On Friday, September 18, 2015, the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) and the U.S. Commerce Department’s Bureau of Industry and Security (“BIS”) announced amendments (the “September Amendments”) to the Cuban Assets Control Regulations (“CACR”) and the Export Administration Regulations (“EAR”) in a continuing effort to relax certain aspects of the U.S. embargo against Cuba. The September Amendments follow an earlier relaxation on January 16, 2015(the “January Amendments”) and the policy changes originally announced by President Obama on December 17, 2014. The latest BIS and OFAC amendments went into effect on September 21, 2015.
Like previous changes to the U.S. embargo of Cuba, the September Amendments are limited in scope due to continuing statutory constraints that can only be lifted by Congressional action. That said, there are several potentially useful new authorizations, including the ability for certain operators to establish a physical presence in Cuba, as well as further relaxations in the context of travel and transportation (including for vessels and civil aviation safety), telecommunications and internet-based services, software development, and financial and estate-related transactions. Despite these changes, the embargo remains in place and most Cuba-related activities—including travel to Cuba for tourism, investment in Cuba, and general trade with Cuba—continue to be prohibited for persons subject to U.S. jurisdiction.
Below we highlight some of the more significant changes. All of these provisions are subject to important caveats and limitations, and companies should carefully review the revised CACR and EAR before engaging in any new transactions with Cuba. Detailed information about these changes is available in updated “Frequently Asked Questions” documents issued by OFAC and by BIS as well as in a joint press release issued by both agencies.
1. Certain Parties Authorized to Establish Physical Presence in Cuba
Perhaps the most notable change relates to establishing and maintaining a physical presence in Cuba. Certain persons subject to U.S. jurisdiction may now establish and maintain offices, retail outlets, warehouses, and other facilities in Cuba to facilitate authorized transactions. This authorization onlyapplies to parties in the following fields: news bureaus; exporters of certain goods authorized for export or reexport to Cuba by BIS and OFAC (e.g., agricultural products and materials for construction or renovation of privately-owned buildings); entities providing mail or parcel transmission services or certain cargo transportation services; providers of telecommunications or internet-based services; entities organizing or conducting educational activities; religious organizations; and providers of authorized carrier and travel services. Travel service providers remain expressly prohibited, however, from establishing a presence to provide lodging in Cuba.
This authorization extends to securing goods and services related to the operation of the physical premises, engaging in marketing activities, employing Cuban nationals or persons subject to U.S. jurisdiction in Cuba, and opening and maintaining bank accounts in Cuba. Certain exports and reexports of items to Cuba for purposes of establishing, maintaining, or operating a physical presence in Cuba are also now authorized pursuant to the revised EAR License Exception Support for the Cuban People (“License Exception SCP”).
2. New Travel and Transportation Authorizations
The September Amendments authorize transportation by vessel (in addition to aircraft) of authorized travelers (i.e., those traveling under one of the existing 12 general licenses for travel) between the United States and Cuba, provided the vessel does not make any third-country stops. Temporary sojourns of vessels in Cuba are also authorized under certain conditions. Booking of vessel transport and provision of lodging on board such vessels is also permissible for authorized travelers.
Persons subject to U.S. jurisdiction and their co-habiting family members may also visit or accompany close relatives who are traveling to Cuba pursuant to authorizations for certain additional educational activities, journalistic activities, professional research, religious activities, humanitarian projects, and activities of private foundations or certain research or educational institutes.
All authorized travelers are now permitted to open and maintain bank accounts in Cuba in order to access funds for authorized transactions while in Cuba. Travelers are no longer subject to the prior $10,000 cap on authorized remittances carried to Cuba. Also, the previous restrictions on temporary exports or reexports (including hand-carries) of certain goods for use in specific authorized activities (including now professional meetings) while in Cuba have been relaxed.
Separately, exports and reexports of parts and components to ensure the safety of civil aviation and the safe operation of commercial aircraft are now eligible for case-by-case licensing review. This policy extends to items for air traffic control, passenger security screening, and aviation communications.
3. Expanded Authorizations for Telecommunications, Internet-Based Services, Software Development, and Technology Transfers
In addition to establishing a business presence in Cuba to provide certain telecommunications and internet-based services, persons subject to U.S. jurisdiction are now authorized to establish and maintain business relationships with Cuban nationals (e.g., subsidiaries, branches, joint ventures) for such purpose. Telecommunications and internet service providers may also license and market their services in Cuba.
In the software development context, the importation into the United States of Cuban-origin mobile applications is now permitted, as is the hiring of Cuban nationals to develop such applications. Related to that, the September Amendments relax licensing requirements on exports and reexports of commodities or software to Cuba that will be used by certain end-users to develop software to improve the free flow of information or that will support certain private sector activities. The EAR also no longer require licenses for “deemed” exports or reexports of EAR99-classified technology or source code to Cuban nationals located outside of Cuba.
Existing authorizations regarding the provision of certain services to Cuba related to some consumer communications devices have also been expanded to include training and certain other additional services. Finally, the September Amendments clarify that exports and reexports of eligible items under License Exceptions SCP and Consumer Communication Devices (“License Exception CCD”) are not limited to sales or donations, but may also include other transactions such as leases or loans.
4. Financial and Estate-Related Transactions
The September Amendments also affect remittances and maintenance of bank accounts for Cuban nationals. For example, the prior limits on donative remittances to certain non-prohibited Cuban nationals have been removed. U.S. financial institutions, including money transmitters, may now also receive remittances from Cuba or from certain Cuban nationals in third countries. OFAC also clarified that payments for authorized transactions via online payment platforms are permitted. U.S. financial institutions are also no longer required to block accounts of Cuban nationals who were lawfully present in the United States when they leave, so long as the accounts are only accessible when the Cuban national is lawfully in the United States.
The administration of estates in which Cuban nationals have an interest (e.g., as beneficiary or decedent) should become easier through an expanded general license obviating the need for specific licenses to unblock Cuban estates or remit estates of persons subject to U.S. jurisdiction to Cuban nationals.
5. Dealings with Cuban Nationals Located Outside Cuba
All persons subject to U.S. jurisdiction are now authorized to provide certain goods and services to individual Cuban nationals located outside of Cuba (so long as there is no commercial exportation of goods or services to or from Cuba). Previously, this authorization was limited to entities owned or controlled by U.S. Persons (e.g., foreign subsidiaries of U.S. companies). In addition, banking institutions are authorized to open and maintain accounts for Cuban individuals for use while the Cuban national is located outside of Cuba.
In addition to the changes outlined above, the September Amendments revise or clarify provisions relevant to legal services, the importation of gifts, educational activities, air ambulances and emergency medical services, humanitarian projects, and support for diplomatic activities.