Sanctions Top-5 for the week ending 4 June 2021

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 White House unveiled Executive Order 14032 to amend Executive Order 13959 and impose new and improved restrictions on US persons transacting in publicly traded securities of “Chinese Military-Industrial Complex Companies” (CMICs) beginning 2 August 2021. (The old prohibitions and timelines were simply revoked.) The annex to the Executive Order includes the names of 59 so-called CMICs. Moving forward, the Treasury Department — not the Department of Defense — is responsible for identifying CMICs operating in China’s “defense and related materiel sector or the surveillance technology sector.”

Comments

Hooray! No more “close name matches.” OFAC FAQ 899 says the amended Executive Order 13959 only applies to “entities whose names exactly match the names of the entities on the NS-CMIC List.” This might be my new favorite FAQ. Other good ones include FAQ 902 and FAQ 903 saying it’s OK for US persons to act as investment advisors and managers and work for non-US persons that transact in CMIC securities. If it wasn’t clear before, FAQ 905 reminds us that US persons can continue to do business with CMICs in other ways. The full list of new and revised FAQs is here.

What do you think? Does the amended Executive Order 13959 expand the old restrictions or soften them? There are arguments on both sides. On the one hand, the list of 59 CMICs includes fewer corporate groups than the old list of CCMCs, while drilling down on subsidiaries and affiliates of a few groups (which was already expected to happen). The amended Executive Order (like the original of November 2020) does not prohibit US persons from “possessing” CMIC securities after the relevant divestment dates (even if selling is prohibited). On the other hand, the criteria for designating new CMICs is broader and probably less open to a court challenge à la Xiaomi and Luokung.

For more on Executive Order 14032 and the amended Executive Order 13959, see my team’s blog post here.

Breaking: China’s National People’s Congress Standing Committee is close to adopting a planned law on countering foreign sanctions. More on that next time.

Like the Top-5? Contact me to talk about tailored sanctions briefings for your team. 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.)

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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