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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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On March 5, 2020, the U.S. Department of the Treasury issued a proposed rule establishing filing fees for parties submitting a voluntary notice to the Committee on Foreign Investment in the United States (CFIUS) for “covered transactions” under Part 800 (which includes covered investments) and “covered real estate” under Part 802. The proposed rule implements the filing fee provision contained in section 1723 of the Foreign Investment Risk Review Modernization Act (FIRRMA).

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On February 3, 2020, the Department of Commerce published a final rule that amends the regulations for countervailing duty investigations to allow the imposition of duties on countries that undervalue their currencies. Publication of the final rule follows a May 28, 2019, notice of the proposed rule. The regulation will go into effect on April 6.

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On January 10, 2020, the United States imposed additional sanctions on Iran in the wake of recent tensions between the countries and the continuing broader “maximum pressure” campaign on Iran. Specifically, President Trump signed Executive Order 13902 (E.O. 13902) authorizing the imposition of secondary sanctions on certain transactions involving Iran’s construction, mining, manufacturing, and textiles industries. This follows Executive Order 13871 from May 2019, which authorized secondary sanctions on Iran’s iron, steel, aluminum and copper sectors. Concurrently with the issuance of E.O. 13902, the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) added to the Specially Designated Nationals and Blocked Persons List (SDN List) several major Iran-related metal and mining companies, Chinese and Seychelles entities plus a related vessel involved in the Iranian metals trade, and Iranian regime officials.

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