On Jan. 27, 2016, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) once again amended the existing Cuban Assets Control Regulations (Cuba Sanctions Regulations) to open the door for further U.S. engagement with Cuba. The amendments remove certain restrictions on the financing of exports to Cuba as well as restrictions on transactions related to public performances and workshops in Cuba. Additionally, the amendments further facilitate travel between the United States and Cuba and authorize additional activities related to informational materials, including media productions, and professional meetings. These newly permissible activities apply to U.S. persons and persons subject to U.S. jurisdiction. Meanwhile the U.S. Department of Commerce loosened its licensing policy for the export and reexport of certain items to Cuba related to telecommunications, construction, and infrastructure.
On Nov. 24, 2015, the U.S. Federal Communications Commission (FCC) released a public notice inviting comments on its proposal to remove Cuba from its Exclusion List. If implemented, Cuba’s removal from the Exclusion List would allow U.S. telecommunication carriers to provide facilities-based telecommunications services from the United States to Cuba without first obtaining a separate country-specific Section 214 authorization. Carriers may obtain from the FCC Section 214 authority to provide global facilities-based service between the U.S and all countries not on the Exclusion List. At this time, Cuba remains the sole country on the FCC’s Exclusion List.
Possible Removal of Cuba from the Exclusion List
Importantly, the FCC’s request for comments does not yet constitute a definitive removal of Cuba from the Exclusion List. The FCC will accept public comments on its proposal through Dec. 24, 2015, after which the Commission will review the public input received and determine whether to proceed with Cuba’s removal from the Exclusion List. Nevertheless, the FCC’s proposal appears in line with recent Administration steps to reestablish diplomatic relations with Cuba and ease certain provisions of the U.S. embargo against Cuba. As of the date of this Alert, at least two U.S. parties have submitted comments to the FCC, both in support of Cuba’s removal from the Exclusions List.
The removal of Cuba from the Exclusion List would permit U.S. carriers with existing global Section 214 authorizations to begin establishing services to Cuba, and would allow carriers applying for global Section 214 authorization in the future to acquire facilities to serve all countries, including Cuba. However, it would not eliminate U.S. government-imposed ceilings on international settlement rates for terminating U.S.-originated telephone calls to Cuba. The FCC has established “benchmarks” for payment levels to foreign telecom providers to terminate U.S. traffic. The FCC benchmark for Cuba is nominally $0.19 per minute. However, at this time no U.S. carrier pays that amount. The standard settlement rate to Cuba remains $0.60, and the FCC allows U.S. carriers to pay Cuba’s state-owned telecommunications provider, ETECSA, $0.60 per minute pursuant to a waiver granted to a U.S. carrier several years ago. That waiver remains available to other U.S. carriers. In the event the FCC finalizes Cuba’s removal from the Exclusion List, a number of U.S. companies are expected to join several U.S. telecommunications companies that have already entered into service agreements with ETECSA.
On Dec. 16, 2015, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated a Mexican national, Naim Libien Tella, and four Mexican entities linked to Libien Tella, under the Kingpin Act. The new designations, which include a Mexican airline and newspaper, stem from Libien Tella’s narco-trafficking activities in association with the Los Cuinis cartel.
The sanctioned individual and entities now listed on OFAC’s Specially Designated Nationals (SDN) List are:
- LIBIEN TELLA, NAIM, of Toluca, Mexico;
- AEROLINEAS AMANECER, S.A. DE C.V. (aka AEROAMANECER), of Mexico City, Mexico;
- DIARIO AMANECER, of Mexico City, Mexico;
- UNOMASUNO (aka UNO MAS UNO), of Mexico City, Mexico; and
- VALGO GRUPO DE INVERSION S.A. DE C.V., of Guadalajara, Mexico.
Under the Kingpin Act and other sanctions programs, U.S. persons are prohibited from dealings with individuals and entities named on OFAC’s SDN List. More challenging from a compliance standpoint, however, U.S. persons are likewise prohibited from dealings with entities that are not specifically enumerated on the SDN List, but are owned 50% or more in the aggregate by any designated entities or individuals.
Even non-U.S. individuals and entities that have had business dealings with the recently-designated Kingpin Act entities and individual should carefully review their relationships and assess the potential risk for future interactions or transactions. Although the Kingpin Act designation does not bar all transactions, and generally addresses only assets or transactions in the United States or in the possession or control of U.S. persons, a violation of the Kingpin Act can result in both criminal and civil enforcement in the United States. Additionally, entities or individuals that are deemed to be providing material support to any designated individuals or entities run the risk of becoming the target of U.S. sanctions themselves.
Urgent Need to Consider Alternative Compliance Mechanisms
On Oct. 6, 2015, the European Court of Justice (CJEU) released its final judgment on the closely-watched U.S.-EU Safe Harbor (Safe Harbor) case, ruling that national Data Protection Authorities (DPAs) in the European Union (EU) retain the right to investigate complaints relating to the Safe Harbor and declaring that the Safe Harbor itself is invalid. This important decision will have a significant impact on the large number of companies currently relying on the Safe Harbor to comply with EU law regarding their EU-to-United States (U.S.) data transfers.
The EU has very high standards for privacy and data protection, and the transfer of data from the EU to another jurisdiction is permitted only if the receiving jurisdiction has “adequate” data privacy laws in the eyes of EU authorities. Among the countries that are deemed by the EU not to have adequate data protection laws is the U.S. Given the need of many multi-national businesses to transfer data from the EU to the U.S., in 2000, the European Commission endorsed the Safe Harbor regime, a relatively streamlined and cost-effective means for companies to voluntarily commit to a certain level of data protection in order to legally transfer personal data from the EU to the U.S.
Thursday, Nov. 5, 2015, witnessed the release of the long-awaited text of the Trans-Pacific Partnership (TPP) trade deal. This 12-nation Pacific Rim deal aims to spur commerce in countries accounting for 40 percent of the world’s economy.
While TPP deserves serious analysis in and of itself, and its path to ratification in the U.S. is expected to be a politically rocky one, its treatment of cross-border data traffic provides an interesting juxtaposition to the recent European Court of Justice decision invalidating the Safe Harbor Program between the U.S. and the European Union. In two recent hearings on the Safe Harbor decision in the House – in the Energy & Commerce and Judiciary Committees, respectively – experts noted that the cross-border data flow protections expected to be embodied in TPP could set an example for how the U.S. and the E.U. should address the cross-Atlantic data protection issues in in upcoming T-TIP trade negotiations.
As reported in an earlier Alert, the UK’s Modern Slavery Act has imposed far reaching reporting requirements on companies to produce an annual statement explaining the steps they have taken to eliminate modern slavery in their businesses, and also within their supply chains. The concept of modern slavery encompasses a range of exploitative behaviour including slavery, servitude, forced or compulsory labour, sexual exploitation, securing services from children and vulnerable people, and human trafficking. These new reporting obligations became effective as of 29 October 2015. This Alert sets out an overview of the statutory guidance published by the UK Government explaining its expectations for compliance.
By way of reminder, the Act’s reporting obligations apply to all companies that carry on some business in the UK, and that have a worldwide turnover in excess of £36m. There is no minimum threshold for the volume of turnover or activity that needs to be linked to the UK, and the turnover of any subsidiaries should be included in the calculation. Whether or not a company “carries on business in the UK” will be assessed using a common sense approach. This approach includes, but is not limited to, considering whether it has any commercial activities in the UK. That common sense approach may, however, allow non-UK companies that do not have a demonstrable business presence in the UK to fall outside of the Act’s jurisdiction. Similarly, simply having a UK subsidiary will not automatically mean that a parent company carries on business in the UK – much will depend on the degree of independence within the group organisation.
The parties to the Trans-Pacific Partnership (TPP), which include the United States and 11 other Pacific nations, concluded negotiations on the text of a multilateral trade and investment agreement on Oct. 5, 2015, and released the text of the agreement on Nov. 5, 2015. As anticipated, the agreement contains investor-state dispute settlement (ISDS) provisions that will provide substantial protection and dispute-resolution options for investors from the TPP countries once the agreement is ratified by the TPP states.
Under the ISDS provisions, an investor from one TPP country will be able to initiate arbitration proceedings directly against the host government of another TPP country for violations of certain substantive protections set forth in the TPP or for breaches of investment authorizations or agreements. According to the provisions, an investor will be able to initiate arbitration at the International Centre for Settlement of Investment Disputes (ICSID), based in Washington, D.C. or through ad hoc arbitration.
Effective Oct. 30, 2015, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a Belarus-related General License authorizing U.S. persons to engage in all previously prohibited transactions with certain Belarusian entities despite OFAC’s sanctions against certain targeted individuals and entities in Belarus. The General License, however, contains a reporting obligation that requires U.S. persons engaging in transactions with those particular entities to notify OFAC of the now licensed transactions. The General License is described below.
On Oct. 18, 2015, “Adoption Day” of the Iran Joint Comprehensive Plan of Action (JCPOA), the U.S. and EU took the required steps to prepare for implementation of the JCPOA. In the U.S., the president issued a memorandum directing the Departments of State, Treasury, Commerce, and Energy to make the necessary arrangements to implement the U.S. commitments in the JCPOA, including preparations for the termination of certain Iran-related Executive Orders. Further, the U.S. Secretary of State issued sanctions waivers contingent upon Iran’s compliance with its initial nuclear-related commitments under the JCPOA. The limited U.S. sanctions relief provided in the Administration’s contingent waivers will enter into effect on Implementation Day, the date on which the International Atomic Energy Agency (IAEA) verifies that Iran has met its nuclear-related commitments. Implementation Day will be no sooner than two months from Oct. 18, 2015, but could be as much as a year or more away, depending on whether and when Iran can meet its obligations under the JCPOA.
Amendments Implement Additional Changes Laid Out by President Obama on Dec. 17, 2014
On Sept. 21, 2015, the U.S. Government further amended the existing Cuba-related regulations to allow for certain additional types of travel and the establishment of physical business premises in Cuba. The amendments also remove certain restrictions on remittances, financial transactions, and exports to Cuba.
The regulations are effective immediately upon publication on Sept. 21, 2015, and serve to further implement President Obama’s Dec. 17, 2014 announcement of a policy change with respect to Cuba, which included the official opening of the U.S. Embassy in Havana on Aug. 14, 2015.
While the amended regulations will expand business and other transactions in which U.S. persons can engage with Cuba, the United States nevertheless maintains a nearly comprehensive embargo on trade with Cuba. U.S. persons are reminded that they may only engage in transactions that are licensed or otherwise specifically authorized.
Summary of the Amendments
The U.S. Department of the Treasury Office of Foreign Assets Control (OFAC) has implemented new measures in the following areas, among others:
1. Continued Easing of Travel Restrictions
The amended regulations ease travel to Cuba for authorized purposes, specifically by authorizing U.S. persons to provide carrier services by vessel (e.g., cruise ships) without the need for specific licenses, and allowing authorized travelers to open, maintain, and close bank accounts in Cuba.
Despite these changes, tourism-related travel is still not permissible so travel to Cuba by U.S. persons continues to be restricted to authorized travel categories only. U.S. persons should take note that, while certain authorized travel categories appear broad (e.g., travel related to “support for the Cuban people”), specific requirements apply to each permitted category of travel. Continue Reading.