Making regular updates to policies and procedures related to international trade compliance has always been an important aspect of ensuring their effectiveness, and particularly in light of the myriad changes to various U.S. sanctions programs in recent months. Further updates to compliance policies and procedures may be in order following the March 16, 2016 changes to two key U.S. sanctions programs – Cuba and North Korea.
With respect to Cuba, the revised regulations, which became effective March 16, 2016, further ease Cuban sanctions in advance of President Obama’s visit to Cuba next week. After decades of a complete embargo, the Obama administration has been gradually easing sanctions against Cuba for the past year and a half. These latest changes, revising both the Export Administration Regulations and the Cuban Assets Control Regulations, further chip away at the travel limitations, transport limitations, finance restrictions, and other aspects of the Cuban embargo. Some of the key changes introduced with these rule changes are as follows:
- Permit U-turn payments to be processed through the U.S. financial system;
- Allow bank accounts to be opened and maintained at U.S. banks for Cuban nationals located in Cuba for receiving payments in the United States for transactions authorized under or exempt from the sanctions, or to remit such payments to Cuba;
- Expand the permitted categories of parties that may establish a business or physical presence in Cuba in connection with activities now authorized under general or specific licenses;
- Permit vessels laden with cargo destined for third countries to transit Cuba after leaving the United States under the AVS license exception;
- Introduce a case-by-case review of applications for licenses for items that will enable or facilitate the export from Cuba of items produced by the private sector;
- Expand license exception SCP to authorize the export or re-export to Cuba of certain items subject to the EAR for use by persons authorized to establish or maintain a business or physical presence in Cuba; and
- Allow salaries and other compensation to be paid to Cuban nationals present in the United States, provided it is consistent with the individual’s non-immigrant status or travel authorization and that the individual is not subject to any special tax assessment by the government of Cuba in connection with receipt of the funds.
In addition, although tourism is still strictly prohibited, people-to-people educational travel may now be done by individuals on their own; individuals are no longer limited to traveling with an organization. However, records must still be maintained to document that all of the requirements of the applicable general license for this type of travel have been satisfied.
The latest in the sanctions against North Korea come in the wake of the most recent nuclear- and missile-related activities conducted by that country and return us much closer to the status of long-standing sanctions that were in place for decades under the Trading with the Enemy Act. The current Executive Order reinstates blocking of property of the Government of North Korea that comes within the United States or within the possession or control of U.S. persons; also now subject to blocking is property of the Workers’ Party of Korea. Additional parties associated with the transportation, mining, energy, and financial services industries in North Korea may be designated by the U.S. government as subject to blocking; already designated on the date of the order are several entities and vessels, as well as the addition of designations under prior sanctions against North Korea. Although licenses have been required for some time for the export or re-export to North Korea of all items subject to the EAR except food and medicine, this Executive Order now prohibits the export or re-export of any goods, technology or services to North Korea from the United States or by U.S. persons, wherever located.
Companies reviewing their policies and procedures to account for these new changes may well find that the changes only provide a slight increase in the opening of opportunities for Cuba and simply inch back the sanctions around the edges. Companies and individuals must continue to pay close attention to ensure that any activities involving Cuba are authorized and all terms of the authorization are met. Although the changes with respect to North Korea equate to a significant imposition of additional sanctions, the real impact on business is likely to be slight given the relative lack of engagement of many businesses, particularly multinational companies, with North Korea at this time.