.S. person that evades or avoids, or 
has the purpose of evading or avoiding, or attempts to violate 
any of the prohibitions set forth in the order is prohibited. 
Executive Order No. 12934 became effective at 11:59 p.m., 
e.d.t., on October 25, 1994.
    2. The declaration of the national emergency on May 30, 
1992, was made pursuant to the authority vested in the 
President by the Constitution and laws of the United States, 
including the International Emergency Economic Powers Act (50 
U.S.C. 1701 et seq.), the National Emergencies Act (50 U.S.C. 
1601 et seq.), and section 301 of title 3 of the United States 
Code. The emergency declaration was reported to the Congress on 
May 30, 1992, pursuant to section 204(b) of the International 
Emergency Economic Powers Act (50 U.S.C. 1703(b)) and the 
expansion of that National Emergency under the same authorities 
was reported to the Congress on October 25, 1994. The 
additional sanctions set forth in related Executive orders were 
imposed pursuant to the authority vested in the President by 
the Constitution and laws of the United States, including the 
statutes cited above, section 1114 of the Federal Aviation Act 
(49 U.S.C. App. 1514), and section 5 of the United Nations 
Participation Act (22 U.S.C. 287c).
    3. There have been no amendments to the Federal Republic of 
Yugoslavia (Serbia and Montenegro) Sanctions Regulations (the 
``Regulations''), 31 C.F.R. Part 585, since the last report. 
The Treasury Department had previously published 853 names in 
the Federal Register on November 17, 1994 (59 FR 59460), as 
part of a comprehensive listing of all blocked persons and 
specially designated nationals (``SDNs'') of the FRY (S/M). 
This list identified individuals and entities determined by the 
Department of the Treasury to be owned or controlled by or 
acting for or on behalf of the Government of the FRY (S/M), 
persons in the FRY (S/M), or entities located or organized in 
or controlled from the FRY (S/M). All prohibitions in the 
Regulations pertaining to the Government of the FRY (S/M) apply 
to the entitled and individuals identified. U.S. persons, on 
notice of the status of such blocked persons and specially 
designated nationals, are prohibited from entering into 
transactions with them, or transactions in which they have an 
interest, unless otherwise exempted or authorized pursuant to 
the Regulations.
    On February 22, 1995, pursuant to Executive Order 12934 and 
the Regulations, Treasury identified 85 individuals as leaders 
of the Bosnian Serb forces or civilian authorities in the 
territories in the Republic of Bosnia and Herzegovina that they 
control. Also on February 22, Treasury designated 19 
individuals and 23 companies as SDNs of the FRY (S/M). These 
designations include FRY (S/M)-connected companies around the 
world that are being directed from Cyprus, two Cypriot-owned 
firms that have had a central role in helping establish and 
sustain sanctions-evading FRY (S/M) front companies in Cyprus, 
and the head of the FRY (S/M)'s Central Bank who is also the 
architect of the FRY (S/M) economic program.
    Additionally, on March 13, 1995, Treasury named 32 firms 
and eight individuals that are part of the Karic Brothers' 
family network of companies as SDNs of the FRY (S/M). Their 
enterprises span the globe and are especially active in former 
East Bloc countries. These additions and amendments, published 
in the Federal Register on April 18, 1995 (60 FR 19448), bring 
the current total of Blocked Entities and SDNs of the FRY (S/M) 
to 938 and the total number of individuals identified as 
leaders of the Bosnian Serb military or paramilitary forces or 
civilian authorities in the territories in the Republic of 
Bosnia and Herzegovina that they control to 85. A copy of the 
notice is attached.
    Treasury's blocking authority as applied to FRY (S/M) 
subsidiaries and vessels in the United States has been 
challenged in court. In Milena Ship Management Company, Ltd. v. 
Newcomb, 804 F.Supp. 846, 855, and 859 (E.D.L.A. 1992) aff'd, 
995 F.2d 620 (5th Cir. 1993), cert. denied, 114 S.Ct. 877 
(1994), involving five ships owned or controlled by FRY (S/M) 
entities blocked in various U.S. ports, the blocking authority 
as applied to these vessels was upheld. In IPT Company, Inc. v. 
United States Department of the Treasury, No. 92 CIV 5542 
(S.D.N.Y. 1994), the district court also upheld the blocking 
authority as applied to the property of a Yugoslav subsidiary 
located in the United States. The latter case is currently on 
appeal to the Second Circuit.
    4. Over the past 6 months, the Departments of State and 
Treasury have worked closely with European Union (the ``EU'') 
member states and other U.N. member nations to coordinate 
implementation of the U.N. sanctions against the FRY (S/M). 
This has included visits by assessment teams formed under the 
auspices of the United States, the EU, and the Organization for 
Security and Cooperation in Europe (the ``OSCE'') to states 
bordering on Serbia and Montenegro; continued deployment of 
OSCE sanctions assistance missions (``SAMs'') to Albania, 
Bulgaria, Croatia, the former Yugoslav Republic of Macedonia, 
Hungary, Romania, and Ukraine to assist in monitoring land and 
Danube River traffic; support for the International Conference 
on the Former Yugoslavia (``ICFY'') monitoring missions along 
the Serbia-Montenegro-Bosnia border; bilateral contacts between 
the United States and other countries for the purpose of 
tightening financial and trade restrictions on the FRY (S/M); 
and ongoing multilateral meetings by financial sanctions 
enforcement authorities from various countries to coordinate 
enforcement efforts and to exchange technical information.
    5. In accordance with licensing policy and the Regulations, 
FAC has exercised its authority to license certain specific 
transactions with respect to the FRY (S/M) that are consistent 
with U.S. foreign policy and the Security Council sanctions. 
During the reporting period, FAC has issued 109 specific 
licenses regarding transactions pertaining to the FRY (S/M) or 
assets its own or controls, bringing the total as of April 25, 
1995, to 930. Specific licenses have been issued (1) for 
payment to U.S. or third-country secured creditors, under 
certain narrowly-defined circumstances, for pre-embargo import 
and export transactions; (2) for legal representation or advice 
to the Government of the FRY (S/M) or FRY (S/M)-located or 
controlled entities; (3) for the liquidation or protection of 
tangible assets of subsidiaries of FRY (S/M)-located or 
controlled firms located in the U.S.; (4) for limited 
transactions related to FRY (S/M) diplomatic representation in 
Washington and New York; (5) for patent, trademark and 
copyright protection in the FRY (S/M) not involving payment to 
the FRY (S/M) Government; (6) for certain communications, news 
media, and travel-related transactions; (7) for the payment of 
crews' wages, vessel maintenance, and emergency supplies for 
FRY (S/M) controlled ships blocked in the United States; (8) 
for the removal from the FRY (S/M), or protection within the 
FRY (S/M), of certain property owned and controlled by U.S. 
entities; (9) to assist the United Nations in its relief 
operations and the activities of the U.N. Protection Force; and 
(10) for payment from funds outside the United States where a 
third country has licensed the transaction in accordance with 
U.N. sanctions. Pursuant to U.S. regulations implementing UNSC 
Resolutions, specific licenses have also been issued to 
authorize exportation of food, medicine, and supplies intended 
for humanitarian purposes in the FRY (S/M).
    During the past 6 months, FAC has continued to oversee the 
liquidation of tangible assets of the 15 U.S. subsidiaries of 
entities organized in the FRY (S/M). Subsequent to the issuance 
of Executive Order No. 12846, all operating licenses issued for 
these U.S.-located Serbian or Montenegrin subsidiaries or joint 
ventures were revoked, and the net proceeds of the liquidation 
of their assets placed in blocked accounts.
    In order to reduce the drain on blocked assets caused by 
continuing to rent commercial space, FAC arranged to have the 
blocked personalty, files, and records of the two Serbian 
banking institutions in New York moved to secure storage. The 
personalty is being liquidated, with the net proceeds placed in 
blocked accounts.
    Following the sale of the M/V Kapetan Martinovic in January 
1995, five Yugoslav-owned vessels remain blocked in the United 
States. Approval of the UNSC's Serbian Sanctions Committee was 
sought and obtained for the sale of the M/V Kapetan Martinovic 
(and the M/V Bor, which was sold in June 1994) based on U.S. 
assurances that the sale would comply with four basic 
conditions, which assure that both U.S. and U.N. sanctions 
objectives with respect to the FRY (S/M) are met: (1) the sale 
will be for fair market value; (2) the sale will result in a 
complete divestiture of any interest of the FRY (S/M) (or of 
commercial interests located in or controlled from the FRY (S/
M)) in the vessel; (3) the sale would result in no economic 
benefit to the FRY (S/M) (or commercial interests located in or 
controlled from the FRY (S/M)); and (4) the net proceeds of the 
sale (the gross proceeds less the costs of sale normally paid 
by the seller) will be placed in a blocked account in the 
United States. Negotiations for the sale of the M/V Bar, now 
blocked in New Orleans, are underway and are likely to be 
concluded prior to my next report.
    Other than the M/V Bar, the four remaining Yugoslav-owned 
vessels are beneficially owned by Jugooceanija Plovidba of 
Kotor, Montenegro, and managed by Milena Ship Management Co. 
Ltd. in Malta. These vessels have many unpaid U.S. creditors 
for services and supplies furnished during the time they have 
been blocked in the United States; moreover, the owner appears 
to have insufficient resources to provide for the future upkeep 
and maintenance needs of these vessels and their crews. The 
United States is notifying the UNSC's Serbian Sanctions 
Committee of the United States' intention to license some or 
all of these remaining four vessels upon the owner's request.
    With the FAC-licensed sales of the M/V Kapetan Martinovic 
and the M/V Bor, those vessels were removed from the list of 
blocked FRY entities and merchant vessels maintained by FAC. 
The new owners of several formerly Yugoslav-owned vessels, 
which have been sold in other countries, have petitioned FAC to 
remove those vessels from the list. FAC, in coordination with 
the Department of State, is currently reviewing the sale terms 
and conditions for those vessels to ascertain whether they 
comply with U.N. sanctions objectives and UNSC's Serbian 
Sanctions Committee practice.
    During the past 6 months, U.S. financial institutions have 
continued to block funds transfers in which there is an 
interest of the Government of the FRY (S/M) or an entity or 
undertaking located in or controlled from the FRY (S/M), and to 
stop prohibited transfers to persons in the FRY (S/M). Such 
interdicted transfers have accounted for $125.6 million since 
the issuance of Executive Order No. 12808, including some $9.3 
million during the past 6 months.
    To ensure compliance with the terms of the licenses that 
have been issued under the program, stringent reporting 
requirements are imposed. More than 279 submissions have been 
reviewed by FAC since the last report, and more than 125 
compliance cases are currently open.
    6. Since the issuance of Executive Order No. 12810, FAC has 
worked closely with the U.S. Customs Service to ensure both 
that prohibited imports and exports (including those in which 
the Government of the FRY (S/M) or Bosnian Serb authorities 
have an interest) are identified and interdicted, and that 
permitted imports and exports move to their intended 
destination without undue delay. Violations and suspected 
violations of the embargo are being investigated and 
appropriate enforcement actions are being taken. There are 
currently 37 cases under active investigation. Since the last 
report, FAC has collected nine civil penalties totaling nearly 
$20,000. Of these, five were paid by U.S. financial 
institutions for violative funds transfers involving the 
Government of the FRY (S/M), persons in the FRY (S/M), or 
entities located or organized in or controlled from the FRY (S/
M). Three U.S. companies and one air carrier have also paid 
penalties related to exports or unlicensed payments to the 
Government of the FRY (S/M) or persons in the FY (S/M) or other 
violations of the Regulations.
    7. The expenses incurred by the Federal Government in the 
6-month period from November 30, 1994, through May 29, 1995, 
that are directly attributable to the authorities conferred by 
the declaration of a national emergency with respect to the FRY 
(S/M) and the Bosnian Serb forces and authorities are estimated 
at about $3.5 million, most of which represent wage and salary 
costs for Federal personnel. Personnel costs were largely 
centered in the Department of the Treasury (particularly in FAC 
and its Chief Counsel's Office, and the U.S. Customs Service), 
the Department of State, the National Security Council, the 
U.S. Coast Guard, and the Department of Commerce.
    8. The actions and policies of the Government of the FRY 
(S/M), in its involvement in and support for groups attempting 
to seize and hold territory in the Republics of Croatia and 
Bosnia and Herzegovina by force and violence, and the actions 
and policies of the Bosnian Serb forces and the authorities in 
the areas of Bosnia and Herzegovina under their control, 
continue to pose an unusual and extraordinary threat to the 
national security, foreign policy, and economy of the United 
States. The United States remains committed to a multilateral 
resolution of the conflict through implementation of the United 
Nations Security Council resolutions.
    I shall continue to exercise the powers at my disposal to 
apply economic sanctions against the FRY (S/M) and the Bosnian 
Serb forces, civil authorities, and entities, as long as these 
measures are appropriate, and will continue to report 
periodically to the Congress on significant developments 
pursuant to 50 U.S.C. 1703(c).

                                                William J. Clinton.
    The White House, July 18, 1995.
    
    
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