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Consarc Corporation and Consarc Engineering, Ltd., Appellees,

v.

United States Treasury Department, Office of Foreign Assets Control, Appellant

SENTELLE, Circuit Judge:

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1. Interpretation of the International Emergency Economic Powers Act

We have already determined that Iraq has no existing interest in the down payment that Consarc has already received. See Consarc I, 27 F.3d at 700. Consarc thus argues that OFAC cannot control the down payment under the IEEPA because the IEEPA limits a Presidential freeze to property or transactions involving property in which the enemy country has some interest. See 50 U.S.C. § 1702(a) (1). As OFAC asserts that its regulation would require Consarc to place the down payment into a blocked account should Consarc want OFAC to release the remaining furnace and the proceeds from the sale of the other furnace, Consarc concludes that the regulation exceeds the plain bounds of the authorizing statute. The District Court appears to have agreed, noting that "OFAC has no authority to block the down payment because the government can only block those payments in which Iraq has an interest." Consarc II, 871 F. Supp. at 1465.

As OFAC is the agency authorized to oversee the freeze, see 31 C.F.R. Sec. 575.805 (1995), a challenge to its interpretation must either demonstrate that the statute clearly forbids the agency's interpretation or that the interpretation is unreasonable. See Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843-44, 104 S. Ct. 2778, 2781-83, 81 L. Ed. 2d 694 (1984). Consarc argues only the former, and it is not persuasive. In order to conclude that OFAC's regulation exceeds the authority delegated to it by the plain meaning of the statute, we would have to narrow the language of the IEEPA to an extent that itself would be unreasonable. The IEEPA grants broad powers to the President to control property within the dominion of the United States in which an enemy nation has an interest. The pertinent section of the IEEPA permits the executive branch

[to] investigate, regulate or prohibit... transfers of credit or payments... by... any banking institution, to the extent that such transfers... involve any interest of any foreign country... [and] transactions involving... any property in which any foreign country... has any interest.

50 U.S.C. § 1702(a) (1). This extensive statutory grant of power cannot be read to bar OFAC from promulgating a regulation that requires a corporation to freeze either the goods it manufactured for Iraq or any payments received for these goods from Iraq. Although Iraq may no longer have any interest in its down payment, it still has some interest in the goods for which the down payment was paid and some interest in the transaction. The text of the statute thus does not clearly forbid OFAC from enforcing its regulation against the down payment or the goods themselves.

2. Interpretation of Iraqi Sanctions Regulation Sec. 575.413

Appellees also question OFAC's interpretation of 31 C.F.R. Sec. 575.413 (1995). Consarc again argues that Sec. 575.413 does not require Consarc to place the down payment into a blocked account because Iraq has no interest in the down payment. See Consarc I, 27 F.3d at 700. Because Consarc had received no other payment from Iraq and Iraq never held title to the goods, Consarc believes that, as the District Court concluded, it "has satisfied all of the requirements of Sec. 575.413." Consarc II, 871 F. Supp. at 1465.

Such belief is unfounded. Both appellee and the District Court have misinterpreted the text of the regulation, which provides an exception to the general freeze on transactions or property involving an Iraqi interest. See 31 C.F.R. Sec. 575.201(a) (1995). Before goods that were "manufactured... for export to Iraq" may be released free and clear to their manufacturer, the manufacturer must show that:

1) Iraq "has never held or received title to such goods;" and

2) "any payment received from the Government of Iraq with respect to such goods" has been placed in an appropriate blocked account.

31 C.F.R. Sec. 575.413 (1995).

Here, Consarc has not fulfilled the second threshold with respect to the down payment that it received for the furnaces. Although the law of the case establishes that the Iraqi government has no property interest in the down payment itself, see Consarc I, 27 F.3d at 700, this lack of interest in the down payment is irrelevant to whether the requirements of Sec. 575.413 have been satisfied. Section 575.413 requires that all payments from Iraq--not merely those payments in which Iraq maintains an interest--be placed into a blocked account before OFAC may release the goods. Consarc has not placed the down payment, which all parties concede was received from the Government of Iraq with respect to the furnaces that Iraq had ordered, into a blocked account. Unless and until this payment is placed in a suitable blocked account, the narrow exception provided for in the above regulation does not apply, and the proceeds from the sale of one furnace and the remaining furnace are subject to OFAC's authority.

We thus have no difficulty concluding that the meaning of the text of Sec. 575.413 agrees with OFAC's interpretation of that regulation. Moreover, an interpretation of the ISR by OFAC, being an agency's application of its own regulations, receives "an even greater degree of deference than the Chevron standard, and must prevail unless plainly inconsistent with the regulation." Consarc I, 27 F.3d at 702. In light of the reasonableness of OFAC's interpretation, the deference owed OFAC, and the general interpretive principle that exceptions to a broad regulatory scheme are to be read narrowly, cf. Commissioner v. Clark, 489 U.S. 726, 739, 109 S. Ct. 1455, 1463, 103 L. Ed. 2d 753 (1989), we are compelled to reverse the District Court. The District Court's appeal to " [e]quity and fairness" affects neither our reasoning nor our result. Even a well-founded claim in equity would not suffice to override the plain effect of the law.[]

"No principle of law is better established than the rule that a District Court is bound 'by the decree [of the Court of Appeals]... and must carry it into execution, according to the mandate.' " Mays v. Burgess, 152 F.2d 123, 124 (D.C. Cir. 1945) (citation omitted). In this case, the District Court, for whatever reason, did not resolve the proceedings on remand as we thought we had directed. Nor have appellees conformed to our order in Consarc I. We therefore again reverse and remand to the District Court to conduct proceedings entirely consistent with this ruling. We expect that the District Court will order Consarc to restore the sum of $6,422,418.10, plus appropriate interest, to a blocked account in Rafidain's name in The Bank of New York. We also expect that the District Court will make clear that any claim Consarc has against Iraq is only a general claim. Finally, we expect that the District Court will permit OFAC to block the unsold 400 KW/120 KW electron beam refining and melting furnace and other unsold goods ordered by IMIM in 1989 as well as the proceeds, along with any interest accrued, obtained from any sale of the goods once ordered by IMIM, unless and until Consarc places any payment received from Iraq for the goods IMIM had ordered into an appropriate blocked account and otherwise complies with Sec. 575.413.

It is so ordered.

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