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Over the past nine months, companies and governments have competed for goods and materials amidst scarcity and disrupted supply chains.  At the same time, governments, central banks, international organizations and NGOs have poured money into economies, hoping to provide relief, meet demand to procure essential goods, and find solutions to an unprecedented situation. This unprecedented environment has created legal risk for market participants, and the potential for a wave of enforcement in the future.

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As we’ve discussed previously, in 2018, the UK enacted the Sanctions and Anti-Money Laundering Act (the Act), allowing it to impose its own post-Brexit autonomous sanctions regime. On July 6, 2020, the UK imposed its first sanctions under the Act: the Global Human Rights Sanctions Regulations 2020 (the Regulations).

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On July 1, 2020, the United-States-Mexico-Canada Agreement (USMCA) entered into force, replacing the 26-year-old North American Free Trade Agreement (NAFTA). The U.S. government has taken several steps toward implementation via executive order and proposed regulations, but the legal framework remains a work in progress.

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The U.S. government has issued several rules aimed at excluding, and in some cases removing, Chinese-origin equipment from U.S. telecommunications networks. Most of these rules apply to U.S. government networks, but some extend to private sector telecom infrastructure and services with no nexus to the U.S. government.

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Since the handover of Hong Kong by the United Kingdom to China in 1997, Hong Kong has enjoyed separate treatment from the mainland by the United States, other countries and international organizations pursuant to the “one country, two systems” model agreed to by the Chinese government.  The United States-Hong Kong Policy Act of 1992 authorized separate treatment of Hong Kong in trade and economic relations as long as Hong Kong remains “sufficiently autonomous” from the mainland.  Hong Kong’s special privileges under this law, and the laws of other countries, have contributed to Hong Kong’s status as a powerful global financial and trading hub. Continue reading →

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On May 22, 2020, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) announced that it will add 33 Chinese companies and institutions to the Entity List.  The designations will prohibit the export, re-export, or in-country transfer of items subject to the Export Administration Regulations (EAR).

The new round of additions comes less than a month after BIS issued new export control rules targeted at commercial companies, especially within China, that do business with military agencies (discussed here).  Previously, in October 2019, BIS added 28 Chinese public security bureaus and companies to the Entity List on the basis of their alleged roles in human rights violations against Muslim minorities in Xinjiang. Continue reading →

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On May 21, 2020, the U.S. Department of the Treasury published a proposed rule that would revise the mandatory declaration requirement for foreign investments involving a U.S. business that produces, designs, tests, manufactures, fabricates, or develops one or more critical technologies.

Currently, a key element of the mandatory declaration requirement is whether the U.S. business engaged in the specified activities involving critical technologies utilizes that critical technology, or designs the technology specifically for use in, one or more industries identified by North American Industry Classification (NAICS) codes.

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On May 15, 2020 the Commerce Department announced an amendment to the direct product rule that further restricts the ability of Huawei Technologies Co., Ltd. and its affiliates on the Entity List, such as HiSilicon (collectively “Huawei”), to receive certain foreign-made semiconductor products.

The Commerce Department also extended the temporary general license (TGL) that authorizes certain dealings with Huawei and its subsidiaries by U.S. persons through August 13, 2020. Statements from the Commerce Department indicate this may be a “final” extension.

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On May 8, 2020, the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) reissued its Geographic Targeting Orders (GTOs) for 12 metropolitan areas.  These GTOs are identical to the November 2019 GTOs.  The GTOs require title companies and their subsidiaries and agents to collect and report information about certain residential real estate transactions in specified jurisdictions.  The terms of the orders are effective beginning May 10, 2020 and ending on November 5, 2020.

Pursuant to 31 U.S.C. § 5326(a), the Director of FinCEN has the authority to impose certain recordkeeping and reporting requirements on domestic financial institutions or nonfinancial trades or businesses in a geographic area where reasonable grounds exist to prevent money laundering.  These orders are only effective for up to 180 days, unless renewed.

The May 8 GTOs require title insurance companies and their subsidiaries and agents that are involved in a “covered transaction” to report the transaction to FinCEN within 30 days of the closing of the transaction.  The orders specifically apply to purchases of residential real property including individual units of condominiums and cooperatives by a corporation, limited liability company, partnership, or other similar business entity in the amount of $300,000 or more.  To be covered, the purchase must be made without a bank loan or other similar form of external financing.  Also, the purchase must be made, at least in part, using currency or a cashier’s check, a certified check, a traveler’s check, a personal check, a business check, a money order in any form, a funds transfer, or virtual currency.

For such transactions, title insurance companies and their subsidiaries and agents will have to identify and report natural persons who are the true “beneficial owners” behind shell companies acquiring the residential estates.  A beneficial owner is defined for purposes of the GTO as any individual who, directly or indirectly, owns 25 percent or more of the equity interests of the entity purchasing the real property.  Title insurance companies will have to obtain documentation identifying the “beneficial owners” (such as a copy of the passport or driver’s license) and retain the information obtained for five years and make it available to FinCEN or any other law enforcement authority when requested.

The order applies to the following jurisdictions: (1) the Texas counties of Bexar (San Antonio), Tarrant (Fort Worth), or Dallas; (2) the Florida counties of Miami-Dade, Broward, or Palm Beach; (3) the Boroughs of Brooklyn, Queens, Bronx, Staten Island, or Manhattan in New York City, New York; (4) the California counties of San Diego, Los Angeles, San Francisco, San Mateo, or Santa Clara; (5) the City and County of Honolulu in Hawaii; (6) the Nevada county of Clark (Las Vegas); (7) the Washington county of King (Seattle); (8) the Massachusetts counties of Suffolk, or Middlesex (Boston); or (9) the Illinois county of Cook (Chicago).

The title insurance company, and any of its officers, directors, employees, and agents, may be liable, without limitation, for civil or criminal penalties for violating the order.

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The COVID-19 pandemic has generated a renewed focus on biotechnology and life sciences companies. Non-U.S. investors need to be aware of the potential that the Committee on Foreign Investment in the United States (CFIUS) may have jurisdiction to review, and possibly disallow certain investments in U.S. companies. In particular, new rules enacted this year expand CFIUS jurisdiction to include non-controlling investments in certain U.S. businesses dealing in “critical technologies,” which includes certain products and technologies in the biotechnology sector. Moreover, the COVID-19 pandemic has resulted in the expansion of biotech-type businesses that might be considered sensitive from a national security perspective even if they do not rise to the level of “critical technologies,” which could trigger mandatory CFIUS filings. CFIUS risk assessments will be an important part of any transaction involving foreign investors in the biotech sector.

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