854. What does General License 38 authorize?
On November 30, 2020, OFAC designated CEIEC pursuant to Executive Order (E.O.) 13692 for its role in undermining democracy in Venezuela. Concurrent with this action, OFAC issued Venezuela General License (GL) 38 (“Authorizing the Wind Down of Transactions Involving CEIEC”). GL 38 authorizes U.S. persons to engage in all transactions and activities prohibited by E.O. 13692 that are ordinarily incident and necessary to the wind down of transactions and activities involving CEIEC, or any entity in which CEIEC owns, directly or indirectly, a 50 percent or greater interest (collectively, Blocked CEIEC Entities), through 12:01 a.m. eastern standard time, January 14 , 2021.
After the expiration of this authorization, unless exempt or authorized by OFAC, U.S. persons will be prohibited from engaging in transactions with the Blocked CEIEC Entities, and must block property or interests in property of such entities that are in, or come within, the United States, or the possession or control of a U.S. person.
Non-U.S. persons may wind down transactions and activities with the Blocked CEIEC Entities without exposure to sanctions under E.O. 13692, provided that such wind-down activity is: (i) consistent with GL 38; and (ii) completed prior to 12:01 a.m. eastern standard time, January 14, 2021. Entering into new business involving the Blocked CEIEC Entities will not be considered wind-down activity. Non-U.S. persons unable to wind down activities with the Blocked CEIEC Entities before 12:01 a.m. eastern standard time, January 14, 2021, may seek guidance from OFAC.
1) See Venezuela GL 38, and comments thereto. Venezuela GL 38 is a straightforward "wind down" GL, which does not include an authorization for the "maintenance" of operations. The lack of a “maintenance” component signals that OFAC has not been presented with a proposal by CEIEC that it considers likely to result in the de-listing of the blocked entity.
Note that OFAC says that "Non-U.S. persons may wind down transactions and activities with the Blocked CEIEC Entities without exposure to sanctions under E.O. 13692." This is a reference to the use of EO 13692 as a "quasi secondary sanctions" authority, not the standard blocking prohibitions of the EO. In other words, a non-U.S. person may deal with CEIEC without being deemed to have "materially assisted" that entity in a way that can result in blocking pursuant to Sec. 1(a)(ii)(D)(1) of EO 13692. Non-U.S. persons are not directly subject to the blocking prohibitions that are partially suspended by Venezuela GL 38.
2) There is nothing that legally requires OFAC to harmonize the scope of its blocking prohibitions with the scope of the activities that can result in derivative designations, but as a matter of practice OFAC does not designate non-U.S. persons for dealings with blocked persons if those dealings would be exempt or authorized if they were engaged in directly by U.S. persons. This FAQ reflects that general practice, by specifying that an activity will not result in derivative designation if it would qualify for the wind down general license if engaged in directly by a U.S. person. For more on that issue, refer to General Note on Secondary Sanctions and “Derivative Designation” Criteria; Identification of the Gap Between the Theoretical and Practical Scopes of Authorities Targeting Transactions with no U.S. Nexus; Enforcement Risk Management and refer generally to General Note on "Counterfactual Secondary Sanctions and Derivative Designation Safe Harbors" in Certain OFAC Guidance and FAQs (System Ed. Note).