On June 24, 2021, US Customs and Border Protection (CBP) issued a Withhold Release Order (WRO) pursuant to 19 USC 1307 against Xinjiang, China-based Hoshine Silicon Industry Co. Ltd. and its subsidiaries (Hoshine). The WRO instructs CPB personnel to detain shipments of silica-based products produced by Hoshine and its subsidiaries, including “materials and goods (such as polysilicon) derived from or produced using those silica-based products.”

On the same day, the US Commerce Department’s Bureau of Industry and Security (BIS) added Hoshine Silicon Industry (Shanshan) Co., Ltd  and four other Xinjiang-based companies to the Entity List based on allegations of their participation “in the practice of, accepting, or utilizing forced labor” in their production processes.

On June 23, 2021, the Department of Labor (DOL) published a Federal Register notice updating its List of Goods Produced by Child Labor or Forced Labor  (TVPRA List) to include polysilicon from China.

Meanwhile, the US Senate Foreign Relations Committee (SFRC) advanced a bill that, if passed, would impose additional restrictions on the importation of goods from China’s Xinjiang Province.

Continue Reading Biden Administration Targets Xinjiang-based Solar Companies over Labor Allegations

China’s Anti-Foreign Sanctions Law (the “Law”), which was enacted and became effective on June 10, 2021, authorizes the Chinese government to develop an “anti-sanctions list” and to impose countermeasures on listed persons involved in “discriminatory restrictive measures.”  It also creates a private right of action for Chinese citizens and organizations to sue in a Chinese court.

The anti-sanctions list and related countermeasures resemble some of the measures that have already been taken by the Chinese Ministry of Foreign Affairs (“MOFA”), which has announced sanctions against dozens of organizations and individuals in the U.S. and other countries in connection with issues relating to Xinjiang, Hong Kong, and Taiwan.  Some of those previous sanctions have included denial of entry into China, a prohibition against conducting business with China, and in some cases also freezing of assets.  In addition, the Chinese Ministry of Commerce (“MOFCOM”) announced an “Unreliable Entity List” regime in May 2019 (see our previous blog post on this here), which similarly targets foreign entities, e.g., for taking “discriminatory measures” against Chinese individuals or organizations.  However, unlike the MOFA sanctions, MOFCOM has not yet taken any actions under the Unreliable Entity List regime.  Most recently, MOFCOM promulgated Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures (the “MOFCOM Blocking Rules”), released in January 2021 (see our client advisory on the MOFCOM Blocking Rules here). Those ministry-level measures had certain limitations, and the enactment of the Law has been a priority of Chinese legislators in order to provide a clearer statutory basis for administrative measures that will ultimately enhance the country’s anti-sanctions “toolkit.”

The Anti-Sanctions List and Related Countermeasures

The Law authorizes the Chinese government to create an “anti-sanctions list,” and to designate on this list individuals and organizations that directly or indirectly participate in the formulation, determination, or implementation of “discriminatory restrictive measures.”   While there are still questions surrounding what specific acts are targeted, generally they include actions (a) by a foreign country, in violation of international law and “the basic norms of international relations,” (b) “using various pretexts or its own laws to contain or suppress China,” (c) to “take discriminatory restrictive measures against Chinese citizens or organizations,” and “interfere in China’s internal affairs.” This broad definition leaves considerable discretion to the Chinese government to target foreign sanctions that it finds to be contrary to China’s interests.  MOFCOM’s Unreliable Entity List provisions use a similar term—“discriminatory measures,” and MOFCOM’s Blocking Rules use the term “unjustified extraterritorial application” of foreign legislation and other measures.  The Law’s focus on restrictive measures that are viewed as being in violation of international law or “basic norms of international relations” similarly indicates an intent to target “extraterritorial” foreign sanctions.

The countermeasures that may be imposed on persons designated on this “anti-sanctions list” may include the following:

  1. denial of entry into China or deportation from China;
  2. freezing of assets located in China;
  3. prohibition against doing business with individuals and organizations located in China; and
  4. an undefined set of “any other necessary measures.”

In addition to the listed persons themselves, these countermeasures may also be imposed against:

  1. listed individuals’ spouses and immediate family members;
  2. listed organizations’ senior management or actual controllers;
  3. other organizations for which a listed individual serves as part of senior management; and
  4. organizations that are effectively controlled by, or in whose establishment or operation a listed individual or organization participates.

Designations on the anti-sanctions list and the imposition of countermeasures are excluded from judicial challenges in a Chinese court.

Individuals and organizations within China are required to comply with the countermeasures imposed under the Law (however, this requirement does not apply to Hong Kong/Macau unless or until the Law is added to Annex III of the Basic Law of the Hong Kong/Macau Special Administrative Region).

The Private Right of Action

In addition to providing for listing and countermeasures, the Law grants a private right of action against any organization or individual that implements, or assists with the implementation of, a foreign country’s discriminatory restrictive measures, as defined above.  The Law allows Chinese parties to sue in a Chinese court for injunctive relief and damages in such cases.

This provision resembles Article 9 of the MOFCOM Blocking Rules, which allows Chinese citizens or organizations to sue “a person” for damages if the person has violated a MOFCOM prohibition order against an unjustified extraterritorial application of foreign law.

But it is not clear how this Article 12 of the Law will be implemented, including whether it will be implemented through the MOFCOM Blocking Rules or in a similar way that would require a prior MOFCOM prohibition order or an administrative action to find “discriminatory restrictive measures,” though a plain reading of the Law suggests that, unlike Article 9 of the MOFCOM Blocking Rules, the private right of action granted by the Law is not conditioned on a prior administrative action.  If that is the case, it may be left for courts to determine what “discriminatory restrictive measures” are within the scope of the Law, and when a party’s implementation of such measures becomes actionable in a Chinese court.

There are additional questions about the jurisdiction of Chinese courts to hear claims under the Law in the context of international business transactions when arbitration is agreed upon as the exclusive dispute resolution mechanism under the relevant contract.  China’s Supreme People’s Court has longstanding guidance stating that, if a dispute resolution clause provides for arbitration of all disputes arising out of or in connection with the contract, and one party sues under that contract, Chinese courts do not have jurisdiction over such claims.  In such a situation, there is a question about whether a Chinese court would hear related claims for relief under the Law.  We would expect some clarifications/mechanism that may allow Chinese courts to hear such claims at some point.  Notably, the MOFCOM Blocking Rules appear to allow claims in Chinese court following the exercise of a contractual arbitration provision if an arbitration award unfavorable to a Chinese person is issued pursuant to a foreign law that has been blocked by a MOFCOM prohibition order.

“So, What Now?”

The immediate impact of the Law on the international business community is likely limited, as it largely reflects pre-existing Chinese policies, which have generally been implemented with caution to date. For the general steps that potentially affected parties may consider as part of their compliance strategies, please see our client advisory on the MOFCOM Blocking Rules here.

On June 21, 2021, the United States, the EU, the UK, and Canada announced coordinated sanctions following the forced and unlawful landing of a Ryanair flight in Minsk and the detention by Belarusian authorities of journalist Raman Pratasevich and Sofia Sapega, in May 2021. The sanctions include new EU sectoral-style sanctions against certain sectors of the Belarusian economy, as well as targeted financial sanctions against dozens of individuals and entities in connection with alleged human rights violations and the violent repression of civil society, democratic opposition, and journalists in Belarus.

The new sanctions follow the reactivation, on June 3, 2021, of longstanding sanctions against nine Belarussian companies and their subsidiaries by the US Treasury Department’s Office of Foreign Assets Control (OFAC), as discussed in our April 20, 2021 blog post.

Continue Reading Belarus Faces New EU, US, UK, and Canadian Sanctions After Ryanair Flight Diverted

The European Commission recently issued three Opinions on the interpretation of specific provisions in different EU sanctions frameworks. They cover the notion “making available”, changes to the features of frozen funds as well as the release of frozen funds.

Continue Reading European Commission Issues Guidance on the Application of Specific EU Financial Sanctions Provisions

The German Federal Parliament has adopted a new Act on Corporate Due Diligence Responsibilities in Supply Chains (‘the Supply Chain Act’) on Friday, June 11, 2021, due to enter into effect on January 21, 2023.  By virtue of the Supply Chain Act, companies with a significant presence in Germany, as further explained below, must ensure compliance with human rights and environmental concerns in their business operations and impose equivalent due diligence responsibilities on their suppliers, irrespective of where they are located.

The Supply Chain Act could be of particular interest to the extractive industry, including oil and gas companies, and suppliers of the German automotive industry, but other industries will be affected as well given that the Act applies in principle across all sectors and covers both manufacturing and services, including, in principle, financial services.

Continue Reading Germany Introduces New Human Rights and Environmental Responsibilities for Parties in B2B-Relationships

On June 9, 2021, the US Department of Commerce (Commerce), Bureau of Industry and Security (BIS), published a notice in the Federal Register amending the Export Administration Regulations (EAR), 15 CFR Part 760, to provide a new interpretation regarding the US antiboycott regime applicable to the United Arab Emirates (UAE).  This Commerce action follows the US Department of the Treasury’s (Treasury) similar action earlier this year to remove the UAE from Treasury’s list of countries that require or may require participation in or cooperation with an international boycott not sanctioned by the United States.  As a result of Commerce’s action, the UAE is no longer presumed to be a country engaging in an unsanctioned boycott, and the risk of violating the prohibitions and reporting obligations under Part 760 of the EAR have been substantially curtailed, but not wholly eliminated.

Continue Reading United Arab Emirates Has Terminated its Boycott Against Israel, but Certain US Antiboycott Risks May Remain

The Biden administration has reactivated a long-delayed immigration program for early-stage international entrepreneurs. The International Entrepreneur Rule (IER) is intended to benefit the US economy by filling a gap in US immigration options for individuals who are positioned to develop high-growth potential start-up companies. Under the IER, qualified entrepreneurial foreign nationals will be eligible to enter the US for up to five years to work for and assist in the growth of the start-up entity.

This program is available to all nationalities, as it is not tied to country specific agreements. Also, unlike other investment-based US visa options, the start-up company must be funded by qualified US investors, awards, and/or grants, rather than the entrepreneur’s personal funds. In light of these novel eligibility requirements, participants will include first-time as well as highly successful entrepreneurs. In all cases, IER participants need to incorporate US tax planning throughout the lifecycle of their ventures, to protect current and hoped-for wealth.

For more information on the IER, including considerations for tax planning for qualified individuals, click here to read the Client Alert.

On June 9, 2021, the White House issued a new Executive Order (EO) that revokes three Executive Orders issued in 2020 and early 2021 that were aimed specifically at TikTok, WeChat, and eight other China-linked communications and financial technology software applications.

In place of these EOs, the new EO, “Protecting Americans’ Sensitive Data from Foreign Adversaries,” builds on steps the US Commerce Department has already taken under EO 13873 of May 15, 2019, to protect the information and communications technology and services (ICTS) supply chain against threats from China and other identified foreign adversaries.

As a result of the new EO, the US government will further analyze the risks arising from the use of applications such as TikTok and WeChat – including risks related to the security of Americans’ sensitive data — and could take further steps to mitigate those risks, either through existing ICTS regulations or through additional executive and legislative actions.

Continue Reading Biden Administration Revokes TikTok and WeChat Executive Orders, Revises Framework on Security Threats from Foreign Apps

On June 3, 2021, the White House issued an Executive Order (EO) amending EO 13959 of November 12, 2020, which imposed restrictions on US persons transacting in publicly traded securities of companies identified by the US Department of Defense (DoD) as “Communist Chinese military companies” (CCMCs). The new EO, “Addressing the Threat from Securities Investments that Finance Certain Companies of the People’s Republic of China,” reformulates and recasts the prior EO, by providing important clarifications on the scope of the restrictions, revising the criteria for designating Chinese companies under the EO, and shifting responsibility for designations from the DoD to the US Treasury Department.  As a result of these changes, the EO creates a securities-related sanctions regime for so-called “Chinese Military-Industrial Complex Companies” that is effectively separated from the CCMC list maintained by DoD pursuant to Section 1237 of the Fiscal Year 1999 National Defense Authorization Act (NDAA) as amended.  The new EO takes effect on August 2, 2021, at 12:01 a.m. eastern daylight time.

In conjunction with the new EO, the US Treasury Department’s Office of Foreign Assets Control (OFAC) published several new and revised Frequently Asked Questions (FAQs) explaining the new EO and addressing questions raised by the securities industry since the issuance of EO 13959 in November 2020. Finally, as evidence that the Biden Administration is pursuing a comprehensive effort across the relevant agencies, the DoD released for the first time a “Chinese Military Companies” (CMC) list under Section 1260H of the Fiscal Year 2021 NDAA.

Continue Reading White House Issues Amended Executive Order on Chinese Military-Industrial Securities

Advocate General of the Court of Justice Gerard Hogan rendered an Opinion in the first case before the Court of Justice of the European Union on the interpretation of the EU Blocking Statute. The case concerns Iranian bank Bank Melli Iran, which has a branch in Hamburg (Germany), and which claims before the German Courts that the notice of ordinary termination given by Telekom Deutschland with respect to their contracts for telecommunication services was motivated solely by Telekom Deutschland’s desire to comply with US sanctions legislation. Bank Melli Iran maintains that Telekom Deutschland violated the EU Blocking Statute, which prohibits EU undertakings (entities engaged in an economic activity, regardless of their legal form or the way in which they are financed) from complying with such extraterritorial US measures.

In its opinion, Advocate General Hogan finds that:

  1. The general prohibition contained in the EU Blocking Statute (which is directed against compliance with certain third country legislation providing for secondary sanctions) applies even in the event that such an undertaking complies with that legislation without first having been compelled by a foreign administrative or judicial agency to do so.
  2. An EU undertaking seeking to terminate an otherwise valid contract with an Iranian entity subject to the US sanctions must demonstrate to the satisfaction of the national court that it did not do so by reason of its desire to comply with those sanctions.

Continue Reading Advocate General Hogan Issues Opinion on Interpretation of EU Blocking Statute against Extraterritorial US Sanctions