Global Trade & Sanctions Law

OFAC removal of 45 parties from the list of Specially Designated Nationals deserves attention.

On March 24, 2015, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the removal of 45 parties from the list of Specially Designated Nationals (SDN List). All had previously been designated in relation to U.S. Cuba sanctions. On closer review, it appears that none of these removals are particularly important or newsworthy—dead persons, dissolved companies, sunken ships and so on. U.S. officials reported to media sources that this was a routine exercise in cleaning up out-of-date sanctions listings.

So why the fuss? Under U.S. Cuba sanctions, in addition to the broad embargo, there is a lengthy list of SDNs. This includes a number of major companies, key individuals and vessels. This can present another obstacle in Cuba in areas where sanctions are relaxed (even where activities are newly permitted, SDNs remain off limits normally). Thus, both companies interested in Cuba and the sanctioned parties themselves are watching for any signals that the Obama administration will update the SDN List as part of its Cuba sanctions reforms.

What should we expect? Based on past practice, it is likely that the U.S. government will be slow and deliberate in removing parties from the SDN List. Removal is an important carrot, and U.S. officials will likely seek changes in behavior and specific actions in advance of de-listing (reparations, privatization, remedying human rights practices, distancing from the regime and so on depending on the party). This is the approach that the U.S. has taken with SDNs in Myanmar/Burma as sanctions reform has proceeded in that market.

How do sanctioned parties come off the SDN List? There are two paths:

First, the U.S. government can remove the party on its own initiative—this is an area of executive discretion and the President or OFAC can take action without the need for any process or Congressional action in most cases.

Second, sanctioned parties can seek removal under a formal procedure for de-listing conducted by OFAC under 31 C.F.R. § 501.807. Under the procedure, the SDNs “provide arguments and evidence as to why “insufficient basis exists for the designation” and may “propose remedial steps … such as corporate reorganization, resignation of persons from positions in a blocked entity, or similar steps, which the person believes would negate the basis for designation.” The precedents are few, and there is no set time limit for the process. However, OFAC has de-listed SDNs in the past based on formal requests under § 501.807.

Where the revised Cuba sanctions permit activities or trade, it will be important for companies and individuals to be vigilant for SDN involvement. However, should a situation arise where an SDN is the only, or most capable, partner for a U.S. company, that company can reach out to counsel in Washington, D.C., to discuss the potential for de-listing. There are paths to engage with U.S. policy makers to gauge the prospects for a given party, and the SDN can petition for removal. U.S. officials also may consider licenses to authorize specific business with SDNs. The involvement of U.S. companies can make a significant difference in the U.S. response versus an SDN approaching on its own. However, persons subject to U.S. jurisdiction should be careful not to transact with or facilitate on behalf of any SDN. This requires careful compliance planning.

Given the above, expect those interested in Cuba to continue to carefully watch any changes to the SDN List for clues to U.S. policy, even if it only turns out to be a defunct company or sunken ship.

The following deletions have been made to OFAC’s SDN List:

ABASTECEDORA NAVAL Y INDUSTRIAL, S.A. (a.k.a. ANAINSA), Panama [CUBA].
ANAINSA (a.k.a. ABASTECEDORA NAVAL Y INDUSTRIAL, S.A.), Panama [CUBA].
ABDELNUR, Nury de Jesus, Panama (individual) [CUBA].
AGENCIA DE VIAJES GUAMA (a.k.a. GUAMA TOUR; a.k.a. GUAMATUR, S.A.; a.k.a. VIAJES GUAMA TOURS), Bal Harbour Shopping Center, Via Italia, Panama City, Panama [CUBA].
VIAJES GUAMA TOURS (a.k.a. AGENCIA DE VIAJES GUAMA; a.k.a. GUAMA TOUR; a.k.a. GUAMATUR, S.A.), Bal Harbour Shopping Center, Via Italia, Panama City, Panama [CUBA].
GUAMATUR, S.A. (a.k.a. AGENCIA DE VIAJES GUAMA; a.k.a. GUAMA TOUR; a.k.a. VIAJES GUAMA TOURS), Bal Harbour Shopping Center, Via Italia, Panama City, Panama [CUBA].
GUAMA TOUR (a.k.a. AGENCIA DE VIAJES GUAMA; a.k.a. GUAMATUR, S.A.; a.k.a. VIAJES GUAMA TOURS), Bal Harbour Shopping Center, Via Italia, Panama City, Panama [CUBA].
ALEGRIA DE PIO (Naviera Maritima de Arosa, Spain) (vessel) [CUBA].
AVALON, S.A., Colon Free Zone, Panama [CUBA].
BEWELL CORPORATION, INC., Panama [CUBA].
CARBONICA, S.A., Panama [CUBA].
CARIBBEAN HAPPY LINES (a.k.a. CARIBBEAN HAPPY LINES CO.), Panama [CUBA].
CARIBBEAN HAPPY LINES CO. (a.k.a. CARIBBEAN HAPPY LINES), Panama [CUBA].
CARIBSUGAR, S.A., Panama [CUBA].
CARISUB, S.A., Panama [CUBA].
CASTELL VALDEZ, Osvaldo Antonio, Panama (individual) [CUBA].
CHAMET IMPORT, S.A., Panama [CUBA].
COMPANIA PESQUERA INTERNACIONAL, S.A., Panama [CUBA].
DELGADO ARSENIO, Antonio, Panama (individual) [CUBA].
DUQUE, Carlos Jaen, Panama (individual) [CUBA].
FAMESA INTERNATIONAL, S.A., Panama [CUBA].
GLOBAL MARINE OVERSEAS, INC., Panama [CUBA].
HERMANN SHIPPING CORP., INC., Panama [CUBA].
HYALITE (Whiteswan Shipping Co., Ltd., Cyprus) (vessel) [CUBA].
INVERSIONES LUPAMAR, S.A. (a.k.a. LUPAMAR INVESTMENT COMPANY), Panama [CUBA].
LUPAMAR INVESTMENT COMPANY (a.k.a. INVERSIONES LUPAMAR, S.A.), Panama [CUBA].
KOL INVESTMENTS, INC., Miami, FL, United States [CUBA].
LOUTH HOLDINGS, S.A., Panama [CUBA].
PADRON TRUJILLO, Amado, Panama (individual) [CUBA].
PESCADOS Y MARISCOS DE PANAMA, S.A. (a.k.a. PESMAR S.A.; a.k.a. PEZMAR S.A.), Panama City, Panama [CUBA].
PESMAR S.A. (a.k.a. PESCADOS Y MARISCOS DE PANAMA, S.A.; a.k.a. PEZMAR S.A.), Panama City, Panama [CUBA].
PEZMAR S.A. (a.k.a. PESCADOS Y MARISCOS DE PANAMA, S.A.; a.k.a. PESMAR S.A.), Panama City, Panama [CUBA].
PIRAMIDE INTERNATIONAL, Panama [CUBA].
RADIO SERVICE, S.A., Panama [CUBA].
RECICLAJE INDUSTRIAL, S.A., Panama [CUBA].
ROSE ISLANDS (Shipley Shipping Corp., Panama) (vessel) [CUBA].
SIBONEY INTERNACIONAL, S.A., Edificio Balmoral, 82 Via Argentina, Panama City, Panama; Venezuela [CUBA].
STERN, Alfred Kaufman, Prague, Czech Republic (individual) [CUBA].
TALLER DE REPARACIONES NAVALES, S.A. (a.k.a. TARENA, S.A.), Panama City, Panama [CUBA].
TARENA, S.A. (a.k.a. TALLER DE REPARACIONES NAVALES, S.A.), Panama City, Panama [CUBA].
TECHNIC DIGEMEX CORP., Calle 34 No. 4-50, Office 301, Panama City, Panama [CUBA].
TEMIS SHIPPING CO., Panama [CUBA].
TRAVEL SERVICES, INC., Hialeah, FL, United States [CUBA].
TREVISO TRADING CORPORATION, Edificio Banco de Boston, Panama City, Panama [CUBA].
HEYWOOD NAVIGATION CORPORATION, c/o MELFI MARINE CORPORATION S.A., Oficina 7, Edificio Senorial, Calle 50, Apartado 31, Panama City 5, Panama [CUBA].
POCHO NAVIGATION CO. LTD., c/o EMPRESA DE NAVEGACION MAMBISA, Apartado 543, San Ignacio 104, Havana, Cuba [CUBA].
BROTHERS (f.k.a. TULIP ISLANDS) (C4QK) Bulk Carrier 25,573DWT 16,605GRT Cyprus flag (Ciflare Shipping Co. Ltd.) (vessel) [CUBA].
TULIP ISLANDS (a.k.a. BROTHERS) (C4QK) Bulk Carrier 25,573DWT 16,605GRT Cyprus flag (Ciflare Shipping Co. Ltd.) (vessel) [CUBA].
CARIBBEAN SALVOR (9H2275) Tug 669DWT 856GRT Malta flag (Compania Navegacion Golfo S.A.) (vessel) [CUBA].
HARNMAN H (f.k.a. PEONY ISLANDS) (5BXH) Bulk Cargo 26,400DWT 15,864GRT Cyprus flag (PEONY SHIPPING CO. LTD. (SDN)) (vessel) [CUBA].
PEONY ISLANDS (a.k.a. HARNMAN H) (5BXH) Bulk Cargo 26,400DWT 15,864GRT Cyprus flag (PEONY SHIPPING CO. LTD. (SDN)) (vessel) [CUBA].
NEW GROVE (f.k.a. KASPAR) (P3QJ3) General Cargo 1,909DWT 754GRT Cyprus flag (Oakgrove Shipping Co. Ltd.) (vessel) [CUBA].
KASPAR (a.k.a. NEW GROVE) (P3QJ3) General Cargo 1,909DWT 754GRT Cyprus flag (Oakgrove Shipping Co. Ltd.) (vessel) [CUBA].
PINECONE (f.k.a. GRETE) (P3QH3) General Cargo 1,941DWT 753GRT Cyprus flag (Pinecone Shipping Co. Ltd.) (vessel) [CUBA].
GRETE (a.k.a. PINECONE) (P3QH3) General Cargo 1,941DWT 753GRT Cyprus flag (Pinecone Shipping Co. Ltd.) (vessel) [CUBA].
RAVENS (9H2485) General Cargo 2,468DWT 1,586GRT Malta flag (ATAMALLO SHIPPING CO. LTD. (a.k.a. ANTAMALLO SHIPPING CO. LTD.) (SDN)) (vessel) [CUBA].
TEPHYS (f.k.a. PAMIT C) (H2RZ) General Cargo 15,123DWT 8,935GRT Cyprus flag (Tephys Shipping Co. Ltd.) (vessel) [CUBA].
PAMIT C (a.k.a. TEPHYS) (H2RZ) General Cargo 15,123DWT 8,935GRT Cyprus flag (Tephys Shipping Co. Ltd.) (vessel) [CUBA].
WEST ISLANDS (C4IB) General Cargo 15,136DWT 9,112GRT Cyprus flag (WEST ISLAND SHIPPING CO. LTD. (SDN)) (vessel) [CUBA].

On February 12, Sen. Amy Klobuchar (D-MN) introduced Senate Bill 491, the Freedom to Export to Cuba Act. This bipartisan bill is intended to lift the broad embargo on U.S. trade and investment in Cuba, but leaves in place many of the restrictions related to human rights and property claims, as well as those imposed by other laws and regulations for other reasons other than the embargo, such as Cuba’s state sponsorship of terrorism. In proposing this type of legislation, its sponsors hoped to take an incremental step to open up U.S.-Cuba trade without addressing the most sensitive issues.

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In December 2014, President Obama made an unexpected announcement signaling a “new course” for Cuba after more than fifty years of comprehensive U.S. sanctions. The changes to U.S. sanctions and export policy under the Cuban Assets Control Regulations and Export Administration Regulations (EAR) implemented in January 2015, although limited, opened new business opportunities for U.S. companies. Further liberalization may be considered in the future with Congressional support, although that is the subject of heated discussions in Washington, D.C. For now, it will make sense for many companies to consider strategic first steps in Cuba, including for intellectual property protection.

When change comes, chance favors the prepared.

First, under current Cuban law, certain U.S. persons and entities are allowed to file a trademark application in Cuba, even when one is not using the trademark in Cuba. Second, being first to file under Cuba’s regime will help preempt opportunists who may seek to file a trademark application for your own trademark. Third, the Cuban trademark application process is protracted, taking months or years, and will slow as the system floods with new applications in the expectation Cuba will soon become an eagerly sought market. Fourth, the adversarial process of eradicating pirated marks will be protracted.

Assuming there are no already-existing blocking marks, the costs to register a mark are relatively low. Protection of your valuable intellectual property—your brand and the customer goodwill it symbolizes—will allow your company to be in a position to conduct business in this new market, whenever it opens, and defend your rights against pirates looking to cash in on your own brand.

With this client alert, we hope to inspire you to file for your trademarks in Cuba, before someone else does and you have to pay to acquire what is rightfully yours.

Cuban Economic Embargo

The current U.S. sanctions program authorizes U.S. persons to apply for and maintain trademark registrations in Cuba, as well as to take certain specified actions necessary to protect their intellectual property. Usually, independent “trademark agents” in Havana are used to file the applications. Under the sanctions system, transmitting payment to the agents for their services has in some cases been difficult, but the financial transactions restrictions may be easing presently.

What If Someone Has Filed An Application For Your Trademark?

The Cuban trademark system is mostly untested from the United States perspective, obviously because of the general sanctions. Even though the U.S. regulations permit trademark registration in Cuba, many U.S. companies have not seen the economic motivation to protect trademarks, being unable to trade in Cuba. Now that the prospects are rising, so is interest in owners registering their marks, and so, too, the interest in pirates exploiting their opportunities.

The Cuban trademark system, described by the International Trademark Association (INTA), is basically like most other countries in the world. Cuba and the United States both are parties to the same major trademark treaty systems. Like most countries, Cuba has a “first to file” system, giving preference to those who are first to file an application for a mark. As a general rule, U.S. trademark law, based on “common law,” is quite unusual in that it recognizes rights in unregistered marks. Most of the rest of the countries in the world, including Cuba, do not generally recognize “common law” or unregistered rights. Thus owning a registration there is crucial to effectively protecting your brand.

Cuban law does provide various procedures to object to applications or registrations of conflicting marks. Such procedures have not been much used by U.S. companies to date. As with applications, one can expect adversarial proceedings to be increasingly protracted. The costs are relatively low at this point, but delay in itself is costly, particularly if there are infringers and counterfeiters at large in the marketplace.

Generally, the more famous your brand is internationally, the higher your chances of blocking a mark in a country where you do not have your own prior registration. The fame of a brand, however obvious it may seem, is usually a question of fact requiring proof, often substantial proof, to satisfy a tribunal in a first-to-file jurisdiction. Also, however obvious it might seem, it can be difficult to prove that an opportunist is in fact a “bad faith” pirate. In “first to file” systems around the world, the first to file has the benefit of the doubt.

Conclusion

For all these reasons, it is highly advisable to verify your eligibility under federal regulations to engage in trademark protection activities in Cuba; to apply to register your important brands in Cuba if you hope to do business there; and to initiate proceedings to try to expunge pirated marks which have already been registered in Cuba by others.

Among the amendments to the Cuban Assets Control Regulations published by OFAC on January 16 is a provision (section 515.582) that provides that “[p]ersons subject to U.S. jurisdiction are authorized to engage in all transactions, including payments, necessary to import certain goods and services produced by independent Cuban entrepreneurs as determined by the State Department as set forth on the State Department’s Section 515.582 List ….” At the time of the CACR revisions, the State Department had not yet published that list.

On February 13, the State Department published the Section 515.582 List. The State Department’s announcement actually is a negative list of categories of the U.S. tariff schedules that are not authorized. Items covered by non-listed categories are permitted.

In fact, the majority of tariff categories are excluded. The categories that are allowed cover product categories such as leather goods, wood items, shoes and works of art. Cigar imports remain prohibited.

The United States does not grant any tariff benefits to Cuba, and imports from that country are subject to relatively high “Column 2” rates. Persons carrying authorized items in their luggage when returning from Cuba may be able to apply the personal use exemption, but purchases of products in commercial quantities will remain complicated.

Note that the State Department’s notice emphasizes that persons importing goods under Section 515.582 “must obtain documentary evidence that demonstrates the entrepreneur’s independent status, such as a copy of a license to be self-employed issued by the Cuban government or, in the case of an entity, evidence that demonstrates that the entrepreneur is a private entity that is not owned or controlled by the Cuban government.”