Sec. 2. Findings and sense of Congress
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Congress finds the following: Under Executive Order 13959 (85 Fed. Reg. 73185; relating to addressing the threat from securities investments that finance Communist Chinese military companies) of November 17, 2020, the President found that the People’s Republic of China increases the size of the country’s military-industrial complex by compelling civilian Chinese companies to support its military and intelligence activities. Those companies, though remaining ostensibly private and civilian, directly support the PRC’s military, intelligence, and security apparatuses and aid in their development and modernization. .
The President further determined that the PRC exploits United States investors to finance the development and modernization of its military. . As a result, Executive Order 13959 restricted transactions in publicly traded securities of Communist Chinese military companies listed pursuant to section 1237 of the Strom Thurmond National Defense Authorization Act for Fiscal Year 1999 ( 50 U.S.C. 1701 note). Although Executive Order 13959 targets transactions in public securities, it does not address financing options for Communist Chinese military companies through other forms of equity financing or debt financing, nor does it limit transactions with United States persons that may generate earnings in a manner that facilitates company growth.
Transaction restrictions pursuant to Executive Order 13959 have not withstood challenges in court. On March 12, 2021, the United States District Court for the District of Columbia granted a preliminary injunction preventing the application of Executive Order 13959 to Xiaomi Corporation, which the Department of Defense had listed as a Communist Chinese military company, based on the high likelihood of success on the merits that the listing did not conform to the Administrative Procedures Act and exceeded the authority granted under section 1237 of the Strom Thurmond National Defense Authorization Act for Fiscal Year 1999.
The Department of Defense chose not to challenge the ruling and removed the company from its listing. On May 5, 2021, the District Court further enjoined the implementation of Executive Order 13959 with respect to Luokung Technology Corp., which the Department of Defense had originally sought to list on January 14, 2021, and re-listed on March 9, 2021. Consequently, the prohibitions of Executive Order 13959 could not be applied to the company. The Office of Foreign Assets Control
(OFAC)of the Department of the Treasury, by imposing asset blocking through the Specially Designated Nationals
(SDN)List, is able to forbid virtually any transaction between United States persons and a designated entity, including debt and equity financing, the exchange of goods and services, and the provision of material or technological support. Conversely, restrictions limited to publicly traded securities are less comprehensive, and in the case of certain Chinese companies of concern, may be irrelevant if the companies do not issue such securities. While restrictions on public securities are restricted to the dealings of United States persons, OFAC’s inclusion of a foreign entity on the SDN list deters third-country persons from dealing with a designated entity, amplifying the effects of United States sanctions globally. OFAC has long devoted significant resources to compiling evidence on SDNs that routinely withstand challenges in court, which enhances the effectiveness of United States sanctions, encourages allies to consider comparable measures, and strengthens national security. On June 3, 2021, the President issued Executive Order 14032, which transferred responsibility for naming Chinese military companies subject to investment restrictions to the Secretary of the Treasury, and expanded restrictions to entities operating in the surveillance technology sector of the Chinese economy. It is the sense of the Congress that the national emergency declared under Executive Order 13959 calls for the President to— more fully cut off financing avenues for Communist Chinese military and surveillance companies; prevent adaptation by a company to partial restrictions that limit themselves to publicly traded securities; ensure that the United States assembles an appropriate evidentiary basis to support the effectiveness of sanctions; enhance the impact of economic sanctions by deterring third-country persons from dealing with the companies; and link the imposition of sanctions to clear objectives that serve to resolve the national emergency.
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- 85 FR 73185
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Sec. 2
Findings and sense of Congress
Fed. Reg.85 FR 73185
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