Canada: Damned If You Do/Damned If You Don't: Foreign Extraterritorial Measures Act And Trump's Cuba Policy

Last Updated: June 28 2017
Article by Cyndee Todgham Cherniak

On June 16, 2017, President Trump gave a speech in Miami and announced he was reversing some of President Obama's Policy on Cuba. Just as Canadian businesses were getting used to the Obama Policy on Cuba, there has been a partial snap-back. Not only has there been a partial snap-back, there is a stronger enforcement mentality in the United States. The Trump Policy on Cuba overlaps with the America First Doctrine and Art of the Deal negotiation style of President Trump. The combination of the Trump Policy on Cuba, America First, and Art of the Deal means that U.S. sanctions against Cuba should be taken very seriously and Canadian companies should know that a contravention under U.S law could mean significant fines and failure to report to the Canadian government as required by Canadian law could result in a Canadian prosecution (and fines up to $1,500,00 and/or imprisonment up to 5 years in Canada).

What does this mean for Canadian businesses who have activities in Cuba? Canadian businesses that have U.S. citizens as shareholders, management, directors, officers, employees or representatives/agents, etc. need to understand the do's and don't of the Trump Cuba Policy or they might find themselves in trouble in both the United States and Canada. The United States imposes various economic sanctions against Cuba effectively prohibiting many transactions with Cuba. Canada, on the other hand, blocks U.S. anti-Cuba legislation with the Foreign Extraterritorial Measures Act (Canada) ("FEMA") and the Foreign Extraterritorial Measures (United States) Order, 1992, as amended. In Canada, persons must report to the Attorney General of Canada when they prevented, impeded or trade or commerce between Canada and Cuba is reduced:

(a) the Cuban Assets Control Regulations, Code of Federal Regulations, Title 31, Part 515, as amended from time to time or replaced, and (b)any law, statute, regulation, by-law, ordinance, order, judgment, ruling, resolution, denial of authorization, directive, guideline or other enactment, instrument, decision or communication having a purpose similar to that of the Cuban Assets Control Regulations referred to in paragraph (a), whether enacted, passed, made, done, voted, established, issued, rendered, given, taken or executed by any legislative, executive, administrative, regulatory, judicial or quasi-judicial authority or body of the United States, the District of Columbia or any of the member states or territories or possessions of the United States, or any municipality or other local authority in the United States or its territories or possessions.

"Trade or commerce" is defined to include the following:

"... the free exchange of goods and services, between Canada, or Canadian nationals, corporations or other legal entities or federal, provincial or local government institutions, and

  1. Cuba, or Cuban nationals, corporations or other legal entities or national, provincial or local government institutions, or
  2. Canadian nationals or corporations that are designated as, deemed to be, or otherwise treated as, Cuban nationals or corporations by or pursuant to an extraterritorial measure of the United States, whether by the use of the expression designated national or specially designated national or in any other manner."

Section 5 of FEMA prohibits Canadian companies and its directors, officers, managers and employees from complying with U.S. anti-Cuba legislation that prohibits, infringes or otherwise influences trade between Canada and Cuba. In other words, a Canadian company or representative cannot not undertake business activities that are legal under Canadian law on the basis of compliance with U.S. anti-Cuba laws. The prohibition applies to trade in goods, including technology and trade in services, including technology-related services.

This results in tension between complying with Canadian law and complying with United States laws (e.g, Helms-Burton). Multi-national companies sometimes get caught between the two sets of opposing laws. For example, recently (on June 8, 2017) OFAC fined a US company (American Honda Finance Corporation) $87,255 in connection with leases of Honda vehicles by Honda Canada Finance, Inc. to the Cuban Embassy in Ottawa. The leased vehicles were on Canadian soil. The financing of the vehicles driven on Canadian roads went through the fined US entity. The transaction was perfectly legal in Canada and could not have been rejected in Canada even if the reason was to comply with U.S. laws. If the Canadian entity was asked to not lease vehicles to the Cuban officials in Ottawa, they would have had to report that request under provisions of FEMA. This recent OFAC file should act as a wake-up call to Canadian companies to understand the Trump Cuba Policy and re-visit compliance programs relating to business with Cuba/Cuban persons. This recent U.S. fine should be a wake-up call to Canadian companies that the U.S. will enforce its Cuba sanctions even if the activities are legal in Canada.

It is therefore, very important to review the Trump Policy on Cuba. Courtesy of our friend, Jennifer Diaz of Diaz Trade Law in Miami, who wrote on her blog an article entitled "President Trump Outlines New U.S. Policy on Cuba", the Trump Cuba Policy will enact the following changes to U.S. law:

  • No new direct transactions with entities related to the Cuban military, intelligence, or security services;
  • The State Department will be publishing a list of entities with which direct transactions generally will not be permitted;
  • President Trump advised "we will very strongly restrict American dollars flowing to the military," "we will take concrete steps to ensure investments flow directly to the Cuban people";
  • The 12 categories of authorized travel will remain, BUT, there will be an end to "people to people" travel on your own (group travel is not impacted). President Trump stated "easing restrictions on travel and trade does not help the Cuban people, they only enrich the Cuban regime". "The profits from investment and tourism flow directly to the military, the regime takes the money and owns the industry;
  • President Trump stated: "we will not lift sanctions on the Cuban regime until "all political prisoners are free, freedoms of assembly and expression are respected, all political parties are legalized, and free and internationally supervised elections are scheduled."
  • Remittances will NOT be impacted; and
  • We can expect the new provisions to be actively enforced. President Trump advised: "our new policy begins with STRICTLY ENFORCING U.S. law". Review our previous travel tips to you, and ensure you meet them!
  • The Embargo will REMAIN in place.

The White House released a Fact Sheet on Cuba Policy and OFAC released a three page FAQ discussing the main questions and answers.

What this means for Canadian businesses is risk. The number of "Do Not's" have increased. This means, the FEMA risk has increased.

What should Canadian companies do?

We cannot list all of the actions that should be taken – here are ten to demonstrate the types of relevant considerations for Canadian companies:

  1. Canadian companies with any activities with Cuba, Cubans or the Cuban Embassy in Canada should review FEMA to know if and when they have a Canadian reporting requirement;
  2. Canadian companies with any activities with Cuba, Cubans or the Cuban Embassy in Canada should review their compliance policy with respect to business in or with Cuba or Cubans (or implement a policy if they do not have one);
  3. Canadian companies must know who they are dealing with in Cuba. Many Cuban businesses are government owned or owned by government officials. Any transaction with a state-owned or government official owned enterprise should be reviewed;
  4. Canadian companies must consider who within their organization is traveling to Cuba on business matters. The removal of "people-to-people travel" from the categories of authorized travel may mean that U.S. citizens working for U.S. companies ca no longer participate in business travel to Cuba;
  5. Canadian companies must review whether U.S. citizens in management positions could be prosecuted under U.S. anti-Cuba laws and whether reporting structures need to be adjusted;
  6. Canadian companies who borrow from U.S. financial institutions should review their loan documents to see if there is a requirement to comply with U.S. laws (which would include U.S. anti-Cuba laws and President Trump's Cuba Policy) and then determine what are the U.S. and Canadian reporting requirements applicable to the company;
  7. Canadian companies who have insurance from a U.S.-based or affiliated insurance company should review their insurance policies to see if there is a requirement to comply with U.S. laws (which would include U.S. anti-Cuba laws and President Trump's Cuba Policy) and then determine what are the U.S. and Canadian reporting requirements applicable to the company;
  8. Canadian companies who provide goods and services to the Cuban embassy in Canada should review the transactions to determine whether they have similar problems as Honda;
  9. Canadian companies must review how they get paid by Cuban businesses (for Canadian goods and services provided to Cuba) to ensure the funds do not flow through U.S. financial institutions in a manner that is contrary to U.S. anti-Cuba laws; and
  10. Canadian companies must review how they pay Cuban businesses (for Canadian goods and services provided by Cuba to Canada) to ensure the funds do not flow through U.S. financial institutions in a manner that is contrary to U.S. anti-Cuba laws.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.