Notes:

*Note common to certain GLs: This is one of 12 GLs that pre-dated the blocking of the Government of Venezuela, pursuant to EO 13884, and was amended to account for the blocking. Except as otherwise noted, the substance of what the GL authorizes remains unchanged as a result of EO 13884. OFAC did not amend any FAQ dealing primarily with this FAQ as a result of the blocking of the GOV.

1) This GL was initially issued in connection with the designation, pursuant to EO 13850, of PdVSA. PDV Holding, Inc. (PDVH), CITGO Holding, Inc., and their subsidiaries are, as subsidiaries of PdVSA, blocked by EO 13850 by operation of law, pursuant to the 50% rule. With respect to subsection (b), note that PDVH and CITGO Holding, Inc. are both U.S. persons, hence the need to permit them to transact with their blocked parent.

The GL was amended in August, 2019, to account for the blocking of the GOV.

Paragraph (a) now authorizes activities:

"with respect to PDV Holding, Inc. (PDVH), CITGO Holding, Inc., and any of their subsidiaries are authorized, where the only Government of Venezuela entities involved are PDVH, CITGO Holding, Inc., or any of their subsidiaries."

Previously, it was "where the only Petróleos de Venezuela, S.A. (PdVSA) entities involved are..."

This change to the GL would appear to limit the scope of the GL substantially, as discussed in part below.

2) Practical interpretive issues may result from subsection (a) implying that a transaction with PdVSA subsidiaries may not "involve" PdVSA itself. May the transaction "indirectly” involve PdVSA? This issue was tricky enough when this GL only excluded the parent company PdVSA from the scope of the authorizations; now the entire Government of Venezuela is excluded. For example, if one suspects that the parent company must sign off, formally or informally, on a given deal, is that “involvement”? Does this refer to only "active involvement" or "passive involvement" as well? The term "involve" appears in other OFAC regulations, but is generally not clearly defined. OFAC must be contemplating at least some degree of "passive involvement" of the parent, at least to the extent that everything having to do with a subsidiary indirectly "involves" (i.e. has to do with) the parent. This same issue arises with respect to dealings with PdVSA (the parent company) that are authorized, but where the president of the company is an SDN, and the applicable GL does not authorize any transactions with the SDN (see General License 8a)). In such cases, there may be dealings with PdVSA, but there can be “no SDN involvement” in the transactions, even by, apparently, the president of the company (see FAQ # 547). Evidence concerning the scope of permissible "indirect involvement" of an SDN is discussed at General Note re: the Legal Status of Discussions, Negotiations, Contracts and other Pre-transactional Activities (System Ed. Note).

3) By implication, subsection (c) makes a notable statement concerning the scope of the term "indirect benefit," which appears in other sanctions regulations as well, notably the ITSR at section 560.516. There is a difference between a "payment for the indirect benefit" of a blocked person and a payment that "indirectly benefits" a blocked person. OFAC has not articulated a clear distinction between these two concepts, but it seems evident that the former, which appears in sanctions regulations, refers to a payment through some intermediary where the payment is actually for, or made at the behest of, the blocked person. A payment to a wholly owned subsidiary of a blocked person necessarily "indirectly benefits" that blocked person, but it is evident that OFAC would not consider such payment to be "for the...indirect benefit of a blocked person," because payments "for the...indirect benefit of" PdVSA are prohibited but payments to the named subsidiaries are permitted.

4) Similar to the comment directly above, an export to a subsidiary is not necessarily an "indirect" export to a parent, but in some cases this may be so. In this case, OFAC would probably expect due diligence and assurances that where, say, technology is exported to one of the two named subsidiaries of the blocked person, that technology will not be shared with the parent company. In practice, this may be difficult to accomplish. For OFAC to allow virtually all transactions with a U.S. person subsidiary of a blocked company is a very rare situation.

5) Read in conjunction with Venezuela GLs 7-13, all of which deal in whole or part with the blocking of PdVSA.

6) The GL was amended on March 14, 2019 to extend expiration date. See FAQ # 933, regarding the expiration date.

It was further amended on June 6, 2019 to exclude from the scope of the GL "[a]ny transactions or dealings related to the exportation or reexportation of diluents, directly or indirectly, to Venezuela." See FAQ # 672, and comments thereto, for a discussion on the proposition that "[a]ny transactions or dealings related to the exportation or reexportation of diluents, directly or indirectly, to Venezuela," are at the threshold level, prohibited by one or more of the Venezuela-related EOs in force as of June 6, 2019.

7) Note the restrictions of EO 13808, including payment of dividends to the GOV, which are not lifted by this GL.

8) The relationship between paragraph (a) and (c) of GL 7 is somewhat unclear. Paragraph (a) provides that “Except as provided in paragraph[] (c) [] of this general license, all transactions and activities prohibited by [EO 13850 or EO 13884], with respect to PDV Holding, Inc. (PDVH), CITGO Holding, Inc., and any of their subsidiaries are authorized, where the only Government of Venezuela entities involved are PDVH, CITGO Holding, Inc., or any of their subsidiaries.” Paragraph (c) provides that “Any payment to or for the direct or indirect benefit of a blocked person other than PDVH, CITGO Holding, Inc., and any of their subsidiaries that is ordinarily incident and necessary to give effect to transactions authorized in [paragraph (a)] of this general license must be made into a blocked, interest-bearing account located in the United States in accordance with 31 C.F.R. § 591.203.”

The question, then, is under what circumstances a payment would need to be blocked, in accordance with paragraph (c). A transaction that involves a GOV entity other than one of the covered entities would not be authorized by paragraph (a) in the first place, so there would be no payment to make pursuant to paragraph (c). However, the exclusion in paragraph (a) relates only to “entities” that meet the definition of “Government of Venezuela.” This should mean that a transaction within the scope of GL 7 can include (i) the covered entities AND (ii) individuals that meet the definition of “Government of Venezuela,” as well as (iii) entities blocked pursuant to EO 13850 that do NOT meet the definition of “Government of Venezuela.” This includes several banks blocked pursuant to EO 13850 that are not GOV banks, and therefore not blocked pursuant to EO 13884 as well.

9) See related specific license at LICENSE No. VENEZUELA-EO13850-2019-359374-1.

10) See notable guidance letter at Case No. VENEZUELA-2018-358633-1 (receiving payments in connection with "old debt" of CITGO, but not where payment is received by PDVSA itself).

*General Note re: The Relationship Between Venezuela-related Loose-leaf GLs and 591.404 (Transactions ordinarily incident to a licensed transaction)

Prior to November, 2019, 591.201 (“Prohibited transactions”) only prohibited transactions within the scope of EO 13692. Because of that, this provision did not, as a technical matter, apply to transactions ordinarily incident to any Venezeula-related general license, except insofar as the otherwise prohibited transactions licensed were (i) prohibited by EO 13692, or (ii) prohibited by another Venezuela-related EO and explicitly licensed in the VSR. Prior to November, 2019, (ii) only applied to the legal services and emergency medical services GLs contained in the VSR—those GLs specifically stated that they applied to activities prohibited by EO 13692 and any other EO issued pursuant to the national emergency declared in EO 13692 (e.g. EO 13850). As of November, 2019, however, 591.201 applies on its face to all prohibitions imposed by all Venezuela-related EOs, meaning that 591.404 applies to all Venezuela-related loose-leaf GLs, most of which do not explicitly account for transactions “ordinarily incident” to the activities authorized. See for example Venezuela General License 27 - Certain Transactions Related to Patents, Trademarks, and Copyrights Authorized, and comments thereto. While it may be comforting to have this interpretive provision apply in a technical legal sense to all Venezuela-related loose-leaf GLs, it is fairly clear form the context of those GLs that OFAC considered the “ordinarily incident” interpretation explicit here to be implicit within all of the GLs that did not pertain to prohibitions imposed by EO 13692. Compare 515.421, and comments thereto (impliedly recognizing that the standard "ordinarily incident" interpretation is inherent in all GLs). In other words, the formal linkage between this provision and the loose-leaf Venezuela-related GLs pertaining to prohibitions other than those of EO 13692 should have no practical effect on the scope of what is actually permitted as a result of the existence of those GLs, such as this one, that do not deal exclusively EO 13692.

*For expired/superseded versions of this GL, see https://www.treasury.gov/resource-center/sanctions/Pages/general_license_archive.aspx. We note that while we have included some expired and/or revoked GLs in the research system as stand-alone searchable items, we avoid clutter by removing GLs once they have been superseded by amended versions.