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 90 percent.
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 Cuba."
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 embargo.
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. Metals Forum welcomes submissions addressing issues of interest to the metals community.