In a move that may honestly mean more to America than to Cuba, the White House has announced that President Obama will remove Cuba from the U.S. list of “State Sponsors of Terrorism.” As we reported here, the U.S. Department of State has listed Cuba as a state sponsor of terrorism pursuant to the Export Administration Act, the Arms Export Control Act, and the U.S. Foreign Assistance Act since 1982. Reviewing Cuba’s place on the list was one of the central proposals of President Obama’s December 17, 2015 announcement of a new policy toward Cuba. On that day, the President directed Secretary of State John Kerry to review the designation of Cuba under the current facts and the applicable laws. Mr. Obama requested Secretary Kerry’s report within six months, setting up June 17 as the date for a massive trade-geek “over-under” betting pool. Knowing Secretary Kerry to be a classic gunner (law school slang for the person who is always first to raise a hand with the right answer) our money was on the under. So we have cashed in on yesterday’s announcement. All of you who took the over, pay up.

Last week, the State Department issued a notification that Secretary Kerry had submitted his report to the White House recommending removal, based on the relevant statutory standards. U.S. Representative Ileana Ros-Lehtinen (R-FL) pre-judged the president’s “expected removal” of Cuba as a “miscarriage of justice.” The statutory provisions permitting a country to be listed include aiding or abetting proliferation of weapons of mass destruction, supporting terrorism, providing sanctuary or financing for terrorists. According to the State Department’s 2013 Country Report on Terrorism (the most recent available), Cuba had provided safe haven to members of two terrorist groups, the Basque Fatherland and Liberty (ETA) and the Revolutionary Armed Forces of Colombia (FARC). But according to the same report, “Cuba’s ties to ETA have become more distant,” and “about eight of the two dozen ETA members in Cuba were relocated with the cooperation of the Spanish government.” The report also noted there was “no indication that the Cuban government provided weapons or paramilitary training to terrorist groups.” The main continuing issue identified by the State Department in 2013 was that Cuba continued to harbor fugitives wanted in the United States. One such fugitive, Joanne Chesimard, made the FBI’s Most Wanted Terrorists List in 1973 after killing a New Jersey state trooper in 1973. She remains at large in Cuba, having been granted asylum. Nobody at Globaltradelawblog would object if Cuba were to return her to the United States for trial. Some other fugitives have reportedly been returned to the United States and tried. Taken together, we think the current facts support Cuba’s removal from the list.

Countries determined by the Secretary of State to have repeatedly provided support for acts of international terrorism are designated pursuant to three laws: section 6(j) of the Export Administration Act, section 40 of the Arms Export Control Act, and section 620A of the Foreign Assistance Act. Taken together, the four main categories of sanctions resulting from designation under these authorities include restrictions on U.S. foreign assistance; a ban on defense exports and sales; certain controls over exports of dual use items; and miscellaneous financial and other restrictions. Consequently, the end of the State Sponsor designation means the United States may provide foreign assistance to Cuba. It may also eventually allow greater latitude to the Department of Commerce in permitting the export of certain goods to Cuba. Theoretically, it could also allow the United States to end the arms embargo of Cuba, but nobody expects that move any time soon. In fact, even with removal, most aspects of the embargo will remain in place.

The next step to removal is actually somewhat ambiguous. One potential path involves the President reporting to Congress that (a) there has been a fundamental change in the leadership and policies of Cuba; (b) Cuba is not supporting acts of international terrorism; and (c) Cuba has provided assurances that it will not support acts of international terrorism in the future. All three statutes governing the terrorist sponsor list provide this option. No action of Congress is required, and no waiting period is imposed. The trick would be making the case on “fundamental change,” but according to a Congressional Research Service report, past removals from the list under this criterion have been based on a “change in outlook of the same leader and has not required a change in personnel.” Certain of the statutes also provide a separate mechanism where the President would consult with leaders of Congress and, after a 45 day waiting period, end the designation. The New York Times is reporting that this waiting period mechanism is being used. But if we’re reading these statutes right, our money here at Globaltradelawblog would have been on the option that does not require the President to consult with Congress. In any event, we may reasonably expect some members of Congress to attempt to block the removal. But those members are swimming against the tide of history. It’s time to move on from the embargo.

One effect of the end of the terrorist sponsor designation is that banks should breathe a bit easier. Several banks have reported that, although the January 15, 2015 revisions to the Cuba regulations permit certain new financial services, the designation as a state sponsor of terrorism has impeded the banks’ own implementation of the liberalized rules. Now we get to see if permitted financial services will move forward more rapidly.

We don’t want to overstate the importance of the removal to Cuba. One Cuban official told me at a seminar two weeks ago, “don’t think you’re doing us any favors” with the removal from the State Sponsor designation. In some ways, it may be more important to the United States’ own credibility and self-esteem than it is to the Cuban government. It’s unjust and a bit embarrassing to continue to accuse Cuba of sponsoring terrorism on the current facts.

That said, the removal of the designation will help clear a diplomatic hurdle: U.S. and Cuban negotiators working out the reopening of their mutual embassies in Havana and Washington have identified the state sponsor designation as a sticking point in those negotiations. Our next over-under prediction: mutual embassies will be announced before May 15. Take the over if you dare; be prepared to pay up. These are still tiny steps in the changing relationship between Cuba and its nearest brother to the North. But there is a lot of lost time to make up for.