The Trump Administration has recently taken several actions to tighten U.S. sanctions against Cuba in accordance with the National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba that was issued on June 16, 2017 (the “NSPM”), which was subsequently published by the U.S. Department of State (“State Department”) in the Federal Register on October 20, 2017 (82 Fed. Reg. 48875). Specifically, as discussed below, on November 9, 2017, the State Department released its List of Restricted Entities and Subentities Associated with Cuba (“CRL” or the “List”), and the U.S. Department of the Treasury (“Treasury Department”) and the U.S. Department of Commerce (“Commerce Department”) published amendments to their Cuban-related regulations to reflect the fact that U.S. persons are largely prohibited from engaging in transactions with entities identified on the Cuba Restricted List, except in certain limited circumstances, and to implement other restrictions on traveling to Cuba or engaging in transactions with certain Cuban entities set forth under the NSPM.
Pursuant to the NSPM, the State Department was tasked with identifying entities and subentities that are under the control of, or act for on behalf of, the Cuban military, intelligence, or security services or personnel, and publishing a list of those entities and subentities with which direct financial transactions would disproportionately benefit such services or personnel at the expense of the Cuban people or private enterprise in Cuba, including but not limited to Grupo de Administracion Empresarial S.A. (“GAESA”), its affiliates, subsidiaries, and successors. In accordance with this mandate, the State Department published the CRL in the Federal Register on November 9, 2017 (82 Fed. Reg. 52089). In total, the State Department has placed approximately 180 Cuban entities on the CRL. Not surprisingly, GAESA and several other major Cuban holding companies are identified on the List, including Grupo de Turismo Gaviota (“Gaviota”), Compania Turistica Habaguanex S.A. (“Habaguanex”), Union de Industria Militar (“UIM”), and Corporacion CIMEX S.A. (“CIMEX”). Two prominent Cuban ministries also are enumerated on the CRL: the Ministerio del Interior and the Ministerio de las Fuerzas Armadas Revolucionarias (“MINFAR”). In addition, dozens of entities and subentities that are owned and controlled by these holding companies and ministries are identified on CRL, including many operators of hotels, stores, and tours. The complete List can be accessed at https://www.state.gov/e/eb/tfs/spi/cuba/cubarestrictedlist/275331.htm.
Significantly, the State Department has stated that “[e]ntities or subentities owned or controlled by another entity or subentity on the list are not treated as restricted unless also specified on the list.” See 82 Fed. Reg. at 52090. The importance of this express limitation by the State Department is that U.S. persons can continue to engage in transactions with a Cuban entity that is not listed on the CRL even if that entity’s parent company is identified on the CRL so long as no other restrictions apply to engaging in such transactions with the Cuban entity that is not on the CRL (e.g., the Cuban entity is on any list of proscribed entities maintained by any U.S. Government agency, such as the List of Specially Designated Nationals (“SDN List”), or the transaction would be prohibited by any applicable regulations such as those administered by the Treasury Department or the Commerce Department).
On November 9, 2017, the Treasury Department’s Office of Foreign Assets Control (“OFAC”) also published amendments to its Cuban Assets Control Regulations (“CACR”) in the Federal Register (82 Fed. Reg. 51998). Among other things, these amendments generally prohibit U.S. persons from engaging in certain direct financial transactions with entities and subentities identified on the CRL, and they make changes to numerous provisions and general licenses throughout the CACR to limit certain pre-existing exemptions to incorporate this new prohibition on financial transactions with CRL entities. OFAC also amended the CACR to place restrictions on certain types of authorized travel to Cuba by U.S. persons (e.g., people-to-people travel, educational travel, and travel related to support for the Cuban people); these new restrictions require, among other things, that people-to-people travel and educational travel must be conducted under the auspices of an organization that is subject to U.S. jurisdiction and that the U.S. person traveling must be accompanied by a person subject to U.S. jurisdiction who is a representative of the sponsoring organization. In addition, OFAC also expanded the CACR’s definition of “prohibited officials of the Government of Cuba” to include certain additional individuals.
The Commerce Department’s Bureau of Industry and Security (“BIS”) also published amendments to certain Cuban-related provisions set forth under the Export Administration Regulations (“EAR”) on November 9, 2017 (82 Fed. Reg. 51983). In accordance with the NSPM, BIS amended the EAR to establish a general policy of denial for license applications to export or reexport items for use by entities and subentities on the CRL, unless the transaction is determined by BIS, in consultation with the State Department, to be consistent with the NSPM. In addition, BIS amended License Exception GFT, License Exception CCD, and License Exception SCP to make clear that those license exceptions do not permit exports or reexports to any “prohibited officials of the of the Government of Cuba” as that term has now been defined under the CACR by the amendments made by OFAC that are discussed above. However, on a positive note for U.S. companies that engage in business operations with Cuba or may be considering doing so, BIS also amended License Exception SCP to eliminate the previous requirement that License Exception SCP be used only for certain sectors of the Cuban economy, and as such, a broader range of items can now be exported or reexported to Cuba for use by the Cuban private sector for private sector economic activities without a license provided that all License Exception SCP requirements can be satisfied.
For additional information, please contact Geoffrey Goodale:
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