The Obama Administration took another step in implementing the change in US policy toward Cuba that the president announced in December of 2014. Specifically, the administration again loosened sanctions and export restrictions related to trade with and travel to Cuba through amendments made by the Department of Treasury’s Office of Foreign Assets Control (OFAC) and the Department of Commerce’s Bureau of Industry and Security (BIS) to the Cuban Assets Control Regulations (CACR) and Export Administration Regulations (EAR), respectively. These amendments, which took effect on January 27, 2016, reflect the Obama Administration’s continued commitment to reduce US sanctions against Cuba in areas that encourage US engagement with, and empowerment of, the Cuban people.
While the changes make it easier for individuals and entities subject to US jurisdiction to trade with and travel to Cuba, significant restrictions on these activities remain in place, particularly where the activity is unrelated to furthering the needs of the Cuban people. In some areas, the administration has reached the limits of what it can do to remove restrictions on Cuba without Congressional action, and such action remains unlikely anytime soon.
The amendments can be divided into two broad categories: trade-related and travel-related. The implications of each are outlined below.
OFAC and BIS have significantly eased trade-related restrictions involving Cuba through the following changes:
OFAC has eliminated payment and financing restrictions for most types of authorized exports and reexports to Cuba other than agricultural commodities and items. Previously, payment and financing terms for authorized exports were restricted to cash-in-advance or third-country financing. Now, US exporters may sell authorized goods to importers in Cuba, including entities owned by the Cuban government, in open account transactions. In addition, US financial institutions are authorized to provide financing for authorized exports and reexports, including issuing, advising, negotiating, paying, or confirming letters of credit (including letters of credit issued by a Cuban financial institution); accepting collateral for issuing or confirming letters of credit; and processing documentary collections.
This change is perhaps the most significant of the current set of amendments to the CACR and the EAR. The past cash-in-advance and third country financing requirements have been cited as major practical impediments, which severely limited the ability of US exporters to sell authorized goods to Cuba. These requirements made it difficult for US exporters to compete with exporters from other countries that have been authorized to provide credit terms to a cash-strapped Cuban government. The current regulatory changes will enable US exporters to provide credit terms to Cuban importers and may also open up opportunities for US financial institutions to provide pre-export financing to US exporters, as well as direct financing to Cuban importers in connection with authorized sales to Cuba.
It is important to note that agricultural exports remain subject to the cash-in-advance and third country financing limitations. Those restrictions have been codified in the Trade Sanctions Reform and Export Enhancement Act. Accordingly, any modification of those financing restrictions applicable to agricultural sales to Cuba would require action by the US Congress.
Policy of approval for certain exports and reexports
BIS has identified additional types of exports and reexports that are subject to a general policy of approval. Thus, BIS will generally approve license applications for exports and reexports of:
- commodities and software to human rights organizations or individuals and non-governmental organizations that promote independent activity intended to strengthen civil society in Cuba;
- commodities and software to US news bureaus in Cuba whose primary purpose is the gathering and dissemination of news to the general public;
- telecommunications items that would improve communications to, from, and among the Cuban people;
- certain agricultural items, such as insecticides, pesticides, and herbicides and agricultural commodities not eligible for a license exception; and
- items necessary to ensure the safety of civil aviation and the safe operation of commercial aircraft engaged in international air transportation, including the export or reexport of such aircraft leased to state-owned enterprises.
Meeting the needs of the Cuban people
BIS has also created a case-by-case licensing policy for exports and reexports of items intended to meet the needs of the Cuban people, including for state-owned enterprises, agencies, and organizations of the Cuban government that provide goods and services to the Cuban people.
Examples of eligible items include those for agricultural production, artistic endeavor, education, food processing, disaster preparedness, relief and response, public health and sanitation, residential construction and renovation, public transportation, and the construction of infrastructure that directly benefits the Cuban people.
Exports and reexports that remain prohibited
Finally, BIS reiterated its general policy against the export and reexport of items that are unrelated to furthering the needs of the Cuban people. To that end, BIS will continue to apply a general policy of denying license applications for the export and reexport of items for use by state-owned enterprises, agencies, or other organizations of the Cuban government that primarily generate revenue for the state, including those in the tourism industry and those engaged in the extraction or production of minerals or other raw materials. Similarly, applications to export or reexport items destined to the Cuban military, police, intelligence, and security services remain subject to a general policy of denial.
The amendments contain a number of provisions that expand existing licenses for certain categories of travel, including:
Air carrier services and temporary soujourn
OFAC made two changes that will facilitate transporting travelers by air to Cuba for authorized purposes.
First, individuals and entities subject to US jurisdiction are now permitted to enter into blocked space, code-sharing, and leasing arrangements with Cuban airlines and Cuban nationals to facilitate air carrier services to Cuba. Second, the CACR now authorize travel-related and other transactions directly incident to the temporary soujourn of aircrafts and vessels that are transporting travelers between the United States and Cuba as authorized by the Department of Commerce. These amendments allow personnel tasked with operating or servicing such aircrafts or vessels to engage in travel-related and other transactions in connection with the temporary soujourn of aircraft on the island.
The practical effect of these changes is to allow US airlines and their personnel to travel to Cuba and enter into a variety of contractual arrangements that will ultimately need to be in place in order for US airlines to provide carrier service to and from the island. The amended regulations also open the door for third-party providers of services to air carriers, such as in-flight meal service, to engage in travel-related and other transactions in furtherance of their services to US airlines operating in Cuba.
Information and informational materials
OFAC has expanded the existing general license that authorized travel-related and other transactions directly incident to the export, import, or transmission of information or informational materials to Cuba.
Prior to these amendments, the general license relating to information and informational materials explicitly prohibited payments relating to works not yet in being, as well as payments relating to artistic or other substantive alteration or enhancements to informational materials. These prohibitions no longer exist.
Specifically, the expanded license now authorizes the export, import, or transmission of information or informational materials through professional media or artistic productions in Cuba. This includes the filming or production of media programs, music recordings, as well as the creation of artworks in Cuba by certain qualified persons. In addition, the amended license authorizes transactions relating to the creation or artistic or other substantive alteration or enhancement of informational materials in Cuba, including through employment of Cuban nationals and the remittance of royalties or other payments. Finally, although the amended license authorizes marketing related to the dissemination of such informational materials, it still contains an express prohibition on other marketing and business consulting services.
The CACR now authorize travel-related and other transactions that are directly incident to organizing professional meetings or conferences in Cuba. Prior to the amendments, this license authorized only attendance at such meetings or conferences.
Public performances, clinics, workshops, athletic, and other competitions and exhibitions
Similar to the expansion of the CACR’s general license for professional meetings and conferences, OFAC has expanded the general license relating to public performances, clinics, workshops, athletic, and other competitions and exhibitions. Specifically, the license now authorizes travel-related and other transactions that are directly incident not only to participation in, but also to the organization of, such events in Cuba.
OFAC further expanded the general license relating to public performances, clinics, workshops, athletic, and other competitions and exhibitions by removing the requirements that (1) any profits from such events be donated to an independent nongovernmental organization in Cuba or a US-based charity; and (2) the event be run at least in part by US travelers.
OFAC added another category to the CACR’s existing list of authorized humanitarian projects in or related to Cuba—namely, disaster preparedness and response.
Travel-related and other transactions incident to exportation and reexportation of certain items
OFAC expanded an existing general license authorizing travel-related and other transactions as are directly incident to market research, commercial marketing, sales or contract negotiation, accompanied delivery, installation, leasing, or servicing in Cuba of items consistent with the export or reexport licensing policy of the Department of Commerce. Prior to the amendments, this list did not includecontract negotiation or leasing.
These amendments represent another incremental step by the Obama Administration toward implementing the new policy it announced toward Cuba in December 2014. Through these amendments, the administration continues to ease sanctions and export restrictions involving Cuba. At the same time, it is important to reiterate that the CACR still contain significant restrictions on trade with and travel to Cuba. General tourism and recreational activity in excess of a full-time schedule, even while in Cuba for otherwise authorized travel, for example, remains prohibited.