On January 10, 2021, then Secretary of State Mike Pompeo designated Ansarallah, an armed militia in Yemen backed by Iran also known as the “Houthis,” as a Foreign Terrorist Organization (FTO) and as Specially Designated Global Terrorists (SDGTs). Secretary Pompeo also designated three Ansarallah leaders—Abdul Malik al-Houthi, Abd al-Khaliq Badr al-Din al-Houthi and Abdullah Yahya al Hakim—as SDGTs. The new designations and sanctions went into effect on January 19, 2021.
On January 19, the European Commission released a strategy intended to “stimulate the openness, strength and resilience of the EU’s economic and financial system.” One of the key pillars of the strategy is centered around strengthening the implementation and enforcement of EU sanctions.
The strategy highlights current weaknesses in the EU sanctions regime, including the lack of uniformity in application and enforcement between Member States. It is thought that these inconsistencies create uncertainty and assist in sanctions evasion.
On January 19, 2021, the Commerce Department issued an interim final rule to implement the Executive Order on Securing the Information and Communications Technology and Services Supply Chain (E.O. 13873), which was issued on May 15, 2019. The interim rule comes after the November 2019 proposed rule implementing E.O. 13873.
On December 21, the Bureau of Industry and Security (BIS) published a Military End User (MEU) list to further implement the military end user/end use (MEU) rule defined in Section 744.21 of the Export Administration Regulations (EAR). An EAR license is required to export or reexport to the listed entities a broad range of items subject to U.S. jurisdiction.
On December 14, 2020, the U.S. Department of State initiated a series of sanctions pursuant to Section 231 of the Countering America’s Adversaries Through Sanctions Act (CAATSA) that target the Turkish Presidency of Defense Industries (SSB). The sanctions deny new U.S. export licenses to SSB and limit the SSB’s access to credit from U.S. and international financial institutions. In addition, the Office of Foreign Assets Control (OFAC) designated several principal executive officers of SSB as Specially Designated Nationals (SDNs). However, the U.S. action is calibrated, and does not designate SSB or its affiliates as SDNs, nor does it apply broader sanctions on Turkey or the Turkish defense industry.
On December 14, 2020 the Bureau of Industry and Security (BIS) published an interim final rule (Interim Rule) making changes to the process for seeking exclusions from tariffs imposed on steel and aluminum imports under section 232 of the Trade Expansion Act of 1962 (section 232). The current rule is the fourth in a series of interim final rules that have, over the course of two years, periodically revised the section 232 exclusion process since it was first implemented in March 2018.
The EU’s new global human rights sanctions regime came into force on December 8. Council Regulation (EU) 2020/1998 provides for the freezing of funds and economic resources and travel bans on those responsible for or involved in serious human rights violations and abuses worldwide. Individuals and entities who provide financial, technical or material support for, or are otherwise involved in or associated with, listed individuals or entities may also be targeted .
On December 2, 2020, U.S. Customs and Border Protection (CBP) issued an import detention or Withhold Release Order (WRO) against cotton produced by Xinjiang Production and Construction Corps (XPCC) based on information that reasonably indicated XPCC used forced labor within its cotton supply chains. This action comes after CBP issued five WROs in September 2020 on products found to be reliant on state-sponsored forced labor in Xinjiang. The U.S. government has expressed ongoing concern about human rights abuses of the Uyghur minority in this part of China.
On November 12, 2020, President Trump issued an Executive Order (E.O.) prohibiting U.S. persons from engaging in any transaction (defined as a “purchase for value”) of publicly traded securities, or transacting in financial products that are derivative of, or provide investment exposure to, securities of designated Communist Chinese military companies (“Chinese Military Companies”).
The prohibition will enter into effect on January 11, 2021 at 9:30 a.m. Eastern time and currently applies to 31 entities that have been identified on a list of Chinese Military Companies published by the U.S. Department of Defense (DoD). U.S. investors will have until November 11, 2021 at 11:59 p.m. Eastern time to fully divest from any shares or funds involving these 31 companies. Continue reading →
Over the course of the Obama and Trump administrations, U.S. officials have found new ways to incorporate human rights concerns into sanctions and export control policies. Recent announcements by the Commerce and State Departments address how, by the U.S. government in its licensing approvals, and private companies in their foreign-sales decisions, can take into account human rights impacts.
Export Licensing for Dual-Use and Commercial Products
On October 6, 2020, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a final rule revising the Export Administration Regulations (EAR) to allow the agency to consider human rights concerns when granting export licenses. Specifically, BIS amended its licensing policy for items controlled for crime control (CC) reasons under 15 CFR §742.7.
The final rule also expands the existing EAR human rights licensing policy. The prior licensing policy provided for case by case review for CC-controlled items “unless there is evidence that the government of the importing country may have violated internationally recognized human rights.” The final rule now would allow BIS to consider the risk that items will be used in violation or abuse of human rights by individuals or entities in addition to the government or the importing country. Further, licensing officers will now review how an item may be used to engage in, or enable, violations or abuses of human rights (not just “internationally recognized” human rights), including through censorship, surveillance, detention, or excessive use of force. Importantly, the new provision also allows the agency to consider such risk for items controlled for reasons beyond CC, covering most items listed on the Commerce Control List (with the exception of items controlled for short supply). The final rule specifically notes the need to examine items controlled for reasons related to certain telecommunications and information security and sensors.
State Department Guidance for Surveillance Tools
Separately, on September 30, 2020, the Department of State released guidance designed to assist U.S. businesses in assessing the risk that surveillance tools exported to foreign government end-users could be used to commit human rights abuses.
The guidance entitled, “U.S. Department of State Guidance on Implementing the UN Guiding Principles for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities,” provides a roadmap for businesses to assess the risk of human rights abuse prior to engaging in a transaction with a foreign government end-user and provides recommended contractual and procedural safeguards should the business proceed with the transaction. The guidelines are non-binding and, according to a statement by a State Department official, they will not be used as a basis for sanctions against foreign governments.
The State Department encourages U.S. businesses to integrate human rights due diligence into compliance programs, including export compliance programs. The following eight recommendations are provided to assist companies seeking to conduct human rights due diligence, screening, and risk mitigation—
- Review the capabilities of the product or service in question to determine potential for misuse to commit human rights violations or abuses by foreign government end-users or private end-users that have close relationships with a foreign government.
- Review the human rights record of the foreign government agency end-user of the country intended to receive the product or service.
- Review, including through in-house or outside counsel, whether the foreign government end-user’s laws, regulations, and policies that implicate products and services with surveillance capabilities are consistent with the Universal Declaration of Human Rights.
- Review stakeholders involved in the transaction (including end-user and intermediaries such as distributors and resellers). Refer to BIS’s Know Your Customer Guidance.
- To the extent possible and as appropriate, tailor the product or service distributed to countries that do not demonstrate respect for human rights and the rule of law to minimize the likelihood that it will be misused to commit or facilitate human rights violations or abuses.
- Prior to sale, strive to mitigate human rights risks through contractual and procedural safeguards and strong grievance mechanisms.
- After sale, strive to mitigate human rights risks through contractual and procedural safeguards and strong grievance mechanisms.
- Publicly report on sales practices (e.g., in annual reports or on websites).
The guidance is designed for U.S. companies that engage in transactions involving sensors, biometric identification, data analytics, internet surveillance tools, non-cooperative location tracking, and recording devices, among other products and services. While the guidance is not designed to address export control licensing, the State Department has suggested that the guidance may be used as a resource during export license reviews in cases that raise a human rights concern.
These two announcements form part of a slow-but-steady growth among U.S. officials looking for ways to use existing trade regulatory tools to recognize human rights considerations. Other examples include recent U.S. Customs withhold release orders (WROs) for certain goods produced from forced or indentured labor in Xinjian, China here; Hong Kong trade treatment in the wake of human rights abuses in that territory here; and Global Magnitsky sanctions designations here.