Sanctions Top-5 for the week ending 18 December 2020

Here are five things that happened this week in the world of economic sanctions that I think you should know about.

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  1. The US Commerce Department’s Bureau of Industry and Security (BIS) added 60 Chinese entities to the Entity List, including chipmaker Semiconductor Manufacturing International Corporation (SMIC). The targets are accused of engaging in a range of activities contrary to US national security and foreign policy interests, as explained in this Federal Register notice and this State Department news release. (More on this below.)
  2. The US State Department announced sanctions on Turkey’s Presidency of Defense Industries (SSB), a military procurement office, and several of its top employees under Section 231 of the Countering America’s Adversaries Through Sanctions Act (CAATSA), in response to Turkey’s 2017 purchase of a Russian S-400 missile system. SSB is subject to a menu of targeted sanctions and export controls. The employees were named Specially Designated Nationals (SDNs). Following the announcement, the US Office of Foreign Assets Control (OFAC) introduced a new “Non-SDN Menu-Based Sanctions (NS-MBS) List” that currently only lists SSB.
  3. The European Union added 30 individuals and 6 entities to the EU Sanctions List in response to the ongoing situation in Belarus. They include “economic actors, prominent businessmen and companies benefiting from and/or supporting the regime of Aleksandr Lukashenko,” according to an EU Council press release.
  4. OFAC named four companies in China and the UAE as SDNs under Executive Order 13846 for engaging in transactions with Triliance Petrochemical Co. Ltd., a Hong Kong-based company sanctioned in January 2020 for Iran-related trade. Meanwhile, the State Department announced sanctions under Executive Order 13846 against a Vietnamese company and its managing director for knowingly engaging in a transaction for the transport of petroleum from Iran.
  5. OFAC named a Venezuelan voting machine vendor and two of its officers as SDNs under Executive Order 13692 for providing equipment and services to the Venezuelan government used in the country’s 6 December legislative elections. According to a State Department news release, the machines were shipped to Venezuela from China (via Iran) by SDN airlines Mahan Air and Conviasa. OFAC used the same authority to sanction China’s CEIEC a few weeks ago.

Comments

There have been rumblings about the potential for Turkey to be sanctioned under CAATSA since 2017, when Turkey and Russia signed the S-400 purchase agreement, and again in 2019 when Russia started delivering the system. In September 2018, OFAC and the State Department named China’s Equipment Development Department (like Turkey’s SSB) and its director as SDNs pursuant to Section 231 of CAATSA in response to China’s purchase of the S-400 system. In Turkey’s case, the sanctions on SSB are limited to restrictions on certain types of financing and prohibitions on issuing certain export control licenses. For what it’s worth, India also has agreed to purchase the S-400.

Remember: The Entity List imposes a licensing requirement on exports, re-exports, and transfers of items that are subject to the Export Administration Regulations (EAR). In other words, you need the US Commerce Department’s permission to provide US-origin goods, technology, or software to the impacted companies. Often, that permission is granted. The Entity List is not like OFAC’s SDN List, and generally speaking US persons are not otherwise prohibited from dealing with SMIC or other companies on the Entity List. The impact on each company will depend on the degree to which they rely on items subject to the EAR.

Confused? Just wait until next week when we talk about the Commerce Department’s just-announced Military End User List.

Happy holidays, everyone!

Did I miss something? Send me a message or comment on LinkedIn.

(The views expressed are my own and do not constitute legal advice. Photo from Vladislav Reshetnyak.)

US attorney in Hong Kong specializing in economic sanctions, financial crimes. Sign up for emails: http://eepurl.com/cVhTXf LinkedIn at: http://goo.gl/KX1jER

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Nicholas Turner

Nicholas Turner

US attorney in Hong Kong specializing in economic sanctions, financial crimes. Sign up for emails: http://eepurl.com/cVhTXf LinkedIn at: http://goo.gl/KX1jER

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