The US Department of Commerce’s Bureau of Industry and Security (“BIS”) has issued new FAQs on its website addressing the new military end use / military end user rule (“MEU Rule”) and the expansion of the MEU controls for China, Russia, and Venezuela. For a summary of the MEU rule changes, please see our prior blog post detailing the changes to Section 744.21 and other related provisions in the Export Administration Regulations (“EAR”).

There are 32 FAQs, which provide a summary of the new MEU Rule, guidance on specific scenarios, and interpretations of the key terms, including, “military end use” and “military end user.” Below we discuss a few of the key points from the BIS FAQs regarding military end users, military end uses, and due diligence.

Continue Reading BIS Issues New FAQs Regarding the Expansion of the Military End Use / Military End User Rule

Following a joint request from several EU national competent authorities (“NCAs”), the European Commission issued an opinion on asset freeze measures imposed on non-EU entities that are controlled by designated persons targeted by EU Council Regulation No 269/2014. The Regulation concerns restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine (“the Regulation”). In its opinion, the Commission takes position on the interpretation of article 2 of the Regulation, which requires EU operators to freeze all funds and economic resources belonging to, owned, held or controlled by persons designated in Annex I to the Regulation. EU operators are also prohibited from making funds or economic resources available, directly or indirectly, to these designated persons. The guidance provided by the Commission is of particular relevance to credit and financial institutions that may be required to comply with EU asset freeze measures.

The NCAs asked the Commission a number of questions in connection with the interpretation of paragraph 63 of the EU Best Practices Guidance, which sets out the criteria to be taken into account when assessing whether a legal person or entity is controlled by another person or entity. The EU Best Practices are non-binding recommendations which aim to promote the uniform implementation of EU sanctions.

Continue Reading European Commission Provides Guidance on the Scope of the Asset Freeze under the EU’s Ukraine-Related Sanctions

On June 29, 2020, the US Department of State announced that the US government “will today end exports of US-origin defense equipment and will take steps toward imposing the same restrictions on US defense and dual-use technologies to Hong Kong as it does for China.”

The US Department of Commerce also announced on June 29, 2020, that, as part of the “revocation of Hong Kong’s special status,” the “Commerce Department regulations affording preferential treatment to Hong Kong over China, including the availability of export license exceptions, are suspended. Further actions to eliminate differential treatment are also being evaluated. We urge Beijing to immediately reverse course and fulfill the promises it has made to the people of Hong Kong and the world.”

Continue Reading Developing: US Announces Tightened Export Controls on Hong Kong

As anticipated, President Trump issued a proclamation on June 22, suspending the ability of foreign nationals in common employment-based non-immigrant (temporary) categories to enter the United States. The proclamation, which is valid until December 31, 2020, places a suspension on the L-1, H-1B, H-2B, and specified J-1 categories. While the proclamation is significant, there are limits to its scope as well as exceptions that can be requested based upon the nature of the work that will be performed by the sponsored foreign national.

The nuances of how the proclamation is interpreted  continue to evolve. The US Department of State (DOS), US Department of Homeland Security (DHS)—particularly the US Customs and Border Protection (CBP) —will be involved initially in the implementation. The US Department of Labor (DOL) is also involved with refining the scope of exceptions based upon economic benefit. Notable interpretive developments include: CBP verbal confirmation that the proclamation does not apply to Canadian citizens and DOS written responses stating that they will not renew visas in the subject category.

For more on this topic, click here to read the full Client Alert.

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

On June 24, 2020, the US Department of Defense (“DoD”) sent a letter to Senator Tom Cotton enclosing a list of twenty companies headquartered in the People’s Republic of China (“PRC”) which DoD determined are operating directly or indirectly in the United States and are “Communist Chinese military companies.”  Titled “Qualifying Entities Prepared in Response to Section 1237 of the National Defense Authorization Act for Fiscal Year 1999 (PUBLIC LAW 105-261),” the “DoD List” includes some Chinese companies frequently associated with the Chinese military, and others that may not have been previously associated with the Chinese military.

For companies doing business with the US government, the US government may consider the inclusion of any of the listed companies in a government contractor’s supply chain as a “supply chain risk” that must be assessed, particularly in connection with information technology.  DoD contractors are already prohibited by their contracts from acquiring certain items and services from “any Communist Chinese military company.”

While not a sanctions list itself, the DoD List may lead to sanctions actions by the US government, as well as reactions from business partners assessing the risk of further action against the listed companies by the US government, particularly for listed companies that are not currently subject to US sanctions.  Pressure from Congress may continue for the administration to continue to update this list, and to impose restrictions on the companies on this list.

Continue Reading US Department of Defense Publishes List of “Communist Chinese Military Companies” Operating Directly or Indirectly in United States Pursuant to Section 1237 of the National Defense Authorization Act for Fiscal Year 1999 (the “Act”)

On 17 June, the European Commission released its White Paper “on levelling the playing field as regards foreign subsidies.” The White Paper is built on the conclusion that foreign subsidies can undermine competition and distort the EU internal market. It aims at introduction of new EU legislation to address the regulatory “gap” between the EU state aid rules applying to subsidies granted by the EU Member States to EU entities and the current lack of rules to redress the behavior of corporate actors in the EU whose market actions are unfairly facilitated by unregulated foreign subsidies. Beyond mergers in the EU involving foreign subsidized companies, the legislation would also address concerns about foreign subsidized actors in the context of EU public procurement and access to EU funding.

At the start of her mandate, Commission President Ursula von der Leyen had announced her wish to develop tools and policies to better tackle the distortive effects of foreign state ownership and subsidies in the internal market. The COVID-19 crisis encouraged a swift move on this initiative, as pointed out by Executive Vice-President Margrethe Vestager and Commissioner Thierry Breton, who are co-responsible for this dossier.

Continue Reading The European Commission releases a White Paper on foreign subsidies in the Single Market

On June 18, 2020, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced the addition of three individuals and eight entities to its list of Specially Designated Nationals and Blocked Persons (SDN List), pursuant to Executive Order 13850, for “their activities in or associated with a network attempting to evade United States sanctions on Venezuela’s oil sector.”  OFAC also identified two vessels as blocked property belonging to the designated persons and issued a general license authorizing wind-down activities with certain of the designated persons, as well as an FAQ regarding the general license.  Finally, OFAC announced the delisting of two entities previously included on the SDN List for operating in the oil sector of the Venezuelan economy.

The actions are the latest in a string of recent designations targeting entities involved in the Venezuelan oil sector, which has been a particular focus for OFAC of late.  The latest actions offer a number of insights for companies doing business with Venezuela and operating in the oil and shipping industries more broadly.  We highlight three key takeaways below.

Continue Reading Three Key Takeaways from OFAC’s Latest Venezuela Sanctions Actions

The UK Financial Conduct Authority (FCA) has fined Commerzbank AG’s London branch (Commerzbank London) £37.8 million for failing to institute adequate anti-money laundering (AML) controls from 2012 to 2017 in violation of Principle 3 of the FCA’s Principles for Businesses.

Mark Steward, the FCA’s Executive Director of Enforcement and Market Oversight stated that “Commerzbank London’s failings over several years created a significant risk that financial and other crime might be undetected,” although the FCA did not identify any evidence of financial crime having been caused or facilitated by Commerzbank London’s AML control failings.

Financial institutions operating in the United Kingdom, such as Commerzbank London, are responsible for minimizing their risk of being used for criminal purposes, including the risk of being used to facilitate money laundering or terrorist financing.  UK firms are required to mitigate this risk by organizing and controlling their affairs responsibly and effectively, establishing and maintaining an effective, risk-based AML control framework and complying with the applicable Money Laundering Regulations.

Continue Reading UK Financial Conduct Authority Fines Commerzbank’s London Branch £37.8 Million for Anti-Money Laundering Control Failings

On June 17, 2020, the President signed the Uyghur Human Rights Policy Act of 2020 (the “Act”). The stated purpose of the Act is to “direct United States resources” to address widely alleged human rights abuses and violations in the Xinjiang Uyghur Autonomous Region (“XUAR”) of the People’s Republic of China (“PRC”). The Act contains sanctions and reporting requirements targeting PRC government officials, and other individuals and companies, that the US government believes to be involved in the alleged human rights abuses and violations in XUAR.

Although the Act names two senior PRC officials, the current XUAR Party Secretary and the former XUAR Deputy Party Secretary, for crafting and implementing policies leading to human rights violations against Uyghurs and other minority groups in XUAR, the Act does not directly impose sanctions on those officials. Continue Reading Trump Signs Uyghur Human Rights Policy Act Authorizing Sanctions Against “Foreign Persons” Engaging in Human Rights Abuses and Violations in Xinjiang Uyghur Autonomous Region