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Alex Baj’s practice primarily involves export controls and economic sanctions laws and regulations, anti-corruption investigations and compliance, international trade, and security clearance issues. Alex advises clients on export control and economic sanctions laws and regulations, including the Export Administration Regulations (EAR), International Traffic in Arms Regulations (ITAR), US sanctions regulations administered by the Office of Foreign Assets Control (OFAC), and nuclear export controls under the jurisdiction of the Nuclear Regulatory Commission (NRC).  Alex specializes in the development and implementation of export and anti-corruption compliance policies and procedures and training, internal investigations and voluntary disclosures under the EAR, the ITAR, and OFAC rules, due diligence for mergers and acquisitions, and on encryption and cybersecurity export controls.  Her clients include companies involved in defense, aerospace, software, semiconductor, and uranium processing industries.

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On March 2, 2021, the US Departments of Treasury, State, and Commerce announced the coordinated imposition of sanctions and other restrictive measures on Russia and Russian officials and entities for the “poisoning and subsequent imprisonment of Russian opposition figure Aleksey Navalny.” The Department of the Treasury added seven Russian officials and entities to the Specially Designated Nationals and Blocked Persons List (the SDN List) pursuant to Executive Order (EO) 13661 and EO 13382, thereby blocking their property or interests in property that come within the possession of US persons or the jurisdiction of the United States. US persons are now prohibited from engaging in transactions with these SDNs. The State Department designated seven entities under its own authority, including four that were already on the SDN List. Treasury further expanded the sanctions applied to Russia in 2018 after the poisoning of Sergei Skripal in the UK, and named six entities as operating for the Russian defense sector, triggering sanctions. The Commerce Department announced the addition of fourteen entities to the Entity List, which triggers a licensing requirement for exports, re-exports, and in-country transfers to those entities of all items subject to the US Export Administration Regulations (EAR).

Continue Reading US Applies Wide Range of Sanctions to Russian Officials and Entities

On August 27, 2020, the US Department of Defense (“DoD”) published a second tranche to its list of “Communist Chinese military companies,” pursuant to Section 1237 of the of the National Defense Authorization Act for Fiscal Year 1999 (the “DoD List”).

The announcement follows the DoD’s June 24, 2020, publication of a letter to Senator Tom Cotton enclosing a list of twenty companies headquartered in the People’s Republic of China (“PRC”) which DoD determined are operating directly or indirectly in the United States and are “Communist Chinese military companies.”

(Click here for Steptoe’s blog post following the June 24, 2020 publication of the DoD letter.)

Continue Reading Update: US Department of Defense Publishes Update to List of “Communist Chinese Military Companies”

On July 16, 2020, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issued two new Ukraine-/Russia-related general licenses:  General License 15I, Authorizing Certain Activities Involving GAZ Group, which replaces General License 15H; and General License 13O, Authorizing Certain Transactions Necessary to Divest or Transfer Debt, Equity, or Other Holdings in GAZ Group, which replaces General License 13N.  OFAC also updated nine related FAQs – 570, 571, 586, 588, 589, 590, 591, 592, and 625 – on July 22.

Most notably, General License 15I expands the scope of the pre-existing authorization (covering only maintenance, wind-down and a very limited set of additional activities involving GAZ Group) to include new activities relating to the manufacture and sale of vehicles and related products.  Although many activities were able to continue under the prior GAZ Group general licenses (due to the expansive definition of “maintenance” in FAQ 625), this appears to be an important development for GAZ Group and for prospective or new business partners of GAZ Group.  OFAC has not disclosed any specific developments triggering this change, such as with respect to the ownership or control of Oleg Deripaska in GAZ Group, although the new license does provide for new reporting obligations related to ownership and control of GAZ Group.

General License 15I authorizes certain activities, subject to numerous limitations stated therein, for 190 days – from July 16, 2020 through 12:01 a.m. eastern standard time, January 22, 2021 – which is over a month longer than any of its predecessors.

Continue Reading OFAC Authorizes Additional Activities Involving GAZ Group

On July 15, 2020, the U.S. Department of State updated its public guidance on Section 232 of the Countering America’s Adversaries Through Sanctions Act (“CAATSA”), which authorizes (but does not require) the president to impose sanctions on “a person” that “knowingly” invests in Russian energy export pipelines, or that sells Russia goods, technology or services for such pipelines where certain monetary thresholds are met.

The Department of State announced that the purpose of the updated guidance is “to expand the focus of implementation of Section 232 to address certain growing threats to U.S. national security and foreign policy interests related to Russian energy export pipelines, particularly with respect to Nord Stream 2 and the second line of TurkStream.” This is a significant change, as the prior public guidance stated “The focus of implementation of Section 232 sanctions would be on . . . [Russian] energy export pipeline projects initiated on or after August 2, 2017 . . . For the purposes of Section 232, a project is considered to have been initiated when a contract for the project is signed. Investments and loan agreements made prior to August 2, 2017 would not be subject to Section 232 sanctions.”  This prior guidance had suggested that the focus of implementation of Section 232 would not be on Nord Stream 2 or Turkstream (either line), because these projects were “initiated” before August 2, 2017.

Continue Reading US Clarifies Secondary Sanctions on Nord Stream 2

On June 24, 2020, the US Department of Defense (“DoD”) sent a letter to Senator Tom Cotton enclosing a list of twenty companies headquartered in the People’s Republic of China (“PRC”) which DoD determined are operating directly or indirectly in the United States and are “Communist Chinese military companies.”  Titled “Qualifying Entities Prepared in Response to Section 1237 of the National Defense Authorization Act for Fiscal Year 1999 (PUBLIC LAW 105-261),” the “DoD List” includes some Chinese companies frequently associated with the Chinese military, and others that may not have been previously associated with the Chinese military.

For companies doing business with the US government, the US government may consider the inclusion of any of the listed companies in a government contractor’s supply chain as a “supply chain risk” that must be assessed, particularly in connection with information technology.  DoD contractors are already prohibited by their contracts from acquiring certain items and services from “any Communist Chinese military company.”

While not a sanctions list itself, the DoD List may lead to sanctions actions by the US government, as well as reactions from business partners assessing the risk of further action against the listed companies by the US government, particularly for listed companies that are not currently subject to US sanctions.  Pressure from Congress may continue for the administration to continue to update this list, and to impose restrictions on the companies on this list.

Continue Reading US Department of Defense Publishes List of “Communist Chinese Military Companies” Operating Directly or Indirectly in United States Pursuant to Section 1237 of the National Defense Authorization Act for Fiscal Year 1999 (the “Act”)

Today, the U.S. Commerce Department’s Bureau of Industry and Security (“BIS”) is publishing a new set of regulations tightening export controls on China, Russia and Venezuela (the new “Rule”).  The new Rule will take effect on June 29, 2020, and will apply to goods, software and technology subject to U.S. export controls jurisdiction – it will not be limited to U.S. persons.

The most significant parts of this new Rule will increase the licensing requirements and due diligence expectations that apply to trade with China, Russia and Venezuela under the U.S. Export Administration Regulations (“EAR”) when “military end users” or “military end uses” are involved.  However, in light of the way these terms are defined, industry should note that the impact of this new Rule will extend into many areas of commercial technology and trade with these countries, beyond the defense sector.

In two additional rulemakings published today, BIS is removing one license exception under the EAR (CIV) and proposing to modify another EAR license exception (APR).

Continue Reading Commerce Issues Long-Awaited Export Control Rules for China, Russia and Venezuela

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On January 10, 2020, the US Treasury Department’s Office of Foreign Assets Control (OFAC) named Beijing-based Pamchel Trading Beijing Co. Ltd., its Seychelles-based affiliate, and a Chinese vessel and vessel operator as Specially Designated Nationals (SDNs) pursuant to Executive Order (EO) 13871 of May 8, 2019, for engaging in significant transactions involving Iran’s metals sectors. OFAC also designated 13 Iranian steel and iron manufacturers, an Oman-based supplier, and three Iranian aluminum and copper companies under EO 13871. The announcement signaled an increasingly aggressive posture toward Iran’s metals industry and the foreign firms who engage with it.

Concurrently, the US President issued a new EO (EO 13902) authorizing sanctions on, among others, persons operating in the construction, mining, manufacturing, or textiles sectors of the Iranian economy; persons who knowingly engage “in a significant transaction for the sale, supply, or transfer to or from Iran of significant goods or services used in connection with” those sectors; and persons who have “materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of” any person designated as an SDN under the EO or entities owned 50% or more by them. Notably, the EO also authorizes sanctions on correspondent and payable-through-accounts of foreign financial institutions that have “knowingly conducted or facilitated any significant financial transaction” involving activities targeted by the EO.

Continue Reading UPDATED: OFAC Targets Chinese Firms for Iranian Metals Trade, Designates Iranian Officials, as White House Expands Secondary Sanctions with New Executive Order

On August 8, 2018, the US State Department announced that it would be imposing new sanctions on Russia pursuant to the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (CBW Act).  The new sanctions are in response to a determination by the US government that the Russian government was behind the recent use of a nerve agent in the United Kingdom against two UK citizens.  The CBW Act requires the imposition of sanctions following a determination by the President (delegated to the Secretary of State) of the use of chemical or biological weapons in violation of international law or in lethal form against one’s own nationals.  Sanctions under the CBW Act, which are expected to take effect on August 22nd, include the termination of foreign assistance, suspension of sales of defense articles or services, denial of credit or other financial assistance by the US government, and a prohibition of exports of national security-sensitive goods and technology.  In a background briefing the State Department announced that it is making “a number of carve-outs” to these sanctions to allow the continuation of certain foreign assistance; exports for space flight activities, safety of commercial passenger aviation, and “purely commercial end users for civilian end uses”; and perhaps other activities.  A Federal Register notice that is to be published by the State Department on August 22 should explain the sanctions and carve-outs in more detail.  According to the State Department, this is the third occasion on which sanctions have been imposed under the CBW Act.  Sanctions under the Act were imposed against Syria in 2013 and against North Korea earlier this year.
Continue Reading US State Department Announces New Russia Sanctions

On April 16, 2018, the US Department of Commerce, Bureau of Industry and Security (BIS) 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 US 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 US-origin items abroad and foreign-made items with more than 25 percent controlled US 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. It should be noted that with respect to non-US items that incorporate US content, such US content is “controlled” where a license would be required to export it to the country of destination as indicated by the Commerce Control List and BIS Country Chart.

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.  

Continue Reading ZTE Denial Order Imposed

The Bureau of Industry and Security at the US Department of Commerce has updated the information on its website to incorporate changes made to its encryption export rules in September of 2016.  The new information includes a helpful reference guide for Category 5, Part 2 of the Export Administration Regulations, flowcharts, and guidance on license