On August 5, 2019, President Trump issued a new executive order (“E.O.”) entitled “Blocking the Property of the Government of Venezuela” (E.O. 13884). This new executive order is a sweeping measure that effectively bars all dealings by U.S. persons with the Government of Venezuela and entities owned or controlled by the Government of Venezuela, wherever located. In issuing this executive order, the Trump administration explained that these sanctions are designed to isolate the Maduro regime and target those who enable it. The restrictions in the order are effective immediately.
Contrary to some press reports, it does not represent an “embargo” of Venezuela similar to that maintained by the United States against Cuba, Iran, or Syria, where the United States prohibits most dealings in the territory of or with all nationals of the country, regardless of their government affiliation. The Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) in its issuing press release confirmed that the E.O. does not prohibit U.S. persons from transactions with private citizens in Venezuela, or the country of Venezuela itself.
Specifically, the order prohibits all transactions by U.S. persons involving the property of the Government of Venezuela, effectively making the entire government a specially designated national (“SDN”). At the same time, the sanctions demonstrate to countries and entities that support the Maduro regime that they could become sanctioned themselves for engaging in certain transactions with the Maduro government.
According to the order, the “Government of Venezuela” (or “GoV”) includes the following persons and entities:
- The state and GoV (i.e., the regime of Nicolas Maduro), and any political subdivision, agency, or instrumentality thereof;
- The Central Bank of Venezuela;
- Petroleos de Venezuela, S.A. (“PdVSA”);
- Any person owned or controlled, directly or indirectly, by the above; and
- Any person who has acted or purported to act directly or indirectly for or on behalf of any of the above, including as a member of the Maduro regime.
Simultaneously, the U.S. government is making significant exceptions to support the government of Juan Guaidó and to permit continued humanitarian assistance to the people of Venezuela.
Clearly, the U.S. government is “upping the pressure” on the Maduro regime, hoping to stimulate rapid change in the country. The fluidity and instability there make it very possible that we will continue to see changes in these measures in the coming weeks and months.
We set out below some highlights of the new actions, along with summaries of the exceptions (known as “general licenses”) issued by the U.S. government. General licenses authorize activity within their scope without need for a specific license application; so long as the contemplated activity satisfies the criteria set out in the general license, no further permission is required.
- Absent authorization granted by OFAC, either by one of the general licenses or a specific license, U.S. persons must wind down all operations and contracts with the GoV before September 4, 2019. U.S. persons include any U.S. 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.
- Non-U.S. companies engaging in transactions with the Maduro government risk being designated themselves as blocked persons pursuant to E.O. 13884 if the U.S. government determines that they “have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of” the GoV or acted on its behalf. Designation as a blocked person would make U.S. person transactions unlawful.
- In contrast to the sweeping prohibition on dealings with the Maduro regime, the newly issued General License 31 expressly authorizes dealings with the Venezuelan National Assembly and designees of the Interim President, Juan Guaidó, who has been recognized by over 25 mostly Western-oriented nations, including the United States. This General License extends to the ad hoc boards of directors appointed by the Guaidó government for certain GoV entities, which currently includes PdVSA and CITGO.
- The executive order and related general licenses all demonstrate an attempt to protect humanitarian assistance and the free flow of information to the Venezuelan people. Among other measures, OFAC has issued general licenses permitting financing for medicine and medical devices, access to communications, and the provision of humanitarian assistance by nongovernmental organizations.
General License Permissions
As noted above, OFAC has limited the broad scope of the prohibition on dealings with GoV entities by amending 12 previously issued general licenses and issuing 13 new general licenses to permit a range of activities. We summarize some of these authorizations below; however, for details concerning the scope and limitations of these and other general licenses, please consult the general licenses directly.
General License 2A. In General License 2, OFAC originally authorized certain transactions and activities involving new debt, new equity, and securities of CITGO Holding, Inc. or any of its subsidiaries. The amended license now includes CITGO’s parent company, PDV Holding, Inc. (“PDVH”), and any of its other subsidiaries as well.
General License 3F. General License 3E authorized transactions related to certain bonds called “GL 3E Bonds.” Pursuant to the amended General License 3F, these are now known as “GL 3F Bonds,” and the amended license continues to prohibit the sale of 3F bonds to the GoV, a change initially made to this general license in April 2019 based on the designation of the Central Bank of Venezuela. General License 3F further clarifies that the unblocking of any property blocked by 31 C.F.R. chapter V is not authorized except as specified in this general license.
General License 4C. General License 4B authorized the sale of medical devices, medicine, and agricultural commodities. In the amended General License 4C, OFAC adds that exports of software updates for medical devices are also permitted provided they are separately authorized by the Commerce Department pursuant to its authority to regulate exports.
General Licenses 7C, 8C, and 9E. These amended licenses, like the originals, continue to authorize certain transactions involving PdVSA.
General License 10A. The original General License 10 permitted U.S. persons in Venezuela to purchase refined petroleum products for personal, commercial, or humanitarian uses from PdVSA and its subsidiaries. The amended General License 10A now includes further authorization for any transactions with the GoV necessary for such purchases, including payment of taxes and fees, as well as the purchase or receipt of permits, licenses, or public utility services.
General License 13C. Under this general license, transactions involving Nynas AB or any of its subsidiaries are permitted through October 25, 2019. This amendment reflects the expansion of the sanctions from PdVSA to the entire GoV under the new E.O., but does not make any additional substantive changes to the existing authorization.
General License 15B. General License 15B permits transactions through certain otherwise-prohibited Venezuelan (government-owned or -controlled) banks until March 22, 2020, if ordinarily incident to the activities of MasterCard, Visa, American Express, Western Union, or MoneyGram.
General License 16B. General License 16A authorized certain transactions ordinarily incident and necessary to maintaining, operating, or closing accounts of U.S. persons in Banco de Venezuela and Banco Bicentenario del Pueblo. General License 16B adds accounts in Banco del Tesoro to the list.
General License 18A. This amended license, like the original, continues to authorize transactions if they are ordinarily incident and necessary to maintain or operate Integración Administradora de Fondos de Ahorro Previsional, S.A., whose fund administrator is owned 50 percent or more by Banco Bandes Uruguay S.A. (Bandes Uruguay).
General License 20A. This amended license, like the original, continues to permit otherwise-prohibited transactions and activities for the official business of certain international organizations.
Newly Issued Licenses
General License 21. General License 21 authorizes U.S. financial institutions to debit otherwise blocked accounts for “normal service charges.” This general license explains that normal services charges include, but are not limited to, telephone and internet fees, custody fees, postage costs, insurance, and credit reports.
General License 22. General License 22 generally authorizes the provision of goods and services in the United States in support of Venezuela’s mission to the United Nations, as well as related payments.
General License 23. U.S. depository institutions, U.S.-registered securities brokers and dealers, and U.S.-registered money transmitters are authorized to process funds transfers involving the GoV if the transfers are necessary to support third-country diplomatic or consular missions in Venezuela.
General Licenses 24 and 25. General License 24 and 25 permit transactions involving the GoV that are incident to the receipt and transmission of telecommunications, as well as the export or re-export of services, software, hardware, and technology incident to the exchange of communications over the Internet (e.g., instant messaging, blogging, and social media). Transactions of common carriers incident to the receipt or transmission of mail and packages are also permitted.
General License 26. General License 26 permits the provision and receipt of nonscheduled emergency medical services that would otherwise be prohibited, in addition to the provision of other medical services.
General License 27. Certain transactions relating to patent, copyright, and trademark protection in the United States or Venezuela that would otherwise be prohibited are permitted by General License 27. The scope of authorized activities includes filing and prosecution of applications, receipt of intellectual property protection, renewal and maintenance of intellectual property protection, and filing and prosecution of any opposition or infringement proceeding.
General License 28. General License 28 temporarily permits all transactions and activities ordinarily incident and necessary to the wind down of operations, contracts, and other agreements with certain GoV entities.
General License 29. Transactions ordinarily incident to the provision of certain types of activities undertaken by NGOs are authorized by General License 29. This General License expressly identifies activities to support in Venezuela: (i) humanitarian projects to meet basic human needs; (ii) democracy building; (iii) education; (iv) non-commercial development directly benefitting the Venezuelan people; and (v) environmental protection.
General License 30. General License 30 generally authorizes transactions involving the GoV that are ordinarily incident to the operations or use of ports and airports in Venezuela.
General License 31. General License 31 permits U.S. persons to engage in transactions involving the Venezuelan National Assembly; Interim President Juan Gerardo Guaidó Marquez and any official, designee, or representative appointed by him; and any person appointed by President Guaidó to serve on the board of directors or be appointed as an executive officer of a GoV entity. General License 31 expressly excludes dealings with the Venezuelan National Constituent Assembly convened by Nicolas Maduro.
General License 32. U.S. persons residing in Venezuela are permitted under General License 32 to engage in transactions with the GoV so long as the transactions are ordinarily incident and necessary to the persons’ “personal maintenance within Venezuela,” including payment of taxes and purchase of public utility services.
General License 33. General License 33 authorizes certain transactions involving overflights of Venezuela, emergency landings in Venezuela, and the provision of air ambulance and related medical services in Venezuela.