The Administration criticized the Cuban government in the announcement, saying: “We know the Cuban economy is in dire straits amid recurring shortages of fuel, electricity, increasingly even food. It’s clear the communist experiment of Cuba has failed, the government is no longer able to provide for its citizens’ most basic needs.” 

The new measures implemented by the Department of Treasury’s Office of Foreign Assets Control (OFAC) include four main parts:

1. Authorized Internet-Based Services and Software.

Cuban small businesses will now be able to access additional internet-based services such as video conferencing, social media, maps, e-learning, automated translation, and other online services. 

U.S.-based entities will be allowed to provide cloud-based services to these small businesses. OFAC is also authorizing the export or reexport of Cuban-origin software and mobile applications from the United States to third countries.

2. Re-defining “Self-Employment.”

OFAC is scrapping the term “self-employed individual” and replacing it with a new term: “independent private sector entrepreneur.” The new term will still cover traditional self-employed individuals such as business owners, but it will also cover private cooperatives or small businesses that are wholly owned by such individuals. 

The new term also excludes prohibited Cuban officials and prohibited Cuban Communist Party members to ensure they do not take advantage of this change intended to benefit the private sector.

3. Access to U.S. Bank Accounts.

OFAC is authorizing Cuban entrepreneurs to open and remotely use U.S. bank accounts. Cuban entrepreneurs can use these accounts whether they are physically located in the United States, Cuba, or another country.   

4. U-Turn Transactions.

OFAC is reinstating its authorization of “U-turn” transactions. “U-turn” transactions are funds transfers that originate and terminate outside the U.S. where neither the sender or recipient is subject to U.S. jurisdiction.  

OFAC disallowed “U-turn” transactions in 2019. U.S. banks may now process these funds transfers when Cuba or a Cuban national has an interest, provided that neither party is subject to U.S. jurisdiction.

OFAC has issued a FAQ document to help guide stakeholders navigate these changes. Available here.

For more information on how these changes may impact your business, contact us at info@diaztradelaw.com or 305-456-3830.

Read more about importing and exporting to Cuba:

• Doing Business With Cuba: What You Need to Know

U.S. Embargo

The United States imposed a comprehensive economic embargo on Cuba in the 1960’s which restricts most trade between the two countries. It also includes restrictions on travel and investment.

Although the U.S. faced pressure to end the embargo, the state of affairs remained largely unchanged until 2014.

In December 2014, President Obama made a historic announcement: “Today, the United States is taking historic steps to chart a new course in our relations with Cuba and to further engage and empower the Cuban people.” By January 16, 2015, both the U.S. Treasury Department, Office of Foreign Assets Control (OFAC) amended its Cuban Assets Control Regulations, and the U.S. Department of Commerce’s, Bureau of Industry and Security (BIS) amended the Export Administration Regulations with a “Support for the Cuban People” license exception. The license exception was most significant for travel, telecom, building materials and agricultural equipment, financial services, and personal importations.

OFAC and BIS issued additional new rules on January 16, 2015, September 21, 2015, January 27, 2016, March 15, 2016, October 14, 2016, November 9, 2017, and June 8, 2022.

While these new rules made progress in enabling business in Cuba, many barriers still existed for private investment and entrepreneurship for Cuban nationals.

Challenges for Privately Held Cuban Companies

State-owned businesses have dominated the Cuban economy for decades. This is partially because private businesses in most sectors have historically been banned. Regulations have long prevented Cuban nationals from forming corporations in most cases. Even when private businesses have been permitted, business owners have been required to partner with the government.

In 1981, public sector employment was over 90%, and only decreased to 78% by 2006. Cuban regulations have also prevented international businesses from forming a business venture with citizens. The only way for an international company to expand to Cuba was for the company to partner with the government, posing significant bureaucratic challenges. While these regulations remained status quo for decades, pressure from citizens accelerated by the pandemic contributed to significant changes to these policies in 2021.

Enabling Private Investment Through MIPYMEs

On August 19, 2021, the Cuban government, headed by Miguel Díaz-Canel Bermúdez issued a series of decrees that attempted to open up the Cuban economy to private management, with a focus on micro, small, and medium-sized enterprises. The decrees modified the regulations on self-employment and enabled the possibility of setting up 100% private companies. For most sectors, this was the first time wholly private entities have ever been permitted.

Under the new regulations, private micro, small, and medium-sized enterprises (classified as MIPYMEs) are now able to incorporate as limited liability companies. MIPYMEs are defined as companies with under 100 workers.

MIPYMEs must be approved by the Ministry of the Economy and may not engage in activities that the government determines are “strategic” such as education, mining, defense, and health. Professional services are largely excluded from the new rules. Service based businesses such as engineers or legal professionals are not authorized to set up an independent enterprise.

Lastly, the initiative is intended to enable private entity ownership by Cuban nationals, not foreigners. The initiative is limited to Cubans who are natural persons and residents. Cubans may also only be partners in one company. While the new regulations do not directly open the economy to foreign investment, they do encourage indirect investment since most Cubans do not have sufficient access to capital.

What Does This All Mean for Doing Business with Cuba?

These changes have made a significant impact in allowing U.S. businesses to expand their offerings to Cuba.

However, while the OFAC, BIS, and MIPYME rules made doing business in Cuba possible,  there are still significant challenges that come with expanding business operations in the country. The Cuban government has issued expansive lists of activities not authorized to be carried out by MIPYMEs. In addition, the United States embargo against Cuba is still in effect and largely prohibits U.S. businesses from conducting trade with Cuban interests. It will take an act of Congress to fully remove the embargo. Legislation has been introduced to lift the embargo, but has failed to gain traction.

Work With an Expert to Ensure You Meet All Regulatory Requirements

Before engaging in any business with Cuban interests, it is important to consult with a trade attorney to ensure you meet all of the U.S. regulatory requirements. Specifically, it is essential to ensure you are aware of whether your transaction is covered by a general license from the Office of Foreign Assets Control (OFAC) or whether you need a specific license before engaging in the transaction. Exports to Cuba may also need a license from the Bureau of Industry and Security (BIS) before proceeding with the exportation. Conducting illegal business in Cuba may lead to a variety of penalties including corporate fines that add up to tens of millions of dollars. Working with a trade expert will ensure you understand the challenges and opportunities in Cuba while minimizing your legal risk.

Diaz Trade Law has significant experience in a broad range of import & export compliance matters including trade with Cuba. Read more about requirements for doing business with Cuba and general export requirements:

• Bloomberg Law Feature: Building & Maintaining an Export Compliance Plan
• Bloomberg Law Feature: Export Licensing Under EAR
• Bloomberg Law Feature: Significant Updates to BIS Enforcement Policies in 2022
• Top 10 Changes with Cuba as a Result of MORE NEW Revised OFAC and BIS Regulations
• Business with Cuba – What’s Legal and What’s Not?
• Building a Strong Export Compliance Plan
• The Importance of Regular Export Compliance Training for your Business

For more information or for help expanding your footprint in Cuba, contact our Customs and International trade law attorneys at info@diaztradelaw.com or call us at 305-456-3830.

We’d love to hear your feedback!

The U.S. Census Bureau’s mission is to serve as the nation’s leading provider of quality data about its people and economy. The Census Bureau’s Trade Regulations Branch in the Economic Management Division is chiefly responsible for enforcing the Foreign Trade Regulations. The Foreign Trade Regulations (15 CFR. Part 30) require certain exporters to file export information with the U.S. Census Bureau. They detail requirements for filing export information, explain filing procedures, and establish penalties for noncompliance. The regulations require export information to be filed on the Automated Export System (“AES”). The information submitted by exporters on to AES is known as EEI.

EEI filings are required for a wide variety of circumstances, including:

• Exports valued at more than $2,500 to any destination except Canada
• Exports that require an export license under the Export Administration Regulations (“EAR”)
• Exports on the EAR’s Commerce Control List (“CCL”) and destined for China, Russia, or Venezuela
• Exports subject to the EAR and destined for a country in Country Group E:1 or E:2 (currently, Cuba, Iran, North Korea, and Syria)
• Exports subject to the International Traffic in Arms Regulations (“ITAR”)
• Exports containing rough diamonds

Routed Export Transactions

Routed Export Transactions (“RETs”) are a particular kind of export transaction that must be reported in EEI filings. RETs are export transactions in which a Foreign Principal Party in Interest (“FPPI”) authorizes a U.S. agent to facilitate export of items from the United States on its behalf and prepare to file the EEI. In other words, if the foreign party who purchases the goods for export and has the primary foreign financial interest in the export transaction authorizes a U.S. agent to facilitate the export and file EEI, then the transaction would be a RET.

RETs differ from standard export arrangements in which the U.S. Principal Party in Interest (“USPPI”) (i.e., the U.S. person or entity that receives the primary benefit from the export transaction) arranges for export and EEI filings.

In a RET arrangement, the USPPI has unique responsibilities. The FPPI may authorize or agree to allow the USPPI to prepare and file the EEI. If the FPPI agrees to allow the USPPI to file the EEI, the FPPI must provide a written authorization to the USPPI assuming the responsibility for filing. The USPPI may then authorize an agent to file the EEI on its behalf. Alternatively, the FPPI can authorize an agent to prepare and file the EEI itself. A typical RET transaction in which the FPPI authorizes the USPPI to prepare and file the EEI via its agent is depicted in the Census graphic below.

According to 15 CFR 30.6, if an export transaction is a RET and an EEI filing is required, the EEI filing must include a Routed Export Transaction filing indicator that identifies that the shipment is a RET. An affirmative RET filing indicator comprises of a simple “Y” (yes) checkmark in the EEI filing. A failure to declare a RET can result in substantial penalties.

What Should You Do?

Exporters have significant responsibilities to ensure compliance, to avoid penalties and/or jail time (i.e., your compliance manager deserves a raise!). Proper adherence to Foreign Trade Regulations and other export control requirements ensures that your business contributes to safeguarding U.S. national security and avoiding costly penalties.

If you are exporting goods subject to filing requirements under the Foreign Trade Regulations, we propose you should:

• Develop an effective export compliance plan.

A key foundation of proactive and effective export compliance requires the development of an export compliance plan. An export compliance plan establishes a set of procedures for your organization to ensure that everyone is on the same page about how standard processes work, who is responsible for what, how to identify violations, what to do when violations occur, etc. An export compliance plan helps build consciousness in your organization that compliance is critical – both to avoid costly penalties and to protect national security. Diaz Trade Law helps exporters create export compliance manuals that help prove you have a process in place to classify your merchandise correctly, vet your customers and ensure you can prove you can take compliance seriously and implement all the important great weight mitigating factors. Diaz Trade Law has significant experience in developing and enhancing export compliance plans for organizations. Additionally, Diaz Trade Law can assist your business in auditing and improving your current plan so that it is in its best shape.

• Engage in regular export compliance training.

A foundation of a strong export compliance program is export compliance training. Training is important because it (1) ensures that all employees understand the export regulations and reinforces internal policies and procedures, (2) demonstrates to federal government agencies that your business is proactive about export compliance, and (3) avoids your business from being subject to costly penalties and even criminal liability. Fortunately, export compliance training can be highly tailored to meet your company’s needs. All your training events include assessments for comprehension, certificates for successful participation, and ample opportunities for Q&A. For your next export compliance training event, trust Diaz Trade Law to provide highly-effective, engaging training.

• Thoroughly vet your proposed export transactions

Unsure whether a proposed export transaction violates the Foreign Trade Regulations or other export control laws? Diaz Trade Law has significant experience vetting your potential transaction against U.S. export control laws and in assisting clients to properly file their EEI. Through research and due diligence, Diaz Trade Law ensures that your transaction won’t get you in trouble later down the road.

• Request authorization when necessary

BIS or DDTC export authorization is required for many export transactions of controlled goods. Diaz Trade Law has significant experience in vetting proposed transactions to determine whether BIS or DDTC authorization is required. Furthermore, Diaz Trade Law assists clients by filing export license applications on their behalf.

• Engage in mitigation and corrective actions.

If your business has violated U.S. export control laws, there is a lot you can do to mitigate penalties and prevent future violations. Diaz Trade Law has significant experience representing businesses in dealing with the U.S. Commerce Department’s Bureau of Industry & Security and the Census Bureau. Specifically, Diaz Trade Law has successfully assisted clients in (1) submitting voluntary self-disclosures to mitigate penalties, (2) negotiated agreements with BIS and Census, and (3) built corrective action systems to help ensure that your business does not make the same violation again.

Check out our Bloomberg article on Submitting a Voluntary Self-Disclosure to the U.S. Census Bureau.

Diaz Trade Law’s Upcoming Webinar: Building & Maintaining an Effective Export Compliance Plan

Diaz Trade Law has available an on-demand webinar on Building & Maintaining an Effective Export Compliance Plan. This one-hour webinar will discuss the elements of an effective export compliance plan, best practices, how to train your employees, and an overview of both how to build and effectively maintain a robust export compliance plan.

In the webinar, you will learn:

• Why you Should Have an Export Compliance Plan in Place
• Elements of an Effective Export Compliance Plan
• How to Build and Effective Export Compliance Plan
• Common Risks Associated with the Export Process that Should be Addressed in Your Plan
• What to do When BIS/OFAC/Census/DDTC Come Knocking on Your Door
• How to Maintain an Effective Export Compliance Plan Through Training
• What to Do When All Goes Wrong
• What NOT to Do – Examples from “Don’t Let This Happen to You”

Contact Us

Diaz Trade Law has significant experience in a broad range of export compliance matters. To learn more about the services we offer, contact us at info@diaztradelaw.com or call us at 305-456-3830.

A lot has happened in the first 6 months of the Biden administration. Notable developments include (at least temporary) resolutions in the large civil aircraft and digital service tax disputes, consensus around a global minimum corporate tax of 15%, lawsuits pertaining to Section 232, increased export controls enforcement, shifting U.S. policy stances on Cuba, and more. However, the most important developments pertain to the ongoing U.S.-China trade war. The U.S. and China are engaged in ongoing negotiations while tensions have risen, a lawsuit challenging Trump’s imposition of 301 tariffs are underway, and a massive U.S. competitiveness bill is being considered in Congress that could bring back broad China tariff exclusions. Join us for a jam-packed hour where we discuss everything that has happened in the world of U.S. trade policy over the past 6 months, and provide insight into how Biden’s trade policies affect industry.

Register today to hear from this experienced trio:

• Todd C. Owen is the former Executive Assistant Commissioner, U.S. Customs and Border Protection (CBP), Office of Field Operations (OFO). As the senior executive for the Office of Field Operations for over 5 years, Mr. Owen was responsible for all operations at the 328 ports of entry in the United States, as well as overseas operations in 32 countries.
• President and Founder of Diaz Trade Law, Jennifer (Jen) Diaz is a Chambers ranked, Board Certified International Attorney specializing in customs and international trade.
• Associate Attorney of Diaz Trade Law, Sharath Patil, assists U.S. manufacturers, distributors, and importers with a range of export compliance and enforcement matters pertaining to the U.S. Department of Commerce; the U.S. Treasury Department; the U.S. State Department; and more.

This one-hour webinar provides an overview of President Biden’s Trade Policy six months into his presidency, an update on CBP enforcement actions, and a summary of Congressional actions pertaining to trade policy.

In This Webinar You Will Learn:

• An Update on the Status of the Section 301 Lawsuit
• An Overview of Key Developments in the U.S.-China Trade War under Biden’s Administration
• Congressional Developments under Biden
• Status of CBP Enforcement Efforts under Biden
• Recent Developments in the Miscellaneous Tariff Bill and Generalized System of Preferences
• The Impact of Economic Stimulus Efforts on Trade Flows
• An Update on USMCA Implementation
• The Latest on U.S.-Cuba Trade
• And Many Other Developments

Who Should Attend:

• Importers/Exporters
• Customs Brokers
• Regulatory Affairs Professionals
• In-house Legal Counsel
• Product Development Managers
• Others Interested in Trade Policy

This webinar is eligible for continuing education credit from the NCBFAA Educational Institute. Space is limited, registration required! Access instructions will be provided after your registration is complete. Don’t just take our word for how awesome Diaz Trade Law webinars are. Click here to see what our past attendees had to say. Be sure to join us on July 28, 2021!

An Introduction to Export Controls

Over 95% of the world’s consumers are outside of the United States. Opportunities abound for U.S. companies that export. However, exporting is a privilege and not a right. U.S. exporters have an important responsibility to adhere to U.S. export control laws, including the Export Administration Regulations (“EAR”), and the International Traffic in Arms Regulations (“ITAR”). Violations of export control laws carry hefty civil and criminal penalties. Exporters can pay hundreds of thousands of dollars in penalties, lose export privileges, and even be imprisoned for violations of U.S. export control laws.

The EAR is a set of regulations which governs whether U.S. persons may export or transfer goods, software, and technology outside of the United States or to non-U.S. citizens. The ITAR, on the other hand, is a set of regulations which governs whether defense or military-related technologies may be exported or transferred to non-U.S. citizens. The purpose of both the EAR and the ITAR is to safeguard U.S. national security interests by ensuring that critical technology does not fall into the wrong hands. The EAR is administered by the Commerce Department’s Bureau of Industry & Security (“BIS”) while the ITAR is administered by the State Department’s Directorate of Defense Trade Controls (“DDTC”).

Filing a Commodity Jurisdiction Request

The purpose of a Commodity Jurisdiction (“CJ”) request is to determine whether a commodity or service is under the licensing authority of the U.S. State Department (under ITAR) or the U.S. Commerce Department (under EAR). If, after reviewing the EAR and ITAR, you are unsure of the appropriate jurisdiction for your proposed export, you should request a CJ determination. Items subject to export controls are often under the jurisdiction of either the ITAR or the EAR, but not both.

Advantages of Filing a Commodity Jurisdiction Request

Filing a CJ request can be a proactive and straightforward mechanism to ascertain the jurisdiction of your proposed export. A CJ determination provides written confirmation from the federal government about which agency has jurisdiction over your proposed export. If an exporter has doubts about which agency has licensing authority but proceeds with filing an export license at the incorrect agency, the exporter can wait a significant period of time only to receive a notice from the agency that it does not have jurisdiction over the proposed export. Alternatively, an incorrect assumption on the part of the exporter about what jurisdiction applies may lead a party to export product in violation of U.S. export control laws. Such a mistake could result in heavy penalties and even criminal liability. In short, a CJ request can save time and money and mitigate risks. The federal government usually responds to a CJ request within 60 days.

Know Before You File: Cautionary Notes

Although a CJ request can save time and money, filing a CJ request comes with the important obligation and responsibility to be knowledgeable about the proposed export and sufficiently transparent in the request. A CJ request includes important technical specifications and details about the proposed export. The filer should have access to and provide all necessary information. Key information to be provided includes a product description, source of the product, understanding the product’s capabilities, understanding the product’s end-uses, product specifications and drawings, real and anticipated customers for the product, any past jurisdiction or export history, and details on comparable products.

BIS has recently increased enforcement against problematic CJ requests. On April 30, 2021, BIS announced that it has fined Flir Systems, Inc. (“Flir”), an Oregon-based producer of thermal imaging and night vision equipment, $307,922 for allegedly making misrepresentations and concealing material facts in its CJ request. According to BIS, when Flir filed its CJ request regarding proposed exports, it was not transparent about its exports to higher-risk markets such as military and drone applications. The key lesson from the Flir case is that filing parties should be careful to be honest, transparent, and sufficiently comprehensive in describing the proposed export.

A CJ determination also comes with limitations. A CJ determination will only identify the proper licensing authority for a proposed export. A CJ request is not the mechanism for applying for a license or otherwise requesting authorization to export. Furthermore, it should be noted that ITAR results will include classification information, but EAR results may not always provide classification information. In other words, if a CJ determination states that the proposed export falls under ITAR jurisdiction, the specific classification on the U.S. Munitions List (“USML”) will be provided. However, if the CJ determination finds that the proposed export falls under EAR jurisdiction, the specific classification on the Commerce Control List (“CCL”) may be provided, but not necessarily so.

What You Can Do

There is a lot you can do to be proactive about your export compliance. These include:

• Develop an effective export compliance program – A key foundation of proactive and effective export compliance requires the development of an export compliance plan. An export compliance plan establishes a set of procedures for your organization to ensure that everyone is on the same page about how standard processes work, who is responsible for what, how to identify violations, what to do when violations occur, etc. An export compliance plan helps build consciousness in your organization that compliance is critical – both to avoid costly penalties and also to protect national security. Diaz Trade Law helps businesses create export compliance manuals that help prove you have a process in place to vet proposed transactions and ensure you can prove you can take compliance seriously and implement all of the important great weight mitigating factors. Diaz Trade Law has significant experience in developing export compliance plans for organizations without plans. Additionally, Diaz Trade Law can assist your business in auditing and improving your current plan so that it is in its best shape.
• Export compliance training – A foundation of a strong export compliance program is export compliance training. Training is important because it (1) ensures that all employees understand the export control laws and reinforces internal policies and procedures, (2) demonstrates to federal government agencies that your business is proactive about export compliance, and (3) avoids your business from being subject to costly penalties and even criminal liability. Fortunately, export compliance training can be highly tailored to meet your company’s needs. All of your training events include assessments for comprehension, certificates for successful participation, and ample opportunities for Q&A. For your next export compliance training event, trust Diaz Trade Law to provide highly-effective, engaging training.
• Transaction vetting – Unsure whether a proposed transaction violates export control laws? Diaz Trade Law has significant experience vetting your potential transaction against export controls and sanctions. Through research and due diligence, Diaz Trade Law ensures that your transaction won’t get you in trouble later down the road. In particular, it is important to vet end-uses (how is your product going to be used?), end-users (who will be using your product?), and destinations (where will your product be used?).
• Voluntary self disclosures – If your business believes it may have violated the EAR, ITAR, or other export control laws, it can be in your business’ strategic interest to submit a voluntary self disclosure (VSD). According to the Bureau of Industry & Security, VSDs are “an excellent indicator of a party’s intent to comply with U.S. export control requirements and may provide BIS important information on other ongoing violations.” Diaz Trade Law has significant experience filing VSDs with and mitigating penalties with a range of federal agencies. Check out our articles published by Bloomberg Law on Submitting a Voluntary Self Disclosure to OFAC and Submitting a Voluntary Self Disclosure to the U.S. Census.
• Requesting authorization / export license applications – BIS or DDTC export authorization is required for many export transactions of controlled goods. Diaz Trade Law has significant experience in vetting proposed transactions to determine whether BIS or DDTC authorization is required. Furthermore, Diaz Trade Law assists clients by filing export license applications on their behalf.
• Mitigation and corrective action – If your business has violated U.S. export control or sanctions laws, there is a lot you should do to get back into compliance, ensuring you work to prevent future violations, training your employees, updating your manuals, and this work can assist in mitigating potential penalties. Diaz Trade Law has significant experience representing businesses in dealing with DDTC, BIS, Census, OFAC, and a range of other export-related agencies. Specifically, Diaz Trade Law has successfully assisted clients in (1) submitting voluntary self disclosures to mitigate penalties, (2) negotiated agreements, (3) built corrective action systems to help ensure that your business does not make the same violation again, and (4) updating and enhancing your current export compliance plan.

Contact Us

If you have questions about Commodity Jurisdiction requests or any other export matter, contact us today at info@diaztradelaw.com or 305-456-3830.

Background on U.S. Sanctions (as of May, 2021)

The U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) administers a number of different sanctions programs. The purpose of U.S. sanctions programs is to advance U.S. foreign policy objectives and protect national security. Currently, OFAC administers 35 sanctions programs. These sanctions programs vary widely – some are comprehensive while others are highly selective.

U.S. sanctions programs generally target one of four categories:

• Foreign countries and regimes
• Terrorist organizations / individuals
• Narcotics traffickers
• Proliferators of weapons of mass destruction

The scope of U.S. sanctions programs can be broad. Depending on the program, sanctions can regulate:

• Non-U.S. persons while in the U.S.
• U.S. citizens and permanent residents wherever located
• U.S. parent companies and the foreign subsidiaries of those entities
• U.S. subsidiaries of foreign parent companies

Given the broad scope of U.S. sanctions programs, a wide range of parties including importers, exporters, and those involved in a variety of both domestic and international commercial transactions can be implicated by U.S. sanctions laws.

The legal authority of U.S. sanctions laws is rooted in numerous statutes passed by Congress including the International Emergency Economic Powers Act; the Trading with the Enemy Act; the Foreign Narcotics Kingpin Designation Act; the Antiterrorism and Effective Death Penalty Act of 1996; the Clean Diamond Act, and more. Furthermore, especially in recent years, U.S. sanctions policies are often promulgated via executive order.

Current U.S. Sanctions Programs

The following is a list of current U.S. sanctions programs administered by OFAC:

• Balkans Sanctions
• ​Belarus Sanctions
• Burma-Related Sanctions
• ​Burundi Sanctions
• Central African Republic Sanctions
• Chinese Military Companies Sanctions
• ​Countering America’s Adversaries Through Sanctions Act of 2017 (CAATSA)
• ​Counter Narcotics Trafficking Sanctions
• ​Counter Terrorism Sanctions
• ​Cuba Sanctions
• ​Cyber-Related Sanctions
• ​Democratic Republic of the Congo-Related Sanctions
• ​Foreign Interference in a United States Election Sanctions
• ​Global Magnitsky Sanctions
• Hong Kong-Related Sanctions
• ​Iran Sanctions
• ​Iraq-Related Sanctions
• ​Lebanon-Related Sanctions
• ​Libya Sanctions
• Magnitsky Sanctions
• Mali-Related Sanctions
• ​Nicaragua-Related Sanctions
• ​Non-Proliferation Sanctions
• ​North Korea Sanctions
• ​Rough Diamond Trade Controls
• Russian Harmful Foreign Activities Sanctions
• ​Somalia Sanctions
• ​Sudan and Darfur Sanctions
• ​South Sudan-Related Sanctions
• ​Syria Sanctions
• Syria-Related Sanctions
• ​Transnational Criminal Organizations
• ​Ukraine-/Russia-Related Sanctions
• ​Venezuela-Related Sanctions
• ​Yemen-Related Sanctions
• ​Zimbabwe Sanctions

General & Specific Licenses

OFAC grants licenses to authorize parties to engage in transactions that would otherwise be prohibited. There are two primary categories of OFAC licenses: general licenses and specific licenses. General licenses are publicly published by OFAC and are broadly applicable. General licenses authorize a particular type of transaction for a class of persons without the need to apply for a specific license. Meanwhile, a specific license is a written document issued by OFAC to a particular person or entity, authorizing a particular transaction in response to a written license application.

What You Can Do

• Develop an effective sanctions compliance program – A key foundation of proactive and effective sanctions compliance requires the development of a sanctions compliance plan. A sanctions compliance plan establishes a set of procedures for your organization to ensure that everyone is on the same page about how standard processes work, who is responsible for what, how to identify violations, what to do when violations occur, etc. A sanctions compliance plan helps build consciousness in your organization that compliance is critical – both to avoid costly penalties and also to protect national security. Diaz Trade Law helps businesses create sanctions compliance manuals that help prove you have a process in place to vet proposed transactions and ensure you can prove you can take compliance seriously and implement all of the important great weight mitigating factors. Diaz Trade Law has significant experience in developing sanctions compliance plans for organizations without plans. Additionally, Diaz Trade Law can assist your business in auditing and improving your current plan so that it is in its best shape.
• Sanctions compliance training – A foundation of a strong sanctions compliance program is sanctions compliance training. Training is important because it (1) ensures that all employees understand the sanctions regulations and reinforces internal policies and procedures, (2) demonstrates to federal government agencies that your business is proactive about sanctions compliance, and (3) avoids your business from being subject to costly penalties and even criminal liability. Fortunately, sanctions compliance training can be highly tailored to meet your company’s needs. All of your training events include assessments for comprehension, certificates for successful participation, and ample opportunities for Q&A. For your next sanctions compliance training event, trust Diaz Trade Law to provide highly-effective, engaging training.
• Transaction vetting – Unsure whether a proposed transaction violates OFAC sanctions? Diaz Trade Law has significant experience vetting your potential transaction against U.S. sanctions laws. Through research and due diligence, Diaz Trade Law ensures that your transaction won’t get you in trouble later down the road. In particular, it is important to vet end-uses (how is your product going to be used?), end-users (who will be using your product?), and destinations (where will your product be used?).
• Voluntary self-disclosures – If your business believes it may have violated OFAC sanctions, it can be in your business’ strategic interest to submit a voluntary self-disclosure (“VSD”). OFAC encourages anyone who may have violated OFAC-administered regulations to disclose the apparent violation to OFAC voluntarily. A voluntary self-disclosure to OFAC is considered a mitigating factor by OFAC in enforcement actions, and pursuant to OFAC’s Enforcement Guidelines, may result in a reduction in the base amount of any proposed civil penalty. Diaz Trade Law has significant experience filing VSDs and mitigating penalties. For detailed information on filing a VSD with OFAC, check out our article Submitting a Voluntary Self-Disclosure to OFAC published by Bloomberg Law.
• Specific license applications – A specific license is an authorization from OFAC to engage in a transaction that otherwise would be prohibited. Businesses may apply for OFAC specific licenses to release blocked funds, generally authorize transactions, and many other purposes. Diaz Trade Law has significant experience submitting specific license applications and receiving authorization for proposed transactions on behalf of our clients.
• Mitigation and corrective action – If your business has violated U.S. sanctions laws, there is a lot you should do to get back into compliance, ensuring you work to prevent future violations, training your employees, updating your manuals, and this work can assist in mitigating potential penalties. Diaz Trade Law has significant experience representing businesses in dealing with the U.S. Treasury Department’s Office of Foreign Assets Control. Specifically, Diaz Trade Law has successfully assisted clients in (1) submitting voluntary self-disclosures to mitigate penalties, (2) negotiated agreements with OFAC, (3) built corrective action systems to help ensure that your business does not make the same violation again, and (4) updating and enhancing your current export compliance plan.

Contact Us

If you have questions on sanctions or export-related matters, contact Diaz Trade Law today at info@diaztradelaw.com or 305-456-3830.

Co-Authored by

Exporting is a Privilege, Not a Right

Over 95% of the world’s consumers are outside of the United States. Opportunities abound for U.S. companies that export. However, exporting is a privilege and not a right. U.S. exporters have an important responsibility to adhere to U.S. export control laws, including the Export Administration Regulations (“EAR”), the International Traffic in Arms Regulations (“ITAR”) the Office of Foreign Assets Control (“OFAC”) sanctions laws, and the Foreign Corrupt Practices Act (“FCPA”). Violations of export control laws carry hefty civil and criminal penalties. Exporters can pay hundreds of thousands of dollars in penalties, lose export privileges, and even be imprisoned for violations of U.S. export control laws.

The EAR is a set of regulations which governs whether U.S. persons may export or transfer goods, software, and technology outside of the United States or to non-U.S. citizens. The ITAR, on the other hand, is a set of regulations which governs whether defense or military-related technologies may be exported or transferred to non-U.S. citizens. The purpose of both the EAR and the ITAR is to safeguard U.S. national security interests by ensuring that critical technology does not fall into the wrong hands. The EAR is administered by the Commerce Department’s Bureau of Industry & Security (“BIS”) while the ITAR is administered by the State Department’s Directorate of Defense Trade Controls (“DDTC”).

OFAC administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United​ States. U.S. persons are generally prohibited from engaging in transactions, directly or indirectly, with individuals or entities (“persons”) on OFAC’s Specially Designated Nationals and Blocked Persons List, other blocked persons, and those covered by comprehensive country or region embargoes (e.g., Cuba, the Crimea region of Ukraine, Iran, North Korea, and Syria).

The FCPA was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business.  The anti-bribery provisions of the FCPA have applied to all U.S. persons and certain foreign issuers of securities. The anti-bribery provisions also apply to foreign firms and persons who cause, directly or through agents, an act in furtherance of such a corrupt payment to take place within the territory of the United States.

Developing or Enhancing Your Export Compliance Plan

A key foundation of proactive and effective export compliance requires the development of an export compliance plan which establishes a set of procedures for your organization to ensure that everyone is on the same page about how standard processes work, who is responsible for what, how to identify violations, what to do when violations occur, etc. An export compliance plan helps build consciousness in your organization that compliance is critical – both to avoid costly penalties and also to protect national security. Diaz Trade Law helps exporters create export compliance manuals that help prove you have a process in place to classify your merchandise correctly, vet your customers and ensure you can prove you can take compliance seriously and implement all of the important great weight mitigating factors. Diaz Trade Law has significant experience in developing export compliance plans for organizations without plans.

Why is Developing a Strong Export Compliance Plan Important?

A strong export compliance plan is beneficial to your business because it:

• Ensures that all employees understand the export regulations and reinforces internal policies and procedures. Many businesses don’t realize the export control concerns many of their employees, not just the export department. This is because the scope of the term “export” is broad in the EAR and the ITAR. For example, “deemed exports” refer to the release of controlled technology to a foreign person, including within the territory of the United States. Therefore, employees that have little to do with a business’ export activities (e.g. accountants, information technology, customer service) can inadvertently cause your business to violate U.S. export control laws (e.g. by sharing information to non-U.S. persons, by failing to secure data on a cloud server, etc.).
• Demonstrates to federal government agencies that your business is proactive about export compliance. An effective export compliance plan is a great way to demonstrate to BIS and DDTC that you are on top of your export compliance obligations.
• Avoids your business from being subject to costly penalties and even criminal liability. Many U.S. businesses have paid hefty civil penalties for violating U.S. export control laws. L3Harris Technologies, for example, was fined $13 million for illicitly exporting defense technology and software. For more examples of costly civil and criminal penalties, check out BIS’ latest Don’t Let This Happen to You!

U.S. Government Guidance on Compliance Plans

According to the Bureau of Industry & Security, developing an effective export compliance program is “an invaluable way a company can contribute to U.S. national security and nonproliferation priorities while protecting vital company interests.”

BIS identifies the following key factors of an effective export compliance plan:

• Management commitment
• Risk assessment
• Export authorization
• Recordkeeping
• Training
• Audits
• Handling export violations and taking corrective actions
• Building and maintaining your export compliance manual

Similarly, DDTC identifies the following key factors:

• A clear description of organizational structure
• Corporate commitment
• A methodology for identifying, receiving, and tracking ITAR-controlled items or data
• A procedure for handling re-exports and re-transfers and restricted exports
• Recordkeeping
• Internal monitoring
• Training
• A system for proactively handling violations

The U.S. government has published similar guidance for OFAC and FCPA compliance. While having an export compliance plan is not a guarantee that an export violation will not occur, a coherent export compliance program can minimize the risk of non-compliance.

Contact Us

Diaz Trade Law can assist your business in auditing and improving your current plan so that it is in its best shape or building an effective plan from scratch. To learn more about the services we offer, contact us at info@diaztradelaw.com or call us at 305-456-3830.

Background on Securing Information Technology & Communications Supply Chains

Protecting and cultivating critical technologies in the United States has been a policy priority of the Trump administration. In October 2020, the White House released a landmark report titled the “National Strategy for Critical and Emerging Technologies.” The report outlined how the United States would promote and protect its competitive edge in fields such as artificial intelligence, energy, communication and networking technologies, and semiconductors. The Trump administration also released a National Space Policy to drive U.S. leadership in space commerce and a regulatory system for strengthening the public health industrial base.

As part of this policy priority, President Trump signed Executive Order 13873: Securing the Information and Communications Technology and Services Supply Chain on May 15, 2019. EO 13873 sought to curb the exploitation of vulnerabilities in the U.S. information and communications technology and services (“ICTS”) sector by foreign adversaries by implementing a screening and monitoring mechanism for ICTS-related transactions. The text of the EO recognized the importance of maintaining an open investment climate in the ICTS sector but emphasized the need for the U.S. government to do more to secure ICTS supply chains from foreign adversaries who seek to “commit malicious cyber-enabled actions, including economic and industrial espionage against the United States and its people.” The EO also declared a national emergency regarding this threat.

Specifically, EO 13873 grants the U.S. Secretary of Commerce the authority to prohibit certain ICTS transactions that have been “designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of foreign adversaries” and that pose an undue or unacceptable risk to the national security of the United States.

Commerce’s Interim Rule Securing ICTS Supply Chains

Pursuant to EO 13873, the Commerce Department issued an interim rule published on January 19, 2021. The rule creates a set of transaction screening procedures that the Commerce Secretary will use to “identify, assess, and address… transactions… between U.S. persons and foreign persons that involve information and communications technology or services designed, developed, manufactured, or supplied, by persons owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary, and pose an undue or unacceptable risk.”

The Commerce Department intends to provide more explanation and greater certainty on the licensing process for potential transactions by publishing proposed procedures within 60 days of the publication of this interim rule. This publication is expected to provide greater certainty regarding the licensing process, the scope of the new rule, retroactivity on the rule’s applicability, and exclusions.

The interim rule does specifically identify the “foreign adversaries” that will be covered under the new licensing procedure. EO 13873 defines “foreign adversary” as “any foreign government or foreign non-government person engaged in a long-term pattern or serious instances of conduct significantly adverse to the national security of the United States or security and safety of United States persons.” The interim rule identifies the following foreign adversaries:

• The People’s Republic of China (China)
• The Russian Federation (Russia)
• The Islamic Republic of Iran (Iran)
• The Democratic People’s Republic of Korea (North Korea)
• The Republic of Cuba (Cuba)
• Venezuelan Politician Nicolás Maduro (Maduro Regime)

Outgoing Commerce Secretary Wilbur Ross issued the following statement:

“Since day one, President Trump has been committed to protecting the national security of all Americans, and the implementation of this rule is a pivotal moment in this Administration’s efforts to put America First and hold bad actors accountable. Aggressively securing the ICTS supply chain will protect American citizens and businesses from vulnerabilities that could undermine the confidentiality, integrity, and availability of their personal information or sensitive data by malicious foreign adversaries and those who wish harm on the United States.”

As of this writing, the Biden administration is yet to provide any guidance on this proposed interim rule. The Biden administration could revoke the underlying executive order and thereby invalidate the ICTS rules. However, the Biden administration may amend the ICTS licensing program, it is not expected to remove the program altogether because the program’s stated national security priorities are consistent with Biden’s announced policy priorities. While Biden has committed to taking a more multilateral approach on geopolitical matters, many experts expect Biden to continue Trump’s policy priority focusing on establishing a level playing field for U.S. and Chinese firms and continue to view China as a strategic threat to U.S. industries. For more information, check out our forecast of Biden’s trade priorities.

What You Should Do

The interim rule will be effective 60 days from publication, and Commerce will issue a subsequent final rule. The Commerce Department will implement procedures for a licensing process 120 days from publication. Diaz Trade Law will be monitoring developments in this new licensing mechanism. We have significant experience on trade compliance, licensing, and transaction-vetting matters. If you have questions about how your current or future investments, acquisitions, imports, or exports will be impacted by this new system, we are available to evaluate your situation. Furthermore, Diaz Trade Law has demonstrated experience in submitting comments for federal rulemaking. Comments on the rule must be received on or before March 22, 2021. Diaz Trade Law is available to prepare comments for submission for your business.

Diaz Trade Law’s Upcoming Webinar: Forecasting the Next 4 Years of Biden on Trade

On March 3, 2021 at 12:00 PM, Diaz Trade Law is hosting a webinar on Forecasting the Next 4 Years of Biden on Trade. The webinar will provide a retrospective overview of U.S.-China trade relations under Trump, explain where we are now, and forecast U.S.-China relations under Biden. Specifically, the presenters will discuss how exporters and particular industries will be affected and forecast the impact of a Biden administration on U.S. Customs and Border Protection trade issues. Our featured speaker, Todd Owen, Former Executive Assistant Commissioner for the Office of Field Operations at U.S. Customs and Border Protection, will be our featured speaker. Todd will be joined by Diaz Trade Law’s president, Jennifer Diaz, and Associate Attorney Sharath Patil.

Contact Us

If you questions about how the new regulations will impact your business or want to submit comments, contact us today at info@diaztradelaw.com and 305-456-3830.

Cuba Designated a State Sponsor of Terror

The U.S. State Department designated Cuba a State Sponsor of Terrorism (“SST”) on January 11, 2021. Countries are designated on the SST list when they are determined by the U.S. Secretary of State to have repeatedly provided support for acts of international terrorism.

The four main categories of sanctions resulting from designation can include restrictions on U.S. foreign assistance; a ban on defense exports and sales; certain controls over exports of dual use items; and miscellaneous financial and other restrictions. Here, the January 11 re-designation of Cuba on the SST subjects Cuba to:

• Sanctions that penalize persons and countries engaging in certain trade with Cuba
• Restricts U.S. foreign assistance to Cuba
• Bans defense exports and sales to Cuba
• Imposes certain controls on exports of dual use items.

Cuba joins only three other countries on the list: (1) North Korea (designated November 20, 2017); (2) Iran (designated January 19, 1984); and (3) Syria (designated December 29, 1979). Sudan was recently removed from the list by the Trump administration on December 14, 2020.

U.S. Secretary of State Mike Pompeo designated Cuba as a State Sponsor of Terrorism for many reasons, including:

• Cuba’s domestic oppression of its people
• Cuba’s malign interference in Venezuela and elsewhere in the Western Hemisphere
• Harboring of fugitives and denial of extradition requests
• The U.S. State Department’s notification to Congress in 2019 that Cuba is “not cooperating fully” with U.S. counterterrorism efforts

This action is part of a broader Trump administration policy to impose stronger trade and economic restrictions on Cuba. In November 2017, the Trump administration restricted financial transactions with entities controlled by the Cuban government. Furthermore, many new entities have been added to the Cuba restricted list under the Trump administration. As of 2019, the Trump administration has more or less abandoned engagement with the Cuban government, and has opted instead to increase sanctions based on Cuba’s human rights violations and its support of the Venezuelan government under Nicolas Maduro.

For more information, check out our recent article on Trump vs. Biden policies on Cuba.

Export and Sanctions Compliance

Fortunately, there is a lot you can do to be proactive about your export sanctions compliance. To ensure compliance with EAR, ITAR, FCPA, and OFAC regulations, businesses should develop and maintain an export compliance plan that is thoughtful, proactive, and well-executed. While having a sanctions compliance plan is not a guarantee that a sanctions violation will not occur, a coherent export compliance program can minimize the risk of non-compliance.

Diaz Trade Law’s EAR, ITAR, FCPA, and OFAC-related services include:

• Developing an effective export compliance program
• Export compliance training
• Transaction vetting
• Voluntary self-disclosures
• OFAC specific license applications
• Export license applications
• Mitigation and corrective action
• Navigating export seizures and penalties

Contact Us

If you have questions on sanctions or export-related matters, contact Diaz Trade Law today at info@diaztradelaw.com or 305-456-3830.