Overview
Effective tomorrow the State Department is updating its Cuba Restricted List (press release here) to add 26 new subentities (along with amending the entries for 5 previously-listed subentities). National Security Advisor John Bolton had previewed this action in a speech in Miami in which he labeled Cuba, Venezuela and Nicaragua the “Troika of Tyranny” and said the US government would be designating "over two dozen additional entities owned or controlled by the Cuban military and intelligence services to the restricted list of entities with which financial transactions by US persons are prohibited." Bolton had ominously warned that this “Troika” had “finally met its match” and that all three countries “will feel the full weight of America’s robust sanctions” under this new policy. Bolton suggested that the Administration would implement a tough new sanctions policy against Cuba, quipping, in contrast to the Obama Administration, that “Our concern is with sanctions, not selfies.”
So what has been the follow up to this strident policy pronouncement? So far, it has been to add several hotels and other seemingly minor entities to a sanctions list that itself has little practical impact in many cases. What this list does under the US sanctions regulations, as we’ve previously advised, is limit the ability of US persons to use certain carve-outs from the Cuba embargo but only when engaging in “direct financial transactions” with one of the listed entities, including “by acting as the originator on a transfer of funds whose ultimate beneficiary is” on the list “or as the ultimate beneficiary on a transfer of funds whose originator is” on the list. Because the Cuban embargo already prohibits US persons from engaging in most types of activity with Cuba, in many instances being on this list does not give rise to additional sanctions restrictions. There is also an impact under US export controls, and these listed entities will generally not be eligible to receive goods, software or technology subject to US jurisdiction.
Organizations operating in Cuba may want to take note that some of the newly added entities are in the real estate business. For example, Compañía Inmobiliaria Aurea S.A. reportedly rents out office space in Havana. So you would not want them as your landlord, as those rent payments may constitute “direct financial transactions.” Telecoms companies should take note that an entity called Servicios de Telecomunicaciones a los Órganos de la Defensa (“SERTOD”) was added to the list. SERTOD reportedly provides telecommunications network design, maintenance and related services. So it would be prudent to avoid SERTOD as a subcontractor, service provider or other business partner in Cuba.
Like President Trump’s June 2017 announcement that he was “cancelling the last administration’s completely one-sided deal with Cuba,” the Troika of Tyranny sanctions so far seem likely to have little practical impact for most US companies dealing with Cuba. That said, one never knows what might happen next, so companies dealing with Cuba would be well advised to continue to watch this space.
