OFAC designated the Xinjiang Production and Construction Corps ("XPCC") and two individuals to the Specially Designated Nationals and Blocked Persons List ("SDN List"). The designations were linked to human rights abuse in the Xinjiang Uyghur Autonomous Region ("XUAR"). In a general license, OFAC authorized certain "wind down and divestment" transactions and activities related to blocked subsidiaries of the XPCC through 12:01 a.m. EDT on September 30, 2020, which otherwise would be prohibited as a result of the sanctions imposed on the XPCC.
OFAC's designation of the XPCC was pursuant to Executive Order 13818, "Blocking the Property of Persons Involved in Serious Human Rights Abuse or Corruption," which implemented the Global Magnitsky Human Rights Accountability Act. As described in the U.S. Treasury Department's press release, the XPCC is a "paramilitary organization in the XUAR that is subordinate to the Chinese Communist Party (CCP)." The entity is also a large business conglomerate, and it is the XPCC's commercial operations that are likely to be most impacted by U.S. sanctions. As a result of OFAC's action, all entities that are owned 50 percent or greater by the XPCC are also automatically "blocked" (the "Blocked XPCC Subsidiaries"), and U.S. persons generally are prohibited from engaging in transactions with them.
OFAC's General License 2 allows for the orderly wind down of business with - and divestment to non-U.S. persons of debt, equity or other holdings in - the Blocked XPCC Subsidiaries. In a related FAQ, OFAC clarified that the general license does not authorize any transactions with XPCC itself, but only transactions with Blocked XPCC Subsidiaries. In addition, OFAC noted that the general license does not allow U.S. persons to purchase or invest in holdings in any Blocked XPCC Subsidiaries, except to the extent such transactions are ordinarily incident and necessary to effectuate authorized divestment transactions (e.g., to facilitate the transfer of Blocked XPCC Subsidiary holdings to a non-U.S. person). OFAC also highlighted that the general license does not authorize any debit to the account of a Blocked XPCC Subsidiary on the books of a U.S. financial institution.
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