On January 17, 2023, the US Department of Commerce’s Bureau of Industry and Security (BIS) issued an interim final rule (the “January 17 rule”), expanding its recent China-focused export controls, related to advanced computing and semiconductors, to Macau.  These controls, initially imposed on China (including Hong Kong), were announced in an interim final rule on October 7, 2022 (the “October 7 rule”). 

Continue Reading BIS Extends Advanced Computing and Semiconductor Rules to Macau

On January 5, 2023, President Biden signed into law the Protecting American Intellectual Property Act of 2022 (the Act). The Act requires periodic reports to Congress identifying any “foreign persons” who are found to have engaged in significant theft of trade secrets of U.S. persons. The Act also requires menu-based sanctions against such persons, which may include blocking sanctions.

Although the Act does not specifically target any country, the press statement from Sen. Chris Van Hollen (D-Md.), the sponsor of the Act, clearly indicates that China is a primary intended target of the legislation.[1]

Continue Reading New Sanctions Authority for Theft of U.S. Trade Secrets by Foreign Persons

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

On December 23, 2021, and following strong bipartisan support in Congress, President Biden signed the Uyghur Forced Labor Prevention Act (“UFLPA” or “Act”) into law.  P.L. 117-78 (2021).  The UFLPA builds on previous congressional and executive branch actions aimed at responding to allegations of forced labor and other human rights concerns in China’s Xinjiang Uyghur Autonomous Region (“XUAR”).  In particular, the UFLPA introduces a rebuttal presumption that “any goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in” the XUAR were made with forced labor and are therefore ineligible for entry into the United States.  In addition, the UFLPA details Congressional expectations for a whole of government enforcement strategy with respect to allegations of XUAR-related forced labor and expands economic sanctions introduced under the Uyghur Human Rights Policy Act of 2020 to cover “{s}erious human rights abuses in connection with forced labor” in the XUAR.

In recognition of the compliance challenges related to the above-described rebuttable presumption, the Forced Labor Enforcement Task Force (“FLETF”) is soliciting comments on how best to ensure that “goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part with forced labor in the People’s Republic of China are not imported into the United States.”  These comments are due no later than March 10, 2022.  As discussed further below, importers should consider submitting comments to the FLETF concerning this set of issues, which will ultimately inform the enforcement strategy employed by U.S. Customs and Border Protection (“CBP”) at the border.  Additionally, importers should begin top-to-bottom reviews of their supply chains to ensure compliance with the newly-introduced rebuttable presumption prior to its implementation in June of this year.

Continue Reading Understanding the Uyghur Forced Labor Prevention Act and What Comes Next

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

In 2015, the People’s Republic of China (PRC) enacted the first part of its comprehensive data security regime with the promulgation of the State Security Law, which provided a statutory basis for the construction of a nationwide network and information security system.  The Cybersecurity Law (CSL), which followed in 2017, addressed cybersecurity protection and introduced the concept of a “Critical Information Infrastructure Operator” (CIIO).  Subsequently, other laws, regulations, and rules have been promulgated addressing the requirements of China’s digital economy, related state security matters, and personal information privacy rights. Among those, the Data Security Law (DSL) became effective on September 1, 2021, and the Personal Information Protection Law (PIPL) will go into effect on November 1, 2021.  After subsidiary regulations and rules addressing implementation of the DSL and PIPL have entered into force, China’s new data security architecture should be largely complete.

Continue Reading China Builds Out Data Security Architecture With New Regulations on Cross Border Data Transfers

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 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

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