American Honda Finance Corporation (American Honda) has settled with the Office of Foreign Assets Control (OFAC) over potential civil liability for 13 violations of the Cuban Assets Control Regulations (CACR), which allegedly occurred between 2011 and 2014. What’s notable is that the matter involved the Canadian affiliate of the global company which was acting entirely independently and outside of the U.S.
Honda Canada Finance, Inc. (Honda Canada), is a majority owned subsidiary of American Honda meaning that, under U.S. law, Honda Canada is generally prohibited from doing business with Cuban parties just as if it were a U.S. company. This is vastly different from the local laws applying to Canadian owned companies, under which there would typically be no prohibition on conducting business in Cuba or with a Cuban party. In fact, under the Canadian Foreign Extraterritorial Measures Act, a Canadian company like Honda Canada is prohibited from complying with a U.S. embargo of Cuba. Therefore, while Honda Canada was complying with the laws of its home country over U.S. law, OFAC still used its extraterritorial jurisdiction to go after the company.
In order to avoid this problem, companies should periodically review their compliance programs. U.S companies with foreign subsidiaries in countries with statutes blocking compliance with the American Cuba embargo might consider applying for a license and basing the request on the blocking statute. For example, if American Honda were to have applied for such a license, the application itself would not have violated the Canadian Foreign Extraterritorial Measures Act, which only covers “persons in Canada” from complying with the U.S. embargo on Cuba, and thus the corporate family may have been protected from violations on both sides of the border.