Introduction

On 5 August 2019 President Trump signed an executive order, freezing all assets in which the Venezuelan government has an interest that are in US hands and prohibiting US persons from conducting transactions with the Venezuelan government, unless specifically exempted or authorised.

Although this is not an embargo on all trade with Venezuela, the executive order goes substantially further than the previous sanctions by:

  • blocking property and interests in property of the Venezuelan government which is in the United States or in the possession or control of US persons. This includes companies that the Venezuelan government controls or owns more than a 50% share in (ie, state-owned companies); and
  • prohibiting US persons from transacting business with the Venezuelan government or state-owned companies, except as exempt or authorised by an Office of Foreign Assets Control (OFAC) specific or general licence.

The term 'Venezuelan government' includes:

  • the Venezuelan state and government and any political subdivision, agency or instrumentality thereof, including Banco Central de Venezuela and Petróleos de Venezuela, SA (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 involving the country or people of Venezuela in currencies other than the Venezuelan petro, provided that the transactions do not involve the Venezuelan government, state-owned companies, specially designated nationals (SDNs) or entities that one or more SDNs owns a 50% or more share in. OFAC has also published general licences that authorise some transactions with the Venezuelan government, as discussed below.

Has OFAC published any additional general licences?

In addition to amending some older licences, OFAC has issued 13 new general licences in connection with the executive order.(1)

The general licences are mostly standard, including General Licence 28, which authorises a short wind-down period through 3 September 2019, and the usual licences for transactions with the Venezuelan government relating to IP protection, telecoms and mail, and communications over the Internet. Transactions with the Venezuelan National Assembly and interim President Juan Guaidò's government also have a general licence. Other general licences (eg, the one authorising the operation 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 licences' authorisations are set out below:

  • General Licence 21 – authorises US financial institutions to debit any account blocked in payment or reimbursement for normal service charges owed it by the owner of that blocked account.
  • General Licence 22 – authorises 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 Licence 23 – authorises US depository institutions, US-registered brokers or dealers in securities and US-registered money transmitters to process funds transfers involving the Venezuelan government that are necessary for the operating expenses or other official business of third-country diplomatic or consular missions in Venezuela.
  • General Licence 24 – authorises certain transactions involving the Venezuelan government incident to the receipt and transmission of telecoms and mail.
  • General Licence 25 – authorises exportation from the United States or by US persons, wherever located, to or involving the Venezuelan government of certain services, software, hardware and technology incident to the exchange of communications over the Internet (eg, instant messaging and email, social networking, sharing photos and movies, web browsing, blogging, web hosting and domain name registration services).
  • General Licence 26 – authorises the provision and receipt of emergency and certain other medical services.
  • General Licence 27 – authorises certain transactions relating to patents, trademarks and copyright, including:
    • the filing and prosecution of any application to obtain a patent, trademark, copyright or other form of IP protection;
    • the receipt of a patent, trademark, copyright or other form of IP protection;
    • the renewal or maintenance of a patent, trademark, copyright or other form of IP protection;
    • the filing and prosecution of any opposition or infringement proceeding with respect to a patent, trademark, copyright or other form of IP protection, or the entering of a defence to any such proceeding; and
    • the payment of fees to the US or Venezuelan government and the payment of reasonable and customary fees and charges to attorneys or representatives within the United States or Venezuela for the above transactions.
  • General Licence 28 – authorises the wind down of operations with persons blocked solely pursuant to the 5 August 2019 executive order:
    • All transactions and activities prohibited by the executive order that are ordinarily incident and necessary to the wind down of operations, contracts or other agreements involving the Venezuelan government that were in effect prior to 5 August 2019 are authorised through 12:01am Eastern Daylight Time on 4 September 2019.
    • The general licence does not authorise any debit to an account of the Venezuelan government on the books of a US financial institution or any transaction or dealings otherwise prohibited by the 5 August 2019 executive order or other executive orders pertaining to Venezuela.
  • General Licence 29 – authorises certain transactions involving the Venezuelan government in support of certain non-governmental organisations' (NGOs') activities, including processing and transferring funds and paying taxes, fees and import duties to, and purchase or receipt of permits, licences or public utility services from, the Venezuelan government.
  • General Licence 30 – authorises all transactions and activities involving the Venezuelan government prohibited by the 5 August 2019 executive order that are ordinarily incident and necessary to the operations or use of ports and airports in Venezuela.
  • General Licence 31 – authorises 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 Venezuelan government, or the interim president's government.
  • General Licence 32 – authorises certain transactions relating to the personal maintenance of US persons residing in Venezuela, including the payment of housing expenses, acquisition of goods or services for personal use, payment of taxes or fees and purchase or receipt of permits, licences or public utility services.
  • General Licence 33 – authorises the receipt of, and payment of charges for, services rendered involving the Venezuelan government 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.

Further, US persons may apply to OFAC for specific licences authorising particular transactions that may otherwise be prohibited by the sanctions, provided that those transactions are in the interest of US foreign policy.

Has OFAC published any guidance on this?

OFAC has published revised FAQs on the executive order, noting the following:

  • Financial institutions should conduct due diligence on their own direct customers (eg, their ownership structure) to determine whether those customers are persons whose property and interests in property are blocked.
  • OFAC will still allow US persons to continue to provide unimpeded humanitarian support (eg, food, clothing and medicine intended to be used to relieve human suffering) to the Venezuelan people.
  • OFAC's General Licence 4C authorises certain transactions:
    • ordinarily incident and necessary to the exportation or re-exportation 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 products specifically for resale to Venezuela.

Can commercial products continue to be exported?

Yes, but this must be done with the utmost caution. While the general licences allow parties to make certain payments to Venezuelan government ports and airports, and trademarks and patents may continue to be protected, it is paramount that all aspects of a transaction are carefully checked to ensure that:

  • no parties to the transaction are state-owned entities or 50% or more owned by SDNs; and
  • there are no additional transactions that will involve the Venezuelan government that are not covered by a general licence.

For example, if an entity's product must be registered with the Venezuelan government for health or safety reasons and there is a registration fee, such a fee would not be covered by a general licence unless the entity is an NGO (see General Licence 29). As such, any Venezuelan business must be conducted using a fine-tooth comb to ensure that there are no hidden risks.

Endnotes

(1) For further information see "OFAC sanctions Venezuelan state-owned oil giant PDVSA" or "President Trump's 'New' Venezuelan Sanctions: Russian Sectoral Sanctions Déjà Vu". A full list of which can be found here.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.