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Last week's major developments in sanctions - May 31st to Jun. 4th, 2021

Monday, May 31st

- No major development on this day.

Tuesday, June 1st - OFAC replaced Venezuela-related General License 8G with General License 8H extending the existing narrow authorization granted to five oil companies through December 1, 2021. (Here)

- The Bureau of Industry and Security added eight entities to its Entity List and made some modifications to the Entity list and its Military End-User List. (Here)

Wednesday, June 2nd

- The U.S. Treasury designated three Bulgarian individuals and a network of 64 companies related to them to the SDN list under the Global Magnitsky authority. (Here, press release) Concurrently, the Department of State used the authority granted in section 7031(c) of the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2021, to designate five individuals and their family members for their role in corrupt practices. Such designation from the Department of States banned the entry into the U.S for the designated individuals. (Here)

Thursday, June 3rd

- It was a big day! The president of the U.S. issued an Executive Order (E.O.) "Addressing the Threat from Securities Investments that Finance Certain Companies of the People's Republic of China." Following the issuance of the new Executive Order, OFAC published eight FAQs and amended seven. Finally, OFAC introduced a new list: Non-SDN Chinese Military-Industrial Complex Companies (NS-CMIC List) (Here)

A lot to unpack here! Here is a general breakdown of what happened:

  • The new E.O. replaced section 1 through 5 of the initial E.O. 13959 which introduced China-related securities sanctions;

  • The new E.O. revoked E.O. 13974 which had amended E.O. 13959;

  • The new E.O. laid down a rather clear ground for designation which is to operate or have operated in the defense and related materiel sector or the surveillance technology sector of the economy of the PRC or to be owned or controlled by such person (not that the last part is a ground for designation and not the 50% rule);

  • The new E.O. empowered the Secretary of the Treasury to designate any person (so, it won't be like before that DoD first would identify a person and then the sanctions would kick in after a certain time.);

  • The new E.O. listed 59 entities as the initial batch of targets. The first layer of restrictions against those 59 entities will come into effect at 12:01 a.m. eastern daylight time on August 2, 2021. The second layer of restrictions against those 59 entities will come into effect at 12:01 a.m. eastern daylight time on June 3, 2022;

  • For those entities that will be added later by the Secretary of the Treasury the first and the second layers of restrictions will come into effect after 60 and 365 days respectively (similar set-up in the previous relevant E.O.);

  • OFAC created Non-SDN Chinese Military-Industrial Complex Companies (NS-CMIC) List and removed the NS-CCMC List from its website;

  • OFAC published the following FAQs: 898, 899, 900, 901, 902, 903, 904, and 905;

  • OFAC amended the following FAQs: 857, 859, 860, 861, 863, 865, and 871.

It seems that between now and the time that the new restrictions come into place (i.e. August 2, 2021) U.S. persons are allowed to purchase securities of the targeted companies. Yet, this is not in line with the spirit of the U.S. actions against China. So, I expect OFAC to clarify this with an FAQ in the coming days.

If you want to know more about the recent changes, please check this notice prepared by Steptoe's stellar team of sanctions experts.

Friday, June 4th

- The Council of the EU adopted a less common type of restrictive measure against Belarus and that was to ban on the overflight of EU airspace and on access to EU airports by Belarusian carriers of all kinds. (Here)

Recommendations of the week

- This week, I would like to recommend to you the EU Commission's opinion on changes to the features of frozen funds. The Commission, which acts as the guardian of the treaties and monitors the implementation of Union law by the Member States, was requested to provide more clarity about the application of EU sanctions. Interestingly, the Commission in its opinion stated that Restrictive measures are not punitive, nor confiscatory in nature, but merely preventative. You can find the Commission's full response here.

- DW had an interesting article about sanctions describing them as"attractive, albeit imperfect, middle ground." You can find the article here.


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