ENCLOSURE

Treasury Department Regulations Not Subject to Review Under E.O.
12866 as of November 1993

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Regulations that implement a military and foreign affairs
function of the United States, including:

Regulations issued by the office of Foreign Assets
Control (OFAC) that implement the President’s foreign
policy by blocking assets and imposing economic
sanctions on foreign countries.

Regulations issued by the Secretary of the Treasury in
his capacity as Chairman of the Committee on Foreign
Investment in the United States pursuant of the Defense
Production Act of 1950 (as amended by the Omnibus Trade
and Competitiveness Act of 1988), providing for the
national security review of mergers, acquisitions and
takeovers of U.S. firms by foreign entities.

Regulations issued by the Assistant Secretary (Economic
Policy) concerning the periodic reporting of portfolio
capital positions and transactions pursuant to the
International Investment and Trade in Services Survey
Act and the Bretton Woods Agreements Act, and the
reporting of foreign currency positions of large U.S.
business enterprises and their foreign affiliates
pursuant to Section 5315 of title 31, United States
Code.

U. S. Customs Service (Customs) regulations restricting
the importation of particular articles.

Bureau of Public Debt (BPD) regulations that implement,
through the exercise of the general borrowing power, the
fiscal policies of the United States.

Bureau of Alcohol, Tobacco and Firearms (BATF) regulations
concerning the establishment or designation of geographical
viticultural areas.

Internal Revenue Service (IRS), Customs and BATF regulations
that are not subject to the approval of an Assistant
Secretary prior to issuance.

Rulings documents issued by the IRS, BATF, and Customs.


DEPARTMENT OF THE TREASURY
WASHINGTON

GENERAL COUNSEL November 4, 1993

The Honorable Sally Katzen

Administrator, Office of Information
and Regulatory Affairs

Executive Office of the President

Office of Management and Budget

Washington, D.C. 20503

Dear Sally:

The purpose of this letter is to restate my understanding,
based on our previous conversations and your October 12 guidance
memorandum, that E.O. 12866 does not apply to regulatory actions of
the Department of the Treasury that were not subject to review under
the terms of E.O., 12291 or the Treasury-OMB memorandum of. agreement
(MOA) implementing that Order.

E.O, 12291 did not apply to agency regulations "issued with
respect to a military or foreign affairs function of the United

States." E.O. 12866 contains a parallel exemption, but specifically
includes such regulations that involve the "import or export of non-
defense articles and services." It is my understanding that this

limitation on the exemption is not intended to apply to Treasury
regulations that were not subject to E.O. 12291. Examples of such
regulations include:

° Regulations issued by the Office of Foreign Assets Control
(OFAC) that implement the President's foreign policy by blocking
assets and imposing economic sanctions on foreign countries.
Current sanctions programs include Haiti, Iraq, Vietnam, Cuba,
Iran, Libya, and Yugoslavia (Serbia and Montenegro) .

e Regulations issued by the Secretary of the Treasury in his
capacity as Chairman of the Committee on Foreign Investment in
the United States pursuant to the Defense Production Act of 1950
(as amended by the Omnibus Trade and Competitiveness Act of
1988), providing for the national security review of mergers,
acquisitions and takeovers of U.S. firms by foreign entities.

° Regulations issued by the Assistant Secretary (Economic Policy)
concerning the periodic reporting of portfolio capital positions
and transactions pursuant to the International Investment and
Trade in Services Survey Act and the Bretton Woods Agreements
Act, and the reporting of foreign currency positions of large
U.S. business enterprises and their foreign affiliates pursuant
to section 5315 of title 31, United States Code.


2

° Customs regulations restricting the importation of particular
articles. For example, Customs issues regulations to restrict
the importation of articles based on determinations made by the
U.S. Information Agency (USIA) under the authority of the Con-
vention on Cultural Property Implementation Act. Recently, such
regulations have restricted the importation of archaeological
artifacts from Mali, El Salvador and Guatemala.

The MOA exempted from E.O. 12291 review (1) all rulings
documents issued by the Internal Revenue Service (IRS), the Bureau of
Alcohol, Tobacco and Firearms (BATF), and the U.S. Customs Service
and (2) and specified regulations issued by those bureaus and the
Bureau of the Public Debt (BPD). Appendix C of your October 12 guid-
ance memorandum, which lists regulations that are not subject to E.0o.
12866 review, includes the ruling documents but omits the regulations
included in the MOA. We believe this was an oversight and it is my
understanding that the following continue to be exempt from review
under E.O. 12866 on the basis of the statement in your memorandum
that previously granted exemptions remain in effect:

° BPD regulations that implement, through the exercise of the
general borrowing power, the fiscal policies of the United
States.

e BATF regulations concerning the establishment or designation of

geographical viticultural areas.

e IRS, Customs and BATF regulations that are not subject to the
approval of an Assistant Secretary prior to issuance. For
example, Customs issues regulations pursuant to certifications
made by the State Department that grant vessels or aircraft of a
foreign country reciprocal treatment in the United States when
the foreign country provides the same treatment to U.S. vessels
or aircraft; the IRS issues regulations amending the Statement
of Procedural Rules, 26 CFR Part 601.

e Advance notices of proposed rulemaking (ANPRMs) issued by IRS,
Customs and BATF. In the past three years, BATF issued three
ANPRMs and Customs issued one, none of which contained proposed
regulatory text; the IRS did not issue any ANPRMs during this
period.

We would be pleased to discuss any of the above referenced
regulations with you or your staff.

Sincerely,

LF

Je#n E. Hanson
General Counsel


EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503

ADMINISTRATOR DEG 22 1998

OFFICE OF
INFORMATION AND
REGULATORY AFFAIRS

Honorable Jean E. Hanson
General Counsel

Department of the Treasury
Room 300

Washington, D.C. 20220

Dear Jean:

This is in response to your letter of November 4, 1993,
which discussed the application of Executive Order No. 12866 to
Treasury regulations.

You are correct in stating our agreement that the new
Executive Order does not apply to the substantive categories of
regulatory actions of the Department of the Treasury that were
not subject to review under Executive Order 12291 or the
Treasury/OMB Memorandum of Agreement implementing that Order.
Please note, however, that the new Executive Order does apply to
advance notices of proposed rules (ANPRM’s) unless an ANPRM falls
within one of the substantive areas that we have agreed to
exempt.

In the enclosed document, we have outlined the substantive
areas of regulation that we are prepared to add to the "exempt
list" attached to our October 12 guidance memorandum. All other
rules should be included on the lists of rules under development
that is to be submitted periodically to OMB so that we can
determine which are "significant" and hence warrant centralized
review. Simply stated, we are continuing the Treasury
Department’s current exemptions from regulatory review, except
for ANPRM’s. If the nature of Treasury’s regulatory issues
should change, we will consult with you to work out any necessary
adjustments.

I want to take this occasion to thank you again for the
professional and expeditious way your staff has handled
regulatory issues. I look forward to working with you as we
implement the new Executive Order.

Sincerely,
\
Sally tzen

Enclosure