The State Department’s Directorate of Defense Trade Controls will soon expand the types of defense articles and services that can be exported to Australia, the U.K. and Canada, including items and activities involving torpedoes, submarine combat control systems, acoustic countermeasure devices and night vision items. The measures were outlined in a final rule, released April 11 and effective May 12, that will also make “clarifying amendments and conforming updates” to the International Traffic in Arms Regulations.
The Treasury Department may be prioritizing enforcement of existing Russia sanctions rather than searching for new measures to impose, said Jay Shambaugh, Treasury’s undersecretary for international affairs. Shambaugh, speaking during an April 10 event hosted by the Brookings Institution, also said industry should expect the Biden administration to continue imposing national security-related trade restrictions on China.
The Commerce Department’s proposed guardrails for recipients of Chips Act funding could lead to compliance risks for semiconductor companies, especially as the agency bolsters its enforcement arm, law firms said. They also said companies should carefully review how the proposals intersect with chip export restrictions.
DOJ’s recent emphasis on corporate compliance may cause companies to update how they conduct due diligence on investment transactions, Morgan Lewis said in a new report released this month. The firm said DOJ is increasingly playing a more active role in the Committee on Foreign Investment in the U.S., which could prompt investors to reassess their procedures for evaluating sensitive deals.
China has asked the World Trade Organization to review semiconductor export controls recently announced by Japan, saying the “harmful” measures violate WTO rules. Beijing also lodged a broader complaint against the reported chip control deal agreed to by the U.S., the Netherlands and Japan, saying it should be made public and scrutinized by WTO members.
The U.S. should be preparing a strategy to make sure it leads in the next generation of advanced semiconductor technologies, said Romesh Wadhwani, founder of investment firm Symphony Technology Group. Wadhwani also said the funding included in the Chips Act is a good start, but likely won’t be enough to remain ahead of China and shield U.S. supply chains from geopolitical risks.
Although European Union conversations around a potential outbound investment screening mechanism will be difficult, Reinhard Butikofer, a member of the European Parliament, said he’s hopeful member states eventually will agree to establish the screening tool. But he and another EU expert were less optimistic about the EU’s stance toward a potential Chinese invasion of Taiwan, saying the bloc isn’t yet prepared to impose sanctions.
The Office of Foreign Assets Control on March 31 fined a California money services firm just over $72,000 for violating U.S. sanctions against Iran, Cuba and Venezuela. OFAC said Uphold HQ, a global digital trading platform, failed to screen transactions for customers located in Iran or Cuba and for employees of a sanctioned Venezuelan energy company, resulting in 152 transactions worth more than $180,000.
Japan last week said it plans to impose new export controls on certain semiconductor manufacturing equipment, a move that could align its restrictions with some of the sweeping China controls released by the U.S. in October. The Japanese restrictions will apply to 23 types of chip items and covering six categories of equipment used in chip manufacturing, including cleaning, deposition, lithography and etching, Reuters reported March 31.
The U.S. last week fined Wells Fargo nearly $100 million for allegedly breaching U.S. sanctions against Iran, Syria and Sudan, violations that stemmed from its "unsafe or unsound" sanctions compliance practices. The bank was fined $30 million by the Treasury Department's Office of Foreign Assets Control and $67.8 million by the Federal Reserve after OFAC said Wells Fargo's subsidiary allowed a European bank to use its trade finance platform to process more than $500 million in sanctioned transactions.