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Sylwia Lis (US)

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Treasury Issues Proposed Regulations Implementing FIRRMA

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On September 17, 2019, the Department of Treasury (“Treasury”) released for public comment two proposed rules (the “Proposed Rules”) implementing the Foreign Investment Risk Review Modernization Act (“FIRRMA”) enacted in August 2018.  FIRRMA expanded the jurisdiction of the Committee on Foreign Investment in the United States (“CFIUS”) and granted CFIUS new tools to regulate foreign investments raising national security concerns.  Our previous analysis of FIRRMA is available here, and our analysis of the “critical technologies” pilot program under FIRRMA implemented by interim regulations issued by Treasury on October 10, 2018, (the “Pilot Program”) is available here.

Treasury will accept comments on the Proposed Rules until October 17, 2019, and the final regulations are to become effective no later than February 13, 2020.  Companies that may be affected by the Proposed Rules are encouraged to comment.  The full text of the Proposed Rules on investments by foreign persons in US businesses can be found here and on real estate transactions here.  We would be pleased to assist our clients with the submission of comments.

Key Changes

US Government Designates Additional Huawei Entities to the Entity List and Extends and Modifies Huawei Temporary General License

By , , and 5 Mins Read

Effective August 19, 2019, the US Commerce Department’s Bureau of Industry and Security (“BIS”) (i) added forty-six (46) additional non-US affiliates of Chinese-headquartered Huawei Technologies Co. Ltd. (“Huawei”) to the Entity List, and (ii) extended and modified the Temporary General License (“TGL”) authorizing certain transactions involving the export, reexport, and transfer of items subject to the Export Administration Regulations (“EAR”) to Huawei and its designated non-US affiliates. The extended and modified TGL (“New TGL”) covers the Huawei entities added to the Entity List on May 16, 2019, as well as the ones added on August 19, 2019. The New TGL will be effective through November 18, 2019. As further discussed below, the New TGL (i) mitigates the impact of the Entity List designation by waiving the Entity List restrictions for certain transactions, and (ii) imposes strenuous certification requirements for the use of the New TGL. Please see our blog post on the initial designation of Huawei and its non-US affiliates here and the original TGL here.

OFAC Amends Procedures and Requirements for Reports and License Applications Related to Blocked Property, Unblocked Property, and Rejected Transactions

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The US Treasury Department’s Office of Foreign Assets Control (“OFAC”) issued an interim final rule effective June 21, 2019 amending the Reporting, Procedures and Penalties Regulations, 31 CFR Part 501 (the “RPPR Rule”), to add new requirements for reporting blocked or unblocked property and rejected transactions. The new reporting requirements apply to any US person (or person subject to US jurisdiction). Importantly, the rejected transaction reporting requirements, which previously applied to funds transfers rejected by financial institutions, now apply in the context of potentially any business transaction. This change could have significant implications for some companies in terms of compliance responsibilities and the need for related internal controls. The RPPR Rule does not provide much detail on the circumstances that would trigger the new reporting requirements in the context of the enumerated categories of transactions.

OFAC also added certain informational requirements for reports to clarify upfront the details needed to fully identify blocked or unblocked property and rejected transactions, and determine the authority under which they were blocked/unblocked/rejected. In announcing the RPPR Rule, OFAC indicated that in the past, these clarifications could sometimes require multiple time-consuming communications between OFAC and the submitter.

US Government Imposes Comprehensive Restrictions on Exports/Reexports to Huawei and its Affiliates and Issues Executive Order to Secure Information and Communications Technology and Services in the United States

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The US Government has taken coordinated actions this week that target Huawei Technologies Co. Ltd (“Huawei”), effectively cutting it off from sourcing US products and technology and likely barring its products from being used in US communications infrastructure and networks. The US export/reexport restrictions targeting Huawei took effect immediately on May 16, 2019. The expected prohibition on the use of Huawei products in US communications infrastructure is likely to take several months to implement.

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