Loosening of the Cuba Sanctions: What You Need to Know

By Helena D. Sullivan, Esq.
Barnes/Richardson
Global Trade Law

In December 2014, global headlines proclaimed the end of Cuba sanctions that had been in place since 1960. While immediately controversial, the true impact of the changes was not clear until January 16, 2015, when the Department of the Treasury, Office of Foreign Assets Control (OFAC) published its amendments to the Cuban Assets Control Regulations. While much more is permitted, it certainly cannot be said that Cuba is now open for U.S. business. Instead, companies and individuals wanting to trade with Cuba or travel there have to look carefully at what is newly permitted and what remains restricted.

A sure-to-be-popular question is whether the import of Cuban cigars and rum is now allowed. The answer is no, unless you travel to Cuba under an authorized category of “general license”. A general license is an authorization subject to certain preconditions allowing such activity, without application to OFAC for a “specific license”. Travel to Cuba will now be permitted not for general tourism, but when you fit under the following general license categories: family visits, official business of the U.S. and foreign governments and certain intergovernmental organizations, journalistic activity, professional research and meetings, educational activities, religious activities, public performances, clinics, workshops, athletic and other competitions and exhibitions, support for the Cuban people (e.g. human rights organizations), humanitarian projects, activities of private foundations or research or educational institutes, import/export/transmission of informational materials, and certain authorized export transactions. It should be noted that each participant in a group must qualify, and the schedule of such activity must be essentially full time. If you are able to travel to Cuba under a general license (or a specific license granted by OFAC), you can bring back up to $100 in Cuban tobacco and alcohol products, and the total value of everything you bring back including those products must not exceed $400.

As for trade with Cuba, U.S. companies may export, or reexport from third countries, U.S.-origin products only when such export or reexport is licensed or otherwise permitted by the Department of Commerce, Bureau of Industry and Security (BIS). BIS currently licenses very limited categories of items to Cuba. Investment or doing business in Cuba will require an application for a specific license to OFAC. Other than the aforementioned accompanied baggage allowance of $400 mentioned above, import of certain goods produced by independent Cuban entrepreneurs as set out in a list which will be published by the State Department will be authorized. Additionally, “informational materials” such as films, publications and photographs are exempt from the Cuban Assets Control Regulations.

A final caveat regarding export or reexport of U.S. origin items to Cuba. The regulations specify that only 2 payment terms are permitted. The first is cash in advance; the definition of cash in advance has been newly modified to mean payment before the transfer of title and control of the items to the Cuban purchaser (rather than cash before shipment). The second is financing by a banking institution in a third country, which can be confirmed or advised by a U.S. bank.

Thus, trade with Cuba is still quite restricted, although it will interesting to see what the list of products from designated Cuban entrepreneurs which will be permitted to be imported will look like.

Please feel free to contact me, Helena Sullivan, hsullivan@barnesrichardson.com, (212) 725-0200 ext. 119, and visit our website at www.barnesrichardson.com, which provides a lot of information on recent developments for importers and exporters.

US West Coast marine terminals suspend Monday vessel shifts to reduce backlog

U.S. West Coast marine terminals will suspend vessel operations on all shifts Monday so they can concentrate their resources on clearing containers from the dangerously congested facilities, the Pacific Maritime Association reported Sunday.

PMA spokesman Steve Getzug said marine terminals continue to experience severe congestion “due to the ILWU’s on-going slowdowns.”

The International Longshore and Warehouse Union responded that the PMA is causing terminal congestion by suspending vessel operations at West Coast ports. “The idea that the PMA is ‘clearing containers’ when it has cut more than 70 percent of the workers during the day and over 80 percent at night is a fantasy,” said Adan Ortega, a spokesman for ILWU Local 13 in Southern California.

The PMA and ILWU have been engaged in a game of brinksmanship for several weeks now as contract negotiations continue to drag on despite the involvement of a federal mediator.

Employers suspended vessel operations during the night shifts, first in Seattle-Tacoma, then in Oakland, and last week in Los Angeles-Long Beach. The PMA said terminals had become so congested that unloading more containers at night into the facilities would push them close to complete gridlock.

Indeed, Gene Seroka, executive director of the Port of Los Angeles, told the annual conference of the California Trucking Association Saturday in Monterey that terminals in the largest U.S. port were operating at 95 to 97 percent of permitted land use. Terminal operators say productivity suffers when a terminal exceeds 80 percent of capacity.

Employers said their strategy is to remove as many containers from the docks as possible during the night shifts so that there will be space available the next morning to resume vessel unloading.

As expected, suspending night vessel operations has delayed the completion of vessel work, and therefore ships have been backing up at anchor at all of the major gateways. The Marine Exchange of Southern California reported on Sunday that there were 11 container ships at anchor, which were three fewer than on Saturday.

However, according to the ILWU, the employers’ strategy has not been working as planned. Ortega said truck traffic at the marine terminals was very light over the weekend, so “growing mountains of containers” continued to congest the docks.

The decision by PMA to suspend vessel work all day on Monday, a national holiday and a day on which dockworkers receive overtime pay, was certain to cause a stir among rank-and-file longshoremen.

With contract negotiations now in their ninth month, nerves are frayed and the PMA and ILWU appear to be attempting to wear each other down financially. By slowing down crane operations and refusing to dispatch sufficient skilled labor to operate cargo-handling equipment, the ILWU is causing employers’ costs to skyrocket, the PMA said. PMA’s website shows that each week terminals are paying 20 to 30 percent more man-hours than the same week last year, even though container volumes are up only 1 percent.

At the same time, by reducing nighttime work opportunities for longshoremen, employers hope that rank-and-file longshoremen will pressure ILWU negotiators to reach a settlement in the contract negotiations.

Despite all of these optics, negotiators are making progress, Chris Lytle, executive director of the Port of Oakland, told the trucking association conference Saturday.

“I’m encouraged,” Lytle said. Negotiations continued into the nights on Thursday and Friday and continued on Saturday. “Go back a few weeks ago and no one was talking,” he said.

Getzug said each terminal operator on Monday would choose whether or not it will work. That is the custom on holidays, he said.

STRIKE NOTIFICATION AT NHAVASHEVA

PLEASE NOTE WORK STOPAGE IN NHAVASHVA PORTS SERVING MUMBAI REGION OF INDIA: 18 TH JAN 2015 1700Hrs

THERE HAS BEEN A COMPLETE CLOSURE OF OPERATIONS AT JNPT PORT. THE GO SLOW AT GTI STARTED PM HOURS, 17TH JAN 2015 AND NOW THE OPERATIONS AT GTI ARE COMPLETELY STOPPED. THE MOB BLOCKED THE APPROACH ROAD OF JNPCT TERMINAL AND NSICT. HEAVY POLICE BANDO BAST IS THERE AND POLICE HAS ADVISED TO BE AWAY FROM THIS AREA. HEAVY STONE PELTING HAS STARTED NEAR Y JUNCTION AND PUB. ONE OF THE POLICE JEEP WAS PUT TO FLAMES BY THE ANGRY MOB. AS PER INFORMATION RECEIVED ADDITIONAL FORCES ARE BEING DEPLOYED BY POLICE TO HANDLE THIS SITUATION.

AS THIS SITUATION CONTINUES TO CAUSE DELAYS IN NHAVASHEVA PORT AREA, WWL WILL CONTINUE TO MONITOR AND ADVISE YOU OF FURTHER DEVELOPMENTS.

Ships back up at US West Coast ports after night vessel work ends

Ships are backing up rapidly at the major West Coast gateways following a decision by employers to stop working vessels at night in order to concentrate on clearing out congested marine terminal yards.

The Marine Exchange of Southern California reported today that 13 container ships were at anchor and awaiting berthing space in Los Angeles-Long Beach. Oakland reported that 7 container ships were at anchor and Tacoma also reported seven container ships at anchor. Although the ports have had vessel backups since last fall, the numbers are now accelerating.

Congestion began to mount at West Coast ports last summer due to a spike in container volume, chassis shortages and dislocations and service degradation on the intermodal rail networks. The knockout punch came at the end of October, according to the Pacific Maritime Association, when the International Longshore and Warehouse Union implemented a policy of work slowdowns and refusals to dispatch sufficient skilled labor to perform yard work in order to gain leverage in the ILWU-PMA contract negotiations.

Port executives today say that most of the container terminals are now at 90 percent of capacity, or higher, which they say puts the terminals on the brink of gridlock. Unless containers can be removed from the yards, the facilities eventually will reach the point where they can no longer accept more containers from the vessels.

Therefore, employers toward the end of 2014 began to reduce the number of work crews, or gangs, assigned to unload vessels on the night shift. They gradually cut back on vessel work at night, and by Wednesday this week, all vessel work at night had been discontinued in Seattle-Tacoma, Oakland and now Los Angeles-Long Beach.

Employers said this policy helps the terminals in two ways. With no containers coming off the ships at night, the terminals are able to devote all of their resources on the night shift to cleaning up the yards and making space for containers that will be discharged from the vessels the next morning.

Also, according to the PMA, the ILWU for the past 10 weeks has refused to dispatch sufficient skilled labor to operate yard cranes. Therefore, although the ILWU has stated that it makes hundreds of workers available for each shift, the refusal to provide sufficient yard crane operators effectively renders some gangs useless. By eliminating vessel crane work opportunities at night, employers hope there will be more yard crane workers availabe for day and night shifts.

“This decision was not made lightly,” said PMA spokesman Steve Getzug. “The ILWU’s ongoing refusal to dispatch sufficient yard crane drivers, the very workers who can best clear congestion at Los Angeles-Long Beach, led to PMA’s decision to halt night vessel work. It is essential to deploy every available crane driver to relieve the crushing congestion on the docks,” he said.

The ILWU disputes the employers’ reasoning. Adan Ortega, spokesman for ILWU Local 13 in Southern California, noted that terminals have been steadily reducing vessel gangs from as many as eight on the biggest ships in July to three gangs after July to one gang beginning New Year’s Eve and now to zero on the night shifts in Los Angeles-Long Beach.

“By my calculation, that is over an 85 percent reduction in the overall workforce since July. By what stretch of the imagination would anyone think that the congestion that existed before the contract would not worsen?” he said.

Carriers knew their vessels would back up at the ports as labor was pulled from ship work at night. In fact, carrier representatives dominate the PMA board of directors, so they factored heavily into the decision-making process. However, employers see this as a last-ditch effort to avoid even more draconian measures, such as an employer lockout such as occurred in the 2002 contract negotiations. Some employers are reportedly considering a lockout to be a viable option as shipping lines and terminal operators continue to bleed cash.

Furthermore, by cutting back on work opportunities for longshoremen, especially the skilled equipment operators that earn more money than those dockworkers without such skills, employers hope that the rank-and-file will pressure ILWU negotiators to resolve the outstanding issues with the PMA and reach a settlement. A major issue yet to be resolved concerns ILWU jurisdiction over chassis maintenance and repair. However, the vast majority of longshoremen have no stake in issues involving ILWU mechanics.

The lengthy contract negotiations, and now the backlog of vessels at West Coast ports, have proved to be quite costly for shipping lines. Today’s big ships cost more than $100 million each. Carriers estimate they lose more than $40,000 each day that a vessel sits idle. There is also the frustration expressed daily by their customers whose merchandise is sitting on the vessels that are stuck at anchor rather than on the store shelves.

Maersk Line spokesman Tim Simpson said the company is focusing on those factors that it can control. Maersk is in constant contact with its customers and vendors, informing them of the steps that are being taken to discharge the containers and move them from the terminals, and providing customers with updated information on delivery times.

Likewise, the terminal operators are doing what they can to clear the container backlogs so the vessels can be worked as quickly as possible and the gate operations will be improved, said John Cushing, president of PierPass Inc., which represents the 13 container terminals in Los Angeles-Long Beach. In addition to the normal five weekday gates, four night gates and one Saturday gate that are now standard operating procedure in Southern California, most of the terminals have added extra night gates as well as Sunday gates to help relieve congestion being experienced by truckers, Cushing said.

In December, the terminals ran 72 additional gates beyond the normally scheduled 10 gates they operated each week under the PierPass program, he said.

Carriers are also beginning to look at extraordinary measures to avoid congestion on the West Coast, with at least one line supplementing its regularly-scheduled weekly all-water services to the East Coast with ad-hoc sailings of additional ships, known as extra-loaders, on all-water services to the East Coast.

NY-NJ truckers: New year, same chassis problems

New York-New Jersey port truckers say chassis shortages and dislocations have continued into 2015 while industry officials work to develop a port wide pool of interchangeable “gray” chassis by mid-year.

Truckers at Tuesday’s monthly meeting of the Association of Bi-State Motor Carriers said chassis shortages have worsened since the holidays.

Several drayage company officials said their drivers are forced to scrounge for chassis and accept defective units that must be repaired before they can be taken on the road.

“We’re spending half a day just to get a chassis that we’ve paid for,” said John Kruse, owner of J-Way Co. in Hillside, New Jersey. He said waiting on the repairs is a waste of drivers’ time and is akin to renting a car, then having to take it to the shop for an oil change.

Container lessors blame shortages of International Longshoremen’s Association mechanics at terminals, equipment dislocations following the holidays, and hoarding of equipment by truckers worried about chassis availability. Lessors say they’re paying copious amounts of overtime to mechanics, and are bringing in newer chassis to replace worn-out units.

Chassis have been a source of contention since most ocean carriers began exiting chassis ownership and transferred their chassis to leasing companies. The transition, which began five years ago, has been bumpy, especially in port areas such as New York-New Jersey and Los Angeles-Long Beach.

New York-New Jersey chassis problems have been aggravated by shortages of mechanics, especially at marine terminals. Terminals’ mechanics often are pulled away from basic readability repairs and reassigned to more-urgent tasks such as work on refrigerated containers.

Beth Rooney, the Port Authority of New York and New Jersey’s assistant director for port performance initiatives, acknowledged the difficulty that truckers face with chassis but said the planned portwide chassis pool should alleviate many of the problems.

The Council on Port Performance, an industrywide group working to implement recommendations of a port performance task force, will launch the port wide pool by the middle of this year.

The pool will be centrally managed, and will allow full interchange of chassis among the three lessors that now provide most chassis in the port. Other chassis providers also could participate in the gray pool.

“We’re all aware of the problems,” Rooney said. “Is there a plan in place? Yes. Is it taking longer than we’d like? Yes. But we’re we’re making good progress toward having a gray chassis pool. I can see the horizon now.”