Webinar 05.08.24
05.08
Ramping Up The Threat of Secondary Sanctions on Foreign Financial Institutions
10:00AM - 3:00PM GMT
Service
The U.S. government has long focused on supply chain risks from foreign countries that directly impact companies around the world, primarily concentrating on the technology, telecommunications and government contracting industries.
Pillsbury’s International Trade team tracks ongoing U.S. government measures and advises clients on the impact of and how to stay in compliance with new national security-focused laws and regulations that also have the potential to affect global supply chains for companies in these industries.
These issues include potential technology transfer involving entities deemed “foreign adversaries,” import and export restrictions on goods and services that enable or involve supply chains that rely upon forced labor, and exports to some companies that conduct activities in support of a military end use.
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Import Restrictions
China’s Xinjiang Uyghur Autonomous Region (XUAR)
The U.S. government has outlined various supply chain risks for businesses with connections to entities engaged in human rights abuses in the XUAR, including but not limited to using forced labor in the manufacture of goods. Most recently, President Biden signed into law the Uyghur Forced Labor Prevention Act, creating a rebuttable presumption that all goods manufactured even partially in the XUAR are the product of forced labor and denied entry at U.S. ports.
Commerce Department Review of ICTS Transactions
On January 19, 2021, the Commerce Department issued an interim final rule, empowering the Commerce Department to conduct CFIUS-like reviews of transactions involving the acquisition of “information and communications technology or services” (ICTS transactions) between U.S. persons and certain “foreign adversaries,” across six defined categories of products. Pursuant to this new authority, the Commerce Department has the authority to prohibit the transaction or impose mitigation measures. A separate rulemaking will also establish a licensing process for pre-approval of covered transactions.
Federal Communications Commission (FCC) Import Restrictions on Certain Chinese-Origin Telecommunications Equipment
On June 17, 2021, the FCC released its proposed rules to restrict the importation and marketing of telecommunications equipment that has been deemed to be a risk to national security. In 2019, the Secure and Trusted Communications Networks Act of 2019 directed the FCC to prepare a list of telecommunications equipment and services (the “Covered List”) which would identify certain Chinese-Origin equipment that U.S.-based telecommunications service providers would be prohibited to use federal subsidy funds to purchase. The pending proceeding is considering which new rules are necessary to prohibit the importation and marketing of equipment and services on the Covered List through the refusal to grant equipment certification authorizations. The FCC is also in the process of coordinating a “rip-and-replace” program that will reimburse telecommunications service providers for the removal and disposal of equipment on the Covered List.
Section 232 National Security Investigations and Supply Chain Reviews
Past and present administrations have conducted multiple Section 232 national security investigations on imports and other supply chain reviews that have impacted or may impact companies globally.
U.S. Government Contracts
The 2020 U.S. government-wide ban on contracts with any entity using equipment, systems or services that use products from Huawei, ZTE and other Chinese companies is another in a series of U.S. rules aimed at excluding, and in some cases removing, Chinese-origin equipment from domestic telecommunications networks. Most of these rules apply to U.S. government networks, but some extend to private sector companies that use covered telecom infrastructure and services with no nexus to the U.S. government.
Export Controls
The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) has increasingly used its Entity List as a tool to designate parties implicated in human rights violations and abuses, as well as parties allegedly contributing to China’s civil-military fusion program.
Military End-Use Restrictions
BIS requires a license for certain exports to military end users in China. Exports to some Chinese companies that conduct activities in support of a military end use also will likely be subject to a license—even if the item itself will be used exclusively for commercial applications. Additionally, the list of items subject to military end-use and end-user license requirements for exports to China, Russia and Venezuela was significantly expanded. BIS also requires an export license for certain telecommunication equipment and computers that are controlled for national security reasons and that previously could be exported without a license to civil end users.