As the United Nations and the European Union continue to take measures to remove the economic sanctions imposed upon Libya earlier this year, the United States through the U.S. Department of the Treasury Office of Foreign Assets Control (OFAC) has continued to do the same.

Yesterday, OFAC issued two general licenses, Libya General License 7a and 8, which removed prohibitions on certain types of activities. Libya General License 7a replaces Libya General License 7 which was issued on September 9, 2011 and allows for U.S. persons to engage in any and all transactions with the Libyan National Oil Company so long as a blocked person identified on the OFAC Specially Designated Nationals (SDN) List. U.S. persons engaged in such transactions, however, are still subject to certain reporting requirements.

Libya General License 8 removes prohibitions on dealings with the Government of Libya and the Central Bank of Libya so long as there are no persons identified in the Annex to the general license involved in the transaction and the transaction does not involve any blocked property.

The interesting thing about how OFAC is approaching the winding down of the Libya sanctions is that they are stripping the prohibitions via use of general licenses. OFAC general licenses are open authorizations to engage in certain types of activities. They are not, however, exemptions; nor do they have the effect of permanently removing a prohibition. Rather, these general licenses can be rescinded at any time by OFAC. So why would OFAC elect to wind down the Libya sanctions program via use of general licenses?

There are a couple of possible reasons. First, they may just be moving very cautiously until such time as Qaddafhi has been apprehended. If there were to be some incredible turn of events and Qaddafhi was able to resume power in Libya, OFAC would be able to quickly rescind the general licenses, thereby reinstating the prohibitions on dealings with the Government of Libya and the Central Bank of Libya. A second, and more plausible, reason could be because the use of general licenses allows OFAC to act much quicker. In regards to Libya, there is likely a large amount of decision making and debating that would need to take place before the Libya Sanctions could be removed. By using its discretion in the licensing process, OFAC’s issuance of general licenses could circumvent such debate and allow the U.S. government to quickly address the winding down of the Libya sanctions and come into line with the recently passed United Nations measures regarding the Libya sanctions.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.