US sanctions 44 Chinese entities over national security threat

China-US.jpgLast week, the US Department of Commerce’s Bureau of Industry and Security (BIS) added 44 Chinese entities (8 entities and 36 subordinate institutions) to the Entity List for “acting contrary to the national security or foreign policy interests of the United States”. Some were specifically listed for their involvement in the “illicit procurement of [US-origin] commodities and technologies for unauthorized military end-use in China”.

For all 44 entities, BIS has imposed a licence requirement for all items subject to the Export Administration Regulations, and a licence review policy of presumption of denial. The licence requirements apply to any transaction in which items are to be exported, re-exported or transferred (in-country) to any of the 44 entities or in which such entities act as purchaser, intermediate consignee, ultimate consignee, or end-user. In addition, no licence exceptions will be available for exports, re-exports or transfers (in-country) to the entities. See Final Rule in the US Federal Register (contains the list of the 44 Chinese entities).

US lifts ban on ZTE after payment of $1.4billion settlement

ZTE2Last week (13 July 2018), the US Department of Commerce announced that Chinese telecoms company ZTE (Zhongxing Telecommunications Equipment Corporation and ZTE Kangxun Telecommunications Ltd) had placed $400 million in escrow at a US bank and, as a result, the Department had lifted the 7-year denial order on ZTE pursuant to the $1.4 billion settlement agreement approved last month (see our previous blog for the full details of that new agreement).

Statement from Joint Commission of JCPOA

Iran-US.jpgToday, the Joint Commission of the JCPOA (the body responsible for overseeing the implementation of the JCPOA) held a ministerial level meeting in Vienna to discuss the continued implementation of the Iran nuclear deal in light of the recent US decision to withdraw from the agreement and to reimpose sanctions on Iran. Statement here.

The meeting was chaired by EU High Representative Federica Mogherini and was attended by representatives from China, France, Germany, Russia, UK and Iran. They all reconfirmed their commitment to the full and effective implementation of the nuclear deal, and affirmed their commitment regarding the following objectives:

·         The maintenance and promotion of wider economic and sectoral relations with Iran;

·         The preservation and maintenance of effective financial channels with Iran;

·         The continuation of Iran’s export of oil and gas condensate, petroleum products and petrochemicals;

·         The continuation of sea (including shipping and insurance), land, air and rail transportation relations;

·         The promotion of export credit cover;

·         Clear and effective support for economic operators trading with Iran, particularly SMEs;

·         The encouragement of further investments in Iran;

·         The protection of economic operators for their investment and other commercial and financial activities in or in relation to Iran;

·         The bringing together of private and public-sector experts, including through the promotion of Business Councils;

·         The practical support for trade with and investment in Iran; and

·     The protection of companies from the extraterritorial effects of US sanctions (see previous blog on the updating of the EU Blocking Statute).

China’s ZTE granted 1-month reprieve from US export denial order

ZTE.jpgIn April 2018, the US Department of Commerce announced that it had activated a 7-year denial of export privileges order in respect of Chinese telecoms company ZTE (Zhongxing Telecommunications Equipment Corporation and ZTE Kangxun Telecommunications Ltd) (previous blog).

In June 2018, ZTE agreed to a $1.4 billion settlement to replace the 7-year denial order (previous blog). However, until all elements of that new settlement have been implemented, the 7-year denial order will continue to take effect.

Yesterday (2 July 2018), the Department of Commerce announced that in the interim it has granted ZTE’s request for authorisation to engage in conduct otherwise prohibited by the 7-year denial order. The authorisation allows, from 2 July until 1 August 2018, the following:

  1. Continued operation of existing networks and equipment;
  2. Support to existing handsets;
  3. Cybersecurity research and vulnerability disclosure; and
  4. Limited transfer of funds.

US sanctions on North Korea to remain until complete denuclearisation attained

North Korea Flag and MissilesAt yesterday’s summit in Singapore between US President Donald Trump and North Korean leader Kim Jong-un, a joint statement was signed to reach (inter alia) the “complete denuclearization of the Korean Peninsula”.

In a press conference following the summit, President Trump stated that “[i]n the meantime, the [US] sanctions will remain in effect”, and that they “will come off when we are sure that the nukes are no longer a factor”.

However, China’s Foreign Ministry has stated that the international community ought to consider lifting UN sanctions on North Korea given the “efforts of current diplomatic talks towards denuclearising the Korean peninsula”.

China’s ZTE agrees $1.4bn settlement to lift 7-year denial of US export privileges

ZTEOn 16 April 2018, the US Department of Commerce announced that it had activated a 7-year denial of export privileges order in respect of Chinese telecoms company ZTE (Zhongxing Telecommunications Equipment Corporation and ZTE Kangxun Telecommunications Ltd) (previous blog).

On 13 May 2018, President Trump tweeted that, following talks with President Xi of China, he had instructed the Department of Commerce to get ZTE “back into business” (previous blog).

Today (7 June 2018), the Department of Commerce has announced that ZTE has agreed to “severe additional penalties and compliance measures” to replace the 7-year denial order. Under the new agreement, ZTE must pay $1 billion and place an additional $400 million in suspended penalty money in escrow before it can be removed from the Denied Persons List (these penalties are in addition to the $892 million in penalties ZTE had already paid to the US government under the March 2017 settlement agreement – see previous blog). Under the new agreement, ZTE will also be required to retain a team of special compliance coordinators for a period of 10 years, whose function will be to monitor on a real-time basis ZTE’s compliance with US export control laws. ZTE will also be required to replace its entire board of directors and senior leadership for both entities. Finally, as before, the new agreement imposes a suspended denial order (this time for 10 years), which the Department of Commerce can activate in the event of additional violations during the 10-year probationary period. Collectively, these are the “most severe penalty” the US Department of Commerce has ever imposed on a company.

President Trump tries to lift sanctions on China’s ZTE

ZTE2.jpgOn 16 April 2018, the US Department of Commerce announced that it had activated a 7-year denial of exports privileges order in respect of Chinese telecoms company ZTE (previous blog here).

Yesterday (13 May 2018), President Trump tweeted that, following talks with President Xi of China, he has instructed the US Department of Commerce to get ZTE “back into business”. ZTE previously announced in a filing to the Hong Kong Stock Exchange (9 May 2018) that as a result of the 7-year denial of exports privileges order, the company had ceased its “major operating activities”.

OFAC sanctions Chinese “fentanyl trafficking network”

US Treasury BuildingToday, OFAC designated Chinese national Jian Zhang as a Significant Foreign Narcotics Trafficker, pursuant to the US Kingpin Act, for operating a “fentanyl trafficking network”. In addition, OFAC designated 4 further Chinese nationals for “acting on behalf of Jian Zhang”, as well as a Hong Kong registered entity (Zaron Bio-Tech (Asia) Limited) for being “owned or controlled by Jian Zhang”. As a result, all will be subject to asset freezing measures. Links to OFAC Notice and US Treasury press release.