On December 9, 2022, the US Department of the Treasury’s Office of Foreign Assets Control designated Li Zhenyu and Xinrong Zhou, two individuals from the People’s Republic of China (“PRC”), and networks of entities that they control, including the Dalian Ocean Fishing Co., Ltd. and Pingtan Marine Enterprise, Ltd. (Nasdaq:PME). OFAC also identified 157 PRC-flagged fishing vessels with links to the newly designated entities. This is the first time that the US Treasury Department has sanctioned an entity that is listed on the NASDAQ stock exchange.
The designations target serious human rights abuse associated with illegal, unreported, and unregulated (“IUU”) fishing -- fishing that is conducted in violation of applicable laws and regulations and is either not reported or misreported to relevant authorities. According to a memorandum issued by President Biden on June 27, 2022, if left unchecked, IUU fishing can endanger ocean ecosystems and sustainable fisheries, exacerbate the environmental and socioeconomic effects of climate change, and threaten the livelihoods and human rights of fishers around the world and, in particular, local populations in the Indo-Pacific region. The OFAC designations were issued pursuant to Executive Order 13818, which builds upon and implements the Global Magnitsky Human Rights Accountability Act and targets perpetrators of serious human rights abuse.
As a result of these designations, all property and interests in property of today’s designees within the United States or within the possession or control of a US person are blocked, and US persons are generally prohibited from engaging in transactions involving the designated persons. In addition, entities owned 50 percent or more by one or more designated persons are also blocked, unless they are exempt or authorized by a general or specific license issued by OFAC.
In addition to the designations, OFAC also issued General Licenses 3 and 4 pursuant to Global Magnitsky Sanctions Regulations (“GMSR”), 31 CFR Part 583. GL 3 temporarily authorizes wind down transactions related to the divestment or transfer of debt or equity of PME to a non-US person until March 9, 2023. This includes transactions involving PME-related debt or equity placed prior to December 9, 2022, and financial contracts or other agreements linked to PME-related debt or equity entered into prior to December 9, 2022, provided that any payments made to blocked persons are placed into a blocked account in accordance with the GMSR. The wind down of financial contracts and agreements includes the delisting of PME from a US securities exchange. GL 4 temporarily authorizes wind down transactions involving certain vessels until March 9, 2023, provided that payments to blocked persons are made into blocked accounts in accordance with the GMSR.
OFAC also issued three new Frequently Asked Questions to clarify the provisions in GL 3 and GL 4. FAQs 1100 and 1101 provide a general overview of the authorizations in GL 3 and GL 4, respectively, while FAQ 1102 emphasizes that non-US persons do not risk exposure to US sanctions for engaging in transactions that US persons are permitted to engage in under GL 3 and GL 4.