On September 29, 2022, the U.S. government took an important step in its efforts to increase transparency, combat shell companies, and limit abuse of entities and trusts formed under U.S. state law. The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued a final rule implementing provisions of the Corporate Transparency Act (CTA), which requires entities to report information about their beneficial owners, i.e., individuals who ultimately own or control the company as well as the “company applicant” who created or registered the entity. The rule will go into effect on January 1, 2024, allowing time for industry to familiarize itself with the new requirements. The CTA is an important component of the Anti-Money Laundering Act of 2020, and this final rule will have significant implications for a variety of companies, investors and professionals that organize via U.S. companies and certain trusts.
In the final few days of September, the U.S. and global allies issued a number of sanctions and export controls against actors who have supported Russia’s referendums in Ukraine and related attempts to annex four Ukrainian territories. The referendums have been condemned by the Group of 7 (G7) nations, which committed to imposing further economic costs on individuals and entities both inside and outside of Russia.
The latest measures include actions by the Office of Treasury’s Office of Foreign Assets Control (OFAC), the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), the U.S. Department of State, and the United Kingdom (UK) Office of Financial Sanctions Implementation (OFSI), as well as further announcements from the European Union (EU), described in turn below.
- The G7 has announced consensus on a price cap for Russian origin oil and petroleum products to be implemented across a wide coalition of countries.
- The cap would be implemented by prohibiting services related to the maritime transportation of Russian-origin crude oil and petroleum products unless the products are purchased below the capped price, and thus impacts a broad array of industries.
- The capped prices have yet to be determined and are proposed to be aligned with the implementation of restrictions in the EU’s sixth sanctions package, which will reportedly go into effect by December 5, 2022.
On September 2, 2022, the Group of 7 (G7) nations formally announced its consensus to implement a global price cap on Russian oil and petroleum products in response to the ongoing conflict in Ukraine. The Joint Statement does not provide a specific timeline for implementation of the price cap, but notes that it seeks to align implementation with related measures within the EU’s sixth sanctions package, which will come into effect on December 5, 2022. (See here for prior analysis of this package.) The initial capped price has not been announced, and will be decided by the full coalition in advance of implementation.
On August 15, 2022, the Department of Commerce’s Bureau of Industry and Security (BIS) published an interim final rule introducing new controls on four “emerging and foundational technologies” that were identified during the December 2021 plenary meeting of the multilateral Wassenaar Arrangement. These items are two substrates of ultra-wide bandgap semiconductors (gallium oxide and diamond), electronic computer aided design (ECAD) software specially designed for the development of integrated circuits with Gate-All-Around Field-Effect Transistor (GAAFET) structure, and pressure gain combustion (PGC) engine technology for the production and development of gas turbine engines.
The new controls were implemented effective on August 15, 2022, with the exception of the controls for ECAD software, which will be effective on October 14, 2022. BIS has requested public comments only on the new ECAD controls, which are due by September 14, 2022.
On July 21, 2022, the EU published its “maintenance and alignment” package of sanctions. This latest package seeks to tighten existing sanctions, perfect their implementation, and strengthen their effectiveness. In summary, this latest package has the following effects:
On July 13, 2022, as part of a new pilot program, the Department of State’s Directorate of Defense Trade Controls (DDTC) issued two open general licenses (OGLs) permitting certain reexports and retransfers of unclassified defense articles subject to the International Traffic in Arms Regulations (ITAR) within or between Australia, Canada, and the United Kingdom. The OGLs were published in the Federal Register on July 20, 2022, and will be effective August 1, 2022. The OGLs could significantly reduce licensing burdens for many entities in these close ally countries of the United States.
- The Uyghur Forced Labor Prevention Act (UFLPA) went into effect on June 21, 2022, and requires the U.S. Customs and Border Protection (CBP) to presume that all goods manufactured wholly or in part in the XUAR, or by the entities identified by the U.S. government on June 17, 2022, are made with forced labor and banned from import to the United States, unless the importer demonstrates otherwise (a “rebuttable presumption”).
- Guidance and Reports published in the week leading up to June 21 identify key information for companies seeking to comply with the law, maintain U.S. imports, and understand the supply chain information that may be required by U.S. Customs and Border Protection (CBP).
- Where the presumption of forced labor applies, rebutting it will require an importer to overcome a high bar by providing “clear and convincing” evidence; however, this same high standard will not necessarily apply to demonstrating that imports have no connection with the XUAR.
On June 12, 2022, a bipartisan group of Senate and House lawmakers announced agreement on a new draft of the National Critical Capabilities Defense Act of 2022 (NCCDA), which would establish an expansive outbound review mechanism for investments and other transactions in specified countries of concern, including China. The draft is based on a bill introduced in the Senate last year that ultimately was not included in the U.S. Innovation and Competition Act (USICA), which passed, while the House included a similar measure in its America COMPETES Act, which also passed, and the two bills are now in conference.
We’ve covered in depth the array of sanctions-related activity brought by the international community against Russia in response to the conflict in Ukraine. As these measures mount, Russia has in return taken steps to alleviate some of the pressure such sanctions have brought to bear. In “Russia Introduces Tools for Russian Persons to Continue Use of Foreign IP Rights without Consent from Rightsholder,” Nancy A. Fischer, Aaron R. Hutman, Luke Wochensky and