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U.S. Amends the Chinese Military Companies Sanctions Program

June 4, 2021

On June 3, 2021, President Biden issued a new Executive Order amending the U.S.’s Chinese Military Companies Sanctions program. The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) also issued extensive guidance, and a new consolidated list of entities that are subject to the restrictions contained in the new E.O. The new list is now referred to as the “Non-SDN Chinese Military-Industrial Complex Companies List” (hereinafter the “NS-CMIC List”), which replaces the prior Non-SDN Communist Chinese Military Companies List. The NS-CMIC List can be found here, as well as in the Annex to the new E.O.

The new E.O. amends and replaces E.O. 13959 (which had previously been amended by E.O. 13974), and provides that U.S. persons are prohibited from purchasing or selling “any publicly traded securities, or any publicly traded securities that are derivative of such securities or are designed to provide investment exposure to such securities” of any person listed in the Annex to the E.O. Additionally, the transaction restrictions can also apply to any person determined by the Secretary of the Treasury to either: (i) “operate or have operated” in the defense and related material sector, or the surveillance technology sector, of the People’s Republic of China (PRC) economy; or (ii) to “own or control, or to be owned or controlled by,” directly or indirectly, a person who operates or has operated in any sector described in (i), among other reasons.

For entities that are currently listed on the new NS-CMIC List, the prohibitions detailed above go into effect at 12:01 a.m. EST on August 2, 2021. After that date, U.S. persons are permitted to purchase or sell the above-mentioned securities solely for the purpose of effectuating divestment, in whole or in part, through 12:01 a.m. EST on June 3, 2022 for the entities listed in the Annex to the new E.O. For entities that are subsequently added to the NS-CMIC List, U.S. persons will have 365 days after that determination date to divest.

Further, for entities that are subsequently added to the NS-CMIC List, the E.O.’s transaction restrictions go into effect at 12:01 a.m. EST on the date that is 60 days after that determination.

In short, the U.S. has amended and largely replaced its Chinese Military Companies Sanctions program, and issued extensive new guidance, which we are continuing to analyze. If you have any questions regarding these new sanctions, or U.S. sanctions in general, please contact Bruce Paulsen (212-574-1533) or Andrew Jacobson (212-574-1477) in Seward & Kissel’s Sanctions Practice Group.


The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm or its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.


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