On September 15, President Biden signed an Executive Order (EO) with the first ever formal Presidential direction to the Committee on Foreign Investment in the United States (CFIUS or the Committee). The EO emphasizes the risks that the Committee should consider when reviewing covered foreign company purchases of U.S. businesses. The EO is intended reemphasize
In a rule change that was effective April 8, 2022, but communicated on April 11, 2022 the Commerce Department’s Bureau of Industry and Security (BIS) expanded coverage of export controls on Russia and Belarus to include any item with an Export Control Classification Number (ECCN). Prior controls applied to items in Commerce Control List (CCL)…
It has been almost three weeks since the U.S. and its allies began imposing serious new sanctions and export control restrictions on Russia and Belarus in response to Russia’s invasion of Ukraine. This post summarizes the state of affairs as of Friday, March 11, 2022.
Please reach out to our team if you have any…
In coordination with the European Union and G7 countries, the United States announced a raft of new sanctions and trade control measures targeting Russia today in response to the ongoing war in Ukraine. The new measures include:
- The planned revocation of Russia’s Most Favored-Nation status, which is likely to substantially increase duties on many imports
Over the last two weeks, the United States, European Union, and allied countries imposed a broad range of sanctions and export control restrictions on Russia and Belarus in response to Russia’s invasion of Ukraine. Additional sanctions measures are likely in response to the very fluid situation in Ukraine.
This post summarizes the state of affairs…
This week, the United States, European Union, and allied countries imposed a broad range of sanctions and export control restrictions on Russia in response to Russia’s invasion of Ukraine. We expect Western countries to implement additional measures in the coming days and weeks in response to the very fluid situation in Ukraine.
This post summarizes…
As part of a package of new sanctions on Russia that are effective February 24, 2022, the United States imposed a series of significant new export control measures on exports of many products, software and technology to Russia. The Bureau of Industry & Security (BIS), the bureau at the Commerce Department that administers U.S. “dual…
This post was updated on 2/24 following the release of the underlying EU legislation.
Yesterday, the European Union imposed new sanctions on Russia in response to the situation in Ukraine. The array of measures imposed by the EU mirror elements of the sanctions imposed over the last few days by the United States and United…
Today, President Biden issued an Executive Order (E.O.) authorizing the imposition of additional sanctions on the Government of Belarus and a number of key sectors of the Belarusian economy in coordination with the United Kingdom and Canada, which also expanded sanctions on Belarus. The E.O. authorizes the Office of Foreign Assets Control (OFAC) to…
Today, President Biden issued an Executive Order expanding U.S. restrictions on dealings in the publicly traded securities of Chinese companies. Today’s move amends Executive Order 13959 to prohibit U.S. persons from buying or selling the publicly traded securities of listed companies operating in (1) the surveillance technology sector or (2) the defense and related material sector of the Chinese economy. E.O. 13959 was previously limited to companies affiliated with the Chinese military.
The amended order reflects a growing emphasis on human rights and “democratic values” in U.S. sanctions policy related to China. The White House fact sheet announcing today’s amendment indicated that the Order is intended to prevent the flow of U.S. capital to companies that develop or use surveillance technology to facilitate repression or serious human rights abuse in and outside of China, including technology used to surveil religious or ethnic minorities. Other recent moves, including those in response to Chinese government policies in the Xinjiang region and Hong Kong, have similar human rights policy motivations. The administration may cite to security and adherence to democratic values in imposing future sanctions.
Below, we summarize the key features of the new restrictions and guidance issued by the Office of Foreign Assets Control (“OFAC”).
The amended E.O. initially applies to the 59 Chinese companies listed in the annex to the E.O. The companies are also included on OFAC’s new “Non-SDN Chinese Military-Industrial Complex Companies List” (“NS-CMIC List”), which replaces the previous “Communist Chinese Military Company” (“CCMC”) list. The NS-CMIC List includes a number of new Chinese companies that did not appear in the prior CCMC list and excludes a handful of companies that were on the prior list. (A table summarizing the list changes is below the break.) Notably, the NS-CMIC List captures companies operating in the defense sector, subsidiaries and affiliates of companies on the CCMC list, and two companies operating in the surveillance technology sector.
The Biden administration indicated that it expects to add additional parties to the NS-CIMC List in the future.
As in the original E.O. 13959, the prohibition on purchasing and selling publicly traded securities also applies to derivatives and securities designed to provide investment exposure to such securities, including ADRs, GDRs, ETFs, index funds, and mutual funds. Restrictions apply regardless of the CMIC securities’ share of the underlying index fund, ETF, or derivative. The amended E.O. defines “securities” as those specified in Section 3(a)(10) of the Securities Exchange Act of 1934.
The amended E.O.’s prohibitions come into effect on August 2, 2021 for the 59 companies currently on the NS-CMIC List, and U.S. persons are permitted to divest holdings in those securities until June 3, 2022. The amended E.O. also provides for a 365-day divestment period for CMICs that are designated in the future.
Guidance for U.S. financial service companies and investors
OFAC guidance issued today explains how the agency will apply the new E.O. to broker-dealers, market intermediates, and other market participants. In particular:
- U.S. financial service companies that provide clearing, execution, settlement, and related services can continue to deal in CMIC securities so long as they do not facilitate prohibited transactions by U.S. persons.
- Securities exchanges operated by U.S. persons, along with market makers, market intermediaries and other participants, are not prohibited from effecting U.S. persons’ divesture of publicly traded securities in the listed CMICs during the wind-down period.
- U.S. persons employed by non-U.S. entities are not prohibited from facilitating purchases or sales related to a CMIC security on behalf of their non-U.S. employer or providing investment management or similar services to a non-U.S. person.
- U.S. financial service companies can rely on “information available to them in the ordinary course of business” in conducting due diligence on whether an underlying purchase or sale is prohibited under the amended E.O
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Our team is actively monitoring developments in this area, please contact us with questions on how the new rules may apply to your business.…