On November 22, 2022, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) published a determination pursuant to Executive Order 14071 (EO 14071) (the Determination) and a guidance on the implementation of the price cap policy for Russian-origin crude oil (the Guidance). These followed OFAC’s preliminary guidance released on September 9 (see Steptoe’s earlier blog post here). The Determination sets forth the categories of services relating to the maritime transport of Russian-origin crude oil (Covered Services) that US persons are prohibited from providing directly or indirectly to a person located in Russia, unless the Russian crude oil is purchased at or below the price cap. The Guidance addresses issues relating to the implementation of the price cap policy for Russian-origin crude oil.

Continue Reading OFAC Publishes Determination and Guidance on Implementing the Price Cap Policy for Russian Crude Oil

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

The World Bank Group (the Bank) issued its fourth joint Sanctions System Annual Report on October 18, covering the Bank’s fiscal year from July 1, 2020 through June 30, 2021. The report includes updates by the Integrity Vice Presidency (INT), the Office of Suspension and Debarment (OSD), and the Sanctions Board.

Notably, the number of

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

On May 18, 2021, the US Treasury Department’s Office of Foreign Assets Control (OFAC) issued an updated general license under Executive Order (EO) 13959 authorizing US persons to transact in publicly traded securities of entities whose names “closely match” the name of any company previously identified as a Communist Chinese military company (CCMC). The general license (now called General License No. 1B), which was due to expire on May 27, 2021, now expires on June 11, 2021.

For the time being, the restrictions under EO 13959 apply only to entities whose names appear on OFAC’s Non-SDN CCMC List as well as seven entities who are yet to be formally added to OFAC’s Non-SDN CCMC List but were identified by the Department of Defense on January 14, 2021.

Continue Reading OFAC Extends General License for “Close Name Matches” under Executive Order 13959 as Biden Administration Reviews Communist Chinese Military Company Sanctions

The Chinese government has enacted new “blocking” rules to counteract extraterritorial application of certain foreign laws that it deems unjustifiable. On January 9, 2021, China’s Ministry of Commerce issued its No. 1 order of 2021— the Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures (the Blocking Rules).

This Client Alert outlines

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

At a press conference on May 31, 2019, China’s Ministry of Commerce (MOFCOM) announced that China is going to establish an “unreliable entities list,” to which “foreign entities or individuals that do not obey market rules, deviate from the spirit of contracts, blockade or stop supplying Chinese companies for non-commercial reasons, and/or seriously damage the legitimate rights and interests of Chinese companies” will be added.[1]

MOFCOM’s announcement does not explicitly refer to the US Department of Commerce’s recent additions of Chinese entities to its Entity List, but the language it used at its press conference closely echoes the US Department of Commerce’s press statements for some of the Entity List designations. For example, regarding the background for establishing the “unreliable entities list,” MOFCOM has stated that some foreign entities who have stopped supplying Chinese companies have “endangered China’s national security and interests and threated the global industrial chain and supply chain security.”
Continue Reading Surprisingly Not Surprising China’s Announcement of “Unreliable Entities List” Regime