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United States: FAQs concerning Ukraine / Russia and general licenses

U.S. general license FAQs Ukraine, Russia

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) today announced the release of two new “frequently asked questions” (FAQs) as guidance on “maintenance” as that term is used in General Licenses 14, 15, and 16.

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The new FAQs are posted on the OFAC website and the text of the FAQs (without hyperlinks) is as follows:

625. What types of activities are considered “maintenance” as the term is used in General License 14, General License 15, and General License 16? 

As a general matter, the authorization for “maintenance” in General License 14, General License 15, and General License 16 includes all transactions ordinarily incident to the continuity of operations. See FAQ 567. Additionally, for the purposes of General License 14, General License 15, and General License 16, the authorization for “maintenance” generally includes all transactions and activities ordinarily incident to performing under a contract or agreement in effect prior to April 6, 2018, 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 blocked entity prior to April 6, 2018. Notwithstanding the absence of a contract or agreement in effect prior to April 6, 2018, 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 a blocked entity listed in General License 14, General License 15, or General License 16 in a manner consistent with the terms of the general license and consistent with past practices that existed between the party and the blocked entity prior to April 6, 2018. OFAC will consider the transaction history between the party, or any intermediary party, and the blocked entity prior to April 6, 2018 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 Licenses 14, 15, and 16, 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 14, General License 15, and General License 16 could include issuing or accepting purchase orders and making or receiving shipments consistent with the terms of the general license that were initiated after April 6, 2018 involving the blocked entities if such activity is ordinarily incident and necessary to contracts in effect prior to April 6, 2018 (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 the blocked entity prior to April 6, 2018. Conversely, General License 14, General License 15, and General License 16 would not authorize purchase orders and shipments involving the blocked entities listed in those general licenses 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 blocked entity prior to April 6, 2018 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. [09-14-2018] 

626. My company signed a procurement contract with a blocked person prior to April 6, 2018. Is stockpiling inventory authorized under General License 14, General License 15, and General License 16? 

No. As explained in FAQ 625, the stockpiling of inventory – even if pursuant to a contract executed prior to April 6, 2018 – would not be authorized unless the transaction history indicates that the scope and extent of maintaining inventory is consistent with past practice between the party and the blocked entity. [09-14-2018]

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