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On March 2, 2021, the US Departments of Treasury, State, and Commerce announced the coordinated imposition of sanctions and other restrictive measures on Russia and Russian officials and entities for the “poisoning and subsequent imprisonment of Russian opposition figure Aleksey Navalny.” The Department of the Treasury added seven Russian officials and entities to the Specially Designated Nationals and Blocked Persons List (the SDN List) pursuant to Executive Order (EO) 13661 and EO 13382, thereby blocking their property or interests in property that come within the possession of US persons or the jurisdiction of the United States. US persons are now prohibited from engaging in transactions with these SDNs. The State Department designated seven entities under its own authority, including four that were already on the SDN List. Treasury further expanded the sanctions applied to Russia in 2018 after the poisoning of Sergei Skripal in the UK, and named six entities as operating for the Russian defense sector, triggering sanctions. The Commerce Department announced the addition of fourteen entities to the Entity List, which triggers a licensing requirement for exports, re-exports, and in-country transfers to those entities of all items subject to the US Export Administration Regulations (EAR).
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Continue Reading US Applies Wide Range of Sanctions to Russian Officials and Entities

On January 19, 2021, the Department of Commerce published an Interim Final Rule (the “Rule”) setting out a more detailed regulatory structure to implement Executive Order 13873, which authorizes Commerce to prohibit or otherwise regulate transactions involving information and communications technology or services (“ICTS”) with a nexus to “foreign adversaries” that pose an “undue or unacceptable risk” to US national security.  See also our post on the predecessor proposed rule.  The stated purpose of the Rule, which bears some resemblance to (though differs in many ways from) the foreign investment review and mitigation process administered by the Committee on Foreign Investment in the United States (“CFIUS”), is to protect US national security through a focus on the ICTS supply chain.

The Rule identifies for the first time the following as covered “foreign adversaries”:

  1. China (including Hong Kong)
  2. Russia
  3. Cuba
  4. Iran
  5. North Korea
  6. “Venezuelan politician Nicolás Maduro (Maduro Regime)

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Continue Reading Insights on the Information and Communications Technology and Services (“ICTS”) Rule

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.

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Continue Reading Biden Administration Announces Sanctions and Export Controls in Response to Myanmar Coup

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…

On January 19, 2021, President Trump issued Executive Order (EO) 13984, “Taking Additional Steps To Address the National Emergency With Respect to Significant Malicious Cyber-Enabled Activities” (86 Fed. Reg. 6,837 (Jan. 25, 2021)), taking further action under the national emergency declared by President Obama in Executive Order 13694 of April 1, 2015.  EO 13984 directs the US Department of Commerce (Commerce) to: (1) promulgate know-your-customer (KYC)-type identification and recordkeeping obligations on US “Infrastructure as a Service” (IaaS) providers engaging in foreign transactions, and (2) consult with other US government agencies to impose “special measures,” i.e., restrictions, on foreign jurisdictions and persons, i.e., actors, determined to be using US IaaS to engage in significant malicious cyber activities.

The EO describes IaaS as “products to provide persons the ability to run software and store data on servers offered for rent or lease without responsibility for the maintenance and operating costs of those servers,” and includes a lengthy definition of different types of IaaS products that are covered by the EO. Although some reports have focused on the impact that EO 13984 may have on cloud service providers, the EO’s broad definition for IaaS could sweep in other information technology service providers operating in the US.

The EO is not effective immediately, and may not go into effect for several months or longer.  The EO directs Commerce “to propose for notice and comment” regulations within 180 days implementing the KYC and “special measures” directives described above.  In addition, EO 13984 was issued by President Trump at the very end of his administration, and it is possible that the Biden Administration will delay implementation for a longer period of time as it reviews the legal and policy implications of the EO.

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Continue Reading US Infrastructure as a Service Providers (IaaS) – New Know-Your-Customer Requirements?

On January 19, 2021, the European Commission presented a Communication setting out a strategy to stimulate the openness, strength, and resilience of the European Union’s economic and financial system.

An important part of this Communication concerns EU sanctions, in particular:

  1. the implementation and enforcement of EU sanctions regimes.
  2. the EU’s resilience to the effects of

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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.

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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 a little-noticed provision of the annual US military authorization law, which took effect on January 1, 2021, the US Congress issued yet another push for the US Commerce Department to grant eligibility to Israel for a key authorization under US export controls.  Israeli companies in the tech, aerospace/defense, and other sectors that are regulated under military and “dual-use” (i.e., military/commercial) export controls should watch these developments closely and consider engaging with the US government and/or the Israeli government regarding the implementation of this regulatory change.  The same is true for US and other global companies in these sectors that trade with Israel, maintain facilities in Israel, cooperate with Israeli partners on R&D, or employ or contract with Israelis who are not US citizens or green card holders.  The export controls authorization in question applies to a broad array of dual-use products/technologies, and even certain military products/technologies, and allows companies to operate without the need to obtain specific licenses from the US Commerce Department in certain instances and thereby may help avoid the added costs, delays and uncertainties that can result from the licensing process.  In short, if the Commerce Department granted this regulatory authorization to Israel, trade and technology cooperation in these sectors with Israel and Israelis would be much simpler.

Looking at the details, Section 1276 of the National Defense Authorization Act for Fiscal Year 2021 (the “NDAA”) requires the State Department to brief Congress during the first few months of the Biden administration “by describing the steps taken to include Israel in the list of countries eligible for” a key authorization under US export controls, License Exception Strategic Trade Authorization (“STA”), which is administered by the US Commerce Department under the Export Administration Regulations (“EAR”).   Specifically, this congressional mandate relates to so-called “STA-37,” or paragraph (c)(1) of STA, which is by far the broadest and most relevant part of STA that currently applies to 37 countries (as listed in “Country Group A:5” of the EAR).  That includes many European countries, the UK, Canada, Japan, S. Korea, Australia, and New Zealand, along with India (which was recently added), Argentina and Turkey.  Israel is already eligible for a much narrower STA provision (applicable to “Country Group A:6” of the EAR), along with Albania, Cyprus, Malta, Mexico, Singapore, South Africa, and Taiwan.  Congress is pushing Commerce to include Israel in the former group that benefits from the much broader regulatory authorization.

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Continue Reading Congress Continues to Push for Key US Export Controls Authorization for Israel

In another attempt to impose restrictions on Chinese technology companies in the final days of his presidency, on January 5, 2021, Trump issued a new Executive Order (EO) “Addressing the Threat Posed By Applications and Other Software Developed or Controlled By Chinese Companies.”  The EO, which was issued pursuant to the International Emergency Economic Powers Act, authorizes the imposition of restrictions, on or after February 19, 2021, against eight popular Chinese connected software applications.

The new EO declares that “additional steps must be taken to deal with the national emergency with respect to the information and communications technology and services supply chain declared in [EO 13873].”  The new EO alleges that “a number of Chinese connected software applications automatically capture vast amounts of information from millions of users in the United States,” including sensitive “personally identifiable information.”  It cites to “the continuing activity” of China and the Chinese Communist Party “to steal or otherwise obtain United States persons’ data” as “mak[ing] clear that there is an intent to use bulk data collection to advance China’s economic and national security agenda.”  The new EO states that the United States “must take aggressive action against those who develop or control Chinese connected software applications to protect our national security.”

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Continue Reading New Executive Order targets Chinese connected software applications

On January 1, 2021, the U.S. Senate passed – over President Trump’s veto – the National Defense Authorization Act, or NDAA, for Fiscal Year 2021 (H.R. 6395), a massive annual Department of Defense spending bill, which this year includes a section expanding sanctions on the Nord Stream 2 and TurkStream pipeline projects.  The Senate action follows House passage of the bill over the President’s veto on December 28, 2020.

Section 1242 of the 2021 NDAA broadens the scope of the sanctions provisions contained in the 2020 NDAA in the following principal ways:

  • For Nord Stream 2 only, it targets foreign persons that provide “services for the testing, inspection, or certification necessary or essential for the completion or operation of the … pipeline[.]”
  • For both Nord Stream 2 and TurkStream, it –
    • expands the scope of sanctionable activities in support of pipe-laying for these projects to include activities that “facilitate pipe-laying, including site preparation, trenching, surveying, placing rocks, backfilling, stringing, bending, welding, coating, and lowering of pipe[;]”
    • includes, in addition to selling, leasing or providing the covered pipe-laying vessels, “facilitat[ing]” that activity (even if not involving “deceptive or structured transactions,” language that had been included in the 2020 NDAA); and
    • clarifies that the scope of sanctionable activity includes providing underwriting services for covered vessels or insurance or reinsurance necessary or essential for the completion of the project; and providing services or facilities for technology upgrades or installation of welding equipment for, or retrofitting or tethering of, covered vessels that are necessary or essential for the completion of the project.

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Continue Reading U.S. Tightens Sanctions on Nord Stream 2, TurkStream Pipeline Projects