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US Sanctions against China

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In the past week, the US Government took several significant steps related to the US sanctions against Russia.  These included imposing sanctions pursuant to Section 231 of the Countering America’s Adversaries Through Sanctions Act (“CAATSA”) for the first time and expanding the list of persons and entities identified as being part of the Russian defense or intelligence sectors under CAATSA Section 231.  The US Government also clarified the scope of a sanctions waiver impacting foreign subsidiaries in Russia under the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (the “CBW Act”).  Finally, the US Government extended the expiration dates for several general licenses related to United Company RUSAL PLC (“RUSAL”) and EN+ Group PLC (“EN+ Group”).

On July 13, 2018, the US Department of Commerce’s Bureau of Industry and Security (“BIS”) issued an order (“Termination Order”) immediately terminating the denial order issued on April 15, 2018 against Zhongxing Telecommunications Equipment Corporation (“ZTE Corporation”) and ZTE Kangxun Telecommunications Ltd. (“ZTE Kangxun” and, collectively, “ZTE”) that had prohibited dealings with ZTE involving items subject to US jurisdiction.  ZTE has been removed from the Denied Persons List, and exporters and reexporters are no longer generally prohibited from supplying to ZTE items subject to US jurisdiction, including parts and components, or servicing such items for ZTE.

On July 2, 2018 the US Department of Commerce’s Bureau of Industry and Security (“BIS”) issued a temporary authorization permitting certain limited transactions with Zhongxing Telecommunications Equipment Corporation (“ZTE Corporation”) and ZTE Kangxun Telecommunications Ltd. (“ZTE Kangxun” and, collectively with ZTE Corporation, “ZTE”) that would otherwise be prohibited under the denial order BIS activated against ZTE on April 15, 2018. The license grants authorization to all persons, aside from those located in Cuba, Iran, North Korea, Sudan and Syria, to resume certain technical support activities with ZTE from July 2 to August 1, 2018.

On June 7, 2018, the US Department of Commerce announced that Zhongxing Telecommunications Equipment Corporation (“ZTE Corporation”) and ZTE Kangxun Telecommunications Ltd. (“ZTE Kangxun” and, collectively with ZTE Corporation, “ZTE”) had agreed to additional penalties and compliance measures to secure their removal from the Bureau of Industry and Security (“BIS”) Denied Persons List and regain access to US products and components. The new agreement imposes significant additional fines on ZTE, requires the company to carry out management changes, and institutes strict compliance requirements. Importantly, ZTE has not yet been removed from the Denied Persons List and remains subject to the existing restrictions until certain steps are taken. Nevertheless, the agreement sets out a path forward for ZTE to soon resume operations that had otherwise stalled due to the lack of access to US items.