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Sergio Leiseca and
David R. Garcia (Miami)
Tel: (1-305) 789-8900
Fax: (1-305) 789-8953
The President signed into law the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act, commonly known as the "Helms-Burton Bill" on 12 March 1996. The following statutory provisions will have a significant impact on the domestic and international business communities: New U.S. Sanctions Against Cuba Prohibition Against Indirect Financing of Cuba Ventures. No person subject to the jurisdiction of the United States may knowingly extend a loan or other financing to any person for the purpose of financing transactions involving any "confiscated property". Violators may be penalized with forfeiture of assets and fines of up to $50,000.
Codification of Existing Cuba Sanctions under U.S. Law. [Section 102(h)] Removal of U.S. sanctions against Cuba, including the Cuban Assets Control Regulations, will require Congressional approval, until Messrs. Fidel and Raul Castro are removed from power, and a democratic transition (as defined under Title II, Section 204) is in place. Previously, authority for the Cuban Assets Control Regulations, which embody the U.S. trade embargo, derived from Executive Orders, which means they could have been removed by Executive Order.
Sugar Imports; Prohibition on Importation of Cuban Sugar Products. [Section 110] The Congress noted, and emphasized, that the President is required not to allocate any of the U.S. sugar import quota to any country that is a net importer of sugar absent verification that the respective country does not import sugar produced in Cuba for reexport to the United States. It similarly noted and emphasized that (i) existing U.S. law prohibits importation into the United States of any product made or derived in whole or in part of any article grown, produced or manufactured in Cuba, and (ii) the statement of administrative action accompanying NAFTA specifically states that its rules of origin will not affect the U.S. trade embargo of Cuba.
Sanctions Against Countries Assisting Cuba. [Section 102(G)] The President is now authorized to deny eligibility for assistance under the Foreign Assistance Act of 1961, and assistance or sales under the Arms Export Control Act, to countries implementing debt-for-equity swaps with the Cuban government enabling the latter to exchange equity or equivalent interests and participations in Cuban ventures for Cuban sovereign debt. Protection of U.S. Property Rights U.S. Right of Action Against "Traffickers" in "Confiscated" Properties.
[Section 302] Generally, any U.S. party, including but not limited to claimants certified by the U.S. Foreign Claims Settlement Commission, may file a claim in U.S. federal district court against the non-U.S. party deemed to be "trafficking" in the "confiscated" "property" of the U.S. national after 1 November 1996 (3 months following the effective date of 1 August). The concept of "property" is broadly defined to include any tangible as well as intangible asset having a value of at least $50,000, and excluding only residential properties. Liability will be the greater of (i) the value of the property as evidenced by the U.S. national's claim, if any, certified by the U.S. Foreign Claims Settlement Commission, plus interest, or (ii) the amount established by the U.S. national, plus interest, or (iii) the fair market value of the property, calculated as being the then current value of the property, or the value of the property when confiscated, plus interest, whichever is greater. It may be tripled in the event the defendant receives notice of the claim of ownership from the U.S. national. The legislation presents a significant potential exposure to any non-U.S. company directly or indirectly engaged in business in or with Cuba, or a Cuban state enterprise. In practical terms, any U.S. asset directly or indirectly held by the non-U.S. company may be placed at risk if a U.S. federal district court were to be persuaded that, by virtue of participation in or managing a Cuban joint venture, or purchasing Cuban origin product for its use or resale, the non-U.S. company, directly or indirectly, is using, benefiting or generally "trafficking" in "confiscated" "properties." The possibility arises because of the very broad definitions of the concepts "confiscated" and "traffics" or "trafficking." They are defined as follows, in relevant parts:
CONFISCATED -As used in titles I and III, the term "confiscated" refers to:
(A) the nationalization, expropriation, or other seizure by the Cuban government of ownership or control of property, on or after 1 January 1959
(i) without the property having been returned or adequate and effective compensation provided; or
(ii) without the claim to the property having been settled pursuant to an international claims settlement agreement or other mutually accepted settlement procedure; and
(B) the repudiation by the Cuban government of, the default by the Cuban government on, or the failure by the Cuban government to pay, on or after 1 January 1959
(i) a debt of any enterprise which has been nationalized, expropriated, or otherwise taken by the Cuban government;
(ii) a debt which is a charge on property nationalized, expropriated, or otherwise taken by the Cuban government; or
TRAFFICS
(A) As used in title III, a person or entity "traffics" in property if that person or entity knowingly and intentionally
(i) sells, transfers, distributes, dispenses, brokers, manages, or otherwise disposes of confiscated property, or purchases, leases, receives, possesses, obtains control of, manages, uses, or otherwise acquires or holds an interest in confiscated property;
(ii) engages in a commercial activity using or otherwise benefiting from confiscated property; or
(iii) causes, directs, participates in, or profits from, trafficking (as described in clauses (i) and (ii)) by another person, or otherwise engages in trafficking (as described in clauses (i) and (ii)) through another person, without the authorization of the United States national who holds claim to the property.
Presidential Suspension. The President is authorized to delay implementation of Title III for a period of no more than 6 months if he determines that such a delay is "necessary for the national interest and will expedite a transition to democracy in Cuba." The President can subsequently suspend the right of action for periods of no more than 6 months each. Any suspension must be submitted to Congress 15 days before taking effect.
A Presidential suspension of Title III provisions would not nullify cases filed in U.S. federal district court by claimants before the date of such suspension. Accordingly, on 15 July President Clinton will confront a difficult election year decision regarding consideration of a temporary delay in implementation of Title III.
Denial of U.S. Entry Visas to Foreign Traffickers. Title IV, which is immediately effective, mandates denial of U.S. entry visas to individuals who "traffic" in property in Cuba "confiscated" from U.S. nationals. The visa provision applies to corporate officers, principals or shareholders with a controlling interest in any firm trafficking in confiscated U.S. property.
Reporting Requirements
The LIBERTAD Act mandates completion of numerous and extensive reports on current trade and investment activity in Cuba, including the following reports by the Executive: * A report [under Section 108], to be submitted to U.S. House and Senate Commerce committees by 13 June 1996 (and 1 January of each year thereafter), detailing: all bilateral foreign aid to Cuba; foreign trade and debt-equity swaps with Cuba; joint ventures completed or under consideration by foreign nationals in Cuba including the location of facilities, terms of agreement and names of joint venture partners; a determination as to whether identified joint ventures involve U.S. claims; measures taken to keep goods produced on confiscated U.S. property from entering the U.S.; and a list of countries with military cooperation agreements with Cuba.
* A report [under Section 202(g)], to be submitted to Congress by 13 September 1996, outlining plans regarding trade with, and assistance to Cuba. Upon determination that a democratic government is in place in Cuba the President will submit a report to the House Ways and Means and Senate Finance committees describing existing barriers to U.S. trade and investment with a democratic Cuba and consideration of Most Favored Nation trade status, NAFTA accession, and other trade agreements with Cuba.
* A progress report [under Section 106(a)], to be submitted to Congress by 13 June 1996, on withdrawal of military/technical personnel from the Juragua nuclear plant.
* A semi-annual report by the President [under Section 102(6)] to Congress detailing payments to Cuba regarding authorized transmission of telecommunications signals to Cuba.
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