New U.S. Cuba Regulations May Make Compliance There Easier

November 10, 2017


New U.S. Cuba Regulations May Make Compliance There Easier

By Samuel Rubenfeld

View of the facade of the Gran Hotel Manzana Kempinski in Havana, Cuba, on Wednesday. PHOTO: EUROPEAN PRESSPHOTO AGENCY

Though new rules from the Trump administration pare back the opening to Cuba started by former President Barack Obama, they also produce brighter lines that may make it easier for companies to identify who exactly they can do business with when trying to operate on the island, two experts said.

The changes, which go into effect Thursday once published in the Federal Register, put in place plans announced in June by President Donald Trump. They largely restrict individual travel and limit financial transactions by Americans. The administration alsoprovided an initial list of Cuban entities owned or controlled by the government to avoid, and it made some changes to the export-control rules on Cuba.

While acknowledging that the changes mean less opportunity for doing business in Cuba by U.S. companies, there were some benefits they could derive from the announcement, experts said.

Peter Harrell, an adjunct senior fellow at the Center for a New American Security who previously served as a deputy assistant secretary for counter-threat finance and sanctions in the U.S. State Department, tweeted that while the U.S. cracked down on trade with the Cuban government, it made trade easier with the country’s private sector. In a follow-up email, Mr. Harrell pointed to the export-control changes, saying that the U.S. Commerce Department will allow the sale of all non-controlled goods and some lightly controlled goods to the private sector, so long as they don’t provide benefit to the state.

“Overall the announcement will definitely result in less U.S. business in Cuba, because the Cuban government remains the dominant economic force in Cuba. But it was interesting and heartening to see the administration simultaneously try to simplify the rules for U.S. companies trying to sell goods to the Cuban private sector,” he said.

Mr. Harrell also noted in the email that the State Department made clear in its frequently-asked-question document that entities not on its restricted list, even if they’re subsidiaries of those on the list, aren’t restricted until they themselves appear on the blacklist, which simplifies questions of due-diligence.

“This should actually help make both business decisions and compliance easier because U.S. companies won’t have to worry as much about figuring out if the Cuban company they want to do business with is somehow owned by one of the companies on the restricted parties list,” he said.

Certain transactions already underway are allowed to continue, which is unusual for U.S. sanctions changes, noted Glen Kelley, a partner in the international-trade focused firm Jacobson Burton Kelley PLLC. Direct financial transactions with entities on the restricted list are grandfathered in, and guidance on this from Treasury “will be interpreted broadly,” he said.

Nevertheless, the Trump administration met its goal to restrict American companies from engaging in the Cuban market, said John Kavulich, president of the U.S.-Cuba Trade and Economic Council, a New York-based trade group, in an emailed statement.

“There are few senior executives of U.S. companies who will argue for, lobby for, and do so publicly, a preference or a desire for wide latitude to engage with military-controlled entities in Cuba, rather than seek alternative opportunities within Cuba or to forgo those opportunities,” he said.

Write to Samuel Rubenfeld at Follow him on Twitter at @srubenfeld.