Law360, February 17, 2023
Blank Rome’s Government Contracts group was recently named a 2022 Practice Group of the Year by Law360, which honors “the attorney teams behind litigation wins and major deals that resonated throughout the legal industry this past year.” Blank Rome is one of five firms recognized in the Government Contracts practice group category nationwide.
Read the group’s full Practice Group of the Year profile, as published in Law360, on our website.
On February 24, 2023, the Biden Administration issued a package of sanctions, export controls, and tariffs against Russia, an action timed to coincide with the one-year anniversary of Russia’s invasion of Ukraine. The U.S. measures, which also target Belarus and Iran in certain respects, were implemented in concert with related UK and EU actions.
Sanctions
The U.S. Department of the Treasury, Office of Foreign Assets Control (“OFAC”) designated 22 individuals and 83 entities for asset freeze sanctions, and issued a determination that the Russian metals and mining sector is subject to sanctions under Executive Order 14024. As a result, U.S. persons are prohibited from engaging in transactions and dealings with the 105 newly sanctioned parties and are required to freeze their assets. Furthermore, individuals and entities that OFAC determines are “operating” in the Russian metals and mining sector are subject to potential designation for asset freeze sanctions.
Moreover, OFAC issued FAQ guidance indicating that U.S. persons seeking to divest from Russian investments may need a license from OFAC before paying any recently required “exit tax” to the Russian government under Russian law, potentially complicating divestment efforts.
Continue reading “Executive Briefing: U.S. Government Imposes New Round of Sanctions on Russia”Corporate Counsel, February 14, 2023
Anthony Rapa and Justin A. Chiarodo ●
Last year marked an inflection point in the geopolitics of the 21st century, with the Biden administration declaring the post-Cold War era “definitively over” against the backdrop of Russia’s invasion of Ukraine and the U.S.-China strategic competition. That dynamic drove a range of national security and economic statecraft policies in 2022—notably including broad sanctions against Russia and semiconductor export controls regarding China—that will create heightened legal and business risks for companies with international supply and distribution chains. These risks will be particularly acute for companies and investors operating in highly regulated industries, including aerospace, defense, manufacturing, technology, and financial services. We highlight below five key geopolitical and international trade issues to watch in 2023.
1. Trade war becomes tech war.
The U.S. strategic competition with China will continue in 2023 and beyond, with a continued focus on limiting the flow of advanced and emerging technologies. U.S. authorities are expected to build on key China-related measures implemented in 2022, which included sweeping semiconductor export controls, designations of Chinese companies on restricted lists, and FCC equipment bans.
Perhaps counterintuitively, total U.S.-China trade in 2022 reportedly was at or around an all-time high, and the Biden administration has stated that “[w]e do not seek conflict or a new Cold War.” U.S. Secretary of State Antony Blinken’s planned visit to China in 2023, postponed after the U.S. shot down a Chinese high-altitude balloon drifting through U.S. airspace, had been intended to build on dialogue between President Biden and Chinese president Xi Jinping on the sidelines of the G20 summit in Indonesia last November.
Key takeaway: Expect stronger enforcement measures to weigh on China trade for the foreseeable future. Companies should revisit the risk profile of their international supply chains—including whether any of their technology is subject to the new export controls or could be the subject of future controls—and consider enhancements in their supplier diligence and risk management practices.
Read more on our website.
Blank Rome partner Anthony Rapa will serve as a panelist at the International Trademark Association’s (“INTA”) 2022 Leadership Meeting, being held November 15 through 18, 2022, in Miami, Florida.
Anthony’s session, “Navigating the Maze of Embargoes and Sanctions,” will take place on Friday, November 18, from 11:30 a.m. to 12:30 p.m.
For more details, visit our website.
On October 20, 2022, the U.S. Department of the Treasury (“Treasury”), in its role as chair of the Committee on Foreign Investment in the United States (“CFIUS”), issued the first-ever CFIUS Enforcement and Penalty Guidelines (the “Guidelines”). The Guidelines apprise the public of CFIUS’s intention to penalize violations of the CFIUS regulations, emphasize the importance of voluntary self-disclosures of violations, and provide a basic overview of the penalty process.
As a threshold matter, it is important to clarify what constitutes a “violation” in the CFIUS context. The relevant regulations provide for CFIUS review of certain foreign investments in U.S. businesses and empower CFIUS to block or mitigate such investments on national security grounds. While CFIUS retains broad discretion to take such action in the context of transactions, “violations” punishable by monetary penalties only arise in specific circumstances.
Continue reading “New CFIUS Enforcement Guidelines: Executive Briefing“On October 7, 2022, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) issued sweeping new export controls under the Export Administration Regulations (“EAR”) aiming to cut off support for China’s advanced computing and supercomputing capabilities, with the new controls targeting specified chips, chipmaking equipment, and related services.
The BIS rule, which runs over 100 pages, is the most significant expansion of semiconductor-related export controls in recent memory, if not the history of the EAR, and marks a decisive inflection point in the U.S. strategic competition with China. Companies in the semiconductor industry should gauge their exposure to China-related risk, which could be present in oblique and non-obvious ways, and service providers to the industry should assess their risk exposure in light of the rule’s provisions regarding U.S. person “support” for restricted activities.
Continue reading “New Semiconductor Export Controls: Executive Briefing“Westlaw Today, October 7, 2022
Anthony Rapa and Matthew J. Thomas ●
On August 15, 2022, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) issued an interim final rule imposing new export controls relating to certain semiconductor technology.
Specifically, the rule establishes a requirement under the Export Administration Regulations (EAR) to obtain a license from BIS before exporting to certain destinations the following materials and technologies:
The control for the specified substrates is effective Aug. 15, 2022, while the control for the ECAD/GAAFET software is effective Oct. 14, 2022, with a comment period for industry that ran through Sept. 14, 2022.
The rulemaking follows public reports in July 2022 indicating that BIS had sent letters to chipmaking equipment manufacturers directing them not to export to China equipment capable of fabricating chips at 14 nanometers and below.
You can read more on our website.
New York Law Journal, September 22, 2022
Anthony Rapa and Justin A. Chiarodo ●
Supply chain security remains a key bipartisan policy goal and burgeoning compliance risk area. This article examines three recent initiatives that exemplify these trends: the regulations on securing the Information and Communications Technology and Services supply chain, the Uyghur Forced Labor Prevention Act, and the proposed National Critical Capabilities Defense Act.
Companies with cross-border supply chains should assess their exposure under these emerging regimes and prioritize their compliance efforts accordingly. The risk profile is greatest for companies developing technology and software across borders; companies importing items produced in (or incorporating components produced in) the Xinjiang region of China; parties seeking to invest in certain critical capabilities outside the United States; and government contractors that may be exposed to foreign adversaries in their supply chains.
Information and Communications Technology and Services Rules
One pillar of the U.S. government’s developing architecture for supply chain security is the U.S. Department of Commerce’s (Commerce’s) regulations on Securing the Information and Communications Technology and Services (ICTS) Supply Chain (ICTS Regulations), set out at 15 C.F.R. Part 7. Promulgated pursuant to Executive Order 13873, the rulemaking identifies the ICTS supply chain as critical to “nearly every aspect” of national security, acknowledging the degree to which American government, business, and the economy at large rely on ICTS. See Securing the Information and Communications Technology and Services Supply Chain, 86 Fed. Reg. 4909 (Jan. 19, 2021).
The ICTS Regulations empower Commerce to review, prohibit, or restrict specified “ICTS Transactions” that present national security risks. The term “ICTS Transactions” is defined broadly to include: “any acquisition, importation, transfer, installation, dealing in, or use of any information and communications technology or service, including ongoing activities, such as managed services, data transmission, software updates, repairs, or the platforming or data hosting of applications for consumer download.”
You can read more on our website.
C4ISRNET, September 1, 2022
Justin A. Chiarodo and Anthony Rapa ●
Building on recent national security initiatives to shore up the protection of U.S. critical assets from strategic adversaries (notably including China and Russia), Congress is considering new government powers to review outbound U.S. investments in certain high-technology sectors.
Inbound foreign investments in key sectors are reviewed by the Committee on Foreign Investment in the United States (CFIUS). However, screening of outbound investments – a so-called “reverse CFIUS” – would be new, and could significantly impact industries ranging from aerospace and defense to fintech to pharmaceuticals.
How did we get here?
The last several years have witnessed an accelerated national security pivot from the twenty-year global war on terror to strategic competition with major state adversaries. Unclassified assessments of the U.S. national security posture reveal significant threats in domains ranging from artificial intelligence to hypersonic weapons to energy, many of which have been exacerbated by the theft of U.S. technology. The legislation proposing a “reverse CFIUS” review would seek to counter these threats by adding new controls to the flow of U.S. capital and intellectual property abroad.
The contemplated regime formally originated with the proposed National Critical Capabilities Defense Act (NCCDA), which passed the House of Representatives in February 2022 as part of the America COMPETES Act of 2022, H.R. 4521, a larger package focused on U.S. domestic semiconductor production and other aspects of U.S. competitiveness (certain elements of which, not including the NCCDA, eventually were signed into law as part of the CHIPS and Science Act in August 2022). Most notably, the NCCDA would create a Committee on National Critical Capabilities (the “Committee”), with authority to review – and block – covered outbound foreign investments.
You can read more on our website.
Westlaw Today, August 9, 2022
A July 2022 report relayed the news that the U.S. Department of Commerce (Commerce) is investigating the installation of Huawei equipment into cell towers situated near U.S. military bases and missile silos, based on concerns the equipment could hoover up sensitive data and transmit it to China.
The report indicates that Commerce is carrying out the investigation pursuant to its rules implementing Executive Order (EO) 13873 on “Securing the Information and Communications Technology and Services Supply Chain” (the ICTS Rules).
What are the ICTS Rules, and how will they be enforced? The ICTS Rules empower Commerce to review — and as warranted, to mitigate, block, or unwind — dealings in information and communications technology and services (ICTS) that have a nexus with a designated “foreign adversary,” including China and Russia.
You can read more on our website.
