On December 15, the U.S. Treasury Department added one Chinese individual and several Chinese companies to a designated list on the basis of their involvement in illicit drug trade. The designated persons and related personnel would be subject to sanctions, including blocking assets and denial of entrance into the United States.
The designation is pursuant to a new Executive Order on Imposing Sanctions on Foreign Persons Involved in the Global Illicit Drug Trade (EO 14059), which was signed by President Biden on the same day as Treasury's announcement. The EO provides additional authority to the Treasury Department to punish foreign individuals in an effort to crack down on illicit drug trafficking. Foreign individuals and entities may be sanctioned if they are engaged in illicit drug trafficking activities, even when they are not linked to a specific kingpin or cartel, or they "have knowingly received" property that "constitutes or is derived from proceeds" of illicit drug trafficking activities. They could also receive sanctions if they have provided "financial, material, or technological support" for illicit drug trafficking or sanctioned persons, or have been "a leader or official of any sanctioned person."
According to the EO, designated individuals or entities could be subject to one or more of the sanctions listed as follows:
Sec 2 (a)
(i) block all property and interests in property of the sanctioned person that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person, and provide that such property and interests in property may not be transferred, paid, exported, withdrawn, or otherwise dealt in;
(ii) prohibit any transfers of credit or payments between financial institutions, or by, through, or to any financial institution, to the extent that such transfers or payments are subject to the jurisdiction of the United States and involve any interest of the sanctioned person;
(iii) prohibit any United States financial institution from making loans or providing credit to the sanctioned person;
(iv) prohibit any transactions in foreign exchange that are subject to the jurisdiction of the United States and in which the sanctioned person has any interest;
(v) prohibit any United States person from investing in or purchasing significant amounts of equity or debt instruments of the sanctioned person; or
(vi) impose on the principal executive officer or officers of the sanctioned person, or on persons performing similar functions and with similar authorities as such officer or officers, any of the sanctions described in subsections (a)(i)-(v) of this section that are applicable.
Sanctioned individuals and the "leader, official, senior executive officer, or director of, or a shareholder with a controlling interest in" a sanctioned entity could also be restricted from entering into the United States, according to the EO. Additional sanctions may be imposed on designated financial institutions.
Based on the EO, the Office of Foreign Assets Control (OFAC) at the Treasury Department designated one Chinese individual and four Chinese entities to the Specially Designated Nationals and Blocked Persons List (the SDN list). The four designated Chinese entities are Wuhan Yuancheng Gongchuang Technology Co. Ltd., Shanghai Fast-Fine Chemicals Co., LTD., Hebei Huanhao Biotechnology Co., Ltd., and Hebei Atun Trading Co., Ltd.
The companies were added to the list by OFAC for "having engaged in, or attempted to engage in, activities or transactions that have materially contributed to, or pose a significant risk of materially contributing to, the international proliferation of illicit drugs or their means of production." In particular, Shanghai Fast-Fine Chemicals Co., LTD., a Shanghai-based chemical transportation company, is listed for shipping "various precursor chemicals, often falsely labeled, to DTOs in Mexico for illicit fentanyl production and intended for U.S. markets for sale and consumption." In addition, Hebei Huanhao Biotechnology Co., Ltd. "imports and exports chemical and pharmaceutical products used to ... produce opioids" and "has advertised or supplied fentanyl precursor chemicals using business-to-business chemical marketplaces and has been involved in producing fentanyl precursors"; and Hebei Atun Trading Co., Ltd. "is also involved in fentanyl precursor chemical sales and falsifying chemical shipment details."
The designated individual is Chuen Fat Yip. According to the Treasury notice, Chuen Fat Yip is designated because he "traffics fentanyl, anabolic steroids, and other synthetic drugs to the United States and controls a group of companies that sell compounds and fentanyl precursor chemicals to the public and to private businesses." One of Yip's businesses is Wuhan Yuancheng Gongchuang Technology Co. Ltd., one of the listed companies.
Biden administration official Brian Nelson, the Under Secretary of the Treasury for Terrorism and Financial Intelligence, stated that "[u]sing President Biden’s new E.O., Treasury will deploy its sanctions authority with greater speed, power, and effect across the entire illicit drug ecosystem, especially those who profit from the death and misery of the opioid epidemic. We will continue working closely with our partners to reduce threats from these groups and disrupt their business models, including by stopping them from using the U.S. financial system."
In response to the designation, Chinese Ministry of Foreign Affairs spokesperson Wang Wenbin said during a press conference that:
I want to stress that the Chinese government adopts a “zero-tolerance” approach on the issue of narcotics, with strict measures taken to regulate anesthetics, psychotropics and precursor chemicals. China’s efforts and achievements are witnessed by the international community. China categorically opposes the erroneous acts of the US.
I must point out that China has scheduled fentanyl substances as a class while the US has not yet taken permanent measures [to control fentanyl substances] so far. Even worse, the US sanctioned the Institution of Forensic Science of the Ministry of Public Security and the National Narcotics Laboratory in China by adding them to the “entity list”. This is like telling others to take the medicine for one’s own illness. This wrong approach is not constructive at all and will only disrupt the law enforcement cooperation on combating narcotics between China and the US.
We urge the US to respect facts and look for causes of the abuse of fentanyl from within. It should view China’s efforts in an objective and fair manner, instead of diverting attention by blaming others.
In the same announcement, the Treasury Department also listed companies and individuals from other nations, including Brazil and Mexico. Altogether, the department designated designated 10 individuals and 15 entities from four countries.