sanctions

On June 27, 2018, the U.S. Department of  Treasury’s Office of Foreign Assets Control (“OFAC”) officially revoked General Licenses H and I.  General License H previously allowed foreign owned or controlled subsidiaries of U.S. companies to engage in limited transactions with Iran that would have otherwise been prohibited under the Iranian Transactions and Sanctions Regulations (the “ITSR”).  General License I previously allowed U.S. persons to negotiate and enter into contingent contracts for exports and reexports to Iran of commercial passenger aircraft and related parts and services that were eligible to potentially receive specific licenses under the Iran Nuclear Deal, otherwise known as the Joint Comprehensive Plan of Action (the “JCPOA”).  OFAC previously advised that these revocations would be forthcoming in May, when President Trump formally announced his decision to withdraw from the JCPOA.

On Monday evening June 18, the U.S. Senate adopted draft legislation in its version of the National Defense Authorization Act for Fiscal Year 2019 (the “2019 Defense Bill”) which would: (i) prevent the U.S. Department of Commerce – Bureau of Industry and Security (“BIS”) from fulfilling its agreement to suspend current export controls applicable to Zhongxing Telecommunications Equipment Corporation of Shenzen, China and ZTE Kangxun Telecommunications Ltd. of Hi-New Shenzhen, China (collectively “ZTE”), and (ii) expand existing language in the 2019 Defense Bill to prohibit all U.S. government agencies from contracting with ZTE.  The Senate approved this bill by a vote of 85-10.  After last night’s vote, it has been reported that ZTE shares have dropped more than 25%.  The U.S. House and Senate will still need to reconcile the differences in their versions of the 2019 Defense Bill before they send it to the President, but if they can do so while retaining enough votes to override a Presidential veto then BIS will be unable to remove ZTE from the Denied Persons list and ZTE will continue to be subject to export and re-export prohibitions in transactions involving U.S. origin goods, software and technology.

President Trump announced today, May 8, 2018, that the United States will withdraw from the Iran Nuclear Deal and will begin reimposing previously waived sanctions on Iran.  The deal, formally known as the Joint Comprehensive Plan of Action, or JCPOA, was signed by the U.S. in July 2015 along with China, France, Germany, Russia, the United Kingdom, the European Union and Iran. The White House issued a statement which explained that “President Trump is terminating United States participation in the JCPOA, as it failed to protect America’s national security interests.”

On April 15, 2018, the Department of Commerce’s Bureau of Industry and Security (“BIS”) issued a denial order against ZTE Corporation and ZTE Kangxun Telecommunications Ltd. (collectively “ZTE”), effectively banning U.S. companies from providing components to ZTE  because the company had failed to comply with the terms of a disciplinary agreement reached in March 2017 arising from violations of U.S. export control restrictions against Iran and North Korea. It is estimated that U.S. companies provide nearly 25-30 percent of the components used in ZTE products. ZTE’s U.S. subsidiary advertises that it has been ranked by independent industry analysts as the fourth-largest supplier of mobile devices in the U.S. overall and second-largest supplier of prepaid devices.

On March 15, 2018 the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) exercised its authority to issue cyber sanctions under Executive Order 13694 and the new Countering America’s Adversaries Through Sanctions Act (CAATSA) by imposing blocking sanctions against 5 Russian entities and 19 Russian individuals connected to previous Russian cyber operations directed towards the United States. In an accompanying press release, OFAC stated that these sanctions were intended to counter Russian destabilizing activities such as interference in the 2016 US election, the 2017 global NotPetya cyber-attack and other cyber-attacks directed at critical U.S. infrastructure sectors. One aspect of this move was somewhat puzzling, because 9 of the total 24 sanctioned entities and individuals were already subject to blocking sanctions for their previous activities. For those 9 sanctioned entities and individuals, (which include Russia’s Federal Security Service (the FSB) and Main Intelligence Directorate (the GRU), whose initial designation we covered here), it is unclear what OFAC seeks to accomplish by imposing blocking sanctions against them for a second time.

Scope of the Investigation

The merchandise covered by this investigation is Laminated woven sacks or bags consisting of one or more plies of fabric consisting of woven polypropylene strip and/or woven polyethylene strip, regardless of the width of the strip; with or without an extrusion coating of polypropylene and/or polyethylene on one or both sides of the fabric; laminated by any method either to an exterior ply of plastic film such as biaxiallyoriented polypropylene (“BOPP”) or to an exterior ply of paper that is suitable for high-quality print graphics (i.e., it has an ISO brightness of 82 or higher and a Sheffield Smoothness of 250 or less); printed; displaying, containing, or comprising three or more colors, regardless of the type of printing process used; with or without lining; whether finished or unfinished; whether or not closed on one end; whether or not in roll form (including, but not limited to, sheets, lay-flat tubing, and sleeves); with or without handles; with or without special closing features; not exceeding one kilogram in weight. Laminated woven sacks subject to the scope are typically used for retail packaging of consumer goods such as pet foods and bird seed. Laminated woven sacks produced in Vietnam are subject to the scope regardless of the country of origin of the fabric used to make the sack.

President Trump announced on Thursday, March 1, that he will impose tariffs on imports of certain steel and aluminum products. We anticipate the President will formally sign the trade measures announced today next week and that they will include an additional tariff of 25% on imports of steel products and 10% on imports of aluminum products covered under the proclamation.

On Friday, February 23, 2018, the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) imposed blocking sanctions against one individual, twenty-seven entities and twenty-eight vessels known to have previously provided maritime support to North Korean coal and petroleum transactions. OFAC added the individuals, entities and vessels to its Specially Designated Nationals List (the “SDN List”), which will generally prohibit the fifty-six sanctioned parties from transacting with the United States or any United States person.

CAATSA Overview

Congress enacted the “Countering America’s Adversaries Through Sanctions Act” (CAATSA) on August 2, 2017 in response to Russia’s continuing occupation of the Crimea region of Ukraine and cyber-interference in the 2018 United States Presidential elections. We previously covered CAATSA in blog posts here and here. CAATSA was notable because it passed the House of Representatives with a 419-3 approval margin and passed the Senate with a 98-2 approval margin. Among other things, CAATSA required President Donald Trump to take certain actions on the 180-day anniversary of CAATSA’s adoption, which included (but were not limited to): (i) imposing sanctions (commonly referred to as the “CAATSA Section 231 sanctions”) against persons engaged in “significant transactions” with Russia’s defense or intelligence sectors; and (ii) preparing and submitting a report (commonly referred to as the “CAATSA Section 241 report”) to various congressional committees identifying senior political figures and oligarchs within Russia. January 29, 2018 marked CAATSA’s 180-day anniversary and, as a result, it sparked a flurry of activity related to the CAATSA Section 231 sanctions and the CAATSA Section 241 report.

President Donald Trump has announced that he will approve certain sanctions waivers necessary in order to preserve the Iran nuclear deal (JCPOA). In an official statement, the President indicated that this is the last such waiver he will issue and warned that “the United States will not again waive sanctions in order to stay in the Iran nuclear deal.”

President Trump called on Congress to enact legislation addressing Iran and stated that the legislation should include the following critical components:

  • The legislation must require Iran to allow immediate inspections by international inspectors at all nuclear sites.
  • The legislation must “ensure that Iran never even comes close to possessing a nuclear weapon”.
  • The legislation “must have no expiration date.” President Trump stated that “My policy is to deny Iran all paths to a nuclear weapon – not just for ten years, but forever.”
  • The legislation must subject Iran’s long-range missile program to the same sanctions imposed on its nuclear weapons program.