United States: United States Expands Cuban Assets Control Regulations

Highlights

• Effective Sept. 24, 2020, persons subject to U.S. jurisdiction (U.S. Persons) are generally prohibited from lodging, paying for lodging, or making any reservations for or on behalf of a third party to lodge at any property that the U.S. Secretary of State identifies as owned or controlled by the Cuban government, a prohibited official of the Government of Cuba, a prohibited member of the Cuban Communist Party, or a close relative of these.
• Concurrent with the above change, the U.S. Department of State has created the Cuba Prohibited Accommodations List (CPA List) for purposes of publishing the names, addresses and other identifying details, as relevant, of the properties meeting the above criteria. The initial publication of the CPA List, dated Sept. 28, 2020, includes mostly hotels, but also some private lodging houses (casas particulares).
• Cuban-origin alcohol and tobacco products are prohibited from entering the United States. U.S. individuals and non-U.S. persons traveling through the U.S. from Cuba or a third country can no longer import any amount of Cuban-origin alcohol or tobacco for personal use.
• The general license under § 515.564 of the Cuban Assets Control Regulations (CACR) that authorized the Cuba travel category known as "professional research/professional meetings" is amended to remove the authorization for U.S. Persons to attend at, or organize professional meetings or conferences in Cuba. Travel-related and other transactions directly incident to "professional research" remain generally authorized, provided the conditions set forth in § 515.564 are met.
• The general license under § 515.567 of the CACR that authorized travel-related and other transactions directly incident to "public performances, clinics, workshops, other athletic or non-athletic competitions and exhibitions" is eliminated. Such activities may only be authorized through specific licenses by Office of Foreign Assets Control (OFAC).

In an effort to curb the Cuban regime from "redirecting revenue from authorized U.S. travel for its own benefit," as stated by U.S. Department of the Treasury Secretary Steven T. Mnuchin, the Office of Foreign Assets Control (OFAC) amended the Cuban Assets Control Regulations (CACR), effective Sept. 24, 2020, tightening its sanctions in relation to activities and products associated with Cuba's travel, hospitality, alcohol, and tobacco industries.

Specifically, the Sept. 24, 2020, amendments to the CACR restrict lodging at certain hotels and private houses in Cuba, and eliminate the general licenses that authorized the importation of Cuban-origin alcohol and tobacco products into the U.S. for noncommercial purposes, the attendance or organization of professional meetings or conferences in Cuba, as well as the participation or organization of public performances, clinics, workshops, competitions and exhibitions in Cuba. In an effort to further explain and provide guidance regarding its changes to the CACR, OFAC has also updated its Cuba-related sanctions Frequently Asked Questions (FAQs).

Restrictions Associated with Lodging at Certain Properties in Cuba

OFAC's amendments to the CACR incorporate a new regulation that generally prohibits U.S. Persons from lodging, paying for lodging, or making any reservations for or on behalf of a third party at any property in Cuba, which the U.S. Secretary of State recognizes as property owned or controlled by the Cuban government, a prohibited official of the Government of Cuba, a prohibited member of the Cuban Communist Party, or a close relative of these. In conjunction with the amendment, the U.S. State Department has created a list – dubbed the CPA List – for purposes of publishing the names, addresses and other identifying details, as relevant, of those properties that the U.S. State Department believes meets the above criteria. The CPA List also identifies the basis for which the property appears on the list. As of the date of this alert, the CPA List includes 433 properties, some of which are "casas particulares" or private homes located throughout the island. The CPA List is administered and maintained by the U.S. State Department and can be expected to be updated periodically.

The amendments do provide for a carveout stating that the prohibition does not apply to lodging-related transactions initiated prior to the date that a property is added to the CPA List as published in the Federal Register. In other words, existing travel-related arrangements that include lodging at properties in Cuba identified on the CPA List are permitted, provided that those travel-related arrangements were initiated prior to the property's addition to the CPA List.

Notably, OFAC's lodging prohibitions and the CPA List have been implemented in addition to the CACR's prohibition against engaging in direct financial transactions with any person that the U.S. Secretary of State identifies as an entity or subentity that is under the control of, or acts for or on behalf of, the Cuban military, intelligence or security services or personnel and with which direct financial transactions would disproportionately benefit such services or personnel at the expense of the Cuban people or private enterprise in Cuba. Like the CPA List, the U.S. State Department administers and maintains a list describing persons meeting the above criteria called the Restricted Entities and Subentities Associated with Cuba (Cuba Restricted List), which also is updated periodically. 

However, while the prohibitions concerning the Cuba Restricted List are limited to "direct financial transactions" with the entities and subentities identified under the Cuba Restricted List, the new restrictions on transactions concerning the properties identified under the CPA List extend not only to direct transactions (e.g., lodging or paying for lodging), but also indirect transactions (e.g., making any reservations for or on behalf of a third party), which potentially includes not only the traveler but also any intermediary travel agency or agent as well as hotel booking company.

As a practical effect, individual travelers, as well as travel service providers, are now prohibited from engaging in any transaction, directly or indirectly, with the properties identified in the CPA List. In addition, direct financial transactions with the entities identified under the Cuba Restricted List remain prohibited. Financial institutions offering banking services to individual passengers and/or travel services providers may need to revisit their internal policies and procedures to verify or request additional confirmation from its customers concerning compliance with the CPA List-related restrictions.

OFAC's lodging prohibitions discussed above also extend to a number of general licenses included in the CACR. The affected general licenses relate to:

• exportations from the U.S. to Cuba, reexportations to Cuba, and the importation and servicing or repair of certain items previously exported or reexported to Cuba (31 CFR § 515.533)
• transactions involving information and informational materials (31 CFR § 515.545)
• certain export and import transactions by U.S.-owned or -controlled foreign firms (31 CFR § 515.559)
• travel-related transactions to, from, and within Cuba by U.S. Persons (31 CFR § 515.560)
• family visits (31 CFR § 515.561)
• journalistic activity in Cuba (31 CFR § 515.563)
• professional research and professional meetings in Cuba (31 CFR § 515.564)
• educational activities (31 CFR § 515.565)
• religious activities in Cuba (31 CFR § 515.566)
• certain public performances, clinics, workshops, competitions and exhibitions in Cuba (31 CFR § 515.567)
• the provision of travel, carrier, and other transportation-related, and remittance forwarding services (31 CFR § 515.572)
• support for the Cuban people (31 CFR § 515.574)
• humanitarian projects in Cuba (31 CFR § 515.575) and
• the activities of private foundations or research or educational institutes (31 CFR § 515.576)

Further, the amendments provide that the lodging prohibitions promulgated under the new regulation to the CACR are not permissible as transactions ordinarily incident to a licensed transaction. In other words, authorized travelers to Cuba cannot use their travel authorization as a means to circumvent the lodging prohibitions described above. 

Restrictions on the Importation into the U.S. of Cuban-Origin Alcohol and Tobacco Products

OFAC's amendments to the CACR also restrict the entry of Cuban-origin alcohol and tobacco products into the U.S.

In particular, the amendments prohibit U.S. Persons from bringing Cuban-origin alcohol and tobacco products into the U.S. from Cuba or a third country. As such, U.S. Persons authorized to travel to Cuba or U.S. persons who travel to a third country that trades with Cuba, such as Canada or France, cannot bring Cuban-origin alcohol or tobacco back to the United States. The amendments do not, however, prohibit these persons from purchasing Cuban-origin alcohol and tobacco for personal consumption during their visit. Under past legislation, U.S. Persons were generally allowed to bring Cuban-origin alcohol and tobacco into the United States in their accompanied baggage as long as the products were intended for personal use.

Non-U.S. citizens and non-U.S. residents (including Cuban nationals who are in the U.S. in a nonimmigrant status or pursuant to another nonimmigrant travel authorization issued by the U.S. government) are also prohibited from bringing Cuban-origin alcohol and tobacco products into the U.S. from Cuba or a third country even if they are just passing through the U.S. to get to their final destination. Under previous legislation, the entry of Cuban-origin alcohol and tobacco products by Cuban nationals, as described above, into the U.S. was generally authorized as long as the products were in the Cuban national's accompanied baggage and intended for personal use. Other foreign nationals were also generally authorized to enter Cuban-origin alcohol and tobacco products into the U.S. in their accompanied baggage as long as the products were intended for noncommercial use.

Professional Research and Professional Meetings in Cuba

The amendments to the CACR now generally prohibit U.S. Persons from engaging in transactions directly incident to the attendance at, or the organization of, professional meetings or conferences in Cuba unless authorized under another travel-related authorization or authorized via a specific license issued by OFAC. Prior to the amendments, U.S. Persons were generally allowed to engage in these transactions pursuant a general license embedded in the CACR.

Although OFAC has tightened authorizations associated with professional meetings and conferences in Cuba, U.S. Persons, subject to certain conditions, are generally authorized to engage in transactions that are directly incident to professional research in Cuba that relate to the traveler's profession, professional background or area of expertise. The amendments do incorporate the lodging prohibitions, discussed above, to the general license authorization. OFAC also provides that direct financial transactions with entities and subentities identified in the U.S. State Department's Cuba Restricted List are prohibited even for persons who seek to engage in transactions under the abovementioned authorization.

Public Performances, Clinics, Workshops, Athletic and other Competitions, and Exhibitions

OFAC's amendments to the CACR also prohibits U.S. Persons from engaging in transactions incident to the organization of or participation in 1) public performances; 2) clinics; 3) workshops; 4) athletic competitions that are not otherwise authorized; 5) nonathletic competitions; or 6) exhibitions unless authorized under a specific license by OFAC. These transactions were generally authorized pursuant a general license under prior law.

The CACR does, however, continue to authorize, subject to certain conditions, U.S. Persons to engage in transactions that are directly incident to the participation in or organization of amateur and semiprofessional international sports federation competitions. Similar to the amendments concerning transactions incident to for professional research, the amendments associated with this authorization incorporate the lodging prohibitions regarding the CPA List. Further, even if authorized under the aforementioned general license, OFAC states that direct financial transactions with entities and subentities identified in the U.S. State Department's Cuba Restricted List are prohibited.

As a result of the amendments to these two travel categories discussed above, travel and carrier service providers are now required to amend their respective materials and procedures under which they must obtain from the individual traveler a certification that he/she is traveling to Cuba under one of the authorized travel categories under the CACR. This certification will now need to reflect, among others, the modifications discussed above by eliminating the travel category related to professional meetings or conferences as well as public performances, clinics, workshops, athletic and other competitions, and exhibitions.

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.