The U.S. Department of Commerce, Bureau of Industry and Security (BIS) has published a final rule amending the Export Administration Regulations (EAR) to further restrict exports and re-exports of items to Cuba. The new regulations were issued to support President Trump’s decision to increase pressure on the Cuban government for its support of the Maduro regime in Venezuela and human rights abuses at home, as outlined in the National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba, dated June 16, 2016. Companies that export or re-export items (commodities, software, or technology) to Cuba will need to reevaluate whether those items are now subject to the EAR and whether they still qualify for a license exception.

Key Takeaways:

  1. BIS has lowered from 25 Percent to 10 Percent (i.e., made more stringent) the de minimis threshold for U.S. content in foreign-made items. Foreign-made items that incorporate more than 10 percent of controlled U.S. content will now be subject to the EAR and need an export license from BIS. This adjustment is consistent with how BIS applies the de minimis rule for controlled U.S. content in foreign-made items exported to similarly sanctioned countries, such as Iran, North Korea, Sudan and Syria. Nonetheless, this change creates a significant compliance hurdle for foreign manufactures looking to export articles using U.S. components to Cuba.
  2. BIS Continues to Target Cuban Tourism Revenue by Restricting Licenses for Aircrafts. BIS has identified the Cuban tourism industry as a significant source of support for the Cuban government. Earlier this year, both BIS and the Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury published rules limiting non-family travel to Cuba in an attempt to restrict what they refer to as “veiled tourism.”i The new regulations continue to target Cuban tourism by limiting the availability of licenses for aircraft that may be used to transport tourists to Cuba. Specifically, current licenses to export aircraft leased to Cuban state-owned airlines will be revoked and future licenses will be subject to a general policy of denial. Additionally, license exceptions that authorize the temporary sojourn of certain aircraft are no longer available for aircraft leased or chartered by Cuban nationals.
  3. License exception designed for support to Cuban population no longer apples to certain items that incidentally benefit the Cuban government. License Exception Support for the Cuban People (SCP)ii was created to authorize certain exports to Cuba intended to benefit the Cuban people, which, in some instances, include articles used by the Cuban government. The new rule excludes certain donated goods, telecommunications goods, and promotional items from the scope of the exception. First, the new rule requires that exporters of donated items to organizations administered or controlled by the Cuban government or Communist Party apply for a license. This change will give the U.S. government the opportunity to ensure that any donations are for the benefit of the Cuban people. Second, the new rule clarifies the scope of the license exception for exports of certain items for telecommunications infrastructure. For infrastructure items that would be used to connect specific end users, the exception applies only to those items that would be used in the Cuban private sector, and not those used to connect Cuban government ministries or state-owned businesses. Finally, items given for free for promotional purposes are no longer eligible for the SCP exception.