The Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a final rule on Updating Provisions Related to Blocking and Other Actions Related to Specific Property or Interests in Property. The rule is effective as of September 17, 2024.

The new rule aims to clarify OFAC’s process for issuing orders that block or identify specific blocked property or interests in property. It updates 35 parts of 31 CFR chapter V to improve regulations regarding these actions. This comprehensive update is designed to provide clearer guidance on how OFAC exercises its authority under various statutes, including the International Emergency Economic Powers Act (IEEPA).

Three Forms of Actions

The final rule identifies three primary forms of actions OFAC may take with respect to specific property or interests in property:

  • Identifying Blocked Property: OFAC may identify specific property or interests in property as blocked due to an interest of an already blocked person. This is particularly useful in cases where such interests may not be apparent to the public.
  • Blocking Pending Investigation: OFAC may block specific property or interests in property of a person who is not yet designated but is under investigation for potential designation. This measure ensures that the property is not transferred before a final decision is made.
  • Non-Full Blocking Sanctions: In certain cases, OFAC may impose prohibitions that are less than full blocking sanctions. In such cases, OFAC would determine that a person meets the criteria for designation but would take action less than blocking the entirety of a person’s property and interests in property.

Notice and Communication

The rule outlines various forms of notice that OFAC may use to inform affected parties about its actions:

  • Federal Register: For designation actions, OFAC will publish notices in the Federal Register, providing constructive notice to the public.
  • Direct Written Notice: For more tailored actions, when OFAC takes more tailored action with respect to specific property or interests in property, OFAC may provide actual notice directly to affected persons or indirectly through financial institutions or other intermediaries.
  • Transaction Intermediaries: Financial institutions or other intermediaries may be required to notify affected persons with whom they maintain direct commercial relationships.

The rule also updates the note in the subject parts that explains the procedures for seeking release of blocked property or administrative reconsideration of OFAC actions to add information about additional unblocking procedures available to blocked or otherwise affected persons. These procedures are detailed in Subpart E of part 501 of 31 CFR chapter V.

All U.S. persons and persons otherwise subject to U.S. jurisdiction, not only U.S. financial institutions, holding property blocked pursuant to various Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctions programs must file their Annual Report of Blocked Property (ARBP) by September 30, 2024.

This report is pursuant to 31 C.F.R. §§ 501.603 of the Reporting, Procedures and Penalties Regulations (RPPR). This report must include all blocked property held as of June 30, 2024, and must be filed by September 30, 2024. Persons filing the 2024 report are required to utilize spreadsheet form TD-F 90-22.50. Completed forms should be filed through the OFAC Reporting System (ORS).

Failure to submit a required ARBP by September 30 constitutes a violation of the RPPR.

What Is Blocked Property?

All property and interests in property of any person designated by the Office of Foreign Assets Control (OFAC) to the Specially Designated Nationals and Blocked Entities List (SDN) or any person owned 50% or greater by an SDN entity that is in the United States, comes within the United States or comes within the possession and control of U.S. persons is blocked. Property of persons subject to certain other sanctions may also be blocked under the terms of the sanctions. U.S. persons are prohibited from directly or indirectly dealing in or with blocked property. Blocked property and interests in property is defined broadly to include not only tangible and intangible property but also accounts payable, invoices, contracts and other intangible items in which a blocked person holds an interest.

What Does Not Have to Be Reported?

OFAC notes that the following property should not be reported:

  • Property that has been unblocked by general or specific OFAC license is not blocked property.
  • Property that has been unblocked because the blocked person originally associated with the property was no longer blocked before July 1, 2023.
  • Property that has been unblocked as a result of an OFAC sanctions program being terminated (e.g., 31 C.F.R. part 543 (Côte d’Ivoire)) and is not currently blocked under any active sanctions program administered by OFAC.
  • Restricted “Iranian accounts,” as defined in OFAC’s regulations, should not be reported to OFAC on the annual report unless they are otherwise blocked.

For additional information on preparing this annual report, see OFAC’s Guidance on Filing the ARBP.

On September 13, 2024, the Office of the U.S. Trade Representative (USTR) announced in a Federal Register notice the final modifications to its tariff actions in the Section 301 investigation of the China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation after concluding a statutorily mandated four-year review. (For additional information on the USTR’s Four-Year Review Report, see Thompson Hine Update of May 15, 2024.) The modifications largely followed those proposed in May 2024. (For details on the USTR’s original proposed modifications, see Update of May 28, 2024.) In modifying these tariffs, President Joseph Biden directed the USTR to increase tariffs on imports from China in the following sectors: (i) steel and aluminum, (ii) semiconductors, (iii) electric vehicles, (iv) batteries, battery components, and critical minerals, (v) solar cells, (vi) ship-to-shore cranes, and (vii) medical products. The updates include: (i) new timing and rates for tariffs on face masks, medical gloves, needles, and syringes; (ii) an exclusion for enteral syringes; (iii) a proposal regarding coverage of additional tungsten, wafers, and polysilicon tariff lines; (iv) an exclusion for ship-to-shore cranes ordered prior to May 14, 2024; (v) an expansion of the scope of the machinery exclusions process to include five additional tariff lines; and (vi) modification of the coverage of proposed exclusions for solar manufacturing equipment.

Both the original May 2024 modification proposal and the September 13, 2024 notice include an Annex of 14 product groups covering the 382 Harmonized Tariff Schedule of the United States (HTSUS) subheadings and five statistical reporting numbers of the HTSUS affected by the modified China Section 301 tariffs, their tariff rate increases, and their implementation dates. For those with increases in 2024, the duty rate will apply to products entered for consumption, or withdrawn from warehouse for consumption, on or after September 27, 2024. Tariff increases identified for 2025 and 2026 will apply to products entered for consumption, or withdrawn from warehouse for consumption, on or after January 1 of the corresponding year. The new tariff levels and dates of entry into force by product categories are summarized below:

Product CategoryTariffEntry Into Force
Steel and aluminum products25%2024
Semiconductors50%2025
Electric Buses (vehicles designed to transport more than 10 persons)100%2024
Hybrid and Electric Passenger Vehicles100%2024
Battery Parts (non-lithium-ion batteries)25%2024
Lithium-ion electrical vehicle batteries25%2024
Lithium-ion Non-electrical Vehicle Batteries25%2026
Natural graphite25%2026
Other Critical Minerals25%2024
Permanent Magnets25%2026
Solar cells (whether or not assembled into modules)50%2024
Ship to shore cranes25%2024
Facemasks25%2024
50%2026
Medical Gloves50%2025
100%2026
Syringes and needles100%2024

Upon identifying additional product groups for these China Section 301 tariffs, President Biden directed the USTR to establish a product exclusion process for machinery used in domestic manufacturing and to prioritize exclusions for certain solar manufacturing equipment. In the USTR’s September 13, 2024 press release announcing its final actions on China Section 301 tariffs, the agency noted that an exclusion process will be launched “soon” and that it will also be accepting public comments soon for proposed modifications of tariff rates on certain tungsten, wafers, and polysilicon tariff lines.

On August 20, 2024, the State Department published an Interim Final Rule in the Federal Register amending the International Traffic in Arms Regulations (ITAR) to add a license exemption regime for exports, reexports, transfers, and temporary imports of defense articles and defense services to and between Australia and the United Kingdom. The Interim Final Rule largely adheres to the Department’s May 1, 2024 Proposed Rule to ease ITAR license restrictions imposed on such transactions to and between the two countries, thus entrenching the objective of closer defense trading per the trilateral security partnership known as AUKUS, which was established in 2021 (see Update of May 2, 2024). The Interim Final Rule went into effect September 1, 2024.

Scope of the Interim Final Rule

Like the earlier Proposed Rule, the Interim Final Rule adds a new section to ITAR, § 126.7, which states: “No license or other approval is required for the export, reexport, retransfer, or temporary import of defense articles, the performance of defense services, or engaging in brokering activities” to and between Australia and the United Kingdom subject to certain restrictions and conditions. For example, as initially envisioned by the Proposed Rule, § 126.7 still requires that such activities “be [directed] to or within the physical territory of Australia, the United Kingdom, or the United States.” Additionally, the exporter/transferor and recipient must be “authorized users,” meaning a U.S. person registered with the Department’s Directorate of Defense Trade Controls (DDTC) and not debarred, or an Australian or United Kingdom person approved by DDTC and so “identified through the DDTC website.” As noted in a Department press release, therefore, the Interim Final Rule, like the Proposed Rule, will ensure “[t]he vast majority of defense articles and defense serviced described [i]n the [ITAR] are eligible…via the § 126.7 exemption.”

Still, the Interim Final Rule introduces a few minor changes from the Proposed Rule. The Interim Final Rule most notably removes certain items previously listed in the new Excluded Technology List (Supplement No. 2 to Part 126 of the ITAR) that renders certain defense articles and defense services ineligible for the special treatment conferred by § 126.7.

Public Comment

Although the Interim Final Rule went into effect September 1, 2024, the State Department seeks public comments to further clarify and refine the ITAR exemption for AUKUS. Comments must be received by DDTC no later than November 18, 2024, and should be filed using the federal rulemaking portal (www.regulations.gov) under Docket DOS-2024-0024. Alternatively, comments can be sent to the State Department via email to DDTCPublicComments@state.gov with the subject line: “Australia, the United Kingdom, and the United States ITAR Exemption.”

On September 11, 2024, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) published an Interim Final Rule to amend its Reporting, Procedures and Penalties Regulations under 31 C.F.R. Part 501, which extends recordkeeping requirements for certain transactions from 5 years to 10 years.  This Interim Final Rule takes effect on March 12, 2025.

OFAC’s recordkeeping amendment aligns with the extension of the statute of limitations for violations of certain sanctions administered by OFAC that were implemented on April 24, 2024, when President Joseph Biden signed into law the 21st Century Peace through Strength Act (Public Law No. 118-50).  A section of this law extended from 5 years to 10 years the statute of limitations for civil and criminal violations under the International Emergency Economic Powers Act, 50 U.S.C. 1701 et seq. (IEEPA) and the Trading with the Enemy Act, 50 U.S.C. 4301 et seq. (TWEA).  See Thompson Hine’s Legal Update of May 8, 2024 for additional background.  Notably, that expanded 10-year statute of limitations provision applies to any violation that was not time-barred at the time of its enactment, meaning OFAC may now commence an enforcement action for any transaction completed subject to IEEPA or TWEA if the transaction occurred after April 24, 2019.

Because the recordkeeping amendment is an Interim Final Rule, OFAC is accepting public comment on the provisional change.  Interested parties may file written comments (i) via the Federal eRulemaking Portal at www.regulations.gov under Docket No. OFAC-2024-0004; or (ii) via mail to: Office of Foreign Assets Control, U.S. Department of the Treasury, Treasury Annex/Freedman’s Bank Building, 1500 Pennsylvania Avenue NW, Washington, DC 20220, and referencing the above docket number.  Any comments must be filed no later than October 15, 2024.

On September 5, 2024, the Department of Labor (DOL) released a revised version of its List of Goods Produced by Child Labor or Forced Labor. This 2024 report identifies the types of goods, the industries involved and the countries that the DOL has reason to believe are produced by child labor or forced labor in violation of international standards. The report is intended to assist foreign governments in developing effective policy responses, and to support U.S. businesses’ due diligence and risk management efforts in their supply chains. 

The 2024 report includes 204 goods from 82 countries identified as likely produced by child labor or forced labor. This revised edition includes 72 new additions, including a “record” of 37 goods not previously included on the list. The report also includes several studies “tracing goods tainted with forced or child labor through complex global supply chains” and adds to the list 43 goods made with inputs that are produced with child labor or forced labor. DOL highlights that these goods include “cotton textile products from China and Vietnam produced with Chinese cotton, food and beverage products linked to child labor in cocoa industries in Ghana and Côte d’Ivoire and sugar products tied to forced labor in the sugarcane industry in the Dominican Republic.” 

This edition of the report removes four items—blueberries from Argentina, salt from Cambodia, shrimp from Thailand, and fluorspar from Mongolia—as the DOL has determined that “child labor in these sectors and countries has been reduced to no more than isolated incidents.” As noted, however, 37 new goods have been added that have not been previously identified as having labor exploitation—including jujubes, lead, nickel, polyvinyl chloride, and squid—and identifies four new countries of concern: Belarus, the Netherlands, Mauritius, and South Korea. The DOL notes that the 2024 update “reveals the unsettling geographic span of labor exploitation, highlighting new additions from every region in the world, including 21 from African countries, 10 from the Western Hemisphere, and 8 from Europe.” Asia, particularly China, continues to have the most goods on the list.

In light of the fact that the Department of Homeland Security and U.S. Customs and Border Protection (CBP) are now fully enforcing the Uyghur Forced Labor Prevention Act (UFLPA) and detaining an increasing number of goods upon importation into the United States for review and possible enforcement actions, DOL’s 2024 report is a significant resource that U.S. importers should be referencing for conducting diligence into their suppliers and supply chains.

On September 4, 2024, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a revised Russia General License (GL) 25E that continues to authorize all transactions ordinarily incident and necessary to the receipt or transmission of telecommunications involving the Russian Federation. This continues to allow for services incident to the exchange of communications over the internet, such as instant messaging, chat and email, social networking, sharing of photos and movies, web browsing, blogging, social media platforms, collaboration platforms, video conferencing, e-gaming, e-learning platforms, automated translation, web maps, user authentication services, web hosting, and domain name registration services. 

The GL also allows for the export or reexport of software, hardware, or technology incident to the exchange of communications over the internet so long as it is licensed or otherwise authorized by the Department of Commerce under the Export Administration Regulations. However, certain dealings – including transactions involving significant Russian telecommunications companies that have been designated by OFAC and placed on the Specially Designated Nationals and Blocked Persons List – continue to remain unauthorized under this GL and therefore require close analysis. OFAC has amended Russia-related Frequently Asked Question 1040 addressing this GL as well.

Additionally, OFAC has published an alert, “Russian Attempts to Evade Sanctions Using New Overseas Branches and Subsidiaries,” to warn foreign jurisdictions and financial institutions about Russia’s attempts to evade sanctions by opening new overseas branches and subsidiaries of Russian financial institutions. The alert notes that “efforts to open new branches or subsidiaries of Russia financial institutions should be viewed as a red flag for attempted Russian sanctions evasion.” As such, foreign regulators and financial institutions are cautioned that “deal[ing] with such branches or subsidiaries — including activities such as maintaining accounts, transferring funds, or providing other financial services such as payment processing, trade finance, and insurance — should be aware of the significant sanctions risks associated with facilitating Russia’s efforts to evade sanctions.”

On August 30, 2024, the Office of the United States Trade Representative (USTR) issued a press release stating that the agency “intends” to publicize tariff increases on certain products subject to the China section 301 investigation “in the coming days.” The press release addresses the second self-imposed deadline missed by the USTR; initially, the agency announced that the tariff increases would take effect August 1, 2024, but a July 30, 2024 press release announced that the modifications would not be publicized until later “in August 2024” and would still require “approximately two weeks” thereafter to take effect (see Update of July 31, 2024).

On March 1, 2024, the Department of Commerce’s Bureau of Industry and Security (BIS) issued an Advanced Notice of Proposed Rulemaking (ANPRM) to explore national security risks posed by connected vehicles (CVs) that incorporate Information and Communications Technology and Services (ICTS) from “foreign adversaries,” including China and the Hong Kong Special Administrative Region. The initiative was driven by concerns that such vehicles could be used to collect sensitive data on U.S. citizens and infrastructure or be remotely accessed or disabled, posing risks to national security and personal privacy. According to recent media reports, BIS is expected to propose rules soon that will bar vehicles with Chinese-developed software in vehicles with Level 3 automation or above.

In the ANPRM, BIS inquired into various topics, including:

  • The definition of CVs within the context of transactions involving ICTS incorporated into such vehicles. BIS proposed the following initial definition for such CVs: “an automotive vehicle that integrates onboard networked hardware with automotive software systems to communicate via dedicated short-range communication, cellular telecommunications connectivity, satellite communication, or other wireless spectrum connectivity with any other network or device.” This definition would likely include automotive vehicles, whether personal or commercial, capable of global navigation satellite system (GNSS) communication for geolocation; communication with intelligent transportation systems; remote access or control; wireless software or firmware updates; or on-device roadside assistance.
  • Information on the role that foreign adversaries play in the supply chain for CVs and the leverage these entities could exert as a result;
  • Details of the ICST supply chain in the United States, including categories of ICST software and hardware that are integral to CVs and market leaders within each distinct phase of the supply chain;
  • Full scope of data collection capabilities in CVs and the scale of data that CVs could collect on U.S. persons, entities, geography, and infrastructure;
  • Any cybersecurity concerns that may arise from linkages between sensors in CVs and the best practices/industry norms on cybersecurity standards relating to ICTS CVs;
  • The review criteria and standards that BIS should consider in granting temporary authorizations to otherwise prohibited transactions under a proposed rule; and
  • The economic impact of the proposed rule on U.S. businesses.

The deadline for public comments was April 30, 2024. In response, BIS received more than 50 comments from various automakers and trade groups urging BIS to tailor the restrictions narrowly and allow for a phase-in. One of the common themes raised by the commenters was that BIS should focus its restrictive efforts on the technology and services that may pose a national security risk on CVs, rather than the individual components, such as cameras, LIDARs, and radar sensors, that do not have any connectivity capabilities. If BIS proceeds with an overly broad restriction on any hardware and software component in CVs, the commenters warned, it could make it exceedingly difficult for automakers to comply with the rules and, in turn, hike the cost of cars. Additionally, a trade group argued for exclusionary tariffs on all Chinese vehicles, wherever they were made. The group asked BIS to establish safeguard measures against China’s automotive sectors to prevent Chinese companies from obtaining USMCA benefits and to place a greater emphasis in UFLPA enforcement on Chinese auto parts, batteries, and raw materials used in electric vehicles.

On August 26, 2024, the Department of Finance Canada announced the country would introduce a 100% tariff on Chinese-made electric vehicles (EVs) and a 25% tariff on certain Chinese steel and aluminum products. The press release, citing “unfair, non-market policies and practices” by China coupled with a “lack of rigorous labour and environmental standards,” thus aligns with President Joe Biden’s May 2024 announcement proclaiming the United States—through an investigation pursuant to Section 301 of the Trade Act of 1974—would raise its tariff rates on Chinese EVs to 100% and on certain Chinese steel and aluminum products to 25% (see Bulletin of May 15, 2024). The Canadian tariffs on EVs will be imposed in addition to the 6.1% Most Favored Nation rate currently applied to EVs produced in China and will take effect October 1, 2024. The list of Chinese steel and aluminum products to be subject to the 25% tariff will be finalized on the same day—October 1, 2024—but will not experience the rate increase until October 15, 2024.

The press release confirms the tariff increases stemmed from recent discussions with “Canada’s international partners,” including fellow G7 members. However, the Canadian—and, for that matter, U.S.—measures still differ from recent tariffs levied by the European Union, which announced a 37.6% countervailing duty rate against Chinese EVs on July 4, 2024.

The press release adds that Canada will reassess the effectiveness of the tariffs in a year’s time. Meanwhile, “in the coming days,” Canada will launch a 30-day consultation period to gauge whether the country should modify its tariff rates on Chinese “batteries and battery parts, semiconductors, solar products, and critical minerals” as well.