On January 28, 2019, the US Treasury Department’s Office of Foreign Assets Control (“OFAC”) designated Petróleos de Venezuela, S.A. (“PdVSA”) as a Specially Designated National (“SDN”) under Executive Order 13850 of November 1, 2018 because it operates in the Venezuelan oil sector.  As a result, US Persons (i.e., entities organized under US laws and their non-US branches; individuals and entities physically located in the United States; and US citizens and permanent resident aliens (“Green Card” holders) wherever located or employed) are prohibited, in the absence of an OFAC license, from transacting, directly or indirectly, with PdVSA and any entities owned 50% or more by PdVSA (“PdVSA Subs”).  In addition, except as permitted under OFAC licenses, US Persons are required to block property or property interests of PdVSA/PdVSA Subs that are currently in the United States, come within the United States or the possession or control of any US Person.

Concurrently, OFAC re-issued one general license (“GL”) and issued eight new GLs that authorize certain transactions with PdVSA/PdVSA Subs, as summarized below and available here.  We note that these descriptions are not exhaustive and that each GL should be reviewed in detail before relying on the authorizations contained therein.

  • GL 3 was re-issued as General License No. 3A (“GL 3A”) and authorizes transactions related to, the provision of financing for, and other dealings in bonds specified in the Annex to GL 3A. Further, Section (b) of GL 3A authorizes transactions related to bonds that were issued both (i) prior to August 25, 2017 and (ii) by US companies owned or controlled by the Government of Venezuela except for the following entities owned by PdVSA and any of their subsidiaries: Nynas AB (“Nynas”), PDV Holding Inc. (“PDVH”), and CITGO Holding Inc. (“CITGO”) (but see GL 9 described below).  (No stated expiration date.)
  • GL 7 authorizes transactions with respect to PDVH and CITGO and any of their subsidiaries. (Valid through July 26, 2019.)  GL 7 also authorizes PDVH and CITGO and any of their subsidiaries to engage in transactions that are ordinarily incident and necessary to the purchase and importation of petroleum and petroleum products from PdVSA/PdVSA Subs.  (Valid through April 27, 2019.)  We note that GL 7 builds on GL 2, which predates PdVSA’s designation and is still in effect.
  • GL 8 authorizes the following five named entities to engage in transactions and activities ordinarily incident and necessary to operations in Venezuela involving PdVSA/PdVSA Subs: (i) Chevron Corporation, (ii) Halliburton, (iii) Schlumberger Limited, (iv) Baker Hughes, a GE Company, and (v) Weatherford International, Public Limited Company. (Valid through July 26, 2019.)
  • GL 9 authorizes transactions that are ordinarily incident and necessary to dealings in any debt of PdVSA/PdVSA Subs that was issued prior to August 25, 2017, subject to certain conditions and authorizes transactions that are ordinarily incident and necessary to dealing in bonds issued prior to August 25, 2017 by the following entities and their subsidiaries: PDVH, CITGO, and Nynas. (No stated expiration date.)
  • GL 10 authorizes US Persons in Venezuela to purchase refined petroleum products for personal, commercial, or humanitarian uses from PdVSA/PdVSA Subs. It does not authorize any commercial resale, transfer, or export/reexport of petroleum products.  (No stated expiration date.)
  • GL 11 authorizes US Person employees and contractors of non-US entities in third countries (including in Venezuela) to engage in all transactions and activities necessary to the maintenance and wind-down of operations, contracts, or other agreements that were in place prior to January 28, 2019, and involve PdVSA/PdVSA Subs. US financial institutions are also authorized to reject (rather than block) transactions related to activities, so long as the funds originate and terminate outside the United States, neither the originator nor the beneficiary is a US Person, and the funds are not destined for a blocked account on the books of a US Person.  (Valid through March 28, 2019.)
  • GL 12 authorizes transactions that are ordinarily incident and necessary to the purchase and importation into the United States of petroleum and petroleum products from PdVSA/PdVSA Subs. (Valid through April 27, 2019.)  GL 12 also authorizes transactions ordinarily incident and necessary to the wind down of operations, contracts, or other agreements, including the importation into the United States of goods, services, or technology not otherwise authorized in GL 12, involving PdVSA/PdVSA Subs that were in effect prior to January 28, 2019.  (Valid through February 26, 2019.)
  • GL 13 authorizes transactions and activities where the only PdVSA Sub involved is Nynas or any of its subsidiaries. (Valid through July 26, 2019.)
  • GL 14 authorizes transactions related to the official business of US Government employees, grantees, or contractors. (No stated expiration date.)

Separate from the above, on January 25, 2019, the President issued a new Executive Order related to Venezuela entitled “Taking Additional Steps to Address the Situation in Venezuela” available here.  OFAC also issued FAQ 649 related to this new Venezuela Executive Order available here, which advises that the new order was issued to broaden the definition of “Government of Venezuela” to include persons that have acted, or purport to act on behalf of the Government of Venezuela, including members of the Maduro regime.  OFAC advised that additional FAQs with regard to the above developments will be forthcoming.

Author

Ms. Test advices clients on issues relating to licensing, regulatory interpretations, enforcement actions, internal investigations and compliance audits, as well as the design, implementation and administration of compliance programs. She also advises clients on the extra-territorial application of trade compliance-related regulations in cross-border transactions.

Author

Meg's practice involves assisting multinational companies with export compliance related matters, specifically trade sanctions and export control classifications. Additionally, she assists companies with respect to customs laws, anti-boycott laws and other trade regulation issues in the US and abroad. She also helps obtain authorizations from the US government for activities subject to sanctions regulations and US export control regulations, including the Export Administration Regulations and the International Traffic in Arms Regulations. Meg's practice extends to assistance in internal compliance reviews as well as enforcement actions and disclosures necessitated by US government action.

Author

Paul Amberg is a partner in Baker McKenzie’s Amsterdam office, where he handles international trade and compliance issues. He advises multinational companies on export controls, trade sanctions, antiboycott rules, customs laws, anticorruption laws, and commercial law matters. Paul helps clients assess and address compliance risks presented by export controls, trade sanctions, antiboycott rules, customs laws, and anticorruption laws. His practice especially focuses on internal reviews, voluntary disclosure filings, and enforcement actions brought by, the US Government in relation to the Export Administration Regulations (EAR), International Traffic in Arms Regulations (ITAR), trade and economic sanctions programs, and US customs laws.