Trump Administration Uses New Approach in Syria Sanctions Action

On April 24, 2017, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned 271 employees of Syria’s Scientific Studies and Research Center (“SSRC”) pursuant to Executive Order 13582 (targeting the Syrian government and its supporters).  The designations are part of the Trump Administration’s response to the April 4, 2017 chemical weapons attack in Khan Sheikhoun, Syria, carried out by the Syrian government.  According to the OFAC press release, the targeted individuals “have expertise in chemistry and related disciplines and/or have worked in support of SSRC’s chemical weapons program since at least 2012.” The new designations come on the heels of a U.S. missile strike against the Syrian airbase from which the chemical attack was launched.

Pursuant to the designations, the property and interests in property of the sanctioned individuals, to the extent located in the United States or in the possession or control of a U.S. person, are blocked. Essentially, this means that all U.S. persons worldwide are required to freeze the sanctioned persons’ assets and are cut off from all transactions and dealings with them. Continue Reading

Trump Administration Considers National Security Implications of Steel Imports

On April 19, the Trump administration took action under a rarely-used provision of the Trade Expansion Act of 1962, allowing the United States to impose tariffs if it determines that certain imports pose a national security threat.  Acting under section 232 of the Trade Expansion Act, the Department of Commerce announced the start of an investigation to assess whether steel imports threaten US national security and should be curtailed accordingly.  Under the statute, the Department of Commerce has 270 days to submit to the President its findings and any recommendations for action.  However, the process may go considerably faster than that, as President Trump has signaled he wants the Commerce Department to move expeditiously.  Section 232 has not been invoked since 2001 and has not resulted in the imposition of tariffs since 1975. 

During the campaign, President Trump repeatedly promised to take a tough line on international trade issues, particularly where he believed American jobs were at stake.  He also frequently alleged that China, one of the principal sources of US steel imports, engages in unfair trade practices.  The initiation of a Section 232 investigation can be seen as another step in following through on those campaign promises.    Continue Reading

Trump Administration Certifies Iran’s Compliance with Nuclear Deal, but Initiates Review of Sanctions Relief

Will the Trump Administration “waive” goodbye to sanctions relief under the Iran nuclear deal?

Last night, Secretary of State Rex Tillerson certified to Congress that Iran is in compliance with the Joint Comprehensive Plan of Action (JCPOA) agreement regarding Iran’s nuclear program, but signaled that the Trump Administration is reviewing whether continued sanctions relief under the JCPOA would be appropriate.  Secretary Tillerson’s communication is set out in a letter to House Speaker Paul Ryan and summarized in a Reuters article.

The Tillerson letter states:

This letter certifies that the conditions of Section 135(d)(6) of the Atomic Energy Act of 1954 (AEA), as amended, including as amended by the Iran Nuclear Agreement Review Act of 2015 (Public Law 114-17), enacted May 22, 2015, are met as of April 18, 2017.

Notwithstanding, Iran remains a leading state sponsor of terror through many platforms and methods. President Donald J. Trump has directed a National Security Council-led interagency review of the Joint Comprehensive Plan of Action (JCPOA) that will evaluate whether suspension of sanctions related to Iran pursuant to the JCPOA is vital to the national security interests of the United States. When the interagency review is completed, the administration looks forward to working with Congress on this issue.

What’s going on here?  The key term is “vital to the national security interests of the United States”.

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What’s in a Photo? And Thoughts on the UK Sanctions Scene

A couple of recent news items throw into sharp relief what we long have noted here at the International Compliance Blog—that economic sanctions are a key tool of a country’s national security and foreign policy, and can serve as an instrument by which to influence a broad array of events.

First, take a look at this photo:

President Donald Trump receives a briefing on a military strike on Syria from his National Security team

This is an official White House photo of President Trump and members of his administration receiving a top secret briefing, in the Secure Compartmentalized Information Facility (SCIF) at the President’s Mar-a-Lago estate, regarding the recent cruise missile strikes against Syria.  The New York Times, BBC, and CNN have scrutinized the photo to decipher its implications for various palace intrigues, noting which administration officials were in the room, who was not in the room, and who was seated where.

Palace intrigues aside, the photo raises an interesting question for our purposes—why were Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross in the room?

Both the Times and BBC have speculated that they were included in the briefing because they were at Mar-a-Lago to meet with Xi Jinping, the President of China, and were invited simply because they were already onsite.

But let’s consider a different view—that the Treasury and Commerce Secretaries attended because the Treasury and Commerce Departments are part of the national security apparatus of the United States.  Continue Reading

Congressional CFIUS Round-Up

The Committee on Foreign Investment in the United States (“CFIUS”) review process has long been a creature of the executive branch, but members of the House and Senate are increasingly trying to exert their influence over CFIUS in 2017—and it is Chinese and Russian investors who are first and foremost in Congress’s sights.

On April 10, a bipartisan group of senators urged Treasury Secretary Steven Mnuchin, who chairs the Committee, to conduct a “thorough, conflict-free and expedient review” of Russian energy giant Rosneft’s potential acquisition of part of Citgo’s Venezuelan parent company, Petroleos de Venezuela S.A. (PdVSA). Rosneft, which is majority-owned by the Russian government and run by Putin ally Igor Sechin, extended a $1.5 billion loan to PdVSA, but required that PdVSA put up as collateral a 49.9% share in Citgo’s US-chartered parent company, Citgo Holding. Sechin is currently on the Specially Designated Nationals and Blocked Persons List (“SDN”), meaning that he has been subject to US economic and travel sanctions in his individual capacity since April 2014 due to his role in “contributing to the situation in Ukraine.” The letter contends that, if PdVSA defaults and Rosneft acquires a stake in Citgo, it would “pose a grave threat to American energy security, impact the flow and price of gasoline for American consumers, and expose critical U.S. infrastructure to national security threats.” Continue Reading

Executive Orders Indicate Increased Enforcement and Costs on Import Declarations, Potential Action on Trade Deficits

On March 31, 2017, President Donald J. Trump signed two Executive Orders on international trade and customs issues. The first of the two orders suggests that much tougher enforcement actions will be coming for import compliance especially, but not only, on merchandise (1) subject to antidumping (“AD”) or countervailing duty (“CVD”) orders, and (2) that may infringe on intellectual property rights (“IPR”).  The second order requires a thorough report on trade deficits to support potential, as yet undefined, changes in trade policy to reduce those deficits.  While relatively short on specifics, the orders strongly suggest that changes in U.S. import requirements – and an increase in enforcement actions – may be implemented in the coming months.

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OFSI Issues Regulations Implementing Civil Penalties for Financial Sanctions Violations

Following up on our previous post, yesterday the UK Office of Financial Sanctions Implementation (OFSI) issued regulations formally implementing the civil penalties framework set out in the Policing and Crime Act 2017.  OFSI has issued a press release, regulations regarding civil penalties, responses received to OFSI’s request for consultation regarding draft guidance issued in December 2016, and amended guidance regarding financial sanctions generally.  The OFSI regulations essentially are consistent with our previous reporting.

We will follow up with a more detailed analysis of the OFSI regulations.

UK to Move Towards US-Style Sanctions Enforcement with Upcoming Penalty Regulations

The UK’s Office of Financial Sanctions Implementation will soon issue regulations that could significantly alter the British sanctions enforcement environment, and bring it closer in line with the US’s approach to such violations.  On the heels of the newly-enacted Policing and Crime Act 2017, the regulations will introduce civil penalties for the violation of financial sanctions.  Previously, the UK sanctions framework imposed only criminal liability.  This and other changes, expected in April 2017, will affect the type and magnitude of penalties available to UK regulators.  For a detailed analysis of the new regulations, including potential impacts and further comparison to US enforcement, please see our advisory.

New Iran Sanctions Bills Backed by Bipartisan Group of Key Legislators

On March 23, 2017, members of Congress introduced two new bills aimed at increasing non-nuclear sanctions against Iran. While several Iran sanctions bills have been introduced since the start of the year, these newly introduced bills are particularly notable due to their bipartisan support from an influential group of legislators. The bills represent legislative compromises between Republican Iran sanctions hawks and Democrats seeking to preserve the Joint Comprehensive Plan of Action (JCPOA) agreement regarding Iran’s nuclear program.

In the Senate, a bipartisan group of senators introduced the Countering Iran’s Destabilizing Activities Act of 2017. The bill’s sponsors included Senate on Foreign Relations Committee Chairman Bob Corker (R-TN) and Ranking Member Ben Cardin (D-MD). In the House, a similarly bipartisan group of representatives introduced the Iran Ballistic Missiles and International Sanctions Enforcement Act of 2017, including House Foreign Affairs Committee Chairman Ed Royce (R-CA) and Ranking Member Eliot Engel (D-NY), House Majority Leader Kevin McCarthy (R-CA), and House Minority Whip Steny Hoyer (D-MD).

Under the JCPOA, the United States suspended a number of sanctions previously imposed in response to Iran’s nuclear program, and agreed not to implement new “nuclear-related” sanctions. Therefore, these bills purport to impose new sanctions only with regard to Iran’s non-nuclear activities, such as its ballistic missile program, support for terrorism, and human rights abuses.

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ZTE Settlement Marked by Record Penalty and Lessons Learned

China’s Zhongxing Telecommunications Equipment Corporation and ZTE Kangxun Telecommunications Limited, and their subsidiaries and affiliates, (collectively, ZTE), reached a historic combined $1.19 billion settlement with the US government on March 7, 2017.  This settlement resolves export controls and sanctions violations associated with shipments of US-origin equipment to Iran and North Korea.  ZTE pled guilty to criminal charges, including obstruction of justice, and reached settlements with the US Department of the Treasury’s Office of Foreign Assets Control (OFAC), the US Department of Commerce’s Bureau of Industry and Security (BIS), and the US Department of Justice (DOJ), concluding a long-running US government investigation into ZTE.

The government investigation resulted in ZTE entities being added to the BIS Entity List in March of 2016 (on which we previously advised), a notable occurrence due to ZTE’s size and international trading presence.  ZTE is one of the world’s largest telecommunications equipment manufacturers with operations in 160 countries and significant business relationships with major US companies.  Due to their inclusion on the Entity List, a license was required to export, re-export, or transfer (in-country) items subject to the Export Administration Regulations (EAR) to the listed ZTE entities.  A license was also required for any transaction in which one of the named entities, “act[ed] as purchaser, intermediate consignee, ultimate consignee, or end user of items subject to the EAR.”  However, BIS issued, and extended several times, a temporary general license to ZTE during the settlement negotiations (on which we have also previously written).  The US government used the Entity List designations, along with the temporary general license, as additional leverage to assure the company’s cooperation in resolving the matters under investigation.  For more information on the historic settlement, please see our advisory.