On Thursday November 9th, the Office of Foreign Assets Control (“OFAC”) published new regulations in the Federal Register executing June’s National Security Presidential Memorandum (“NSPM”) regarding U.S. sanctions against Cuba. (See our previous post on the NSPM here). The State Department and Bureau of Industry and Security (“BIS”) also published complementary rules giving effect to the changes in the Cuba sanctions. The rules became effective with their publication in the Federal Register.
The primary purpose of the rule changes is to prevent commerce between the U.S. and Cuba from benefiting the Cuban military. The State Department’s regulation includes a new Cuba Restricted List, which lists parties deemed to be under control of or acting on behalf of the Cuban military, intelligence, or security services personnel. Parties on the Cuba Restricted List include government ministries (MININT and MINFAR), holding companies (GAESA, Gaviota, and Cimex, among others, as well as sub-entities thereof), more than 30 entities directly serving the defense and security sectors, and hotels and other entities involved in tourism. Persons subject to U.S. jurisdiction are generally prohibited from engaging in certain financial transactions with entities on the Cuba Restricted List.
To soften the blow, U.S. businesses may continue direct financial transactions with listed entities provided that they are made pursuant to commercial engagements prior to the date of listing (i.e., November 9 for the currently listed entities, and Federal Register publication date for any subsequently listed entities). This carve out includes transactions provided for in contingent or other contractual arrangements, provided that they are consistent with other OFAC authorizations. Other exceptions, including the remittance exception, remain largely in effect if the remittances do not involve “prohibited officials of the Government of Cuba,” as defined in the updated OFAC regulations. This revised definition reinstates the definition of “prohibited officials of the Government of Cuba” in place prior to an October 17, 2016 amendment.
The new regulations will also affect travel to Cuba, partially rolling back some of the Obama-era changes. In general, travel will only be permitted for sponsored groups, and engaging in financial transactions with hotels and other listed entities will not be permitted.