OFFICE OF FOREIGN ASSETS CONTROL
Executive Order 13959 of November 12, 2020
Addressing the Threat From Securities Investments That Finance Communist Chinese Military Companies, as Amended
GENERAL LICENSE NO. 1B
Authorizing Transactions Involving Securities of Certain Communist Chinese Military Companies
(a) Except as provided in paragraph (b) of this general license, all transactions and activities prohibited by section 1(a) of Executive Order (E.O.) 13959, as amended by E.O. 13974 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 an entity whose name closely matches, but does not exactly match, the name of a Communist Chinese military company as defined by section 4(a) of E.O. 13959, as amended, are authorized through 9:30 a.m. eastern daylight time, June 11, 2021.
(b) This general license does not authorize:
(1) Any transactions or activities involving publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to such securities, of entities identified in the Office of Foreign Assets Control’s Non-SDN Communist Chinese Military Companies List (NS-CCMC List) pursuant to section 4(a)(iii) of E.O. 13959, as amended, as a subsidiary of a person determined to be a Communist Chinese military company, including entities added to the NS-CCMC List on January 8, 2021 (CNOOC Limited, China Mobile Limited, China Telecom Corporation Limited, China Unicom (Hong Kong) Limited).
Note to paragraph (b)(1): Pursuant to section 1(a)(ii) of E.O. 13959, as amended, prohibitions relevant to entities identified in the NS-CCMC List pursuant to section 4(a)(iii) of E.O. 13959, as amended, including entities added to the NS-CCMC List on January 8, 2021 (CNOOC Limited, China Mobile Limited, China Telecom Corporation Limited, China Unicom (Hong Kong) Limited), take effect beginning 9:30 a.m. eastern time on the date that is 60 days after such listing.
(2) Any transactions or activities otherwise prohibited by E.O. 13959, as amended, any other E.O. or statute, or any part of 31 C.F.R. chapter V.
(c) Effective May 18, 2021, General License No. 1A, dated January 26, 2021, is replaced and superseded in its entirety by this General License No. 1B.
Bradley T. Smith
Acting Director
Office of Foreign Assets Control
Dated: May 18, 2021
[On 6-3-2021, this GL was moved to OFAC’s Archive of Revoked and Expired General Licenses. This was done because the basis for the conduct prohibited, Executive Order 13974 on (Amending Executive Order 13959), was revoked in its entirety by EO 14032. The commentary below remains as it was just prior to the 6-3-2021 issuance of EO 14032. The reason for the revocation of the GL is that the basis for the conduct prohibited, Executive Order 13974 on (Amending Executive Order 13959), was revoked in its entirety by EO 14032].
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1) In FAQ # 858 and FAQ # 864 OFAC says that the prohibitions of the CMC EO apply to entities that appear on the OFAC "Non-SDN Communist Chinese Military Companies List," as well as entities whose names "closely match[]" the names of entities that appear on the list. No standards are articulated for what constitutes a “close match,” but OFAC gives some examples in FAQ # 864.
On January 8, 2021, OFAC issued GL 1 [1]. With that GL, the effective date for the prohibitions with respect to the entities that appear on the annex to the CMC EO was still Jan. 11th. What the GL did is make it so that the prohibitions only apply to the entities that actually appear on the OFAC NS-CCMC list. That list does include some names of “close matches” to entities on the annex, but with the GL, the “close match” concept only mattered insofar as the matches actually appeared on the OFAC NS-CCMC list (e.g., in the AKA column).
On January 27, 2021, OFAC issued GL 1A, superseding GL 1. GL 1A appears to have the practical effect to making it so that the “closely matches” standard articulated in FAQ # 858 and FAQ # 864 does not create any compliance burden, at least as it relates to the question of what entities are subject to the prohibitions of the EO (and at least through May 27, 2021). See FAQ # 878 and FAQ # 879.
On May 18, 2021, the GL was amended to extended the expiration date.
For the question of what entities are subject to the prohibitions of the EO, one may look to the Annex to the original EO and relevant lists produced by OFAC and the Department of Defense. If an entity is not listed on any of those lists, transactions in securities “of” that entity are either not prohibited or otherwise authorized by GL 1A.
That is true at least as it relates to the question of what entities' securities are subject to the prohibitions. The concept of “close match” is probably still relevant if (say) a debt instrument is (in fact) issued by an entity that is actually listed on the list, but the name of the debtor that appears on the instrument is one that “closely matches” the name of the entity on the list. In that case, OFAC would presumably consider the security at issue to be a security “of” the entity whose name actually appears on the list. In that case, the question is not what entity is subject to the prohibitions, as a threshold matter, but instead whether the securities at issue are, in fact, securities "of" an entity that is subject to the prohibitions.
[1] https://home.treasury.gov/system/files/126/chinese_military_gl1.pdf
2) For consolidated commentary on EO 13959, as amended by EO 13974, refer to Consolidated Comment on the CCMC EO, as Amended.