806. What types of activities are considered “maintenance” as the term is used in General License K-1?
As a general matter, the authorization for “maintenance” in General License K -1 includes all transactions ordinarily incident to the continuity of operations by U.S. persons involving COSCO Shipping Tanker (Dalian) Co., Ltd. or any entity owned, directly or indirectly, 50 percent or more by COSCO Shipping Tanker (Dalian) Co., Ltd., other than COSCO Shipping Tanker (Dalian) Seaman & Ship Management Co. or any entity owned, directly or indirectly, 50 percent or more by COSCO Shipping Tanker (Dalian) Seaman & Ship Management Co. (hereinafter, “General License K-1 Covered Entities”). Additionally, for the purposes of General License K-1, the authorization for “maintenance” generally includes all transactions and activities ordinarily incident to performing under a contract or agreement in effect prior to September 25, 2019, provided that the level of performance is consistent with the terms of the general license and consistent with past practices that existed between the party and the General License K-1 Covered Entities prior to September 25, 2019. Notwithstanding the absence of a contract or agreement in effect prior to September 25, 2019, the authorization for “maintenance” also generally includes all transactions and activities ordinarily incident to obtaining goods or services from, or providing goods or services to, General License K-1 Covered Entities in a manner consistent with the terms of the general license and consistent with past practices that existed between the party, or any intermediary party, and the General License K-1 Covered Entities prior to September 25, 2019. OFAC will consider the transaction history between the party, or any intermediary party, and the General License K-1 Covered Entities prior to September 25, 2019 in assessing whether activity is consistent with past practices. The authorization for “maintenance” also generally includes authorization to enter into contingent contracts for transactions and activities consistent with the above, extending beyond the current expiration of General License K-1 where any performance after the expiration of the general license is contingent on such performance either not being prohibited or being authorized by OFAC.
For example, transactions and activities authorized by General License K-1 could include issuing or accepting purchase orders (including for sales of fuel to General License K-1 Entities) and making or receiving shipments (including undertaking new charters or voyages) that were initiated after September 25, 2019 involving General License K-1 Entities, if such activity is ordinarily incident and necessary to contracts in effect prior to September 25, 2019 (provided the purchase and shipment amounts are consistent with past practices, as demonstrated by transaction history). Similarly, transactions and activities that are not within the framework of a preexisting agreement may be considered “maintenance” if such activity is consistent with the transaction history between the person and General License K-1 Entities prior to September 25, 2019. Conversely, General License K-1 would not authorize purchase orders and shipments involving the General License K-1 Entities where there was no preexisting relationship between a person and a blocked entity or where the contemplated activity exceeds past practices that existed between the party and the General License K-1 Entities prior to September 25, 2019 as demonstrated by transaction history. Stockpiling inventory, for example, would not be authorized unless transaction history indicates that the scope and extent of maintaining inventory is consistent with past practice. [12-19-2019]
*FAQ Removed at some point in 2020, presumably due to the expiry of Iran GL K.
1) This FAQ is a slight variation on FAQ 625 and FAQ 648, both of which deal with the scope of the term "maintenance" in the context of general licenses authorizing certain transactions with blocked parties.
There is one notable difference between this FAQ and the two others. OFAC says "OFAC will consider the transaction history between the party, or any intermediary party, and the General License K Covered Entities prior to September 25, 2019 in assessing whether activity is consistent with past practices."
The language concerning the "transaction history" between the sanctioned entity and "any intermediary party" is new to this FAQ, but given the parallelism between this FAQ and the other "maintenance" FAQs, it should be considered to apply across the board. For discussion of the likely rationale behind the addition of the "or any intermediary party" language, see comment to FAQ 807.
2) FAQ amended on 19 Dec, 2019 to account for the issuance of Iran General License (No. K-1), which extended the expiration date of the prior version.
3) See generally Examples of Transactions Deemed to be, and not to be, Within the Scope of the Standard "Wind-down" and "Maintenance" GLs.
4) Web capture of original OFAC website not available - see text from three separate other sources.