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…
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
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…
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
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…
On April 20, OFAC issued COVID-related guidance indicating that it encourages those subject to its jurisdiction to contact the OFAC staff if they believe they will have difficulty meeting OFAC deadlines (whether reporting deadlines, responses to administrative subpoenas, or other matters). OFAC also encouraged electronic submission of any communications. In our experience, OFAC is still functioning at a relatively high level, remote operations notwithstanding, but the staff has also been flexible in responding to the challenges all institutions face. As OFAC’s guidance and our own experience underline, open communication with the staff is very important.
Continue Reading OFAC Issues Guidance on COVID’s Impact on Compliance and Enforcement
Update: Treasury has clarified that comments on the Proposed Rule are due April 3, 2020, instead of the previously provided deadline.
On March 9, 2020, the U.S. Department of the Treasury published a proposed rule implementing the filing fee provisions of the Foreign Investment Risk Review Modernization Act. The Proposed Rule would assess tiered…
In June of 2019, OFAC amended its Reporting, Procedures and Penalties Regulations (RPPR), apparently effecting a radical expansion of the obligation of non-financial institutions in the U.S. to report “rejected” transactions involving U.S.-sanctioned persons. OFAC has long required financial institutions to report rejected financial transactions involving sanctioned persons. (“Rejected” transactions involve persons who are not Specially Designated Nationals (SDNs) or other persons whose property within U.S. jurisdiction is blocked, but with whom transactions are nevertheless prohibited, such as private individuals and companies resident in Iran and not explicitly designated for sanctions. U.S. persons may not execute these transactions but are not required to block and report any related assets that come within their control; to take the historical example of funds transfers, the payment is returned to the sender rather than being frozen in a blocked account.) The amended reporting guidelines expanded that obligation from financial institutions to all U.S. persons and persons within the United States, defined the relevant transactions to include “transactions related to wire transfers, trade finance, securities, checks, foreign exchange, and goods or services,” and (as before) did not define “reject” at all. If any person subject to U.S. jurisdiction does reject a transaction for goods or services (financial or otherwise) for sanctions reasons, it is now legally required to report that rejection within ten days.
Continue Reading New FAQs Provide Little Clarity on Expanded OFAC Reporting Obligations for Non-Financial Institutions
On February 11, 2020, Judge Stanton of the U.S. District Court for the Southern District of New York denied Dresser-Rand Company’s (Dresser Rand) motion for summary judgment in a suit to collect on a promissory note issued by Petróleos de Venezuela, S.A. (PdVSA). The Court’s decision turned on a finding that payment by PdVSA was legally impossible under U.S. sanctions. That finding was based on incomplete briefing by the parties and appears seriously flawed given the licenses and guidance provided by the Department of Treasury’s Office of Foreign Assets Control (OFAC). We discuss the decision and the U.S. sanctions regime as applied to the promissory note below.
Continue Reading District Court Decision Incorrectly Holds that OFAC Sanctions Bar PdVSA from Making Payment on Pre-Sanctions Debts
On January 13, 2020, the U.S. Department of the Treasury (“Treasury”) released final regulations (the “Final Regulations”) implementing the updates to the foreign investment review process of the Committee on Foreign Investment in the United States (“CFIUS”) contained in the Foreign Investment Risk Review Modernization Act of 2018 (“…
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