On July 22nd, the Department of Commerce’s Bureau of Industry and Security (BIS) revised the Export Administration Regulations (EAR) to implement the Secretary of State’s May 29, 2015 rescission of Cuba’s designation as a State Sponsor of Terrorism.  While Cuba’s removal from this list is a notable symbolic action, and provides some benefit to non-US companies, it will not significantly change the limitations on the ability of US companies to export to Cuba.  Unless US companies have a license, or rely on a license exception, they will still be prohibited from exporting to Cuba.  For non-US companies that are exporting foreign-origin items containing US-origin content to Cuba, however, this removal of Cuba from the State Sponsor of Terrorism does offer some relief.

Countries designated as State Sponsors of Terrorism are listed in the EAR’s Country Group E:1, and are subject to anti-terrorism (AT) controls.  As a result of Cuba’s “State Sponsors” removal it will no longer be subject to AT controls.  However, the US embargo against Cuba – though now somewhat relaxed – continues to require that any exports by US companies to Cuba be made pursuant to a license or license exception.

Cuba’s removal from the State Sponsors of Terrorism list also means that it is no longer part of Country Group E:1, and instead is now part of Country Group E:2 – a change that does have some implications.

First, for US-origin items that are incorporated abroad into foreign-origin items, the de minimis threshold will now be 25%, rather than 10%.  For those who are uninitiated in export controls parlance, this means that if a non-US company manufactures items outside of the United States that contain US-origin content, the value of that US-origin content can comprise up to 25% of the value of the non-US origin item without subjecting the foreign-origin item to the jurisdiction of the EAR.  Before Cuba’s removal from the list the percentage was only 10%.  Even with this change, though, certain EAR-controlled items and defense articles controlled under the International Traffic in Arms Regulations (ITAR) are not eligible for de minimis treatment.

In addition – and of note to US companies – exports to Cuba are now eligible for the use of certain license exceptions from which they were previously excluded.  These include exports of certain types of replacement parts and components under License Exception RPL; certain transfers to Cuban nationals for US-government-related transactions under License Exception GOV; carrying certain types of encryption-related commodities, software and technology in personal baggage for personal use under License Exception BAG; and certain activities related to aircraft on temporary sojourn under License Exception AVS.  Certain transactions related to exports lawfully made under the license exceptions noted above would be permitted under the Cuban Assets Control Regulations, which authorize transactions incident to the export of items pursuant to a valid license exception under the EAR, see 31 C.F.R. § 515.533(a).  Other than these limited changes, though, restrictions on exports by US persons to Cuba will remain in place.