Explainer: Trump's New Executive Order Forces Companies Out of Cuba
A new executive order has had a quick and dramatic impact on the business environment in Cuba.
By Nick Turner
In recent weeks, companies in industries as diverse as finance, mining, and hospitality have announced their sudden withdrawal from the Cuban market. The catalyst was a single document, Executive Order (EO) 14404, issued by President Donald Trump on May 1, which has fundamentally altered the perception of U.S. sanctions risk for foreign companies operating in Cuba.
While some of the EO’s terms are clear and explicit, others are less so. Meanwhile, the potential penalties are severe. As a result, companies may err on the side of caution and withdraw from the Cuban market, even in cases where the regulations do not expressly require it.
Key Provisions of EO 14404
EO 14404 builds on the “national emergency” first declared by President Trump in EO 14380 on January 29, 2026, citing various “policies, practices, and actions of the Government of Cuba”.
Section 2 of EO 14404 authorizes the U.S. Treasury and State Departments to impose asset freezes (referred to as “blocking sanctions”) on individuals and entities engaged in conduct described in the EO or operating in designated sectors of the Cuban economy. The EO specifically names the energy, defense, metals and mining, financial services, and security sectors; however, the Treasury Department could designate other sectors of the Cuban economy in the future, including, but not limited to, the tourism sector.
The meaning of “operating in” a designated sector is broad and encompasses both Cuban and non-Cuban companies engaged in trade involving one of the named sectors.
Importantly, Section 4 of EO 14404 creates for the first time the risk of “secondary sanctions” on financial institutions under the Cuba program. Section 4 can be applied to any non-U.S. financial institution that “has conducted or facilitated any significant transaction or transactions for or on behalf of any person” sanctioned under the EO. The term “significant transaction” here is not defined. While the Treasury Department’s Office of Foreign Assets Control (OFAC) has previously laid out several factors it could consider in identifying a significant transaction, they include a broad catch-all for “such other factors that the Secretary of the Treasury deems relevant on a case-by-case basis.”
Companies Sanctioned So Far
In a series of tranches beginning in May 2026, the State Department and OFAC have added dozens of names of individuals and entities to OFAC’s List of Specially Designated Nationals and Blocked Persons (the SDN List). These include several entities that play a major role in Cuba’s economy: Grupo de Administración Empresarial S.A. (GAESA), a holding company for enterprises engaged in tourism, among other things; state-owned oil and gas company Unión Cuba-Petróleo (CUPET), state-owned mining company GeoMinera S.A., and numerous individuals associated with these entities and the Cuban government. Two Cuban joint ventures co-owned by Canadian and Australian mining companies were also added to the SDN List.
FAQs 1254 and 1258
OFAC has published a series of Frequently Asked Questions (FAQs) about EO 14404, two of which (numbered 1254 and 1258) warn that non-Cuban persons that transact with persons designated under EO 14404, including the companies named above, could also be added to the SDN List. This also applies to any entity owned 50% or more by any person or entity designated under EO 14404 (even if the owned entities are not specifically named on the SDN List).
In other words, if a designated entity such as GAESA owns 50% or more of another company, then any foreign company, whether based in Canada, Europe, or elsewhere, could be added to the SDN List for transacting with the GAESA-owned entity. This is true regardless of the GAESA-owned entity’s economic sector. GAESA and other designated persons have significant interests throughout the Cuban economy, including the tourism, financial, port operations, and retail industries, so the sanctions risk extends far and wide.
There is no official list of entities owned 50% or more by persons designated under EO 14404. As a result, companies must perform their own due diligence to ascertain their counterparties’ ownership. FAQ 1258 advises companies “to consult all available sources to inform their independent assessment regarding the network of entities” owned by designated persons in Cuba.
The language of EO 14404 does not require the U.S. government to show that a company knew or intended to transact with a sanctioned counterparty before imposing sanctions. Thus, a company may be subject to risk even for inadvertent violations.
IEEPA Versus TWEA
The President issued EO 14404 pursuant to authority granted in the International Emergency Economic Powers Act (IEEPA). IEEPA gives the President broad authority to regulate trade in response to “national emergencies” involving foreign threats to U.S. national security, foreign policy, or the economy.
The U.S. embargo against Cuba, which has been in place since the 1960s, is authorized under a separate and older statute called the Trading With the Enemy Act of 1917 (TWEA). Legally, IEEPA allows for more creativity in the design of sanctions and is subject to fewer procedural constraints than TWEA. By invoking IEEPA to supplement the TWEA-based embargo, the President gains flexibility to ratchet sanctions up or down with the stroke of a pen as part of a wider pressure campaign against the Cuban government.
Consequences of the Sanctions
Persons on the SDN List are generally excluded from receiving services from U.S. persons or transacting through the U.S. financial system. Their property is frozen when under U.S. jurisdiction.
Under Section 4 of EO 14404, foreign financial institutions could either be added to the SDN List or prohibited from opening or maintaining correspondent or payable-through accounts in the United States. The former measure would effectively cut off a financial institution from the U.S. financial system, while the latter would restrict access without eliminating it entirely. Either measure could be severely damaging to a financial institution that relies on the U.S. financial system for clearing U.S.-dollar-denominated payments.
Secondary Sanctions
Legally, EO 14404 is significant because it disrupts a longstanding assumption about OFAC’s Cuba sanctions program. Before EO 14404, companies operating outside of U.S. jurisdiction were mostly beyond the reach of the Cuban Assets Control Regulations (CACR). The CACR were limited to “persons subject to U.S. jurisdiction” and transactions involving the United States. A relatively small number of Cuban persons were added to the SDN List under the CACR. Now, companies anywhere in the world risk being added to OFAC’s SDN List for engaging in conduct described in EO 14404. This is true even if their transactions are otherwise lawful under OFAC regulations.
In practice, OFAC has used its authority to sanction foreign financial institutions sparingly. For example, OFAC has not imposed secondary sanctions on any financial institution under similar provisions of the Russia or Hong Kong programs, although the possibility remains. OFAC has only sanctioned or investigated a handful of large international banks for violating sanctions on Iran.
Commercial Actors and De-risking
For most multinational companies—especially those with ties to the U.S.—the risk of being added to an OFAC list is too much to bear.
Apart from the risk of being sanctioned, companies that commit breaches of OFAC regulations could also be subject to costly investigations and enforcement actions. The risk is highest for U.S. persons, including U.S. nationals and companies incorporated under U.S. law, as well as non-U.S. legal entities owned or controlled by U.S. persons, all of whom are directly subject to OFAC’s enforcement jurisdiction. Non-U.S. companies whose businesses have U.S. touchpoints are also at risk.
Ambiguities inherent in U.S. sanctions rules shift the burden to companies to perform exhaustive due diligence and risk assessments before engaging in Cuba-related transactions.
As noted above, OFAC sanctions apply not only to designated persons, but also any entity owned 50% or more by one or more designated persons. According to FAQs 1254 and 1258, non-Cuban companies that transact with designated Cuban entities or entities owned by them could be exposed to sanctions risk under EO 14404. This means that companies—regardless of where they are based—must carefully scrutinize the ownership structure of their counterparties because failing to identify sanctioned owners could lead to OFAC enforcement, financial penalties, or even exclusion from the U.S. market.
Importantly, OFAC enforces its sanctions on a “strict liability” basis, meaning that OFAC does not need to show knowledge or intent as part of its enforcement proceedings.
Owing to these and other factors, many companies have already chosen to voluntarily “de-risk” from the Cuban market. EO 14404 has had the predictable effect of causing more companies to do so.
Humanitarian Activities and Licensed Transactions
The CACR contains numerous licenses and exceptions that allow persons subject to U.S. jurisdiction to engage in certain activities involving Cuba without breaching U.S. law. This includes, for example, U.S. exports of agricultural goods, medicine, and medical devices to Cuba subject to strict conditions detailed in the CACR and the Commerce Department’s Export Administration Regulations (EAR).
On 7 May 2026, OFAC issued a general license clarifying that activities that were previously licensed under the CACR are also permissible under EO 14404. In theory, this should permit companies to continue ongoing humanitarian trade and other licensed activities. However, recent reports suggest that the withdrawal of banking and logistics providers is hampering these ostensibly lower-risk activities.
Blocking Statutes
A number of jurisdictions have adopted so-called “blocking statutes” that attempt to counter U.S. sanctions by penalizing their own companies that comply with the Cuban embargo. These penalties could come in the form of regulatory enforcement or, in some cases, private litigation from plaintiffs who suffer damages as a result of another person’s compliance with the embargo. Examples of such statutes include the E.U. Blocking Statute (Council Regulation (EC) No 2271/96), the U.K. Protection of Trading Interests legislation, Canada’s Foreign Extraterritorial Measures Act (FEMA), and Mexico’s Law of Protection of Commerce and Investments from Foreign Policies that Contravene International Law. Anti-sanctions legislation in the People’s Republic of China and the Russian Federation could also apply depending on the circumstances.
Both the E.U. and U.K. legislation enumerate the U.S. statutes or regulations within their scope and would therefore require amendments to specifically apply to sanctions adopted under EO 14404. It is uncertain that either jurisdiction would do so.
OFAC does not accept the existence of a blocking statute as a defense against a breach of U.S. sanctions regulations and has brought a number of past enforcement actions against Canadian, Mexican, E.U., and U.K. companies under the CACR. Some companies may decide that it is preferable to risk breaching a blocking statute than to attract the ire of the U.S. government.
Sanctions Relief
The expansion of U.S. sanctions under EO 14404 has had an immediate impact on the Cuban economy and follows a punishing fuel embargo initiated in January 2026. The humanitarian consequences of the U.S. blockade are well reported.
The Trump administration has shown a willingness to offer significant sanctions relief in response to changing circumstances, as recently demonstrated by the lifting of most Syria-related sanctions in June 2025, loosening of Venezuela-related sanctions since January 2026, and licensing of Iranian oil-related payments in June 2026.
EO 14404 was adopted pursuant to IEEPA, so the President retains the discretion to remove the sanctions at any time. The President also has broad authority to modify elements of the U.S. embargo under the CACR, but a full lifting of the embargo would require congressional support due to certain statutory requirements.
Nick Turner is a U.S.-qualified lawyer who advises companies on compliance with sanctions regulations. He is the author of a chapter in Economic Sanctions from Havana to Baghdad: Legitimacy, Accountability, and Humanitarian Consequences, edited by Joy Gordon. The views expressed are the author’s own. Nothing in this article constitutes legal advice.
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