Cuba is one of the world's most important sources of nickel.
The island nation has the second-largest base reserves of
nickel, with an estimated 29 million tons, or about 15 percent
of the global total. Cuba's nickel deposits also are considered
to be of the highest quality, with an average nickel content of
U.S. companies, however, are barred from accessing Cuban
nickel or importing products derived from that nickel pursuant
to the Cuban Assets Control Regulations, which implement the
U.S. embargo on Cuba. The regulations prohibit all persons
subject to U.S. jurisdiction from transacting in, purchasing,
importing or transporting any products made or derived from
"any article of the growth, produce or manufacture of
Nickel-bearing materials are specifically barred from
importation into the U.S. without appropriate documentation,
reflecting the importance of nickel production to the Cuban
economy and government. As the country's largest export, nickel
plays a crucial role in the Cuban economy and serves as an
important source of hard currency.
While the regulations bar the importation of items derived
from Cuban-origin goods, it appears very likely that stainless
steel derived from embargoed Cuban nickel is regularly entering
the U.S. market from China.
China's consumption of Cuban nickel has grown greatly over
the past decade and today China imports nearly all of Cuba's
nickel production. As Chinese consumption of Cuban nickel has
surged, so have China's exports of stainless steel products to
the United States, making China the largest foreign supplier of
stainless steel to the U.S. market since 2007.
Given China's prominence in both the Cuban nickel and U.S.
stainless steel markets, and since the primary use of nickel is
the production of stainless steels, it is highly likely that
imports of Chinese stainless products into the United States
contain embargoed Cuban nickel in violation of U.S. law.
To date, no action has been taken in response to this
apparent violation of U.S. law by the Office of Foreign Assets
Control (OFAC), the agency responsible for enforcing the
In the 1980s, similar evidence was presented that stainless
steel derived from Cuban nickel was being imported from the
Soviet Union in violation of the U.S. embargo. The U.S.
government responded by requiring Soviet producers to present
certificates of origin documenting that their products complied
with the embargo and were free of Cuban nickel.
When the Soviet government refused to certify its stainless
steel as compliant with U.S. law, the U.S. government barred
all further imports of Soviet stainless steel.
Other countries, including Japan, France and Italy, complied
with U.S. requests to certify their stainless steel producers
as compliant. As a result, imports of stainless products from
those countries were permitted so long as certification
documents were presented at the time of import, as required by
the embargo regulations.
The U.S. government has failed to pursue a similar policy
with respect to China and has failed to engage the Chinese
government to establish a certification program. Instead, the
agency has adopted a legal presumption that Chinese stainless
steel is compliant with the embargo, an approach that is at
odds with the agency's prior practice.
Furthermore, it is not possible for U.S. producers to
present sufficient evidence to overcome a legal presumption
because U.S. law forbids U.S. persons from collecting the
necessary evidence to do so.
The origin of nickel in stainless steel can be determined by
analyzing the material's chemical fingerprint, which is unique
to the mine from which the nickel was extracted. U.S. stainless
steel producers believe this method would be effective in
demonstrating that imports of Chinese stainless products do
contain Cuban nickel. To conduct such an analysis, however,
U.S. industry would need access to Cuban nickel-which is
prohibited by the U.S. embargo.
There are two important implications of OFAC's current
policy. First, by allowing Chinese producers to circumvent the
Cuban sanctions regime, important U.S. foreign policy
objectives are being thwarted. Second, OFAC's lack of
enforcement places domestic stainless steel producers at a
competitive disadvantage by granting a major foreign competitor
access to one of the world's largest nickel reserves while
denying access to domestic industry.
The U.S. government should either enforce the embargo on
Cuba and work with the Chinese government to ensure compliance
by China's stainless steel manufacturers, or level the playing
field between Chinese and U.S. stainless steel producers by
repealing the sanctions regime and allowing U.S. industry to
access Cuban nickel.
David A. Hartquist of Kelley Drye & Warren, Washington,
is counsel to the Specialty Steel Industry of North America.
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