OFAC Issues General License Extending Maintenance / Wind-Down Period for Rusal Dealings

On Monday, OFAC issued General License No. 14 under the Ukraine-Related Sanctions Regulations (URSR), authorizing the maintenance or winding down of business with United Company Rusal plc (Rusal) through October 23, 2018.  The imposition of sanctions on Rusal, which OFAC listed as a Specially Designated National (SDN) on April 6, had roiled the global aluminum market and sparked fears of a worldwide supply shock.  The Trump Administration appears to have taken these concerns on board in issuing the new general license, with Treasury Secretary Steven Mnuchin noting in a press release that the “the U.S. government is not targeting the hardworking people who depend on RUSAL and its subsidiaries”.  OFAC also issued new Frequently Asked Questions (FAQs) providing interpretative guidance regarding the new general license.

As previously noted, OFAC designated Rusal as an SDN on April 6, cutting it off from all dealings with U.S. persons and subjecting non-U.S. persons to secondary sanctions to the extent they engage in “significant” transactions with the aluminum producer.  These restrictions also apply to all entities owned 50 percent or greater by Rusal.  To soften the blow of the designation, OFAC issued General License No. 12, authorizing the maintenance or winding down of business with Rusal through June 5.  However, the general license did not authorize U.S. persons to export items to Rusal from the United States, and required any payments to Rusal to be made into a blocked account, restrictions that also carried significant implications for non-U.S. persons.

General License No. 14 provides significantly more extensive relief, authorizing the maintenance or winding down of business with Rusal and its subsidiaries through October 23, and removing the restrictions on exports and payments.  Continue Reading

Upcoming Webinar: Export Controls for Encryption Items

On Thursday, April 26 at 11:00 AM EST, Anthony Rapa will present “U.S. Encryption Export Controls”, a webinar hosted by Federal Publications.  As described on the Federal Publications website:

Our export controls trilogy reaches a riveting conclusion with a discussion of U.S. encryption controls. This webinar will explore encryption controls in place under the U.S. Export Administration Regulations, the various de-control notes that are available, the function of License Exception ENC, and how encryption controls might evolve in the future.

You can sign up for the webinar here.

ZTE Denial Order Imposed

On April 16, 2018, the U.S. Department of Commerce imposed a denial order involving Zhongxing Telecommunications Equipment Corporation of Shenzhen, China (ZTE Corporation) and ZTE Kangxun Telecommunications Ltd of Hi-New Shenzhen, China (ZTE Kangxun).  The denial order, effective immediately, restricts ZTE Corporation and ZTE Kangxun from participating in any way in any transaction involving any hardware, software, or technology that is exported / re-exported or to be exported / re-exported from the United States and is subject to the U.S. Export Administration Regulations (EAR).  The denial order also restricts any person from engaging, directly or indirectly, in certain EAR-related activities involving ZTE Corporation or ZTE Kangxun.  Restricted activities include exporting or re-exporting to ZTE Corporation or ZTE Kangxun any hardware, software, or technology subject to the EAR (including U.S. origin items abroad and foreign-made items with more than 25 percent U.S. content), as well as facilitating acquisition of such items by the ZTE entities, and servicing EAR-controlled items that are owned, possessed or controlled by the ZTE entities. 

Restrictions on servicing also include servicing items in ZTE’s possession that are not subject to the EAR if, in providing the service, a person uses an item that is subject to the EAR.  “Service” in this context means installation, maintenance, repair, modification, or testing.  The restrictions in the order last for a period of seven years, until March 13, 2025.  

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FCPA/Anti-Corruption Developments: 2017 Year in Review & Q1 2018 Preview

2017 was a year of transition for US enforcement of the Foreign Corrupt Practices Act (FCPA) and saw a substantial increase in global anti-corruption enforcement. As we advised in our 2017 FCPA Mid-Year Review, last year started with a flurry of FCPA enforcement at the conclusion of the Obama Administration, followed by a prolonged lull as the Trump Administration reviewed enforcement policies and filled key positions at the US Department of Justice (DOJ) and Securities and Exchange Commission (SEC). FCPA enforcement resumed in earnest in the third and fourth quarters of 2017, putting the year well within the usual range of reported corporate and individual prosecutions for the last five years. Those enforcement trends continued in the first quarter of 2018, with both the DOJ and SEC inking corporate resolutions.

For more information, please see our advisory.

New Sanctions Against Russian Oligarchs, Officials, and Companies May Have Significant Impact

Following up on our earlier blog post, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced new blocking sanctions on April 6, 2018 against seven Russian oligarchs, 12 entities owned or controlled by those oligarchs, 17 senior Russian government officials, a Russian weapons trading company, and a banking subsidiary owned by the weapons trading company. Treasury Secretary Steven Mnuchin stated that the sanctions were issued in response to Russia’s “range of malign activity around the globe,” including actions in Crimea, Eastern Ukraine, and Syria, and “Russian oligarchs and elites who profit from this corrupt system will no longer be insulated from the consequences of their government’s destabilizing activities.”

For more information, please see our advisory.

How Far Can the U.S. Take Trade and Investment Restrictions on China?

Very far, under existing U.S. law. The authority already available to the President under the International Emergency Economic Powers Act (IEEPA) is vast, and could be applied to Chinese investments with the (relatively) simple declaration of a national emergency related to such investments.  Reports have already been swirling about a plan by the Trump Administration to use IEEPA to impose tighter restrictions on Chinese investment in sensitive sectors of the U.S. economy, or to implement by executive order parts of the CFIUS reform legislation under consideration by Congress.  But IEEPA could be used far more broadly than that.

Although rumors of new trade and investment restrictions against China have been in circulation for several months, the President’s March 22 order in response to the “Section 301 investigation” on Chinese trade practices has brought those rumors into sharper focus.  In his order, President Trump directed the Secretary of the Treasury to develop options “under any available statutory authority” that could be used “to address concerns about investment in the United States directed or facilitated by China in industries or technologies deemed important to the United States.”  Continue Reading

Rising Tensions in the US-China Trade Relationship

The Office of the US Trade Representative (USTR) published on April 3, 2018 a proposed list of products imported from China to target with an additional 25% tariff. These tariffs have been proposed in response to USTR’s findings in an investigation conducted under Section 301 of the Trade Act of 1974 (Section 301) and would cover $45-50 billion in Chinese exports. USTR concluded in the investigation that China engages in unreasonable and discriminatory practices — including the forced transfer of US technology to Chinese companies and the Chinese government and unfair conditions on IP licensing — that burden or restrict US commerce. The list of 1,333 articles targeted for additional duty primarily covers machinery, metals, electronics, and advanced medical products. USTR has established a process for interested parties to comment on the proposed list of products through written submissions as well as participation at a public hearing.

For more information, please see our advisory.

OFAC Sanctions Russian Oligarchs and Major Russian Companies

Today, the U.S. Department of Treasury, Office of Foreign Assets Control (OFAC) designated several Russian individuals and companies as Specially Designated Nationals (SDNs).  Specifically, in response to what Treasury Secretary Steven Mnuchin described as Russia’s “malign activity”, OFAC indicated that it sanctioned

seven Russian oligarchs and 12 companies they own or control, 17 senior Russian government officials, and a state-owned Russian weapons trading company and its subsidiary, a Russian bank.

In making the new designations, OFAC issued a press release, web notice, General License No. 12 under the Ukraine-Related Sanctions Regulations (URSR, 31 C.F.R. Part 589), General License No. 13 under the URSR, eight new Frequently Asked Questions (FAQs) related to the new designations, and one updated FAQ related to the Countering America’s Adversaries Through Sanctions Act (CAATSA).

OFAC made the designations pursuant to Executive Orders 13661 and 13662, which are focused on the crisis in Ukraine, as well as Executive Order 13582, which relates to the Syrian civil war.

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Buy America 2.0 Bill Continues Emphasis on Domestic Purchasing

On March 1, House Democrats introduced the Buy America 2.0 Act (Buy America 2.0), H.R. 5137, continuing the recent emphasis on imposing “Buy America” requirements on federally funded projects.  Other related actions include President Trump’s April 2018 Executive Order (EO) 13788, Buy American – Hire American and the BuyAmerican.gov Act of 2018 (S.2284). Buy America 2.0 has been referred to the House committees on Transportation and Infrastructure and Energy and Commerce.

For more information, please see our advisory.