Today, the Obama Administration published regulatory changes,
effective immediately, that will significantly ease the US embargo
against Cuba, which has been in place since 1963. These
changes give effect to the Obama Administration's new policy
towards Cuba that was announced on December 17, 2014 to normalize
US-Cuba relations.
The changes will create economic opportunities in Cuba for a wide
range of industries, including travel and carrier services,
insurance, telecommunications and consumer communications,
financial services, agriculture, media, construction, shipping, and
many others. For potential business opportunities not covered
by the new general authorizations, licensing agencies will likely
review more favorably specific license
applications.
However, changes to the US trade embargo against Cuba remain
incremental, and key elements of the embargo remain in place.
Although the Executive Branch has discretion to alter certain
aspects of the embargo, various statutes enacted over the past
decades (such as the Cuban Liberty and Democratic Solidarity Act
(LIBERTAD or the Helms-Burton Act)) have codified the basic
architecture of the US sanctions regime, and several members of
Congress have questioned the President's authority to implement
the new changes. We expect legislative activity in the near
future that will attempt to limit and clarify Executive Branch
authority relating to Cuba sanctions and Cuba policy more
broadly.
The US Department of the Treasury's Office of Foreign Assets
Control (OFAC) has already published Frequently Asked Questions
(FAQs) regarding its new regulations, but many questions about the
operation of today's changes remain.1 Over the next
weeks and months, firms with potential business in Cuba should
closely monitor further changes to the Cuba sanctions regulations
and clarifying guidance, as well as congressional action to limit
such changes.
Sectors Affected by the Regulatory Changes
This initial easing of the US embargo has been accomplished through
the issuance of general licenses, the expansion of certain license
exceptions, and other clarifications in the Cuban Assets Control
Regulations,2 administered by OFAC, and the Export
Administration Regulations,3 administered by the US
Department of Commerce's Bureau of Industry and Security
(BIS).
The changes to the Cuban embargo include the following
categories:4
Travel to Cuba
The changes significantly ease regulatory impediments to Cuba
travel:
- New general licenses have been issued for travel falling into 12 categories previously authorized by specific license, including: journalistic activity; professional research and professional meetings; educational activities; religious activities; activities of private foundations or research or educational institutes; and exportation, importation, or transmission of information or information materials.
- The limit on expenditures during travel to Cuba has been lifted, and authorized travelers will be allowed to engage in transactions incident to travel within Cuba.
- Authorized travelers will be allowed to use US credit and debit cards in Cuba.5
- Authorized travelers may make arrangements through any service provider that complies with OFAC regulations governing travel services to Cuba.
The authorization does not cover travel to Cuba for tourist
activities.6
Financial Services
OFAC regulations now permit US depository institutions to open
correspondent accounts at Cuban financial institutions to
facilitate the processing of authorized transactions, but Cuban
banks are not permitted to open such accounts in the United
States.7 Moreover, US financial institutions may enroll
merchants and process credit and debit card transactions for
travel-related and other transactions in Cuba. US financial
institutions may also unblock the accounts of Cuban nationals
(except government officials or Communist party members) who have
taken up permanent residence outside Cuba and do not intend to
return to Cuba. Such institutions may rely on a variety of
evidence that the Cuban national qualifies for such unblocking,
including government-issued identification or sworn
statements.8
Telecommunications and Consumer
Communications
The changes significantly expand opportunities for
communications with and within Cuba:
- An OFAC general license now facilitates the establishment of commercial telecommunications facilities (including fiber-optic cable and satellite facilities) linking the United States, third countries, and Cuba and within Cuba.
- A new BIS license exception now permits the commercial export of certain items that will contribute to the ability of the Cuban people to communicate within Cuba and around the world. This includes the commercial sale of certain consumer communications devices, related software, applications, hardware, and services, and items for the establishment and update of communications-related systems.
- An OFAC general license now authorizes additional services incident to Internet-based communications and related to exports of communications items.
- A separate, revised BIS license exception, "Consumer Communications Devices" (CCD), expands the existing authorization for exports to Cuba of certain consumer computers, disk drives, monitors, printers, modems, network access equipment, mobile phones, and certain other commodities and software.9
Other Opportunities for US Exports
BIS has also created a new license exception, "Support for the
Cuban People" (SCP), that authorizes exports in three areas:
improving living conditions and supporting independent economic
activity; strengthening civil society; and improving
communications:
- To improve living conditions and support independent economic activity, SCP authorizes exports of building materials, equipment, tools and other supplies for use in certain private sector construction and renovation activities. SCP also authorizes exports of tools, equipment, supplies, and instruments for use by private sector entrepreneurs, and exports of tools and equipment for private sector agricultural activity.
- To strengthen civil society, SCP authorizes exports of donated items and temporary export by travelers to Cuba of items for use in scientific, archaeological, cultural, ecological, educational, historic preservation, or sporting activities, as well as exports to human rights organizations, individuals, or non-governmental organizations that promote independent activity intended to strengthen civil society. Travelers are also able to export temporarily items for use in professional research in the traveler's profession or full-time field of study.
- To improve communications, SCP authorizes exports of items for telecommunications, including Internet access, use of Internet services, and the creation and upgrading of telecommunication infrastructure. SCP also provides new authorizations for exports to Cuba of items used by the news media.10
OFAC regulations also reinterpret "cash in advance"
from "cash before shipment" to "cash before transfer
of title to, and control of," which will allow authorized
exports to receive expanded financing.
Insurance
US insurers are now authorized to provide coverage for global
health, life or travel insurance policies for individuals residing
in a third country who travel to or within Cuba. Furthermore,
health, life and travel insurance-related services will continue to
be permitted for authorized US travelers to Cuba.
Importation of Cuban Goods
Authorized US travelers may import up to $400 worth of goods
acquired in Cuba for personal use, including no more than $100 of
alcohol or tobacco products.
Remittances
Remittance levels have also been substantially raised:
- General remittances have been raised from $500 to $2,000 per quarter (except to certain officials of the government or the Communist party) and other types of remittances will no longer require specific licensing.
- Certain other remittances for humanitarian projects and development of private businesses and farms are permitted without limitation.
- Authorized travelers are now allowed to carry $10,000 in total family remittances, periodic remittances, and remittances to religious organizations in Cuba.
- OFAC has also issued a general license for banking institutions (including US-registered brokers or dealers) in securities and US-registered money transmitters to process authorized remittances to Cuba.
Third-Country Services to Cubans
US-owned or US-controlled entities in third countries (including
banks) that are currently prohibited from dealing with Cuban
individuals are now generally licensed to do so (but this license
does not cover any export of goods or services to Cuba
itself). In addition, new general licenses unblock the
accounts at US banks of Cuban nationals who have relocated outside
of Cuba; permit US persons to participate in third-country
professional meetings and conferences related to Cuba; and allow
foreign vessels to enter the United States after engaging in
certain humanitarian trade with Cuba.
Small Business Growth
OFAC regulations now authorize certain micro-financing
projects and entrepreneurial and business training in Cuba, such as
for private business and agricultural operations. Moreover,
commercial imports of certain independent Cuban
entrepreneur-produced goods and services (as determined by the
State Department at a future date) are authorized.
Supporting Diplomatic Relations and Official
Business
An OFAC general license has been issued to authorize transactions
with Cuban official missions and their employees in the United
States, as well as transactions with Cuba by employees, grantees,
and contractors of the US government, foreign governments, and
certain international organizations in their official
capacities.
Review of Cuba's Designation as a State Sponsor of
Terrorism
The President has also instructed the Secretary of State to review
Cuba's designation as a state sponsor of terrorism, which has
been in place since 1982. The removal of this designation
would result in the easing of a variety of additional sanctions and
export restrictions against Cuba.
1See US Department of the Treasury,
Frequently Asked Questions Related to Cuba, Jan. 15, 2015,
accessed at http://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_faqs_new.pdf.
2 31 C.F.R. Part 515.
3 15 C.F.R. Parts 730-774.
4 US Department of the Treasury, Fact Sheet:
Treasury and Commerce Announce Regulatory Amendments to the Cuba
Sanctions, Jan. 15, 2015, accessed at http://www.treasury.gov/press-center/press-releases/Pages/jl9740.aspx.
5 However, the regulations do not require financial
institutions or credit card companies to accept or facilitate such
authorized transactions.
6 See OFAC FAQ #7.
7 See OFAC FAQ #33.
8 See 31 C.F.R. § 515.505.
9 Previously, CCD required that items be donated to
Cuba; the newly expanded CCD removes the donation requirement and
expands the list of eligible items.
10 The authorizations generally cover only EAR99 items
(low-technology consumer goods) and those items listed on the
Commerce Control List controlled only for anti-terrorism
purposes. They do not authorize the export of items on the Commerce
Control List for sensitive reasons such as national security,
nuclear proliferation, regional stability, missile technology, and
other reasons of similar sensitivity.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.