Bureau Of Industry And Security, Department Of Commerce Final Rule:

Amendments To The Export Administration Regulations Affecting The Licensing Policy For Cuba

By Odyssey E. Gray, III

The Department of Commerce, Bureau of Industry and Security issued a final rule, published in the Federal Register, effective November 9, 2017, which enumerated amendments to the Export Administration Regulations (“EAR”) in connection with implementation of U.S. policy in accordance with the National Security Presidential Memorandum on Strengthening the Policy of the United States Towards Cuba (“NSPM”), issued under the current administration on June 16, 2017.

The NSPM’s stated goals are “to enhance compliance with United States law; hold the Cuban regime accountable for oppression and human rights abuses; further the national security and foreign policy interests of the United States and the interests of the Cuban people; and lay the groundwork for empowering the Cuban people to develop greater economic and political liberty.”  The NSPM makes limited changes to the historic policy changes towards Cuba enacted under the Obama administration that are intended to benefit U.S. commerce and the citizens of Cuba, not its governmental regime.

It is important to note that the statutory embargo of Cuba remains in place whereby items subject to the EAR are subject to a general policy of denial unless the transactions are eligible for review as provided in Part 746 of the EAR, Embargoes and Other Special Controls.  Specifically, § 746.2(b) provides policy guidance under the EAR with respect to Cuba. 

This final rule makes revisions to § 746.2 of the EAR by amending the Note 2 to paragraph (b)(3)(i) in connection with licensing policy for Cuba, amending License Exceptions found at §§ 740.12, 740.19 and 740.21 (Gift Parcels and Humanitarian Donations (“GFT”), Consumer Communications Devices (“CCD”), and Support for the Cuban People (“SCP”)), respectively, of the EAR to conform with the Office of Foreign Assets Control (“OFAC”) amendment which defines what are “prohibited officials of the Government of Cuba,” and revises § 740.21 (License Exception SCP) to further support free enterprise in Cuba.

In accordance with section 3(a) of the NSPM, Note 2 to EAR 746.2(b)(3)(i) clarifies that BIS will deny license applications for export or reexport to Cuba which include certain entities or subentities the State Department identifies on its List of Restricted Entities and Subentities associated with Cuba, also referred to as the “Cuba Restricted List,” unless the transactions are consistent with the policy and criteria specified in the NSPM.  The Cuba Restricted List is now available in the Federal Register and the Department of State website at https://www.state.gov/e/eb/tfs/spi/cuba/cubarestrictedlist/index.htm.  

Also in accordance with section 3(a) of the NSPM, sections of the EAR License Exceptions GFT, CCD, and SCP are amended pursuant to the aforementioned OFAC amendment to include certain additional individuals that would be deemed ineligible Cuban government officials which, in turn, would exclude the use of the GFT, CCD, and SCP License Exceptions for exports and reexports to Cuba.

License Exception SCP (§ 740.21) authorizes the export and reexport of certain items to Cuba that

are intended to improve the living conditions of the Cuban people; support independent economic activity and strengthen civil society in Cuba; and improve the free flow of information to, from, and among the Cuban people.  Three times since its inception, License Exception SCP has been amended to add additional categories of commodities for export and reexport. 

Under this final rule, and to expand opportunities for free enterprise in Cuba pursuant to section 2(d) of the Cuba NSPM, the EAR language identifying specific items, activities and end use activities eligible for License Exception SCP has been simplified and expanded to a single provision that authorizes “the export and reexport to Cuba of items, without specifying types, for use by the Cuban private sector for private sector economic activities.”  Limitations of SCP are crafted to ensure any revenue generated is not to the benefit of the state or state-owned facilities.  In addition, no exports or reexports may contribute to the operation of the state.  Eligible items for export or reexport under the provisions of this license exception continue to be only those items designated as EAR99 or controlled for Anti-Terrorism reasons only.

With these changes, more opportunities exist for U.S. exporters related to commerce in Cuba, however, these opportunities also implement additional layers of scrutiny to ensure that only eligible parties, items and end uses are the basis of proposed transactions.  Exporters are advised that they should fully research the many restrictions on exports or reexports to Cuba, particularly when contemplating use of one of the EAR License Exceptions for proposed transactions.

As reported in the media, travel restrictions for U.S. citizens are enhanced based on the limitations that such activities benefit the Cuban government who owns a large number of the hotels in Cuba.

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