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Trade Matters – International Law


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1. Treasury makes mandatory reporting of foreign securities holdings of $200 million or more

All U.S. persons (custodians and end investors) who manage $200 million or more of foreign securities for themselves or others must file a report before March 4, 2022. The information collected as part of the investigation is confidential and failure to report may result in civil and criminal penalties. The Treasury Department conducts this survey every five years.

2. Prepare now for potential increased sanctions against Russia

As tension over a potential Russian invasion of Ukraine increases, companies can take steps now to prepare for possible increased sanctions against Russia. Specifically, companies must:

  • Identify unpaid debts of Russian entities or individuals and quickly pursue collection activities.
  • Check sanctions screening policies and procedures and screen customers and business partners in real time against global sanctions lists.
  • Identify contracts with Russian entities or individuals and review them to ensure that they comply with legal clauses, notice clauses and termination clauses.
  • Identify the beneficial owners of Russian business partners. If an entity is 50% or more owned by one or more SDNs, that entity is also treated as if it is on the SDN list and subject to asset blocking and freezing.
  • Identify items or technology exported to Russia and any transactions with Russian entities that have ongoing or ongoing obligations. You may need an export license.
  • Consider other sources for any supplies or services from Russia.

3. Stricter export controls on cybersecurity items postponed until March

In a January 11 note, the Bureau of Industry and Security (BIS) has delayed the effective date of its new export controls on certain cybersecurity items after receiving feedback from industry. The controls, which were due to come into force on January 19, have been delayed by 45 days and will now come into force on March 7. Controls impact hardware and software on platforms for ordering and delivering “intrusion software”; technology for the “development”, “production” or “use” of the ordering and delivery platforms; and technology for the “development” of “intrusion software”.

4. Disclaimer Burma; Sanctions continue

a. US government warns against doing business in Burma
On January 26, several US government agencies published joint business advice to inform companies of the heightened reputational, financial, and legal risks of doing business in Burma, including violations of U.S. anti-money laundering laws and sanctions as well as complicity in human rights abuses . Specific entities and sectors of greatest concern include state-owned enterprises; precious stones and precious metals; real estate and construction projects; and arms, military equipment and related activities. Companies and investors considering or already doing business in Burma should review their compliance processes to ensure they are adequately addressing the risks involved.

b. Hong Kong company fined $5.2 million by OFAC over dealings with Iran
On January 11, the Office of Foreign Assets Control (OFAC) announced a $5.2 million settlement with the Hong Kong-based chemical company Sojitz (Hong Kong) Ltd. for its apparent violations of Iran’s Transactions and Sanctions Regulations. From 2016 to 2018, Sojitz HK made 60 US dollar payments totaling $75,603,411 for 64,000 tons of Iranian-origin high-density polyethylene (HDPE) resin from its bank in Hong Kong to the HDPE supplier’s banks in Thailand . These US dollar payments were processed through US financial institutions, which facilitated prohibited transactions related to goods of Iranian origin. Some non-compliant Sojitz HK employees concealed the Iranian country of origin on all relevant documents. OFAC said the case shows the importance of risk-based internal controls in identifying and preventing prohibited sanctions activities.

vs. TD Bank fined for breaching sanctions
On December 23, 2021, OFAC announced a Settlement of $115,000with TD Bank, NA (TD Bank) in connection with TD Bank’s apparent violations of the North Korea Sanctions Regulations and the Foreign Narcotics Sanctions Regulations. The apparent violations in both cases resulted from multiple sanctions compliance failures, including screening shortcomings and human errors such as the rejection of a match between the name and date of birth of an individual on the list. Specially Designated Nationals and Stranded Persons (SDN). This enforcement action highlights the importance of maintaining and following proper escalation procedures and ensuring adequate employee training.

5. CFIUS updates the list of foreign excepted states; New Zealand in the Mix

On January 5, the Treasury Department announced final settlementamending the definitions of excepted foreign state and real estate excepted foreign state for the Committee on Foreign Investment in the United States (CFIUS). CFIUS has also determined that Australia and Canada have met the criteria for permanent status as excepted foreign states. New Zealand has been added as an eligible foreign state, and it, along with the United Kingdom, has until February 23, 2023 to meet the criteria for effective foreign investment screening for national security and facilitation of coordination with the United States on issues related to investment security.

6. Commerce acts to deter misuse of biotechnology, adds 37 to list of entities

On December 16, 2021, the Bureau of Industry and Security (BIS) implemented a to reign to address threats to U.S. national security resulting from the misuse of biotechnology by China and Iran. BIS has added 37 entities in China, Georgia, Malaysia and Turkey to the entity list.

7. CFIUS asks a Ukrainian technology company to divest its stake in the American space company

CFIUS has asked Ukrainian tech entrepreneur Max Polyakov to sell his 50% stake in Texas-based rocket company Firefly Aerospace Inc. Russia or other countries trying to develop rocket programs. This sales request comes against a backdrop of growing tensions with Ukraine and Russia.

BUSINESS TIP OF THE MONTH: New import ban means companies must trace and document all their supply chains
On January 24, the Forced Labor Enforcement Task Force asked for public comment on how best the United States will enforce Uyghur law on the prevention of forced labor. The law’s import ban on all products containing Xinjiang-originating inputs is due to come into effect on June 21, and the government has until that date to release guide about the compliance requirements that importers will need to meet to bring goods into the United States. Importers should already review their supply chains to identify and substitute Xinjiang inputs/suppliers and compile documents demonstrating that none of their products are linked to Xinjiang or forced labor. The trend to demand greater supply chain transparency and accountability continues to garner bipartisan support and growing consumer attention, so full supply chain tracing is becoming a compliance expectation.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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