On November 30, 2020, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned and placed on the Specially Designated Nationals (SDN) List China National Electronics Import and Export Corporation (CEIEC). The Treasury Department indicated in a press release that this designation was due to CEIEC’s support for “the illegitimate Maduro regime’s efforts to undermine democracy in Venezuela, including its efforts to restrict internet service and conduct digital surveillance and cyber operations against political opponents. Chinese technology companies, including CEIEC, continue to challenge democratic values of freedom and transparency by developing and exporting tools to monitor, censor, and surveil citizens’ activities on the internet.” A State Department press release added that “CEIEC has provided software, training, and technical expertise to the [Maduro] regime’s entities. It provides cyber support and technical experts to state-run telecommunications provider Venezuelan National Telephone Company (CANTV) which controls 70 percent of internet service in Venezuela and frequently blocks online independent newspapers and speeches by opposition members.”
According to OFAC, CEIEC has over 200 subsidiaries and offices around the world. Thus, CEIEC’s designation on the SDN List could have far reaching implications with the application of OFAC’s “50% Rule,” which states that property of entities directly or indirectly owned 50% or more by one or more blocked persons are also considered blocked, even if not listed on the SDN List. As a result of CEIEC’s placement on the SDN List, all property and interests in property of CEIEC, or any entity in which it owns, directly or indirectly, a 50% or greater interest, that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. In announcing this action, OFAC issued General License No. 38 under the Venezuela Sanctions Regulations, which authorizes until January 14, 2021 all transactions and activities otherwise prohibited that are ordinarily incident and necessary to the wind-down of transactions involving CEIEC. The license does not authorize “any debit to an account” of CEIEC or any entity that CEIEC owns by more than 50%. Entering into new business with CEIEC “will not be considered wind-down activity” according to OFAC pursuant to a newly posted frequently asked questions.