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PREMIUMCIGARS
CUBAN PARTNERS/EMPLOYEES: If
you plan to run a business in Cuba, but
are not able to live there full time, you
should choose your Cuban business
partners/employees with extreme caution. The cigar industry has countless
stories of a gringo setting up a cigar factory in Honduras, Nicaragua, or the
Dominican Republic with a local, only to
later be screwed in ways that are incomprehensible to the American psyche.

Advice on Starting a Cigar
(or any) Business in Cuba
A surprise change of U.S. foreign policy towards Cuba will take the
biggest steps ever in normalizing relations, but there’s still likely a long
road ahead before the embargo itself is lifted. Post-embargo Cuba will
still present challenges to cigar entrepreneurs. >BY FRANK HERRERA

O

ver the past 13 years, I have been
asked what the cigar industry
landscape will look like if the
Cuban Embargo is lifted. In the United
States, obviously you will see a prevalence of Cuban cigars. Sales of those
cigars will skyrocket, causing a dip in
sales of non-Cuban cigars. After a few
years, at most, sales will subside, and
non-Cuban cigars will come back since
the American palate has changed over
time. Further, you will find that there
will be less of a distinction between
Cuban cigars and non-Cuban cigars
since cigar companies will liberally
blend tobaccos from Cuba, Nicaragua,
Honduras, and the Dominican Republic.
What is less understood, is what
will the cigar industry look like in
Cuba? Over the years, I have speculated
as to different scenarios. But the truth is,
I don’t know. Even though I am intimately involved in Cuban trademark
disputes and other cigar trademark disputes, I can not tell you with any certainty what the future holds for business in Cuba. However, it is possible
that the following eight topics will be
challenges to any company that is interested in conducting any business in a
post-Embargo Cuba.

42 SMOKESHOP February 2015

TRADEMARKS: There will continue to be
trademark disputes both in Cuba, and in
the United States. Therefore, you should
register your trademarks in Cuba as soon
as possible. For decades, large U.S. companies have registered their trademarks in
Cuba, but smaller companies have not.
Cuba has a Patent and Trademark Office
like nearly every nation in the world. It is
antiquated, but it runs surprisingly well. If
you are interested in conducting business
in Cuba, you need to first secure your
trademarks in that country as a first step
in conducting business.
REAL PROPERTY: Property rights issues
stemming from exiles claiming confiscated lands/buildings will be a thorny issue
for years to come in Cuba. Not all property will be challenged, but you can bet that
desirable property (beach front, downtown, and Pinar del Rio farming land)
will be hotly litigated in whatever legal
forum that might exist at the time.
Therefore, if you are holding a big bag of
money and itching to buy land in Cuba,
whether for the cigar industry or not, you
should do your homework before handing the loot over to the first “fulana del
tal” that you meet once you land at Jose
Marti Airport.

THOSE THAT ARE THERE BEFORE YOU:
If you are a newcomer to the cigar industry, don’t think that you are going to
storm down there and pick up great
farmland in Pinar del Rio, or have access
to the best, or any raw materials. Remember European-based Altadis, S.A. (a
huge cigar conglomerate) is a 50 percent
partner with Cubatobacco’s Corporacion
Habanos, S.A. They, along with some
others, have Cuba’s best tobacco fields
and people on lockdown and will defend
it in a post-Embargo landscape.
TAKE A CUBAN-ZEN APPROACH:
During the first few years of a new Cuba,
just tell yourself that everything will be a
financial and psychological challenge.
As such, you will need to have substantial resources to weather the early days.
For instance, there is currently no decent
roadway system in Cuba. As such, transporting your Cuban made goods will
take longer then expected. The banking
system is a wildcard. There is no Internet
infrastructure, so your American habits
of communication will be slowed to a
crawl. Countless other daily inconveniences will be frustrating. So, take a
Cuban-zen approach to your start-up
days on the island.
COURT SYSTEM: As any person involved in business knows, threats of litigation, and litigation happen. It’s a cost
of doing business. Lawyers are usually
blamed for this, but the truth is that
lawyers get involved once a dispute has
heated up for some time and the parties
make the costly decision to seek court
intervention when business discussions
have broken down. If you conduct business in Cuba, there is a very good

>PREMIUM CIGARS
chance that you are going to have business disputes. Most will be small and
you will be able to resolve on your own.
However, some will require the hiring
of counsel and court intervention. What
then? What court will hear your business dispute?
I have no idea what a post-Embargo
Cuban court system will look like. Will it
continue as it has? Will it change to look
like our American system? Will it become
a hybrid of the Cuban law system and
our American system? Again, I don’t
know. However, you may want to consider including a choice of law provision
that requires that all disputes be held in
the United States. I believe that Miami
would be a good venue, as I am certain
that Cuba/U.S. business disputes will be
increasingly heard in courts located
there. You may also choose to include in
your business contracts a provision that
any dispute will be resolved by arbitration. I am certain that will be a growing
method of resolving business disputes in
Cuba. It follows that you must exercise
extreme caution when choosing who rep-

44 SMOKESHOP February 2015

resents your interests. Cuban lawyers are
not like United States lawyers. Both have
their strengths and weaknesses, so you
should research who (or what team) will
represent you with the understanding
that there are differences in legal culture
and dispute resolution.
NO RISK, NO REWARD—Those currently producing cigars in Nicaragua,
Honduras, and the Dominican Republic
are well aware of the challenges set forth
above. They will find success in Cuba
just as they have in these other cigar-producing countries since the transition will
not be as jarring. However, this article is
written more for those of you that are
dreaming about getting into the cigar
business, or some other business in
Cuba. There will be significant challenges, but no risk, no reward.
PA’LANTE—Finally, many in the Cuban
exile community have displayed outrage
at the manner in which Obama et al
made this announcement and the fact
that the United States will be viewed as

weak on the international stage. I agree
that you can not negotiate with terrorists, communists, or others that use violence, human rights violations, and systematically manipulate the liberal media
to justify their repressive agendas. Alan
Gross’ alleged “crimes” of providing
communication devices to facilitate
Internet communications do not equal
the crimes of Cuban spies for which he
was exchanged. However, Cubans on
both sides of the Florida Straits have a
saying, “siempre pa’lante, para atras ni
para coger impulso.” This translates as
always move forward, never backwards,
not even for a boost. So, to all of you
interested in conducting business in
Cuba, be cautious, be respectful, and do
everything you can to instill that freedom of speech, the press, association,
and other inalienable rights are part of
your contribution to a new Cuba.

Frank Herrera is a Delray Beach, Fla.
attorney specializing in intellectual proproperty, corporate, and internet law,
and is the founder of Herrera Cigars.