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Venezuela Sanctions Update 2017

US has restricted Venezuela shipments of export cargo and import cargo in international trade.

Venezuela Sanctions Update 2017

2017 has been an eventful and significant year for the Venezuela economic sanctions programs, particularly in the aftermath of President Nicolas Maduro’s consolidation of political power in a series of contested elections and political maneuverings throughout the first half of the year.

On August 24, 2017, President Donald Trump imposed extensive sanctions against the government of Venezuela in response to its persecution of political opposition, human rights abuses and “rampant” public corruption via Executive Order 13808. This order broadly prohibits transactions related to the financing of new debts, securities and certain pre-existing bonds for the Venezuelan government and the state-owned oil company Petróleos de Venezuela S.A. (PdVSA).

In conjunction with the order, the US Treasury Department’s Office of Foreign Assets Control (OFAC) issued new guidance along with four general licenses that mitigate economic harm for certain US companies and allow for specific transactions that would otherwise be prohibited under the sanctions program.

Sanctions Background

The zenith of Venezuelan President Maduro’s power grab came in the midst of the nation’s constitutional crisis, when his government conducted an end-around the opposition-controlled parliament known as the National Assembly by creating a new governmental body with constitution drafting powers, the 545-member National Constituent Assembly. Since its creation in July, the Constituent Assembly has usurped the legislative power from the democratically elected National Assembly, ousted the sitting attorney-general and dangerously mismanaged the nation’s economy. Democratic nations around the world have declared they will not recognize the Constituent Assembly as legitimate.

The US sanctions program was “carefully calibrated” to tighten the economic screws on Maduro’s regime and restrict its access to capital. The US maintains great influence over Venezuela’s economy because it buys approximately half of the country’s oil, an industry that accounts for about 95 percent of Venezuela’s export revenue. Due to this significant petroleum trade between the nations, the US stopped short of imposing a full crude oil embargo, which would surely be crippling for the Venezuelan nation, nor do the sanctions apply to short-term financing for oil sales. OFAC also issued four general licenses to allow for certain exemptions to protect the interests of both US companies and the Venezuelan people.

The general licenses allow for a 30-day wind-down period for existing contracts; transactions only involving PdVSA’s US subsidiary Citgo; dealings in select existing Venezuelan debts; and the financing for humanitarian goods to Venezuela.

The sanctions prevent American entities from buying any new debt issued by Venezuela with maturities longer than 30 days, or 90 days for the debt of PdVSA. Sanctions have now made it difficult to raise money from international investors, and effectively prohibit refinancing or restructuring Venezuela’s existing debt, because they block financial institutions under US jurisdiction from buying new bonds.

While Citgo is protected from the sanctions through General License 2, it will be prohibited from distributing profits back to the PdVSA and the Venezuelan government.

SDN List and Individual Sanctions Update

One of the most effective tools for OFAC sanction programs is the Specially Designated Nationals and Blocked Persons List. On July 26, OFAC sanctioned 13 Venezuelan government officials ahead of the July Constituent Assembly elections; and on July 31, added President Maduro himself to the SDN List. In August, OFAC sanctioned eight more Venezuelan officials involved with the creation of the Constituent Assembly.

On November 9, the US imposed sanctions against 10 additional Venezuelan officials, including members of Venezuela’s election commission and several government ministers, for their roles in undermining the electoral process, extensive media censorship and corruption related to the government-administered food program. OFAC has now frozen US assets, banned US travel, and prohibited US persons from doing business with dozens of President Maduro’s closest regime allies.

Debt Restructuring Negotiations

On November 2, President Maduro announced that Venezuela and PdVSA will have to “refinance and restructure” its massive external debt estimated at over $60 billion in outstanding bonds. Maduro and his vice president, Tareck El Aissami, invited bondholders to a meeting in Caracas on November 13 as Venezuela prepares to restructure its overwhelming debt.

However, El Aissami was sanctioned by OFAC in February 2017 under the Foreign Narcotics Kingpin Designation Act after accusations that he “played a significant role in international narcotics trafficking.” Additionally, US persons are now prohibited from receiving such new bonds that Venezuela could give them as part of a restructuring. Although creditors are not forbidden under General License 3 from participating in talks on Venezuela’s bonds, any deal made with the sanctioned El Aissami would be problematic for US persons. Penalties for violations of the Foreign Narcotics Kingpin Designation Act can include up to 30 years in prison or fines of up to $5 million. For financial institutions, the fines can reach as high as $10 million.

International Sanctions Update

In August, 12 nations across the Americas issued a declaration refusing to recognize the “illegitimate” Venezuelan Constituent Assembly and condemning the government for undermining the nation’s democratic order. The so-called Lima Declaration was put together by Foreign Ministers and representatives of Argentina, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Honduras, Mexico, Panama, Paraguay and Peru. The Lima Group has met three times during the fall of 2017, and continues to reiterate their rejection of the Venezuelan government and its ongoing human rights abuses. Their next meeting is planned to be held in Chile in January 2018.

On November 13, the European Union also announced that it approved new economic sanctions on Venezuela, including a full arms embargo. The sanctions program will allow for a system of asset freezes and travel bans to be put into place against key Venezuelan government officials. The announcement also highlighted that EU member states would not recognize the Venezuela’s Constituent Assembly as legitimate.

Key Takeaways

The US has shown Venezuela and the Maduro regime that it will not sit idly by while the Venezuelan people suffer through political repression along with one of the worst economic collapses in modern Latin American history. Through its OFAC sanctions program and updated SDN List, the US has made it increasingly difficult for the Maduro regime to prosper, and will continue to do so until Venezuela reestablishes sustainable democratic processes and holds free and fair elections.

Even if Venezuela seeks to get around the US sanctions by restructuring outstanding bonds in other currencies, authority for that would come from the Constituent Assembly, which the EU, the US and Lima Group member-states do not recognize as legitimate. This will likely push the Maduro regime to seek financial assistance from Russia and China, who both recently boycotted a UN Security Council meeting on Venezuela. Due diligence will remain critical for compliance practitioners who deal with clients engaging in the region, particularly as the list of sanctioned government officials and government-owned entities grows.

Doreen M. Edelman is a shareholder and co-leader of the Global Business Team at Baker Donelson (Washington, DC). With more than 25 years of experience in import and export compliance, foreign investment and global expansion, she advises both US and foreign-based companies on international business matters. Julius Bodie also contributed to this article. A law clerk with Baker Donelson, he recently graduated from Loyola Law School.

US has imposed sanctions against Russian shipments of export cargo and import cargo in international trade.

Russia Sanctions 2017

Despite numerous diplomatic ceasefires aimed at resolving the ongoing Russo-Ukrainian conflict, violent hostilities between Kiev’s government forces and Russian-backed separatists in eastern Ukraine’s Donetsk and Luhansk regions continue today, having claimed more than 10,000 lives since April 2014. This article will provide a brief background and update on the sanctions programs implemented in response to the Kremlin’s aggressive foreign policy regime in Ukraine.

In 2014, the US and EU began imposing sanctions against Russian and Ukrainian individuals and entities in response to Russia’s annexation of Crimea and its backing of a separatist movement in eastern Ukraine. The Ukraine/Russia-related sanctions program implemented by the US Department of Treasury’s Office of Foreign Assets Control (OFAC) began on March 6, 2014, when President Obama, in Executive Order (EO) 13660, declared a national emergency to deal with the threat posed by those who undermined the democratic processes in Ukraine and threatened the nation’s security, sovereignty and territorial integrity.

The president subsequently issued EOs that expanded the scope of the initial order, authorizing the imposition of sanctions against Russian government officials, certain individuals and institutions in Crimea, and persons operating in Russia’s arms sector. The US also imposed an entirely new type of sanctions regime known as Sectoral Sanctions, comprised of four directives outlining prohibitions against transacting with certain Russian financial service, defense and energy companies. OFAC issued a corresponding Sectoral Sanctions Identification List (SSI), prohibiting US persons from doing business with specified individuals or entities in identified business sectors.

On August 2, 2017, President Donald Trump signed into law H.R. 3364, a wide-ranging sanctions measure titled the Countering America’s Adversaries Through Sanctions Act (CAATSA). The bill passed with near unanimous Congressional approval, and served to expand the scope of current sanctions in place against Iran, Russia and North Korea. Pursuant to CAATSA’s Title II, the Countering Russian Influence in Europe and Eurasia Act (CRIEEA), OFAC amended its Ukraine/Russia-related Sectoral Sanctions first issued in 2014.

First, on September 29, OFAC issued updated versions of Directives 1 and 2, which prohibit dealing in new debts in the financial and energy sectors. Subsequently, on October 27 the US Department of State released a list of 39 prominent Russian state-owned and private defense companies that will be subject to a variety of menu-based sanctions starting early next year, warning companies to avoid conducting “significant transactions” with the listed Russian entities. The State Department noted it will take into account the “totality of the circumstances” on a case-by-case basis when considering each individual transaction.

OFAC then expanded Directive 4 on October 31, substantively expanding the scope of the sanctions program for businesses involved in the Russian oil industry. Since Directive 4 was issued in September 2014, US individuals and entities have been prohibited from providing goods, services or technology in support of deepwater, Arctic offshore, or shale projects that produce oil in the Russian Federation or in Russian waters. This prohibition applies to major Russian oil companies on the Sectoral Sanctions List (SSI), including the state-owned energy giant Gazprom, as well as Lukoil, Surgutneftegas and Rosneft. The Modified Directive 4 expands the geographical scope of this restriction and broadens the criteria for sanctionable activity. Support of such oil projects will now be prohibited if they meet all three of the following criteria:

The project was initiated on or after January 29, 2018; the project has the potential to produce oil in any location; and, any person determined to be subject to Directive 4 or any earlier version has a 33 percent or greater ownership interest in the project or owns a majority of the voting interests in the project. (Formerly it was those on the SSI List and their 50 percent or more owned entities).

The amended Directive 4 gives the Trump administration the option of imposing sanctions on companies helping develop Russian export pipelines, the most important of which for the EU is the Nord Stream Project. In fact, Section 257 of CAATSA specifically articulates the US’s continued opposition to the Nord Stream 2 pipeline, which is managed by Gazprom. However, as of November OFAC had not released guidance on its plans for Gazprom’s Nord Stream financial partners throughout the western EU, which includes major gas companies such as Royal Dutch Shell, Austria’s OMV, and Germany’s Uniper and Wintershall. When asked for comment on the directive’s effect on the Nord Stream 2, a senior US administration official stated that they were not going to go “project by project or company by company and talk about whether or not we think that the guidance affects them or not.”

It is thus too soon to predict how the US will enforce the updated Russian sanctions with regards to western Europe’s energy sector. Gazprom’s partners in the western EU could be drastically affected; and the extent to which US regulators will go after them remains to be seen. The sanctions program will likely drive Russian energy companies to China for financing assistance on upcoming large-scale transnational pipeline projects. Ultimately, compliance practitioners will need to stay up to date on any upcoming OFAC guidance and comprehensive due diligence will remain a necessity, particularly for those who engage with Russian and European entities in the international energy and defense sectors.

Doreen M. Edelman is a shareholder and co-leader of the Global Business Team at Baker Donelson (Washington, D.C.). With more than 25 years of experience in import and export compliance, foreign investment and global expansion, she advises both U.S. and foreign-based companies on international business matters. Julius Bodie also contributed to this article. A law clerk with Baker Donelson, he recently graduated from Loyola Law School.

US and UN imposed sanctions on North Korean shipments of export cargo and import cargo in international trade.

Global Sanctions Regimes Ramp Up Against North Korea

The United Nations, the United States, and governments around the world have sought to update, implement and impose severe economic sanctions regimes against the Democratic People’s Republic of Korea (DPRK) in response to Pyongyang’s continued development of nuclear weapons and ballistic missile programs.

This article will provide a brief timeline and overview of the most recent updates to international sanctions regimes targeting the North Korean economy.

US and UN Sanctions Expansion

On August 2, 2017, President Donald Trump signed into law a wide-ranging sanctions measure titled The Countering America’s Adversaries Through Sanctions Act (CAATSA), expanding current sanction regimes against Iran, Russia and North Korea. Pursuant to CAATSA’s Title III, Korean Interdiction and Modernization of Sanctions Act (KIMSA), President Trump was authorized to impose new sanctions on non-US persons for certain North Korean-related transactions.

The UN Security Council then unanimously passed the US-drafted Resolution 2371 on August 6, which imposed fresh sanctions on North Korea targeting $1 billion worth of the nation’s primary exports, including coal, iron, iron ore, lead, lead ore and seafood. It also called for a resumption of talks between the US, China, Japan, Russia, North Korea and South Korea, with the ultimate goal of denuclearizing the Korean peninsula.

North Korea conducted its sixth and most powerful nuclear test on September 3, 2017, prompting the UN to pass Resolution 2375 on September 11. Driven by the efforts of US Ambassador Nikki Haley, the unanimously-backed sanctions regulations were severe, but not as far-reaching as the Trump administration initially had hoped for after receiving pushback in the negotiation process from its Russian and Chinese counterparts. However, the resolution did increase inspection requirements of ships engaging with North Korean ports, banned North Korean textile exports, capped sales of crude oil and prohibited the sale of natural gas into North Korea.

Executive Order 13810 and OFAC Update

On September 21, President Trump issued an executive order (EO) that authorized a wide variety of sanctions against numerous individuals, entities and foreign financial institutions involved with the “provocative” and “destabilizing” North Korean regime. Following the September UNSC Resolution and EO 13810, on September 26 the US Treasury Department’s Office of Foreign Assets Control (OFAC) published updated guidance, issued new general licenses, and designated 26 individuals and eight banks as Specially Designated Nationals and Blocked Persons (SDNs) under the North Korean sanctions regime.

EO 13810 also expanded the categories of conduct that can result in a designation on the SDN list, and requires foreign entities to cut ties with persons who operate in a variety of North Korean industries or risk being designated as blocked parties themselves, subject to forfeiture actions by the US Department of Justice.

The expanded list of vulnerable individuals and entities includes those who:

Operate in the North Korean construction, energy, financial services, fishing, information technology, manufacturing, medical, mining, textile or transportation industries;

Own, control or operate any port in North Korea, including any seaport, airport or land port of entry;

Have engaged in at least one significant importation from or exportation to North Korea of any goods, services or technology; and,

Are a North Korean citizen, including any North Korean person that has engaged in commercial activity that generates revenue for the Government of North Korea. In addition, the EO prohibits aircraft and vessels that have engaged with North Korea within the prior 180 days from entry into the US.

EO 13810 further authorizes the imposition of secondary sanctions on foreign financial institutions that conduct significant transactions related to North Korea or with a blocked party, regardless of whether the institution has any connection to the US This expansion will result in considerable risk for US companies that engage in business with entities and institutions in North Korea’s major trading partner countries, particularly Russia and China.

Fresh Sanctions from the EU and UN

On October 16, the Foreign Affairs Council of the European Union (EU) adopted autonomous sanctions measures to complement and reinforce the September UN Resolution 2375. The new sanctions include a total ban on EU investment in all sectors of North Korea’s economy, as well as a total ban on the sale of refined petroleum products and crude oil. EU member states additionally agreed not to renew work authorizations for North Korean nationals present on their territory, with certain exemptions for refugees. On October 23, the UN Security Council on North Korea expanded its current export prohibitions, adding 32 items with both civilian and military uses to the banned goods and technologies list.

Pending Legislation

The US House of Representatives approved the Otto Warmbier North Korea Nuclear Sanctions Act on October 24. The measure passed overwhelmingly 415-2, and was described as the “most far-reaching sanctions ever directed at Pyongyang” by the bill’s sponsor Congressman Andy Barr. Named in honor of the American student who died after spending more than a year in North Korean custody, the Otto Warmbier North Korea Nuclear Sanctions Act directs the US Treasury Department to impose strict conditions and oversight on foreign financial institutions that engage with North Korea. The bill additionally authorizes the Treasury Department to cut off financial assistance to any international government that knowingly fails to prevent economic transactions that benefit the DPRK regime.

China and Chinese financial institutions are likely the primary target of this most recent round of sanctions legislation.

Key Takeaways

Amidst escalating tensions between Pyongyang and Washington, the most recent sanctions have expanded the extraterritorial scope of available enforcement mechanisms in the current unpredictable climate of international relations. The geopolitical instability of North Korea will continue to invite harsh economic sanctions from around the world. The bottom line is that businesses will have to spend more time focused on due diligence and documentation to ensure compliance.

Doreen M. Edelman is a shareholder and co-leader of the Global Business Team at Baker Donelson (Washington, D.C.). With more than 25 years of experience in import and export compliance, foreign investment and global expansion, she advises both US and foreign-based companies on international business matters.

Sudan sanctions impact shipments of export cargo and import cargo in international trade.

Sudan Sanctions 2017

On October 6, the US government announced that it will revoke its economic sanctions regime with respect to Sudan and the Government of Sudan. The Treasury Department’s Office of Foreign Assets Control (OFAC) issued a frequently asked questions as a guideline with respect to the revocation, as well as a new general license authorizing certain agricultural and medical-related exports. (This development does not affect sanctions on South Sudan, as discussed below.)

The US State Department provided a report on the Government of Sudan’s sustained positive actions for the mandated reporting period spanning the last nine months, recognizing Sudan’s improved humanitarian access and its cooperation with the US in addressing regional conflict and threats of terrorism. In exchange for ending the sanctions program, the US also said it had secured a commitment from Sudan that it would not engage in weapons trade with North Korea.

However, sanctions remain in place on certain individuals and entities, as do export control regulations for certain defense-related items. This article will briefly detail recent updates to Sudan’s sanction regimes in 2017.

Sudanese Sanctions Regulations

Sudan’s established links with international terrorist groups and attempts to destabilize neighboring regions led to the US designating it as a State Sponsor of Terrorism in 1993. The Sudan sanctions program began in 1997, when the US imposed a comprehensive trade embargo on Sudan, as well as an asset freeze against the Sudanese government. In light of persistent violence against civilians and severe human rights violations in Sudan’s Darfur region, in 2006 the US government blocked the property of individuals involved with the conflict. For years, the comprehensive sanctions regime prohibited US entities from engaging in nearly any transactions involving Sudan or its government.

On January 13, President Obama issued Executive Order (EO) 13761, (Recognizing Positive Actions by the Government of Sudan and Providing for the Revocation of Certain Sudan-Related Sanctions). It called for a revocation of the Sudanese Sanctions Regulations (SSR) if the government of Sudan met certain benchmarks over a six-month period, including reduced military activity, improved humanitarian access and cooperation with the US in addressing regional threats. The EO was amended July 11 by President Trump to extend the review period through October.


In conjunction with the EO, OFAC issued a general license on January 17 authorizing transactions formerly prohibited under the SSR. That general license will no longer be needed after October 12 to engage in transactions that were previously prohibited by the SSR.

In addition, the State Department’s Bureau of Industry and Security (BIS) has amended the Export Administration Regulations (EAR) to change its general policy of denial into a general policy of approval for applications for licenses to export certain goods into Sudan, including 1) equipment and technology controlled only for anti-terrorism reasons and intended to ensure the safety of commercial passenger aircraft; and 2) items controlled only for anti-terrorism reasons that will be used to construct, operate, maintain or refurbish railroads in Sudan.

These favorable licensing policies apply only to civil, non-military end uses by “non-sensitive end-users” in Sudan, which excludes Sudan’s military, police, and intelligence services. BIS will still impose specific licensing requirements for most exports to Sudan of items (e.g. software, technology) subject to the EAR and described on the EAR’s Commerce Control List.

As noted in the recent FAQs sheet promulgated by OFAC, a number of Sudan-related sanctions will remain in place, including its designation as a State Sponsor of Terrorism and the blocking of property for the individuals and entities involved with undermining stability in Darfur. There are also individuals in Sudan that remain designated as Specially Designated Nationals (SDNs) under OFAC’s terrorism-related authorities.

Sudan remains subject to a US arms embargo pursuant to the State Department’s International Traffic in Arms Regulations (ITAR), with limited exceptions related to peacekeeping and humanitarian operations. This ITAR policy is based in part on a U.N. Security Council arms embargo on Sudan that is currently in place.

Key Takeaways

It is critical to note that US companies that engaged in illicit transactions in violation of the SSR before the issuance of the January 2017 EO can still be held liable for those activities. For example, on October 5, the Connecticut-based paper company BD White Birch Investment agreed to pay OFAC over $370,000 to settle allegations it violated the SSR by using a Canadian subsidiary to facilitate the sale and shipment of Canadian-origin paper to Sudan in 2013. This reinforces the notion that OFAC will not hesitate to investigate and pursue pre-2017 transactions that violated the SSR.

The formal revocation of the SSR on October 12 will create new opportunities for US businesses in Sudan, as well as help the debt-ridden Sudanese economy that currently owes foreign creditors $51 billion, representing 60 percent of the nation’s GDP, according to The New York Times. State Department officials noted the removal of the sanctions would unfreeze Sudanese government assets, which in turn will greatly benefit the aviation and energy sectors. These industries have been particularly affected by the 2011 secession of South Sudan, which currently holds 75 percent of former Sudan’s oil wells.

While the decision reflects progress towards the normalization of bilateral relations between the US and Sudan, US companies and multi-national exporters should remain wary of the sanctions regimes and trade restrictions that remain in force through authorities in the US, the European Union and the U.N. Comprehensive due diligence remains a necessity for doing business in the region, particularly for the defense industry. As international OFAC enforcement trends shift from sweeping, country-based sanctions to more targeted, individual-based sanctions regimes, it will be critical for exporters to stay up to date on increasingly nuanced compliance challenges when transacting in high-risk regions around the world.

South Sudan

South Sudan, which became an independent country in 2011, has not been subject to the comprehensive restrictions imposed upon Sudan, though some designated parties in South Sudan and certain South Sudanese activities relating to Sudan’s economy have been restricted. On September 6, the Treasury Department announced new sanctions designations for three South Sudanese individuals and their business entities. The sanctions prohibit any US individual from dealing with the designated entities and individuals, and further states that “all of these individuals’ and entities’ assets within US jurisdiction are blocked.”

Doreen M. Edelman is a shareholder and co-leader of the Global Business Team at Baker Donelson (Washington, D.C.). With more than 25 years of experience in import and export compliance, foreign investment and global expansion, she advises both US and foreign-based companies on international business matters.

Cuba sanctions impact shipments of export cargo and import cargo in international trade.

Cuba Sanctions 2017

President Donald Trump’s issuance of a National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba on June 16 signaled a sweeping shift from the Obama-era Cuba policy that concentrated on ending the US’s longstanding sanctions program on Cuba and the Castro regime. That day, in a speech given in Miami, the president emphasized that the latest update in policy is motivated by a desire to restrict the flow of US currency to the military, security and intelligence apparatuses of the Castro regime.

While the Cuba memo sets out a basic framework of change for agencies such as the Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the Department of Commerce’s Bureau of Industry and Security (BIS), the memorandum did not have the force of an executive order. OFAC issued a press release designed to answer frequently asked questions about the modified sanctions in conjunction with the president’s announcement of a revised Cuba policy, and then later released an updated Cuba FAQs on July 25 to clarify the extent of those changes. According to the update, OFAC planned to issue the regulatory amendments in the “upcoming months” and that the announced changes will not take effect until these regulations are issued. The State Department also plans to publish a list of entities with which direct transactions will be prohibited.

However, as of October, OFAC has yet to issue any concrete regulatory amendments effectuating the changes described in the President’s June Cuba memo. This article seeks to detail the practical effects of the proposed amended sanctions regime as described by OFAC.

The changes will be implemented into the Treasury Department’s Cuban Assets Control Regulations, as well as the Department of Commerce’s Export Administration Regulations. However, OFAC noted that the policy changes will likely have little impact on most US businesses, as the revisions will not affect existing business contracts and licenses formed prior to the June announcement.

The most significant changes concern restrictions on 1) authorized individual travel, and 2) direct transactions with entities and sub-entities related to the Cuban military, intelligence or security services.

President Barrack Obama’s 2016 Cuba policy directive allowed the Treasury Department to ease its sanctions restrictions on individual “people-to-people” travel to Cuba, particularly for students and researchers. However, the new Treasury regulations will prohibit any individual travel that does not include academic study as part of a supervised degree or exchange program. Such educational trips will further be limited to group travel, and those groups will be required to “maintain a full-time schedule of educational exchange activities” intended to promote contact with the Cuban people and independence from the Cuban government.

The most significant changes for international trade concern the expansion of prohibited Cuban entities and sub-entities authorized to engage in direct transactions. The changes prohibit prospective travel arrangements or business engagements that involve such direct transactions with Cuban military, intelligence, or security services.

OFAC was directed to expand the definition of “prohibited officials of the government of Cuba,” while the State Department plans to publish a list of prohibited Cuban entities and sub-entities, both of which will help alleviate the encumbrance of due diligence required to scrutinize the true ownership of certain Cuban companies and organizations.

While OFAC will likely further define “direct transactions,” the Cuban military arm for state-run businesses known as GAESA controls large swathes of the Cuban economy, particularly in the tourism industry. US companies will likely be barred from financial transactions with the GAESA conglomerate and its affiliates or subsidiaries, including Gaviota, a GAESA division serving an estimated 40 percent of all foreign tourism in Cuba.

Importantly, however, OFAC asserted that companies who were already engaged with the now-prohibited entities prior to issuance of the new regulations “will be permitted to continue,” as long as the existing contracts and transactions were compliant with the Cuban Assets Control Regulations.

While it remains to be seen when and how these amended policies will be enforced, it is critical for US companies that engage with Cuba to stay informed on the upcoming Treasury and Commerce revisions to the current sanctions regulations. Conducting proper due diligence will be the key to ensuring your company does not engage in trade with a restricted entity. However, companies who have already legally conducted such a transaction as of June 16, 2017, or who do not plan to transact with the specified prohibited military, intelligence or security entities, will generally be unaffected by the Cuba memo’s announced changes.

In sum, despite President Trump’s June assertion that these changes are a complete cancellation of President Obama’s Cuba directive “effective immediately,” OFAC has yet to issue any binding regulatory amendments to the sanctions regime. More importantly, the amended regulations, when issued, will not significantly impact the majority of US companies.

Doreen M. Edelman is a shareholder and co-leader of the Global Business Team at Baker Donelson (Washington, D.C.). With more than 25 years of experience in import and export compliance, foreign investment and global expansion, she advises both US and foreign-based companies on international business matters.

Trump's policies will impact shipments of export cargo and import cargo in international trade.

The Road Ahead Under Trump: How Should Businesses Prepare?

One hundred days into the Trump Administration, American businesses should not be concerned with what President Trump promised and what he has accomplished. Rather, businesses should be preparing for the future. Let’s take a minute to perform our own kind of “state of trade SWOT analysis” so we can determine the types of questions business leaders should be asking themselves.

For starters President Trump has followed the lead of previous administrations on some policy issues. One practical business note is that the Trump administration has implemented some regulatory changes to continue his predecessors’ decade-long efforts to streamline regulatory requirements for exporters and importers. This project will modernize and streamline procedures and paperwork that must be filed with government agencies and eliminate redundant requirements for exporters and importers. His willingness to stay the course on this practical initiative, as well as on more controversial issues like relations with Cuba, Iran, and China, suggests that President Trump may develop into a more cautious chief executive than the unpredictable candidate he was in 2016. This is good news for the trade community, which often suffers when uncertainty is the norm.

However, the Trump administration is falling behind in moving overall trade policy forward. To date, many senior policy positions are unfilled and Robert Lighthizer has yet to be confirmed as US Trade Representative (USTR). Meanwhile, Commerce Secretary Wilbur Ross and White House advisors have been busy on trade issues despite losing many seasoned negotiators and policy makers from government. You will also remember that President Trump terminated all politically appointed ambassadors when he was sworn into office. Of the 188 open ambassador positions around the world, the administration has only nominated six people to these jobs.

While the Trump administration did take the United States out of the 12 nation Trans-Pacific Partnership (TPP), which the USTR spent the last ten years negotiating, it has not taken any measurable steps to renegotiate the North American Free Trade Agreement (NAFTA). To actually make changes to NAFTA, the administration must formally notify Congress 90 days before it begins new negotiations. Furthermore, the administration must provide specific details regarding all proposed changes. Such a detailed NAFTA review is likely not ready since the administration does not have a USTR in place. With that being said, it is important to note that recent action on Canadian softwood lumber and dairy products are unrelated to NAFTA, as those issues were specifically excluded from the original agreement.

President Trump has indicated that he wants to address trade issues on a bilateral or trilateral basis. Our assumption is that he believes he can get a better deal for American companies with such negotiations. However, here are a few things that will complicate the issue. When the USTR negotiated the TPP, it could use the multilateral nature of the agreement to better leverage a deal. For example, if a country wants a concession for agreeing to a particular US provision, our government could secure that concession from another country involved in the agreement. Such action allows the US to satisfy demands while giving up nothing, a type of negotiation tactic that is not possible in bilateral or trilateral negotiations.

Meanwhile, the Commerce Department recently determined that new countervailing duties on Canadian softwood lumber are warranted because of Canadian government subsidies. The new duties, while fitting with the administration’s promise to enforce our trade laws, were planned long before President Trump took office. As the administration looks for opportunities to strengthen and enforce trade law, the decision would seem to be in the best interest of the US In fact, US parties negatively affected by Canadian government subsidies will be recompensed by the new duties our government collects from Canada. While this sounds like tough enforcement action by the administration, ultimately it won’t be the Canadians who pay duties. As is the case with similar trade issues, softwood lumber duties will ultimately be passed on to US importers of Canadian lumber and downstream to home builders and home buyers. If the administration does move forward and renegotiate NAFTA, perhaps it would be better to add softwood lumber, dairy and other omitted topics into the agreement for predictability for businesses going forward.

So how can companies doing business in the US move forward without a clear vision of the next few years of US trade policy? By staying the course, being prepared but knowing your options and constantly self-assessing.

Consider where your products and component parts come from. What if duties increase for those items? Can you buy them in the US? Do you have other sources? How quickly can you get what you need and how much inventory do you keep?

Are you foreign-owned? Consider your product’s country of origin. Is it substantially transformed in the US? Where is the technology and engineering coming from? Could you manufacture in the US and take advantage of Trump’s potential tax plan if it comes to fruition? Are you going to need foreign workers? How are you going to get them if immigration rules change?

Do you export? Ensure you are screening your customers and complying with the Treasury Department’s sanctions requirements. The administration promises more enforcement regarding US and foreign parties violating US export and Office of Foreign Assets Control’s sanction requirements. Understand US jurisdiction over your products and services, including the potential for US control over the exports of any foreign subsidiaries.

The new administration promises an uptick in other types of trade enforcement, and it might surprise some to learn that the US has jurisdiction over products and technology with US content all over the world. The Commerce Department controls and licenses the shipments of US commercial products globally and the State Department governs not only US military goods and technology but also the actions of US entities providing defense services and facilitating the manufacture, sale and export of foreign defense products worldwide. So be sure you know the rules that apply to you.

Doreen Edelman is a trade attorney and co-leader of the global business team at Baker Donelson. She has more than 25 years of experience advising companies on import and export compliance, foreign investment and global expansion. She can be reached at 202.508.3460 or by email at