Background

The Office of Foreign Assets Control has extended from Sept. 30 to Nov. 30 a general license allowing companies to wind down their supply chains to exclude the majority-owned subsidiaries of China’s Xinjiang Production and Construction Corporation. Sandler, Travis & Rosenberg initiated contact with OFAC on this change, worked with a major trade organization to generate support for it, and engaged in follow-up efforts to push it forward.

OFAC added XPCC to its Specially Designated Nationals List on July 31 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.

XPCC’s placement on the SDN list means that all U.S. entities or non-U.S. entities subject to U.S. jurisdiction (covered persons) are banned from engaging, directly or indirectly, with XPCC and its majority-owned subsidiaries without a license from OFAC. Any transaction by a covered person that directly or indirectly benefits XPCC may be considered a violation of these sanctions, including apparel-related transactions made anywhere in the world that contain XPCC cotton.

However, a general license is available for companies to wind down their supply chains to exclude XPCC majority-owned subsidiaries, and OFAC has now extended that general license through Nov. 30. OFAC has also extended from Oct. 14 to Dec. 10 the deadline for reporting to OFAC 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.

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

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