OFAC, BIS AND STATE DEPARTMENT PUBLISH NEW REGULATIONS TIGHTENING US SANCTIONS CONCERNING CUBA

On 8 November 2017, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) published significant amendments to the Cuban Assets Control Regulations (CACR) and Export Administration Regulations (EAR). These amendments were made following President Trump’s June 2017 National Security Presidential Memorandum (NSPM) setting out changes of policy direction towards Cuba.

The State Department is taking complementary steps to implement the policy changes by releasing a “Cuba Restricted List” identifying Cuban military, intelligence, and security entities. US persons are prohibited from conducting “direct financial transactions” with these entities, meaning that an entity listed cannot be the originator or the ultimate beneficiary of a transfer of fund, while a US person is at the other end of the transaction. Entities that are owned or controlled by another entity on this list are not treated as restricted unless also specified by name on the Cuba Restricted List. The prohibition grandfathers pre-existing transactions, including transactions outlined in contingent or other types of contractual arrangements agreed to prior to the issuance of the new regulations.

In relation to export, BIS is establishing a general policy of denial for license applications to export items for use by entities on the Cuba Restricted List. However, BIS is also simplifying and expanding its license exception that authorizes certain license-free exports to the Cuban private sector.

As outlined in the NSPM, changes on travel policy will result in the return of restrictions on individual people-to-people travel by US persons. Individual people-to-people nonacademic educational travel will no longer be authorized. Travelers relying on the educational activities license will also be subject to similar restrictions. However, such travel previously authorized will continue to be authorized where the traveler has completed at least one travel-related transaction (i.e. purchase of airline ticket or reservation of hotel) prior to the publication of the regulations in the Federal Register on November 9.

For travelers under the “support for Cuban people” license, they are now required to engage in a full-time schedule of activities that “result in meaningful interaction with individuals in Cuba.”

The amended regulations conform with the policy goals of targeting the Cuban military, intelligence and security sectors while preserving relaxed sanctions allowing American individuals and entities to develop economic ties to the private, small business sector in Cuba. They also contain meaningful grandfathering provisions and will likely have only a limited impact on third-country commerce and trade with Cuba.

The Trump Administration may continue to further adjust its policy towards Cuba. Herbert Smith Freehills’ New York office continues to monitor developments in this area and will continue to release updates as warranted.

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Filed under Announcements, Sanctions and Money Laundering, US

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