The Department of Treasury’s office that administers reviews of foreign investments in U.S. companies is changing how it identifies critical technology businesses and related technologies that require mandatory review during a foreign investment process. The Committee on Foreign Investment in the United States (CFIUS or the Committee) issued a final rule effective October 15, 2020
On August 20, the Bureau of Industry and Security (“BIS”) published a final rule (“final rule”) amending the Export Administration Regulations (“EAR”) to expand restrictions on transactions involving Huawei entities that are included on BIS’s Entity List (“designated Huawei entities”). The newly expanded rule applies to a broader range of items produced outside of the…
Last Thursday, the President issued two executive orders (“E.O.s”) targeting social media applications TikTok (and its parent company, ByteDance) and WeChat (and its parent company, Tencent Holdings). The E.O.s direct the Department of Commerce (“DOC”) to prohibit transactions involving the applications. Companies that deal directly with TikTok or WeChat in the United States and abroad or use their services need to evaluate the scope of those activities and determine if they will be affected by the E.O.s.
The E.O.s were issued pursuant to the national emergency declared in E.O. 13873 regarding information and communication services in the United States that are controlled by persons within the jurisdiction of a “foreign adversary.” In issuing the E.O.s, the President cited concerns that the Chinese government could gain access to Americans’ personal information collected by the applications, among other policy considerations. The President has the power to issue the directives under the International Emergency Economic Powers Act (“IEEPA,” 50 U.S.C. 1701 et seq.), which provides the President with the authority to declare national emergencies and implement sweeping trade controls based on national security concerns.
The intended scope of the E.O.s is not clear due to ambiguous language used in Section 1, which contain the E.O.s’ primary prohibitions. Here is an excerpt of that section from the TikTok order:…
Continue Reading President Issues Executive Orders Targeting TikTok and WeChat
Today the Bureau of Industry and Security (BIS) announced that it is suspending license exceptions for exports, re-exports, or transfers to or within Hong Kong that provide differential treatment than license exceptions available for shipments to mainland China. In other words, if a license exception is not available for shipments to China, then it can…
Bureau of Industry and Security Issues Guidance on Rule
The new Bureau of Industry and Security (“BIS”) rule prohibiting certain exports, reexports, and transfers of items to “military end-users” and “military end-uses” in China, Russia, and Venezuela is effective today.
The new rule creates additional due diligence burdens on manufacturers and exporters in the materials…
On May 21, the U.S. Treasury Department, as chair of the Committee on Foreign Investment in the United States (“CFIUS”), issued a proposed rule that more directly links mandatory filing obligations with export control restrictions administered by other federal agencies, including the Bureau of Industry and Security (“BIS”) and the Directorate of Defense Trade Controls (“DDTC”). The rule is open for comment until June 22.
Pursuant to amendments implementing the Foreign Investment Risk Review Modernization Act (“FIRRMA”), which expanded CFIUS jurisdiction in several respects, certain types of transactions are subject to mandatory declarations with CFIUS. Currently, one type of transaction that requires a mandatory filing is one in which: 1) the target company produces, designs, tests, manufactures, fabricates, or develops a “critical technology.” A “critical technology” is an item that is included on one of the U.S. export control lists, including the Commerce Control List (“CCL”), included within the Export Administration Regulations (“EAR”); and 2) the target company uses the critical technology in a sensitive industry, identified in Appendix B to the CFIUS regulations (31 C.F.R. Part 800). This two-prong test is slightly more strict than the export control regulations themselves because an item included in the CCL is not generally restricted for export to all destinations. For example, transactions with NATO allies are generally subject to more permissive restrictions than are transactions with other countries. The current CFIUS mandatory declaration framework does not account for this distinction.…
Continue Reading CFIUS Issues Proposed Rule to Amend Mandatory Declaration Requirements
Earlier this week, the COVID-19 Accountability Act was introduced in the Senate and the House by Rep. Senator Lindsey Graham and Rep. Doug Collins respectively. While the text of the draft legislation is not yet available, a summary indicates that it would require within sixty days that the President certify to Congress that China has:
“Provided a full and complete accounting to any COVID-19 investigation led by the United States, its allies, or United Nations affiliates, such as the World Health Organization (WHO);
- Closed all wet markets that have the potential to expose humans to health risks; and
- Released all pro-democracy advocates in Hong Kong that were arrested in the post COVID-19 crackdowns.”
If there is no such certification, the Act would then authorize the President to impose at least two of a variety of sanctions to hold China accountable, including travel bans, visa revocations, asset freezes, restricting U.S. financial institutions from loaning money to Chinese businesses, and barring Chinese firms from being listed on American stock exchanges. Such sanction would be effective until the certification could be made.…
Continue Reading COVID-19 Accountability Act – New Potential Sanctions on China
The Department of State’s Office of Defense Trade Controls Policy announced that they are temporarily suspending, modifying, and excepting certain International Traffic in Arms Regulations (ITAR) requirements in an effort to mitigate the impact of the COVID-19 pandemic. The temporary changes are as follows:
- As of February 29, 2020, ITAR registrations and fees with an
On April 28, 2020, the Department of Commerce’s Bureau of Industry Security (“BIS”) published three separate rules which, in response to the Administration’s conclusion that “civil-military integration” in China is increasing, impose significant additional restrictions on the export of dual-use items to strategic rivals including China, Russia, and Venezuela. These rules, when implemented, will have an especially acute effect on transactions with China. Specifically, consistent with the Administration’s conclusion that these countries present national security and other foreign policy concerns, BIS restricted exports, re-exports, and in-country transfers to these destinations by: 1) issuing a final rule expanding end-use and end-user restrictions related to China by expanding the scope of prohibitions to include “military end-users” in China and expanding the definition of “military end use”, among other changes; 2) issuing a final rule removing a license exception that allows the export of some items to certain countries that present national security concerns, including China and Russia, provided that the end-use was civilian (license exception CIV); and 3) issuing a proposed rule narrowing the scope of a license exception that allows the re-export of some items that present national security concerns (license exception APR).
These changes, which are largely effective on June 29, 2020, will create additional hurdles in transactions with China, Russia, and Venezuela. …
Continue Reading Bureau of Industry and Security Imposes Significant Additional Restrictions on Exports to China, Russia, and Venezuela
Even as companies make rapid changes to respond to business challenges posed by the COVID-19 pandemic, executives and compliance team leaders must protect their company and employees by continuing to comply with critical U.S. international trade laws and regulations (including those addressing customs, anti-corruption, export controls, and economic sanctions). Trade regulations are not suspended, and it is important to not make assumptions or conclude that the law does not apply during this difficult time with all of the issues competing for attention, not least family and employee health and company survival. With the need to move so quickly, we have seen clients inadvertently come close to trade compliance violations that would not pose a problem for them in normal times. The following suggestions are intended to help companies reduce the risk of certain significant federal international trade law violations and avoid inbound and outbound shipment delays – while continuing to operate.
Trade rules and surrounding circumstances are changing quickly. For example, the Administration very recently appeared to be seriously considering suspending or lowering certain import tariffs, but backed away from that approach given the complexity of administering a revised system on short notice, among other problems. You are likely also seeing reports about various countries’ restrictions on exports of medicine, medical equipment (including protective equipment and ventilators), and food, among other products. How do you keep up with what is actually happening that may affect your company and what is just rumor that you do not need to react to?
One step companies are taking is to include key personnel from their trade compliance and legal teams in the decision processes related to changing international transactions. You need to move quickly, but including a team member who knows trade rules can help keep things on track and help avoid clear compliance errors.
Here are four substantive areas of U.S. trade regulation that should continue to be part of international transaction diligence: U.S. anti-corruption, export controls, and sanctions laws (that permit most exports of medicines, medical devices, and food to sanctioned locations), and U.S. Customs rules on personal protective equipment and medical devices (among other imported items). …
Continue Reading COVID-19 – Four Key International Trade Compliance Considerations