Frequently Asked Questions

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Chinese Military Companies Sanctions

857. Do the prohibitions in E.O. 13959 apply to transactions in publicly traded securities of subsidiaries of Communist Chinese military companies?

The prohibitions in E.O. 13959 apply to any subsidiary of a Communist Chinese military company, after such subsidiary is publicly listed by Treasury pursuant to section (4)(a)(iii) of the Order.  The initial prohibitions pursuant to section 1(a)(ii) of E.O. 13959 would go into effect beginning 9:30 a.m. eastern time on the date that is 60 days after such subsidiary is added to OFAC’s new list to further implement E.O. 13959. 

Treasury intends to publicly list as subsidiaries any entity that issues publicly traded securities and that is (1) 50 percent or more owned by one or more Communist Chinese military company(ies) identified in or pursuant to E.O. 13959, consistent with OFAC’s 50 Percent Rule Guidance; or (2) determined to be controlled by one or more Communist Chinese military company(ies) identified in or pursuant to E.O. 13959.  Additionally, as outlined in section 4(a)(ii) of E.O. 13959, the Secretary of Defense, in consultation with the Secretary of the Treasury, may determine that an entity, including a subsidiary, is a Communist Chinese military company operating directly or indirectly in the United States or in any of its territories or possessions, and therefore list it as such pursuant to section 1237 of Public Law 105–261, as amended by section 1233 of Public Law 106–398 and section 1222 of Public Law 108–375, until such time as the Secretary of Defense removes such person from such list.

 

858. In certain cases, the names of the entities published in the Annex to E.O. 13959 or subsequently identified pursuant to E.O. 13959 as Communist Chinese military companies do not match the names of issuers of publicly traded securities.  How do I know which entity is subject to the prohibitions under E.O. 13959? 

The prohibitions in E.O. 13959 apply with respect to publicly traded securities (or any publicly traded securities that are derivative of, or are designed to provide investment exposure to, such securities) of an entity with a name that exactly or closely matches the name of an entity identified in the Annex to E.O. 13959 (effectively January 11, 2021) or subsequently identified pursuant to E.O. 13959 (effective 60 days subsequent to public notice).  To further implement E.O. 13959, OFAC has published a list on its website (PDF; CSV) containing the names of entities identified in or pursuant to E.O. 13959 as Communist Chinese military companies, along with additional identifying information where possible.  See FAQ 857 for additional information regarding subsidiaries of identified entities.  

 

859. How does OFAC interpret the term “publicly traded securities” for purposes of Executive Order (E.O.) 13959?

For purposes of E.O. 13959, OFAC intends to interpret the term “publicly traded securities” to include securities (as defined in section 4(d) of E.O. 13959) denominated in any currency that trade on a securities exchange or through the method of trading that is commonly referred to as “over-the-counter,” in any jurisdiction. 

860. For purposes of Executive Order (E.O.) 13959, what financial instruments are covered by the provision stating the prohibitions apply to “any transaction in … any securities that are derivative of, or are designed to provide investment exposure to such” publicly traded securities?

Examples of financial instruments covered by this provision include, but are not limited to, derivatives (e.g., futures, options, swaps), warrants, American depositary receipts (ADRs), global depositary receipts (GDRs), exchange-traded funds (ETFs), index funds, and mutual funds, to the extent such instruments also meet the definition of “security” as defined in section 4(d) of E.O. 13959.

861. Does Executive Order (E.O.) 13959 prohibit U.S. persons from investing in U.S. or foreign funds, such as exchange-traded funds (ETFs) or other mutual funds, that hold publicly traded securities of a Communist Chinese military company? 

Yes.  Under E.O. 13959, any transaction in publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to such securities, of any Communist Chinese military company is prohibited regardless of such securities’ share of the underlying index fund, ETF, or derivative thereof.

862. Does Executive Order (E.O.) 13959 require U.S. persons, including U.S. funds and related market intermediaries and participants, to divest their holdings in publicly traded securities (and securities that are derivative of, or are designed to provide investment exposure to, such securities) of the Communist Chinese military companies identified in the Annex to E.O. 13959 by January 11, 2021?  

No.  Executive Order (E.O.) 13959 does not require U.S. persons, including U.S. funds and related market intermediaries and participants, to divest their holdings in publicly traded securities (and securities that are derivative of, or are designed to provide investment exposure to, such securities) of the Communist Chinese military companies identified in the Annex to E.O. 13959 by January 11, 2021.  Please see FAQ 858 for more information regarding the names of entities identified in the Annex to E.O. 13959.

863. Can U.S. persons custody, offer for sale, serve as a transfer agent, and trade in covered securities?

For purposes of E.O. 13959, activity by U.S. persons related to the following services are considered permissible, to the extent that such support services are not provided to U.S. persons in connection with prohibited transactions:  clearing, execution, settlement, custody, transfer agency, back-end services, as well as other such support services.  

864. Does the prohibition in E.O. 13959 apply to transactions in securities of a Communist Chinese military company subsidiary with a name that exactly or closely matches the name of an entity identified in the Annex to E.O. 13959?

Yes.  As stated in FAQ 858, the prohibitions of E.O. 13959 apply with respect to “publicly traded securities (or any publicly traded securities that are derivative of, or are designed to provide investment exposure to, such securities) of an entity with a name that exactly or closely matches the name of an entity identified in the Annex to E.O. 13959 (effectively January 11, 2021).”  OFAC has published and will continue to update a list on its website to aid in the implementation of E.O. 13959, including the names of certain entities that closely match the name of entities identified in the Annex to E.O. 13959.  Among other names, OFAC’s current list includes (1) China Telecommunications Corp. / China Telecommunications; (2) China Mobile Communications Group / China Mobile Communications / China Mobile Communications Group Co Ltd; and (3) China United Network Communications Group Co Ltd / China United Network Communications Ltd.  These names closely match the names of China Telecom Corporation Limited (NYSE: CHA), China Mobile Limited (NYSE: CHL), and China Unicom (Hong Kong) Limited (NYSE: CHU).  Transactions in the securities of any Communist Chinese military company subsidiary (whether expressly listed or not) are prohibited if the subsidiary’s name exactly or closely matches the name of these or any other entities identified in the Annex to E.O. 13959 or the name of any Communist Chinese military company listed by the Departments of the Treasury or Defense.  

In addition, as OFAC stated in FAQ 860, the prohibitions in section 1(a)(i) of E.O. 13959 expressly apply to “any securities that are derivative of, or are designed to provide investment exposure to” the publicly traded securities of any Communist Chinese military company, including American depository receipts (ADRs).  

The prohibition in section 1(a)(i) of E.O. 13959 takes effect at 9:30 a.m. eastern time on January 11, 2021.  Compliance with this prohibition is measured by trade date, rather than settlement date.  

 

865. May market intermediaries and other participants facilitate divestment from publicly traded securities of Communist Chinese military companies, including divestment by investment fund managers?

Yes.  Market intermediaries and other participants may engage in ancillary or intermediary activities that are necessary to effect divestiture during the relevant wind-down periods or that are otherwise not prohibited under the E.O.  Transactions by U.S. persons (including investors and intermediaries) involving investment funds that are seeking to divest during the relevant wind-down periods to ensure compliance with the E.O. are permitted.

As explained in FAQ 861, under E.O. 13959, any transaction in publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to such securities, of any Communist Chinese military company, as defined in E.O. 13959, is prohibited regardless of such securities’ share of the underlying index fund, ETF, or derivative thereof.  FAQ 862 also notes that U.S. funds are not required to divest covered securities of companies identified in the Annex to E.O. 13959 by January 11, 2021.  Divestment must be completed by November 11, 2021.

 

871. What are the compliance obligations of securities exchanges operated by U.S. persons with respect to Executive Order 13959, as amended?

Please see General License 2, “Authorizing Securities Exchanges Operated by U.S. Persons to Engage in Transactions Involving Securities of Communist Chinese Military Companies,” dated January 14, 2021.  In general, all transactions and activities by securities exchanges operated by U.S. persons prohibited by section 1(a)(ii) of Executive Order (E.O.) 13959, as amended by the E.O. of January 13, 2021, involving publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to such securities, of any entity that is listed on the Office of Foreign Assets Control’s Non-SDN Communist Chinese Military Companies List (NS-CCMC List) after 12:01 a.m. eastern standard time, January 14, 2021, are authorized through 12:01 a.m. eastern time on the date that is 365 days after the date the entity is listed on the NS-CCMC List.

872. Does Executive Order 13959, as amended (E.O. 13959), require United States persons to divest their holdings of publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to, such securities of Communist Chinese military companies?

Yes.  With respect to any Communist Chinese military company as defined in section 4(a)(i) of E.O. 13959, section 1(b) states that, effective at 11:59 p.m. eastern standard time on November 11, 2021, possession of any such securities by a United States person is prohibited.  With respect to any person that is determined to be a Communist Chinese military company pursuant to section (4)(a)(ii) or (iii) of E.O. 13959, section 1(c) states that, effective at 11:59 p.m. eastern standard time on the date 365 days after the date of such determination, possession of any such securities by a United States person is prohibited.  United States persons are thus prohibited from holding covered securities after the relevant deadline.

873. How does Executive Order 13959, as amended (E.O. 13959), define the term “transaction”?  

Section 4(e) of E.O. 13959 defines the term “transaction” as the purchase for value, or sale, of any publicly traded security. 

874. I am a United States person seeking to divest my holdings of covered securities before the relevant deadline stated in Executive Order 13959, as amended (E.O. 13959).  For purposes of E.O. 13959, what types of activities are permitted to effectuate such divestment?

Any transaction (including purchases for value and sales) entered into on or before 11:59 p.m. eastern standard time on November 11, 2021, solely to divest, in whole or in part, from securities that any United States person held as of 9:30 a.m. eastern standard time on January 11, 2021, in a Communist Chinese military company as defined in section 4(a)(i) of E.O. 13959, is permitted.  Similarly, for a person determined to be a Communist Chinese military company pursuant to section 4(a)(ii) or (iii) of E.O. 13959, any transaction (including purchases for value and sales) entered into on or before 365 days from the date of such determination, solely to divest, in whole or in part, from securities that any United States person held in such person, as of the date 60 days from the date of such determination, is permitted.  See FAQ 865 with respect to the permissibility of market intermediaries and other participants engaging in ancillary or intermediary activities that are necessary to effectuate divestiture during the relevant wind-down periods or that are otherwise not prohibited under the E.O.   

878. What does General License 1A (GL 1A) authorize?

During the period that GL 1A is in effect, U.S. persons may, subject to the conditions in the general license, engage in transactions otherwise prohibited by E.O. 13959 involving covered securities of entities whose names closely match, but do not exactly match, the name of a Communist Chinese military company (CCMC) as defined by section 4(a) of E.O. 13959.  

GL 1A does not authorize transactions in covered securities of entities identified on OFAC’s Non-SDN Communist Chinese Military Companies List (NS-CCMC) List or otherwise identified by the Department of Defense pursuant to E.O. 13959.  

879. Does GL 1A authorize transactions with entities identified as subsidiaries of a Communist Chinese military company (CCMC)?

No.  GL 1A does not authorize any transactions involving covered securities of entities listed on OFAC’s Non-SDN Communist Chinese Military Companies List (NS-CCMC List) pursuant to section 4(a)(iii) of E.O. 13959 as a subsidiary of a person already determined to be a CCMC, including entities added to the NS-CCMC List on January 8, 2021 (i.e., CNOOC Limited, China Mobile Limited, China Telecom Corporation Limited, China Unicom (Hong Kong) Limited).  Pursuant to section 1(a)(ii) of E.O. 13959, prohibitions relevant to entities listed on the NS-CCMC List pursuant to section 4(a)(iii) take effect beginning 9:30 a.m. eastern time on the date that is 60 days after such listing.  Accordingly, the relevant prohibitions with respect to such entities added to the NS-CCMC List on January 8, 2021 (i.e., CNOOC Limited, China Mobile Limited, China Telecom Corporation Limited, China Unicom (Hong Kong) Limited) begin on March 9, 2021. 

880. Do the prohibitions in Executive Order 13959, as amended (E.O. 13959), apply with respect to Xiaomi Corporation?

On January 14, 2021, the Secretary of Defense listed Xiaomi Corporation (“Xiaomi”), pursuant to section 4(a)(ii) of E.O. 13959.  On March 12, 2021, the U.S. District Court for the District of Columbia issued an order in Xiaomi Corporation v. Department of Defense (Case No. 1:21-cv-00280-RC) preliminarily enjoining the implementation and enforcement of the E.O. 13959 prohibitions against Xiaomi.  Consequently, the prohibitions in E.O. 13959 do not apply with respect to Xiaomi pending further order of the Court.

881. When do the prohibitions in Executive Order 13959, as amended (E.O. 13959), apply with respect to Luokung Technology Corp. (LKCO)?

On January 14, 2021, the Secretary of Defense listed Luokong Technology Corporation (LKCO), pursuant to section 4(a)(ii) of E.O. 13959.  This listing was erroneous.  Accordingly, on March 9, 2021, the Secretary of Defense delisted Luokong Technology Corporation (LKCO) and listed Luokung Technology Corp. (LKCO), pursuant to section 4(a)(ii) of E.O. 13959.  As such, the prohibition in section 1(a)(ii) of E.O. 13959 will take effect with respect to Luokung Technology Corp. (LKCO) 60 days after March 9, 2021 (i.e., May 8, 2021), and the prohibition in section 1(c) of E.O. 13959 will take effect with respect to Luokung Technology Corp. (LKCO) 365 days after March 9, 2021 (i.e., March 9, 2022).