On 28 October 2022, the US Commerce Department’s Bureau of Industry and Security issued a first round of FAQs regarding the advanced computing and semiconductor manufacturing Interim Final Rule, published on 13 October 2022 (87 Fed. Reg. 62,186) and amending the Export Administration Regulations. The FAQs clarify that that the new restrictions on exports and reexports to China also apply to Hong Kong.
As an unfortunate consequence of the deterioration of the US-China relationship, more and more Chinese companies are divesting and exiting their US-based operations. In order to execute a smooth exit from US operations, Chinese companies should retain a good US financial adviser. Careful consideration should also be given to how the asset is packaged, preparing stand-alone audited financial statements, and optimizing the business for post-closing operations. Chinese companies should be prepared to use US law and engage in longer negotiations as a result. CFIUS-related requirements and risks should be understood during the early stages of the deal.
On 20 October 2022, the US Treasury Department released the first Committee on Foreign Investment in the United States Enforcement and Penalty Guidelines. The Guidelines provide visibility into factors CFIUS considers when assessing violations of CFIUS laws and regulations, and determining potential penalties. The Guidelines are applied by the Monitoring and Enforcement office, which is part of the US Treasury Department’s Office of Investment Security.
After the introduction of the UK Modern Slavery Act, the French Duty of Vigilance Law, Germany also followed by adopting the Act on Corporate Due Diligence Obligations in Supply Chains (Lieferkettensorgfaltspflichtengesetz or “LkSG”). The LkSG lays down extensive obligations for companies with regard to their own business area, but also their direct and indirect suppliers. Many of the necessary measures require preparation. Therefore, companies should finalize their preparation in the coming weeks as the LkSG enters into force in 2023.
Effective 28 October 2022, Canada implemented additional sanctions against Iran due to its “ongoing gross and systematic human rights violations and continued actions to destabilize regional peace and security.” An additional four individuals and two entities have been listed under Schedule 1 of the Special Economic Measures (Iran) Regulations.