OFAC Issues Hong Kong-Related Sanctions Regulations, Names Entities to Sanctions List

Several sanctions-related actions of potential interest to Hong Kong and mainland China were taken in the waning days of the Trump administration. Most importantly, the Treasury Department’s Office of Foreign Assets Control issued regulations on 15 January as part of efforts to formally implement Executive Order 13936 dated 14 July 2020, which took various actions to implement a previous determination that Hong Kong is no longer sufficiently autonomous to justify differential treatment in relation to mainland China. OFAC described the announcement as being in “abbreviated form at this time for the purpose of providing immediate guidance to the public”, and said that it would supplement the regulations with a more comprehensive set of rules which may include additional interpretive and definitional guidance as well as additional general licences and statements of licensing policy.

The OFAC rule creates a new part in Title 31 of the U.S. Code of Federal Regulations (part 585) to implement the requirements of EO 13936. Among other things, it formally prohibits all transactions prohibited under EO 13936 – as well as under any further executive orders issued pursuant to the national emergency declared in EO 13936 – and sets associated requirements as well as provisions regarding exempt transactions. It also adopts provisions in the areas of interpretations; licences, authorisations and statements of licensing policy; reports; and penalties and findings of violation.

Separately, OFAC on 15 January added the following persons to the Specially Designated Nationals and Blocked Persons List (SDN List):

• mainland China’s You Quan, Vice Chairman of the Central Leading Group on Hong Kong and Macao Affairs; Sun Wenqing (also known as Sun Qingye), Deputy Director of the Office for Safeguarding National Security in Hong Kong; and Tam Yiu-Chung, Hong Kong delegate to the National People’s Congress Standing Committee; and

• Hong Kong’s Frederic Choi Chin-Pang, Kelvin Kong Hok Lai, and Andrew Kan Kai Yan, identified by the U.S. State Department as officials in the National Security Division of the Hong Kong Police.

Former Secretary of State Mike Pompeo stated at the time that these designations were in response to the arrests on 6 January of more than 50 people in Hong Kong, including 13 former Legislative Council members and an American lawyer. While noting that many of those arrested had been released on bail, Pompeo demanded that all charges be dismissed. 

OFAC also added one mainland Chinese company to the SDN List – Jiangyin Mascot Special Steel Co. Ltd. – for trading with Iran in violation of United Nations resolutions.

An SDN designation bars any dealings with the United States or U.S. persons, placing severe constraints even on operations that are indirectly or tangentially associated with the United States. The term “U.S. persons” is defined in the regulations to include U.S. citizens, U.S. legal permanent residents, any person in the United States, and entities incorporated in the United States as well as their foreign branches. OFAC interprets the term “any person in the United States” under the definition of “U.S. persons” very broadly and liberally, and it takes the position that any entity or individual engaged in a transaction that “touches” U.S. soil, including by movement of funds through a financial institution in the United States, is a “person in the United States.”