CGCC Successfully Hosts “Current Hot Topics on Compliance for CGCC Member Companies in the U.S.”

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On June 22nd, 2023, China General Chamber of Commerce-USA (CGCC) hosted  “Current Hot Topics on Compliance for CGCC Member Companies in the U.S.,” as part of its Legal and Policy event series.

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Taking place at the Bank of China Building in New York, the event brought together nearly 40 representatives from CGCC member companies for an afternoon of discussions surrounding the relevant compliance requirements, recent activities, and best practices.

Wei HU, Chairman of CGCC, President and CEO of Bank of China U.S.A., welcomed members to the event, emphasizing the timeliness of the topic, and wished everyone a happy holiday in light of the dragon boat festival.

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Wei HU, Chairman of CGCC, President and CEO of Bank of China U.S.A.

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Xiaomin CHEN, CGCC-USA General Counsel and Legal Counsel Committee Member, Managing Partner of DeHeng Chen, LLC in New York, moderated the high-level panel that featured three Squire Patton Boggs experts in the field, Michael A. Curto, Managing Partner (Washington DC office), Dan Waltz, Partner, and Edward J. Newberry, Global Managing Partner.

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Xiaomin CHEN, CGCC-USA General Counsel and Legal Counsel Committee Member, Managing Partner of DeHeng Chen, LLC in New York

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The event covered a broad range of topics that may impact CGCC member companies, including Piercing the Corporate Veil, Foreign Agents Registration Act (FARA), FCPA and Anti-Corruption, Data Security and Privacy Protection, Sanctions, Trade and Export Controls, etc.

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Edward J. Newberry, Global Managing Partner, Squire Patton Boggs

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Michael A. Curto, Managing Partner (Washington DC office),Squire Patton Boggs

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Dan Waltz, Partner, Squire Patton Boggs

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CGCC sincerely thanks Mr. Chen, Mr. Curto, Mr. Waltz and Mr. Newberry for their expertise and professional insights during the event.

About the CGCC Legal and Policy Event Series

Strengthening members’ understanding of recent developments within laws and regulations related to U.S.-China trade and investment, our Legal and Policy events invite renowned legal practioners to share their expertise and knowledge on timely legal topics such as compliance, taxation, labor, etc.

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On June 22nd, 2023, Mr. Xiaomin Chen, the Managing Partner of DeHeng New York law office, and three partners of Squire Patton Boggs (SPB), Edward Newberry, Michael Curto, and Daniel Waltz, attended a panel hosted by the China General Chamber of Commerce (CGCC) at the Bank of China Building in New York. With the impact of China-US relations on China-US trade in recent years, Mr. Chen used hypotheses to introduce the hot topics that related to Chinese-invested companies’ legal compliance, and representatives of the member companies of CGCC interacted with Mr. Chen and SPB partners. The attorneys addressed the common concerns of Chinese-invested companies in practice, including the “piercing the corporate veil” principle, the Foreign Agents Registration Act (FARA), the Foreign Corrupt Practices Act (FCPA), information and data protection, sanctions, and trade and export controls. At the same time, the attorneys introduced the recent laws and regulations that have passed in the past two years or are to be legislated by the U.S. government and explained the relevant contents that involve Chinese- invested companies’ business in the U.S. Finally, the attorneys gave suggestions on improving the Chinese-invested companies’ legal compliance.

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2023年6月22日，德恒（纽约）律师事务所主任陈小敏律师与Squire Patton Boggs（SPB）的三位合伙人，Michael Curto, Daniel Waltz, 和Edward Newberry参加了由美国中国总商会（CGCC）在纽约中国银行大楼举办的讲座。针对近年来中美两国关系对中美贸易产生的影响，结合CGCC各成员公司关心的热点问题，陈律师以案例形式引入各热点话题，各成员公司代表与陈律师及SPB的合伙人进行互动讨论。各位律师针对中资公司在实务中普遍关注的问题，包括“穿透公司面纱”原则、外国代理人登记法(FARA)、反海外行贿法案 (FCPA)、信息数据保护、经济制裁、外贸及出口管制等问题和相关法律规定进行探讨。同时，针对美国政府及部分州近两年已出台及拟出台的相关法律，对涉及到中资公司在美业务开展的内容进行讲解。最后，就中资企业的日常法律合规问题提出建议。

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CFIUS EXPANDS JURISDICTION TO INCLUDE REAL ESTATE TRANSACTIONS

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Introduction

In a recent development, the Committee on Foreign Investment in the United States (CFIUS) has proposed new rules aimed at broadening its jurisdiction over real estate transactions. Under the proposed regulations, foreign purchases of real estate within a 100-mile radius of sensitive military installations could trigger a CFIUS review. The expansion seeks to enhance national security safeguards and ensure appropriate oversight of foreign investments. Written public comments on the proposal are due by June 5, 2023.

Expanded Scope and Definition

CFIUS has identified eight additional sites, classified as sensitive military installations, to be included in its list. The proposed rules define a "covered real estate transaction" as any purchase, lease, or concession that grants a foreign person at least three out of the four specified rights in "covered real estate":

1. Right to physical access

2. Right to exclude others from physical access

3. Right to improve or develop the parcel

4. Right to attach fixed or immovable structures or objects to the real estate

In the majority of cases, the acquisition or lease of a real estate parcel is likely to confer the requisite number of rights as outlined above.

Implications and Compliance

Upon finalization of the proposed rule, all covered real estate transactions within a 100-mile radius of the listed facilities will be subject to CFIUS review. Therefore, it is crucial for foreign investors contemplating any investment in the United States, including real estate purchases, to seek guidance from CFIUS counsel for interpreting the regulations. Even if the acquisition does

not involve a listed facility, acquiring a U.S. business near a sensitive government facility or a commercial building housing government tenants may warrant filing with CFIUS. Mandatory filings might be necessary for cases involving foreign government-controlled investors or certain sensitive industries.

Conclusion

CFIUS's proposed expansion of jurisdiction over real estate transactions aims to strengthen national security measures. Foreign investors are advised to consult CFIUS counsel to ensure compliance with the regulations, particularly when considering investments involving listed facilities or proximity to sensitive government sites. By adhering to the updated guidelines, foreign investors can navigate the regulatory landscape effectively and mitigate potential risks associated with real estate transactions in the United States.

CFIUS扩大辖区范围以纳入房地产交易

简介

近期，美国外国投资委员会（CFIUS）提出新规定，旨在扩大其对房地产交易的监管范围。根据这项提案，外国人购买位于敏感军事设施100英里半径范围内的房地产可能会引发CFIUS审查。这一扩大旨在加强国家安全防护措施，并确保对外国投资进行适当监督。对该提案的书面公众评论截止日期为2023年6月5日。

范围扩大和定义

CFIUS已确认八个额外的敏感军事设施，并将其列入名单。根据提案规定，所谓的“涉及的房地产交易”是指外国人购买、租赁或获得让其在“涉及的房地产”中拥有以下四项中至少三项权利的交易：

1. 进入物理空间的权利

2. 禁止他人进入物理空间的权利

3. 改善或开发土地的权利

4. 在房地产上安装固定或不动的结构或物体的权利

在大多数情况下，房地产买卖或租赁很可能具备上述所述的必要权利数量。

影响和合规性

一旦该提案规定定稿，所有涉及的房地产交易在列入设施名单范围内的100英里半径内将受到CFIUS审查。因此，外国投资者在考虑对美国进行任何投资，包括房地产购买时，应咨询CFIUS顾问以解释相关法规。即使收购不涉及列入设施，收购靠近敏感政府设施的美国企业或商业建筑租赁给政府租户，也可能需要向CFIUS提交申请。涉及外国政府控制的投资者或某些敏感行业的情况可能需要强制性申报。

结论

CFIUS提议扩大对房地产交易的监管范围，旨在加强国家安全措施。建议外国投资者咨询CFIUS顾问，以确保遵守相关法规，尤其是在考虑涉及列入设施或靠近敏感政府场所的投资时。遵守更新的指南，外国投资者可以有效地应对监管环境，并减轻与美国房地产交易相关的潜在风险。

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Department of Treasury Releases CFIUS Enforcement and Penalty Guidelines

美财政部公布CFIUS执法与处罚指南

 

        On October 25, 2022, the U.S. Department of Treasury released the CFIUS Enforcement and Penalty Guidelines (the “Guidelines”). Such Guidelines are a new step in the evolving development of CFIUS review procedures after the expansion of its staff and funding under the Consolidated Appropriations Act in March 2022, as our prior newsletter described.

        The Guidelines clarify four issues: first, The Types of Conduct that may constitute a violation; second, the Sources of Information on which CFIUS Relies; third, the Penalty Process; fourth, Aggravating and Mitigating Factors.

        First, the Guidelines point out three potentially unlawful conducts: Failure to File, Non-Compliance with CFIUS Mitigation, and Material Misstatement, Omission, or False Certification. Second, regarding the sources of information on which CFIUS relies, the Guidelines note that the committee considers a wide range of sources but emphasize three sources in particular: Tips, Self-Disclosure, and Requests for Information. Third, the Guidelines address that a violation does not necessarily lead to a penalty but outline two important steps in the penalty process: Notice; Contest and Assessment. Fourth, in determining the appropriate response to a violation, the Guidelines point out that CFIUS considers a series of aggravating and mitigating factors. The Guidelines list six relevant factors: Accountability and Future Compliance; Harm; Negligence, Awareness, and Intent; Persistence and Timing; Response and Remediation; Sophistication and Record of Compliance.

        This is the first time that CFIUS clarifies its otherwise obscure procedures. However, this Guideline is non-binding and CFIUS retains broad discretion with respect to its enforcement and penalty decisions. Indeed, listing those potentially unlawful conducts may forewarn investors. To be sure, investors should be cautious in making their filing/non-filing decisions and be especially careful to ensure the completeness and accuracy of information submitted to CFIUS during the review process.

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        2022年10月25日，美国财政部发布了《外国投资委员会执法和处罚指南》（以下简称《指南》）。正如我们之前的通讯消息所描述的那样，在2022年3月《综合拨款法》扩大商务部工作人员和资金后，该《指南》是外国投资委员会审查程序的深入发展。

 该《指南》澄清了四个问题。第一，可能构成违法的行为类型；第二，外国投资委员会所依赖的信息来源；第三，处罚程序；第四，加重和减轻处罚的因素。

        首先，准则指出了三种可能的非法行为。未提交审查，不遵守外国投资委员会的缓解措施，以及重大错报、漏报或虚假证明。第二，关于外国投资委员会所依赖的信息来源，《指南》指出，委员会将考虑广泛的信息来源，但特别强调了三个来源。线索、自我披露和信息请求。第三，《指南》提到，违规行为不一定会导致处罚，但概述了处罚过程中的两个重要步骤。通知；异议和评估。第四，在决定对违规行为如何处罚时，《指南》指出，美国外国投资委员会会考虑一系列的加重和减轻处罚因素。《指南》列出了六个相关因素。责任和未来的合规性；危害；过失、意识和意图；持续时间；回应和补救；对规则的了解程度和合规记录。

        这是美国外国投资委员会首次澄清其原本并未公布的程序。然而，该《指南》不具有法律上的约束力，并且外国投资委员会对其执法和处罚决定保留了广泛的自由裁量权。事实上，列出这些潜在的非法行为可能会给投资者带来警示。可以肯定的是，投资者在做出申请/不申请的决定时应该谨慎，并特别注意在审查过程中确保提交给外国投资委员会的信息的完整性和准确性。

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Department of Defense updated its Section 1260H list

美国防部更新其1260H中国企业名单

 

        On October 5, 2022, U.S. Department of Defense releases a new list of People's Republic of China (PRC) Military Companies – as required under Section 1260H of the National Defense Authorization Act for Fiscal Year 2021 (NDAA 2021). The first list was released last year in June, 2021. The Department of Defense is required, under Section 1260H(b)(1) of NDAA 2021, to annually report “Chinese military company” until December 31, 2030.

        Although the text of the statute imposes an obligation to report annually, the Secretary of Defense is of the authority to decide additions or deletions to the list. The definitions provided in Section 1260H are broad and vague. The text of that statute does not exclude the possibility that any private Chinese company be labelled as “Chinese Military Company.” Indeed, Section 1260H(d)(1) to (3) of NDAA defines “Chinese military company” and “Military-civil fusion contributor” (MCFC) loosely. The definition of MCFC contains an all-encompassing definition under which an entity can be a “MCFC” whenever “the Secretary determines … appropriate.”

        However, no trade restriction measures or any other forms of sanctions are stated in the list this time. Indeed, Section 1260H of NDAA only labels these companies as “CMC” without stating what sanctions or limitations to follow -- a scenario that is different from NS-CMIC list produced by the Biden administration and Section 1237 list produced by the Trump administration.

        2022年10月5日，美国国防部宣布了第二批中国企业名单并宣称该名单上的企业为“中国军方企业”（CMC）。第一批1260H名单于去年6月公布。2021国防预算法案第1260H条b款1项要求美国防部从2021年起每年公布一批“中国军方企业”直到2030年。

        尽管NDAA 2021法律条文赋予美国防部每年公布名单的义务，但是具体某一企业进入或脱离名单由美国防部决定。并且，2021国防预算法案中所规定的判断一家企业是否属于“中国军方企业”和“军民融合的贡献企业”的定义宽松。不能排除任何一家与军方并无关联的民营企业被美方划入该名单的可能。具体来说，第1260H条d款1项至3项提供了对于“中国军方企业”和“军民融合的贡献企业”的定义。其中，“军民融合的贡献企业”的定义中包含一兜底条款第1260H条d款2项H节：“其他任何由国防部部长决定符合的情形。”

        但是，就目前为止，该法案和美国防部本次发布的名单并未明确指出采取何种惩罚或贸易限制措施。事实上，目前1260H名单仅仅是套口袋，而未决定采取任何措施——这不同于拜登政府的NS-CMIC名单或特朗普时期公布的1237名单。

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CFIUS Conference 2022 – updates on case review principles

美国外国投资委员会会议重要内容概述

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        In June 2022, the Committee of Foreign Investments in the United States (“CFIUS”) hosted their first ever conference for practitioners, many important notices were addressed at the conference.

To adapt to the ever-evolving national security landscape, CFIUS suggested that it would be smart for investors to be prepared for mitigation and expect any future re-negotiation of mitigation measures. To prepare for a CFIUS review, filing a shortened declaration instead of a full Joint Voluntary Notice (“JVN”) can be beneficial at times, however for investors from countries of concern, or when the petition involves other complex issues, a JVN would be expected.

        With respect to data security, cases involving sensitive personal data (“SPD”) should be analyzed not only for its current access to SPD, but also for how these data collecting practices would change in the future. Genetic and Medical data are now concerned as “high risk”. CFIUS stated that they will continue to share investment screening data with allies of the United States, and work with them on collecting intelligence on foreign acquirers.

        The Consolidated Appropriations Act on March 8th, 2022 funded 12 staff positions in the “Industry and Analysis” unit of the Commerce department’s International Trade Administration, The CFIUS review would become more in-depth around the protection of American technology, and investors should expect increasing mitigation orders, and more post-review questions.

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        今年六月，美国外国投资委员会（"CFIUS"）举办了他们有史以来的第一次从业人员会议，该次会议讨论了许多重要议题。

        首先，为适应不断变化的国家安全形势，CFIUS会建议投资者为缓解措施，以及后续的措施重新商讨环节做好准备。为准备CFIUS的审查，提交一份简短的声明取代完整的联合自愿通知（"JVN"）是有益的，但是对于来自“受关注国家”的投资者，或者当申请涉及其他复杂问题时，投资者需提交完整JVN。

        其次，数据安全方面，涉及敏感个人数据（"SPD"）的案件，审查不仅包括其目前对SPD的访问情况，也需涵盖未来数据收集方式可能发生的变化。其中基因和医疗数据现在被视为 "高风险"。CFIUS表示，他们将继续与众多盟友国分享投资相关数据，并与他们合作收集有关外国投资者的情报。

        最后，2022年3月8日的《综合拨款法案》为商务部国际贸易管理局的 "行业和分析 "部门提供了12个职位，CFIUS的审查将围绕防止技术外泄变得更加深入严谨，投资者预计会面临更多的缓解令，以及审查完结之后来自相关部门的后续跟进。

             

SEC published Sample Letter to China-Based Companies

美国证券交易委员会发布致中国公司的信函样本

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        On Dec 20, 2021, Division of Corporation Finance of SEC publish Sample Letter to China-Based Companies. Recent events have highlighted the risks associated with investing in companies that are based in or that have the majority of their operations in the People’s Republic of China (China-based companies). The Division of Corporation Finance believes that more prominent, specific, and tailored disclosure about these risks, and companies’ use of the variable interest entity (VIE) structure specifically, is warranted to provide investors with the information they need to make informed investment decisions and for companies to comply with their disclosure obligations under the federal securities laws. In light of these concerns, the Division is issuing comments to China-based companies seeking more specific and prominent disclosure about the legal and operational risks associated with China-based companies.

        The Division’s comments focus on the need for clear and prominent disclosure regarding the structure of the company, including the relationship between the entity conducting the offering and the entities conducting the operating activities, risks associated with a company’s use of the VIE structure, and the potential impact on the company’s operations and investors’ interests if such structure were disallowed or the contracts were determined to be unenforceable. The Division’s comments also focus on additional legal, regulatory, and enforcement risks that may apply to investments in China-based companies, such as the potential impact of the Holding Foreign Companies Accountable Act and related rules and any necessary PRC permissions a China-based company may need to operate its business or offer securities to foreign investors. The illustrative sample letter contains sample comments that, depending on the particular facts and circumstances, the Division may issue to China-based companies. The Division urges companies to consider these sample comments and additional regulatory developments in this area as they prepare their disclosure documents.

        2021年12月20日，美国证券交易委员会公司财务部发布《致中国公司函样本》。他们认为最近的事件凸显了投资于设在中国或大部分业务在中国的公司(中国公司)的相关风险。公司财务部认为，对于这些风险的更突出、更具体、更有针对性的披露，以及公司具体使用可变利益实体(VIE)结构，有权向投资者提供作出明智投资决策所需的信息，并使公司遵守联邦证券法规定的披露义务。鉴于这些担忧，该部门正向中国公司发表意见，要求披露与中国公司有关的法律和经营风险的更具体和突出的信息。

        该部门的意见集中于明确和突出披露公司结构的必要性，包括进行发行的实体和进行经营活动的实体之间的关系，与公司使用VIE结构相关的风险，如果这种结构被禁止，或合同被确定为不可执行，将对公司的运营和投资者的利益产生潜在影响。该部门的评论还关注了在中国投资公司可能面临的额外法律、监管和执法风险，例如《外国控股公司问责法》(Holding Foreign Companies accountability Act)和相关规定的潜在影响，以及中国公司在经营其业务或向外国投资者提供证券时可能需要获得的任何必要的中国许可。

        说明性样本信包括有样本意见，根据具体事实和情况，该部门可向中国公司发出样本意见。敦促各公司在拟备披露文件时，会考虑这些样本意见和在这些方面的相关监管情况。

 

U.S. BLACKLISTS 27 COMPANIES DUE TO SECURITY THREATS

美国因安全威胁将 27 家公司列入黑名单

 

        The Bureau of Industry and Security (BIS) of the US Department of Commerce recently stated that for national security reasons, the US has blacklisted 27 foreign entities, 12 of which are from China. BIS stated in the rule published in the Federal Register: “In this final rule, BIS amended the Export Administration Regulations (EAR) and added 27 entities to the list of entities. These 27 entities have been identified by the U.S. government as violating countries. Security or foreign policy the interests of the United States," BIS said in the rules published in the Federal Register. In addition to these 12 Chinese entities, the list also includes entities from Japan, Pakistan, and Singapore, as well as one Russian entity. The list includes three subsidiaries of China Jiazhao Technology Co., Ltd. (an entity that was blacklisted in 2019) in China, Singapore, and Japan. The above facts are not difficult to see that the Biden administration has not relaxed the relevant control policies implemented by the previous government since it came to power. There is huge room for sanctions and the lack of legal basis is not ruled out. Chinese companies, especially technology companies, should maintain a high degree of vigilance, actively prepare, and earnestly study and implement compliance measures. In this way, we can plan to prevent problems before they happen, and establish the awareness of compliance for all employees of the company; second, even if they encounter possible sanctions, they can submit reliable evidence in time to defend themselves and get the company out of the sanctions list. For a long time, DeHeng New York office has been dedicated to serving the American compliance business of various large overseas companies, and has maintained close cooperation with top law firms in Washington, D.C., and has successfully completed various legal services delivered by clients many times. At the same time, DeHeng New York Attorney Xiaomin Chen has been serving as the legal counsel of CGCC for many years, and he is familiar with the latest policies and trends of all parties. We will make persistent efforts to provide professional and reliable legal services for various corporate entities in the process of implementing cross-border compliance strategies.

        美国商务部工业和安全局 (BIS) 近期表示，出于国家安全考虑，美国已将 27 个外国实体列入黑名单，其中 12 个来自中国。BIS在联邦公报上发布的规则中指出：“在此最终规则中，BIS 修改了出口管理条例 (EAR)，将 27 个实体添加到实体清单中。这 27 个实体已被美国政府认定为违反国家安全或外交政策美国的利益，”BIS在联邦公报上发布的规则中说。除了这 12 家中国实体外，该名单还包含来自日本、巴基斯坦和新加坡的实体，以及 1 家俄罗斯实体。该名单包括中国嘉兆科技有限公司（一家于 2019 年被列入黑名单的实体）在中国、新加坡和日本的三个附属公司。

        以上事实不难看出拜登政府上台以来并未放松前任政府实施的相关管制政策，制裁理由空间极大，并不排除缺乏法律依据的可能。中国公司，特别是科技类公司应保持高度警惕，积极准备，认真研究、实施合规措施。这样一则能未雨筹谋防患于未然，建立公司全员合规意识；二则即便遭遇可能的制裁，也能及时提交可靠证据自辩清白，使公司脱离制裁名单。长期以来，德恒纽约办公室专业致力于服务于各大型海外企业的美国合规业务，并与美国华府顶尖律所一直保持密切合作，多次成功完成了客户交付的各类法律服务工作。同时德恒纽约陈小敏律师多年来一直担任中国美国总商会法律顾问一职，熟知各方最新政策及动向。我们将再接再厉，为各企业实体在实施跨境合规策略的过程中提供专业而又可靠的法律服务。

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