On October 7, 2022, in a move that was hailed by senior U.S. government officials as a paradigm shift in U.S. export controls policy toward China, the Department of Commerce’s Bureau of Industry and Security (BIS) issued an interim final rule that amends the Export Administration Regulations (EAR) to impose new and expanded controls on advanced computing integrated circuits (ICs), computer commodities that contain such ICs, and certain semiconductor manufacturing items. Transactions for supercomputer end-uses and transactions involving certain entities on the Entity List are now subject to additional export controls, as are certain semiconductor manufacturing items and transactions for certain IC end uses. U.S. person activities as they relate to certain semiconductor activities in China are also now restricted.

Certain aspects of the rule, specified below, including the availability of license exceptions, became effective immediately on October 7, 2022. The new restrictions on U.S. person activities under § 744.6 became effective on October 12, 2022. The remainder of the provisions with a delayed effective date are specified below and will become effective on October 21, 2022. BIS is also accepting public comments on the interim final rule through December 12, 2022.

Separately, also on October 7, 2022, BIS issued a final rule, which revised the Unverified List (UVL) and clarified the activities and criteria that may lead to the addition of an entity to the Entity List. BIS stated that a sustained lack of cooperation by the host government in a country where an end-use check is to be conducted, such as China, that effectively prevents BIS from determining compliance with the EAR, will be grounds for adding an entity to the Entity List.

The U.S. policy goals behind the new rules are ambitious and seek to degrade China’s advanced computing capabilities in an unprecedented manner. As summarized recently by National Security Advisor Jake Sullivan: “On export controls, we have to revisit the longstanding premise of maintaining ‘relative’ advantages over competitors in certain key technologies.  We previously maintained a ‘sliding scale’ approach that said we need to stay only a couple of generations ahead. That is not the strategic environment we are in today. Given the foundational nature of certain technologies, such as advanced logic and memory chips, we must maintain as large of a lead as possible.”

The broad implications of these new rules, along with their efficacy from a policy standpoint, may take some time to come fully in to focus. For now, it is clear that any U.S. or non-U.S. individuals or entities that play any role in the global semiconductor supply chain—whether as manufacturers, producers, consumers, or otherwise—need to carefully review the new rules to determine what is required to comply and, if necessary, seek guidance or a license from BIS.

Continue Reading BIS Issues Expansive New Rules Targeting China

This year, we have witnessed an extraordinary set of coordinated economic sanctions and export control regulatory actions against Russia after its invasion of Ukraine. In contrast to the fast and furious pace of regulatory action, enforcement actions did not keep pace.

This year’s enforcement actions by the US Treasury Department’s Office of Foreign Assets Control (OFAC) are notable for their jurisdictional reach and expansion of liability theories that aren’t necessarily supported by the plain language of their regulatory authority. The Commerce Department’s Bureau of Industry & Security (BIS) enforcement actions have targeted the aerospace industry, especially in relation to Russia and Belarus. The Department of Justice (DOJ) expended much of its resources on seizing and forfeiting assets linked to Russian oligarchs, galvanizing its multilateral networks.

Interestingly, OFAC continued to target the Iranian petroleum and petrochemical sector despite news reports of intensive negotiations to revive the Joint Comprehensive Plan of Action (JCPOA).

Below we discuss some representative enforcement actions to date.

Continue Reading What to Expect Next? US Economic Sanctions and Export Controls Enforcement Actions Thus Far in 2022

On December 29, 2021, the PRC State Council’s Information Office (the Information Office) published a white paper on export controls, providing a comprehensive picture of China’s current legal and regulatory regime for export controls and potential future changes in export control governance. The document is China’s first white paper on export controls and comes approximately one year after the implementation of the PRC Export Control Law in December 2020.

On the same day, the PRC Ministry of Commerce (MOFCOM), which plays a central role in administering China’s export control regime for non-military items, issued a statement giving more information about the White Paper, while an unnamed MOFCOM official gave an interview to Chinese state-owned media discussing the White Paper in the context of PRC government policy with respect to multilateral export controls as well as China’s national security and development interests.

Continue Reading China’s First White Paper on Export Controls Summarizes Legal Developments, Opposes “Abuse” of Export Controls

On December 22, 2021, the US Treasury Department’s Office of Foreign Assets Control (OFAC) issued three general licenses (GLs) to authorize additional activities involving the Taliban and the Haqqani Network in Afghanistan that would otherwise be prohibited under the Global Terrorism Sanctions Regulations, 31 CFR part 594 (GTSR), the Foreign Terrorist Organizations Sanctions Regulations, 31

On September 24, 2021, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued General License 14 (GL-14) and General License 15 (GL-15), authorizing certain types of humanitarian transactions involving Afghanistan that could relate to the Taliban or the Haqqani Network that would otherwise be prohibited by the Global Terrorism Sanctions Regulations (GTSR), the Foreign Terrorist Organizations Sanctions Regulations (FTOSR), or Executive Order (EO) 13224.

Both the Taliban and the Haqqani Network are designated by OFAC as Specially Designated Global Terrorists (SDGTs) pursuant to EO 13224. The Haqqani Network is also designated by the US Department of State as a Foreign Terrorist Organization (FTO) under section 219 of the Immigration and Nationality Act.  Furthermore, several of the individual members of the Taliban and the Haqqani Network are designated by OFAC as SDGTs.

These groups have recently taken control of, and appointed officials (including at least one individual designated as an SDGT) to administer, the Government of Afghanistan and its associated agencies and organizations.  As a result, there are concerns that interactions with the Government of Afghanistan could be prohibited to the extent they involve a person subject to US sanctions or expose parties to broader risks under US counter-terrorism financing laws.

Continue Reading OFAC’s New Afghanistan-Related Humanitarian Licenses: Opportunities and Challenges

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

On March 8, 2021, the US Commerce Department’s Bureau of Industry and Security (BIS) published amendments to the Export Administration Regulations (EAR) imposing new export control restrictions on Myanmar (Burma) and adding four entities to the Entity List, in response to a military coup in early February 2021.

The BIS announcements follow the imposition of sanctions on 12 individuals and three entities by the US Treasury Department’s Office of Foreign Assets Control (OFAC), pursuant to Executive Order 14041 of February 10, 2021.

In addition to designating major military-linked commercial entities to the Entity List, the new EAR amendments make Myanmar ineligible for certain license exceptions and add Myanmar to the list of countries subject to BIS’s military end use / military end user rule (the MEU Rule)—alongside China, Russia, and Venezuela.

For background on the US government’s previous Myanmar-related measures in response to the recent coup, including Executive Order (EO) 14014, see our blog post of February 12, 2021, “Biden Administration Announces Sanctions and Export Controls in Response to Myanmar Coup.”

Continue Reading Commerce Department Issues Significant New Export Controls in Response to Myanmar Coup

Two important anti-corruption due diligence tools published their 2020 results in November 2020 and January 2021. While the results are largely consistent, there are some important differences and some key improvements and declines in the Transparency International 2020 Corruption Perceptions Index and the TRACE 2020 Bribery Risk Matrix.

To comprehensively understand the risks and take

On February 11, 2021, the White House issued an Executive Order (EO) authorizing sanctions in response to the February 1, 2021, military coup in Myanmar (Burma). The US Treasury Department’s Office of Foreign Assets Control (OFAC) named ten individuals and three entities as Specially Designated Nationals (SDNs) pursuant to the EO. At the same time, the US Commerce Department’s Bureau of Industry and Security (BIS) announced new restrictions on certain exports to Myanmar of items subject to the Export Administration Regulations (EAR).

This is the first new sanctions program adopted under the Biden administration, less than one month after the inauguration. Prior US sanctions and export controls targeting Myanmar were terminated in October 2016. Since then, the United States continued to maintain targeted sanctions against certain individuals and entities under other sanctions programs, including a number of SDNs named under the Global Magnitsky Sanctions program.

Continue Reading Biden Administration Announces Sanctions and Export Controls in Response to Myanmar Coup

In a Federal Register notice dated February 5, 2021, the US Department of State provided notice that the Secretary of State has determined that six individuals sanctioned by the US Treasury Department’s Office of Foreign Assets Control (“OFAC”) on January 15, 2021 fulfilled the criteria for being designated as Specially Designated Nationals (SDNs) under Section 4(a)(iii) of Executive Order (EO) 13936, which authorizes the Treasury and State Departments to impose blocking sanctions in relation to certain events in Hong Kong.

The State Department issued similar notifications on January 22, 2021 (here and here) with respect to a total of 18 individuals designated as SDNs under EO 13936 on December 7 and November 9, 2020. No such determination appears in the Federal Register for 11 individuals designated under EO 13936 on August 7, 2020.

The Secretary of State’s recently issued determinations do not alter OFAC’s SDN designations, which took effect on January 15, 2021, December 7, 2020, and November 9, 2020, respectively, nor has the State Department added the individuals to its report under Section 5(a) of the Hong Kong Autonomy Act.

Continue Reading US State Department Issues Notices on Prior Hong Kong Sanctions Designations