By Joan Koenig and Mollie Sitkowski
On April 14, 2015, President Obama notified Congress that he intends to remove Cuba from the State Department’s State Sponsors of Terrorism list. While this is a newsworthy occurrence, it does not have immediate, or even certain, impact on the ability of U.S. companies or individuals to transact business with (or vacation in) Cuba.
Any reduction in sanctions would require regulatory changes before sanctions would be reduced. Further, Congress can override the President’s decision by passing a joint resolution prohibiting the removal before it takes effect. If that happens, President Obama could veto the joint resolution and then Congress could try to override the veto.
The removal of Cuba from the list will not remove the trade embargo against Cuba, which is codified by statute. In the event the State Department does remove Cuba from the list, the various export control agencies, such as the Department of the Treasury’s Office of Foreign Assets Control (OFAC), the Department of State’s Directorate of Defense Trade Controls (DDTC) and the Department of Commerce’s Bureau of Industry and Security, can further modify the sanctions that are in place. These agencies would have to amend their regulations before Cuba sees any sanctions changes resulting from its removal from the State Sponsors of Terrorism list.
The State Department may designate countries it has determined to have repeatedly provided support for acts of international terrorism as a State Sponsor of Terrorism. Currently, there are only four countries designated, Cuba, Iran, Sudan and Syria. Cuba has been designated since 1982. The designation results in a country facing various sanctions, such as restrictions on foreign assistance, a ban of defense exports and sales, and certain controls over exports of “dual use” items.
The State Department has been reviewing its designation process since shortly after President Obama’s December announcement heralding a diplomatic breakthrough with Cuba. The designation as a State Sponsor of Terrorism has been a stumbling block to establishing embassies in both Havana and Washington.
Since December, the Obama Administration has moved quickly in “normalizing relations” with Cuba. OFAC and BIS created general licenses allowing for more travel and trade with Cuba.
Removal from the State Sponsors of Terrorism list likely signals further easing of financial sanctions against the nation. However, only the United States Congress can remove the broader embargo against Cuba, which is not likely in the next year.
For more information on how Cuba’s removal from the State Sponsors of Terrorism list and the current sanctions relief in place, please contact Joan Koenig, Mollie Sitkowski, or any other member of Drinker Biddle’s Customs and International Trade team.