Archive for the ‘Cuba Sanctions’ Category


Jun

16

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 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/7cPMmY [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 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/7cPMmY [cropped and processed]. Copyright 2009 Daniele Febei

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Copyright © 2017 Clif Burns. All Rights Reserved.
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Jun

9

OFAC Fines Honda For Complying with Canadian Law


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

Image via https://pixabay.com/p-1202440/?no_redirect [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.

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Copyright © 2017 Clif Burns. All Rights Reserved.
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May

2

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 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/nxC2Pr [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 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/nxC2Pr [cropped and processed]. Copyright 2013 Richard Smallbone

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Copyright © 2017 Clif Burns. All Rights Reserved.
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Mar

15

Word of the Day: Peloteros


Posted by at 6:04 pm on March 15, 2017
Category: BaseballCuba SanctionsOFAC

Cuba Baseball Stamp [Fair Use]It’s time for our annual Cuba baseball post which each year has been motivated by cold weather, spring training, and anxious anticipation of opening day. And what better subject for this post than the recently concluded trial in Miami in which Bartolo Hernandez, a baseball agent, and Julio Estrada, a baseball trainer, were accused of smuggling Cuban players into the United States and which featured testimony by one of these peleteros about how he ate his fake Haitian passport on his plane trip to the United States. (Insert optional better-than-airline-food joke here.)

One of the key elements of the case is section 515.505 of the Cuban Assets Control Regulation which unblocks Cuban nationals after they have established residency in a country outside Cuba other than the United States. The other element is that an unblocked Cuban in a third country is, under Major League Baseball’s rules, a “free agent” that can negotiate higher salaries; Cubans who come directly to the United States and become unblocked by seeking permanent residence here are eligible to be signed to an MLB team only through the amateur draft system and will not be able to command the astronomical salaries of a free agent.

According to prosecutors, the defendants smuggled the Cubans into third countries and then forged documents that could be used to evidence residency in those countries. The payoff to the defendants was the high commissions (allegedly around $150 million) that they received on the salaries of their free agent clients. The defense claimed that the two defendants did not forge documents and were unaware that the players, desperate to get to the United States, were using forged documents. The jury, however, convicted both men earlier today.

In other baseball news, opening day for the Chicago Cubs is Sunday, April 2, in St. Louis, a town that even the Rams had the good sense to escape.  Go Cubs Go!

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Mar

6

Penn Senate Rum Runners Eye Cuban Rum


Posted by at 5:58 pm on March 6, 2017
Category: Cuba SanctionsOFAC

Havana Club on the Road to Havana by Richard Smallbone [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/nxC2Pr [cropped and processed]A story in the Pittsburgh Post-Gazette (and not, I swear, in The Onion) reveals that a bunch of Pennsylvania state legislators flew off to Cuba where they concocted this genius plan. Step 1: ship boatloads of rum from Cuba to state liquor stores in Pennsylvania without an OFAC license and in defiance of the embargo. Step 2: argue that Pennsylvania can simply ignore the embargo and import all the rum it wants for ever and ever because of Clause 2 of the Twenty-First Amendment to the U.S. Constitution. Seriously. (The esteemed University of Pennsylvania Law School is reportedly so embarrassed by the legal reasoning of its local legislators that it packed up in the middle of the night and relocated to the recently vacated Qualcomm Stadium in San Diego.)

If you just clicked on the above link to the Twenty-First Amendment, you are probably pretty confused as to how anyone, state senators included, could argue that this clause allows a state to import Cuban rum in violation of the Cuban embargo. After all, it reads:

The transportation or importation into any state, territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.

It seems clear from the language and the history of Clause 2 that it was designed to allow states, if they wanted, to remain dry and regulate the sale of liquor in their own states. Mississippi, bless its heart, stayed dry until 1966. Kansas prohibited public bars until 1987. (Useful trivia: the reason Dorothy said to Toto, after landing in Oz, that they weren’t in Kansas any more was because she saw a bar.)

The clause has been read to give states the right to regulate the importation of liquor from other states by imposing taxes that would otherwise violate the Commerce Clause. But the courts have pretty much stopped there, with Craig v. Boren holding that Clause 2 did not permit states to set different drinking ages for men and women and California Liquor Dealers v. Midcal Aluminum holding that Clause 2 did not override the federal Sherman Act.

All that being said, nothing in Clause 2 which allows states to restrict importation and sale of liquor to their hearts’ content also allows states to import liquor in violation of federal law.  It says that imports prohibited by state law are prohibited, not that imports permitted by state law are permitted.  Morever, even if it did, the embargo would still apply.  If Clause 2 doesn’t trump the Sherman Act, it certainly doesn’t trump the Trading with the Enemy Act or Helms-Burton.

Moral of the story: legal theories concocted after long afternoons of daiquiris and mojitos in Havana will not likely survive judicial scrutiny.

Photo Credit: Havana Club on the Road to Havana by Richard Smallbone [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/nxC2Pr [cropped and processed]. Copyright 2013 Richard Smallbone

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