Archive for the ‘Cuba Sanctions’ Category



Florida Imposes Its Own Embargo on Cuba

Posted by at 5:34 pm on September 11, 2017
Category: BISCuba SanctionsOFAC

Rick Scott Head Shot by Rick Scott [CC-BY-SA-2.0 (], via Flickr 2007 [cropped]Last week, before other things got in the way, Florida governor Rick Scott looked in the mirror and suddenly realized that he had been elected by the American voters to run the foreign policy of the United States. So, without further delay, Scott announced that Florida would cut off all state funding for any port that permitted traffic to Cuba. As a result, the ports in Everglades and Palm Beach cancelled memoranda of understanding that they were planning to sign with Cuban officials visiting the state.

Now, of course, we all understand that Governor Scott’s 8th grade civics class may not have covered some of the finer points of the U.S. Constitution, and we also understand that Cuba-bashing is a favorite sport for Florida politicians, but even a quick review of the Supreme’s Court’s decision in Crosby v. National Foreign Trade Council reveals the problems with the governor’s actions here. In Crosby, Massachusetts prohibited state agencies from buying goods from companies that did business with Burma. The Supreme Court held that the law was preempted by the Supremacy Clause of the United States Constitution. In doing so, the Court noted that the Massachusetts law interfered with the ability of the federal government to conduct foreign policy with respect to Burma. Central to that holding was the court’s finding that the Massachusetts law penalized companies for engaging in trade with Burma that was expressly permitted by the federal sanctions against Burma

Here, Governor Scott’s threat extends to all trade with Cuba, even if that trade is permitted by a specific or general license. So, to take a timely example, it is legal, under section 515.591 of the Cuban Assets Control Regulations and License Exception SCP of the Export Administration Regulations to export goods and services to Cuba to assist with rebuilding infrastructure damaged by Hurricane Irma. Yet, under the threatened action, if that relief is shipped through a Florida port, that port will be penalized by Florida. This does seem, shall we say, pretty ungrateful under the circumstances: Irma’s strength, and impact on Florida, was lessened by the time she spent wreaking havoc on the northern coast of Cuba. Florida ought to think of that before blocking aid to Cuba in rebuilding destroyed infrastructure.

Photo Credit: Rick Scott Head Shot by Rick Scott [CC-BY-SA-2.0 (], via Flickr 2007 [cropped]. Copyright 2007 Rick Scott

Permalink Comments (1)

Bookmark and Share

Copyright © 2017 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)



OFAC Fines AIG for Drafting Error in Global Insurance Policies

Posted by at 10:40 am on June 28, 2017
Category: Cuba SanctionsEconomic SanctionsIran SanctionsSudan

IG Employees via [Fair Use]On Monday, the Office of Foreign Assets Control (“OFAC”) announced that insurance giant AIG had agreed to pay $148,698 to settle charges that it had insured 555 shipments involving Sudan, Iran and Cuba. Although some of the apparent violations involved single shipment policies to the sanctioned destinations or paying claims under global policies on shipments to those destinations, others involved simply accepting premiums under global insurance policies that were later used to cover shipments on which no claims were made to sanctioned destinations.

In November of last year, OFAC provided guidance on how global insurance policies should deal with U.S. economic sanctions

The best and most reliable approach for insuring global risks without violating U.S. sanctions law is to insert in global insurance policies an explicit exclusion for risks that would violate U.S. sanctions law. For example, the following standard exclusion clause is often used in open marine cargo policies to avoid OFAC compliance problems: “whenever coverage provided by this policy would be in violation of any U.S. economic or trade sanctions, such coverage shall be null and void.” The legal effect of this exclusion is to prevent the extension of a prohibited service (insurance or risk assumption) to sanctioned countries, entities or individuals. It essentially shifts the risk of loss for the underlying transaction back to the insured – the person more likely to have direct control over the economic activity giving rise to the contact with a sanctioned country, entity or individual. [11-16-07]

This is a sensible and reasonable policy with respect to global insurance policies. So, you must be assuming, AIG must have left the language cited above out of its global policies and that led to the fines. But you would be wrong. OFAC said this about the AIG global policies:

While a majority of the policies were issued with exclusionary clauses, most were too narrow in their scope and application to be effective.

And how were they “too narrow in their scope and application”? OFAC is not saying. Apparently, OFAC thinks it will be easier to fine other insurance companies later if it keeps secret the drafting errors in the global policies that made the exclusionary clauses in the AIG global policies “too narrow in their scope and application.” And what about those clauses other than most clauses that were too narrow?  Why was AIG being fined for shipments under policies where the exclusionary clauses were acceptable?

Worse yet, after staying mum on what was wrong with “most” of AIG’s exclusionary clauses beyond being “too narrow,” OFAC has the nerve to say this in its announcement:

This enforcement action highlights the important role that properly executed exclusionary clauses play in the global insurance industry’s efforts to comply with U.S. economic sanctions programs.

If “properly executed exclusionary clauses” are so gosh-darned important, then why on earth does OFAC refuse to give the insurance industry a single clue as to what exactly are  “properly executed exclusionary clauses” and what was wrong with “most” of the clauses in the AIG global policies? Did they leave out the word “void” from the recommended language? Did they just say “U.S. economic sanctions” instead of “U.S.economic or trade sanctions”?  How hard would it have been for the agency to say precisely and specifically what was wrong with AIG’s exclusionary clauses?  This just underscores the perception that OFAC is more interested in terrifying than regulating U.S. businesses.

Permalink Comments Off on OFAC Fines AIG for Drafting Error in Global Insurance Policies

Bookmark and Share

Copyright © 2017 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)



New Cuba Travel Rules: No Place to Stay, No Place to Eat, Nothing to Do While There

Posted by at 3:41 pm on June 16, 2017
Category: Cuba SanctionsOFAC

Women with Cigar by Daniele Febei [CC-BY-SA-2.0 (], via Flickr [cropped and processed]

President Trump today announced new sanctions on Cuba, effectively rolling back many, if not most, of the changes made by the Obama administration to loosen the sanctions.  The most significant changes will make travel to Cuba by U.S. citizens to Cuba more difficult, if not virtually impossible.

The executive order signed by Trump has not yet been released, but FAQs on the new policy have been posted to OFAC’s website. The biggest change will be with respect to individual people-to-people travel that was permitted starting March 15, 2016. Under the new rules, educational travel under the people-to-people exception will only be permitted if organized “under the auspices of an organization that is subject to U.S. jurisdiction that sponsors such exchanges.” What organizations will meet this test is not clarified in the new FAQs.

OFAC says that the individual people-to-people license remains in effect until OFAC issues new regulations, but there is a wrinkle, actually more a tectonic fault than a wrinkle. If you  purchased a ticket or hotel room before today, you can rely on the old license even after the new rules are formally adopted by OFAC. The flip side of this, however, is that you make individual travel arrangements after today at your own risk.  This is because in that case if the new rules are adopted before you complete your travel to Cuba, you’re out of luck and the individual general license no longer applies. In the worst case scenario, if the rules are changed while you’re in Cuba and you have made your travel arrangements after today, you will be in violation of the new rules unless you can instantly teleport yourself off the island.

The other change that will significantly impact travel is the prohibition on all transactions by U.S. travelers in Cuba with “entities related to the Cuban military, intelligence, or security services.” This is directed at Grupo de Administración Empresarial, S.A. (“GAESA”) which controls a large portion, probably around 60 percent, of the Cuban economy and most of the tourist sector. Almost all of the shops, hotels and restaurants in Old Havana are run by GAESA, as are most of the hotels elsewhere in Cuba. U.S. tourists who buy a bottle of cold water from a supermarket run by GAESA anywhere on the island will risk getting in hot water with OFAC when they return home.

This obviously poses problems for every traveler in Cuba whether they are on a specific license or are traveling under any of the twelve general license categories. Certainly one cannot expect GAESA to warn U.S. tourists or to plaster its name over all of its properties, hotels, restaurants, gas stations, supermarkets and stores. Never fear, however — the FAQs say that when the new regulations are adopted the State Department will publish a list of GAESA entities. So, all tourists will have to do is carry the twenty-page list around with them and check the list before ordering a dacquiri, buying a cigar, checking into a hotel, or eating in a restaurant, or doing anything else on their travels. (That sounds like fun.)

You might think that private rentals, like those handled by AirBNB, will be spared the GAESA taint. But you would be wrong. VaCuba, which handles remittances for AirBNB, is owned by GAESA.

The good news is this: if you can somehow manage to get to Cuba under the new rules and find a legal place to stay, you can still buy cigars and bring them back with you. At least, if you haven’t bought them from a store owned by GAESA.

Photo Credit: Women with Cigar by Daniele Febei [CC-BY-SA-2.0 (], via Flickr [cropped and processed]. Copyright 2009 Daniele Febei

Permalink Comments (5)

Bookmark and Share

Copyright © 2017 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)



OFAC Fines Honda For Complying with Canadian Law

Posted by at 9:25 am on June 9, 2017
Category: Cuba SanctionsOFAC

Image via [Public Domain]Apparently Cuban diplomats in Cuba like to drive spiffy new Hondas (as opposed to the somewhat older cars almost everybody else in Cuba drives). But, because a dealership in Ottawa financed leases on those cars for the Cuban Embassy through Honda Canada Finance Inc. (“HCFI”), a subsidiary of California-based American Honda Finance Corporation (“AHFC”), there was all hell — or rather $87,255 — to pay to OFAC.

OFAC went out of its way to point out a not-uncommon deficiency in HCFI’s screening process:

The Cuban entity had the word “Cuba” in its name and provided documentation to HCFI demonstrating it was a Government of Cuba entity. Although AHFC and HCFI had policies and procedures in place review transactions against OFAC’s List of Specially Designated Nationals and Blocked Persons for compliance with U.S. economic sanctions laws, they did not include the names of countries subject to OFAC-administered comprehensive sanctions in their screening system.

Many screening processes simply check names against lists and stop there. So, HCFI screened “Embassy of Cuba” and when that did not show up in the SDN list, the leases were issued. I can’t tell you how many times I’ve seen something like this.

As usual, and longtime readers will know where I’m going, OFAC works itself up in a high dudgeon over these leases without bothering to mention at all the Canadian Foreign Extraterritorial Measures Act.  That law makes it clearly illegal  for HCFI, a Canadian company in Canada and fully subject to Canadian law, to deny financing based on the U.S embargo of Cuba.  This applicable Canadian law is not even mentioned as a mitigating factor. Once again, it appears that the U.S. is telling one of its closest allies that we don’t really care what their laws are.

But wait, there’s something in the OFAC release that hints that this might not be entirely the case. The transactions leading to the penalty occurred between 2011 and 2014. OFAC lists as a mitigating factor that “it issued a specific license to AHFC in June 2015 regarding the subject leases.” In most cases, getting an OFAC license to deal with the Cuban government in a third-country would be considered a near impossibility. One has to wonder whether AHFC, after it disclosed the violations, applied for a license and relied on the Canadian Foreign Extraterritorial Measures Act as a basis.  This might indeed be the reason why the licenses were granted here and why HCFI wasn’t forced to repo the diplomats’ cars.

The takeaway here is that U.S. companies with foreign subsidiaries in countries with statutes blocking compliance with the Cuba embargo might consider applying for a license and basing the request on the blocking statute.  Because the U.S. company is applying for the license, the application itself would not violate the Canadian blocking law, which only covers “persons in Canada” from complying with the U.S. embargo on Cuba.  Given the massive delays at OFAC in getting license granted this may not be a practical solution. But it is, at least, something to consider.

Permalink Comments Off on OFAC Fines Honda For Complying with Canadian Law

Bookmark and Share

Copyright © 2017 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)



Cuban Rum, Pennsylvania, OFAC and a Recipe

Posted by at 6:16 pm on May 2, 2017
Category: Cuba SanctionsOFAC

Havana Club on the Road to Havana by Richard Smallbone [CC-BY-SA-2.0 (], via Flickr [cropped and processed]In an earlier post, I expressed some incredulity with respect to an dubious scheme cooked up by some Pennsylvania legislators to import Cuban rum without an OFAC license.  The scheme was based on a questionable reading of Clause 2 of the Twenty-First Amendment. There’s no way to tell whether my derision directed at the legal case for Cuban rum-running by the Pennsylvania legislators was responsible, but it appears that someone in Pennsylvania has thought better of the idea.

According to this article, the Pennsylvania Liquor Control Board which runs the Fine Wine and Good Spirits stores, Pennsylvania’s state-owned monopoly on the sales of wines and hard liquor, is preparing a license to file with OFAC to permit the PLCB to purchase Cuban rum for sales in those stores. The application apparently argues that the “mystique” of Cuban rum would create a boon to the Pennsylvania economy by enticing shoppers into the state-run liquor stores. After all, who needs to fly down to Havana when you can buy Cuban rum in a state store in Erie or drink authentic daiquiris made with Havana Club in Wilkes-Barre?

A Pennsylvania state senator instrumental in the state’s efforts to bring Cuban rum to his state dismissed the notion that this plan posed a threat to national security, telling ABC News “We’re talking about buying a rum.” Good point.

But, of course, with all things Cuba not everyone agrees — here’s an irate letter to the editor of the Express Times in Lehigh Valley criticizing the proposed rum deal.

For those of you now planning a road trip to Pennsylvania to stock up on Cuban rum when (and if) it becomes available there, I commend to you this recipe for the El Presidente Cocktail. This cocktail was named after Cuban president Gerardo Machado (who served between 1925 and 1933) and was a favorite among Americans who sought respite from Prohibition in the night clubs of Havana. And, as the recipe makes clear, use real grenadine that you make yourself, not that pink-colored sugar water that you find on grocery shelves or in the wells of your less estimable drinking establishments. Cheers!

Photo Credit: Havana Club on the Road to Havana by Richard Smallbone [CC-BY-SA-2.0 (], via Flickr [cropped and processed]. Copyright 2013 Richard Smallbone

Permalink Comments (3)

Bookmark and Share

Copyright © 2017 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)