In advance of President Obama’s highly publicized trip to Cuba, the Administration took additional steps to ease restrictions on trade and travel with Cuba. These changes to the Cuban Assets Control Regulations (CACR) and Export Administration Regulations (EAR) have implications for the banking sector, shippers, the travel industry and other businesses.
On January 27, 2016 the Department of Commerce, Bureau of Industry and Security (“BIS”) and the Department of Treasury, Office of Foreign Assets Control (“OFAC”) published amendments to the Export Administration Regulations (EAR) (Link) and Cuban Assets Control Regulations (CACR) (Link). These amendments further loosen aspects of the Cuba embargo in line with the President’s December 2014 initiative:
- Trade Finance – OFAC added a new general license authorizing payment and financing terms, including letters of credit, for U.S. exports and reexports of 100 percent U.S.-origin items from a third country so long as they (a) are authorized by the BIS and (b) not related to agriculture or commodities. OFAC’s previous policy restricted financing for exports to cash-in-advance or third-country financing.
- Trade and Business Licensing Opportunities – BIS established a new case-by-case licensing policy to permit exports and reexports “meeting the needs of the Cuban people,” including exports and reexports destined for state-owned enterprises, agencies and other organizations of the Cuban government. BIS provided a list of examples including agricultural production, artistic endeavors, education, food processing, disaster preparedness, relief and response, public health and sanitation, residential construction/renovation and public transportation. BIS suggested that the types of eligible items could include water treatment, electrical generation facilities, athletic facilities and other infrastructure beneficial to the Cuban people. The new licensing policy opens the door for U.S. companies to consider a range of possible exports. Areas that are still off-limits include items that primarily generate revenue for the state (including tourism and extractive industries) or are destined to Cuban intelligence and security services.
- Travel Authorizations for Business – OFAC expanded the general license for travel to Cuba to include travel-related transactions for market research, commercial marketing, sales or contract negotiations, accompanied delivery, installation, leasing, or servicing in Cuba of items consistent BIS export and licensing policy. In addition, OFAC expanded its previous authorization for attending professional meetings to also allow organizing such meetings.
- Aviation and Vessels – OFAC expanded the general license relating to carrier services between the United States and Cuba to allow the entry into blocked space, code-sharing, and leasing arrangements, including with Cuban nationals. Transactions related to travel between the United States and Cuba by aircraft or vessel on temporary sojourn and transactions by personnel required for normal operation and service of such aircraft and vessel also are authorized. BIS has adopted a general policy of approval for items necessary for safety of civil aviation including the export or reexport of aircraft leased to state-owned enterprises.
- Telecom / Electronics – BIS now “will generally approve license applications for exports and reexports of telecommunications items that would improve communications to, from, and among the Cuban people.” BIS policy will also be more favorable with respect to items and software related to civil society and news gathering.
- Public Performances. OFAC expanded the general license for public performances, clinics and workshops to not only those participating in the event but to those organizing it, provided the event is open for attendance and, in relevant situations, participation by the Cuban public.
- Media and Artistic Activities. OFAC expanded the general license for travel related transactions directly incident to the exportation, importation or transmission of informational materials. This includes transactions directly incident to professional media or artistic productions, including filming movies and television programs, music recording and the creation of art works in Cuba by travelers with professional experience in these areas.
Notwithstanding these changes to the Cuba regulations, it is important to emphasize that the Cuba embargo still remains in force and cannot be lifted without congressional authorization. Transactions outside the scope of BIS license exceptions or OFAC general licenses remain prohibited unless specifically licensed.
With “Implementation Day” came the lifting of certain key U.S. and EU sanctions on the civil aviation industry. However, many prohibitions still remain, and licensing requirements may attach to U.S. persons or non-U.S. persons who seek to do business in Iran or operate airline services to/from Iran. Companies must continue to navigate this complex sanctions framework if seeking to engage in Iran’s aviation sector.
The front line of Iran sanctions compliance and enforcement has been the banking sector. With the arrival of “Implementation Day” under the Joint Comprehensive Plan of Action (JCPOA), financial institutions and persons engaging in financial transactions face an adjusted, but still complex, sanctions environment. Continue reading →
January 16, 2016 was “Implementation Day” under the Joint Comprehensive Plan of Action (JCPOA), bringing into effect the sanctions commitments of the United States and European Union (EU). The International Atomic Energy Agency (IAEA) confirmed in Vienna that Iran had met its JCPOA milestones with respect to its nuclear program. The U.S. sanctions changes involve partial relief within a complex regime with continuing primary sanctions and designations on Iranian parties which carry secondary sanctions.
The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Implementation Day guidance describing the changes to the U.S. sanctions program for Iran, which largely reflect what had been expected under the JCPOA. This includes the ending of secondary sanctions on Iran related to nuclear weapons proliferation; delisting of over 400 Iranian and Iran-related Specially Designated Nationals (SDNs); issuance of general licenses for non-U.S. entities owned or controlled by U.S. persons to engage in certain activities in Iran, as well as for import to the United States of Iranian carpets and foodstuffs including pistachios and caviar; and adjustment of licensing policy to allow authorization of certain exports, sales, leasing and transfers of civilian passenger aircraft. Existing authorizations for agricultural commodities (including food), medicine, and medical supplies remain unchanged. Exports and reexports of U.S. origin products (as well as foreign-origin products with more than 10% U.S. content) still require a license, and U.S. persons still may not participate in business transactions with Iran unless licensed.
Following will be a series of posts on key aspects of the adjustments to U.S. and EU regulations relating to Iran.
On Friday December 18, 2015 the President signed the Consolidated Appropriations Act, 2016, which funds the Federal government through the 2016 fiscal year. Among many other non-funding related provisions, section 101 of Division O of the Act removed the 40-year ban on the export of crude oil. It repeals Section 103 of the Energy Policy and Conservation Act (42 U.S.C. § 6212), the cornerstone of the prohibition on exporting crude, and provides that “[n]otwithstanding any other provision of law … no official of the Federal Government shall impose or enforce any restriction on the export of crude oil.”
The U.S. Office of Foreign Assets Control (OFAC) issued General License 20 for Myanmar (Burma) on December 7, 2015, which authorizes certain trade related transactions that were previously prohibited due to the role of sanctioned parties in the country’s ports and other trade infrastructure.
On October 29, 2015, the U.S. and the EU took separate actions to ease their respective Belarus-related sanctions programs for six months. These measures follow the October 11, 2015 reelection of Alexander Lukashenko as President of Belarus, the regime’s decision to release certain political prisoners and hopes for an improvement of the political and economic relationship between Western countries and Belarus. While currently temporary in nature, the sanctions relief provided affords Western companies opportunities to engage in certain transactions in Belarus.
On October 18, 2015, both the United States and the European Union took action to prepare for future changes to sanctions policy which will be effective upon IAEA verification of Iran’s commitments under the Joint Comprehensive Plan of Action (JCPOA). This was a required step under the JCPOA, termed “Adoption Day,” scheduled to occur ninety (90) days after the JCPOA was endorsed by the UN Security Council via resolution 2231.
Importantly, Adoption Day does not bring about any immediate sanctions relief. OFAC reminded companies again about potential violations related to arranging agreements and contingent contracts with Iranian parties prior to Implementation Day.
Pillsbury and Goltsblat BLP are pleased to announce that Evgeny Shumilov, Economic Attaché, Embassy of the Russian Federation, will be participating in the October 21 luncheon and roundtable discussion on doing business in Russia. Mr. Shumilov will open the event by discussing the state of U.S.-Russia trade and opportunities for U.S. companies in the Russian market.
Please join us for Mr. Shumilov’s remarks and for presentations from top legal minds from Pillsbury and Goltsblat BLP regarding the key developments under Russian, U.S. and EU laws and regulations for U.S. companies doing business in Russia today.
- Russian Legal Developments: Major recent Russian legislative developments and initiatives, including changes to employment, real estate, commercial, anti-trust, corporate and tax laws.
- U.S. and EU Sanctions Update: Current compliance considerations for U.S. companies and their subsidiaries and affiliates doing or seeking to do business in Russia.
- News from Capitol Hill: Outlook for U.S.-Russia relations through the November 2016 elections.
Evgeny Shumilov, Economic Attaché, Embassy of the Russian Federation
Andrey Goltsblat, Managing Partner, Goltsblat BLP
Nancy Fischer, Partner, Pillsbury
The Honorable Gregory H. Laughlin, Senior Counsel, Pillsbury
Elina Teplinsky, Partner, Pillsbury
For questions or to register, please contact Julie Merkin at email@example.com.