On October 21, 2019, the U.S. Department of Commerce's Bureau of Industry and Security (BIS) published a final rule further restricting the export and reexport of items to Cuba, including (1) a reduction in the de minimis level applicable to Cuba, (2) limiting the export of aircrafts to government-owned airlines, and (3) tightening the rules for certain donations to Cuba. The rule was issued in response to Cuba's continuing support for the Maduro regime in Venezuela and human rights violations in Cuba. It also represents another step in implementing President Trump's policy of restricting the Cuban government's access to funding, as outlined in the 2017 National Security Presidential Memorandum.
The rule restricts the leasing of aircraft and vessels to Cuban persons. In particular, BIS is removing the general policy of approval for leasing aircraft to Cuban state-owned airlines, subjecting these transactions to the general policy of denial applicable to most exports to Cuba. Within the next week, BIS will also revoke previously issued licenses that authorized aircraft to be leased to Cuban state-owned airlines.
The Aircraft, Vessels and Spacecraft (AVS) license exception in the Export Administration Regulations (EAR) is amended such that aircraft leased to or chartered by a Cuban national or by a national of a country designated a State Sponsor of Terrorism are not eligible for the AVS license exception. Cargo vessels leased to or chartered by a Cuban national are also not eligible for the AVS license exception. BIS stated in a press release that the changes related to aircraft are because "the Cuban regime is resorting to transporting tourists on leased aircrafts...and [BIS] will deny future applications for aircraft leases."
De Minimis Level
Since Cuba was removed from the List of State Sponsors of Terrorism in 2015, foreign-manufactured items exported to Cuba would only be subject to the EAR if they contained 25% or greater controlled U.S.-origin content. The new rule lowers this de minimis threshold to 10%, matching the level applicable to other countries subject to comprehensive U.S. sanctions. License applications for such exports are subject to a general policy of denial, unless another licensing policy is applicable to that item. This change in de minimis level should be reviewed by non-U.S. companies that sell into Cuba and rely on the de minimis rule to avoid U.S. export jurisdiction.
Support for the Cuban People
The License Exception Support for the Cuban People (SCP) permits license-free exports to Cuba of items intended for certain humanitarian and development purposes. This amendment now requires a license for donations to organizations administered or controlled by the Cuban government or communist party. Additionally, exports of promotional items to be given away for free will require an export license, unlike in the past, as BIS states those items have primarily benefitted the Cuban government.
U.S. and foreign businesses that deal with Cuba should remain vigilant and aware of the latest developments in the Cuba sanctions and export control programs. If you have any questions regarding the Cuba sanctions program or how it may affect your business, please reach out to the contacts listed below.