In what has been described as the most significant change in Cuba policy in more than 50 years, President Barack Obama has instructed the Secretary of State to begin the process of re-establishing diplomatic relations with Cuba, which were severed in January 1961. 

As part of this new diplomatic approach, the President also instructed Secretary John Kerry to review Cuba’s designation as a State Sponsor of Terrorism[1] and to provide a report to the President within six months regarding Cuba’s support for international terrorism.

In addition, President Obama announced that the Departments of the Treasury and Commerce would soon be amending  their regulations to liberalize the existing Cuban sanctions regime.  The President noted that none of the changes he was announcing would be effective until the regulations were amended. 

Following the President’s announcement, the Treasury Department’s Office of Foreign Assets Control (OFAC) provided the following guidance:

OFAC will implement the Treasury-specific changes via amendments to its Cuban Assets Control Regulations. The Department of Commerce will implement the remainder of the changes via amendments to its Export Administration Regulations.  OFAC expects to issue its regulatory amendments in the coming weeks.  None of the announced changes takes effect until the new regulations are issued.  (Emphasis added.)

Limits on the President’s authority

The Cuban Liberty and Democratic Solidarity (Libertad) Act of 1996 (the Helms-Burton Act), in codifying the Cuban sanctions, placed limits on the President’s authority to loosen the Cuban trade and travel embargo.  The Administration has determined that the regulatory changes the President has asked Treasury and Commerce to implement fall within the President’s authority. 

In the days following the President’s announcement, significant discussion of the new policy has been heard from both sides of the political aisle.  Some Congressional leaders have voiced complete opposition to the new Cuban policy and expressed their intention to take action to block it. Those objecting to the new policy include senior Senate leaders, such as the incoming  Senate majority leader, Mitch McConnell (R-KY); current Chairman (and future senior Democrat) of the Senate Foreign Relations Committee, Senator Robert Menendez (D-NJ); and the incoming Chairman of the Western Hemisphere subcommittee, Senator Marco Rubio (R-FL). The future Chairman of the committee, Bob Corker (R-TN) has indicated that the new Congress will closely examine the implications of the policy changes.

Changes to be implemented through regulatory amendments

The President’s announcement included a description of the changes that Treasury and Commerce will be implementing through  regulations.  These proposed changes fall into the following categories:

A.   Facilitating an expansion of travel under general licenses for the 12 existing categories of travel to Cuba authorized by law

General licenses[2] will be made available for all “authorized travelers” in the 12existing categories set out in the Cuban Assets Control Regulations (the “CACR”).  The 12 existing categories are:

  1. family visits
  2. official business of the US government, foreign governments, and certain intergovernmental organizations
  3. journalistic activity
  4. professional research and professional meetings
  5. educational activities
  6. religious activities
  7. public performances, clinics, workshops, athletic and other competitions, and exhibitions
  8. support for the Cuban people
  9. humanitarian projects
  10. activities of private foundations or research or educational institutes
  11. exportation, importation, or transmission of information or information materials and
  12. certain export transactions that may be considered for authorization under existing regulations and guidelines.

Travelers in the 12 categories of travel to Cuba authorized by law will be able to make arrangements through any service provider that complies with OFAC’s regulations governing travel services to Cuba, and general licenses will authorize the provision of these services.

B.   Facilitating remittances to Cuba by US persons

Under current provisions of the CACR, persons subject to the jurisdiction of the United States are authorized to make remittances to Cuban nationals (excluding prohibited officials of the Cuban government and prohibited members of the Cuban Communist party), provided that the remittances are not made from a blocked source, and provided the remitter’s total remittances to any one Cuban national do not exceed $500 per quarter.

The President proposes to increase authorized remittance levels for such general donative remittances to Cuban nationals from $500 to $2,000 per quarter.  Also, as proposed by the President, donative remittances for humanitarian projects, support for the Cuban people, and support for the development of private businesses in Cuba will no longer require a specific license.  Remittance forwarders too will no longer require a specific license.

C.   Authorizing expanded commercial sales/exports from the US of certain goods and services

Items that will be authorized for export include certain building materials for private residential construction, goods for use by private sector Cuban entrepreneurs, and agricultural equipment for small farmers.

D.   Authorizing American citizens to import additional goods from Cuba

Licensed US travelers to Cuba will be authorized to import $400 worth of goods from Cuba, of which no more than $100 can consist of tobacco products and alcohol combined.

E.    Authorizing expanded financial transactions to facilitate authorized transactions between the United States and Cuba

  • US financial institutions will be permitted to open correspondent accounts at Cuban financial institutions to facilitate the processing of authorized transactions. 
  • Travelers to Cuba will be allowed to use US credit and debit cards.

In addition, under current provisions of the CACR, only certain specified payment and financing terms may be used for exports to Cuba, or re-exports of 100 percent US-origin items, that are licensed or otherwise authorized by the Department of Commerce under the provisions of the Export Administration Regulations.  “Payment of cash in advance,” one of the authorized payment terms, is defined currently to mean that payment is received by the seller or the seller’s agent prior to shipment of the goods from the port at which they are loaded.  The President proposes to provide more efficient financing of authorized trade with Cuba by revising the definition of this term to specify that it means “cash before transfer of title.”

F.    Initiating new efforts to increase Cubans’ access to telecommunications and the Internet

The commercial export of certain items that will contribute to the ability of the Cuban people to communicate with people in the United States and the rest of the world will be authorized.  This will include 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.

In addition, telecommunications providers will be allowed to establish the necessary mechanisms, including infrastructure, in Cuba to provide commercial telecommunications and Internet services, which will improve telecommunications between the United States and Cuba.

G.   Updating the application of Cuba sanctions in third countries

US-owned or -controlled entities in third countries will be generally licensed to provide services to, and engage in financial transactions with, Cuban individuals in third countries.

In addition, among other measures, general licenses will be issued that will:

  • 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.

Are you contemplating business relationships with Cuba?

Notwithstanding the President’s December 17 Statement, the Cuban embargo still remains fully in effect, and its provisions must be carefully followed.  Full relaxation of the US embargo requires an Act of Congress.  Any new commercial activities mentioned in the President’s announcement will be permitted only when (and if) OFAC and the US Commerce Department (Bureau of Industry and Security), as appropriate, issue the necessary regulatory amendments.