Last night, President Trump issued two Executive Orders establishing a framework for prohibiting transactions involving popular Chinese-owned communications apps WeChat and TikTok.[1] Contrary to some press reports, the Executive Orders do not prohibit all transactions with their respective parent companies; they do not in fact set out the scope of the restrictions. Rather, they give the Commerce Department authority to prohibit any transaction involving a U.S. person or within the jurisdiction of the United States involving the two services; each of the Executive Orders clearly states “45 days after the date of this order, the Secretary shall identify the transactions subject to subsection (a) of this section [which contains the broad authority to prohibit].”[2] Furthermore, the scope of Commerce’s authority is subtly (and no doubt intentionally) different in the two Executive Orders: with respect to TikTok, the authority covers any transaction with ByteDance, TikTok’s parent; with respect to WeChat, the authority covers any transaction relating to WeChat involving its parent, Tencent Holding. Commerce will, within 45 days, take further action specifying exactly which transactions will be prohibited; it is even possible, particularly with respect to TikTok if the mooted divestiture of U.S. operations occurs, that no restrictions will be imposed.[3] Unless and until Commerce implements the Executive Orders, no restrictions are in place and their precise future scope is unknown.
Continue Reading President Trump Authorizes Restrictions on WeChat and TikTok; Details to Come
Updated Guidance for Section 232 of CAATSA Published
Yesterday, updated guidance from the U.S. Department of State relating to Section 232 of the Countering America’s Adversaries Through Sanctions Act of 2017 (“CAATSA”) was published in the Federal Register.[1] The updated guidance, which became effective on July 15, 2020, expands the potential applicability of secondary sanctions pursuant to Section 232 with respect to Nord Stream 2 and the second line of TurkStream. Any work on or financial involvement in NordStream 2 or the second line of TurkStream will now be sanctionable, even if undertaken pursuant to an existing contract. This could affect, among other things, lending and other financing to companies (including European companies) with any connection to either project.
Continue Reading Updated Guidance for Section 232 of CAATSA Published
United States Enacts Additional Hong-Kong Related Sanctions; Impact Remains Unclear
Today, President Donald Trump signed into law the Hong Kong Autonomy Act (“HKAA”), authorizing the U.S. administration to impose blocking sanctions against individuals and entities (as well as visa bans in the case of individuals) determined to “materially contribute” to the erosion of Hong Kong’s autonomy. The HKAA further authorizes secondary sanctions, including the imposition of blocking sanctions, against foreign financial institutions that knowingly conduct a significant transaction with foreign persons sanctioned under this authority.[1]
Continue Reading United States Enacts Additional Hong-Kong Related Sanctions; Impact Remains Unclear
New Syria-Related Sanctions Regulations Issued; Secondary Sanctions Authority Targeting Syria to Take Effect Soon
On June 4, 2020, the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC) issued the Syria-Related Sanctions Regulations (SRSR). Not to be confused with the pre-existing Syrian Sanctions Regulations found in 31 C.F.R. Part 542, the SRSR, which are found in 31 C.F.R. Part 569, are intended to
CFIUS Blocks Joint Venture Outside the United States, Releases 2018-2019 Data, and Goes Electronic
Over the last few weeks, there has been a flurry of activity at the Committee on Foreign Investment in the United States (CFIUS). In addition to imposing filing fees, which we wrote about here, and issuing proposed amendments to broaden the mandatory CFIUS notification requirements, which we wrote about here, CFIUS recently blocked a robotics joint venture in China with no U.S. assets and limited to operations outside the United States, released detailed information regarding the transactions reviewed by CFIUS during 2018 (as well as summary data for transactions reviewed in 2019), and announced a new electronic filing system.
Continue Reading CFIUS Blocks Joint Venture Outside the United States, Releases 2018-2019 Data, and Goes Electronic
Proposed Rule Would Broaden CFIUS Mandatory Notification Requirements
On May 21, 2020, the U.S. Department of the Treasury published a proposed rule (the “Proposed Rule”) that would significantly broaden the scope of mandatory filing requirements of the Committee on Foreign Investment in the United States (“CFIUS”) for foreign investments involving U.S. critical technology businesses.
The Proposed Rule abandons the current restriction to specified
BIS Expands Export Restrictions on Huawei, Extends Temporary General License
On May 15, 2020, the U.S. Department of Commerce, Bureau of Industry and Security (BIS) issued an interim final rule (the Interim Rule) amending the direct product rule under the Export Administration Regulations (EAR) to further restrict Huawei Technologies Co., Ltd. (Huawei) and its affiliates designated on the Entity List from receiving semiconductor and other products produced outside the United States using U.S.-origin software and technology. The changes, which are effective immediately (but subject to two savings clauses), could have a significant impact on the ability of non-U.S. foundries that manufacture semiconductor products for Huawei and its affiliates (e.g., HiSilicon) using U.S.-origin software or technology to continue to do so (and could have a corresponding significant impact on the competitiveness of U.S. semiconductor manufacturing equipment and software). BIS also extended the temporary general license (TGL) that authorizes certain activities subject to the EAR involving Huawei and its affiliates through August 13, 2020.[1]
Continue Reading BIS Expands Export Restrictions on Huawei, Extends Temporary General License
COVID-19: CFIUS Considerations for Distressed M&A and Lending Transactions
The COVID-19 pandemic has created market conditions ripe for increased cross border investment as businesses scramble for capital and investors target distressed assets. The Committee on Foreign Investment in the United States (CFIUS) is focused on the trend. Senior Department of Defense officials have recently and repeatedly stressed the need for the active
BIS Tightens National Security Export Controls
On April 28, 2020, the U.S. Department of Commerce, Bureau of Industry and Security (BIS) published two final rules and one proposed rule[1] that will result in tighter restrictions on exports, reexports, and in-country transfers of dual-use items subject to the Export Administration Regulations (EAR) and controlled for national security reasons to China, Russia, Venezuela, and a number of other countries. Companies involved in exports and reexports of controlled items to these countries should carefully review the changes.
Continue Reading BIS Tightens National Security Export Controls
CFIUS Imposes Filing Fees
Today, the U.S. Department of the Treasury (“Treasury”) published an interim rule (the “Interim Rule”) implementing the filing fee provisions of the Foreign Investment Risk Review Modernization Act (“FIRRMA”) along the lines set out in Treasury’s proposal of March 9. The Committee on Foreign Investment in the United States