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New Chinese Rules Aim to Limit Impact of Foreign Sanctions

China issued a set of new rules and regulations to protect its firms against extraterritorial U.S. sanctions and to allow for penalties for complying with U.S. restrictions. The rules, issued Jan. 9 by the country’s Ministry of Commerce, allow China to restrict its people and companies from complying with foreign sanctions or else face Chinese sanctions, according to an unofficial translation of the regulations. The rules, which don’t mention the U.S. specifically, include reporting obligations, a legal process for complying with Chinese law over U.S. sanctions and outlines a working mechanism that will oversee the process.

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In a guidance, China said the measures do not apply to “specific countries or specific transactions in specific fields.” The working mechanism will “closely follow the improper application of relevant national laws and measures” outside their territory and impose penalties based on the working mechanism’s criteria. China did not outline what specific penalties it will impose, only saying it will take “necessary countermeasures.”

China also said the rules draw on “international common practices,” pointing to the United Nations as a precedent. China said the UN routinely calls for the “abolition of various unilateral laws and measures that have extraterritorial effects on companies and individuals in other countries.” China also said it plans to provide guidance to companies on the law, and entities that “suffer losses” due to foreign sanctions can “seek judicial relief” from Chinese courts. The White House didn’t comment.