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

On November 17, 2020, OFAC issued Venezuela General License 8G, “Authorizing Transactions Involving Petróleos de Venezuela, S.A. (PdVSA) Necessary for the Limited Maintenance of Essential Operations in Venezuela or the Wind Down of Operations in Venezuela for Certain Entities.”  General License 8G extends the pre-existing authorization for US persons to engage in certain transactions and activities involving the Venezuelan state-owned oil company PdVSA through June 3, 2021, for Chevron, Halliburton, Schlumberger, Baker Hughes, and Weatherford International.  These are some of the most significant petroleum companies with US connections operating in Venezuela.  Aside from extending the expiration date – which had been December 1, 2020 – General License 8G is substantively the same as general License 8F, which it replaces.

Specifically, General License 8G authorizes US persons to engage in transactions and activities “ordinarily incident and necessary to the limited maintenance of essential operations, contracts, or other agreements” for the above-mentioned companies and their subsidiaries that –

  1. are for safety or the preservation of assets in Venezuela;
  2. involve PdVSA or any entity in which PdVSA owns, directly or indirectly, a 50 percent or greater interest; and
  3. were in effect prior to July 26, 2019.


Continue Reading OFAC Issues Updated General License 8G Extending Authorization of Transactions with PdVSA for Five Petroleum Companies

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

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

On October 30, 2020, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issued an advisory on potential sanctions risks arising from dealings in high-value artwork (the “Advisory”). The Advisory follows a July 2020 report from the U.S. Senate Permanent Subcommittee on Investigations detailing how the art industry could be used to evade U.S. sanctions, notably in regard to sanctioned Russian individuals.

The Advisory focuses on the market for high-value artwork and provides guidance on mitigating risks related to transactions involving persons on the OFAC List of Specially Designated Nationals (“SDNs”) and territories subject to comprehensive sanctions (i.e., Crimea, Cuba, Iran, North Korea, Syria).

The Advisory targets art galleries, museums, private art collectors, auction companies, agents, brokers, and other participants in the art market. In describing the vulnerabilities in the market, the Advisory notes that the lack of transparency and high degree of anonymity and confidentiality in the sale and purchase of high-value artworks make the market attractive for illicit actors to obscure their identities and source of funds.


Continue Reading The Joy of Sanctions: OFAC Paints Picture of High-Risk Artworks

On October 21, 2020, the UK Foreign, Commonwealth and Development Office’s Sanctions Unit hosted a webinar to explain how UK sanctions policy and compliance will operate when the Brexit transition period ends.

EU sanctions will no longer apply in the United Kingdom after 11pm GMT on December 31, 2020. The UK’s new sanctions regime will

On October 14, 2020, the U.S. State Department issued a much-anticipated report pursuant to Section 5(a) of the Hong Kong Autonomy Act (HKAA), identifying ten individuals who were determined by the State Department to be “foreign persons” who “are materially contributing to, have materially contributed to, or attempt to materially contribute to the failure of the PRC to meet its obligations under” the Sino-British Joint Declaration of 1984 or Hong Kong’s Basic Law.

Under Section 5(b) of the HKAA, the U.S. Treasury Department is now given 30 to 60 days to release a report identifying any foreign financial institution (FFI) “that knowingly conducts a significant transaction with a foreign person identified” in the October 14 report. This report could be released by mid-November or December. Within one year of this Section 5(b) report, the Treasury Department could impose secondary sanctions on the FFIs identified therein, based on a menu of 10 sanctions laid out in Section 7 of the HKAA.

In conjunction with the State Department’s report, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued four Frequently Asked Questions (FAQs) providing additional guidance on how the agency intends to implement the secondary sanctions.

For additional background on this issue and a description of the secondary sanctions under the HKAA, see our blog post of July 15, 2020, “U.S. Executive Order Implements, Strengthens Hong Kong Sanctions.”


Continue Reading Update: Hong Kong Financial Institutions Face U.S. Secondary Sanctions after State Department Issues First Report under Hong Kong Autonomy Act

On September 30, 2020, President Trump issued Executive Order 13953 on “Addressing the Threat to the Domestic Supply Chain from Reliance on Critical Minerals from Foreign Adversaries and Supporting the Domestic Mining and Processing Industries.”

In the Executive Order, the President declared a national emergency under the International Emergency Economic Powers Act, in order to

The US Department of Homeland Security’s Customs and Border Protection agency (CBP) announced on September 14 the issuance of five new withhold release orders (WROs) on entities allegedly using forced labor in or from China’s western Xinjiang Uyghur Autonomous Region (XUAR). The WROs bar the import into the United States of various goods alleged to

The Trump administration is considering a ban on US imports of Xinjiang-origin cotton and other products due to allegations of widespread forced labor. The scope of the possible restrictions has not been made public but credible reporting suggests that it could include cotton and tomato products from the Xinjiang Uyghur Autonomous Region (XUAR) or wider