Trade Law

On July 10, 2015, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) published, in abbreviated form, Venezuela Sanctions Regulations (VSR) in 31 C.F.R. Part 591. The VSR implement the Venezuela Defense of Human Rights and Civil Society Act (“the Act”) and Executive Order 13692 (see prior post from March 11, 2015). Consistent with the existing restrictions, the VSR prohibit transactions with the individuals and entities designated under Executive Order 13692. Currently, this list identifies seven individuals but could be expanded by the President pursuant to the Act. These regulations also reiterate OFAC’s position that an entity in which a designated party owns a 50 percent or greater interest is blocked even if OFAC has not specifically designated that entity. This rule consequently expands the scope of these designations and requires parties doing business in Venezuela to conduct additional diligence of counterparties to ensure compliance.

On August 13, 2014, the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC) published guidance (“Revised Guidance”) that revises its 2008 guidance regarding how to treat entities that are owned or controlled by blocked persons—i.e., persons whose property and interests in property are blocked. The 2008 guidance—which is widely known as the “50 Percent Rule”—held that if a blocked person owns 50 percent or more interest of an entity, either directly or indirectly, that entity would automatically be blocked by operation of law. The Revised Guidance reaffirms this 50 Percent Rule, but now requires aggregation when determining blocked persons’ ownership interests. In other words, under the Revised Guidance, an entity is automatically considered “blocked” if one or more blocked persons together own 50 percent or more (directly or indirectly) of the entity, even if the entity itself is not formally identified as a blocked party by OFAC.

OFAC stated that this Revised Guidance equally applies to entities identified on the Sectoral Sanctions Identification (SSI) List, which is part of the Ukraine-Russia sanctions program. Thus, any entity that is owned 50 percent or more (directly or indirectly) in the aggregate by one or more persons on the SSI List is also subject to SSI restrictions.