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

On August 4, a massive explosion tore through Beirut’s port and surrounding neighborhoods, killing over 200 people and displacing an estimated 300,000 from their homes. In the aftermath of the explosion, angry protesters took to the streets and the country’s cabinet resigned.

In the days since the blast, countries around the world have pledged US$300m in humanitarian assistance for Lebanon and a number of charity drives have raised considerable funds. Initial estimates put the material cost of the explosion as high as US$15 billion.

The purpose of this blog post is to provide some topline US sanctions and export control considerations for institutions and individuals considering the distribution of funds and/or goods or services to Lebanon.

For organizations looking for specific advice on navigating US sanctions and export controls, including Steptoe’s pro bono engagements, contact a member of our Economic Sanctions or Export Controls teams.

Continue Reading Charitable giving in times of crisis: Lebanon

On August 7, 2020, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced the imposition of sanctions on 11 prominent Hong Kong and People’s Republic of China (PRC) officials for taking actions that, in the view of the US government, undermined Hong Kong’s autonomy and restricted fundamental freedoms of people in Hong Kong. The officials include Hong Kong’s Chief Executive Carrie Lam, Hong Kong’s Secretary for Justice, the Secretary for Security, the Commissioner of the Hong Kong Police Force, and Chinese officials responsible for Hong Kong affairs, among others.

OFAC named the officials as Specially Designated Nationals (SDNs) pursuant to Executive Order (EO) 13936, entitled The President’s Executive Order on Hong Kong Normalization. Section 4 of the EO authorizes sanctions called for by Congress in the Hong Kong Human Rights and Democracy Act of 2019 and the Hong Kong Autonomy Act (HKAA).

As a result of the designations, all property and interest in property of the SDNs must be blocked (frozen) when in the United States or within the possession or control of a US person. US citizens and green card holders and US-domiciled companies are generally prohibited from transactions or dealings, directly or indirectly, with SDNs as well as entities owned 50% or more by one or more SDNs. This includes financial transactions processed through US banks. Note that the general prohibitions and blocking requirements under EO 13936 do not apply to foreign subsidiaries of US companies, but would apply to foreign branches of such companies.

(For a detailed summary of the sanctions provisions of EO 13936 please see our recent client advisory here.)

Continue Reading Financial Institutions Watch and Wait as OFAC Sanctions Top Hong Kong Officials

Skirting over financial crime due diligence when considering a quick transaction in an emerging market can cost you dearly down the line when regulators or shareholders discover issues with regulatory compliance after your transaction. The safer and ultimately more cost-effective course may be an independent assessment of the financial crimes compliance risks before completing cross-border

On July 15, 2020, the U.S. Department of State updated its public guidance on Section 232 of the Countering America’s Adversaries Through Sanctions Act (“CAATSA”), which authorizes (but does not require) the president to impose sanctions on “a person” that “knowingly” invests in Russian energy export pipelines, or that sells Russia goods, technology or services for such pipelines where certain monetary thresholds are met.

The Department of State announced that the purpose of the updated guidance is “to expand the focus of implementation of Section 232 to address certain growing threats to U.S. national security and foreign policy interests related to Russian energy export pipelines, particularly with respect to Nord Stream 2 and the second line of TurkStream.” This is a significant change, as the prior public guidance stated “The focus of implementation of Section 232 sanctions would be on . . . [Russian] energy export pipeline projects initiated on or after August 2, 2017 . . . For the purposes of Section 232, a project is considered to have been initiated when a contract for the project is signed. Investments and loan agreements made prior to August 2, 2017 would not be subject to Section 232 sanctions.”  This prior guidance had suggested that the focus of implementation of Section 232 would not be on Nord Stream 2 or Turkstream (either line), because these projects were “initiated” before August 2, 2017.

Continue Reading US Clarifies Secondary Sanctions on Nord Stream 2

On July 14, President Trump issued an Executive Order (EO) strengthening and expanding sanctions mandated by Congress under the Hong Kong Autonomy Act (HKAA), which the president also signed into law on July 14. In particular, the EO introduces blocking sanctions against foreign persons pursuant to the International Emergency Economic Powers Act in response to

On June 17, 2020, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the US Department of State announced the addition of 17 individuals and 22 entities to the List of Specially Designated Nationals and Blocked Persons (SDN List), pursuant to the Caesar Syria Civilian Protection Act of 2019 (Caesar Act) and Executive Order 13894 (EO 13894), for their support of the Bashar al-Assad government in Syria, and actions to undermine peace efforts in the country.  The State Department described the concurrent designations as part of a “whole-of-government campaign by the United States aimed at deterring the Assad regime from continuing its attacks against the Syrian people.”

Continue Reading Treasury, State Departments Sanction Syrian Government and Supporters