US Imposes New Sanctions on Cuba – Affect on Aircraft Parts Exports is Unclear

The President announced today that the United States would impose new sanctions on Cuba.  Rough details are available through the White House Fact Sheet, but we are still awaiting complete details.  It is unclear what effect this might have on current licenses to sell aircraft parts to entities in Cuba, which are permitted under BIS policy.  ASA will continue to monitor this situation to ascertain whether the new sanctions adversely affect aircraft parts export licenses.

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US Rolling Back Cuba Sanctions – Permits Expanded Payment Options

The Treasury Department will publish a final rule tomorrow that rolls back more of the Cuba sanctions by amending the Cuban Assets Control Regulations, 31 C.F.R. part 515 (the “CACR”), to make it easier to receive payments for aircraft parts (and other commodities) that are sold to Cuban business partners.  The new rule comes out of the Treasury Department’s Office of Foreign Asset Control (OFAC).

The changes appear to permit US persons to receive funds from Cuban customers for non-agricultural export transactions.  This does not permit all transactions, but it does lay the foundation for receiving payment for transactions that that are permitted.  In September, we reported that ASA members wishing to sell aircraft parts to Cuban business partners could now apply for a license from the Bureau of Industry and Security (BIS) in order to legally sell and export such commercial aircraft parts.

Don’t forget that there is an OFAC general license that authorizes the export from the United States to Cuba in those cases where the export is already licensed or otherwise authorized by the Commerce Department’s Bureau of Industry and Security (BIS). 15 C.F.R. § 515.533(a)(1). This means that if you can obtain a BIS license, and you do not run afoul of other US restrictions, then you do not need to obtain a separate OFAC license.

As of today, the forms of allowable payment are limited by the OFAC general license provisions (15 C.F.R. § 515.533(a)(2)); but when the new final rule is published, it is expected that payment and financing terms for authorized (e.g. licensed) exports will no longer be restricted.

In summary, aircraft parts being exported to Cuba will still be subject to BIS licensing, but the OFAC restrictions on payment methods will be removed by this new rule.

A draft of the final rule is available online now, and it is expected to be available at http://federalregister.gov/a/2016-01559 tomorrow or shortly after tomorrow, once it is published.

 

US Easing Iran and Cuba Sanctions

The United States continues to ease sanctions against Iran and Cuba by small increments.

Sellers of commercial aircraft parts (subject to US jurisdiction) are able to apply for U.S. licenses for exporting commercial aircraft parts to Iran and Cuba. For all commercial aircraft parts transactions to these two jurisdictions,  export licenses are still required from the U.S. government (currently you may not freely ship aircraft parts on a ‘No License required’ basis to either of these jurisdictions).

Licenses for exporting aircraft parts to Iran are issued by the Treasury Department’s Office of Foreign Asset Control (OFAC).  Licenses for exporting aircraft parts to Cuba are issued by the Commerce Department’s Bureau of Industry Security (BIS).

Recently, the United States has started to remove Cuban nationals from the list of Specially Designated nations, which will make it easier to obtain licenses to do business with the Cuban aviation community.

Cuba: Open for Aircraft Parts Business (sort of) ….

Many of ASA’s are wondering whether they can begin selling aircraft parts to Cuban operators. The short answer is yes (if you obtain a license).

Americans are still generally prohibited from doing business or investing in Cuba unless licensed by the Treasury Department’s Office of Foreign Asset Control (OFAC).  For articles subject to Commerce Department jurisdiction, a license from the Bureau of Industry and Security is also typically necessary.  The problem?  There is a general policy of denial that applies to such licenses.

But as of September 21, 2015, there is special licensing program that permit the sale of aircraft parts.  This program is similar in scope to the program that permitted licenses to be issued for aircraft parts transactions to Iran.  It permits licenses to be issued on a case-by-case basis for the export to Cuba of:

(6) … items to ensure safety in civil aviation, including the safe operation of commercial passenger aircraft ….  15 C.F.R. § 746.2(b)(6).

The new rules have also removed Cuba from Country Group E:1 (terrorist supporting countries) in Supplement No. 1 to Part 740 of the EAR.  80 Federal Register 43314 (July 22, 2015). This is an important removal because it makes Cuba potentially subject to certain useful license exceptions.  Look carefully at the license exceptions before using them, because some special Cuba-related-provisions have been added to some of the useful license exceptions.  80 Federal Register 56898 (Sept. 21, 2015).
An OFAC general license (a form of published exception) is a special exception to the rules.  There is an OFAC general license that authorizes the export from the United States to Cuba in those cases where the export is already licensed or otherwise authorized by the Commerce Department’s Bureau of Industry and Security (BIS). 15 C.F.R. § 515.533(a)(1).  This general license restricts payment methods to either cash-in-advance or financing by a banking institution located in a third country (not the US or Cuba).  15 C.F.R. § 515.533(a)(2).
Interested in visiting potential customers in Cuba?  U.S. trade delegations are now authorized to travel to Cuba in limited situations.  For example, travel to Cuba is authorized when it is incidental to exporting authorized goods.  This includes “market research, commercial marketing, sales negotiation,accompanied delivery, or servicing in Cuba of items consistent with the export or re export licensing policy of the Commerce Department.”  31 CFR § 515.533(d).

Is Cuba Opening Up for Business? Be Wary of US Laws!

Many of you have seen the headlines that say that the United States is trying to normalize relations with Cuba. Many of ASA’s members are no doubt already working the phones into Cuba to see where there is business to be had.  Some caution is still warranted, though.  While the Treasury Department has issued new regulations affecting trade with Cuba, those changes have not yet opened up trade in aircraft parts with Cuba.

The major categories of activities affected by the recent changes include:

  • Travel to Cuba for authorized purposes – certain travel-related transactions will now be authorized, including travel for certain educational, journalistic, and religious activities, professional
    meetings, and humanitarian projects.  Cuban tourism continues to be forbidden.
  • Travel services – U.S. persons (including travel agents and airlines) will be permitted to provide authorized travel and carrier services, within parameters set forth by the new regulations.
  • Remittances – authorized transactions have been increase from $500 per quarter to $2,000 per quarter.  This privilege is still limited – additional details can be found at 31 C.F.R. § 515.570(b).
  • Credit cards – U.S. credit cards and debt cards will be permitted to be used on authorized travel to Cuba.
  • Cuban cigars – authorized travelers will be permitted to import no more than $400 worth of goods from Cuba (including up to $100 in alcohol or tobacco products).
  • Banking – certain banking changes designed to better facilitate authorized transactions.

Until the Bureau of Industry and Security (BIS) relaxes its own sanctions, most transactions with Cuba involving aircraft parts remain forbidden.  But those who are interested in building relationships with Cuban carriers while we await further relaxation of sanctions may be interested in the “professional meetings” clause of the new regulations.  Under the old regulations, there was a narrow permission for attendance at professional meetings, but the meeting had to be sponsored by an “international professional organization, institution, or association that regularly sponsors meetings or conferences in other countries.”  This language has been relaxed somewhat to apply to a broader range of professional meetings including those where:

(i) The purpose of the meeting or conference is not the promotion of tourism in Cuba;
(ii) The purpose of the meeting directly relates to the traveler’s profession, professional background, or area of expertise, including area of graduate-level full-time study;
(iii) The traveler does not engage in recreational travel, tourist travel, or travel in pursuit of a hobby;
(iv) The traveler’s schedule of activities does not include free time or recreation in excess of that consistent with a full-time schedule of attendance at professional meetings or conferences.

For fuller details, please be sure to examine 31 C.F.R. 515.564.

This may offer some expanded opportunity for Americans to attend professional aviation meetings in Cuba in order to begin developing relationships with Cuban air carriers.

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