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While the incoming administration has blanketed the news cycle with newly threatened tariffs against typical targets like China, and against neighboring allies like Canada and Mexico, the current administration has quietly continued its compliance efforts in areas such as forced labor and foreign investments. This includes the biggest expansion yet of companies under the UFLPA list and enhanced powers of the Committee on Foreign Investments in the U.S.
November was also one of the biggest months this year for enforcement, with an $85 million anti-bribery violation and a number of export control and OFAC violations. More on all of this below.
Compliance Updates
DHS Vastly Expands UFLPA Entity List
UFLPA Entity List now restricts goods of 107 PRC-based companies from entering the U.S. Effective November 1, the U.S. Department of Homeland Security (DHS) added China-based textile companies to the Uyghur Forced Labor Prevention Act (UFLPA) Entity List. U.S. Customs and Border Protection (CBP) will apply a rebuttable presumption that goods produced by Esquel Group, Guangdong Esquel Textile Co., Ltd., and Turpan Esquel Textile Co., Ltd. will be prohibited from entering the U.S. In addition, Changji Esquel Textile Co., Ltd. was removed from one section of the UFLPA Entity Lists and added to another. Goods produced by Changji Esquel Textile Co., Ltd. (also known as Changji Yida Textile Co., Ltd.) will continue to be subject to a rebuttable presumption that they are prohibited from entering the U.S.
On November 22, DHS added 29 entities, the single largest expansion of the list. Newly banned companies are in the agricultural sector, though some come from other industries, including mining and smelting of aluminum, lithium and other metals.
The full list of companies can be found here.
Expanded CFIUS Review of Real Estate Transactions
On November 1, the U.S. Department of the Treasury (Treasury), as Chair of the Committee on Foreign Investment in the United States (CFIUS), issued a final rule that significantly expands its ability to review certain real estate transactions by foreign persons near more than 60 military bases and installations across 30 states.
CFIUS jurisdiction allows CFIUS to review the purchase or lease by, or concession to, a foreign person of real estate in the United States that is in close proximity to a military installation or another facility or property of the United States Government that is sensitive for reasons relating to national security; could reasonably provide the foreign person the ability to collect intelligence on activities being conducted at such an installation, facility, or property; or could otherwise expose national security activities at such an installation, facility, or property to the risk of foreign surveillance.
Treasury Enhances CFIUS Powers on Foreign Investment
On November 18, the Treasury Department issued a final rule to enhance certain CFIUS procedures and to sharpen its penalty and enforcement authorities. The final rule is the first substantive update to the monitoring and enforcement provisions of the CFIUS regulations since the implementation of the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), which amended CFIUS’s governing statute (section 721 of the Defense Production Act of 1950). The final rule follows a proposed rule issued in April.
The rule enhances CFIUS authorities in a number of respects - the type of information it can require, expanding the circumstances in which it can level a civil penalty, increasing the maximum penalty award, and expanding its investigative powers. The final rule will become effective 30 days after publication in the Federal Register and is available at https://www.cfius.gov/.
Appeals Court Sets Oral Argument in 301 Litigation
The U.S. Court of Appeals for the Federal Circuit finally scheduled oral argument for January 8, 2025, in the lead case for the mass Section 301 litigation. The suit challenges the USTR’s enhanced tariffs under the so-called List 3 and List 4a of the PRC-based 301 tariffs.
Enforcement Actions
FCPA Violations
A subsidiary of a global Spanish telecom company is required to pay over $85.2 million to resolve an investigation by the Justice Department into a scheme to bribe government officials in Venezuela to receive preferential access to U.S. dollars in a currency auction. The company was charged with conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA).
According to court documents and admissions, in 2014, Telefónica Venezolana participated in a government-sponsored currency auction in Venezuela that allowed it to exchange its Venezuelan bolivars for U.S. dollars. To ensure its success in the auction, Telefónica Venezolana recruited two suppliers to make approximately $28.9 million in corrupt payments to an intermediary, knowing that some of those funds would be paid as a “commission” to Venezuelan government officials. To conceal the bribe payments, Telefónica Venezolana covered the cost of the bribes by purchasing equipment from the two suppliers at inflated prices.
The Justice Department charged the former CEO of 500.com (now BIT Mining Ltd.), a Chinese national, with violations of the Foreign Corrupt Practices Act (FCPA). BIT Mining Ltd. agreed to resolve investigations by the Justice Department and the Securities and Exchange Commission (SEC) into related FCPA violations arising from the company’s participation in a corrupt scheme to pay bribes to Japanese government officials.
Between 2017 and 2019, BIT Mining admitted that its former CEO, employees, and agents paid approximately $1.9 million in bribes and payments to intermediaries to make bribe payments to Japanese government officials to help win a bid to open an integrated resort. Bribes were paid in the form of cash, travel, entertainment, and gifts.
Export Control Violations
The Department of Commerce’s Bureau of Industry and Security (BIS) imposed a civil penalty of $500,000 against GlobalFoundries U.S. Inc., a semiconductor wafer manufacturing company headquartered in New York. The penalty relates to GlobalFoundries’ shipments of semiconductor wafers valued at approximately $17.1 million to SJ Semiconductor (SJS), a company on the BIS Entity List, without the requisite license or other authorization from BIS. GlobalFoundries voluntarily disclosed the conduct to BIS, cooperated with the investigation by BIS’s Office of Export Enforcement (OEE), and took remedial measures after discovering the conduct at issue, which resulted in a significant reduction in the penalty.
The Justice Department charged a Virginia company and two of its senior executives with conspiracy to violate the Export Control Reform Act. According to the complaint, between approximately March 2022 and June 2023, Eleview, an alleged operator of a freight consolidation and forwarding business, along with the executives, conspired to illegally export almost $7 million in goods and technology from the United States to Russia by transshipping them through three countries bordering or near Russia. If convicted, the executives face up to 20 years in prison.
The founder and former CEO of a California-based international logistics and freight forwarding company pleaded guilty to conspiring to violate export laws by shipping goods to Chinese companies on the U.S. Department of Commerce’s Entity List.
OFAC Violations
OFAC imposed a $1,104,408 penalty on a natural U.S. person for 75 violations of OFAC sanctions on Iran valued at approximately $561,802. Between 2019 and 2022, the individual executed a plan to purchase, renovate, and operate a hotel in Iran. In furtherance of this scheme, the person used foreign money services businesses in Iran and Canada to evade U.S. sanctions. The person was aware at all times of U.S. sanctions on Iran. The penalty amount reflects OFAC’s determination that the violations were egregious and were not voluntarily self-disclosed.
OFAC entered into a $178,421 settlement with American Life Insurance Company (ALICO), a subsidiary of MetLife, Inc, to resolve its potential civil liability for 2,331 apparent violations of OFAC sanctions on Iran. The apparent violations related to insurance policies provided to entities in the United Arab Emirates that were owned or controlled by the Government of Iran. The settlement amount reflects OFAC's determination that the apparent violations were voluntarily self-disclosed and were not egregious.