On January 11, 2021, the US State Department published a press release announcing Cuba’s designation as a State Sponsor of Terrorism (“SST”) for allegedly providing support for acts of international terrorism in granting safe harbor to terrorists. Cuba was originally designated as an SST in 1982 but was delisted in 2015 by President Barack Obama.
Cuba’s SST designation follows increasingly stringent sanctions imposed by the US Government including restriction on remittances to Cuba and further restrictions on travel. For more information, see our recent blog posts regarding the US embargo of Cuba here.
Legal Implications of the SST Designation
Cuba’s SST designation triggers the following sanctions and restrictions:
- A licensing requirement for exports or reexports of goods or technology that could significantly enhance Cuba’s military capability or ability to support terrorism;
- A prohibition on exports and reexports to Cuba of defense articles and defense services and related technology under the International Traffic in Arms Regulations;
- A requirement for the United States to oppose loans to Cuba by the World Bank and other international financial institutions;
- A prohibition on any assistance to Cuba under the Food for Peace, Peace Corps, and Export-Import Bank programs;
- A prohibition on US Persons (i.e., entities organized under US laws and their non-US branches; individuals and entities physically located in the United States; and US citizens and permanent resident aliens, wherever located or employed) from engaging in financial transactions with the Cuban government without a license from the Treasury Department’s Office of Foreign Assets Control, under the Terrorism List Governments Sanctions Regulations; and
- An exception to sovereign immunity that would allow individual US Persons to bring claims against the Cuban government in US courts for personal injury and death resulting from terrorism or material support for terrorism.
The legal implications of Cuba’s SST designation are likely to be limited. Many of the above activities have remained prohibited by US sanctions or export controls even after Cuba was delisted as an SST in 2015. For example, an SST designation normally triggers a change under the Export Administration Regulations to claim US jurisdiction over non-US items that incorporate more than 10% controlled US content rather than the 25% de minimis threshold used for most other countries. However, the Trump Administration imposed the 10% de minimis threshold on Cuba in October 2019 (see here) even though Cuba was not then an SST.
Increased Scrutiny for US-Listed Companies from the US Securities and Exchange Commission
Cuba’s SST designation may lead to increased scrutiny for US-listed companies if they engage in dealings with Cuba. Specifically, the Office of Global Security Risk (“OGSR”) within the US Securities and Exchange Commission may periodically request information from US-listed companies regarding material dealings with SST countries if such dealings have not been previously disclosed in a company’s regular annual and quarterly filings. Accordingly, US-listed companies that receive OGSR inquiries can now expect them to ask about Cuba transactions.