On June 3, 2021, President Biden issued Executive Order 14032, “Addressing the Threat from Securities Investments that Finance Certain Companies of the People’s Republic of China” (EO). The EO supersedes the executive orders targeting “Communist Chinese Military Companies” that the Trump administration issued. Specifically, it revises Sections 1 through 5 of Executive Order 13959, as amended, and revokes Executive Order 13974. The impact of the EO is to expand the restrictions on investments in Chinese defense and surveillance technology firms by adding 59 Chinese companies to the Non-SDN Chinese Military-Industrial Complex Companies List (NS-CMIC List). It also changes the date by which divestment must be made to June 3, 2022 at the earliest. Note: The previous annex listing Communist Chinese Military Companies has been replaced and superseded in its entirety by the Annex to the June 3, 2021 order.
Effective at 12:01 a.m. eastern daylight time (EDT) on August 2, 2021, the EO prohibits U.S. persons from engaging in the purchase or sale of any publicly traded securities of any persons listed in the Annex of the EO or the NS-CMIC List, or any persons added in the future. However, under the EO, companies may divest themselves from holdings in NS-CMIC entities listed in the EO before 12:01 a.m. EDT on June 3, 2022. Companies will be granted a one-year divestment period for all entities added to the NS-CMIC list in the future.
The EO clarifies that the Treasury Department has final authority in determining which companies are added. Unlike the previous Trump-era executive orders, the designation criteria in this EO have extended to companies that are deemed (1) to operate or have operated in the defense and related materiel sector or the surveillance technology sector of the economy of the PRC, or (2) to own or control, or to be owned or controlled by, directly or indirectly, parties operating in these sectors, and/or designated pursuant to this EO.
Moreover, the EO expands the U.S. government’s ability to “address the threat of Chinese surveillance technology firms that contribute – both inside and outside China – to the surveillance of religious or ethnic minorities or otherwise facilitate repression and serious human rights abuses.”