On June 20, 2016, U.S. President Barack Obama will deliver the keynote address at the meeting of the international trade and investment delegation. This event is being organized by the United States – India Imports Council (USIIC).

The USIIC will be taking a trade and investment delegation composed of 18 members from Gujarat, India, to the U.S.  The delegation will attend SelectUSA, a project of the U.S. Department of Commerce, where the U.S. will present its trade benefits to over 50 other countries. The goal is to promote foreign direct investment and trade in the U.S.  The delegates from Gujarat represent several business sectors, including infrastructure, mining, logistics, pharmaceuticals, automotive, and financial services.

For more information about the USIIC and the trade relationship between the U.S. and India, visit the USIIC website.

Copyright: paulprescott72 / 123RF Stock Photo
Copyright: paulprescott72 / 123RF Stock Photo

On Thursday, April 28, 2016, the United States and Sri Lanka adopted a joint plan to boost trade between the countries. U.S. Trade Representative Michael Froman and Sri Lanka Minister of Development Strategies and International Trade Malik Samarawickrama announced the deal after a meeting in Washington, D.C, under the nations’ bilateral Trade and Investment Framework Agreement.

The goal of the plan is to expand trade and encourage foreign investment. The plan also focuses on promoting business in Sri Lanka. The plan aims to make Sri Lanka’s business and trade sectors more accessible to women and to promote workers’ rights and ethical practices in the work force.

The two countries aim to achieve the goals of the plan over a five year period, and they will release their proposals for implementing the plan later this year.

The U.N. Security Council has delayed its vote on the proposed sanctions against North Korea until Wednesday, at the request of Russia.

Last week, the United States and China proposed expanded sanctions against North Korea, which include mandatory inspection of cargo leaving or entering North Korea, by sea or air. The United States and China had spent seven weeks negotiating the new sanctions in response to North Korea’s nuclear tests.

The U.N. Security Council, composed of 15 member nations, will vote on the resolutions on Wednesday. The vote was delayed after Russia invoked a procedural 24-hour review of the resolutions.  Russia has requested more time to review the lengthy text of the resolutions and consider the changes to the current sanctions.

Copyright: hypermania2 / 123RF Stock Photo
Copyright: hypermania2 / 123RF Stock Photo

The United States and China agreed on draft resolutions, which, if accepted by the United Nations Security Council, would result in increased sanctions against North Korea. The United Nations has enforced sanctions against North Korea since 2006 because of its multiple nuclear tests and rocket launches. Currently there is a U.N. embargo on arms exports to and imports from North Korea, and Pyongyang (North Korea’s capital) is banned from importing and exporting nuclear and missile technology and is not allowed to import luxury goods.

The United Nations Security Council has adopted four major resolutions since 2006 that impose and strengthen sanctions on North Korea. These resolutions are aimed at preventing North Korea from continuing to develop its nuclear weapons program, and they also call on Pyongyang to dismantle its nuclear program and refrain from ballistic missile tests.

In response to the claim in January of this year that North Korea tested a nuclear weapon, the United States and China began intense negotiations to once again strengthen sanctions against North Korea. The United States and China have reached an agreement, but to-date the text of the resolution proposed by the two countries has not been supplied to the public.  Diplomats believe that the resolutions should come before the United Nations Security Council within the coming days.

Skepticism exists as to whether the proposed new sanctions would actually curb North Korea’s nuclear program, and whether other countries would enforce the sanctions. However, if adopted, the resolutions would be legally binding.

The proposed sanctions would require countries to inspect all North Korean cargo entering or leaving a country. Additionally, 31 ships that have been identified as trafficking in illegal nuclear goods will be banned from docking in any port.  The resolutions are expected to call for the blacklisting of certain individuals and entities.  The resolutions would also prohibit countries from sending any item to North Korea that could be used by the North Korean army, like trucks that could be repurposed for military use.

Despite the new sanctions, North Korea would still be able to buy oil and sell coal and iron ore, provided that such materials are not being used to fund its nuclear weapons program, something which would be difficult to prove.

 

President Obama announced on Thursday that he would travel to Cuba in March and meet with Cuban President Raúl Castro. The two men first met face-to-face during a summit in Panama last year, but President Obama has never visited Cuba. In fact, President Obama will be the first sitting American president to visit Cuba in 88 years. The last president to visit Cuba was President Coolidge who attended the Pan American Conference in Havana in January 1928.

Recently, there has been significant communication between the two countries, including American officials traveling to Havana on Tuesday to sign a pact that will for the first time in decades allow scheduled commercial flights between the two countries. Cuban officials are also in Washington this week to discuss ways of expanding business ties between the two countries.

Despite the President’s announcement in December 2014 regarding significant changes in the U.S. policy toward Cuba to normalize relations between the two countries, the Cuba embargo remains in place. Most transactions between the United States, or persons subject to U.S. jurisdiction, and Cuba continue to be prohibited, and OFAC continues to enforce the prohibitions of the Cuban Assets Control Regulations (CACR).

Effective on January 27, 2016, there have been several changes to the trade relationship between the two countries. These changes are targeted at further engaging and empowering the Cuban people by facilitating authorized travel to Cuba; certain authorized commerce; and the flow of information to, from, and within Cuba.  For more information about the loosening of Cuban sanctions, see our earlier post here.

As U.S. sanctions on Cuba continue to thaw, some long standing disputes have been reignited.  Perhaps chief among them is the decades-old battle over the trademark for “Havana Club” rum.

The original distillery that produced Havana Club rum was expropriated by the Castro regime in the 1960s.  After the original distiller’s trademark registration had lapsed, the Cuban government registered the mark in the United States in 1976.  The Cuban government assigned its rights in the mark to spirit producer Pernod Ricard in 1993.  Meanwhile, distiller Bacardi Ltd., which had fled Cuba in the 1950s, acquired rights to the Havana Club mark from the family of the original distiller in 1994.

After litigation in U.S. courts over the right to use the mark ensued, U.S. Congress passed the Omnibus Appropriations Act in 1998, which included Section 211, known as the “Bacardi Act.” Section 211, which was reportedly crafted at the behest of Bacardi, protected the trademarks of companies which had been expropriated by the Cuban government and, in turn, solidified Bacardi’s claim to the Havana Club mark through its connection to the original distillers.  In 2001, the World Trade Organization found that Section 211 was illegal because it was aimed at a single country, Cuba. The United States has, however, largely ignored the WTO ruling.

As part of the recent reduction of restrictions on Cuba, Pernod Ricard (through a joint venture with Cubaexport) has been been permitted to renew the Havana Club once owned by the Cuban government.  In a recent letter to the U.S. Treasury Secretary and the U.S. Secretary of State, twenty-five members of Congress demanded an explanation as to how OFAC has permitted Cubaexport-Pernod Ricard to renew the Havana Club mark in light of Section 211.  The members of Congress, largely representing Florida districts, are particularly concerned the U.S. government is ignoring Section 211 and is instead choosing to recognize the rights once held by the Castro regime which expropriated the goodwill of the brand decades ago.  Neither the Department of Treasury nor the State Department has yet issued a response.

The Havana Club saga is a cautionary tale which demonstrates that even though formal U.S. regulations are being scaled back, the broader relationship between the countries remains politically charged and full of pitfalls.  Navigating both the black letter regulations and the larger landscape of Cuban-U.S. relations requires skilled advocates and patience as “normalization” continues to take root.

Effective today, January 27, 2016, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) and the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) have further reduced sanctions affecting U.S. relations with Cuba.  The amendments to the Cuban Assets Control Regulations (CACR) and Export Administration Regulations (EAR) represent significant steps toward the liberalization of commerce and travel which were first announced by the Obama administration in December 2014.

Cuba's flag
Copyright: mishchenko / 123RF Stock Photo

Among the reductions in current regulations are new allowances for financing, exportation, and travel.

  • Financing  – Restrictions on payment and financing terms for authorized non-agricultural exports and reexports have been removed and U.S. banking institutions are now permitted to provide financing for such transactions.  The U.S. Department of Commerce has indicated that payments of cash in advance; sales on an open account; and financing by third-country financial institutions or U.S. financial institutions will all permissible under the newly revised regulations.
  • Exports – OFAC and BIS have expanded general licenses for goods and services which aid the Cuban people.  General licenses related to the export and reexport of telecommunications items, agricultural items, civil aviation safety items, and news gathering software and technology items have all be expanded.  OFAC and BIS have also announced a case-by-case licensing policy which will facilitate the exportation of goods (including artistic and cultural endeavors as well as education, infrastructure, public health, and sanitation items) which will benefit the Cuban people even if their exportation necessarily involves the Cuban government or other state-owned enterprises with whom commercial interaction is generally prohibited under current U.S. regulations.
  • Travel – OFAC authorized travel for additional business-related reasons as well as authorizing additional transactions which are incident to authorized travel.  Among the newly authorized reasons for travel are the production of media and artistic programs (including, television programs, films, music recordings, the creation of artworks by Cuban artists), and the organization of professional conferences, sports competitions, artistic exhibitions, and public performances, as well as additional types of humanitarian projects such as disaster preparedness projects. It is now also permissible to travel to Cuba and engage in market research, marketing, sales and contract negotiation, delivery, installation, and leasing of items which are incident to otherwise authorized activities in Cuba.

Although relations between the U.S. and Cuban continue to take strides toward liberalization, numerous sanctions regulations remain in full effect and can carry significant penalties if violated.  Accordingly, companies looking for opportunities in Cuba must, with the the help knowledgeable counsel, remain vigilant in their adherence to existing regulations despite the progress of the past year and the promising trend of rapid deregulation.

As of December 18, 2015, U.S. companies will no longer be required to obtain a license to export crude oil.  President Obama signed into law the Consolidated Appropriations Act, 2016 (H.R. 2029) that included Section 101 of Division O.  The new law ends the 40-year ban on crude oil exports from the U.S.

Effective immediately, a Department of Commerce license is no longer required to export crude oil.  Crude oil is now classified as EAR99.  The classification as EAR99 indicates that crude oil is subject to the Export Administration Regulations (EAR), but is not listed with a specific Export Control Classification Number on the Commerce Control List.  Most exports of crude oil may now be made as NLR (no license required).

Why Is This Important

The law makes it easier for U.S. companies to export crude oil, and it also makes it difficult for the U.S. government to reimpose such restrictions. The President can only reimpose export licensing requirements or other restrictions on the export of crude oil from the U.S. for a period of one year or less.  Additionally, the President and his administration would need to take affirmative actions to reinstate the export ban, including declaring a national emergency and issuing a notice of the declaration of such emergency in the Federal Register.

Things to Remember

  1. The new law excludes shipments of crude oil to embargoed or sanctioned countries or persons, including those end-users and end-uses covered in parts 744 and 746 of the EAR. U.S. companies will still need authorization to export to these countries or persons.
  2. Companies holding current licenses for crude oil exports should be aware of section 750.7(i) of the EAR regarding terminating license conditions.  Even though crude oil has become eligible for export without a license, the export still remains subject to the EAR and any export, reexport, or disposition of the crude oil must be made in accordance with the requirements of the EAR.
  3. This change does not relieve an exporter or reexporter of its responsibility for any export violations that might have occurred prior to December 18, 2015.

Ostensibly, Investor-State Dispute Settlement (ISDS) provisions in international trade agreements create a necessary judicial mechanism which empowers international investors to bring actions against host states who act arbitrarily, to the detriment of the international investment.  ISDS has, however, long been criticized as a non-transparent, privately run judicial system through which wealthy investment entities can extract substantial judgments from hosts states who change their national policies.

A recent article in the Canadian Bar Association’s National Magazine, traces these these historic tensions in North America and Europe ,as well a growing number of states which are pushing on the use of ISDS after being burned by significant judgments.

As new international trade agreements, such as the Trans-Pacific Partnership, are discussed and debated is important that investors understand what recourse they may have when investing abroad and whether the protections they have historically enjoyed will still exists in the coming years and decades.