Facing Risk of U.S. Sanctions, Hapag and CMA CGM Suspend Cuba Bookings

Cargo operations at the port of Mariel, Cuba (file image courtesy Zona Especial de Desarrollo Mariel)

Following the threat of asset seizures from the U.S. government, CMA CGM and Hapag-Lloyd have both paused all of their cargo bookings in and out of Cuba, ratcheting up the economic pressure on the island's socialist government. The U.S. has sought a change in the governance of Cuba to a greater or lesser extent since the communist revolution in 1959, but the Trump administration is pursuing it wholeheartedly using blockade tactics - first on oil, and now (via administrative means) on all other forms of trade.

On May 1, the Trump administration issued an executive order that would freeze the assets of any foreign entity that assists the Cuban government or operates in the "energy, defense and related materiel, metals and mining, financial services, or security sector of the Cuban economy, or any other sector of the Cuban economy." While not enumerated in the list, shipping touches all spheres of economic activity, and falls within the "any other sector" category. Since much of the Cuban economy is state-controlled, filtering out any cargoes that would be delivered "to or in support of the Government of Cuba" would be difficult for a carrier.

To ensure compliance, the White House's order also targets the senior executives of any company whose assets are blocked under the new restrictions, as well as the assets of any foreign banks that finance or transact with them.

On Sunday, both Hapag and CMA CGM cited the compliance risks of continuing to engage in Cuban trade, and said that they were suspending bookings to and from Cuba. Shipping sources told Reuters that the suspension would likely affect up to 60 percent of Cuban container-freight traffic, and would be especially felt for trade to and from China.

"While the expanded US sanctions on Cuba have had the desired effect of further isolating the island from global trade and investment, the deeply entrenched Communist government has continued to divert remaining resources to repressing dissent and maintaining power on the island. In the absence of a major catalyst for change, the status quo will likely continue as global investors over-comply with the sanctions regime to minimize risk," advised Elton Smole, analyst with the compliance-focused corporate law firm Steptoe.