U.S. Sanctions and Export Controls Update: New Measures Targeting Iranian Petroleum and Chinese Semiconductor Capabilities

The U.S. continues to rigorously enforce sanctions and export controls to safeguard its national security objectives.

This week, U.S. Department of Treasury announced new sanctions on 35 entities and vessels including two India-based entities involved in the transportation of illicit Iranian petroleum to foreign markets. Simultaneously, the U.S. Bureau of Industry and Security (BIS) issued new export control measures aimed at restricting China’s ability to produce advanced-node semiconductors integral to the development of next-generation weapon systems, artificial intelligence (AI), and advanced computing technologies with significant military applications. These measures build upon prior rules issued in October 2022, 2023, and April 2024, highlighting the U.S.’ ongoing commitment to addressing national security risks.

Two India-based entities i.e., Vision Ship Management LLP and Tightship Shipping Management (OPC) Private Limited were sanctioned (i.e., listed under the SDN list) for owning, managing and operating certain vessels which has carried millions of barrels of Iranian crude oil for U.S. designated companies since 2022.

The implications of listing the aforementioned entities under the SDN list include the following:

• The property and interests in property of these entities that are in the U.S. or in the possession or control of U.S. persons are blocked. As an illustration, the bank accounts or funds of such entities in the U.S. would be frozen and cannot be accessed.
• Any entities that are owned, directly or indirectly, fifty (50) percent or more by one or more blocked persons are also blocked. In other words, such entities property and interests in property will also become inaccessible to the concerned entity.

The U.S. persons, or non-U.S. persons dealing with such designated or blocked persons also run a risk of sanctions violations.

Several regulatory measures have been implemented on certain U.S. origin and foreign-produced items. Examples of such measures include:

• New controls
  • New controls on U.S. origin and foreign produced High-Bandwidth Memory (HBM) subject to Export Administration Regulations (EAR) under the Foreign Direct Product (FDP) rule with limited exceptions.
• Expansion of the Entity List
  • BIS has added 140 new entities and modified 14 existing entries on the Entity List. These include semiconductor fabs, tool companies, and investment firms acting at the behest of China to further China’s efforts to advance its chip-making capabilities, particularly for military end-uses.
• New FDP Rules and corresponding de minimis provisions
  • Semiconductor Manufacturing Equipment (SME) FDP Rule extending U.S. jurisdiction over foreign-produced SME and related items with knowledge that they are destined for Macau or countries in Group D:5 including China.
  • Footnote (FN5) FDP Rule extending U.S. jurisdiction to foreign-produced SME and related items with knowledge of involvement by an entity under Entity List with an FN5 designation.
  • De minimis provisions extending U.S. jurisdiction over foreign-produced SME and related items described in the above FDP rules and may contain any amount of U.S. origin integrated circuits.

These changes could affect foreign companies involved in the semiconductor supply and value chain, particularly those using U.S.-origin software, technology, or items like integrated circuits.

These recent sanctions and export control measures reflect the U.S.’ continued commitment to safeguarding national security by restricting access to critical technologies and addressing illicit activities. Foreign entities, including those based in India, should closely monitor these developments, as non-compliance with U.S. regulations may result in significant penalties and restrictions. Companies involved in the semiconductor supply chain or dealing with Chinese entities should assess their exposure to these new rules and ensure they are in full compliance with the updated regulatory landscape.

We trust you will find this an interesting read. For any queries or comments on this update, please feel free to contact us at elptrade@elp-in.com or write to our authors:

Sanjay Notani, Partner, Email – SanjayNotani@elp-in.com

Ambarish Sathianathan, Partner, Email – AmbarishSathianathan@elp-in.com

Harika Bakaraju, Principal Associate, Email – HarikaBakaraju@elp-in.com