United States: U.S. Imposes Partial Embargo On Venezuela

On August 5, 2019, President Donald Trump issued an “Executive Order on Blocking Property of the Government of Venezuela” (the “Order”). The Administration’s latest effort to ratchet up pressure on the Maduro regime represents a significant expansion of U.S. sanctions targeting Venezuela. However, the new Order does not impose a comprehensive embargo against Venezuela, and OFAC has issued (and re-issued) a wide range of general licenses authorizing certain transactions involving the Government of Venezuela (“GOV”). Parties with Venezuela touchpoints are well-advised to carefully consider the effects of these new (and complex) restrictions.

Unpacking the Order

What does the Order do?

The August 5 Order imposes four key requirements/prohibitions:

  1. The Order “blocks” all property and interests in property of the GOV that come within the United States or the possession or control of any U.S. person.
  2. The Order authorizes the Secretary of the Treasury, in consultation with the Secretary of State, to impose sanctions against any person who provides goods, services, or financial, material, or technological support to any person blocked pursuant to the Order (including, notably, the GOV).
  3. The Order suspends entry into the United States for persons blocked pursuant to the Order.
  4. The Order prohibits any transaction that evades, or causes an independent violation of, the Order’s prohibitions.

What is the significance of the blocking requirement?

The Order blocks all property interests of the GOV in the possession of U.S. persons. U.S. persons who come into possession or control of blocked property must (1) transfer the property to a segregated account; and (2) file a report with OFAC within ten business days.

For purposes of the Order, the GOV includes the “state and Government of Venezuela,” as well as “any political subdivision, agency, or instrumentality” of the GOV and any person owned or controlled by (or acting on behalf of) the GOV. Practically speaking, the prohibitions extend to all facets of the Venezuelan government, as well as state-owned or –controlled companies.

Importantly, the OFAC sanctions regulations define the terms “property” and “property interest” extremely broadly, to include (without limitation) money, bank deposits, debts, indebtedness, obligations, notes, guarantees, debentures, stocks, bonds, coupons, any other financial instruments, goods, merchandise, goods on ships, leaseholds, real estate and any other interest therein, options, accounts payable, judgments, patents, trademarks or copyrights, insurance policies, safe deposit boxes and their contents, services of any nature whatsoever, contracts of any nature whatsoever, and any other property, real, personal, or mixed, tangible or intangible, or interest or interests therein, present, future, or contingent. See 31 C.F.R. § 591.309. As such, U.S. persons should construe the scope of their blocking obligation in the broadest possible terms, and should consult with qualified sanctions counsel to resolve any potential ambiguities.

Who must comply with the new prohibitions?

The new prohibitions are relevant to both U.S. and non-U.S. parties. Although the blocking obligation (described above) applies only to U.S. persons (i.e., U.S. citizens, U.S.-organized entities, and persons physically present in the United States), other aspects of the August 5 order may implicate the activities of non-U.S. parties.

Notably, the Order authorizes the Department of the Treasury to impose sanctions upon any person, regardless of nationality, who provides—or receives—funds, goods, or services to or from any party blocked pursuant to the Order. As a result, non-U.S. parties that engage in transactions involving the GOV—or individuals or entities subsequently blocked pursuant to the Order—will be at risk of being targeted by U.S. sanctions (and effectively cut off from the U.S. marketplace).

Along similar lines, the Order prohibits any person, regardless of nationality, from causing a violation of the Order’s prohibitions. This may occur, inter alia, where a non-U.S. party causes a party subject to U.S. jurisdiction (e.g., U.S. financial institution, U.S. vendor) to unwittingly provide services in relation to a transaction that the party subject to U.S. jurisdiction could not engage in directly. By way of example, in the context of the Iran sanctions, OFAC has brought enforcement actions against non-U.S. parties that transacted Iran-related business in U.S. dollars, thereby causing financial institutions subject to U.S. jurisdiction to unknowingly export financial services to Iran. It is conceivable that OFAC could take a similar approach with respect to non-U.S. parties that transact GOV-related business in U.S. dollars.

Is Venezuela now off limits?

While the August 5 action represents a significant expansion of the Venezuela sanctions program, the United States has not imposed a comprehensive embargo against Venezuela, such as those currently in place with respect to Cuba and Iran. While the Order prohibits virtually any dealings with GOV-affiliated entities, unless those dealings are licensed, it does not prohibit dealings with private Venezuelan counterparties, or with Venezuelan nationals ordinarily resident in Venezuela. Further, while certain aspects of the Order may implicate non-U.S. parties’ activities, the Order generally does not apply to non-U.S. entities owned or controlled by U.S. persons (as do the Cuba and Iran sanctions).

Going forward, parties engaged in transactions with Venezuelan counterparties—as well as parties contemplating investments in targets that conduct business with Venezuela—should conduct thorough due diligence to assess whether the underlying transactions may involve, directly or indirectly, the GOV. In addition, as U.S. sanctions targeting Venezuela have continued to escalate in recent months, parties engaged in Venezuela-related transactions should continue to monitor for additional developments.

What general licenses, if any, remain in effect?

In connection with prior Venezuela-related actions, OFAC has issued a range of general licenses, including general licenses authorizing certain transactions involving CITGO Holdings Limited (“CITGO”) and bonds issued by the GOV or Petróleos de Venezuela, S.A. (“PdVSA”). The Order clarified, however, that its prohibitions “apply except to the extent provided by statutes, or in regulations, orders, directives, or licenses that may be issued pursuant to this order, and notwithstanding any contract entered into or any license or permit granted prior to the effective date of this order.” As such, the Order supersedes all previously issued general licenses and authorizations.

To mitigate the Order’s unintended effects, OFAC has reissued preexisting general licenses pursuant to this new authority, as well as a wide range of new general licenses. The general licenses, as set forth below, extend the most heavily relied upon general licenses that were in effect prior to the Order, and authorize a range of additional—and, in some cases, nuanced—exceptions to the otherwise expansive prohibition on dealings with the GOV.

Preexisting General Licenses

  • General License 2A, Authorizing Certain New Debt, New Equity, and Securities Involving PDV Holding, Inc. and CITGO Holding, Inc., supersedes General License 2, and continues to authorize certain transactions and activities where the only GOV entities involved are PDV Holding, Inc., CITGO Holding, Inc., or any of their subsidiaries (including CITGO).
  • General License 3F, Authorizing Transactions Related to, Provision of Financing for, and Other Dealings in Certain Bonds, supersedes General License 3E, and continues to authorize transactions related to the divestment or transfer of certain GOV-issued bonds.
  • General License 4C, Authorizing Certain Debt Transactions and Other Transactions Involving Certain Blocked Persons Related to the Exportation or Reexportation of Agricultural Commodities, Medicine, Medical Devices, Replacement Parts and Components, or Software Updates, supersedes General License 4B, and continues to authorize certain transactions ordinarily incident and necessary to the exportation or reexportation of agricultural commodities, medicine, medical devices, replacement parts and components, and software updates for medical devices.
  • General License 5, Authorizing Certain Transactions Related to the Petroleos de Venezuela SA 2020 8.5 Percent Bond, continues to authorize transactions related to the referenced bond.
  • General License 6, Authorizing Certain Activities Necessary to the Maintenance or Wind Down of Operations or Existing Contracts with Globovision Tele C.A. or Globovision Tele CA, Corp., continues to authorize wind down transactions related to the foregoing entities (through January 8, 2020).
  • General License 7C, Authorizing Certain Activities Involving PDV Holding, Inc. and CITGO Holding, Inc., supersedes General License 7B, and continues to authorize certain transactions and activities where the only GOV entities involved are PDV Holding, Inc., CITGO Holding, Inc., or any of their subsidiaries (including CITGO).
  • General License 8C, Authorizing Transactions Involving Petróleos de Venezuela, S.A. (PdVSA) Necessary for Maintenance of Operations for Certain Entities in Venezuela, supersedes General License 8B, and continues to authorize certain specified U.S. energy companies (e.g., Halliburton, Baker Hughes, Schlumberger Limited, Weatherford International, etc.) to engage in transactions involving PdVSA, through October 25, 2019.
  • General License 9E, Authorizing Transactions Related to Dealings in Certain Securities, supersedes General License 9D, and continues to authorize transactions related to the divestment or transfer of certain PdVSA-issued bonds.
  • General License 10A, Authorizing the Purchase in Venezuela of Refined Petroleum Products from Petróleos de Venezuela, S.A. (PdVSA), supersedes General License 10, and continues to authorize the purchase in Venezuela of refined petroleum products for personal, commercial, or humanitarian uses from PdVSA or PdVSA-affiliated entities.
  • General License 12, Authorizing Certain Activities Necessary to Wind Down of Operations or Existing Contracts with Petróleos de Venezuela, S.A. (PdVSA), remains formally in effect (though the wind down period has expired).
  • General License 13C, Authorizing Certain Activities Involving Nynas AB, supersedes General License 13B, and continues to authorize certain transactions and activities where the only GOV entities involved are Nynas AB or its subsidiaries, through October 25, 2019.
  • General License 14, Official Business of the United States Government, continues to authorize GOV-related transactions conducted by the U.S. government, as well as its employees, grantees, or contractors.
  • General License 15B, Authorizing Transactions Involving Certain Banks for Certain Entities, supersedes General License 15A, and continues to authorize certain U.S. financial institutions and companies (e.g., MasterCard Incorporated, Visa Inc., American Express Company, Western Union Company, MoneyGram International) to engage in certain transactions with specified Venezuelan financial institutions.
  • General License 16B, Authorizing Maintenance of U.S. Person Accounts and Noncommercial, Personal Remittances Involving Certain Banks, supersedes General License 16A, and continues to authorize transactions ordinarily incident and necessary to maintaining, operating, or closing accounts of U.S. persons in specified Venezuelan financial institutions, through March 22, 2020.
  • General License 17, Authorizing Certain Activities Necessary to Wind Down of Operations or Existing Contracts with Certain Banks, remains formally in effect (though the wind down period has expired).
  • General License 18A, Authorizing Certain Transactions Involving Integración Administradora de Fondos de Ahorro Previsional, S.A., supersedes General License 18, and continues to authorize transactions ordinarily incident and necessary to maintain or operate Integración Administradora de Fondos de Ahorro Previsional, S.A.
  • General License 20A, Authorizing Official Activities of Certain International Organizations Involving the Government of Venezuela, supersedes General License 20, and continues to authorize transactions involving the GOV that are for the official business of certain international organizations, such as the United Nations (and its Programmes and Funds), the Inter-American Development Bank, and the Red Cross.

New General Licenses

  • General License 21, Entries in Certain Accounts for Normal Service Charges and Payments and Transfers to Blocked Accounts in U.S. Financial Institutions Authorized, permits U.S. financial institutions to debit any account blocked pursuant to the Order held at that financial institution in payment or reimbursement for normal service charges owed to the financial institution by the owner of the blocked account.
  • General License 22, Venezuela’s Mission to the United Nations, authorizes the provision of goods or services in the United States to Venezuela’s mission to the United Nations (and to staff members of Venezuela’s mission to the United Nations), provided that the goods or services are for the conduct of official business of the mission and/or for personal use of mission staff members. However, General License 22 clarifies that U.S. financial institutions are required to obtain specific licenses to operate accounts for, or to extend credit to, the mission of the GOV to the United Nations.
  • General License 23, Third-country Diplomatic and Consular Fund Transfers Authorized, authorizes U.S. depository institutions, U.S.-registered brokers or dealers in securities, and U.S.-registered money transmitters to process funds transfers involving the GOV that are necessary for the operating expenses or other official business of third-country diplomatic or consular missions in Venezuela.
  • General License 24, Certain Transactions Involving the Government of Venezuela Related to Telecommunications and Mail Authorized, authorizes transactions involving the GOV incident to the receipt and transmission of telecommunications or mail and packages between the United States and Venezuela.
  • General License 25, Exportation of Certain Services, Software, Hardware, and Technology Incident to the Exchange of Communications over the Internet Authorized, authorizes the exportation or reexportation, including involving the GOV, of services, software, hardware, and technology incident to the exchange of communications over the Internet. However, General License 25 clarifies that it does not relieve exporters from their separate obligations under other related laws, such as the Export Administration Regulations (“EAR”) administered by the U.S. Department of Commerce’s Bureau of Industry and Security.
  • General License 26, Emergency and Certain Other Medical Services Authorized, authorizes the provision and receipt of nonscheduled emergency medical services and the provision of medical services involving the GOV.
  • General License 27, Certain Transactions Related to Patents, Trademarks, and Copyrights Authorized, authorizes certain transactions in connection with patent, trademark, copyright, or other intellectual property (“IP”) protection in the United States or Venezuela that would otherwise be prohibited, including (1) the filing and prosecution of any application to obtain such IP protection; (2) the receipt of such IP protection; (3) the renewal or maintenance of such IP protection; (4) the filing and prosecution of any opposition or infringement proceeding with respect to such IP protection; and (5) payment of fees to the United States Government or the GOV in connection with the foregoing.
  • General License 28, Authorizing Certain Transactions Necessary to the Wind Down of Operations or Existing Contracts Involving the Government of Venezuela, authorizes all transactions and activities that are ordinarily incident and necessary to the wind down of such operations or contracts that were in effect prior to August 5, 2019. Notably, however, General License 28 is set to expire on September 4, 2019.
  • General License 29, Certain Transactions Involving the Government of Venezuela in Support of Certain Nongovernmental Organizations’ Activities Authorized, authorizes transactions involving the GOV that are ordinarily incident and necessary to certain activities of nongovernmental organizations—including activities to support humanitarian projects, democracy building, education, non-commercial development projects directly benefiting the Venezuelan people, and environmental protection—including the processing and transfer of funds, and payment of taxes, fees, and import duties to, and purchase or receipt of permits, licenses, or public utility services from, the GOV.
  • General License 30, Authorizing Certain Transactions Involving the Government of Venezuela to Port and Airport Operations, authorizes all transactions involving the GOV that are ordinarily incident and necessary to operations or use of ports and airports in Venezuela. General License 30 does not authorize, however, the export or reexport of diluents to Venezuela (directly or indirectly), and does not relieve exporters from their separate obligations under the EAR and any other related laws.
  • General License 31, Certain Transactions Involving the Venezuelan National Assembly, the Interim President of Venezuela, and Certain Other Persons Authorized, authorizes transactions involving the Venezuelan National Assembly (including its members, staff, and designees) or Interim President of Venezuela Juan Gerardo Guaidó Marquez (and any officials, designees, or representatives appointed by or acting on behalf of Guaidó).
  • General License 32, Authorizing Certain Transactions Related to Personal Maintenance of Individuals Who Are U.S. Persons Residing in Venezuela, authorizes transactions that are ordinarily incident and necessary to the personal maintenance of U.S. citizens residing in Venezuela, including payment of housing expenses, acquisition of goods or services for personal use, payment of taxes or fees, and the purchase or receipt of permits, licenses, or public utility services.
  • General License 33, Authorizing Overflight Payments, Emergency Landings, and Air Ambulance Services, authorizes the receipt of, and payment of charges for, services rendered involving the GOV 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 U.S. jurisdiction. General License 33 also authorizes transactions involving the GOV necessary to provide air ambulance and related medical services, including medical evacuation from Venezuela.

Conclusion

The Venezuela sanctions do not constitute a comprehensive embargo, and many of the key transactions that were previously authorized—including dealings with CITGO and dealings in GOV- or PdVSA-issued bonds—remain authorized. However, the additional restrictions imposed by OFAC pursuant to the Order still mark a significant escalation of U.S. sanctions targeting Venezuela, complicating Venezuela-related dealings for U.S. and non-U.S. parties alike. Parties engaged in dealings with Venezuela, or considering investments in companies with Venezuela-related dealings, are advised to take note of the new restrictions and ensure that all transactions remain compliant with the rapidly evolving Venezuela sanctions program.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions