Every now and then a good economic sanctions compliance story pops up. This one has the added bonus of annoying the Cuban regime. I promise to spare you all the legal gobbledygook. Read on.
San Diego, California headquartered PriceSmart appears to have told Cuban diplomats in Latin America that their business is not welcome at any of their retail locations in anywhere in the world. With 32 stores in 12 countries, it seems as if someone in the company is looking after compliance. They’ve taken a very prudent step to eliminate some potential legal exposure, as well as potential violations, of U.S. economic sanctions and possibly export control laws.
I first learned about this item a few days ago when a reporter called to interview me about it. As I told him then, it was news to me and, at first, I did not believe any of it. A little digging and I found a few Spanish-language stories about it. Most of the coverage is in Leftist newspapers and Cuba regime propaganda sites.
Of the more reputable, or at least better-known news outlets, El Salvador’s Leftist daily DiarioCoLatino reports that it has a copy of the letter sent by PriceSmart corporate headquarters to its subsidiaries:
“‘PriceSmart El Salvador, is a subsidiary of a U.S. company, making it the U.S. government prohibits our parent company, and therefore, to us in El Salvador, the business make sales or citizens of Cuba, who did not permanently residing in the country or possibly another,’ says the letter to which he had access Diario Co Latino.”
A few days earlier, the Cuban government published a statement, more like a rant, about the matter saying that:
Last week the Cuban diplomatic mission in this nation denounced the extraterritorial policy of the US blockade by saying that the Pricesmart leading board in Guatemala announced that they suspended membership of Cubans non-resident in Guatemala. The subsidiary in Guatemala of Pricesmart notified the Cuban embassy here that the measure was adopted in compliance with the US laws, noted the release spread by the quoted diplomatic headquarters. Cuban diplomatic mission in this nation denounced the extraterritorial policy of the US blockade by saying that the Pricesmart leading board in Guatemala announced that they suspended membership of Cubans non-resident in Guatemala.
A similar missive was issued by the Cuban Mission in El Salvador and then another story appeared a few days ago in Prensa Latina. I could not find a copy of the letter in any of the stories. And I doubt they would release it because it will likely detail the legal rationale for the decision (that the regime knows full well is correct).
I know what you’re thinking, “Jason, it’s just food!” Well, think again. The membership and fee, in and of itself, is a legal problem. I guess PriceSmart could apply for a specific license with the Treasury Department Office of Foreign Assets Control (OFAC), however, the resulting transaction and compliance costs would prove too much to really bother wish.
That’s assuming OFAC would approve the license. I strongly doubt it would. By the way, there things other than food at these stores some that, believe it or not, could be controlled for export under other regulations.
Extraterritorial application of U.S. law? So be it. The law is the law. PriceSmart made a wise decision to bar Cuban regime officials from their stores. I only wish other companies did the same right here in the United States. PriceSmart should be commended for taking this step and, for all we know, we’re really only seeing one very small part of this story.
Over the long-run, U.S. companies like PriceSmart will be better prepared to penetrate a free and democratic Cuba. I think companies that take a tough line against the current regime, even with these small steps, will be more welcome than European, Asian, and Middle East companies that insist on propping up the regime by doing business in Cuba today.
A side but related note, I’ve seen a spike in my legal practice in calls from folks and businesses having many challenges finding U.S. financial institutions willing to remit funds to Cuba. I think this is part of the reason why the regime cancelled visa processing late last year and then again this year. If this is true, it is all welcome news and the Obama Administration should do a lot more of it.
That’s not to say the Obama team has enforced used all tools at its disposal to deploy sanctions and other measures. Far from it. But someone seems to be minding the store. To what end? The release of Allan Gross and/or more? Time will tell.