1 INTRODUCTION

1.1 Statement of Policy

It is the policy of Modern Terminals Limited (the "MTL" or the "Company") and its subsidiaries (together, the "MTL Group") to conduct business in a manner consistent with all relevant laws in the jurisdictions where they do business, including the applicable economic sanctions and export controls laws and regulations imposed by Hong Kong, the People's Republic of China, and, when applicable, the United States and the European Union (collectively, "Trade Controls")¹.  This includes avoiding transactions that could expose the MTL Group or other parties to risks under applicable Trade Controls. You must comply with this policy, even where local law is less strict than this policy. Where local law is stricter, you must comply with those laws in addition to this policy.

1.2 Scope

This policy applies to all MTL Group directors, senior management, and employees ("MTL Employees"). Consultants, independent contractors, and any other third parties must also comply when they are acting on our behalf in connection with MTL Group's business.

1.3 Effective Date / Approval / Annual Review

This Policy is effective 20 December 2017 and was last revised on 4 December 2020.

This Policy is owned and approved, and will be reviewed and updated as needed, by the Legal Department.

2 COMPLIANCE WITH TRADE CONTROLS

2.1 Overview

The MTL Group follows a policy of compliance with all Trade Controls, including economic sanctions laws and other restrictions on trade, that are applicable to its business. Violations of Trade Controls can result in civil and/or criminal penalties and personal liability for MTL Employees who fail to comply. All MTL Employees must understand their obligations and strictly observe this protocol, both for their own protection and for the protection of their fellow personnel and the Company. Specifically:

A. We comply with all Trade Controls applicable to our transactions;

B. We will not knowingly participate in transactions that would expose any of the participants to risks under applicable Trade Controls; 

C. We will not participate in transactions designed or intended to evade Trade Controls of jurisdictions in which we do business; and 

D. We will take steps that we reasonably deem to be necessary to comply with, or mitigate risks from, applicable Trade Controls, including declining to render services to any vessel or counterparty that presents an unreasonable Trade Controls risk.

2.2 Definitions

US Embargoed Territory: a country or territory subject to a comprehensive US trade and financial embargo (currently, Cuba, Iran, North Korea, Syria, and the Crimea region of Ukraine).

US Sanctions Target: (i) any individual or entity ("person") listed on any official list maintained by the US Treasury Department's Office of Foreign Assets Control ("OFAC"); (ii) any entity that is directly or indirectly 50 percent or more owned by one or more such persons in the aggregate (collectively, "SDNs"); (iii) any person located in, incorporated under the laws of, or domiciled in an Embargoed Territory, and (iv) any Government of an Embargoed Territory, including entities that are owned or controlled by such governments.

US-Origin Items: any goods, software, or technology ("items") that are: (i) made in, located in, exported from, or transshipped through the United States; (ii) any non-US origin products that contain more than de minimis controlled US-origin content.  For MTL, the origin of the item is as disclosed in the certificate of origin, the commercial invoice, or the bill of lading to the extent such information is made available to MTL in the ordinary course of business. 

US Restricted Persons: (i) any persons on the US Commerce Department's Denied Persons List, the Unverified List, or the Entity List, (ii) any persons on the US State Department's Debarred List or Sanctioned Entities List.

US Persons: (i) any US citizen, permanent resident alien, entity (including financial institutions) organized under the laws of the United States or any jurisdiction within the United States (including foreign branches), or any person in the United States; and (ii) in the case of activities involving Cuba, North Korea, or Iran, any non-US entity that is owned or controlled by a US Person.

2.3 Compliance with US Sanctions and Export Controls 

2.3.1 US Dollar (USD) Transactions

MTL Group will not send or receive USD payments in connection with business relating to US Sanctions Targets or Embargoed Territories unless licensed by OFAC.

2.3.2 US Persons

MTL Group will not involve US Persons, including US financial institutions, in business relating to US Sanctions Targets or Embargoed Territories unless licensed by OFAC. For more information on US Person Employees, see the Recusal of US Persons Guidelines provided in Appendix A.

2.3.3 Export Controls

MTL Group will not knowingly engage in any violation of applicable export controls laws or regulations, including those of the PRC or, where relevant, the United States. In this regard, MTL Group will not knowingly handle any items (including US-origin items) in breach of  a license application requirement applicable to MTL Group and will apply risk-based measures to identify any such items with regard to existing terminal compliance procedures, market practices, and related obligations under applicable laws. These measures may include, but are not limited to, providing training or otherwise making information available to relevant MTL Employees on Trade Controls red flags, requiring escalations by MTL Employees to the Management Board and the Legal Department of Trade Controls red flags, risk-based Counterparty Due Diligence, and other measures adopted from time to time at the discretion of the Legal Department in consultation with the Management Board and MTL's external Trade Controls advisor. 

2.4 Due Diligence

2.4.1 Counterparty Due Diligence

MTL Group will conduct reasonable risk-based due diligence on counterparties (i.e., customers, agents, intermediaries, and consultants) at the time of onboarding in order to identify any counterparties that are US Sanctions Targets or Restricted Persons. Due diligence steps will include, but are not limited to, open source research on prospective counterparties such as shipping lines, agents, and other parties with whom MTL Group will conduct direct business.

2.4.2 Ad Hoc Due Diligence 

When MTL Group becomes aware of a potential Trade Controls risk involving a vessel or counterparty, ad hoc, risk-based due diligence should be conducted to further understand the nature of the risk to allow senior management, in consultation with the Legal Department, to determine what steps may be required to address it. Examples of ad hoc due diligence steps include, but are not limited to: 

For vessels:  

(i) Screening vessel name against publicly available sanctions lists 

(ii) Performing an open-source search of vessel name and IMO number for indicators of Trade Controls risk such as adverse media or government notices

(iii) Using open-source or commercially available tools for reviewing vessel history for 3-6 months to identify sanctioned ports and/or irregularities (e.g. AIS gaps)

(iv) Reviewing a ship’s particulars and inspection history for indicators of Trade Controls risk such as inspections performed in sanctioned ports, sanctioned vessel owner/operator, etc.

(v) Gathering information about vessel owner, operator, lessee, charterer, manager, and other related parties and performing name screening and open-source searches for each party

(vi) Considering other common Trade Controls red flags such as frequent changes in ownership /control of a vessel, vessel name, country flag, etc.

(vii) Requesting information (e.g. container manifests and vessel schedule) from a customer, vessel owner, captain, or other relevant parties to compare against other due diligence information for inconsistencies or to verify information

(viii) Performing a risk-based review of information so collected or gathered to identify high-risk goods, ports, and container prefixes

For customers and other parties: 

(ix) Screening the customer’s name and names of beneficial owners/connected parties (e.g., officers and directors) against publicly available sanctions lists 

(x) Performing open-source search of the above parties for indicators of Trade Controls risks   

(xi) Obtaining representations and warranties about the customer’s ongoing compliance with Trade Controls (e.g. in a side letter).  

The amount of due diligence required will depend on the facts and circumstances as well as the specific type of Trade Controls risk involved. For guidance, contact the Legal Department. 

MTL Group may perform ongoing monitoring of customers or vessels that were previously identified as potentially having Trade Controls risk.  Such monitoring could include, for example, repeating the steps above when a vessel returns to an MTL Group terminal or performing a high-level review of each cargo manifest associated with the vessel or customer. 

2.5 Training 

Where appropriate, MTL Group will provide MTL Employees with training on Trade Controls compliance and red flags tailored to the particular Trade Controls risks and roles applicable to that employee. Records will be kept as to the substance of and attendance at each training. 

2.6 Recordkeeping

Relevant departments will oversee and provide guidance on adequate recordkeeping in relation to transactions involving US Sanctions Targets or Embargoed Countries.  Such records shall be maintained for 5 years.

2.7 Risk Assessments and Testing

The Management Board, in consultation with the Legal Department, will conduct reasonable risk assessments of MTL Group's business in order to implement effective Trade Controls compliance measures which are commensurate with its business risk. The Legal Department and/or Internal Audit may conduct testing of MTL Group's compliance with the requirements of this policy from time to time.

2.8 Reporting

MTL Employees should escalate their questions and concerns about potential red flags and questions about this policy or Trade Controls compliance to the attention of the Management Board and the Legal Department. The Legal Department will consult as necessary with MTL's external Trade Controls advisors. 

The Legal Department can be reached at: 

Lolita Wong – General Counsel
Email: Lolita.Wong@modernterminals.com
Direct line: (852) 2115 3713

Teresa O – Legal Counsel
Email: Teresa.O@modernterminals.com
Direct line: (852) 2115 3466

Elaine Chung – Legal Counsel
Email: Elaine.Chung@modernterminals.com
Direct line: (852) 2115 3841 

3   External Resources

For more information about Trade Controls risks involving the maritime industry, MTL Employees may consult the following guidance documents: 

“Guidance to Address Illicit Shipping and Sanctions Evasion Practices,” US Department of State, US Department of the Treasury, US Coast Guard (14 May 2020), available at:

https://home.treasury.gov/system/files/126/05142020_global_advisory_v1.pdf 

“Maritime Guidance,” HM Treasury Office of Financial Sanctions Implementation (July 2020), available at: 

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/903901/OFSI_-_Maritime_guidance__July_2020_.pdf 

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^{1. Examples of relevant laws and regulations may include, without limitation, the Hong Kong United Nations (Anti-Terrorism Measures) Ordinance (Cap 575); the Hong Kong United Nations Sanctions Ordinance (Cap 537); the US International Emergency Economic Powers Act ("IEEPA") and all applicable executive orders and regulations issued thereunder; the US Export Administration Act ("EAR"); relevant EU Council Regulations; and all applicable circulars, guidelines, notices, and freezing orders issued by the People's Bank of China and other relevant PRC authorities.} 

APPENDIX A

RECUSAL OF US PERSONS GUIDELINES² 

1 Overview

1.1 In the absence of an applicable license or exception, US Trade Controls prohibit the involvement of US Persons in transactions with US Sanctions Targets or Embargoed Territories.

1.2 Accordingly, all MTL Employees who are US citizens or hold a US green card, anywhere in the MTL Group (including non-US citizens while in the United States), must not participate in or otherwise support or facilitate transactions involving US Sanctions Targets or Embargoed Territories unless OFAC has licensed such transactions.

1.3 Specifically, if you are a US Person, employed by a US entity or located in the United States:

• Do not provide any commercial advice, assistance or other support in connection with US Sanctions Targets or Embargoed Territories;
• Do not supervise or authorize any OFAC-sanctioned business involving US Sanctions Targets or Embargoed Territories or manage or direct the conduct of other personnel in regard to such business;
• Do not participate in the re-design or restructuring of any transactions, operations, products or services for the purpose of facilitating OFAC-sanctioned business involving US Sanctions Targets or Embargoed Territories;
• Do not provide corporate services (e.g., accounting, logistics, contract administration, technical services) specifically to support OFAC-sanctioned business involving US Sanctions Targets or Embargoed Territories. 
• Do not refer OFAC-sanctioned business opportunities involving US Sanctions Targets or Embargoed Territories to US persons.

1.4 Directors and other personnel who are not US Persons must not involve US Persons, US-origin goods or services, or the US financial system in any OFAC-sanctioned business involving US Sanctions Targets or Embargoed Territories.   

1.5 Thus, if you are not a US Person and your transaction involves US Sanctions Targets or Embargoed Territories:

• Do not work on that transaction while you are in the United States;
• Do not ask a US Person (including a US citizen or green card holder outside the United States) to assist you with that transaction;
• Do not discuss that transaction with a US Person, except to alert them to the need for compliance with this protocol or raise an OFAC compliance issue;
• Do not include US Persons in e-mail chains in furtherance of that transaction;
• Do not attempt to involve US Persons in that transaction by withholding information about its connection to a US Sanctions Target or Embargoed Territory; and
• Do not use credit or other assets provided by US Persons to finance transactions with US Sanctions Targets or Embargoed Territories or provide US Persons with funds derived from such transaction. 

1.6 Examples:  The following are examples of actions that are prohibited under this Policy:

• A MTL senior executive, who is a US green card holder, but working and residing in Hong Kong, authorizes a contract with a Syrian shipping line which is not licensed by OFAC; 
• A UK citizen who is a member of MTL's legal team prepares and emails comments in furtherance of business involving an Iranian counterparty while temporarily working from an office in the United States; 
• A non-US citizen MTL Employee telephones a consultant in New York for commercial advice in regard to a shipment on a vessel originating from Cuba; or
• A US green card holder employed by MTL in Hong Kong approves an agreement with a shipping line that is sanctioned by OFAC.

2 Recusal of US Person Board and Committee Members

2.1 As noted above, any MTL Employee who is a US Person may not approve, authorize, advise on or otherwise provide support or assistance in connection with business involving US Sanctions Targets or Embargoed Territories unless US law permits their involvement in a particular case (e.g., because OFAC has licensed the transaction).

2.2 A strict recusal policy therefore applies to US Persons serving on MTL Group managing boards and committees, meaning that they may not participate in any portion of a meeting of such boards or committees, including planning or votes, specifically in furtherance of OFAC-sanctioned business involving US Sanctions Targets or Embargoed Territories.

2.3 US Persons therefore should leave the meeting room and/or drop-off video/audio conferences (and verbally announce their departure) during such interval that a board or executive committee may take action specifically in furtherance of business involving US Sanctions Targets or Embargoed Territories.³  

2.4 Clarification regarding Compliance Advice:  MTL may and routinely will seek and consider advice provided by US Persons on compliance with OFAC and other sanctions regulations and MTL's exposure sanctions risks.  In this context, US Person members of or advisors to MTL Group boards and committees may address sanctions compliance issues on behalf of the MTL, while at the same time recusing themselves from any commercial planning or decisions in furtherance of OFAC-sanctioned business with US Sanctions Targets or Embargoed Territories.

2.5 In regard to any minutes of meetings recorded by the respective boards and committees, for any meeting in which voting or other action in furtherance of OFAC-sanctioned business with a US Sanctions Target is recorded, such minutes should indicate the manner in which any US Persons in attendance recused themselves from such action (e.g., left the room, dropped off the conference call).

2.6 Board and committee members (and executives generally) who are not US Persons should not include US Persons in emails or other communications regarding the commercial aspects of OFAC-sanctioned business with US Sanctions Targets or Embargoed Territories (in contrast to requests for compliance advice), and should avoid any other actions that might contradict the recusal policy applicable to US Persons.

2.7 The respective boards and committees will not approve or authorize any business with a US Sanctions Target if, following the recusal of all US Person members, the remaining members do not exceed the number of recused US Person members.

2.8 Effectively, this means that MTL Group boards and committees may never act in furtherance of OFAC-sanctioned business involving a US Sanctions Targets or Embargoed Territories at meetings, if any, that occur when the majority of the members present are US Persons or participating from the United States. 

3 Permissible Activities for US Personnel

3.1 The OFAC sanctions do not prohibit US Persons from travelling to Crimea, Iran, or Syria or engaging in customary travel-related transactions such as hotel and restaurant expenditures.⁴   In contrast, whether inside or outside Crimea, Cuba, Iran, North Korea, or Syria, US Persons may not facilitate unlicensed trade or commerce with those countries.

3.2 The facilitation prohibition does not extend to "passive awareness" by US Persons in relation to MTL's activities involving US Sanctions Targets or Embargoed Territories, as long as the US Persons do not use their awareness of such business to engage in activity that facilitates OFAC-sanctioned business.

3.3 Publication and distribution to US Person directors of general purpose management reports or financial statements disclosing costs/revenues/profits from business with US Sanctions Targets or Embargoed Territories as distinct line items in the context of MTL's overall business activity, would not expose those directors to facilitation liability as long as they did not participate in any commercial deliberations or decision making in furtherance of OFAC-sanctioned business.

3.4 On the same basis and with the same caveat, the ability of US Persons to access such reports or accounts through MTL's intranets or internal databases will not create facilitation liability if their purpose for accessing a particular report is not to assist MTL's business involving US Sanctions Targets or Embargoed Territories.

3.5 US Persons may consult the Legal Department at any time regarding any questions or issues arising under MTL's compliance policies and procedures.

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<sup>2. Although the United States is most well known for seeking extraterritorial enforcement of US Trade Controls, under some circumstances, nationals of jurisdictions other than the United States (e.g., Australia, Canada, EU member states) may also need to comply with their home jurisdictions' national laws with respect to Trade Controls. In such cases, they should also follow these recusal guidelines. 

3. The mere fact that a US Person may know about or become aware of business with a US Sanctions Target or Embargoed Territory, or questions the risks presented by such business, does not violate this protocol, as long as the US Person does not use the information to facilitate such business. 

4. US Persons are generally prohibited from travelling to Cuba and North Korea except for certain types of expressly authorized travel.</sup>