September 20, 2018: New CAATSA-related Executive Order

Today, President Trump issued a new CAATSA-related Executive Order (Authorizing the Implementation of Certain Sanctions Set Forth in the Countering America’s Adversaries Through Sanctions Act). Here are the important parts:

Section 1.  (a)  When the President, or the Secretary of State or the Secretary of the Treasury pursuant to authority delegated by the President and in accordance with the terms of Section 1.  (a)  When the President, or the Secretary of State or the Secretary of the Treasury pursuant to authority delegated by the President and in accordance with the terms of such delegation, has determined that sanctions shall be imposed on a person pursuant to sections 224(a)(2), 231(a), 232(a), or 233(a) of CAATSA and has selected from section 235 of CAATSA any of the sanctions set forth below to impose on that person, the Secretary of the Treasury, in consultation with the Secretary of State, shall take the following actions where necessary to implement the sanctions selected and maintained by the President, the Secretary of State, or the Secretary of the Treasury:

(i)    prohibit any United States financial institution from making loans or providing credits to the sanctioned person totaling more than $10,000,000 in any 12-month period, unless the person is engaged in activities to relieve human suffering and the loan or credits are provided for such activities;

(ii)   prohibit any transactions in foreign exchange that are subject to the jurisdiction of the United States and in which the sanctioned person has any interest;

(iii)  prohibit any transfers of credit or payments between financial institutions, or by, through, or to any financial institution, to the extent that such transfers or payments are subject to the jurisdiction of the United States and involve any interest of the sanctioned person;

(iv)   block all property and interests in property of the sanctioned person that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person, and provide that such property and interests in property may not be transferred, paid, exported, withdrawn, or otherwise dealt in;

(v)    prohibit any United States person from investing in or purchasing significant amounts of equity or debt instruments of the sanctioned person;

          or

(vi)   impose on the principal executive officer or officers of the sanctioned person, or on persons performing similar functions and with similar authorities as such officer or officers, the sanctions described in subsections (a)(i)–(a)(v) of this section, as selected by the President, the Secretary of State, or the Secretary of the Treasury.

And:

Sec. 2.  (a)  When the President, or the Secretary of State or the Secretary of the Treasury pursuant to authority delegated by the President and in accordance with the terms of such delegation, has determined that sanctions shall be imposed on a person pursuant to sections 224(a)(2), 231(a), 232(a), or 233(a) of CAATSA and has selected from section 235 of CAATSA any of the sanctions set forth below to impose on that person, the heads of relevant departments and agencies, in consultation with the Secretary of State and the Secretary of the Treasury, as appropriate, shall ensure that the following actions are taken where necessary to implement the sanctions selected and maintained by the President, the Secretary of State, or the Secretary of the Treasury:

(i)    The Export-Import Bank shall deny approval of the issuance of any guarantee, insurance, extension of credit, or participation in an extension of credit in connection with the export of any goods or services to the sanctioned person;

(ii)   Departments and agencies shall not issue any specific license or grant any other specific permission or authority under any statute that requires the prior review or approval of the United States Government as a condition for the export or reexport of goods or technology to the sanctioned person;

(iii)  The United States executive director of each international financial institution shall use the voice and vote of the United States to oppose any loan from the international financial institution that would benefit the sanctioned person;

(iv)   With respect to a sanctioned person that is a financial institution:  the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of New York shall not designate, or permit the continuation of any prior designation of, the sanctioned person as a primary dealer in United States Government debt instruments; and departments and agencies shall prevent the sanctioned person from serving as an agent of the United States Government or serving as a repository for United States Government funds;

(v)    Departments and agencies shall not procure, or enter into a contract for the procurement of, any goods or services from the sanctioned person;

(vi)   The Secretary of State shall deny a visa to, and the Secretary of Homeland Security shall exclude from the United States, any alien that the President, the Secretary of State, or the Secretary of the Treasury determines is a corporate officer or principal of, or a shareholder with a controlling interest in, the sanctioned person by treating the person as covered by section 1 of Proclamation 8693 of July 24, 2011 (Suspension of Entry of Aliens Subject to United Nations Security Council Travel Bans and International Emergency Economic Powers Act Sanctions); or

(vii)  The heads of the relevant departments and agencies, as appropriate, shall impose on the principal executive officer or officers of the sanctioned person, or on persons performing similar functions and with similar authorities as such officer or officers, the sanctions described in subsections (a)(i)-(a)(vi) of this section, as  selected by the President, the Secretary of State, or the Secretary of the Treasury.

And: 

Sec. 3.  (a)  When the President, or the Secretary of State or the Secretary of the Treasury pursuant to authority delegated by the President and in accordance with the terms of such delegation, has determined that sanctions shall be imposed on a person pursuant to section 224(a)(3) of CAATSA or sections 4(a) or 4(b) of UFSA and has selected from section 4(c) of UFSA any of the sanctions set forth below to impose on that person, the Secretary of the Treasury, in consultation with the Secretary of State, shall take the following actions where necessary to implement the sanctions selected and maintained by the President, the Secretary of State, or the Secretary of the Treasury:

(i)    block all property and interests in property of the sanctioned person that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person, and provide that such property and interests in property may not be transferred, paid, exported, withdrawn, or otherwise dealt in;

(ii)   prohibit any transfers of credit or payments between financial institutions, or by, through, or to any financial institution, to the extent that such transfers or payments are subject to the jurisdiction of the United States and involve any interest of the sanctioned person;

(iii)  prohibit any United States person from transacting in, providing financing for, or otherwise dealing in certain debt or equity of the sanctioned person, in accordance with section 4(c)(7) of UFSA; or 

(iv)   impose on the principal executive officer or officers of the sanctioned person, or on persons performing similar functions and with similar authorities as such officer or officers, the sanctions described in subsections (a)(i)-(a)(iii) of this section, as selected by the President, the Secretary of State, or the Secretary of the Treasury.

(b)  The prohibitions in subsection (a)(i) of this section include:

(i)   the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any sanctioned person whose property and interests in property are blocked pursuant to this order; and

(ii)  the receipt of any contribution or provision of funds, goods, or services from any such sanctioned person.

And:
 
Sec. 4.  (a)  When the President, or the Secretary of State or the Secretary of the Treasury pursuant to authority delegated by the President and in accordance with the terms of such delegation, has determined that sanctions shall be imposed on a person pursuant to section 224(a)(3) of CAATSA or sections 4(a) or 4(b) of UFSA and has selected from section 4(c) of UFSA any of the sanctions set forth below to impose on that person, the heads of relevant departments and agencies, in consultation with the Secretary of State and the Secretary of the Treasury, as appropriate, shall ensure that the following actions are taken where necessary to implement the sanctions selected and maintained by the President, the Secretary of State, or the Secretary of the Treasury:
(i)    The Export-Import Bank shall deny approval of the issuance of any guarantee, insurance, extension of credit, or participation in an extension of credit in connection with the export of any goods or services to the sanctioned person;
(ii)   Departments and agencies shall not procure, or enter into a contract for the procurement of, any goods or services from the sanctioned person;
(iii)  Departments and agencies shall prohibit the exportation, or provision by sale, lease or loan, grant, or other means, directly or indirectly, of any defense article or defense service to the sanctioned person and shall not issue any license or other approval to the sanctioned person under section 38 of the Arms Export Control Act (22 U.S.C. 2778);
(iv)   Departments and agencies shall not issue any license, and shall suspend any license, for the transfer to the sanctioned person of any item the export of which is controlled under the Export Control Reform Act of 2018 (subtitle B of title XVII of Public Law 115-232), or the Export Administration Regulations under subchapter C of chapter VII of title 15, Code of Federal Regulations;
(v)    The Secretary of State shall deny a visa to, and the Secretary of Homeland Security shall exclude from the United States, the sanctioned person by treating the person as covered by section 1 of Proclamation 8693; or
(vi)   The heads of the relevant departments and agencies, as appropriate, shall impose on the principal executive officer or officers of the sanctioned person, or on persons performing similar functions and with similar authorities as such officer or officers, the sanctions described in subsections (a)(i)–(a)(v) of this section, as selected by the President, the Secretary of State, or the Secretary of the Treasury.

And OFAC issued a new CAATSA-Russia Frequently-Asked Question (FAQ):

627. What is the purpose of the Executive Order (E.O.) of September 20, 2018, “Authorizing the Implementation of Certain Sanctions Set Forth in the Countering America’s Adversaries Through Sanctions Act”? 

Title II of the Countering America’s Adversaries Through Sanctions Act, as amended (CAATSA), and the Ukraine Freedom Support Act of 2014, as amended (UFSA), provide for the imposition of certain sanctions with respect to the Russian Federation.  The E.O. of September 20, 2018 provides authority under the International Emergency Economic Powers Act (IEEPA) to the Secretary of the Treasury to take certain actions to further implement those sanctions and directs agencies of the United States Government to take all appropriate measures within their authority to ensure the full implementation of those sanctions. 

Specifically, the E.O., among other things, (i) delegates the implementation of listed sanctions menu items in section 235 of CAATSA and section 4(c) of UFSA regardless of whether that agency is delegated the authority to select the sanctions under section 235 of CAATSA or section 4(c) of UFSA, as applicable, and (ii) authorizes the Secretary of the Treasury to employ all powers granted to the President by IEEPA and relevant provisions of UFSA and CAATSA to carry out the purposes of the E.O.  Section 4(c) of UFSA provides a menu of nine sanctions from which the Secretary of the Treasury or the Secretary of State must select when imposing sanctions on persons pursuant to sections 4(a) or 4(b) of UFSA.  Furthermore, section 235 of CAATSA provides a menu of 12 sanctions from which the Secretary of the Treasury or the Secretary of State must select when imposing sanctions on persons pursuant to sections 224(a)(2), 231(a), 232(a), and 233(a) of CAATSA.  The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) anticipates promulgating regulations to implement these sanctions.

The E.O. provides for comprehensive implementing and penalties provisions that enable OFAC, among other things, to promulgate regulations and issue administrative subpoenas, licenses, and the full range of civil enforcement actions with respect to sanctions violations. [09-20-2018]  

And the State Department issued two versions of a press release about this and other actions – here’s the short version (will post the long version separately):

Press Statement

Heather Nauert 
Department Spokesperson
Washington, DC
September 20, 2018

 

Today, President Donald J. Trump issued a new Executive Order, “Authorizing the Implementation of Certain Sanctions Set Forth in the Countering America’s Adversaries Through Sanctions Act.” This action furthers the implementation of certain sanctions in Countering America’s Adversaries Through Sanctions Act (CAATSA) with respect to the Russian Federation. Consistent with this Executive Order, the Secretary of State is taking two actions today to implement his delegated authorities pursuant to section 231 of CAATSA and to further impose costs on the Russian Government in response to its malign activities.

First, the Secretary of State is adding 33 additional persons – both entities and individuals – to the CAATSA section 231 List of Specified Persons (LSP) for being a part of, or operating for or on behalf of, the defense or intelligence sectors of the Government of the Russian Federation. Any person who is determined to have knowingly engaged in a significant transaction with any of these persons will be subject to mandatory sanctions under CAATSA section 231. This action increases the number of persons identified on the LSP to 72.

Second, the Secretary of State, in consultation with the Secretary of the Treasury, has imposed sanctions pursuant to section 231 of CAATSA on the Chinese entity Equipment Development Department (EDD) and its director, Li Shangfu, for engaging in significant transactions with Rosoboronexport, Russia’s main arms export entity, which is on the LSP. These significant transactions involved Russia’s delivery to China of Su-35 combat aircraft in 2017 and S-400 surface-to-air missile system-related equipment in 2018. The sanctions being imposed on EDD are a denial of export licenses; a prohibition on foreign exchange transactions under United States jurisdiction; a prohibition on transactions with the United States financial system; blocking of all property and interests in property within United States jurisdiction; and the imposition of sanctions on an EDD principal executive officer, its director Li Shangfu, which include a prohibition on foreign exchange transactions under United States jurisdiction, a prohibition on transactions with the United States financial system, blocking of all property and interests in property within United States jurisdiction, and a visa ban.

These Department of State sanctions actions are the result of United States’ implementation of Title II of CAATSA, which Congress passed in response to Russia’s aggression in Ukraine, annexation of Crimea, cyber intrusions and attacks, interference in the 2016 elections, and other malign activities. We will continue to vigorously implement CAATSA and urge all countries to curtail relationships with Russia’s defense and intelligence sectors, both of which are linked to malign activities worldwide.

Links:

OFAC Notice

Executive Order

FAQ

State Department Press Release

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