On September 14, 2020, U.S. Customs and Border Protection (CBP) issued five Withhold Release Orders (WROs) for a range of goods produced in the Xinjiang region of China. Under 19 U.S.C. § 1307, CBP can initiate enforcement actions for products made wholly or “in part” by forced or indentured labor – defined as “work or service which is exacted from any person under the menace of any penalty for its nonperformance and for which the worker does not offer himself voluntarily,” as well as forced or indentured child labor. CBP issues WROs following an investigation if it finds that information “reasonably but not conclusively” indicates that the goods have been made in whole or in part by such forced labor. A WRO prevents the products from being released by CBP into the United States.
On September 18, 2020, the U.S. Commerce Department published two rules defining the scope of prohibited transactions related to the mobile applications, WeChat and TikTok. The scope of prohibited transactions clarified the two parallel executive orders (EOs) issued by the Trump administration on August 6, 2020, which required the Commerce Department to impose restrictions on both platforms.
The scope of prohibited transactions are the same for both WeChat and TikTok. Prohibited transactions do not include individual use of these mobile platforms to exchange personal or business information. However, the rule would effectively shut down WeChat and TikTok within the United States via mobile application storefronts (e.g., Apple Store and Google Play), and additional restrictions would further impair the apps’ functionality and user experience.
On September 15, 2020, the U.S. Department of Treasury published a final rule that removes the mandatory declaration requirement for filings to the Committee on Foreign Investment in the United States (CFIUS) based on North American Industry Classification System (NAICS) code and replaces it with a determination based on U.S. export control criteria. The final rule largely adopts the changes outlined in the proposed rule that was published on May 21, 2020, and which was have discussed previously, with some added clarifications. The final rule will be effective on October 15, 2020.
On August 11, 2020, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a new guidance document, the Sudan Program and Darfur Sanctions Guidance (“Sudan Guidance”), which clarifies the current status of sanctions and export controls that apply to Sudan and the Government of Sudan. The Sudan Guidance confirms the removal of comprehensive sanctions on Sudan, permitting U.S. persons to engage in most economic activity. However, individual sanctions listings in Sudan and South Sudan continue and a U.S. embargo policy remains in place for exports to Sudan.
The Department of Commerce (the Department) has proposed to modify its regulations under Part 351 of Title 19 to improve administration and enforcement of the antidumping duty (AD) and countervailing duty (CVD) laws. The proposed modifications have been undertaken with a view to address circumvention and evasion of duties and will make significant changes to existing procedures for new shipper reviews, scope inquiries, circumvention proceedings among others. The Department has sought comments to the proposed changes by September 14, 2020.
On August 17, 2020, the U.S. Department of Commerce Bureau of Industry and Security (BIS) made available for public inspection a final rule expanding restrictions on Huawei Technologies Co., Ltd. and its non-U.S. affiliates on the BIS Entity List (collectively “Huawei”).
In the final rule, BIS announced a further expansion of the direct product rule asserting U.S. jurisdiction over foreign-manufactured items with respect to Huawei, ended the Huawei Temporary General License (TGL), added 38 non-U.S. Huawei affiliates to the BIS Entity List, and clarified that Entity List license requirements apply to transactions where Huawei acts in a variety of roles as a “party to the transaction.”
In a concurrent final rule, BIS clarified that license requirements under the Entity List apply where the listed party is a “party to the transaction,” whether acting as a purchaser, intermediate or ultimate consignee, or end-user as defined in the Export Administration Regulations (EAR).
These actions, while not officially published in the Federal Register until August 20, 2020, are effective as of August 17, 2020.
On July 23, 2020, the U.S. Senate passed its version of the National Defense Authorization Act for fiscal year 2021 (NDAA) which includes an amendment that expands sanctions in connection with the Nord Stream 2 and TurkStream pipeline projects. The amendment is based on a bill previously introduced by Senators Ted Cruz (R-TX) and Jeanne Shaheen (D-NH) entitled, the “Protecting Europe’s Energy Security Clarification Act of 2020”, which sought to clarify and expand existing U.S. sanctions under the Protecting Europe’s Energy Security Act of 2019.
Last year, the Protecting Europe’s Energy Security Act of 2019, enacted as part of the National Defense Authorization Act (NDAA) of 2020, implemented sanctions targeted at Allseas, the Swiss-Dutch company that had been laying the Nord Stream 2 pipeline. Shortly after the NDAA was enacted in December 2019, the company suspended its activities, leaving six percent or around 100 miles (160 km) of pipeline to be completed. Reports indicate that Russia has taken steps to continue construction of the pipeline, prompting Members of Congress to take further action. The House passed its version of the FY 2021 NDAA with a similar amendment introduced by Rep. Ruben Gallego (D-AZ) on July 21.
On August 6, 2020, President Trump issued a pair of executive orders targeting China’s Tencent Holdings Ltd. (Tencent) and its mobile application WeChat and ByteDance Ltd. (ByteDance) and its mobile application TikTok. The orders instructed the U.S. Commerce Department to prohibit the following within 45 days from their issuance (by September 20, 2020), to the extent permitted by law:
- Any transaction by any person, or with respect to any property, subject to the jurisdiction of the United States, with ByteDance, or its subsidiaries, in which any such company has any interest; and
- Any transaction that is related to WeChat by any person, or with respect to any property, subject to the jurisdiction of the United States, with Tencent, or any subsidiary of that entity.
Both executive orders direct the Secretary of Commerce to identify transactions that will be prohibited, leaving substantial discretion in implementation.
Over the past nine months, companies and governments have competed for goods and materials amidst scarcity and disrupted supply chains. At the same time, governments, central banks, international organizations and NGOs have poured money into economies, hoping to provide relief, meet demand to procure essential goods, and find solutions to an unprecedented situation. This unprecedented environment has created legal risk for market participants, and the potential for a wave of enforcement in the future.
As we’ve discussed previously, in 2018, the UK enacted the Sanctions and Anti-Money Laundering Act (the Act), allowing it to impose its own post-Brexit autonomous sanctions regime. On July 6, 2020, the UK imposed its first sanctions under the Act: the Global Human Rights Sanctions Regulations 2020 (the Regulations).