Yesterday, the Office of Foreign Assets Control (OFAC) amended the Cuban Assets Control Regulations (CACR) to further limit the ability of U.S. persons to book lodging in Cuba, import certain goods from Cuba, and participate in professional meetings or artistic and athletic events in Cuba. The changes include the following:
Today, the U.S. Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR) to further tighten restrictions on Cuba. The changes, which are effective immediately, are part of a broader U.S. government effort to tighten the embargo on Cuba after a tentative easing of relations under the Obama Administration.
The amendment lowers the applicable de minimis threshold for non-U.S. items that contain U.S.-origin content; tightens rules regarding the leasing or chartering of aircraft or vessels; and limits license exception Support for the Cuban People (SCP), including by clarifying the scope of authorized telecommunications exports and reexports.
10 percent de minimis threshold
First, and most importantly for non-U.S. companies, BIS lowered the de minimis threshold for Cuba from 25 percent to 10 percent. During the Obama Administration, the de minimis level for Cuba was raised from 10 percent to 25 percent. This amendment reverses that change.
The amendment means that non-U.S. companies must now obtain a BIS license or use an EAR license exception before exporting any product (including goods, software, or technology) to Cuba if the product contains more 10 percent U.S.-origin content, by value. According to BIS, such license applications will face a presumption of denial unless the project supports U.S. policy, defined in Section 742.2(b) of the EAR. Non-U.S. companies should review pending and planned projects in Cuba to ensure compliance with the new rules. There is no grace or wind down period associated with the change.
The EAR’s de minimis provisions are an example of the extraterritorial application of U.S. export control laws – non-U.S. items located outside of the United States are subject to the EAR’s license requirements if the items contain more than a de minimis level of controlled U.S.-origin content.
Aircraft & vessel restrictions
Second, BIS is rescinding a favorable a licensing policy regarding the export or reexport of aircraft leased to Cuban state-owned airlines and is revoking licenses issued under the prior licensing policy within seven days. License requests related to such exports and reexports will now face a presumption of denial. The amendment also tightens the restrictions in license exception Aircraft, Vessels, and Space (AVS) when applied to aircraft or vessels leased to or chartered by a Cuban national or a state sponsor of terrorism.
New limits on license exception Support for the Cuban People
Finally, the amendment narrows license exception SCP with respect to certain donated items, clarifies the scope of the authorized telecommunications exports, and limits exports on
Continue Reading BIS tightens Cuba restrictions, lowers de minimis threshold to 10 percent
On Thursday November 9th, the Office of Foreign Assets Control (“OFAC”) published new regulations in the Federal Register executing June’s National Security Presidential Memorandum (“NSPM”) regarding U.S. sanctions against Cuba. (See our previous post on the NSPM here). The State Department and Bureau of Industry and Security (“BIS”) also published complementary rules giving effect to the changes in the Cuba sanctions. The rules became effective with their publication in the Federal Register.
The primary purpose of the rule changes is to prevent commerce between the U.S. and Cuba from benefiting the Cuban military. The State Department’s regulation includes a new Cuba Restricted List, which lists parties deemed to be under control of or acting on behalf of the Cuban military, intelligence, or security services personnel.
Continue Reading New Sanctions Placed on Trade with Cuba
Late last week, President Trump issued a directive that would purportedly “cancel” the recent changes in the Cuban Assets Control Regulations made under President Obama’s administration. This announcement caused confusion in the business community, which had relied on the Obama administration’s changes to begin commercial engagement in Cuba. Even though the directive actually leaves many of the Obama administration’s policies in place, the new directive – once implemented – will likely create issues for U.S. businesses in Cuba.
The directive is designed to ensure that Cuba’s Grupo de Administracion Empresarial (“GAESA”), a business conglomerate run by Cuba’s military, does not benefit from any increase in U.S.-Cuba engagement. To implement this portion of the directive, the State Department has been directed to list entities with which transactions will be prohibited, and it is unclear how many entities the State Department will list. GAESA is estimated to control up to 60 percent of the Cuban economy. However, according to the FAQs issued by OFAC, deals that are in place prior to the issuance of new regulations implementing the directive will be permitted.
Continue Reading Trump Issues New Cuba Restrictions
