INSIGHT: Cuba Sanctions
Cuba: US sanctions
The nature of the relationship between Cuba and the US dates back to the some of the most intense periods of the cold war era. A thaw in relations under the Obama administration has led to some liberalisation of existing sanctions, but the Trump administration has adopted a more restrictive policy and in June 2017 introduced limitations on travel and transactions with entities related to the Cuban military, intelligence, or security services, including the Grupo de Administración Empresarial (GAESA). Members are well advised to consider the full picture before deciding to develop their trade in this direction.
With effect from 9 October 2019 OFAC is amending the Cuban Assets Control Regulations (CACR). Following restrictions on non-family travel announced 5 June 2019, OFAC is now further tightening their policy by restricting certain remittances to Cuba and – most importantly – removing the authorization for US banking institutions to process transactions originating and terminating outside the United States, commonly known as "U-turn" transactions. OFAC has published updated Frequently Asked Questions and a Fact Sheet pertaining to this regulatory amendment.
On 8 November 2017 the US announced new restrictions on travel and transactions with Cuba by persons subject to US jurisdiction. Changes implement announcement made by President Trump in June 2017. Payments and exports to entities on the Cuba Restricted List by US personsare now prohibited. Cuba Restricted List targets entities controlled by Cuban military, intelligence and security sectors. Restrictions are also imposed on travelling, including independent and educational travels.
US Treasury factsheet on the changes is available here.
Sanctions introduced against the regime in Venezuela in 2019 have also had an impact on Cuba, with the carriage to Cuba of petroleum products of Venezuelan origin leading to designation of ships and shipowners (some of which have subsequently been removed). The Cuban oil company Cubamentales was also designated on 3 July 2019 for its involvement in trade with Venezuela.
In June 2017, Trump signed an Executive Order introducing new sanctions measures against Cuba and reinstating some of the measures that had been lifted by Obama. The new sanctions did not re-impose the trade embargo. However new US restrictions on travel to Cuba were introduced and transactions were prohibited which involve entities related to the Cuban military, intelligence, or security services, including Grupo de Administración Empresarial (GAESA).
US sanctions on Cuba
The US has had, for over 50 years, a number of restrictions in place that mainly affected the interaction between the US and Cuba including significant travel and other economic restrictions. While some of these are being liberalised, many are still in place.
The US had previously imposed a boycott of Cuba that affected third parties, too, and specifically the shipping industry.
On 14 October 2016 the US amended the Cuban Asset Control Regulations to ease the 180 Day Rule prohibiting vessels from calling at US ports for 180 days after leaving a Cuban port. If a foreign vessel calls at Cuba with cargo from a third country which would not be subject to the US Export Administration Regulations or Commercial Control List for anti-terrorism reasons, that vessel is not prohibited from thereafter calling at a US port. See Client update of 19 October 2016 for more information.
On 6 January 2017 OFAC has further clarified exemption to the 180-day rule in its FAQs, see Nos. 86-90.
Vessel is now exempt from the 180-day rule if, for example it is:
- Engaging or has engaged in trade with Cuba authorized under the CACR, such as a vessel carrying goods from the United States that are licensed or otherwise authorized for export or reexport to Cuba by the US Department of Commerce pursuant to the EAR;
- Engaging or has engaged in trade with Cuba that is exempt from the prohibitions of the CACR, such as a vessel carrying exclusively informational materials;
- Engaging or has engaged in the export or reexport from a third country to Cuba of agricultural commodities, medicine, or medical devices that, were they subject to the EAR, would be designated as EAR99;
- Carrying or has carried persons between the United States and Cuba or within Cuba pursuant to the general license for the provision of carrier services under the CACR or, in the case of a vessel used solely for personal travel (and not transporting passengers), pursuant to a license or other authorization issued by the Department of Commerce for the exportation or reexportation of the vessel to Cuba; or
- A foreign vessel that has entered a port or place in Cuba while carrying students, faculty, and staff that are authorized to travel to Cuba pursuant to the general license for educational activities under the CACR.
Vessels carrying Cuban goods or passengers may not enter a US port, unless also expressly authorised to do so.
Risk management advice
Until there is a substantive legislative change, members need to continue proceed on the basis that a call to Cuba may have consequences with respect to future calls to US ports.
Members attention is drawn to Skuld Rule 30.4.6 which excludes "liabilities, costs or expenses where payment by the Association or the provision of cover in respect thereof may expose the Association to the risk of being subject to a sanction, prohibition or any adverse action by a state or international organisation or competent authority".
In addition, it is unlikely that Skuld would be able to make a full recovery under the reinsurance contract because a number of the participants on the reinsurance programme are subject to US primary sanctions and such payments would be unlawful. Such shortfalls under the Skuld Rule 32.6. would fall to the Member, if they arose as a result of an inability to pay as a result of sanctions. Terms and Conditions for non-mutual products contain the same provision.
On a lighter note, it seems that it is now possible to enjoy Cuban cigars again, for those United States citizens that can comply with the present travel regulation regime (which still limits travel significantly).
Should members have a vessel specific enquiry they are asked to contact their usual Skuld business unit.
Sanctions before January 2017
Developments up to January 2017
The Office of Foreign Assets Control, of the US Treasury Department, has under 31 CFR 515, amended the Cuban Assets Control Regulations following Presidential action in December 2014.
These changes include the following:
- facilitation of travel to Cuba for authorised purposes
- facilitation of travel services
- authorisation of certain remittances
- interaction by US financial institutions with Cuban financial institutions
- liberalise certain activities with regards to telecommunications
- liberalise certain export activities
The note to the Final Rule of 31 CFR 515 is republished alongside this bulletin.
OFAC and US Bureau of Industry and Security announced further changes in their Cuba embargo regulations effective 21 September 2015. For the summary of these changes please see Freehill, Hogan & Mahar Client Alert dated 23 September 2015 published on this page.