Global Trade & Foreign Policy Insights

China recently enacted a revision to the PRC Law on Guarding State Secrets, and shortly after Hong Kong followed suit when it passed the Safeguarding National Security Ordinance.

As a resource to our clients, our global team—which includes attorneys resident in China—has designed a mini-series of presentation recordings outlining recent international trade updates between the U.S. and China in key areas. 

On May 20, 2024, the PRC Ministry of Commerce (MOFCOM) announced the inclusion of three U.S. companies on its unreliable entities list over sales of arms to Taiwan. We discussed the implementation of the Unreliable Entity List here. The move mimics similar designations in February 2023, which we wrote about here, and follows recent actions by the BIS and Treasury to apply new export controls and sanctions on Chinese entities for allegedly doing business with Russia.

On February 28, President Biden issued a major new executive order. The E.O. directs the Attorney General to issue regulations within 180 days that prohibit or restrict U.S. persons from engaging in transactions with “countries of concern” involving the transfer of Americans’ bulk sensitive data or U.S. government-related data. 

It’s been another big year on the national security front. The Biden administration finally published its long-awaited Executive Order (E.O.) restricting U.S. investors from making investments in Chinese companies working on certain technologies and products. Evidence is mounting that the Committee on Foreign Investment in the United States (CFIUS or the Committee) is taking longer than ever to process transactions and, even when foreign investors can avoid CFIUS review, local communities are starting to fill the gaps in CFIUS’s authorities by making certain investments untenable. Finally, the Department of Energy (DOE) issued proposed guidance on its interpretation of “foreign entity of concern” (FEOC), a term that is becoming popular in national security-related statutes and regulatory frameworks.

The annual report for 2022 shows that the CFIUS process is becoming more difficult to negotiate in a timely and predictable manner, and in some cases, transactions can get bogged down in the CFIUS quagmire for several months.

China has come out of its zero-Covid slumber with a bang, utilizing its Unreliable Entity List to reiterate its ultimatum to companies regarding Taiwan. Companies doing business with Taiwan and mainland China in critical industries should take note.

With the ink barely dry on the October 7, 2022 Export Administration Regulations (“EAR”) advanced semiconductors and supercomputing interim final rule (the “Semiconductor IFR”), the U.S. Department of Commerce (“Commerce”) continues to pull multiple levers in a bid to fundamentally change the trajectory of global advanced semiconductors manufacturing in the United States’ (“U.S.”) favor.

Over are the days of carefree selling to and offshoring supply chains through China for leading-edge semiconductors and the technologies and equipment used to produce them. On October 7, 2022, the U.S. Department of Commerce’s (“Commerce”) Bureau of Industry and Security (BIS) announced surgically precise and novel export controls targeting China’s[1] semiconductor and advanced computing industries. According to the BIS Press Release, the new controls will restrict China’s ability “to produce advanced military systems including weapons of mass destruction; improve the speed and accuracy of its military decision making, planning, and logistics, as well as of its autonomous military systems; and commit human rights abuses.”

On August 17, 2022, the U.S. Trade Representative (“USTR”) released an 11-point negotiation mandate to facilitate formalized trade negotiations between the U.S. and Taiwan (the “Mandate”). In time, the PRC will respond to the increased cooperation between the U.S. and Taiwan with more than mere rhetoric, flyovers, and a weeklong naval blockade.

Companies in a variety of industries are preparing for enforcement of the Uyghur Forced Labor Prevention Act (“UFLPA”), which went into effect on June 21, 2022. Those working in UFLPA high-risk industries have expressed justifiable concern about enforcement, conducting diligence on opaque and complex supply chains, and the volume of evidence required to prove forced labor was not used in a production cycle. This article provides an overview of the steps and challenges companies face while handling UFLPA compliance.

ACI held its annual CFIUS conference from April 27 to 28 in Washington, D.C., bringing together practitioners and government officials to discuss a range of CFIUS topics. On the government side, the two-day event involved significant participation by the Department of Defense (DoD), which was represented by officials on a majority of the panels. The following are the key takeaways.

On Tuesday, March 1, The Wall Street Journal reported that the Committee on Foreign Investment in the United States approved a Chinese investment in Icon Aircraft, Inc., a California-based maker of small recreational vehicles.

In an earlier client alert, we noted that Wise Road Capital’s proposed acquisition of Magnachip Semiconductor Corporation was on life support: the Committee on Foreign Investment in the United States (CFIUS) had issued a Due Process letter, and the transaction parties could either abandon the transaction or allow the matter to be referred to the President, who would likely block it. 

Earlier this year, Wise Road Capital, a Chinese private equity firm, entered into an agreement to purchase Magnachip Semiconductor Corporation, a South Korean chip manufacturer. On August 27, 2021, Magnachip submitted an SEC filing indicating that the Committee on Foreign Investment in the United States is preparing to block the deal.

On July 16, 2021, the U.S. Departments of State, the Treasury, Commerce, and Homeland Security jointly issued a Business Advisory for Hong Kong Special Administrative Region (Hong Kong) of the People’s Republic of China (China or the PRC).