On November 8, 2017, the Department of Treasury’s Office of Foreign Assets Control (“OFAC”) and the Department of Commerce’s Bureau of Industry and Security (“BIS”) announced amendments to the Cuban Assets Control Regulations (“CACR”) and Export Administration Regulations (“EAR”). In addition, the State Department published a list of entities and subentities deemed to be under the control or to act on behalf of the Cuban military, intelligence, or security services or personnel. These steps implement the changes to the Cuba sanctions program announced by the President in his June “National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba” (“NSPM”). The changes reflect adjustments to the broader Cuba reform initiated by former President Obama in January 2015. A majority of the general license and guidance issued since that time remain in effect.
The key changes to the Cuba sanctions program are as follows:
State Department
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The State Department issued a list of 180 entities and subentities (“Cuba Restricted List”) subject to restrictions on direct financial transactions involving persons subject to U.S. jurisdiction. The list consists of ministries, holding companies, hotels, tourist agencies, marinas, stores, and entities serving the defense and security sectors. Key holding companies identified by the State Department include:
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Grupo de Administración Empresarial S.A. (“GAESA”);
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Grupo de Turismo Gaviota (“Gaviota”);
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Compañía Turística Habaguanex S.A.; and
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Corporación CIMEX S.A. (“CIMEX”).
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The State Department clarified that there is no “50% Rule” for companies owned or controlled by entities on the Cuba Restricted List. This means that subsidiaries of listed entities are not treated as restricted unless they are positively identified on the Cuba Restricted List.
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Commercial engagements and travel-related transactions in place prior to the State Department’s listing of any entity or subentity will continue to be authorized.
OFAC
Financial Transactions
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Persons subject to U.S. jurisdiction are prohibited from engaging in certain direct financial transactions with the listed entities and subentities.
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For purposes of this prohibition, a person engages in a direct financial transaction by acting as the originator on a transfer of funds whose ultimate beneficiary is on the Cuba Restricted List or as the ultimate beneficiary on a transfer of funds whose originator is on the Cuba Restricted List.
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As stated above, transactions occurring prior to an entity being placed on the Cuba Restricted List are grandfathered. For example, an existing OFAC general license authorizes the entry into contracts contingent on obtaining OFAC authorization. For any previously agreed-upon contingent contracts, direct financial transactions will be permitted consistent with other regulatory authorizations.
People-to-People Travel
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Individual people-to-people nonacademic educational travel is no longer authorized.
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People-to-people nonacademic educational travel conducted under the auspices of an organization that is subject to U.S. jurisdiction will continue to be authorized. A person from the sponsoring organization subject to U.S. jurisdiction must accompany the travelers.
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Other travel-related general license categories remain in place, such as the general license for professional meetings and professional research.
Prohibited Officials
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The definition of “Prohibited Official” will revert to the definition that was in place prior to amendments made in October 2016. Existing OFAC general licenses for certain telecommunications transactions and remittances included limitations on dealing with prohibited officials. Thus, there will now be a broader list of prohibited officials excluded from these general licenses. Prohibited officials will also be ineligible for certain BIS license exceptions involving Cuba, such as License Exception CCD. This exception authorizes the export and reexport of certain consumer communications items for use by eligible recipients.
BIS
Trade and Commerce
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BIS established a general policy of denial for license applications to export items for use by persons on the Cuba Restricted List unless the transaction is otherwise consistent with the NSPM (e.g., supports programs to build democracy in Cuba, supports the expansion of direct telecommunications and internet access for the Cuban people).
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BIS simplified License Exception SCP to create a single more expansive provision authorizing the export and reexport of items for use by the Cuban private sector for private sector economic activities, except for items used to primarily generate revenue for the state or contribute to the operation of the state, including through the construction or renovation of state-owned buildings.
The November 8, 2017 Department of Treasury Fact Sheet on changes to the Cuba Sanctions Program may be found here. The November 8, 2017 Cuba FAQ’s may be found here.
