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On April 28, 2020, the U.S. Commerce Department’s Bureau of Industry and Security (BIS) published two final rules that will eliminate the license exception for civil end users (CIV) in the People’s Republic of China, Russia, and Venezuela and expand military end use and end user restrictions on these countries. These rules confront the national security risks presented by the increasing integration of civilian and military technology development, particularly in China, by requiring U.S. Government review of a broader range of exports including electronics and telecommunications items only controlled for antiterrorism (AT) reasons (with licenses subject to a presumption of denial) when shipped for military end uses or to military end users. These final rules will go into effect on June 29, 2020.

BIS also published a proposed rule that would modify License Exception Additional Permissive Reexports (APR) by restricting the destinations that will be eligible for the license exception. Comments on the proposed rule are also due June 29, 2020. Continue reading →

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On April 19, 2020, the Treasury Department in conjunction with Customs and Border Protection (CBP) released a temporary interim final rule (“Rule”) to provide importers that meet the qualifying criteria with the option of a 90-day deferment period on the payment of duties, taxes, and fees for goods coming into the U.S. in March and April.  Similar to other COVID-19-related rules, the Rule became effective immediately. Continue reading →

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The COVID-19 pandemic and the resulting economic turmoil have the potential to shake up the U.S. real estate market due to an anticipated influx of real estate investors looking to purchase heavily discounted, distressed assets and an expected increase in real estate foreclosures. Non-U.S. real estate lenders and 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 potentially disallow certain investments in real estate and mortgage default remedies where foreign persons are involved.

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On April 6, 2020, Secretary of State Mike Pompeo designated the Russian Imperial Movement (RIM), a paramilitary and white supremacist group, and several of its leaders as Specially Designated Global Terrorists (SDGTs). This is the first time the United States has applied sanctions to a white supremacist group.

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TAKEAWAYS

  • Establishes deadlines for Committee to respond to FCC referrals
  • Invites Committee review of existing license holders
  • Resolution of long pending FCC proposed rulemaking expected

On April 4, 2020, the White House issued an Executive Order creating the Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector (the Committee). The Committee, chaired by the Attorney General, includes the Secretaries of Homeland Security and Defense, and any other executive department head so designated by the President, is seen as an attempt to formalize the long-standing “Team Telecom” review process that began in the 1990s. The Committee’s stated goal is similar to Team Telecom’s, i.e., to assist the Federal Communications Commission (FCC) in its public interest review of national security and law enforcement concerns that may be triggered by foreign investment in the U.S. telecommunications sector. But there may be some notable differences.

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On April 7, 2020, the Federal Emergency Management Agency (FEMA) released for public inspection a temporary rule that prohibits the export of five types of personal protective equipment (PPE) without explicit approval by FEMA.  The rule will remain in effect from April 7, 2020 through August 8, 2020.

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TAKEAWAYS

  • A transfer of control of a borrower or its business to non-U.S. lenders who exercise remedies under financing documents could trigger CFIUS issues
  • CFIUS regulations adopted in February 2020 dramatically heighten the risk to non-U.S. lenders and borrowers by sweeping many more businesses and industries within CFIUS’ regulatory reach.
  • Advance planning can limit the need for CFIUS reviews for parties entering into new financings and provides a safety valve for parties to existing financings, whether in distressed, workout or bankruptcy scenarios.

The COVID-19 pandemic has had a drastic and abrupt impact on global commerce, as many businesses have slowed or suspended operations. Despite aggressive U.S. Government efforts to support vulnerable businesses, the sharp economic downtown is compelling lenders and investors to consider restructuring and/or exercising remedies under their financing documents in order to protect their interests. In so doing non-U.S. lenders and investors potentially face an additional hurdle that may not have been accounted for at the time of the original transaction. The Committee on Foreign Investment in the United States (CFIUS) may have jurisdiction to review and potentially disallow certain default remedies, financial restructurings, and equity conversion rights where foreign persons are involved.

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On Friday, March 20, 2020, in an effort to fight against the coronavirus pandemic, the U.S. Trade Representative (USTR) announced that it is accepting exclusions requests to remove tariffs imposed on Chinese origin medical-care products under Section 301 of the Trade Act of 1974 (Section 301). This process does not replace the current exclusion process, but rather serves to supplement it.

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On March 12, 2020, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued sanctions against a second affiliate of PJSC Rosneft Oil Company (Rosneft) related to its activities with Venezuela. OFAC added TNK Trading International S.A. of Switzerland (TNK) to the Specially Designated Nationals and Blocked Persons List (SDN List), and the Sectoral Sanctions Identifications List (SSI List) under Directives 2 and 4, pursuant to Executive Orders 13850 and 13662. Previously, on February 18, 2020, OFAC placed Rosneft Trading S.A. (Rosneft Trading), a Swiss subsidiary of Rosneft, on the SDN List for purchasing, transferring, brokering, and otherwise facilitating the shipment of crude oil from PdVSA. OFAC has authorized a wind down period for both companies through 12:01 a.m. U.S. Eastern Time on May 20, 2020.

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On March 6, 2020, President Trump issued an Executive Order (EO) instructing the Chinese company Beijing Shiji Information Technology Co. Ltd. (Shiji) to divest its acquisition of StayNTouch Inc., a U.S.-based software company providing management systems to hotels. Pursuant to the EO, Shiji is required to fully divest its interest in StayNTouch within 120 days, with the possibility of a 90-day extension. The President determined that there was “credible evidence” that Shiji, through its acquisition of StayNTouch, “might take action that threatens to impair the national security of the United States.” The EO does not specify CFIUS’s particular concerns but it appears that StayNTouch’s platform could provide Shiji with access to a large database of personal and financial information of its users.

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