Through a broad exercise of presidential authority, President Obama announced today sweeping changes to current U.S. policies regarding Cuba, including significant revisions to current economic sanctions and export controls currently restricting trade, travel, and financial transactions with Cuba. The President also announced the initiation of steps toward restoring diplomatic relations with Cuba and formally lifting the trade embargo, which has been codified under federal statutes.  

Easing of Trade Sanctions and Export Controls

The trade- and travel-related measures announced today will not take effect until implemented through formal amendments to the Cuba sanctions regulations administered by the Treasury Department’s Office of Foreign Assets Control (OFAC) and the Export Administration Regulations (EAR) administered by the Department of Commerce Department. Once implemented, the changes will include (among other things):

  • Exports of Goods and Services to Cuba: Authorizations for exports of commercial goods and services to support development of the private sector in Cuba, including certain building materials for private residential construction, goods for use by private sector Cuban entrepreneurs, and agricultural equipment for small farmers. In addition, in the telecommunications sector, the U.S. government will authorize exports of telecommunications products and services to Cuba, including commercial sales of certain consumer communications devices, related software, applications, hardware, and services, and items and services for the establishment and update of communications-related systems.  

  • Travel: New “general licenses” authorizing travel-related transactions in 12 existing categories, most of which currently require specific licenses from OFAC, including (1) family visits; (2) official business of the U.S. 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.  

  • Financial Transactions: Current restrictions on financial transactions with Cuba will be eased to permit, among other things, (1) U.S. institutions to open correspondent accounts at Cuban financial institutions, and (2) the use of U.S. credit and debit cards in Cuba by authorized travelers.  

  • Easing of Extraterritorial Sanctions Applicable to Third Countries: In addition, among other measures, general licenses will be issued to authorize (1) U.S.-owned or -controlled entities in third countries to engage in transactions with Cuban individuals in third countries; (2) U.S. banks to unblock the accounts of Cuban nationals who have relocated outside of Cuba; (3) U.S. persons to participate in third-country professional meetings and conferences related to Cuba; and (4) foreign vessels to enter the United States after engaging in certain humanitarian trade with Cuba.

A more detailed summary of the actions announced today by President Obama was provided in a White House Fact Sheet

Steps Toward Formal Lifting of Trade Embargo

Through a series of federal statutes, Congress has sought to codify the comprehensive U.S. economic sanctions against Cuba and to restrict the President’s authority to suspend or terminate those sanctions until certain conditions have been met. In his statement today, the President also announced steps to initiate the process under those statutes of formally lifting the U.S. embargo against Cuba. Specifically, the President instructed the Secretary of State to immediately launch a review and provide a report within six months regarding the designation of Cuba as a state sponsor of international terrorism. Cuba was designated as a terrorism supporting country in 1982 under the Export Administration Act of 1979. Before lifting this designation, the President must certify to Congress that certain conditions have been met, including a finding that there have been “fundamental changes in the leadership and policies” of Cuba. Additional requirements apply under other federal statutes, including the requirement under the Cuban Liberty and Democratic Solidarity Act of 1996 (known as Libertad or Helms-Burton) that the President must determine that a “transition government” or a democratically elected government is in power in Cuba before lifting the sanctions. The President’s statement today did not address whether how those requirements will be met.

In 2011, Hogan Lovells partner Stephen Propst published a legal analysis regarding the President’s authority to ease U.S. sanctions against Cuba without approval by Congress.

Other Considerations

There are a number of important legal issues that are not addressed in the President’s statement or the White House Fact Sheet, some of which will need to be resolved in the implementing regulations from OFAC and the Commerce Department. For example, the President’s announcement does not specify what licensing procedures will be adopted for exports of goods to Cuba under the EAR and whether “license exceptions” will be established for less sensitive items such as medical  products (which currently require specific licenses). In this regard, we note that until the terrorism designation under the EAR is lifted, the Commerce Department generally will be required under current law to notify Congress at least 30 days before granting a license for exports to Cuba of items on the EAR’s Commerce Control List. In addition, the provisions of Helms-Burton restricting investments in property confiscated by the Cuban government remain in effect and will continue to restrict engagement with Cuba in some sectors, such as investment in the development of Cuba’s real estate, agricultural, and energy resources.

Finally, not surprisingly, the President’s executive action today was quickly met with sharp criticism from a number of members of Congress, including Representative Ileana Ros-Lehtinen (R-FL), who strongly oppose any easing of the U.S. embargo until democracy has been restored. It remains to be seen whether those members of Congress will seek to block the President’s actions through legal or legislative challenges.