Nicholas Turner

Subscribe to Nicholas Turner's Posts
Contact: Read more about Nicholas Turner

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

On January 14, 2021, the White House issued an Executive Order (EO) to amend EO 13959 of November 12, 2020, which prohibits US persons from transacting in securities related to so-called “Communist Chinese military companies” (CCMCs).

The amended EO 13959 makes clear that US persons must divest their holdings in such securities within designated wind-down periods, after which possessing the securities will also be prohibited. For CCMCs identified in the Annex to EO 13959, on November 12, 2020, the wind-down period will end on November 11, 2021. The amended EO also clarifies that prohibited transactions include both “purchase for value” and “sales” of covered securities.

Meanwhile, the US Department of Defense (DoD) identified an additional nine entities as CCMCs, bringing the total number to 44. Restrictions under EO 13959 will take effect with respect to the newly named CCMCs after 60 days, on March 15, 2021.

Shortly thereafter, the US Treasury Department’s Office of Foreign Assets Control (OFAC) published four new Frequently Asked Questions (FAQs) and General License No. 2 (GL-2) authorizing securities exchanges operated by US persons to engage in transactions involving covered securities through the relevant wind-down periods.…

Continue Reading Updated: Amended Executive Order Makes Clear US Persons Must Divest Securities of Chinese Military Companies as Defense Department Identifies Nine More Entities

In the latest shoe to drop in the escalation of tensions between the United States and China, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a final rule on December 23, 2020, removing Hong Kong as a separate destination under the Export Administration Regulations (EAR). Rather than adding Hong Kong alongside the People’s Republic of China to Country Group D in the Commerce Country Chart, BIS eliminated references to it in all but a few sections of the EAR.

The removal of Hong Kong as a separate destination is a further step toward implementation of Executive Order (EO) 13936, signed July 14, 2020. (85 FR 43413, 7/17/2020). Steptoe’s prior analysis of EO 13936 is available here. EO 13936 directed relevant agencies to amend their regulations to remove differential and preferential treatment for exports, reexports, or transfers (in-country) to or within Hong Kong of all items subject to the EAR when compared to the treatment for such transactions to or within China. The final rule codifies the BIS rule issued July 31, 2020, which required that Hong Kong be treated the same as China in almost all circumstances; that is, Hong Kong would be subject to the same license requirements, license exceptions, and other applicable provisions as China under the EAR (85 FR 45998).

Specifically, in this new rule, BIS removes the entry for Hong Kong from the Commerce Country Chart at Supplement No. 1 to Part 738, since Hong Kong is now to be governed by the entry for China. Most references to Hong Kong in Part 740 of the EAR governing license exceptions were previously removed, consistent with the July 31 final rule. The Hong Kong entities listed separately on the Unverified List, Supplement No. 6 to Part 744, are now merged, alphabetically under the entries for China.…

Continue Reading Hong Kong Removed as a Separate Destination from China Under the EAR

On December 11, 2020, the US Treasury Department’s Office of Foreign Assets Control (OFAC) issued a much-anticipated report under Section 5(b) of the Hong Kong Autonomy Act (HKAA) that—to the relief of non-US financial institutions, including those in Hong Kong—stated the Treasury Department had not identified any foreign financial institution (FFI) at risk of secondary sanctions under the HKAA at this time.

Background

Under Section 5(b) of the HKAA, Congress directed the Treasury Department to identify any FFI that knowingly conducted a significant transaction with a person identified by the State Department in a report under Section 5(a) of the HKAA. The State Department issued its report on October 14, 2020, identifying ten individuals, including Hong Kong’s Chief Executive and other prominent government officials.

(For more information about the HKAA and the State Department’s Section 5(a) report, see our blog post of October 15, 2020, “Update: Hong Kong Financial Institutions Face US Secondary Sanctions after State Department Issues First Report under Hong Kong Autonomy Act.”)

Under the HKAA, FFIs identified in a Section 5(b) report could be subject to a “menu” of ten secondary sanctions described in Section 7 of the HKAA. Those sanctions would become mandatory after one year of the report’s issuance.…

Continue Reading Financial Institutions Spared, for Now, from Secondary Sanctions after Treasury Department Issues ‘Null Report’ Under Section 5(b) of the Hong Kong Autonomy Act

In this advisory, members of our Sanctions and Export Control team provide a preliminary assessment of the expected policy approach of President-elect Biden’s administration to major US sanctions programs, including China and Hong Kong, Russia, Iran, Cuba, Venezuela, Syria, North Korea, and Sudan sanctions programs.

While specific steps to be taken will be revealed in…

The US Treasury Department, or presumably, its Office of Foreign Assets Control (“OFAC”), is expected to issue a report by mid-December under Section 5(b) of the Hong Kong Autonomy Act (“HKAA”) identifying “foreign financial institutions” (“FFIs”) that have knowingly conducted significant transactions with “foreign persons” previously identified by the US State Department under Section 5(a) of the HKAA on 14 October 2020. FFIs identified in the Section 5(b) Report will face a menu of ten sanctions, ranging from prohibitions on serving as a repository of US government funds to travel bans against corporate officers.

Prior to identification in the Section 5(b) Report and imposition of those sanctions, OFAC “will reach out to an FFI to inquire about its conduct,” according to FAQ 848 issued by OFAC in conjunction with the State Department’s 5(a) report.

While awaiting issuance of the Section 5(b) Report, and in addition to identifying any connection to individuals previously identified by the State Department, FFIs should consider how to respond if they receive an outreach from OFAC. Such an outreach, like any inquiry or request for information from OFAC, must be handled expeditiously and strategically. Inaccuracies or omissions in the response or the failure to respond at all could form the basis of enforcement action separate and apart from the conduct OFAC is reviewing under the HKAA. It will certainly set the tone for interactions with OFAC going forward.

In this note, we provide guidance on how to handle requests from OFAC under the HKAA, and more broadly to other informational outreach, based on our considerable experience in managing similar US government requests for clients in Asia.…

Continue Reading Responding to the US Treasury Department’s Information Requests: The Hong Kong Autonomy Act and Beyond

(For more recent information, see our blog post of January 15, 2021, “Updated: Amended Executive Order Makes Clear US Persons Must Divest Securities of Chinese Military Companies as Defense Department Identifies Nine More Entities.”)

On November 12, 2020, the White House issued an Executive Order (“EO”), “Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies,” which will prohibit US persons from purchasing securities of certain “Communist Chinese military companies,” including 31 companies previously identified by the US Department of Defense (“DoD”) in June and August 2020 (available here and here). The prohibitions in the EO will take effect on January 11, 2021.

Background

The EO, which was issued pursuant to the president’s authority under the International Emergency Economic Powers Act (“IEEPA”), declares a national emergency with respect to the “PRC’s military-industrial complex,” which is said to be “directly supporting the efforts of the PRC’s military, intelligence, and other security apparatuses” and threatening the national security, foreign policy, and economy of the United States.

In response to this stated threat, the EO will prohibit US persons from purchasing publicly listed securities of specific “Communist Chinese military companies,” as that term is defined  in Section 1237 of the National Defense Authorization Act for Fiscal Year 1999, as amended (“NDAA 1999”).  Restrictions will go into effect on January 11, 2021 against the 31 companies already identified by DoD, and will take effect 60 days after any subsequent listings by the DoD or the US Department of the Treasury.…

Continue Reading Executive Order Prohibits US Persons from Buying Securities of Chinese Military Companies as of January 11, 2021