Category: Administrative & Regulatory

Virginia Accelerates Adult-Use Cannabis Legalization

We previously highlighted the Virginia Legislature’s move to legalize adult-use cannabis.  This week the Virginia Legislature passed a bill legalizing adult-use cannabis.  In doing so, Virginia greatly accelerated the timeline for legalization.

Prior drafts had set a 2024 date for legalizing the possession of recreational cannabis.  The bill passed this week when Lieutenant Governor, Justin Fairfax, broke a 20-20 tie in the Virginia Senate legalizes adult possession of an ounce or less of cannabis beginning on July 1, 2021.

While the new law legalizes recreational possession and allows Virginia residents to grow up to four cannabis plants beginning July 1st, Virginia still isn’t likely to begin licensing recreational cannabis retailers until 2024.  Likewise, the new bill doesn’t allow existing medical cannabis dispensaries to begin selling to adults for recreational use.

Copyright © 2021 Womble Bond Dickinson (US) LLP All Rights Reserved.

 

ARTICLE BY Morgan E. Persinger of Womble Bond Dickinson (US) LLP
For more articles on cannabis, visit the NLR Biotech, Food, Drug section.

Biden Administration’s Current U.S. Travel Restrictions and Revised National Interest Exception Criteria

The ongoing COVID-19 pandemic has resulted in numerous presidential proclamations restricting travel and entry into the United States. Likewise, since the pandemic began, the criteria for “national interest exceptions” (NIEs) has also evolved. On March 2, 2021, the U.S. Department of State issued updated criteria for NIEs relating to certain travelers from the Schengen Area, United Kingdom, and Ireland. Given the frequency of the changes, it can be difficult to track the current state of these matters. The following information is a summary of the latest updates with regard to U.S. travel restrictions.

Travel Restrictions Based on Country of Physical Presence

Presidential Proclamation Current Status Impact
Proclamation 9984 In effect Suspends and limits entry into the United States by individuals who were physically present in China during the 14-day period prior to their entry/attempted entry
Proclamation 9992 In effect Suspends and limits entry into the United States by individuals who were physically present in Iran during the 14-day period prior to their entry/attempted entry
Proclamation 9993 Revoked Suspended and limited entry into the United States by individuals who were physically present in the Schengen Area during the 14-day period prior to their entry/attempted entry
Proclamation 9996 Revoked Suspended and limited entry into the United States by individuals who were physically present in the United Kingdom and Ireland during the 14-day period prior to their entry/attempted entry
Proclamation 10041 Revoked Suspended and limited entry into the United States by individuals who were physically present in Brazil during the 14-day period prior to their entry/attempted entry
Proclamation 10143 In effect Suspends and limits entry into the United States by individuals who were physically present in South Africa, the Schengen Area, the United Kingdom, Ireland, and Brazil during the 14-day period prior to their entry/attempted entry

Following the issuance of Proclamation 10143, the State Department rescinded previous NIE guidance and simultaneously issued new guidance on March 2, 2021, as related to the Schengen Area, the United Kingdom, and Ireland. According to the State Department, the original guidance had provided exceptions for “certain technical experts and specialists, senior-level managers and executives, treaty-traders and investors, professional athletes, and their dependents.” However, the updated guidance includes exceptions under Proclamation 10143 for individuals who “provide vital support for critical infrastructure.” [Emphasis added.] Additionally, NIEs remain available for individuals entering the United States “for purposes related to humanitarian travel, public health response, and national security.”

Travel Restrictions Based on Visa Type

On April 22, 2020, the Trump administration issued Proclamation 10014 suspending the entry of individuals to the United States on immigrant visas. This proclamation did not affect applications for adjustment of status or nonimmigrants, such as business visitors or temporary workers. On June 22, 2020, the Trump administration issued Proclamation 10052, which extended the sunset date of Proclamation 10014 to December 31, 2020. Proclamation 10052 also suspended the entry of certain individuals to the United States on select nonimmigrant visas, including H-1B, H-2B, J-1, and L-1 visa holders, as well as their dependents through the end of the year. On December 31, 2020, the Trump administration issued Proclamation 10131, extending Proclamations 10014 and 10052 until March 31, 2021. On February 24, 2021, the Biden administration revoked Proclamation 10014 and section 1 of Proclamation 10052. The Biden administration allowed the remaining sections of Proclamation 10052 to expire on March 31, 2021, and has not expressed any plans to renew or replace it at this time. As a result, Proclamations 10014 and 10052 are no longer in effect.

Backlogs Remain for Most Consular Operations

While the expiration of Proclamation 10052 is certainly welcome news, foreign nationals should not expect immediate processing of their visa applications. The backlog of cases pending at the U.S. consulates around the world remains an ongoing issue due to COVID-19. The U.S. consular posts have confirmed they will begin a phased resumption of routine visa services based on local conditions but no specific timeline is available. Additionally, applicants who are no longer subject to Proclamation 10052 may still face obstacles entering the United States due to country-specific travel restrictions. Foreign nationals who are subject to country-specific travel bans will continue to require an NIE authorizing each entry to the United States.

© 2020, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

ARTICLE BY Ashley K. Kerr and Melissa Manna of Ogletree, Deakins, Nash, Smoak & Stewart, P.C.
For more articles on COVID-19 travel restrictions, visit the NLR Immigration section.

Legislation to Create a Pathway to Legalization Passes House and Goes to Senate

On March 18, 2021, the House passed two bills designed to create paths to legalization for certain groups of immigrants. Both the Dream and Promise Act of 2021 and the Farm Workforce Modernization Act have been sent to the Senate.

American Dream and Promise Act

Legislation that will create a route for legalization for Dreamers (residents who were brought to the United States as children) has passed the House. The legislation received bipartisan support, although a closer battle can be expected in the Senate. The bill passed 228-197, with nine Republicans joining the Democrats.

The bill’s sponsor said that this legislation will bring relief to 2.5 million undocumented immigrants. The legislation covers all the undocumented immigrants who entered the U.S at the age of 18 years or younger. This legislation also includes immigrants who have protection under the Deferred Action for Childhood Arrivals (DACA). It would also provide a path to legal status for individuals with Temporary Protected Status (TPS) as of 2017 and Deferred Enforced Departure (DED), which are the two forms of temporary protection for immigrants from countries that face a crisis.

The bill “eliminates the ambiguity in their lives and recognizes the talents and indispensable contributions Dreamers make to our country,” Rep. Lucille Roybal-Allard, a primary sponsor, said on the House floor. “Some are married or educated, they speak the language, they’re working, they pay the taxes,” said Rep. Fred Upton of Michigan. “When you get to know these people, and I do, it breaks your heart.”

Pathway to Legalization

The Biden administration expressed its support for this legislation in a statement before the vote on March 18. “Americans recognize that our Nation is enriched by the contributions of immigrants. [The bill] is a critical milestone toward much-needed relief for the millions of undocumented individuals who call the United States home,” the statement said.

Farm Workforce Modernization Act

The House also passed the Farm Workforce Modernization Act by a 247-174 vote. Thirty Republicans voted for the bill, while one Democrat voted against it.

The legislation will provide a temporary status, Certified Agricultural Workers, for those who were agricultural workers for at least 180 days during the past two years. Spouses and children of the workers can also apply under the Act. Undocumented farmworkers will have to pay a fine and engage in additional agricultural work depending on their length of period they have performed agricultural labor in the United States.

Those with ten years of previous agricultural experience will be eligible to apply for a green card after working four more years. Those with less than ten years of experience will have to work eight more years to apply.

The legislation also streamlines the process to get an H-2A visa, which is a work visa for foreign citizens to work temporarily in the United States. This bill is seen as a welcome measure for many in the agricultural sector, as there has always been a dearth of farmworkers in the United States. Undocumented farmworkers are especially vulnerable to the COVID-19 virus, as they have limited access to medical facilities and are often underpaid due to their immigration status.

©2020 Norris McLaughlin P.A., All Rights Reserved

ARTICLE BY Raymond G. Lahoud of Norris McLaughlin P.A.
For more articles on immigration, visit the NLR Immigration section.

SEC Ventures Into The Dark Web, But Can It Establish A Connection?

In March, the Securities and Exchange Commission announced its first securities enforcement action involving the “dark web”.  The SEC’s complaint describes the “dark web” as referring to “a subset of the deep web that is intentionally hidden, requiring specific software to access content”.   The SEC states that the “deep web” refers to “anything on the internet that is not indexed by, or accessible via, a search engine like Google”.

The SEC’s complaint alleges that the defendant “offered and sold on one of the dark web marketplaces various purported
‘insider tips’ that he falsely described as material, nonpublic information from the insider trading forum or corporate insiders”.  I found this interesting because the SEC wasn’t charging the defendant with insider trading but with selling false insider tips.  This may be fraudulent, but is it it a securities law violation?  Stock tips, whether false or true, are not themselves securities.  How does the SEC bring the defendant’s allegedly fraudulent conduct under the securities laws?

To establish a violation of Rule 10b-5, the SEC must prove that the defendant’s activities were “in connection with” the purchase or sale of a security.  Here, the defendant’s deception did not relate to securities that he sold to investors.  The SEC’s complaint attempts to connect the defendant’s activities to securities transactions by alleging  that traders paid for the tips using Bitcoin, and used the fake insider information to purchase and sell stock of various publicly traded companies.  In SEC v. Zandford, 535 U.S. 813 (2002), the U.S. Supreme Court found that the person deceived do not have to be counterparties to the person committing the fraud.  However, the defendant in this case might argue that his fraud was complete when he sold the false tips and therefore the SEC cannot establish the requisite connection.  I will be interested to learn whether this becomes a contested issue at trial.

© 2010-2020 Allen Matkins Leck Gamble Mallory & Natsis LLP

ARTICLE BY Keith Paul Bishop of Allen Matkins Leck Gamble Mallory & Natsis LLP
For more articles on the SEC, visit the NLR Securities & SEC section.

American Jobs Plan, By the Numbers

On March 31, 2021, President Biden released details on the American Jobs Plan, which provides funding for infrastructure, clean energy, innovation and R&D, manufacturing and workplace support, and the caregiving economy. The proposal also includes revenue increase proposals to partially offset the new initiatives. Here is a summary of the amounts proposed in each major category:

INFRASTRUCTURE AND CLEAN ENERGY
Transportation Infrastructure $ 621 billion
Roads and Bridges $ 115 billion  
Public transit $ 85 billion  
Passenger and Freight Rail $ 80 billion  
Road safety $ 20 billion  
Electric vehicles $ 174 billion  
Airports, ports, waterways $ 42 billion  
Reconnect neighborhoods $ 20 billion  
Large projects $ 25 billion  
Resilience $ 50 billion  
Other $ 10 billion  
Water, Electricity, Broadband $ 311 billion
Drinking water $ 111 billion  
EPA state fund ($45 billion)    
Water systems ($56 billion)    
PFAS ($10 billion)    
Broadband $ 100 billion  
Electric Power $ 100 billion  
Electric grid    
Extend clean energy ITC, PTC; establish EECES    
Reclamation ($16 billion)    
Brownfield, Superfund ($5 billion)    
Carbon capture and sequestration    
Civilian Conservation Corps ($10 billion)    
Homes and Buildings $ 378 billion
Retrofit Homes and Buildings $ 213 billion  
Affordable rental housing    
NHIA tax credits ($20 billion)    
Zoning incentives    
Public housing ($40 billion)    
Clean Energy Accelerator ($27 billion)    
Education and Child Care Facilities $ 137 billion  
Public School modernization ($ 100 billion)    
Community Colleges ($ 12 billion)    
Child Care ($25 billion)    
VA Hospitals $ 18 billion  
Federal Buildings $ 10 billion  
SUBTOTAL, INFRASTRUCTURE AND CLEAN ENERGY $ 1.310 trillion
CAREGIVING ECONOMY
Expand Medicaid Home and Community-based Care $ 400 billion
INNOVATION AND R&D
Future technologies $ 180 billion
NSF $ 50 billion  
Rural, additional R&D $ 30 billion  
Research labs $ 40 billion  
Climate R&D $ 35 billion  
HBCUs/MSIs $ 25 billion  
Retool and revitalize manufacturing $ 300 billion
Commerce supply chains $ 50 billion  
Semiconductors $ 50 billion  
Medical countermeasures $ 30 billion  
Clean energy (EV, nuclear) $ 46 billion  
Regional innovation hubs $ 20 billion  
NIST $ 14 billion  
Manufacturing extension partnerships $ 2 billion  
Capital access, sec. 48C $ 52 billion  
Small business incubators $ 31 billion  
Rural Partnership program $ 5 billion  
Workforce Development $ 100 billion
Dislocated Workers program $ 40 billion  
Underserved communities $ 12 billion  
Apprenticeships, STEM $ 48 billion  
SUBTOTAL, INNOVATION AND R&D $ 580 billion
     
TOTAL $ 2.290 trillion

LABOR REFORMS

  • Enact the Protecting the Right to Organize Act
  • Apply labor standards to infrastructure, clean energy funding recipients
  • Increased penalties for workplace safety and health violations

REVENUES

  • Raise Corporate Rate to 28%
  • Increase Global Minimum Tax to 21%
  • Global agreement on minimum corporate tax
  • Limit Corporate Inversions
  • Deny Offshoring deductions, create Onshoring credit
  • Repeal Foreign Derived Intangible Income deduction
  • 15% minimum on corporate book income
  • Eliminate fossil fuel tax incentives
  • Increase corporate enforcement
    ©2020 Greenberg Traurig, LLP. All rights reserved.

    For more articles on the American Jobs Plan, visit the NLR Coronavirus News section.

COBRA Alert: Enhanced Benefits for Those Eligible

On March 11, 2021, President Biden signed into law the American Rescue Plan Act (ARPA), which provides important health insurance benefits to certain eligible individuals. Specifically, the ARPA requires employers to cover 100% of Consolidated Omnibus Budget Reconciliation Act (COBRA) premiums from April 1, 2021, through September 30, 2021, for former employees who:

  • Became COBRA-eligible in or after November 2019;
  • Lost employer-sponsored health insurance because of an involuntary termination of employment or because of an involuntary reduction in hours; and
  • (1) Elected COBRA; (2) elected COBRA but let the coverage lapse; or (3) did not elect COBRA.

Former employees are not eligible for the ARPA COBRA subsidy if they:

  • Resigned voluntarily, or voluntarily reduced their hours;
  • Were terminated for gross misconduct;
  • Are now covered under another group health plan; or
  • Are Medicare-eligible.

Note, if COBRA coverage is set to expire before September 30, 2021, ARPA does not extend the expiration date; and many questions remain. For instance, does the ARPA COBRA subsidy extend to those who left employment per a mutual decision, for “good reason” under an employment agreement, or pursuant to a voluntary exit incentive plan? The Department of Labor is currently drafting regulations and guidance that should help answer these questions.

What Do Eligible Former Employees Need To Do?

For anyone who is covered by COBRA as of April 1, 2021, nothing needs to be done. It is up to the employer or the employer’s health insurance carrier to ensure that the premiums are paid for the relevant period. For those who let COBRA lapse or had not elected COBRA, the employer or the health insurance provider must provide notice of the new benefit and of a new enrollment period. The new enrollment period begins on April 1, 2021 and ends 60 days from delivery of the ARPA COBRA notification.

If you believe you may be entitled to coverage, are interested in receiving the benefits, and are not contacted by your former employer or their provider in the next few weeks, consider reaching out to the employer’s Human Resources Department or the insurance carrier to ask for information about your COBRA benefits under ARPA, or contact your employment lawyer.

© 2020 SHERIN AND LODGEN LLP

ARTICLE BY Gavriela M. Bogin-Farber of Sherin and Lodgen LLP
For more articles on COBRA, visit the NLR Corporate & Business Organizations section.

CBD Regulatory Enforcement Continues with Over-the-Counter CBD Pain Relief Products

Enforcement by the Food and Drug Administration (FDA) against cannabidiol (CBD)-containing products continues through the issuance of two new warning letters. On March 22, 2021, FDA published a press release cautioning companies against illegally selling over-the-counter (OTC) CBD products for pain relief. In the warning letters, FDA cited products listing CBD as an inactive ingredient for unapproved drug and misbranding violations.

Regulatory Background of CBD Products

We have previously blogged about the regulation of CBD products by the FDA and provided updates to the government’s actions to create a comprehensive regulatory framework for CBD. But as a brief refresher, FDA does not permit adding CBD as an ingredient of food products or dietary supplements. And while the Agriculture Improvement Act of 2018 (the Farm Bill) legalized the production of industrial hemp and products derived from hemp, it did not legalize all uses of and products containing hemp derivatives (such as CBD).

Under the Federal Food, Drug and Cosmetic Act (FD&C Act), any product intended to diagnose, cure, mitigate, treat or prevent a disease, and any product (other than a food) that is intended to affect the structure or function of the human body is a drug. This definition includes articles and components of drugs, which are regulated as drugs. OTC drugs must be approved by the FDA or meet the requirements for marketing without an approved new drug application under federal law; this includes drug products containing CBD.

Currently, nonprescription drug products containing CBD may not be legally marketed without an approved new drug application, regardless of whether the CBD is represented on the labeling as an active ingredient or an inactive ingredient. To date, no CBD-containing drug has met applicable FDA requirements to be legally marketed for nonprescription use. However, as noted in a prior blog post, the FDA has approved one CBD-containing prescription drug product for the treatment of seizures associated with tuberous sclerosis complex, Lennox-Gastaut syndrome, and Dravet syndrome in human patients.

FDA’s primary concerns pertaining to CBD use in products include a lack of safety data and the quality of the CBD products on the market. Currently, there is insufficient safety data to establish cumulative exposure to CBD (and THC), impact on vulnerable populations, or impact on drug development. There are also concerns about contaminants such as heavy metals, microbials, pesticides, and THC. In addition, FDA is concerned that there is a lack of appropriate processing controls and practices regarding the quality of CBD products, which puts consumers at additional risk.

Analysis of OTC CBD Warning Letters and Potential Implications to Industry

To date, FDA’s CBD enforcement has focused on disease or health claims as well as the products’ intended use. FDA commonly determines a product’s “intended use” based on: claims in the labeling, advertising, or promotion; consumer perceptions; and ingredients with well-known therapeutic uses. Products with unsubstantiated or misleading claims may result in a change to the intended use and consequently, a change to the status of the product causing it to become an unapproved drug or adulterated product under the FD&C Act.  A product is adulterated if it fails to conform to FDA’s standards of quality, strength, or purity.

FDA’s recently issued warning letters to Honest Globe, Inc. and BioLyte Laboratories, LLC are no different with the exception that these warning letters address OTC CBD drug products claiming to provide pain relief. Honest Globe and BioLyte, both manufactured and marketed OTC CBD products that allegedly provide pain relief. Although CBD is labeled as an inactive ingredient on the products, the labeling of these products represent CBD as an active ingredient due to the frequent and prominent placement of CBD claims on the products’ labeling and advertising on the companies’ websites. The labeling and advertising may lead consumers to the conclusion that the product provides benefits due to the CBD contents. To add insult to injury, CBD is not an active ingredient in any applicable final monograph or TFM, for purposes of establishing eligibility for lawful marketing without an approved application under the FD&C Act. Even if CBD was considered an “inactive ingredient” in these nonprescription drug products, the products would still require approval through a new drug application in order to be legally marketed since CBD has no known functional role as an inactive ingredient in a finished product.

In addition, Honest Globe issued a press release on its Instagram page that stated the “Did you know that Elixicure [product in question] was the first over-the-counter CBD-infused topical pain cream product to receive FDA certified registration” (the company made several similar claims identified in the warning letter). FDA noted that to state the product is “FDA registered” is inaccurate. Drugs are subject to listing with FDA, not registration. Moreover, registration of an establishment or listing of a drug does not denote approval of the establishment, the drug, or any other drugs of the establishment, nor does it mean that a product may be legally marketed. FDA stated that “[a]ny representation that creates an impression of official approval or that a drug is approved or is legally marketable because of registration or listing is misleading and constitutes misbranding.”

Aside from the labeling and advertising claims and an assessment of the products’ intended use, both companies displayed significant violations of current good manufacturing practice (CGMP) regulations for finished pharmaceuticals demonstrating FDA’s concerns over safety data and quality control. The companies’ methods, facilities, and controls for manufacturing, processing, packing, and holding did not confirm to CGMP making the product adulterated within the meaning of the FD&C Act.

Neither of the company’s products have been subject to the approval process, nor have there been any evaluation of whether they are effective for the claims used, appropriate dosage, interaction with other drugs or products, or dangerous side effects or other safety concerns.

FDA Principal Deputy Commissioner Amy Abernethy, M.D., Ph.D. stated that: “The FDA continues to alert the public to potential safety and efficacy concerns with unapproved CBD products sold online and in stores across the country. . . It’s important that consumers understand that the FDA has only approved one drug containing CBD as an ingredient. These other, unapproved, CBD products may have dangerous health impacts and side effects. We remain focused on exploring potential pathways for CBD products to be lawfully marketed while also educating the public about these outstanding questions of CBD’s safety. Meanwhile, we will continue to monitor and take action, as needed, against companies that unlawfully market their products — prioritizing those that pose a risk to public health.”

Over the past several years, FDA has continued to issue warning letters to companies that market unapproved new drugs that allegedly contain CBD at an increased rate. These new warning letters are unique in that they address OTC CBD pain relief. As noted, demonstrating a product’s intended use and making disease and health claims are common pitfalls for companies selling CBD products. The rise of OTC CBD pain relief products make this an area to watch. As this area will no doubt continue to be a hot enforcement area for the FDA, we will continue to update our readers of any important regulatory activity.

©1994-2020 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
ARTICLE BY Elizabeth K. Conti of Mintz
For more articles on CBD, visit the NLR Biotech, Food, Drug section

More than a “Board” Game: How Companies Thrive with Diversity, Equity and Inclusion

Over the past few years, California has enacted legislation that requires public companies in California to meet certain diversity metrics with respect to their boards of directors. These board-specific requirements follow the development of empirical data that supports the following conclusions: (1) diversity in public corporations’ boards of directors was severely lacking and (2) diversity at a top level can make a company perform better. But diversity, equity and inclusion (“DE&I”) does not end at the top, though that is a great place to start.

To that end, in 2018, Senate Bill 826 was signed into law to advance equitable gender representation on California corporate boards. The law required that by the end of 2019, all domestic general corporations and foreign public corporations whose principal offices are located in California must have a minimum of one female on its board of directors. By the end of 2021, the law requires an increase to a minimum of two female directors if the corporation has five directors, or a minimum of three female directors if the corporation has six or more directors. And in order to add teeth, the California Secretary of State is authorized to impose fines for violations of these requirements: $100,000 for a first violation, or for failure to timely file board member information with the Secretary of State, and $300,000 for a second or subsequent violation. See Cal. Corp. Code Sections 301.3 and 2115.5.

In September 2020, Assembly Bill 979 was signed into law, requiring boards of California public corporations to include directors from underrepresented communities by the end of 2021. An individual from an underrepresented community is defined as “an individual who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native, or who self-identifies as gay, lesbian, bisexual, or transgender.” By the end of 2022, those requirements grow to two board seats if there are five to eight board seats total, and three board seats for companies with nine or more board seats. Similar fines are available for non-compliance ($100,000/$300,000). See Cal. Corp. Code Sections 301.3, 301.4 and 2115.6.

While there is ample justification for these board-specific legislative changes, DE&I go far beyond the make-up of a board of directors and impact the entirety of a company. Recently, we spoke with Melynnie Rizvi, Deputy General Counsel and Senior Director of Employment, Inclusion and Impact at SurveyMonkey on our podcast, The Performance Review, to discuss how DE&I can make a company thrive. (Check out the episode here – where you can also get MCLE self-study credit).

Among the salient points: To thrive with DE&I, it cannot just happen in the boardroom – it’s the whole company. According to Ms. Rizvi, companies should let those initiatives permeate further into the company culture and be included in a company’s business plans. There are a number of reasons companies should focus on developing programs and policies to enrich DE&I efforts:

Reason 1: It is the right thing to do.

Though business can be cutthroat, more often than not, the right business decision is also just the right thing to do. Put simply, developing an environment that champions diversity is not only consistent with California law, it is good for your employees and good for your consumers. This dovetails with an ancillary benefit – it is good for a company’s image. Brand loyalty and awareness is more important than ever, both for recruiting solid talent, and making consumers happy. More and more employees and consumers are making choices about which company to support based on the company’s outward facing DE&I initiatives or protocols. As this data becomes clearer, we see more and more employees sharing positive sentiment toward racial justice and racial equality. According to Ms. Rizvi, a SurveyMonkey poll recently found that the majority of employees in the tech sector want to work for companies that take a stand on social issues.

Reason 2: It is good for business.

Indeed, research and data have shown that a focus on DE&I, along with other initiatives related to environmental, social and governmental programs, actually result in better financial performance for companies. Here are some examples cited in SB 826 and AB 979:

  • “According to a report by [an international consulting firm], for every 10 percent increase in racial and ethnic diversity on the senior-executive team, earnings before interest and taxes rise 0.8 percent.”
  • “A study by [a research firm] found that the high tech industry could generate an additional $300 billion to $370 billion each year if the racial or ethnic diversity of tech companies’ workforces reflected that of the talent pool.”
  • “In 2014, [a large financial institution] found that companies with at least one woman on the board had an average return on equity (ROE) of 12.2 percent, compared to 10.1 percent for companies with no female directors. Additionally, the price-to-book value of these firms was greater for those with women on their boards: 2.4 times the value in comparison to 1.8 times the value for zero-women boards.”
  • “A 2017 study by [a finance company] found that United States’ companies that began the five-year period from 2011 to 2016 with three or more female directors reported earnings per share that were 45 percent higher than those companies with no female directors at the beginning of the period.”
  • “[A large financial institution] conducted a six-year global research study from 2006 to 2012, with more than 2,000 companies worldwide, showing that women on boards improve business performance for key metrics, including stock performance. For companies with a market capitalization of more than $10 billion, those with women directors on boards outperformed shares of comparable businesses with all-male boards by 26 percent.”

There are a number of ways to measure performance but, at minimum, seeing an increase in profitability is usually top of mind. Moreover, focusing on recruiting and training a more diverse talent pool can open a company up to a wider range of backgrounds and ideas, which can lead to better products and services.

Reason 3: It may keep you out of court.

DE&I initiatives can help prevent companies from facing discrimination or pay equity lawsuits. These lawsuits can be costly, time-consuming, and an overall business distraction – not to mention – bad for publicity. By addressing any deficiencies in diversity now, you may prevent your company from litigation heartache in the future. Moreover, SB 973, another of California’s recent laws, requires covered employers (100+ employees) to file a pay data report (Form EEO-1) with the Department of Fair Housing and Employment on or before March 31, 2021, and each year thereafter, that states the number of employees by race, ethnicity, and sex for the prior calendar year in 10 covered job categories. See Gov. Code Section 12999.

So perhaps that leaves you wondering, what should my company do? Systemic changes take time and can be difficult to get started and/or sustain. They require buy-in from the top all the way down. This will typically require a multi-faceted approach, but according to Ms. Rizvi (seriously, go listen to the podcast) here are a few ideas:

  1. Integrate DE&I into your business goals/objectives. Make this a priority with specific benchmarks and deliverables, just as you would set a profit target.
  2. Hold people accountable for lack of progress, and reward achievements. Just as you would hold someone accountable for missing a sales goal, or releasing a product behind schedule, companies could consider measuring job performance, at least in part, on how DE&I initiatives are performing.
  3. Look for ways to implement across the company, not just at the top. And this should go between departments as well. For example, it is one thing if your workforce is majority female, but if they all work only in one department, have you really created the diverse environment across the company to make it thrive? Not likely.
  4. Find ways to improve DE&I advocacy. This can be within the organization, or external, such as partnering with different social justice groups, or engaging in efforts to develop new legislation.
  5. Implement policies consistent with these goals. This means fine-tuning anti-discrimination policies, developing diversity initiatives, and crafting policies related to social justice initiatives.

There are a number of ways employers can create an environment that champions DE&I. But at minimum, California has spoken and requires covered companies to start this process in the boardroom. But as data continues to show, the need for DE&I runs all the way through a company, and can drastically transform not just the public’s perceptions, but your company’s bottom line.

©2020 Greenberg Traurig, LLP. All rights reserved.

ARTICLE BY Kurt A. Kappes and Michael Wertheim of Greenberg Traurig, LLP
For more articles on corporate law, visit the NLR Corporate & Business Organizations section.

American Rescue Plan Act of 2021: Tax Reports

President Biden signed the American Rescue Plan Act of 2021 (the “ARPA”) on Thursday, March 11. The legislation is one of the largest economic stimulus plans in U.S. history. Providing for approximately $1.9 trillion in federal spending, the ARPA contains an array of economic assistance programs, including continued direct payments to Americans, extended jobless benefits, funding for coronavirus testing and vaccine distribution and an infusion of cash to state and local governments. The ARPA also contains significant anti-poverty measures and various benefits for low-income Americans. As with previous coronavirus-related stimulus packages, many of these benefits are provided via temporary and permanent changes to the U.S. tax system. This Tax Report summarizes the significant tax provisions of the Act.

Child Tax Credit

The ARPA made significant changes to the Child Tax Credit (“CTC”) which may be worth as much as $3,600 per child for tax year 2021. Under the CTC in effect for tax year 2020, (i) the CTC was $2,000 per dependent child under the age of 17, (ii) the CTC did not begin to phase out until a taxpayer’s adjusted gross income reached $200,000 (and $400,000 for a joint return) and (iii) only up to $1,400 of the CTC was refundable and could only be obtained if the taxpayer earned income of at least $2,500. These final two limitations on the CTC have been historically criticized as being disproportionately burdensome for lower-income individuals who presumably need the benefit of the CTC the most.

Under the ARPA, for tax year 2021 the CTC has been increased to $3,600 per child under the age of 6, and $3,000 per child ages 6 through 17 (the CTC previously applied only to children under 17). The credit is also fully refundable (the refundable amount was limited to $1,400 in 2020), and the $2,500 earned income requirement has been eliminated. Further, those eligible for the CTC will enjoy some of the cash benefit of the CTC this year as opposed to realizing receiving cash only when filing their tax return in the spring of following year, as had been the case prior to the ARPA. More specifically, the IRS will make monthly payments from July 2021 through December 2021 amounting to ½ of the CTC, and the remaining half will be realized when claimed in the spring of 2022 when the taxpayer files the 2021 tax return.

Finally, the CTC will effectively have 2 sets of phase-outs. The expanded CTC benefits added by the ARPA begin to phase out for taxpayers with an adjusted gross income of $75,000 ($150,000 for a joint return). However, those who do not qualify for the expanded benefits are still eligible for the CTC under the same rules applicable to 2020, meaning they can receive up to $2,000 per child with the higher phase-outs covered above ($200,000 for single, and $400,000 for joint returns). For now, the expanded benefits of the CTC are only available for 2021. Unless extended, the rules for 2022 will revert back to those in place for 2020.

Child and Dependent Care Credit

The ARPA made several modifications to the Section 21 of the Internal Revenue Code of 1986, as amended (the “Code”) which governs the child and dependent care tax credit. Like the changes to the CTC, changes to the child and dependent care credit are effective for tax year 2021 only. The ARPA raises the dollar limit on employment-related child and dependent care expenses from $3,000 to $8,000 for one qualifying individual and from $6,000 to $16,000 for two or more qualifying individuals. In addition, the maximum reimbursement percentage is increased from 35% to 50%. Consequently, the maximum allowable credit amount has been increased to $4,000 for one qualifying individual and $8,000 for two or more qualifying individuals. This 50% maximum credit amount is reduced, to a floor of 20%, by one percentage point for every $2,000 that a taxpayer’s adjusted gross income exceeds $125,000. For taxpayers with adjusted gross income in excess of $400,000, the 20% maximum credit amount is further reduced for every $2,000 of adjusted gross income in excess of $400,000 until the credit is fully phased out.

Student Loan Debt

Relief for taxpayers with student loan debt has been a common target of previous COVID related stimulus packages. Federal student loans have been in a forbearance period since March of 2020 (scheduled to continue until October of 2021). The Biden Administration is also expected to move to cancel some portion of existing federal student loan debt, though it is unclear what amount will be cancelled or when such a move will be made. Continuing along this path, the ARPA provides further relief for those with student loans by temporarily changing the income tax treatment of student loan debt cancellation. Under prior law, any amount of private or federal student loan debt that is cancelled or forgiven is treated as gross income for the debtor. The ARPA amends Code Section 108(f) to exclude any amount of private or federal student loan debt forgiven after December 31, 2020. Notably, however, the ARPA did not make this change permanent and the revision to Code Section 108(f) is scheduled to sunset as of January 1, 2026.

Stimulus Checks

The ARPA authorizes a third round of stimulus payments up to $1,400. Like previous stimulus payments, the $1,400 payments are excluded from taxable income. This round expands the eligibility for certain dependents of eligible taxpayers from children under the age of 17 to all dependents in the household. The stimulus payments are subject to certain limitations with respect to a household’s adjusted gross income. Households with adjusted gross income of more than $80,000 for single filers, $120,000 for head of household filers, and $160,000 for married filing jointly will not receive any payment. For taxpayers with adjusted gross incomes below those respective limitations the stimulus is subject to a phaseout beginning at $75,00 for single filers, $112,500 for head of household, and $150,000 for married filing jointly.

Earned Income Credit

For the tax year 2021 only, the ARPA will increase the availability of the earned income tax credit (“EIC”) for childless households, effectively making more taxpayers eligible to claim the EIC. Pursuant to the ARPA, individual taxpayers (with no qualifying children) will see changes to the computation of their EIC, including increases in (i) the phase-out percentage, (ii) the earned income amount, and (iii) the phase-out amount. Also, the maximum EIC amount for childless households, will increase from $540 to $1,500. Moreover, the age range for the EIC recipients has been broadened. For childless households, individual taxpayers will be able to claim the EIC beginning at age 19 (instead of age 25), with the exclusion of certain students ages 19 to 24. Further, the upper age limit of 65 years will be eliminated and the EIC will not be subject to an upper age limit. For purposes of calculating the 2021 EIC, individual taxpayers may choose to use their 2019 income if it was higher than their 2021 income.

For all future tax years, including tax year 2021, married individual taxpayers who are separated may be treated as not married for the purpose of the EIC if, and only if, such married individual taxpayers do not file a joint tax return. This change applies only if the individual taxpayer (who is claiming the EIC) lived with a qualifying child for more than one-half of the applicable tax year and also did not have the same principal residence as the spouse for at least six (6) months of the applicable tax year. In addition, individual taxpayers who otherwise would be eligible to claim the EIC, but whose children do not have social security numbers (SSNs), will now be permitted to claim the EIC available to childless households.

Unemployment Compensation Benefits

Although unemployment compensation benefits are normally includable as taxable income, retroactive for the 2020 tax year only, the ARPA has made the first $10,200 of income from unemployment compensation benefits tax-free for individual taxpayers with incomes of less than $150,000 for the 2020 tax year. How this tax benefit will be claimed and applied is subject to further instructions or guidance to be issued by the Internal Revenue Service.

Employee Retention Credit

The Employee Retention Credit (the “ERC”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was originally scheduled to expire on December 31, 2020 and was extended by the Consolidated Appropriations Act, 2021 (the “CAA”) until June 30, 2021 (see our prior Alert). The ERC is extended under the ARPA to cover qualified wages paid through December 31, 2021. In addition, the ARPA provides the following changes to the ERC rules:

  • Expansion of ERC eligibility to “recovery startup businesses” which is defined as employers that (i) commenced operations after February 15, 2020, (ii) have gross annual receipts of less than $1 million, and (iii) otherwise don’t satisfy the ERC eligibility requirements. The ERC is capped at $50,000 per quarter for “recovery startup businesses.”
  • Expansion of ERC eligibility to “severely financially distressed” employers (even those with more than 500 employees) which is defined as employers that are experiencing a gross receipts reduction of more than 90% as compared to the same calendar quarter in 2019.
  • As a reminder, the CAA increased the amount of the ERC from 50% of qualified wages to 70% of qualified wages paid per calendar quarter (this was not increased by the ARPA). Thus, eligible employers may now claim up to $28,000 per employee in 2021.
  • The ERC may now be claimed against the employer’s share of Medicare tax (1.45%).

Revenue Raising Changes

The ARPA also includes certain Code changes designed to raise federal revenue to offset some of the cost of the forgoing stimulus measures.

Code Section 162(m) limits the deduction that a publicly held corporation can take with respect to compensation paid to its “covered employees” to $1 million per year. Generally speaking, a “covered employee” means the corporation’s principal executive officer (“CEO”), principal financial officer (“CFO”), and its three other highest compensated officers for the taxable year. Beginning with tax years commencing on or after January 1, 2027, the ARPA expands the number of “covered employees” to include the CEO, the CFO, and the next eight highest compensation employees of the publicly-held corporation (i.e., an increase in five covered employees). The Joint Committee on Taxation (the “Joint Committee”) estimates that the expansion of the Code Section 162(m) limits will raise $7.8 billion over 10 years.

The ARPA also permanently repeals the worldwide interest allocation rules of Code Section 864. These rules were initially adopted in 2004 as part of the American Jobs Creation Act and were intended to limit the extent to which interest expenses of a U.S. parent company are overallocated to foreign subsidiaries, which can cause an unintended reduction in foreign tax credits available to US parent companies. Since the enactment of these rules, Congress has consistently delayed their effective date and used such delay as an offset to other tax cuts. The ARPA effectively makes those prior delays a permanent repeal. The Joint Committee estimates that the repeal of the worldwide interest allocation rules will raise $22.3 billion over 10 years.

In addition, the ARPA extends the Code Section 461(l) excess business loss rule that limits certain current losses attributable to trades or businesses of noncorporate taxpayers to $250,000 for individual filers and $500,000 for joint filers. The limitation was enacted under the Tax Cuts and Jobs Act of 2017 (the “TCJA”) but was suspended by the CARES Act for tax years 2018, 2019 and 2020. As originally enacted under the TCJA, the limitation was set to expire at the end of tax year 2025. The ARPA extends the limitation through tax year 2026. The Joint Committee estimates that the extension of the excess business loss rule will raise $31 billion over 10 years.

Copyright ©2021 Nelson Mullins Riley & Scarborough LLP

ARTICLE BY Matthew R. Zischke, Chip Gray,
Nathaniel G. Dutt, Bobby Streisel, Drew Hermiller and C. Wells Hall, III of Nelson Mullins
For more articles on the American Rescue Plan, visit the NLR Coronavirus News section.

Sanctions and Export Control Developments in the First 50 Days of the Biden Administration

As the calendar flipped past the 50th day of President Joe Biden’s administration on March 11, 2021, a survey of economic sanctions and export control-related developments shows where the Administration felt a pressing need to impose new sanctions, alter existing policies or, in several areas, clarify existing programs. To date, we have not seen substantial changes to any ongoing sanctions programs by the Biden Administration, but we will be watching complex hot spots such as China and Iran as the Administration works through the nuances of its foreign policy and deepens its diplomatic efforts over the coming weeks and months. In this bulletin, we share our thinking on these early developments with our clients and friends to help you keep your sanctions programs current and monitor shifting risk levels posed by your international operations.

Sanctions Map

Download Map PDF

Africa

Democratic Republic of the Congo and Mozambique

The Biden Administration advanced the long-standing sanctions program against foreign terrorist organizations operating on the African continent with the designation by the Department of State of two affiliates of the Islamic State, one each in the Democratic Republic of Congo and Mozambique, as “foreign terrorist organizations,” adding them to the Office of Foreign Assets Control’s (“OFAC”) Specially Designated Nationals (“SDN”) List and subjecting them to broad sanctions. Allied Democratic Forces (also known as ISIS-DRC (“ADF”)) and Ansar al-Sunna (also known as ISIS-Mozambique) are believed to be responsible for multiple attacks on civilians and government security forces that have killed thousands of people in south and central Africa since 2017.1 The Department of State also designated ISIS-DRC, ISIS-Mozambique, and their leaders Seka Musa Baluku and Abu Yasir Hassan as Specially Designated Global Terrorists under Executive Order 13224. The leader of the ADF, Musa Baluku, as well as five of his ADF associates, previously were designated in December 2019 pursuant to Executive Order 13818 under the Global Magnitsky Human Rights sanctions program for their role leading an organization that has engaged in serious human rights abuses, and they joined a long list of individuals and organizations designated by President George W. Bush under Executive Order 13413 and President Barack Obama under Executive Order 13671 for engaging in armed conflict and widespread human rights abuses. As human rights remain a focus of the Biden Administration globally, additional designations under the Global Magnitsky sanctions program in areas of ongoing conflict in Africa—and wherever else ISIS expands its activities—are likely.

Asia

Myanmar (Burma)-Related Sanctions

President Biden established the first new sanctions program under his Administration on February 10, 2021, with Executive Order 14014, a blocking order targeting the defense sector of the Burmese economy, as well as Burmese military and security forces that were responsible for the February 1, 2021 coup and the brutal attacks against unarmed protesters that ensued.2 Six current and former military officials were designated for being directly involved in the coup.3 Four military officials and two other individuals appointed to the State Administration Council were also designated, together with three Burmese entities owned or controlled by the military or security forces .4 The most recent designations named the two adult children of the Commander-in-Chief of the Burmese military forces as SDNs, as well as six Burmese entities that they own or control.5

In addition to military and security leaders, the new sanctions also apply broadly to the Government of Burma, including the Central Bank of Myanmar, and the Government’s political subdivisions, agencies, instrumentalities, all persons “owned or controlled by, or acting on behalf of, the Government of Burma,” and other individuals who have undermined democratic processes or institutions or committed actions that threaten the peace, security or stability of Burma. 6  In the first 50 days of the Biden Administration, 23 individuals and entities have been designated under this program, and additional designations are likely if political prisoners are not released and the democratically elected government is not restored.7

In a related development, the Commerce Department’s Bureau of Industry and Security (“BIS”) removed Burma from Country Group B and placed it in Country Group D:1, resulting in a more restrictive review of license applications for exports and reexports, and also subjecting Burma to “military end use” and “military end user” restrictions under the Export Administration Regulations (“EAR”). 8  BIS also added four entities to the Entity List. As matters currently stand, transactions requiring a license for the export or re-export of items subject to the EAR when destined for Burma’s Ministry of Defense, Ministry of Home Affairs, armed forces, and security services will be reviewed by BIS under a presumption of denial. 9,10

Communist Chinese Military Companies Sanctions

Under the Administration of President Donald J. Trump, the United States imposed a new sanctions program designed to restrict the increasing militarization of the People’s Republic of China (“PRC”), which poses a threat to the national security of the United States. The Trump Administration initiated the sanctions program with Executive Order 13959 on November 12, 2020, by issuing sanctions designed to prevent U.S. persons from purchasing securities in—and thereby providing financing to—“Communist Chinese military companies”11  appearing on the Non-SDN Communist Chinese Military Companies List (NS-CCMC). Justifying the sanctions, President Trump stated,

“the People’s Republic of China (PRC) is increasingly exploiting United States capital to resource and to enable the development and modernization of its military, intelligence, and other security apparatuses, which continues to allow the PRC to directly threaten the United States homeland and United States forces overseas, including by developing and deploying weapons of mass destruction, advancing conventional weapons, and malicious cyber-enabled actions against the United States and its people.”12

The Biden Administration has not significantly altered the sanctions program, and has indicated a continued desire to “push back against the Chinese government’s economic abuses and coercion that undercut the foundation of the international economic system.” 13  However, the Administration reduced risks for market players by providing some additional certainty regarding which entities are subject to the sanctions. Specifically, the Biden Administration issued General License No. 1A clarifying, through May 27, 2021, which securities must be treated as issued by Communist Chinese military companies. General License No. 1A Authorizing Transactions Involving Securities of Certain Communist Chinese Military Companies covers transactions or activities that are derivative of, or are designed to provide investment exposure to the securities of entities whose names closely match—but do not exactly match—the name of a Communist Chinese military company, as defined by section 4(a) of Executive Order 13959.

PRC Military End-Users
The Biden Administration has not yet made significant changes to the new Military End-User (MEU) List — which contains many Chinese entities, as well as entities from Russia and Venezuela, that was issued in an amendment to the EAR by BIS in December 2020.14  As diplomatic engagement with the PRC takes the forefront of the foreign policy stage in the coming weeks, the direction of the PRC sanctions program, military end user restrictions, and military end use controls under the Biden Administration may come into sharper focus.

Europe

Ukraine-/Russia-Related Sanctions

The Biden Administration imposed a series of sanctions against individuals and entities involved in the poisoning and subsequent imprisonment of Aleksei A. Navalny, who has been the target of systematic harassment and repression by the Russian government due to his prominent role in the political opposition. Sanctions were issued simultaneously on March 2, 2021, by the Treasury Department, the State Department and the Commerce Department.

The OFAC designated seven Russian government officials on the SDN List.15  It also issued amended Cyber General License No. 1B Authorizing Certain Transactions with the Federal Security Service, and amended related FAQs: FAQ 501, FAQ 502 and FAQ 503.

The State Department imposed broad sanctions on Russia under the U.S. Chemical and Biological Weapons Control and Warfare Elimination Act of 1991. It also designated a series of entities and individuals under Executive Order 13382 and the Countering America’s Adversaries Through Sanctions Act for their association with Russia’s chemical weapons program, defense sector and intelligence sector.16  The State Department also amended Section 126.1 of the International Traffic in Arms Regulations (“ITAR”) to add Russia to the list of countries subject to enhanced export scrutiny and a policy of denial for exports of defense articles and defense services, with limited exceptions for certain exports in support of government space cooperation.

The Commerce Department also added 14 entities to the Entity List based on their activities supporting Russia’s weapons of mass destruction programs and chemical weapons activities.17 BIS added entities located in Germany, Russia and Switzerland to the list because they had undertaken proliferation activities in support of Russia. In taking these sweeping measures, the United States aligned its response to Russia’s use of a chemical weapon more closely with that of the European Union and other G7 partners.

The Biden Administration has taken no immediate steps with respect to the broad trade embargo against the Crimea region of Ukraine, which was first imposed by the Obama Administration following Russia’s invasion and annexation of the region in 2014. However, we expect no material deviation from the current programs based upon President Biden’s recent remarks and comments. At the virtual Munich Conference held in February, the President confirmed that “standing up for the sovereignty and territorial integrity of Ukraine remains a vital concern for Europe and the United States.”18  One week later, on the seventh anniversary of Russia’s invasion of Crimea, the President remarked: “The United States does not and will never recognize Russia’s purported annexation of the peninsula, and we will stand with Ukraine against Russia’s aggressive acts. We will continue to hold Russia accountable for its abuses and aggression in Ukraine.”19

Latin America

Cuba

Although President Biden has not yet taken any formal positions regarding Cuba policy, officials from his Administration have indicated that President Trump’s last-minute designation of Cuba as a state sponsor of terrorism and broader Cuba policy will be reviewed, with a focus on human rights and democracy.20  The state sponsor of terrorism designation brings with it restrictions on foreign assistance, a ban on defense exports and sales, and other export and financial controls.21 Aside from Cuba, such a severe designation currently only applies to Iran, North Korea and Syria.22 The Biden Administration also is expected to carefully examine the consequences of the Trump Administration’s decision in May 2019 to lift the suspension of Title III of the Helms-Burton Act, which opened the door for U.S. nationals to file suit in U.S. courts seeking compensation for property that had been seized by the regime of Fidel Castro. Although the Administration has said that Cuba policy is not its top priority, we expect to eventually see efforts to reassemble some of the pieces of the Obama Administration’s Cuba initiatives and policies, and we note that achieving closer cooperation may require shutting the door on Helms-Burton Act litigation.

Mexico-Related Sanctions under the Counter Narcotics Trafficking Sanctions Program

As human rights and immigration remain at the forefront of policy issues for the Biden Administration in Latin America, a new designation has been added in the Counter Narcotics Trafficking sanctions program. On March 3, 2021, the OFAC designated Mexican national Juan Manuel Abouzaid El Bayeh for his high-level role facilitating drug shipments and money laundering for the Cartel de Jalisco Nueva Generación (“CJNG”), a violent drug trafficking organization that traffics fentanyl and other illicit controlled substances into the United States. Abouzaid El Bayeh joins CJNG’s leader Ruben Oseguera Cervantes, his associates, and a series of Mexican businesses they own or control, including shopping centers, real estate companies, agricultural companies, a music promotion business, and a luxury boutique hotel in designations under the Foreign Narcotics Kingpin Designation Act, along with more than 2,200 other individuals and entities.23

Venezuela-Related Sanctions

The Biden Administration has indicated that it will not make significant changes to the Venezuela sanctions program for the time being, despite calls to reexamine the program due to the deteriorating economic and social conditions in the country and the inability of the sanctions program to bring about the desired regime change to date. The sanctions, first imposed by President Obama with Executive Order 13692 in 2015, are intended to put an end to “erosion of human rights guarantees, persecution of political opponents, curtailment of press freedoms, use of violence and human rights violations and abuses in response to antigovernment protests, and arbitrary arrest and detention of antigovernment protestors, as well as the exacerbating presence of significant public corruption” 24  perpetrated by the government of Venezuela under Maduro’s leadership. Through a series of seven executive orders, the program has imposed sweeping limitations on the government of Venezuela, as well as individuals and entities linked to the Maduro regime and its repressive acts.

On March 2, 2021, Secretary of State Antony Blinken spoke directly with Venezuelan Interim President Juan Guaidó to reaffirm U.S. support for a transition to the democratically elected government.25 The Biden Administration also issued an amended general license, adding to an already voluminous list of general licenses and FAQs to facilitate humanitarian and public health operations in Venezuela. The OFAC issued amended General License No. 30A, “Authorizing Certain Transactions Necessary to Port and Airport Operations,” adding interactions with the Instituto Nacional de los Espacios Acuáticos (the National Institute for Aquatic Spaces) to the license for transactions and activities that are incident and necessary to operations or the use of ports and airports in Venezuela. Previously, General License No. 30 applied only to port and airport operations with the Government of Venezuela.

Middle East

Iran Sanctions Program

There have been no new developments in the various sanctions programs involving Iran, although President Biden has made it clear that the United States would be “prepared to reengage in negotiations with the P5+1 on Iran’s nuclear program”26 to achieve a new deal on a “compliance for compliance basis.”27 Meanwhile, certain “mixed messages” sent by Ayatollah Ali Khamenei in recent weeks regarding Iran’s intentions with respect to its nuclear program28 have clouded the picture, as have pressures from Iranian hard-liners that further diplomatic engagement with the United States will not put an end to crippling sanctions that have devastated the Iranian economy.29

On February 2, 2021, the Biden Justice Department commenced a civil action in the U.S. District Court for the District of Columbia seeking the seizure and forfeiture of certain petroleum cargoes as assets of the Islamic Revolutionary Guard (“IRGC”) and the IRGC Quds Force (“IRGC-QF”).30 The complaint alleges that the petroleum product is aboard the motor tanker ACHILLEAS following a series of AIS spoofing incidents and clandestine ship-to-ship transfers designed to disguise the product’s origin and affiliations. The lawsuit suggests the continuation of an aggressive litigation policy started under the Trump Administration designed to intercept and disrupt the ocean transportation of petroleum product with alleged ties to the IRGC and the IRGC-QF.31

Saudi Arabia-Related Sanctions under the Global Magnitsky Sanctions Program

On the same day the declassified intelligence report was released regarding the murder of Washington Post columnist Jamal Khashoggi in 2018, OFAC announced sanctions against an additional individual and entity directly involved in the killing. OFAC designated the Saudi Rapid Intervention Force and Ahmad Hassan Mohammed al Asiri, the former Deputy Head of Saudi Arabia’s General Intelligence Presidency, under the Global Magnitsky Human Rights sanctions program pursuant to Executive Order 13818. Attempting to strike a delicate balance regarding a key ally in the region, the Administration stopped short of sanctioning Crown Prince Mohammed bin Salman, despite findings in the report that he was ultimately responsible for the murder. Asiri and RIF join 17 individuals who were designated on November 15, 2018, for having led or participated in the operations team allegedly responsible for Mr. Khashoggi’s murder.

Yemen-Related Sanctions

The Biden Administration has expressed a deep and urgent commitment to ending the ongoing conflict in Yemen to alleviate humanitarian suffering there. Responding to calls by humanitarian agencies that the sanctions designations were inhibiting their ability to operate in the region, the Biden Administration revamped the Yemen sanctions program by revoking the designation of Ansarallah, also known as the Houthi movement, as a foreign terrorist organization, which was issued on the last days of former President Trump’s presidency. Officials have clarified that the un-designation did not demonstrate support for the Houthis, a group the United States continues to condemn. Rather, the designation was revoked because it had the unintended consequence of impeding the delivery of humanitarian aid to the people of Yemen, and international aid groups resoundingly called for the United States to rescind the designation to avoid dramatic consequences to humanitarian efforts in the region.32 In place of the Ansarallah designations, OFAC designated key military leaders of the Ansarallah militia, Houthi Naval Forces Chief of Staff Mansur Al-Sa’adi and commander of Yemen’s Houthi-aligned Yemeni Air Force and Air Defense Forces Ahmad Al-Hamzi. Previous Ansarallah designations made in 2014 and 2015 under U.N. sanctions and U.S. Executive Order 13611 against Abdul Malik al-Houthi, al-Khaliq Badr al-Din al-Houthi, and Abdullah Yahya al Hakim remain in effect.

____________________________________________________

1See U.S. Dep’t of State, Media Note, “State Department Terrorist Designations of ISIS Affiliates and Leaders in the Democratic Republic of the Congo and Mozambique” (Mar. 10, 2021) (https://www.state.gov/state-department-terrorist-designations-of-isis-affiliates-and-leaders-in-the-democratic-republic-of-the-congo-and-mozambique/).
2See Exec. Order No. 14014, “Blocking Property with Respect to the Situation in Burma,” Fed. Reg., Vol. 86, No. 28 (Feb. 12, 2021).
3The designated individuals are: Commander-in-Chief of the Burmese military forces Min Aung Hlaing; Deputy Commander-in-Chief of the Burmese military forces Soe Win; First Vice President and retired Lieutenant General Myint Swe; Lieutenant General Sein Win; Lieutenant General Soe Htut; and Lieutenant General Ye Aung.
4The designated individuals and entities are: General Mya Tun Oo; Admiral Tin Aung San; Lieutenant General Ye Win Oo; ans Lieutenant General Aung Lin Dwe. Lieutenant General Moe Myint Tun, General Maung Maung Kyaw, Cancri Gems & Jewellery Co., LTD. Myanmar Imperial Jade Co., LTD., and Myanmar Ruby Enterprise. See U.S. Treasury Dep’t, Press Release, “United States Targets Leaders of Burma’s Military Coup Under New Executive Order” (Feb. 11, 2021) (https://home.treasury.gov/news/press-releases/jy0024); U.S. Treasury Dep’t, Press Release, “United States Targets Members of Burma’s State Administrative Council following Violence against Protestors” (https://home.treasury.gov/news/press-releases/jy0031).
5The designated individuals and entities are: Aung Pyae Sone; Khin Thiri Thet Mon; A & M Mahar Co. Ltd.; Everfit Co. Ltd; Seventh Sense Co. Ltd; Sky One Construction Co. Ltd; the Yangon Gallery; and the Yangon Restaurant.
6See Exec. Order No. 14014, “Blocking Property with Respect to the Situation in Burma,” Fed. Reg., Vol. 86, No. 28 (Feb. 12, 2021).
7The extension of martial law across more districts in Burma and the increased violence against protestors, resulting in the reported death of 50 protestors on March 14, 2021, is complicating an already deteriorating situation. See BBC News, “Myanmar military extends martial law after bloodiest day since coup” (Mar. 15, 2021)( https://www.bbc.com/news/world-asia-5639800)
8See U.S. Dep’t of Commerce, Bureau of Industry and Security, “Burma: Implementation of Sanctions,” Docket No. 210302-0033, Final Rule, 86 Fed. Reg. 13173-13178 (Mar. 8, 2021). By removing Burma from Country Group B and moving it to Country Group D:1, BIS has effectively narrowed the AVS license exception for the export and re-export of equipment and spare parts for aircraft and vessels registered in Burma, or owned or controlled by or under charter or lease to a Burmese national.
9See U.S. Dep’t of Commerce, Bureau of Industry and Security, “Burma: Implementation of Sanctions,” Docket No. 2102-0010, 86 Fed. Reg. 10011 (Feb. 18, 2021).
10The designated entities are: the Burmese Ministry of Defence; the Burmese Ministry of Home Affairs; the Myanmar Economic Corporation; and the Myanmar Economic Holding Limited. See U.S. Dep’t of Commerce, Bureau of Industry and Security, Press Release, “Commerce Implements New Export Controls on Burma and Makes Entity List Additions in Response to the Military Coup and Escalating Violence against Peaceful Protesters” (Mar. 4, 2021).
11See Exec. Order No. 13959, “Addressing the Threat from Securities Investments That Finance Communist Chinese Military Companies,” 85 Fed. Reg. 73185-73189 (Nov. 17, 2020). This Executive Order was subsequently amended by Executive Order No. 13974, “Amending Executive Order 13959 – Addressing the Threat from Securities Investments That Finance Communist Chinese Military Companies,” 86 Fed. Reg. 4875 (Jan. 13, 2021).
12See 85 Fed. Reg. at 73185.
13The White House, “Remarks by President Biden at the 2021 Virtual Munich Security Conference” (Feb. 19, 2021) (https://www.whitehouse.gov/briefing-room/speeches-remarks/2021/02/19/remarks-by-president-biden-at-the-2021-virtual-munich-security-conference/).
14See 15 C.F.R. 744, Supp. No. 7.
15The designated individuals are: Aleksandr Bortinkov, director of FSB; Alexander Kalashnikov, director of the Russian Penitentiary Service, or FSIN; Sergey Kiriyenko, deputy chief of staff to Russian President Vladimir Putin; Igor Krasnov, Russia’s prosecutor-general; Col. Gen. Aleksey Krivoruchko and Gen. of the Army Pavel Popov, deputy defense ministers; and Andrei Yarin, director of Russia’s Presidential Domestic Policy Directorate.
16The designated individuals and entities are: 27th Scientific Center; 48 Central Scientific Research Institute Sergiev Posad; 48 Central Scientific Research Institute Kirov; 48 Central Scientific Research Institute Yekaterinburg; State Scientific Research Institute of Organic Chemistry and Technology; 33rd Scientific Research and Testing Institute; the Federal Security Service (“FSB”); the Main Directorate of the General Staff of the Armed Forces of the Russian Federation (“GRU”); and GRU officers Alexander Yevgeniyevich Mishkin and Anatoliy Vladimirovich Chepiga.
17See U.S. Dep’t of Commerce, Bureau of Industry and Security, Addition of Entities to Entity List, Docket No. 201216-0348, Final Rule, 86 Fed. Reg. 12529–12534 (Mar. 4, 2021).
18The White House, “Remarks by President Biden at the 2021 Virtual Munich Security Conference” (Feb. 19, 2021) (https://www.whitehouse.gov/briefing-room/speeches-remarks/2021/02/19/remarks-by-president-biden-at-the-2021-virtual-munich-security-conference/).
19The White House, “Statement by President Biden on the Anniversary of Russia’s Illegal Invasion of Ukraine” (Feb. 26, 2021) (https://www.whitehouse.gov/briefing-room/statements-releases/2021/02/26/statement-by-president-biden-on-the-anniversary-of-russias-illegal-invasion-of-ukraine/).
20The White House, “Press Briefing by Press Secretary Jen Psaki and Deputy Director of the National Economic Council Bharat Ramamurti” (Mar. 9, 2021).
21See U.S. Dep’t of State, Bureau of Counterterrorism, “State Sponsors of Terrorism” (https://www.state.gov/state-sponsors-of-terrorism/).
22See U.S. Dep’t of State, Bureau of Counterterrorism, “State Sponsors of Terrorism” (https://www.state.gov/state-sponsors-of-terrorism/).
23See U.S. Treasury Dep’t, Office of Foreign Assets Control, Press Release, “Treasury Sanctions Fugitive Associate of CJNG” (Mar. 3, 2021).
24See Exec. Order No. 13692, “Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Venezuela,” Fed. Reg. 12747-12751 (Mar. 8, 2015).
25See U.S. Dep’t of State, Office of the Spokesperson, Readout, “Secretary Blinken’s Call with Venezuelan Interim President Guaidó” (Mar. 2, 2021).
26The White House, “Remarks by President Biden at the 2021 Virtual Munich Security Conference” (Feb. 19, 2021) (https://www.whitehouse.gov/briefing-room/speeches-remarks/2021/02/19/remarks-by-president-biden-at-the-2021-virtual-munich-security-conference/).
27See Ned Price, U.S. Dep’t of State, Office of the Spokesperson, “Department Press Briefing – February 22, 2021,” (Feb. 11, 2021) (https://www.state.gov/briefings/department-press-briefing-february-22-2021/).
28Hadi Kahalzadeh, “’Maximum Pressure’ Hardened Iran Against Compromise,” Foreign Affairs (Mar. 11, 2021) (https://www.foreignaffairs.com/articles/iran/2021-03-11/maximum-pressure-hardened-iran-against-compromise).
29Id.
30United States of Am. v. All Petroleum Prod. Cargo Aboard the Achilleas, Civil A. No. 21-cv-305 (D.D.C. Feb. 2, 2021).
31See United States of Am. v. All Petroleum Prod. Aboard the Bella, Civil A. No. 20-cv-1791 (D.D.C. _____); United States of America v. Oil Tanker – “Grace 1” and All Petroleum Aboard Oil Tanker – “Grace 1,” Civil A. No. 19-cv-1989 (D.D.C. July 3, 2019).
32See Ned Price, U.S. Dep’t of State, Office of the Spokesperson, “Department Press Briefing – February 11, 2021” (Feb. 11, 2021)

© 2020 Vedder Price

ARTICLE BY John E. Bradley,  and Aleksandra Rybicki of Vedder Price
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