Sanctions Watch - Cuba

on Monday, 20 April 2015. Posted in Export Control Reform

US and Cuba flags

 

Fact Finding Mission or Something More?

by Frank Record

 

Governor Cuomo arrives in Cuba today as head of a New York trade delegation between Washington and Havana. While his spokesman said he will ‘stick to business matters’ focusing on travel, education, agriculture, health care and financial services, other commentators expect him to address broader topics including ways to encourage Cuba’s development and private sector.

 

Whatever the outcome, the state-sponsored trip is likely to be the first of many designed to open up a market closed to American businesses for more than 50 years.  President Obama’s announcement last week to take Cuba off the list of states that sponsor terrorism should be the key impetus in restoring relations between Havana and Washington, but the trade embargo and the decision to end it remains in the hands of the Republican-controlled Congress.

 

The President eased the sanctions on Cuba, allowing freer travel for Americans, more remittances to Cubans, liberalized rules on the export of telecommunication equipment and services to the island nation, and the use of credit cards by American tourists.

Historically significant, symbolically important, the opening to Cuba has captured the attention of all Americans, but it has yet to move the needle on U. S.-Cuban trade and investment.  

 

Since their unveiling in January,  the Commerce Department has approved only a handful of newly created license exceptions for Cuba. With U. S. banks thus far steering clear of Cuba and with no export credits or any other financing forthcoming from the U.S. government, the impetus for the re-integration of Cuba into the global economy will most likely not come from  the U.S.,  but from Cuba’s creditors in Europe and Asia with debt consolidation and forgiveness and export credits.

 

Non-American companies are the likely beneficiaries in the short term of the U.S. opening to Cuba and its removal from the list of terrorist nations, as well as the gradual economic reforms introduced by President Raul Castro in 2010. American agricultural exporters have actually been losing ground to foreign competitors over the past six years with food shipments down from $700 million to $265 million last year.

 

Unless and until Congress repeals the embargo on Cuba, American companies will face numerous obstacles in getting back into the domestic market. Additional and broader license authority is needed from the Department of Commerce’s Bureau of Industry and Security  and Treasury’s Office for Foreign Assets Control to facilitate trade and lay the groundwork for ship traffic across the Florida Straits.

 

New License Exception Support for the Cuban People (SCP) authorizes the license-free export and reexport to Cuba of the following items: building materials, equipment and tools for use by the private sector to renovate privately owned businesses and residences; tools and equipment for private sector agricultural activity; and tools and equipment and supplies for private sector entrepreneurs. Eligible items must be designated EAR99 or controlled on the Commerce Control List solely for anti-terrorism (AT) reasons.

 

License exception have been broadened  to authorize the commercial sale of consumer communication devices and the shipment of consolidated gift parcels. Commerce has also instituted a policy encouraging license applications for items and services for environmental protection for air quality, coastlines and waters around Cuba.

 

With the thaw in relations and the arrival of the American trade delegation in Havana, attention is beginning to shift from the U.S.-imposed embargo to the Cuban government’s own internal ‘embargo’ on the Cuban private sector and the development of a more market-based economy. Will Cuba follow the example of China, or Russia or seek its own development path?

 

Read Sanction Watch - Cuba Part II


Frank Record is the Executive Partner at the MK Trade Compliance Group. With more than 25 years of experience in the legislative and executive branches, he has substantial high-level experience in a wide range of trade and security issues.  Read More about Frank

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