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 be produced by forced, indentured, and convict labor (“Forced Labor”), including cotton, apparel, hair, and technology products.

CBP’s announcement is just the latest in a wider US government interagency effort to crack down on alleged human rights abuses related to ethnic minorities in XUAR. Companies are encouraged to take a fresh look at how their existing compliance programs address the risks of Forced Labor and related labor and human rights issues in their supply chains, as well as related economic sanctions and export controls risks.

For more information, click here to read the full client alert.

On August 28, China’s Ministry of Commerce and Ministry of Science and Technology jointly released a newly revised Catalogue of Technologies Prohibited and Restricted from Export (“Catalogue”), which is the second revision since the creation of the Catalogue in 2001. While China has separate control lists for items (including technology) controlled for non-proliferation reasons (i.e. nuclear, biological, chemical and missile-related control lists), this Catalogue sets forth technologies that otherwise warrant control, including on grounds of national security, public interests, environmental protection, etc.[1]

The Catalogue is structured in accordance with the industry classification issued by China’s National Bureau of Statistics, with the controlled technologies listed by category under each industry with a code assigned to the category. Before the revision, the Catalogue contained 150 categories/codes of technologies related to 34 industries, including 33 prohibited categories and 117 restricted categories. The controlled technologies include techniques related to China’s indigenous cultural and natural resources (e.g. manufacturing techniques of certain tea, alcohol, food and Chinese medicine, certain panda nurturing techniques) as well as technologies that are important to safeguarding China’s economic interests and national security.

The revision this time removed 4 categories of “prohibited” technologies and 5 categories of “restricted” technologies, while adding 23 new categories of “restricted” technologies. Moreover, changes were made to 21 existing categories with respect to the nature and parameters of the specific technology covered. Those newly added include technologies related to encryption, cyber defense, metal 3D printing, aero remote sensors, UAVs, lasers, major power and petrochemical facilities, etc.

Continue Reading China Updates its Catalogue of Technologies Prohibited and Restricted from Export

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 prohibitions covering cotton products from across China and third-countries relying on XUAR-sourced materials or labor.

XUAR produces an estimated 20% of the world’s cotton and 85% of China’s cotton. The far western province is also the site of alleged human rights violations, including the detention and internment of ethnic Uyghur and Turkic Muslim minorities, surveillance of local populations, and use of forced and prison labor from the XUAR.

A ban on Xinjiang-sourced cotton products could radically impact global supply chains and the apparel industry, and further escalate the US-China trade war. The Trump Administration has aggressively employed sanctions and export controls against Chinese officials and entities. This advisory discusses Customs and Border Protection’s processes for implementing and enforcing such an import ban, as well as related investigative and enforcement risks under customs, sanctions, export control, and other laws and regulations

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

On August 25, 2020, the US Department of Commerce’s Bureau of Industry and Security (BIS) published a final decision by the Undersecretary, affirming an Administrative Law Judge’s (ALJ) imposition of a US $ 31.4 million civil monetary penalty on Nordic Maritime Pte. Ltd., a Singapore-based marine seismic company, and its chairman (together, the “Respondents”), for knowingly exporting highly controlled equipment to Iran. This final decision follows the Undersecretary’s previous decision vacating and remanding the initial penalty as disproportionate to that imposed in similar cases (Remand Order). Our previous blog post discussing this unusual action is available here.

By way of background, the ALJ, in his initial recommended decision and order (RDO) dated February 7, 2020, found the Respondents liable for violating the Export Administration Regulations (EAR), and recommended a civil monetary penalty of US $ 31.4 million. The Respondents then appealed the ALJ’s decision to the Undersecretary, whose first decision, including the Remand Order, was published in March 2020. In that decision, the Undersecretary affirmed the ALJ’s findings on liability, but vacated the penalty and remanded it back to the ALJ for reexamination because the “analysis of damages in the RDO [was] incomplete.” The Undersecretary also listed a number of cases settled with proportionally lower penalties to guide the ALJ on remand. The ALJ then ordered additional briefing focused on the penalty amount, and reinstated the original penalty with a fuller justification in a subsequent RDO dated July 15, 2020. The Undersecretary affirmed the US $ 31.4 million civil monetary penalty in its entirety.

Continue Reading BIS Undersecretary Affirms USD 31.4 Million Penalty on Singaporean Company for Iran Sanctions Violations

According to public statements of high-ranking representatives, the EU is considering whether to impose new economic sanctions against Turkey. The measures discussed include targeting certain Turkish industry sectors, such as the energy industry.

On November 11, 2019 the Council of the EU  adopted a sanctions framework set forth in Council Regulation 2019/1890 and Council Decision 2019/1894, and subsequently designated two executives of the Turkish oil company TPAO on February 27, 2020, in response to Turkish hydrocarbon drilling activities in what the EU views as Cypriot territorial waters. The sanctions that are currently in place consist of a travel ban to the EU, an asset freeze for persons and entities, as well as a prohibition to satisfy claims for their benefit. In addition, EU persons and entities are forbidden from making funds and economic resources available to those listed.

Continue Reading EU Mulls New Economic Sanctions Against Turkey

In July 2020, the Committee on Foreign Investment in the United States (“CFIUS”) released its Annual Report to Congress for Calendar Year (“CY”) 2019.  The Annual Report, which fulfills certain statutory reporting requirements, provides information on covered transactions filed with CFIUS during 2019.  Among other things, the 2019 Annual Report provides some initial data and other insights into CFIUS’s administration of the Foreign Investment Risk Review Modernization Act (“FIRRMA”), which expanded the jurisdiction of CFIUS and included new reporting requirements.

Continue Reading Analysis of Annual Report of CFIUS to Congress for Calendar Year 2019

On September 1, 2020, several US government agencies issued an advisory warning industry of the risks of inadvertent involvement in North Korea’s ballistic missile procurement activity. The advisory focuses not only on the producers and traders of products that can be misused for ballistic missile purposes, but also logistics providers and financial institutions that may unwittingly support this unlawful trade.

The advisory, issued by the US Departments of the Treasury, State, and Commerce, specifically highlights North Korea’s “collaborat[ion]” with “foreign-incorporated companies, such as Chinese and Russian entities, to acquire foreign-sourced basic commercial components.” It describes some of the deceptive tactics that these intermediaries may use, including concealing the true end-user and mislabeling export documentation, such as by “falsely declaring specialized materials to instead be general-purpose items that are widely commercially available.” The advisory notes that “most” of the products North Korea sources internationally for its ballistic missile program do not meet the thresholds of UN-mandated restrictions on trade with North Korea or of national export control lists, “and are widely available from overseas distributors, highlighting the importance of complying with ‘catch-all’ controls, as required by [United Nations Security Council Resolution (‘UNSCR’)] 2270.”

Continue Reading US Advisory on North Korea Ballistic Missile Procurement Highlights Risk of “Catch-all” Export Controls

On August 27, 2020, the US Department of Defense (“DoD”) published a second tranche to its list of “Communist Chinese military companies,” pursuant to Section 1237 of the of the National Defense Authorization Act for Fiscal Year 1999 (the “DoD List”).

The announcement follows the DoD’s June 24, 2020, publication of 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.”

(Click here for Steptoe’s blog post following the June 24, 2020 publication of the DoD letter.)

Continue Reading Update: US Department of Defense Publishes Update to List of “Communist Chinese Military Companies”

On August 27, 2020, the U.S. Commerce Department’s Bureau of Industry and Security (“BIS”) published an advance notice of proposed rulemaking (“ANPRM”) to solicit comments from industry and other stakeholders about how BIS should approach the establishment of new export controls on “foundational technologies” under the U.S. Export Administration Regulations (“EAR”).   Comments must be received by October 26, 2020.   This is an important opportunity for both U.S. and non-U.S. companies, industry groups, academic institutions and others to have a role in shaping this new U.S. regulatory process at an early stage.

The U.S. government is required under Section 1758 of the Export Control Reform Act of 2018 (“ECRA”) to “identify emerging and foundational technologies” that are “essential to the national security of the United States” and that are not yet subject to export controls for most countries, and then to “establish appropriate controls” on such technologies, which “at a minimum” are to include restrictions on providing such technologies to China and other U.S. arms-embargoed countries.  Therefore, the end result of this process may be new U.S. export controls on China and other countries that are viewed as more sensitive from the perspective of U.S. national security.  Any controls ultimately established for foundational technologies will be relevant not just for export controls, but also other regulatory areas.  Notably, “emerging and foundational technologies” controlled pursuant to Section 1758 of ECRA will be treated as “critical technologies” for the purpose of foreign investment national security reviews led by the Committee on Foreign Investment in the United States (“CFIUS”), as we previously advised.

Continue Reading Export Controls on “Foundational Technologies” – Opportunity for Public Comment

On July 14, the president issued Executive Order (EO) 13936, directing US federal agencies to revoke or suspend the Hong Kong Special Administrative Region’s (HKSAR) special status from mainland China under select laws and regulations.  As of August 15, several agencies had announced rule changes or proposed changes to implement the president’s directive. After one month, what are the major impacts of EO 13936 on individuals and companies doing business or investing in Hong Kong?

This Client Alert provides a summary of EO 13936’s impact on export controls, arms controls, investigations and white-collar defense, immigration, and trade, with contributions from Steptoe’s cross-border teams based in Washington, DC, New York, and Hong Kong.

Click here to read the full Client Alert to learn more about EO 13936 and recent changes to US law related to Hong Kong.