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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.

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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:

  1. 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
  2. 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.

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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.

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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).

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On July 1, 2020, the United-States-Mexico-Canada Agreement (USMCA) entered into force, replacing the 26-year-old North American Free Trade Agreement (NAFTA). The U.S. government has taken several steps toward implementation via executive order and proposed regulations, but the legal framework remains a work in progress.

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The U.S. government has issued several rules aimed at excluding, and in some cases removing, Chinese-origin equipment from U.S. telecommunications networks. Most of these rules apply to U.S. government networks, but some extend to private sector telecom infrastructure and services with no nexus to the U.S. government.

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Since the handover of Hong Kong by the United Kingdom to China in 1997, Hong Kong has enjoyed separate treatment from the mainland by the United States, other countries and international organizations pursuant to the “one country, two systems” model agreed to by the Chinese government.  The United States-Hong Kong Policy Act of 1992 authorized separate treatment of Hong Kong in trade and economic relations as long as Hong Kong remains “sufficiently autonomous” from the mainland.  Hong Kong’s special privileges under this law, and the laws of other countries, have contributed to Hong Kong’s status as a powerful global financial and trading hub. Continue reading →

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On May 22, 2020, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) announced that it will add 33 Chinese companies and institutions to the Entity List.  The designations will prohibit the export, re-export, or in-country transfer of items subject to the Export Administration Regulations (EAR).

The new round of additions comes less than a month after BIS issued new export control rules targeted at commercial companies, especially within China, that do business with military agencies (discussed here).  Previously, in October 2019, BIS added 28 Chinese public security bureaus and companies to the Entity List on the basis of their alleged roles in human rights violations against Muslim minorities in Xinjiang. Continue reading →

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On May 21, 2020, the U.S. Department of the Treasury published a proposed rule that would revise the mandatory declaration requirement for foreign investments involving a U.S. business that produces, designs, tests, manufactures, fabricates, or develops one or more critical technologies.

Currently, a key element of the mandatory declaration requirement is whether the U.S. business engaged in the specified activities involving critical technologies utilizes that critical technology, or designs the technology specifically for use in, one or more industries identified by North American Industry Classification (NAICS) codes.

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On May 15, 2020 the Commerce Department announced an amendment to the direct product rule that further restricts the ability of Huawei Technologies Co., Ltd. and its affiliates on the Entity List, such as HiSilicon (collectively “Huawei”), to receive certain foreign-made semiconductor products.

The Commerce Department also extended the temporary general license (TGL) that authorizes certain dealings with Huawei and its subsidiaries by U.S. persons through August 13, 2020. Statements from the Commerce Department indicate this may be a “final” extension.

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