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New Sanctions Threaten Cotton Supply Chains

Saturday, August 01, 2020

The Office of Foreign Assets Control placed Xinjiang Production and Construction Corporation on its Specially Designated Nationals List on July 31.  XPCC’s placement on this list means that all U.S. entities or non-U.S. entities subject to U.S. jurisdiction (covered persons) are now banned from engaging, directly or indirectly, with XPCC without a license from OFAC. 

XPCC was added to the SDN List for serious rights abuses against ethnic minorities in China’s Xinjiang Uyghur Autonomous Region. XPCC engages in cotton farming and sales in XUAR for certain types of cotton. China accounts for 20 percent of all the cotton in the world and XUAR accounts for 80 percent of China’s cotton. This production represents 50 percent of global spinning capacity.

OFAC may consider any transaction by a covered person that directly or indirectly benefits XPCC as a violation of these sanctions, including apparel-related transactions made anywhere in the world that contain XPCC cotton.   

A general license is available through Sept. 30 for companies to wind down their supply chains to exclude XPCC. However, details regarding any transactions or activities necessary to the wind down of transactions involving XPCC subsidiaries that are authorized under the general license, including the names and addresses of the parties involved, the type and scope of activities conducted, and the dates on which the activities occurred, must be reported to OFAC by Oct. 14.

For more information on these sanctions and how they may affect your specific supply chain, please contact Kristine Pirnia, Tom Travis, or Nicole Bivens Collinson.

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