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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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On December 26, 2019, the Department of State published in the Federal Register an interim final rule amending the International Traffic in Arms Regulations (ITAR) to define “activities that are not exports, reexports, retransfers, or temporary imports,” and specifically to clarify that the electronic transmission and storage of properly secured unclassified technical data via foreign communications infrastructure does not constitute an export. The rule also defines “access information” and revises the definition of “release” to address the provision of access information to an unauthorized foreign person.

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On January 13, 2020, the U.S. Department of the Treasury issued two final rules for the Committee on Foreign Investment in the United States (CFIUS) implementing the Foreign Investment Risk Review Modernization Act (FIRRMA), which was enacted on August 13, 2018. The final rules largely adopt the proposed rules published on September 17, 2019, with several key clarifications and modifications. As discussed previously, FIRRMA has resulted in two separate rulemakings that expand CFIUS’ jurisdiction to include (i) certain non-controlling investments in U.S. businesses engaged in critical technology, critical infrastructure, and sensitive personal data, and (ii) certain real estate transactions. The final rules will be published in the Federal Register on January 17, 2020 and will go into effect February 13, 2020 (Effective Date), with one exception described below. We anticipate that the Treasury Department will publish a separate rule concerning filing fees soon.

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On December 31, 2019, the U.S. District Court for the Northern District of Texas overturned a $2 million fine imposed by the Department of the Treasury’s Office of Foreign Assets Control (OFAC) against ExxonMobil Corp., and its U.S. subsidiaries ExxonMobil Development Company and ExxonMobil Oil Corp. (collectively, “Exxon”). This marked a rare court decision overturning an OFAC sanctions penalty. The Court’s decision focused not on the subject of the sanctions but addressed whether OFAC had provided proper notice of its sanctions requirements.

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Companies anxiously awaiting the release of “emerging technology” export control rules now have an initial interim rule indicating how the Department of Commerce Bureau of Industry and Security (BIS) is likely to proceed. Specifically, the interim rule related to software for training AI appears to be a narrowly tailored rule covering a specific type of AI software related to specific national security concerns involving geospatial imagery. While there are some questions on the scope of what is covered by “geospatial imagery,” comments on the rule due on March 6 will allow industry to provide input and hopefully obtain formal clarification once the final rule is issued. Additionally, the interim rule highlights that the new “emerging technology” rules will not be a “one and done” but rather a rolling series of rules on specific technologies warranting control.

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fDiOn a recent episode of The fDi Podcast, titled “Hunting for String in the Labyrinth. How Can Investors Safely Navigate Current Sanctions Regime?”, Pillsbury Public Policy partner Matt Oresman joined host Jacopo Dettoni to discuss the current U.S. sanctions landscape and identify some of the important factors businesses must consider to navigate them safely.