On February 16, 2022, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) published in the Federal Register a final rule adding formal regulations to implement previously announced sanctions regarding Chinese Military-Industrial Complex companies. These formal regulations are the result of a November 12, 2020, Executive Order (EO) 13959 issued by former President Donald Trump which banned U.S. persons from transacting in publicly traded securities or derivatives or similar securities of any Chinese companies designated by the U.S. government as enabling Chinese military aims. See Update of November 24, 2020. On June 3, 2021, President Joseph Biden issued EO 14032 amending (and in part superseding) the November 2020 EO and expanding the restrictions on investments in Chinese defense and surveillance technology firms.
Currently effective EO 14032 prohibited, as of August 2, 2021, 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, there is essentially a “wind-down” period allowing divestment from holdings in NS-CMIC entities listed in the EO before 12:01 a.m. EDT on June 3, 2022. The EO also granted U.S. persons a one-year divestment period for securities of all Chinese entities added to the NS-CMIC list in the future. See Update of June 9, 2021.
OFAC has issued the Chinese Military-Industrial Complex Sanctions Regulations, 31 C.F.R. part 586, to implement EO 13959, as amended by EO 14032. OFAC notes that these regulations are being published in abbreviated form at this time for the purpose of providing guidance to the public and that a more comprehensive set of regulations will supplement part 586 in the future, which may include additional interpretive guidance and definitions, general licenses, and other regulatory provisions.