On January 13, 2021, President Donald Trump issued an Executive Order amending EO 13959, “Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies” (CCMCs). Shortly thereafter, on January 14, 2021, the Department of the Treasury’s Office of Foreign Assets Control issued a new general license, and four new frequently asked questions to address Executive Order 13959 of November 12, 2020, as amended.
The President’s amendment of EO 13959 in large part revises Sections 1(b) and (c) of the Executive Order. Section (b) provides that transactions by US persons, made solely to divest from securities held in CCMCs held as of 9:30 am EST on January 11, 2021, are permitted and can be held until 11:59 pm EST on November 11, 2021. Any such security held by a US person after this date is prohibited. Section (c) provides that any transaction by a US person that is entered into within 365 days of a company being designated as a CCMC, is permitted in order to enable US persons to divest from securities in those companies, as long as the transaction occurs by 11:59 pm EST within 60 days from the date of determination. The amendment also revises subsections (a)(ii) and (iii) of section 4, to provide that the investment prohibitions on publicly-listed CCMCs will remain in effect until the Secretary of Defense removes the company from the list, or the Secretary of the Treasury determines that the company no longer meets the criteria of a CCMC, and removes it from the list.
General License No. 2, “Authorizing Securities Exchanges Operated by US Persons to Engage in Transactions Involving Securities of Communist Chinese Military Companies,” allows securities exchanges operated by US persons to engage in transactions related to CCMCs that are listed on OFAC’s Non-SDN Communist Chinese Military Companies List (NS-CCMC List) after 12:01 am EST January 14, 2021. This authorization lasts until 12:01 am EST, 365 days after the entity appears on the NS-CCMC list. This general license was issued shortly after the January 8, 2021 release of General License No. 1, “Authorizing Transactions Involving Securities of Certain Communist Chinese Military Companies,” permitting transactions until January 28, 2021, that involve securities related to subsidiaries of CCMCs whose names are not listed in the Annex to EO 13959, but have names that are similar to those listed in the Annex.
Finally, OFAC also issued FAQs 871-874 on January 14, 2021, to clarify how securities rules apply to US persons in light of the new amendments to EO 13959. FAQ 871 provides a general overview of GL 2, while FAQ 872 makes clear that the EO 13959 amendment requires US persons to divest of their holdings of publicly traded securities connected to CCMCs, emphasizing that any possession of such securities after November 11, 2021 is prohibited. FAQ 872 provides that the new definition of the term “transaction” under the amendment to EO 13959, includes purchases for value, for sale, or any publicly traded security. Finally, FAQ 874 addresses the types of activities that are permitted in order to enable US persons to divest from CCMC securities, and provides a brief overview of the provisions in the new EO 13959 amendment.
Department of Treasury Recent Action (links to FAQs) | Executive Order on Amending EO 13959 | General License No. 2 | General License No. 1