On May 24, 2019, the US Commerce Department’s Bureau of Industry and Security (“BIS”) issued a final rule amending the Export Administration Regulations (“EAR”) to (i) remove Venezuela from Country Group B, which affords favorable treatment for certain exports of national security-controlled items, and (ii) add Venezuela to Country Group D:1, which includes countries of national security concern, and to Country Groups D:2, D:3, and D:4, which include countries of nuclear, chemical and biological weapons, and missile technology concern, respectively. BIS also made other conforming changes to the EAR, including adding (i) nonproliferation column 2 (NP 2) and (ii) chemical and biological weapons column 3 (CB 3) reasons for control for Venezuela. Venezuela had previously been part of Country Group D:5 as a US arms embargoed country, meaning that exports and reexports to Venezuela for items classified under 9×515 and “600 series” ECCNs were already subject to a policy of denial, and Venezuela has been included in the military end-use and end-user control in Section 744.21 of the EAR. BIS noted that the final rule better protects US national security and better aligns the Country Group designations for Venezuela with other EAR national security-related provisions that already apply to Venezuela.
Below we highlight some of the major changes which result from (i) the removal of Venezuela from Country Group B and (ii) the addition of Venezuela to Country Groups D:1, D:2, D:3, and D:4. This list is not exhaustive.
- License applications for the export and reexport of national security-controlled items to Venezuela will be reviewed on a case-by-case basis, which means BIS will determine, on a case-by-case basis, whether or not items are for civilian use or otherwise would not make a significant contribution to the military potential of Venezuela that would prove detrimental to the national security of the United States;
- Exports and reexports to Venezuela and transfers (in-country) in Venezuela will now be ineligible for license exceptions LVS, GBS, and TSR;
- The use of license exceptions TMP, RPL, GFT, BAG, AVS, APR, and ENC are subject to certain limitations and restrictions for destinations in Country Groups D:1, D:2, D:3, and/or D:4, and those limitations and restrictions will now apply to the use of such license exceptions to Venezuela;
- Certain exports, reexports, and transfers (in-country) of microprocessors and associated software and technology for military end uses and to military end users in Venezuela will now be restricted; and
- Certain reexports of foreign-produced direct products of US-origin technology and software to Venezuela will now be restricted pursuant to Section 736.2.(b)(3) of the EAR, General Prohibition Three.
Any shipments that were “on dock for loading, on lighter, laden aboard an exporting carrier, or en route aboard a carrier to a port of export, on or before May 24, 2019, pursuant to actual orders for exports, reexports, and transfers (incountry)” may proceed under the previous license exception eligibility or without a license so long as they have been exported, reexported, or transferred (in-country) before June 24, 2019. Any such items not actually exported, reexported, or transferred (in-country) before midnight, on June 24, 2019, require a license in accordance with the final rule.
Parties that export or reexport to Venezuela or transfer (in-country) in Venezuela should make sure their understanding of EAR requirements are current in light of the developments discussed herein. For further recent developments related to Venezuela, please see our blog posts here and here.
Terry Gilroy is a partner in the New York office of Baker McKenzie and a member of the Compliance and Investigations Practice Group. Prior to joining the Firm in 2018, Terry served as Americas Head of the Financial Crime Legal function at Barclays. Terry advises businesses and individuals on white collar and financial crime issues and has significant experience conducting investigations relating to compliance with the US Foreign Corrupt Practices Act (FCPA) and related bribery and corruption statutes, economic sanctions regulations as administered by the US Department of the Treasury's Office of Foreign Assets Control (OFAC), and the Bank Secrecy Act and related anti-money laundering (AML) regulations and statutes. Terry spent six years on active duty in the United States Army as a Field Artillery officer.