Not a Full-On Embargo, But Decision to Freeze Government Assets Makes US Trade with Venezuela Tricky

This is not an embargo of all trade with Venezuela. However, this EO does go substantially further than the sanctions previously imposed against Venezuela. Specifically, the EO makes the following changes:

• Blocks the property and interests in property of the Government of Venezuela that are in the United States or the possession or control of US persons. This includes companies owned 50% or more or controlled by the Government of Venezuela (“state-owned companies”).
• Prohibits US persons from transacting business with the Government of Venezuela or state-owned companies except as exempt or authorized by an Office of Foreign Assets Control (OFAC) specific or general license.

“US person” means any US citizen, permanent resident alien, entity 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.

The term “Government of Venezuela” includes the state and Government of Venezuela, any political subdivision, agency, or instrumentality thereof, including Banco Central de Venezuela (BCV) and Petróleos de Venezuela, S.A. (PdVSA), any person owned or controlled, directly or indirectly, by the foregoing, and any person who has acted or purported to act directly or indirectly for or on behalf of, any of the foregoing, including as a member of the Maduro regime.

Are all transactions prohibited?

No. US persons may still engage in transactions in currencies other than the Venezuelan petro involving the country or people of Venezuela, as long the transactions do not involve the Government of Venezuela, state-owned companies, Specially Designated Nationals (SDNs) or entities owned 50% or more by one or more SDNs. OFAC has also published general licenses that authorize some transactions with the Government of Venezuela as discussed below.

Has OFAC published any additional general licenses?

In addition to amending some older licenses, which we reported on in our September 25, 2017 and January 29, 2019 alerts, and a full list of which can be found here, OFAC has issued 13 new general licenses in connection with the EO.

The general licenses are mostly standard, including General License 28, which authorizes a short wind-down period through September 3, 2019, and the usual licenses for transactions with the Government of Venezuela related to intellectual property protection, telecommunications and mail, and communications over the internet. Transactions with the Venezuelan National Assembly and the Government of the Interim President of Venezuela, Juan Guaidò, also has a general license. Other general licenses – such as one authorizing operations and use of ports and airports in Venezuela – seem calibrated to allow at least some commerce to continue between the United States and Venezuela.

Brief summaries of the general licenses’ authorizations follow:

• General License 21: Authorizes US financial institutions to debit any blocked account blocked in payment or reimbursement for normal service charges owed it by the owner of that blocked account.
• General License 22: Authorizes the provision of goods or services in the United States to Venezuela’s mission to the United Nations and payment for such goods or services.
• General License 23: authorizes US depository institutions, US-registered brokers or dealers in securities, and US-registered money transmitters to process funds transfers involving the Government of Venezuela that are necessary for the operating expenses or other official business of third-country diplomatic or consular missions in Venezuela.
• General License 24: Authorizes certain transactions involving the Government of Venezuela incident to the receipt and transmission of telecommunications and mail.
• General License 25: Authorizes exportation from the United States or by U.S. persons, wherever located, to or involving the Government of Venezuela of certain services, software, hardware, and technology incident to the exchange of communications over the internet, such as instant messaging, chat and email, social networking, sharing of photos and movies, web browsing, blogging, web hosting, and domain name registration services.
• General License 26: Authorizes the provision and receipt of emergency and certain other medical services.
• General License 27: Authorizes certain transactions related to patents, trademarks, and copyrights:
  • The filing and prosecution of any application to obtain a patent, trademark, copyright, or other form of intellectual property protection;
  • The receipt of a patent, trademark, copyright, or other form of intellectual property protection;
  • The renewal or maintenance of a patent, trademark, copyright, or other form of intellectual property protection;
  • The filing and prosecution of any opposition or infringement proceeding with respect to a patent, trademark, copyright, or other form of intellectual property protection, or the entrance of a defense to any such proceeding; and
  • The payment of fees to the US Government or the Government of Venezuela, and of the reasonable and customary fees and charges to attorneys or representatives within the United States or Venezuela for the above transactions.
• General License 28: Authorizes the wind down of operations with persons blocked solely pursuant to EO of August 5, 2019.
  • All transactions and activities prohibited by the EO that are ordinarily incident and necessary to the wind down of operations, contracts, or other agreements involving the Government of Venezuela that were in effect prior to August 5, 2019 are authorized through 12:01 a.m. eastern daylight time, September 4, 2019.
  • The General License does not authorize any debit to an account of the Government of Venezuela on the books of a US financial institution or any transaction or dealings otherwise prohibited by the EO of August 5, 2019 or other EOs pertaining to Venezuela.
• General License 29: Authorizes certain transactions involving the Government of Venezuela in support of certain nongovernmental organizations’ activities, including processing and transfers of funds, payment of taxes, fees, and import duties to, and purchase or receipt of permits, licenses, or public utility services from, the Government of Venezuela.
• General License 30: Authorizes all transactions and activities involving the Government of Venezuela prohibited by the EO of August 5, 2019 that are ordinarily incident and necessary to operations or use of ports and airports in Venezuela.  
• General License 31: Authorizes transactions involving the Venezuelan National Assembly, including its members and staff, and any persons appointed or designated by the National Assembly to act on behalf of the Government of Venezuela, as well as with the Government of the Interim President of Venezuela.
• General License 32: Authorizes certain transactions related to personal maintenance of individuals who are US Persons residing in Venezuela, including payment of housing expenses, acquisition of goods or services for personal use, payment of taxes or fees, and purchase or receipt of permits, licenses, or public utility services.
• General License 33: Authorizes receipt of, and payment of charges for, services rendered involving the Government of Venezuela in connection with overflights of Venezuela or emergency landings in Venezuela by aircraft registered in the United States or owned or controlled by, or chartered to, persons subject to US jurisdiction.

Finally, US persons may apply to OFAC for specific licenses authorizing particular transactions that may otherwise be prohibited by the sanctions, as long as those transactions are in the foreign policy interests of the United States.

Has OFAC published any guidance on this?

OFAC has published revised FAQs on the EO, noting the following:

• Financial institutions should conduct due diligence on their own direct customers (including, for example, their ownership structure) to determine whether those customers are persons whose property and interests in property are blocked.
• Additionally, OFAC will still allow US persons to continue to provide unimpeded humanitarian support, such as food, clothing and medicine intended to be used to relieve human suffering, to the Venezuelan people.
• OFAC’s General License 4C authorizes certain transactions ordinarily incident and necessary to the exportation or reexportation of agricultural commodities, medicine, medical devices, replacement parts and components for medical devices, or software updates for medical devices to Venezuela, or to persons in third countries purchasing specifically for resale to Venezuela.

So Can I Continue to Export Commercial Products from the US to Venezuela?

Yes, but you are going to need to do so very carefully. The general licenses do allow you to make certain payments to Government of Venezuelan ports and airports for your shipments and you can continue to protect your trademarks and patents, but you will need to carefully check all aspects of a transaction to make sure:

1. no parties to the transaction are state owned entities or owned 50% or more by SDNs;
2. there are no additional transactions that you will have to engage in that involve the Government of Venezuela that are not covered by a general license.

For example, if your product must be registered with the Government of Venezuela for health or safety reasons, and there is a registration fee, such a fee would not be covered by a general license unless you are an NGO (see General License 29). So you will need to take a fine tooth comb to your Venezuelan business to make sure there are no hidden risks.