Elliott Abrams, the U.S. Special Representative for Venezuela, announced a plan to lift sanctions on Venezuela should the Maduro regime step aside to permit a transitional government to be elected until full elections can take place in late 2020. If there is transition of power, individual sanctions on dozens of Venezuelan government officials could
Treasury Issues New Guidance Regarding June 21, 2019 Amendment to the Reporting, Procedures, and Penalties Regulations (“RPPR”)
In late February, the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) published additional guidance regarding the June 21, 2019 amendment to OFAC’s Reporting, Procedures, and Penalties Regulations (“RPPR”). That guidance caused a stir among manufacturing company compliance personnel and others because it appeared to imply that unsolicited sales inquiries and other contacts from Iranian companies or government entities might require submission of a report to OFAC whether those inquiries were formally rejected or not.
OFAC clarifies that as of June 21, 2019, when the changes to the RPPR took effect, they expected all U.S. persons and persons otherwise subject to U.S. jurisdiction, including entities that are not U.S. financial institutions, to comply fully with all requirements of the RPPR, including the requirement to report rejected transactions within 10 business days of the rejected transaction. (Note: Prior to June 21, 2019, only U.S. financial institutions were required to submit reports to OFAC for rejected funds transfers). Rejection reports must be submitted to OFAC using their Report of Rejected Transaction Form.
The June 21, 2019 changes incorporated new requirements for parties filing reports on blocked property, unblocked property, or rejected transactions. The rule requires more information in blocked property reports in order to prevent multiple requests from OFAC for additional information. …
Companies outside the U.S. contemplating purchases of U.S. business (and potential U.S. acquisition targets) are continuing to parse the Department of the Treasury’s two proposed regulations continuing implementation of the Foreign Investment Risk Review Modernization Act (“FIRRMA”). The proposed rules change the Committee’s jurisdiction and certain procedures related to the national security reviews undertaken by the Committee on Foreign Investment in the United States (“CFIUS”). These proposed regulations provide additional clarity regarding how CFIUS intends to implement the FIRRMA amendments. When implemented, these regulations will formally expand CFIUS jurisdiction – but will also formalize current CFIUS practice in most respects. Implementation is scheduled to occur on or before February 13, 2020.
Jurisdiction over non-controlling investments
Traditionally, CFIUS exercised jurisdiction over investments that result in the “control” of a non-U.S. person over a U.S. business. After FIRRMA implementation, CFIUS will have jurisdiction over certain investments that do not result in control by a non-U.S. person. Specifically, CFIUS will have jurisdiction over non-controlling investments if the investment is in a specific company type, and if it affords the investor specific, enumerated rights.
The draft regulations identify several company types that satisfy the first part of the test. The first type is a business that produces or otherwise deals in certain “critical technologies.” A separate statute authorizes the Department of Commerce to identify these critical technologies. Although the Department of Commerce did identify examples of these technologies in a 2018 rulemaking, that process is not yet complete.…
Yesterday, the Office of Foreign Assets Control (“OFAC”) listed Petroleos de Venezuela, S.A. (“PdVSA”) as a Specially Designated National (“SDN”) pursuant to its authority under Executive Order 13850. As a result of the designation, all property and interests in PdVSA property subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from engaging in transactions with the entity and its 50-percent owned subsidiaries.
Concurrent with the designation, OFAC amended one existing and issued eight new General Licenses (“GLs”). These GLs authorize activities that would otherwise be prohibited by Executive Order 13850 or other Venezuela-related sanctions, and fall into one of several categories: 1) authorizations regarding maintenance and wind down activities related to contracts with PdVSA or certain of its subsidiaries existing prior to January 28, 2019 (GL 11, GL12). The most significant authorization allows parties to wind down pre-existing contracts with PdVSA until February 27, 2019; 2) authorizations regarding certain PdVSA subsidiaries, including PDV Holding, Inc. (“PDVH”), CITGO Holding, Inc. (“CITGO”), and Nynas AB (GL 7, GL 13). These GLs include an authorization for the export of certain U.S. items and services until July 27, 2019; 3) the purchase in Venezuela of gas from PdVSA and its subsidiaries for certain uses (GL 10); 4) authorization for certain Venezuela-based operations involving PdVSA (GL 8); and 5) transactions related to certain bonds and debts (GL 3A, GL 9), among others.
The GLs generally have difference scopes, apply to different entities, and have different validity periods. The key aspects of each of the GLs are described below.
It has always been a possibility that the United Kingdom would crash out of the European Union on 30 March 2019 but “no deal” preparation is now highly recommended by both sides. For organisations that export dual use items, the possibility of the UK becoming a “third country” vis-à-vis the EU without an exit agreement or transition period means an overnight need for export licenses where none are required today.
Seasoned international businesses understand that dual use items, which can be used for both civil and military purposes, include far more products than one might assume. In addition to the more obvious goods that may be used to produce or develop military items, such as machine tools and equipment used for chemical manufacturing, computers, drawings, technology, software, raw materials, and components also may be subject to dual use controls. Even seemingly mundane items such as protective clothing used in medical laboratories, certain commonly used chemicals, certain ball bearings, and a wide variety of other products are controlled for export and they need to be properly classified to determine if a license would be needed to ship to a UK that has left the EU. Many entities that have been operating exclusively within the EU could soon be confronted with dual use licensing requirements for the first time and global businesses may be faced with a potentially significant increase in the number of items that need be licensed.…
Earlier this week, the Bureau of Industry and Security (“BIS”) published a request for public comment regarding a proposed expansion of export controls under the Export Administration Regulations (“EAR”) for certain spraying or fogging systems, which are controlled under Export Control Classification Number (“ECCN”) 2B352.i. Currently, the ECCN controls only spraying or fogging equipment that is specially designed or modified for use on certain aircraft that also meet certain technical specifications related to droplet size and flow rate.
After months of negotiation, Congress recently passed, and the president is expected to sign, the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”). FIRRMA updates the national security review of inbound investments undertaken by the Committee on Foreign Investments in the United States (“CFIUS” or “the Committee”), an interagency body located within the…
Today, the EC announced that it is moving forward with a package of measures to blunt the impact of renewed U.S. sanctions on Iran following the U.S. exit from the Joint Comprehensive Plan of Action (JCPOA). Included in those measures is the planned activation of the EU blocking statute, which would bar EU companies from complying with the extraterritorial effects of U.S. sanctions requirements on Iran. The statute is also intended to insulate EU companies from certain U.S. sanctions penalties. Implementation of blocking statutes can create a situation in which companies must decide which country’s law they are going to violate – if they cannot find an approach that avoids the conflict. …
On Tuesday President Trump announced that the United States will exit the multilateral Iran nuclear deal and fully re-impose sanctions on Iran. After the announcement, the Office of Foreign Assets Control (OFAC), the agency responsible for administering most U.S. sanctions, issued a statement and guidance on the re-imposition of U.S. sanctions. This announcement reflects a major change in U.S. policy towards Iran and will have far-reaching implications for companies that re-entered the Iranian market following the 2016 nuclear deal.
U.S. and non-U.S. companies should formulate carefully considered wind down and exit strategies to ensure compliance with applicable U.S. rules and to avoid secondary sanctions risks.
In January 2016, the Joint Comprehensive Plan of Action (JCPOA) between the United States, Iran, and other countries was formally implemented, lifting many sanctions on Iran in exchange for restrictions on Iran’s nuclear program. Under the JCPOA, the United States waived most secondary sanctions on Iran, including those targeting non-U.S. companies for doing business that involved Iran’s energy, finance, and other sectors. OFAC also removed a large number of Iranian parties associated with the Government of Iran from the List of Specially Designated Nationals (SDN List), allowing non-U.S. companies to conduct transactions with those parties without being subject to secondary sanctions. Foreign subsidiaries of U.S. companies were also authorized under OFAC’s General License H to conduct most commercial business involving Iran. These changes allowed non-U.S. companies and foreign subsidiaries of U.S. companies to re-enter the Iranian market in compliance with U.S. law and without the threat of U.S. secondary sanctions penalties.…
Does your company source components or parts outside the U.S.? When doing so, you need to be careful about sending unlicensed export controlled technical data like drawings, blueprints and manufacturing instructions as part of an RFQ or production process. Many companies send such information to overseas parts vendors and to non-U.S. person employees at domestic vendors without a systematic check to see if the information requires an export license. And an increasing number of companies already have — or are establishing — offshore engineering centers of their own, or they have a relationship with an offshore third party engineering center, without focusing on the need to implement a rigorous process to ensure that data exchanged with those centers is licensed for export when needed. Similar challenges arise when engineers and procurement personnel at U.S.-based business units collaborate with a sister facility abroad, or they use web-based collaborative platforms (e.g. Sharepoint) for product development without thinking through export control concerns. …