Articles Posted in Cuba Sanctions

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On Monday, September 21, 2015, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the Department of Commerce’s Bureau of Industry and Security (BIS) took coordinated action to further ease U.S. restrictions on trade with Cuba and Cuban nationals.

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On July 22, 2015, the Department of Commerce’s Bureau of Industry and Security (BIS) released amendments to the Export Administration Regulations (EAR) implementing the Secretary of State’s May 29, 2015 decision to rescind the designation of Cuba as a State Sponsor of Terrorism. The removal of Cuba from Country Group E:1 and “AT” controls under the EAR requires a number of highly-technical changes to U.S. regulations. The key practical impacts are:

  •  The de minimis level for Cuba will be 25 percent instead of 10 percent (with some exceptions);
  •  License exception AVS will be expanded somewhat for aircraft on temporary sojourn in Cuba;
  • License exception RPL will be available to replace, on a one-for-one basis, parts, components, accessories or attachments for aircraft and other items controlled for national security reasons that were previously lawfully exported or reexported to Cuba; and
  • License exception BAG generally will allow travelers to Cuba to carry encryption commodities and software.

It is important to emphasize that the change to Cuba’s status as a state sponsor of terrorism does not remove the U.S. embargo on Cuba. Cuba remains in Country Group E:2, and any export, re-export, or transfer of goods, software or technology that are subject to the EAR to Cuba must still be licensed or be eligible for export under a license exception. Also, there have been no further changes to the U.S. sanctions policy administered by the Office of Foreign Assets Control (OFAC).

Increase in De Minimis Amount of U.S. Content Allowed for Cuba

Under the de minimis exception of the EAR, foreign-made products incorporating “controlled” U.S. content – that is, items that would require a license if exported separately to the country of ultimate destination – below certain threshold amounts are not subject to the EAR.

Previously, foreign made products that incorporated more than 10% U.S.-origin content were subject to the EAR when exported to Cuba from third countries. The amendments increase the threshold de minimis level to 25%, consistent with the threshold applied to most other countries.

As a result of this change, non-U.S. companies may find it easier in some cases to export products to Cuba incorporating U.S.-origin content. Nonetheless, companies should be mindful of continuing U.S. sanctions rules when assessing de minimis eligibility. In particular, because all U.S. content is controlled for export to Cuba (even items classified under EAR99), products that satisfy the de minimis test for export to other countries may not qualify for export to Cuba under the de minimis exception. Also, several categories of items are not eligible for the de minimis exception, including items incorporating content classified as a “600 series” item.

Changes to License Exceptions

License Exception Aircraft, Vessels and Spacecraft (AVS)

License exception AVS (“Aircraft, Vessels and Spacecraft”) (EAR § 740.15) previously allowed non-Cuban airlines to operate flights into Cuba. The amended regulations remove some restrictions on the use of AVS for Cuba, but the modifications currently seem likely to have a limited impact until such time as export licensing requirements for sales of aircraft and aircraft parts to Cuba are relaxed.

License Exception Servicing and Replacement of Parts and Equipment (RPL)

Certain exports and re-exports to Cuba may now be eligible for License Exception “Servicing and Replacement of Parts and Equipment” (EAR § 740.10). This would allow one-for-one replacement of parts, components, accessories, and attachments to be exported or re-exported to Cuba for aircraft; as well as for commodities controlled for national security (NS) reasons. Note that this license exception may only be used for items previously lawfully exported or reexported to Cuba.

License Exception Baggage (BAG)

License Exception “Baggage” (BAG) (EAR § 740.14) was previously available for Cuba. The amendments have the effect of now authorizing travellers to carry in their baggage encryption items (e.g., laptops containing encryption software) for their own use.

Before using any of the above license exception, it is important to review all of the specific requirements under EAR Part 740 and § 746.2 (providing information of the permitted use of license exceptions for Cuba) as well as the FAQ’s that accompanied the release of the amendments.

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As previously reported, the Obama Administration is actively continuing its rapprochement with Cuba, most recently removing Cuba from the list of state sponsors of terrorism. However, despite this consistent push from the Administration and the strong interest of the U.S. business community to enter the Cuba market as quickly as possible, Congress remains divided on how best to approach Cuba. In recent days, powerful Members of Congress has taken divergent steps to either expand the relationship or put the brakes on the momentum. Continue reading →

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Today the State Department issued a press release announcing that the Secretary of State has finalized the removal of Cuba from the official U.S. list of state sponsors of terrorism, effective May 29:

Although this is an important step forward, it does not automatically eliminate any of the current U.S. sanctions.  Many of the sanctions, in fact, were “codified” (that is, converted from regulations to statute) by Congress through the Cuban Liberty and Democratic Solidarity Act of 1996.  Moreover, the export control restrictions for Cuba are in part maintained under an older law – the Trading with the Enemy Act of 1917 – that is unrelated to the requirements for countries designated as state sponsors of terrorism.  The President has authority to relax some aspects of the embargo without Congressional approval – as demonstrated by his prior liberalizing measures – but there are a number of ambiguities in the relevant statutes and it is difficult to predict how aggressive the President will be in moving forward without seeking legislation.

The situation requires careful monitoring, and companies should not assume that any existing sanctions will be quickly repealed.

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The Office of Foreign Assets Control (OFAC) granted specific licenses to operate passenger/cargo ferries from the United States to Cuba earlier this week. Havana Ferry Partners LLC announced on its Facebook page on May 5, 2015 that it had received approval from both OFAC and the Commerce Department’s Bureau of Industry and Security (BIS) to conduct ferry operations from four South Florida ports to Havana, Cuba. Reportedly, several other companies received similar approvals.

Under the Cuban Assets Control Regulations, persons subject to U.S. jurisdiction are authorized to provide carrier services via aircraft to persons authorized to travel to Cuba pursuant to a general license. This means that any person can provide these services, provided that they meet the requirements outlined in the regulations, with no approval necessary. Transportation of authorized travelers by vessels, however, requires a U.S. person to apply for and receive a specific license from OFAC. Accordingly, the vessel operators had to obtain licenses from OFAC.

In addition, under the Export Administration Regulations, a license from BIS is needed for a vessel to travel to Cuba, even though the visits will be temporary.

The ferries will only be able to carry passengers that are authorized by one of the twelve general licenses for travel to Cuba (e.g., professional research/meetings, religious and educational purposes, etc.) or by a specific license. Travel to Cuba for tourism purposes is still not authorized.

The ferry operators will also need to obtain approval from Cuba for the operations to commence.

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Tuesday, the Chairman of the House Appropriations Subcommittee on Transportation released the FY 2016 Department of Transportation, Housing and Urban Development appropriations bill which will be considered by the subcommittee tomorrow.  The legislation includes provisions which would, in essence, bar the U.S. government from recertifying any airline or cruise line if it were to include travel to Cuba.  This is one of the first attempts we have seen in Congress to try to counter President Obama’s efforts to normalize relations with Cuba.

The Cuba-related language was supported by the Chairman of the Transportation Appropriations Subcommittee, Congressman Mario Diaz-Balart (R-FL), who is a Cuban American and who strongly opposes normalization of relations between the U.S. and Cuba.

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OFAC removal of 45 parties from the list of Specially Designated Nationals deserves attention.

On March 24, 2015, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the removal of 45 parties from the list of Specially Designated Nationals (SDN List). All had previously been designated in relation to U.S. Cuba sanctions. On closer review, it appears that none of these removals are particularly important or newsworthy—dead persons, dissolved companies, sunken ships and so on. U.S. officials reported to media sources that this was a routine exercise in cleaning up out-of-date sanctions listings.

So why the fuss? Under U.S. Cuba sanctions, in addition to the broad embargo, there is a lengthy list of SDNs. This includes a number of major companies, key individuals and vessels. This can present another obstacle in Cuba in areas where sanctions are relaxed (even where activities are newly permitted, SDNs remain off limits normally). Thus, both companies interested in Cuba and the sanctioned parties themselves are watching for any signals that the Obama administration will update the SDN List as part of its Cuba sanctions reforms.

What should we expect? Based on past practice, it is likely that the U.S. government will be slow and deliberate in removing parties from the SDN List. Removal is an important carrot, and U.S. officials will likely seek changes in behavior and specific actions in advance of de-listing (reparations, privatization, remedying human rights practices, distancing from the regime and so on depending on the party). This is the approach that the U.S. has taken with SDNs in Myanmar/Burma as sanctions reform has proceeded in that market.

How do sanctioned parties come off the SDN List? There are two paths:

First, the U.S. government can remove the party on its own initiative—this is an area of executive discretion and the President or OFAC can take action without the need for any process or Congressional action in most cases.

Second, sanctioned parties can seek removal under a formal procedure for de-listing conducted by OFAC under 31 C.F.R. § 501.807. Under the procedure, the SDNs “provide arguments and evidence as to why “insufficient basis exists for the designation” and may “propose remedial steps … such as corporate reorganization, resignation of persons from positions in a blocked entity, or similar steps, which the person believes would negate the basis for designation.” The precedents are few, and there is no set time limit for the process. However, OFAC has de-listed SDNs in the past based on formal requests under § 501.807.

Where the revised Cuba sanctions permit activities or trade, it will be important for companies and individuals to be vigilant for SDN involvement. However, should a situation arise where an SDN is the only, or most capable, partner for a U.S. company, that company can reach out to counsel in Washington, D.C., to discuss the potential for de-listing. There are paths to engage with U.S. policy makers to gauge the prospects for a given party, and the SDN can petition for removal. U.S. officials also may consider licenses to authorize specific business with SDNs. The involvement of U.S. companies can make a significant difference in the U.S. response versus an SDN approaching on its own. However, persons subject to U.S. jurisdiction should be careful not to transact with or facilitate on behalf of any SDN. This requires careful compliance planning.

Given the above, expect those interested in Cuba to continue to carefully watch any changes to the SDN List for clues to U.S. policy, even if it only turns out to be a defunct company or sunken ship.

The following deletions have been made to OFAC’s SDN List:

ABDELNUR, Nury de Jesus, Panama (individual) [CUBA].
AGENCIA DE VIAJES GUAMA (a.k.a. GUAMA TOUR; a.k.a. GUAMATUR, S.A.; a.k.a. VIAJES GUAMA TOURS), Bal Harbour Shopping Center, Via Italia, Panama City, Panama [CUBA].
VIAJES GUAMA TOURS (a.k.a. AGENCIA DE VIAJES GUAMA; a.k.a. GUAMA TOUR; a.k.a. GUAMATUR, S.A.), Bal Harbour Shopping Center, Via Italia, Panama City, Panama [CUBA].
GUAMATUR, S.A. (a.k.a. AGENCIA DE VIAJES GUAMA; a.k.a. GUAMA TOUR; a.k.a. VIAJES GUAMA TOURS), Bal Harbour Shopping Center, Via Italia, Panama City, Panama [CUBA].
GUAMA TOUR (a.k.a. AGENCIA DE VIAJES GUAMA; a.k.a. GUAMATUR, S.A.; a.k.a. VIAJES GUAMA TOURS), Bal Harbour Shopping Center, Via Italia, Panama City, Panama [CUBA].
ALEGRIA DE PIO (Naviera Maritima de Arosa, Spain) (vessel) [CUBA].
AVALON, S.A., Colon Free Zone, Panama [CUBA].
CARISUB, S.A., Panama [CUBA].
CASTELL VALDEZ, Osvaldo Antonio, Panama (individual) [CUBA].
DELGADO ARSENIO, Antonio, Panama (individual) [CUBA].
DUQUE, Carlos Jaen, Panama (individual) [CUBA].
HYALITE (Whiteswan Shipping Co., Ltd., Cyprus) (vessel) [CUBA].
KOL INVESTMENTS, INC., Miami, FL, United States [CUBA].
PADRON TRUJILLO, Amado, Panama (individual) [CUBA].
PESCADOS Y MARISCOS DE PANAMA, S.A. (a.k.a. PESMAR S.A.; a.k.a. PEZMAR S.A.), Panama City, Panama [CUBA].
PESMAR S.A. (a.k.a. PESCADOS Y MARISCOS DE PANAMA, S.A.; a.k.a. PEZMAR S.A.), Panama City, Panama [CUBA].
PEZMAR S.A. (a.k.a. PESCADOS Y MARISCOS DE PANAMA, S.A.; a.k.a. PESMAR S.A.), Panama City, Panama [CUBA].
ROSE ISLANDS (Shipley Shipping Corp., Panama) (vessel) [CUBA].
SIBONEY INTERNACIONAL, S.A., Edificio Balmoral, 82 Via Argentina, Panama City, Panama; Venezuela [CUBA].
STERN, Alfred Kaufman, Prague, Czech Republic (individual) [CUBA].
TECHNIC DIGEMEX CORP., Calle 34 No. 4-50, Office 301, Panama City, Panama [CUBA].
TRAVEL SERVICES, INC., Hialeah, FL, United States [CUBA].
TREVISO TRADING CORPORATION, Edificio Banco de Boston, Panama City, Panama [CUBA].
HEYWOOD NAVIGATION CORPORATION, c/o MELFI MARINE CORPORATION S.A., Oficina 7, Edificio Senorial, Calle 50, Apartado 31, Panama City 5, Panama [CUBA].
POCHO NAVIGATION CO. LTD., c/o EMPRESA DE NAVEGACION MAMBISA, Apartado 543, San Ignacio 104, Havana, Cuba [CUBA].
BROTHERS (f.k.a. TULIP ISLANDS) (C4QK) Bulk Carrier 25,573DWT 16,605GRT Cyprus flag (Ciflare Shipping Co. Ltd.) (vessel) [CUBA].
TULIP ISLANDS (a.k.a. BROTHERS) (C4QK) Bulk Carrier 25,573DWT 16,605GRT Cyprus flag (Ciflare Shipping Co. Ltd.) (vessel) [CUBA].
CARIBBEAN SALVOR (9H2275) Tug 669DWT 856GRT Malta flag (Compania Navegacion Golfo S.A.) (vessel) [CUBA].
HARNMAN H (f.k.a. PEONY ISLANDS) (5BXH) Bulk Cargo 26,400DWT 15,864GRT Cyprus flag (PEONY SHIPPING CO. LTD. (SDN)) (vessel) [CUBA].
PEONY ISLANDS (a.k.a. HARNMAN H) (5BXH) Bulk Cargo 26,400DWT 15,864GRT Cyprus flag (PEONY SHIPPING CO. LTD. (SDN)) (vessel) [CUBA].
NEW GROVE (f.k.a. KASPAR) (P3QJ3) General Cargo 1,909DWT 754GRT Cyprus flag (Oakgrove Shipping Co. Ltd.) (vessel) [CUBA].
KASPAR (a.k.a. NEW GROVE) (P3QJ3) General Cargo 1,909DWT 754GRT Cyprus flag (Oakgrove Shipping Co. Ltd.) (vessel) [CUBA].
PINECONE (f.k.a. GRETE) (P3QH3) General Cargo 1,941DWT 753GRT Cyprus flag (Pinecone Shipping Co. Ltd.) (vessel) [CUBA].
GRETE (a.k.a. PINECONE) (P3QH3) General Cargo 1,941DWT 753GRT Cyprus flag (Pinecone Shipping Co. Ltd.) (vessel) [CUBA].
RAVENS (9H2485) General Cargo 2,468DWT 1,586GRT Malta flag (ATAMALLO SHIPPING CO. LTD. (a.k.a. ANTAMALLO SHIPPING CO. LTD.) (SDN)) (vessel) [CUBA].
TEPHYS (f.k.a. PAMIT C) (H2RZ) General Cargo 15,123DWT 8,935GRT Cyprus flag (Tephys Shipping Co. Ltd.) (vessel) [CUBA].
PAMIT C (a.k.a. TEPHYS) (H2RZ) General Cargo 15,123DWT 8,935GRT Cyprus flag (Tephys Shipping Co. Ltd.) (vessel) [CUBA].
WEST ISLANDS (C4IB) General Cargo 15,136DWT 9,112GRT Cyprus flag (WEST ISLAND SHIPPING CO. LTD. (SDN)) (vessel) [CUBA].

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On February 12, Sen. Amy Klobuchar (D-MN) introduced Senate Bill 491, the Freedom to Export to Cuba Act. This bipartisan bill is intended to lift the broad embargo on U.S. trade and investment in Cuba, but leaves in place many of the restrictions related to human rights and property claims, as well as those imposed by other laws and regulations for other reasons other than the embargo, such as Cuba’s state sponsorship of terrorism. In proposing this type of legislation, its sponsors hoped to take an incremental step to open up U.S.-Cuba trade without addressing the most sensitive issues.

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In December 2014, President Obama made an unexpected announcement signaling a “new course” for Cuba after more than fifty years of comprehensive U.S. sanctions. The changes to U.S. sanctions and export policy under the Cuban Assets Control Regulations and Export Administration Regulations (EAR) implemented in January 2015, although limited, opened new business opportunities for U.S. companies. Further liberalization may be considered in the future with Congressional support, although that is the subject of heated discussions in Washington, D.C. For now, it will make sense for many companies to consider strategic first steps in Cuba, including for intellectual property protection.

When change comes, chance favors the prepared.

First, under current Cuban law, certain U.S. persons and entities are allowed to file a trademark application in Cuba, even when one is not using the trademark in Cuba. Second, being first to file under Cuba’s regime will help preempt opportunists who may seek to file a trademark application for your own trademark. Third, the Cuban trademark application process is protracted, taking months or years, and will slow as the system floods with new applications in the expectation Cuba will soon become an eagerly sought market. Fourth, the adversarial process of eradicating pirated marks will be protracted.

Assuming there are no already-existing blocking marks, the costs to register a mark are relatively low. Protection of your valuable intellectual property—your brand and the customer goodwill it symbolizes—will allow your company to be in a position to conduct business in this new market, whenever it opens, and defend your rights against pirates looking to cash in on your own brand.

With this client alert, we hope to inspire you to file for your trademarks in Cuba, before someone else does and you have to pay to acquire what is rightfully yours.

Cuban Economic Embargo

The current U.S. sanctions program authorizes U.S. persons to apply for and maintain trademark registrations in Cuba, as well as to take certain specified actions necessary to protect their intellectual property. Usually, independent “trademark agents” in Havana are used to file the applications. Under the sanctions system, transmitting payment to the agents for their services has in some cases been difficult, but the financial transactions restrictions may be easing presently.

What If Someone Has Filed An Application For Your Trademark?

The Cuban trademark system is mostly untested from the United States perspective, obviously because of the general sanctions. Even though the U.S. regulations permit trademark registration in Cuba, many U.S. companies have not seen the economic motivation to protect trademarks, being unable to trade in Cuba. Now that the prospects are rising, so is interest in owners registering their marks, and so, too, the interest in pirates exploiting their opportunities.

The Cuban trademark system, described by the International Trademark Association (INTA), is basically like most other countries in the world. Cuba and the United States both are parties to the same major trademark treaty systems. Like most countries, Cuba has a “first to file” system, giving preference to those who are first to file an application for a mark. As a general rule, U.S. trademark law, based on “common law,” is quite unusual in that it recognizes rights in unregistered marks. Most of the rest of the countries in the world, including Cuba, do not generally recognize “common law” or unregistered rights. Thus owning a registration there is crucial to effectively protecting your brand.

Cuban law does provide various procedures to object to applications or registrations of conflicting marks. Such procedures have not been much used by U.S. companies to date. As with applications, one can expect adversarial proceedings to be increasingly protracted. The costs are relatively low at this point, but delay in itself is costly, particularly if there are infringers and counterfeiters at large in the marketplace.

Generally, the more famous your brand is internationally, the higher your chances of blocking a mark in a country where you do not have your own prior registration. The fame of a brand, however obvious it may seem, is usually a question of fact requiring proof, often substantial proof, to satisfy a tribunal in a first-to-file jurisdiction. Also, however obvious it might seem, it can be difficult to prove that an opportunist is in fact a “bad faith” pirate. In “first to file” systems around the world, the first to file has the benefit of the doubt.


For all these reasons, it is highly advisable to verify your eligibility under federal regulations to engage in trademark protection activities in Cuba; to apply to register your important brands in Cuba if you hope to do business there; and to initiate proceedings to try to expunge pirated marks which have already been registered in Cuba by others.

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Among the amendments to the Cuban Assets Control Regulations published by OFAC on January 16 is a provision (section 515.582) that provides that “[p]ersons subject to U.S. jurisdiction are authorized to engage in all transactions, including payments, necessary to import certain goods and services produced by independent Cuban entrepreneurs as determined by the State Department as set forth on the State Department’s Section 515.582 List ….” At the time of the CACR revisions, the State Department had not yet published that list.

On February 13, the State Department published the Section 515.582 List. The State Department’s announcement actually is a negative list of categories of the U.S. tariff schedules that are not authorized. Items covered by non-listed categories are permitted.

In fact, the majority of tariff categories are excluded. The categories that are allowed cover product categories such as leather goods, wood items, shoes and works of art. Cigar imports remain prohibited.

The United States does not grant any tariff benefits to Cuba, and imports from that country are subject to relatively high “Column 2” rates. Persons carrying authorized items in their luggage when returning from Cuba may be able to apply the personal use exemption, but purchases of products in commercial quantities will remain complicated.

Note that the State Department’s notice emphasizes that persons importing goods under Section 515.582 “must obtain documentary evidence that demonstrates the entrepreneur’s independent status, such as a copy of a license to be self-employed issued by the Cuban government or, in the case of an entity, evidence that demonstrates that the entrepreneur is a private entity that is not owned or controlled by the Cuban government.”