On July 16, 2020, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issued two new Ukraine-/Russia-related general licenses: General License 15I, Authorizing Certain Activities Involving GAZ Group, which replaces General License 15H; and General License 13O, Authorizing Certain Transactions Necessary to Divest or Transfer Debt, Equity, or Other Holdings in GAZ Group, which replaces General License 13N. OFAC also updated nine related FAQs – 570, 571, 586, 588, 589, 590, 591, 592, and 625 – on July 22.
Most notably, General License 15I expands the scope of the pre-existing authorization (covering only maintenance, wind-down and a very limited set of additional activities involving GAZ Group) to include new activities relating to the manufacture and sale of vehicles and related products. Although many activities were able to continue under the prior GAZ Group general licenses (due to the expansive definition of “maintenance” in FAQ 625), this appears to be an important development for GAZ Group and for prospective or new business partners of GAZ Group. OFAC has not disclosed any specific developments triggering this change, such as with respect to the ownership or control of Oleg Deripaska in GAZ Group, although the new license does provide for new reporting obligations related to ownership and control of GAZ Group.
General License 15I authorizes certain activities, subject to numerous limitations stated therein, for 190 days – from July 16, 2020 through 12:01 a.m. eastern standard time, January 22, 2021 – which is over a month longer than any of its predecessors.
General License 15I
General License 15H only authorized transactions and activities necessary for certain maintenance and wind-down activities, as well as research, development, and related activities in connection with safety and emissions standards. General License 15I expands the scope of that pre-existing general license by authorizing the following types of transactions and activities that are “ordinarily incident and necessary to the manufacture and sale of existing and new models of vehicles, components, and spare parts, including automobiles, light commercial vehicles, trucks, buses, engines/powertrains, produced by GAZ Group, or any entity in which GAZ Group owns, directly or indirectly, a 50 percent or greater interest”:
- Research, design, development, production, modification, upgrade, certification, distribution, and marketing;
- Provision or receipt of services, including warranty, maintenance, logistics, storage, shipping, insurance, security, brokerage, legal, banking and financial (including financing and renegotiation of debt), technical and engineering, advertising, and customer services;
- Entry into joint ventures, contract manufacturing agreements, supplier contracts, and other new contracts associated with [such] activities [];
- Payment and receipt of dividends and other funds owed by or to GAZ Group relating to [such] activities [];
- The conduct of financial transactions associated with [such] activities []; and
- Activities necessary for compliance with [a GAZ Group reporting requirement discussed below], including financial auditing services.
Additionally, General License 15I contains new reporting requirements: First, GAZ Group must provide OFAC with a monthly certification that “GAZ Group is not acting for or on behalf of Mr. Oleg Deripaska” or any other person on OFAC’s SDN List, “and that control over the actions, policies, and decisions of the company rests with GAZ Group’s Board of Directors and shareholders”; and second, GAZ Group must provide, on a quarterly basis, information including audited financial statements, JVs, financing agreements of $5 million or more, and board composition changes and meeting minutes. Furthermore, U.S. persons are required to report to OFAC about their activities pursuant to this general license.
Notably, this general license does not authorize the unblocking of blocked property (except funds used for activities authorized by this general license), and GAZ Group remains on the SDN list.
For background information on General Licenses 13 and 15, see our prior analyses from May 23, 2018 (General License 15), June 5, 2018 (General Licenses 15 and 13B), and April 12, 2018 (General License 13).