US accuses Huawei’s CFO of violating Iran sanctions

Huawei.jpgUS authorities have requested the extradition of Huawei’s Chief Financial Officer and daughter of the firm’s founder, Meng Wanzhou, who is currently being held on remand in Vancouver, Canada, over allegations that she utilised Skycom Tech Co Ltd, an “unofficial subsidiary” of Huawei, in order to violate US sanctions on Iran between 2009 and 2014. Her bail hearing before a Vancouver court is due to be determined today.

New CAATSA-related Executive Order; 33 persons added to CAATSA list of Russian defence & intelligence sectors; 2 Chinese persons sanctioned

US-Russia3Last week (20 September), US President Donald Trump issued a new  Executive Order to further the implementation of certain CAATSA-related sanctions with respect to the Russian Federation. See new OFAC FAQ, Presidential Statement and Special Press Briefing for further details. In addition, the US Secretary of State has taken two actions to implement his delegated authorities pursuant to section 231 of CAATSA and to “further impose costs on the Russian Government for its malign activities”.

First, the Secretary of State has added 33 additional persons to the section 231(d) CAATSA list of those “being a part of, or operating for or on behalf of, the defense or intelligence sectors of the [Russian government]”. This action increases the number of persons identified to 72 (39 persons were originally identified in October 2017 – see previous blog). This list does not itself impose sanctions, but any person who knowingly engages in a “significant transaction” with any of the identified persons will be subject to mandatory sanctions, pursuant to section 231(a) of CAATSA.

Second, in consultation with OFAC (see Notice here), the Secretary of State has sanctioned Chinese entity Equipment Development Department (EDD) and its director, Li Shangfu, for “knowingly engag[ing] in significant transactions with a person that is a part of, or operates for or on behalf of, the defense sector of the [Russian government]”. According to the US Department of State Fact Sheet (which includes the additional 33 identified persons), China took delivery from Russia of ten Su-35 combat aircraft in December 2017 and a batch of S-400 (a.k.a. SA-21) surface-to-air missile system-related equipment in January 2018. Both transactions were negotiated between EDD and Russia’s main arms export entity, Rosoboronexport; an entity identified on the aforementioned section 231(d) CAATSA list. The following 5 sanctions have been selected from section 235 of CAATSA to be imposed on EDD:

  1. A denial of export licences;
  2. A prohibition on foreign exchange transactions under US jurisdiction;
  3. A prohibition on transactions with the US financial system;
  4. Blocking of all property and interests in property within US jurisdiction; and
  5. The imposition of sanctions on an EDD principal executive officer, namely, its director Li Shangfu, which include a prohibition on foreign exchange transactions under US jurisdiction, a prohibition on transactions with the US financial system, blocking of all property and interests in property within US jurisdiction, and a visa ban.

This is the first time the US has sanctioned anyone under section 231 of CAATSA for knowingly engaging in a significant transaction with a person identified as “being a part of, or operating for or on behalf of, the defense or intelligence sectors of the [Russian government]”.

US considers sanctions on China over Muslim detention camps

China-US.jpgThe US is considering sanctions against 7 Chinese officials, including Chen Quanguo, the Communist Party Chief in Xinjiang, over the region’s detention of an estimated one million people – predominantly ethnic Uighurs, Kazakhs and other Muslim minority groups – as part of the country’s wider counter-terrorism campaign. Chinese companies involved in building detention camps and surveillance systems used to track and monitor Uighurs are also being considered for US sanctions. It is reported that the sanctions would be imposed on human rights grounds, pursuant to the US Global Magnitsky Act.

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”.