Development
What is the new development?
Counter-designations
The Implementation Act1 provides, among other things, that discriminatory restrictive measures against Chinese individuals or entities, as decided by Chinese government authorities, may be met with counter-designation of any relevant entities, organizations, or individuals. In addition, companies being deemed as committing, assisting, or supporting acts that endangers China’s sovereignty, security and development interests can, through the relevant departments of the State Council, be targeted by countermeasures. Those targeted by countermeasures can, pursuant to the Implementation Act, apply to have them suspended. According to the act, in order to have the countermeasures suspended, the designated parties should rectify their actions and mitigate the consequences. This stated the Implementation Act states that any changes to countermeasures may be subject to conditions. Individuals on the list could face several consequences: they might be denied entry or expelled from China, have their assets seized or frozen, be restricted from conducting business with Chinese entities or individuals, and restricted from import and export of certain goods and technologies.
Definitions and exemplifications
The term "other types of property" that can be subject to seizure, detention, or freezing under the anti-foreign sanction law has been declared as including cash, bills, bank deposits, securities, fund shares, equity, intellectual property rights, accounts receivable and other property and property rights.
“Relevant transactions, cooperation, and other activities” that can be prohibited or restricted are stated to include activities in the fields of education, science and technology, legal services, environmental protection, economy and trade, culture, tourism, health, and sports.
Examples for what could constitute “other necessary measures” that can be implemented under the law have been provided. These include:
- Prohibiting or restricting import and export activities related to China,
- Prohibiting or restricting investment in China,
- Prohibiting or restricting the provision of data/personal information to persons listed,
- Cancelling or restricting work-, stay-, and residence permits, and
- Imposition of fines.
Government Departments' Roles and Coordination in Countering Foreign Sanctions
Lastly, the Implementation Act outlines that various government departments are responsible for countermeasures and should undertake efforts to counter foreign sanctions within their respective domains (e.g., commerce). It also instructs the departments to coordinate and share information with other relevant departments.
What should companies do?
The Implementation Act should be seen as a further indication that China intends to implement countermeasures in response to the sanctioning of Chinese entities or individuals. Given the uncertain future development in the areas of global trade and sanctions, our recommendation for companies that are exposed to these regulatory risks with respect to China, by way of e.g. direct commercial presence or indirect exposure via supply chain or sourcing arrangements, is to monitor developments and be aware that sanctions directed at Chinese parties may be met with countermeasures.
Furthermore, companies are recommended to identify which government departments (e.g., on the basis of industry sector) that may announce countermeasures to ensure adequate monitoring of any decisions or sanctions that may affect their business operations. We will continue monitoring the situation and provide updates as additional information becomes available.
1 Implementation of the Anti-Foreign Sanctions Law of the People's Republic of China.
