Sen. Marco Rubio (R-Fla.) has expressed concern regarding the Treasury Department’s quiet updates to its sanctions related to the Chinese military.
Rubio referred to the updates, which were posted as “Frequently Asked Questions” notes, as “unacceptable” and running “directly counter to U.S. national security priorities.” He strongly urged the department to reverse its change in policy.
Potentially Damaging Rules
On June 21, Rubio wrote to Treasury Secretary Janet Yellen regarding the release of three FAQs on June 1 relating to the Trump-era Executive Order (E.O.) 13959, amended by Biden’s Treasury and its Office of Foreign Assets Control (OFAC) in E.O. 14032.
In a letter, he said that actions allowed by the new policy changes “risk diminishing [the E.O’s] effectiveness in curbing the influence and power of Chinese Military Industrial Complex Companies (CMIC), as well as undoing the intent of the original order as it was first enacted.”
Rubio reminded the Treasury that Biden had previously declared that Trump’s November 2020 E.O. 13959 was amended to prevent “U.S. investment from supporting the Chinese defense sector,” saying that his administration “will not hesitate to prevent U.S. capital from flowing into the [People’s Republic of China’s] defense and related materiel sector.”
“With the introduction of two new FAQs on June 1, 2022, OFAC has now provided several substantive updates squarely in tension with such objectives,” Rubio wrote.
According to the FAQ 1046, the 365-day divestment period mandated by the E.O. was “optional.” Rubio said that as “there will be no penalties for failure to divest of targeted securities of CMIC entities, OFAC has minimized the essential importance of depriving Chinese military companies access to American capital.”
Meanwhile, OFAC banned U.S. investors from closing positions after that 365-day divestment period, absent OFAC authorization. Rubio said that this “risks playing into some investors’ hopes that Chinese firms’ listings are simply temporary or that the CMIC list itself will eventually be retired.”
Rubio wrote that FAQ 1047 “confirms that not only are there no consequences for refusing to divest, but also that U.S. persons may continue to profit off of their investments in Chinese military companies via passive benefits, such as cash dividends and stock splits.”
He emphasized that “OFAC has weakened a core tool at its disposal for confronting the critical threat posed to Americans by Chinese companies operating in the defense, aerospace, and surveillance sectors.”
According to the sanction list, more than 40 Chinese companies in the aerospace, shipbuilding, construction, technology, and communications industries were identified as CCMCs.
Ting Chen contributed to this report.