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OFAC Sanctions CEIEC for Its Support to Venezuela Regime

Venezuela
Archives, Global Trade Daily, News

OFAC Sanctions CEIEC for Its Support to Venezuela Regime

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The U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) has sanctioned CEIEC (China National Electronic Import-Export Company), a Chinese technology exporter, for its alleged support to the Maduro government in Venezuela. As a result of CEIEC’s addition to OFAC’s Specially Designated Nationals List, all property and interests belonging to CEIEC, or any entity in which it owns a 50% or greater interest—and which are in the United States or in the possession or control of U.S. persons—must be blocked and reported to OFAC.

According to OFAC, CEIEC has provided software, training, and technical expertise to the government of Venezuela since 2017, which has been used to oppress the Venezuelan people. OFAC specified CEIEC’s support to Venezuela National Telephone Company (CANTV), the state-owned telecoms company which provides 70% of internet service in Venezuela, and described CEIEC’s suite of software and hardware that it provided to CANTV as a “commercialized version” of China’s “Great Firewall” system of internet censorship. “The illegitimate Maduro regime’s reliance on entities like CEIEC to advance its authoritarian agenda further illustrates the regime’s prioritization of power over democratic values and processes,” said Treasury Secretary Mnuchin.

OFAC issued Venezuela-related General License 38 (GL 38) on November 30, 2020, authorizing the wind-down of transactions involving CEIEC. According to the related Frequently Asked Question 854 (FAQ 854), GL 38 authorizes U.S. persons to engage in transactions and activities prohibited by Executive Order 13692 (E.O. 13692) that are ordinarily incident and necessary to the wind-down of transactions and activities involving CEIEC, or any entity in which CEIEC owns a 50% or greater interest, until January 14, 2021.

Non-U.S. persons may also wind down transactions and activities with CEIEC without being sanctioned under E.O. 13692, provided that such wind-down activity is consistent with GL 38 and is completed prior to January 14, 2021.

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Cortney O’Toole Morgan is a Washington D.C.-based partner with the law firm Husch Blackwell LLP. She leads the firm’s International Trade & Supply Chain group.

Grant Leach is an Omaha-based partner with the law firm Husch Blackwell LLP focusing on international trade, export controls, trade sanctions and anti-corruption compliance.

Camron Greer is an Assistant Trade Analyst in Husch Blackwell LLP’s Washington D.C. office.

8G
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OFAC Issues Venezuela General License 8G Extending Authorization of Certain Transactions for U.S. Oil & Gas Companies

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The U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) issued General License 8G (“GL 8G”), which authorizes five (5) U.S. oil and gas companies to engage in transactions “ordinarily incident and necessary to the limited maintenance of essential operations, contracts or other agreements”, as well as transactions necessary to the wind-down of operations in Venezuela involving Petroleos de Venezuela, S.A. (“PdVSA”) or any entity which PdVSA owns a 50% or greater interest and that were in effect prior to July 26, 2019.

Effective November 17, 2020, GL 8G replaces and supersedes GL 8F which was set to expire on December 1, 2020, effectively extending its deadline through 12:01 eastern daylight time on June 3, 2021. GL 8G applies specifically to the following entities and their subsidiaries: Chevron Corporation, Halliburton, Schlumberger Ltd., Baker Hughes (a GE company), and Weatherford International, PLC.

Notably, GL 8G does not authorize the drilling, lifting, processing of, purchase or sale of, or transport or shipping of any Venezuelan-origin petroleum or petroleum products. It does not authorize the provision or receipt of insurance for such transactions/activities, or any work on oil wells or other infrastructure for the provision of goods or services. The GL also does not authorize the payment of a dividend, the provision of any loans to PdVSA, or any other transaction/activity otherwise prohibited by the Venezuela Sanctions Regulations (“VSR”).

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Cortney O’Toole Morgan is a Washington D.C.-based partner with the law firm Husch Blackwell LLP. She leads the firm’s International Trade & Supply Chain group.

Grant Leach is an Omaha-based partner with the law firm Husch Blackwell LLP focusing on international trade, export controls, trade sanctions and anti-corruption compliance.

Camron Greer is an Assistant Trade Analyst in Husch Blackwell LLP’s Washington D.C. office.

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BIS Amends EAR to Implement Export Enforcement Provisions of Export Control Reform Act

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The U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) recently issued a final rule, effective November 18, 2020, which revises certain provisions of the Export Administration Regulations (“EAR”) to implement enforcement provisions pursuant to the Export Control Reform Act of 2018 (“ECRA”), which expanded the export control authorities available to the Secretary of Commerce. BIS also amended the EAR with respect to the issuance of licenses and denial orders and the payment of civil penalties, not directly related to the implementation of ECRA.

The final rule affirms BIS’ authority to conduct investigations, pre-license checks, and post-shipment verifications outside of the United States, as well as the production of books and other information required to be kept as specified in ECRA Section 1761(a)(2) which may be requested of persons located outside the United States.

The enforcement and protective measures in Part 764 of the EAR include violations and sanctions outlined in sections 764.2 and 764.3. Sanctions for violations of the EAR outlined in Section 764.2 include civil monetary penalties, the denial of export privileges, or the exclusion from practice for persons who act as attorneys, accountants, consultants, freight forwarders, or “in any other representative capacity for any license application or other matter before BIS…”  Criminal violations may result in a maximum fine of $1,000,000 and a prison sentence of up to twenty years.

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Cortney O’Toole Morgan is a Washington D.C.-based partner with the law firm Husch Blackwell LLP. She leads the firm’s International Trade & Supply Chain group.

Grant Leach is an Omaha-based partner with the law firm Husch Blackwell LLP focusing on international trade, export controls, trade sanctions and anti-corruption compliance.

Camron Greer is an Assistant Trade Analyst in Husch Blackwell LLP’s Washington D.C. office.

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U.S. Scheduled Bans on TikTok and WeChat Apps Delayed

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China-based smartphone apps, TikTok and WeChat, have each received a reprieve from the respective bans, which were originally ordered by President Trump on August 6, 2020, against both parties and were scheduled to take effect on September 21, 2020. Please see our previous post covering the Executive Orders. Pursuant to the Executive Orders banning the apps on national security grounds, the U.S. Department of Commerce (“Commerce”) published final rules for implementing the bans on September 19, 2020, which were subsequently withdrawn. Commerce then delayed the order to withdraw TikTok from U.S. app stores until September 27, 2020, at 11:59 pm. Meanwhile, Commerce’s order to withdraw WeChat has been suspended temporarily due to an injunction granted by the U.S. District Court for the Northern District of California.

In an effort to come into compliance with the Executive Order and avoid the ban, TikTok’s parent, ByteDance Ltd. (“ByteDance”), negotiated a deal with Oracle and Walmart to keep TikTok operating in the United States. Under the terms of the agreement, based on media reports, TikTok will be spun off into a U.S.-based company majority-owned by its Chinese parent ByteDance, while Oracle and Walmart will take up to a twenty (20) percent stake of the new U.S. company. ByteDance will maintain control over the app’s algorithm, while user data will be stored in the U.S.  It is possible that the ban on TikTok may be formally lifted once the deal is finalized since President Trump has given his personal approval of the agreement, though that is unclear at this time.

A judge from the U.S. District Court for the Northern District of California granted a nationwide injunction on September 19, 2020, temporarily suspending Commerce’s order for Apple and Google to remove WeChat from their app stores. Plaintiffs U.S. WeChat Users Alliance, et al. allege that the ban violates First Amendment rights, especially for Chinese Americans. Judge Beeler stated that the plaintiffs “have shown serious questions going to the merits of the First Amendment claim” and that “the balance of hardships tips in the plaintiffs’ favor”.

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Cortney O’Toole Morgan is a Washington D.C.-based partner with the law firm Husch Blackwell LLP. She leads the firm’s International Trade & Supply Chain group.

Grant Leach is an Omaha-based partner with the law firm Husch Blackwell LLP focusing on international trade, export controls, trade sanctions and anti-corruption compliance.

Camron Greer is an Assistant Trade Analyst in Husch Blackwell LLP’s Washington D.C. office.

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U.S. Moves to Block Conventional Arms Sales to Iran

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President Trump issued an Executive Order on September 21, 2020, which is effective immediately, imposes secondary sanctions on the transfer and sale of certain conventional arms shipments and the supply of related services to Iran by non-U.S. persons. This Executive Order follows the current administration’s failed effort to reinstate sanctions and a conventional arms embargo by the U.N. Security Council. The Executive Order, titled “Blocking Property of Certain Persons with Respect to the Conventional Arms Activities of Iran”, attempts to enforce such sanctions unilaterally by authorizing the U.S. Secretary of State to impose blocking sanctions on any non-U.S. person who transfers conventional arms to Iran or otherwise performs activities to support such transfers.

If the U.S. Secretary of State, in consultation with the U.S. Secretary of the Treasury, determines that a non-U.S. person has engaged in any of the following activities, then all of that non-U.S. person’s U.S. property (including property in the U.S., which transits through the U.S. financial system or which is otherwise in the possession of a U.S. person) will become blocked. U.S. persons and the U.S. financial system will be prohibited from transacting with those:

-Engaging in any activity that materially contributes to the supply, sale, or transfer, directly or indirectly, to or from Iran, or for the use in or benefit of Iran, of arms or related materiel, including spare parts;

-Providing Iran any technical training, financial resources or services, advice, other services, or assistance related to the supply, sale, transfer, manufacture, maintenance, or use of arms and related materiel;

-Engaging, or attempting to engage, in any activity that materially contributes to, or poses a risk of materially contributing to, the proliferation of arms or related materiel or items intended for military end-uses or military end-users, including any efforts to manufacture, acquire, possess, develop, transport, transfer, or use such items, by the Government of Iran or paramilitary organizations supported by Iran;

-Materially assisting, sponsoring, or providing financial, material, or technological support for, or goods or services to or in support of, any person whose property and interests in property are blocked pursuant to the Executive Order;

-Being owned or controlled by, or to having acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to this Executive Order.

The Executive Order clarifies that it does not apply to persons “facilitating a transaction for the provision (including any sale) of agricultural commodities, food, medicine, or medical devices to Iran.”

Following the issuance of the Executive Order, the U.S. Department of Treasury’s Office of Foreign Asset Controls (OFAC) added several individuals and two (2) entities to the Specially Designated Nationals (SDN) list, thereby subjecting the designated entities to the above-described blocking sanctions. The Iranian entities are Mammut Diesel and Mammut Industrial Group P.J.S. (aka Mammut Industrial Group, Mammut Tehran Industrial Group, or Mammut Industries).

The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) added five (5) individuals to the Entity List who BIS says “played a critical role in Iran’s nuclear weapons development program and continue to work for the Iranian regime.” By adding these individuals to the Entity List, they are now prohibited from receiving any items or technology that are “subject to the EAR”, which will essentially prohibit any exports or re-exports of U.S. origin items or technology to these individuals.

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Cortney O’Toole Morgan is a Washington D.C.-based partner with the law firm Husch Blackwell LLP. She leads the firm’s International Trade & Supply Chain group.

Grant Leach is an Omaha-based partner with the law firm Husch Blackwell LLP focusing on international trade, export controls, trade sanctions and anti-corruption compliance.

Camron Greer is an Assistant Trade Analyst in Husch Blackwell LLP’s Washington D.C. office.

Huawei
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BIS Allows U.S. Companies to Work with Huawei on Standards

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The U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) published a notice in the Federal Register announcing a rule change effective June 18, 2020, which amends the Export Administration Regulations (“EAR”) to allow for the release of certain technology to Huawei Technologies, Co., Ltd. and 114 of its non-U.S. affiliates designated on the Entity List without a license “if such release is made for the purpose of contributing to the revision or development of a ‘standard’ in a ‘standards organization.’”

Despite being added to the Entity List by BIS in 2019, Huawei and its foreign affiliates still participate in several international standards organizations in which U.S. companies also participate. BIS states in its notice “[a]s international standards serve as the building blocks for product development and help ensure functionality, interoperability, and safety of the products, it is important to U.S. technological leadership that U.S. companies be able to work in these bodies in order to ensure that U.S. standards proposals are fully considered.”

As a result of Huawei’s entity list designation, BIS has received questions regarding the applicability of the EAR in the context of standards-setting or development. On August 19, 2019, BIS issued a “General Advisory Opinion Concerning Prohibited Activities in the Standards Setting or Development Context When a Listed Entity is Involved”, which addressed the applicability of certain types of releases. With the issuance of this new interim final rule, that previous guidance has been rescinded.

The new rule removes certain licensing requirements imposed by the original listing and removes the need to determine the application of controls to those releases. The interim final rule revises ninety-three entries, which list Huawei and its 114 foreign affiliates by changing the text in the Licensing Requirement column from “For all items subject to the EAR (See §744.11 of the EAR)” to “For all items subject to the EAR (see § 744.11 of the EAR), EXCEPT for technology subject to the EAR that is designated as EAR99, or controlled on the Commerce Control List for anti-terrorism reasons only, when released to members of a ‘‘standards organization’’ (see § 772.1) for the purpose of contributing to the revision or development of a ‘‘standard’’ (see § 772.1).’’

According to the notice, the definition of a “standard” for the purpose of this rule can be found in the Office of Management and Budget (“OMB”) Circular A-119. BIS welcomes comments from interested parties on the impact of the rule change on or before August 17, 2020.

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Cortney O’Toole Morgan is a Washington D.C.-based partner with the law firm Husch Blackwell LLP. She leads the firm’s International Trade & Supply Chain group.

Grant Leach is an Omaha-based partner with the law firm Husch Blackwell LLP focusing on international trade, export controls, trade sanctions and anti-corruption compliance.

Camron Greer is an Assistant Trade Analyst in Husch Blackwell LLP’s Washington D.C. office.