By Keil J. Ritterpusch, Esq., Senior Associate, FD Associates, Inc.
On April 14, 2015, President Obama told Congress that he recommends that Cuba be removed from the various U.S. Government lists of State Sponsors of Terrorism (“SSOTs”). The recommendation followed a review by the U.S. Department of State over the past six months regarding Cuba’s support for international terrorism. In making the recommendation, the White House stated: “After a careful review of Cuba’s record, which was informed by the intelligence community, as well as assurances provided by the Cuban government, the Secretary of State concluded that Cuba met the conditions for rescinding its designation as a State Sponsor[1].
Congress has forty-five days from April 14 to review the removal of Cuba as an SSOT. However, there isn’t any indication that Congress will block the removal. If Congress takes no action, Cuba will automatically be removed as an SSOT under the Export Administration Act of 1979 (“EAA”), the Foreign Assistance Act of 1961 (“FAA”), and the Arms Export Control Act (“AECA”)[2]
Removing Cuba as an SSOT will authorize the Obama Administration to expand the scope of items that are permitted to be exported to Cuba and reduce the restrictions that U.S. persons have in engaging in financial transactions with Cuba. It should be noted, however, that removing Cuba as an SSOT is merely an important first step in restoring diplomatic relations with the communist nation.
The U.S. Arms Embargo on Cuba enacted by the Cuban Liberty and Democratic Solidarity Act of 1996 (also called the “Helms-Burton Act”) will remain in place despite the removal of Cuba as an SSOT. The Helms-Burton Act includes significant restrictions on trade and financial transactions with Cuba that are separate and distinct from the consequences of Cuba being an SSOT. The U.S. Arms Embargo on Cuba can only be lifted if Congress passes new legislation to remove the embargo.
Despite the continued operation of the U.S. Arms Embargo on Cuba, the removal of Cuba as an SSOT will immediately permit (among other things):
- The Department of Commerce to allow a wider range of exports of dual-use items on the EAR, without the requirement to notify Congress in advance of the issuance of export licenses -- though formal amendment of the EAR by the Department of Commerce will be required first;
- The provision of certain foreign assistance and humanitarian aid by the Federal Government to Cuba, though such assistance must be consistent with the standing Helms-Burton Act; and
- U.S. citizens to pursue legal claims against Cuba and persons in Cuba in U.S. federal courts.
The removal of Cuba as an SSOT will also eliminate certain disclosure requirements in connection with filings with the U.S. Securities and Exchange Commission (“SEC”) and will permit companies to conduct business in Cuba without violating State laws that prohibit investment in SSOTs.
In conclusion, while the removal of Cuba as an SSOT is an important political maneuver that is likely to ultimately result in expanded trade with Cuba, the U.S. Arms Embargo on Cuba remains in place. As a result, persons looking to sell goods to Cuba need to carefully consider all of the legal implications of sale before engaging in transactions with Cuba.
[1]The EAA is the legal authority for the Department of Commerce’s Export Administration Regulations (“EAR”). While Congress allowed the EAA to lapse in 2001 and has not taken any steps to cure the lapse, the EAR has been maintained by way of the emergency powers granted to the President by the International Emergency Economic Powers Act of 1977 (“IEEPA”).
[2] The AECA is the legal authority for the Department of State’s International Traffic in Arms Regulations (“ITAR”).