On January 26, 2016, the United States again modified its stance on travel to Cuba and eased certain export restrictions to that country. The changes are not surprising, considering the White House’s determination to re-establish diplomatic relations with the nation and promote the “free flow of information” to, from and within Cuba. The new regulatory changes follow statements made by President Obama in December 2014, which ordered the restoration of full diplomatic relations with Cuba and removed Cuba from the list of states that sponsor terrorism.
U.S. trade and economic sanctions imposed against Cuba are primarily enforced by the Treasury Department’s Office of Foreign Assets Control (“OFAC”) through the Cuban Assets Control Regulations (31 C.F.R. Part 515) (“CACR”), and the Commerce Department’s Bureau of Industry and Security (“BIS”) through the Export Administration Regulations (15 C.F.R. Parts 730-774) (“EAR”). While there is some overlap, OFAC generally has jurisdiction to restrict the provision of services and funds to Cuba, while BIS has jurisdiction to license and/or prohibit the export or re-export of U.S.-origin items to Cuba.
BIS and OFAC issued a joint statement January 26 that announced further amendments to the CACR and the EAR that seek to “facilitate exports” so that they may “strengthen civil society and enhance communication to, from and among the Cuban people.”1
CACR Amendments The CACR are revised to further facilitate certain types of travel and other activities under general licenses. The regulations have been expanded to allow travel and other activities for the following purposes:
- Information and informational meetings. Travel directly related to professional media such as filmmaking, television programs, music records and the creation of artwork in Cuba will be authorized by OFAC. A general license may also be used to authorize transactions related to the creation or dissemination of artistic or informational materials, including employment of Cuban nationals.
- Humanitarian projects. Travel for disaster preparedness and response projects are now added to the list of generally authorized humanitarian projects in Cuba. Humanitarian projects for which travel to Cuba was authorized before, and continue to be authorized, include: (1) medical and health-related projects; (2) construction projects to benefit independent civil society groups; (3) historic preservation; (4) environmental projects; (5) projects involving educational training, within Cuba or off-island, relating to topics involving entrepreneurship and business, civil education, journalism, advocacy and organizing, adult literacy, or vocational skills; (6) community-based grassroots projects; (7) projects for developing small-scale private enterprise; (8) agricultural and rural development projects to promote independent activity; and (9) microfinancing projects (except for loans, extensions of credit or other financing which are prohibited). Projects to meet basic human needs are also authorized. Remittances to Cuban nationals for humanitarian projects, support of the Cuban people, or developing private business were also generally authorized since January 16, 2015, and continue to be authorized.
- Temporary sojourn. The “temporary sojourn” of aircraft and vessels may be authorized by the Department of Commerce, either through a license or license exception, in connection with permissible travel between the United States and Cuba. License exception Aircraft, Vessels, and Spacecraft (AVS) may be applicable, provided its requirements are met.
- Professional meetings. OFAC will provide authorization by general license for organizing professional meetings or conferences in Cuba. Previously, only attendance at such meetings was permitted.
- Sports competitions and athletic events. A general license may be used to organize certain amateur and semi-professional sports competitions.
- Internet-based services. Certain services incident to internet-based communications, such as email, social networking, VOIP, web-hosting, and domain-name registration, are now authorized under a general license. The use of certain applications on personal computers, cell phones and other personal communication devices is also authorized by general license. Services such as cloud storage, software design, business consulting, and IT management related to exports of hardware/software are authorized under Commerce’s license exception Consumer Communications Device (CCD). Software used to develop software exported to Cuba may be authorized under the license exception Support for the Cuban People (SCP).
Export Laws Additional export licenses may now be approved by a BIS license under a general policy of approval. Previously, all items subject to the EAR (even items designated as EAR-99) required a license to Cuba and were reviewed on a case-by-case basis. BIS also held a general policy of denial for many dual-use items subject to specific control identified on the Commerce Control List (CCL). The new general policy of approval may result in more efficient license processing times for certain items being exported or re-exported to Cuba.
- Telecommunications. Exports and re-exports for telecommunications improving communications to, from, and among the Cuban people are now an exception to BIS’ general policy of license denial. In addition, the commercial export of certain items contributing to the ability of the Cuban people to communicate with people within Cuba, in the United States, and rest of the world will be authorized under the new Commerce license exception SCP. OFAC recently issued an expanded general license to establish mechanisms for the provision of commercial telecommunications services in Cuba or linking third countries and Cuba, as well as authorizing telecommunications-related transactions. Previously, transactions incident to the establishment of telecommunications facilities linking third countries and Cuba required a specific license. Examples of the now-expanded general authorization are that U.S. persons may establish a telecommunications business presence in Cuba, which provides telecommunications and internet-based services. U.S. persons may also purchase calling cards for an individual to use in Cuba or pay the bills of such individual to a telecommunications operator in Cuba. The regulations were also amended September 21, 2015, to authorize U.S. persons to enter into licensing agreements related to, and to market, authorized telecommunications services. Those telecommunications services not specifically identified in the CACR and otherwise prohibited by the CACR continue to require an application for a specific license, subject to a policy of denial, such as investment in domestic telecommunications networks in Cuba and/or entering into joint ventures with telecommunications state-owned entities controlled by the Cuban government, officials or military.
- News gathering. Individuals can obtain licenses for exports of certain commodities and software to U.S. news bureaus in Cuba.
- Travel-related transactions. OFAC regulations will expand an existing general license to include market research, commercial marketing, sales or contract negotiation, accompanied delivery, installation, leasing, or servicing in Cuba of items consistent with the export or re-export licensing policy of the Department of Commerce.
- Human rights organizations. BIS will generally approve license applications for exports related to human rights organizations or non-governmental organizations. Exports and re-exports made to Cuban government agencies that provide goods and services, or that otherwise “meet the needs” of the Cuban people, may also be authorized by license.
- Agriculture. Exports/re-exports for certain U.S.-origin agricultural items may occur under license exception Agricultural Commodities (AGR).
- Civil aviation safety. Individuals may obtain licenses for items to ensure safety of civil aviation and safe operation of commercial aircraft engaged in international air transportation.
- Case-by-case assessment. BIS will authorize on a special case-by-case basis those exports that “meet the needs” of the Cuban people. BIS may also provide licenses for such items related to state-owned enterprises, organizations and agencies of the Cuban government.
Payment Terms for Certain Exports The amendments to the EAR and OFAC regulations also impact payment terms for certain exports:
- Easing of restrictions on payment and financing terms for exports and re-exports. Restrictions on the payment and financing terms for authorized exports and re-exports involving Cuba will be removed. U.S. depository institutions may now be authorized to provide financing, such as a letter of credit, for exports and re-exports.
- Expansion of payment terms for non-agricultural exports. For authorized non-agricultural exports and re-exports, permissible payment terms include: (1) payment of cash in advance; (2) sales on an open account; and (3) financing by third-country financial institutions or U.S. financial institutions.
Even though some restrictions have been eased, businesses and investors should continue to conduct due diligence prior to engaging in exports or other transactions involving Cuba. Certain transactions will still require specific licenses, and it is important that entities have the requisite authorization to partake in certain activities involving Cuba, or risk a violation of the EAR or CACR regulations.