Emerging Markets Law

How Could Trump Change U.S. Policy on Cuba?

Posted In Cuba

A number of writers have recently looked at the possibilities for changes in U.S. policy coming out of the Trump administration. 

In that regard, it’s important to note how fragile the current arrangement is with Cuba and how easily the new administration could implement changes.

As previously discussed, the U.S.-Cuba embargo is a product of legislative sanctions authorized by the Trading with the Enemy Act of 1917, (TWEA) 50 U.S.C. App. §§ 1—44. TWEA restricts trade with countries hostile to the United States and authorizes the president to restrict trade between the US and its enemies in times of war. IEEPA grants somewhat broader powers to the president and is invoked during states of emergency when the country is not at war.

On October 14, 2016, President Obama issued a Presidential Policy Directive stating:

“The United States Government will seek to expand opportunities for U.S. companies to engage with Cuba. The embargo is outdated and should be lifted. My administration has repeatedly called upon the Congress to lift the embargo, and we will continue to work toward that goal. While the embargo remains in place, our role will be to pursue policies that enable authorized U.S. private sector engagement with Cuba's emerging private sector and with state-owned enterprises that provide goods and services to the Cuban people. Law enforcement cooperation will ensure that authorized commerce and authorized travelers move rapidly between the United States and Cuba. Although we recognize the priority given to state-owned enterprises in the Cuban model, we seek to encourage reforms that align these entities with international norms, especially transparency.”

“United States regulatory changes have created space for the Cuban government to introduce comparable changes. In tandem with the Department of the Treasury's regulatory change to expand Cuba's access to the U.S. financial system and U.S. dollar transit accounts, the Cuban government announced in early 2016 plans to eliminate the 10 percent penalty on U.S. dollar conversion transactions, subject to improved access to the international banking system. We will sustain private and public efforts to explain our regulatory changes to U.S. firms and banks, Cuban entrepreneurs, and the Cuban government.”

In January 2015, the U.S. Commerce Department amended its Export Administration Regulations (EAR) and the Treasury Department amended its OFAC Cuba regulations to begin to liberalize U.S. trade restrictions with Cuba in support of the President’s December 17, 2014, declaration of a new approach towards Cuba. The new rules, issued piecemeal in 2015 and 2016, do nothing to alter the statutory U.S. embargo against Cuba. Only Congressional action can alter that law.

After the inauguration, the new President can easily amend or revoke the former administration’s Policy Directive and issue new regulations under TWEA. Such changes could range from a restoration of trade sanctions as they existed before December 17, 2014, to a more or less-stringent approach.

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