For decades, it would have been almost impossible for a US company to sell anything to Cuba. Today, a slight easing of the embargo allows the sale of agricultural, food, and medical products to the island. However, even trade with Cuba in these areas remains challenging:

  • Sales and exports or re-exports to Cuba require a license from the U.S. Department of Commerce;
  • Once licensed, agricultural and food sales must be paid for cash-in-advance or financed through a third-party bank;
  • A license is still required for travel by authorized US persons to Cuba.

As a Virginia farmer who has begun to export apples to Cuba can attest, all of this translates to a lot of paperwork, delays, and other challenges for authorized sellers to Cuba.

Trading with the ‘Wrong’ Country or Person

In our posts and seminars, I caution traders against doing business with the ‘wrong’ country.  The United States maintains several embargoes or sanctions programs.

An embargo or sanction program is a total or partial prohibition against trading or doing business with a given country, or individuals or entities within a country. The policy intention is to punish or sanction the identified country, or individuals, for what the international community has labeled or the United States considers “poor” behavior.

The United States maintains a unilateral embargo against Cuba, the only US-sanctioned country in the Western Hemisphere. Just about every other country in the world, including U.S. NAFTA partners, Canada and Mexico, trades legally with Cuba.

The United States also participates in United Nations universal embargoes against such countries, or entities located there, as:

  • Iran (to deter nuclear proliferation);
  • North Korea (to deter nuclear proliferation); and
  • Somalia (humanitarian concerns)

The United States also maintains, along with other countries, sanctions programs against specified individuals and entities in such countries as Zimbabwe and Yemen, and against persons involved in narcotics traffickingillegal diamond trading, and transnational criminal organizations. The above is not a comprehensive list of sanctions programs. The programs change and are updated frequently.

What does not change is the severity of the penalties for ignoring the embargo or failing to comply with the licensing requirements. Penalties, irrespective of the company’s size, range from $50,000 to $10,000,000 for each transaction that violates the embargo. A trader who is found to have willfully violated the rules may also incur increased penalties, loss of exporting privileges, and/or imprisonment.

There is no statute of limitations. A company could find itself paying millions of dollars in fines for violations that occurred over decades. This is what happened to ING bank in 2012, which began life in 1991 as a small local Dutch bank. You can read here about the latest enforcement actions taken by the US Department of the Treasury.

Avoiding Penalties

Whether it’s selling apples to Cuba, or oranges to Iran, a red flag should go off when it comes to doing business with individuals or entities in certain countries.

  • Familiarize yourself with the sanctions programs enforced by the U.S. government against countries and individuals.
  • Programs change with some frequency, so sign up to receive updates.
  • Be aware of other countries’ embargo programs.
  • Contact us for support with developing an effective compliance program.

DevelopTradeLaw, LLC provides business-oriented advice to the legal challenges that face companies doing business internationally. Contact us for more information or advice on the topic of this article.