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Under U.S. law, all U.S. individuals and companies are prohibited from engaging in any transactions with any Cubans, including Cuban athletes such as baseball and soccer players, unless certain narrow exemptions apply. All assets, property, and bank accounts of Cuban nationals are blocked.
U.S. regulations provide an exemption permitting transactions with Cuban nationals who have qualified for a specific or general license from the Treasury Department’s Office of Foreign Assets Control (OFAC) to be “unblocked.” Anyone engaging in transactions with Cuban nationals where a license has not been obtained that “unblocks” the individual may face severe criminal and civil fines and imprisonment.
This past Friday, September 27, 2013, Cuba announced that athletes from all sports will soon be able to sign contracts with foreign leagues, in an apparent effort to prevent Cuban athletes from defecting to other countries. Despite Cuba’s change in policy, however, the U.S. sanctions regulations remain unchanged.
The United States has imposed comphensive and substantial sanctions against Cuba under the Trading With the Enemy Act. Specifically, the sanctions imposed under that Act generally prohibit all persons subject to U.S. jurisdiction (U.S. citizens and residents, persons within the United States, U.S. entities, foreign branches and subsidiaries of U.S. entities, and persons engaging in transactions that involve property subject to the jurisdiction of the United States) from engaging in transactions with Cuban nationals wherever they are located, unless such Cuban nationals have been unblocked or the transaction is otherwise authorized by OFAC.
Criminal penalties for a violation of the Cuba sanctions regulations are up to 10 years in prison and fines of up to $1,000,000 for corporations and $250,000 for individuals, or twice the amount of the gain or loss from the violation. Civil penalties of up to $65,000 per violation may also be imposed.
Cuban nationals who have taken up permanent residence outside of Cuba can apply to OFAC to be specifically licensed as unblocked nationals. This requires certain evidence that the Cuban national has established permanent residence outside of Cuba or that the Cuban national does not intend to, or would not be welcome to, return to Cuba.
Once a Cuban national is unblocked, persons subject to U.S. jurisdiction may engage in transactions with that Cuban national, but must maintain full and accurate records of those transactions for five years and, upon request from OFAC, furnish information regarding such transactions. The unblocked Cuban national is deemed “a person within the United States” and must comply with the U.S. sanctions regulations.
In certain circumstances the regulations also permit general licenses — under which certain Cuban nationals are unblocked without the need for a written application to OFAC. However, recent reports indicate that Major League Baseball requires that all Cuban players receive specific unblocking licenses from OFAC before signing with a team.
After the Cuban government’s announcement, the Baseball commissioner’s office stated, “Given that we do not have any details of this change in policy, it would be premature for us to speculate what effect it may have.... MLB and its clubs have and will continue to act in accordance with the laws and policies of the United States government." (Quote from Miami Herald, 9/27/13)
Obtaining a specific license in the form of a document from OFAC also has benefit of giving U.S. entities confidence that the national has been unblocked, which is an important safeguard to all U.S. persons engaging in any transactions with a Cuban national.
There were 21 Cuban players on Major League Baseball rosters this year, including outfielder Yasiel Puig, who signed a $42 million, seven-year contract with the Los Angeles Dodgers in July 2012, and pitcher Aroldis Chapman, who signed a $30.25 million, six-year deal with the Cincinnati Reds in 2010.
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