On January 27, 2016, the Office of Foreign Assets Control (“OFAC”) and the Department of Commerce’s Bureau of Industry and Security (“BIS”) issued new regulations expanding the list of possible exports to Cuba.
Summary of New Rules
The new rules provide that many exports or re-exports to Cuba will now be subject to a policy of general approval to the extent the exports are related to:
- U.S. journalists in Cuba;
- human rights and NGOs promoting changes in civil society;
- civil aviation safety; and
- the environment and renewable energy.
On a case-by-case basis, a much broader list of potential exports are subject to possible approval to the extent those exports or re-exports “meet the needs of the Cuban people,” including exports/re-exports to state-owned enterprises that provide goods and services for the benefit of Cubans.
Moreover, U.S. depository institutions will be allowed to provide financing and issue letters of credit for the new categories of exports and re-exports, except agricultural goods previously exportable pursuant to part 772 of the Export Administration Regulations (EAR). Travel regulations are also eased to allow business-related activities for the new export categories, film and television production, and other media, athletic and non-athletic events and performances and professional events.
Highlights of New Rules
1. Commerce Department Establishes Policy of “General Approval” for Certain Exports
EAR §746.2 is now amended to provide that license applications to export the following to Cuba “”will be generally approved:
- telecommunications items that would improve communications to, from, and among the Cuban people;
- commodities and software to human rights organizations or to individuals and non-governmental organizations that promote independent activity intended to strengthen civil society in Cuba;
- commodities and software to U.S. news bureaus in Cuba whose primary purpose is the gathering and dissemination of news to the general public;
- agricultural items that are outside the scope of agricultural commodities as defined in part 772 of the EAR, such as insecticides, pesticides and herbicides, and agricultural commodities not eligible for License Exception AGR;
- 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 re-export of such aircraft leased to state-owned enterprises; and
- items necessary for the environmental protection of U.S. and international air quality, waters, or coastlines, including items related to renewable energy or energy efficiency.
2. Commerce Department Establishes Case-by-Case Approval Process for Certain Exports
EAR §746.2 is now amended to establish a policy that license applications for certain exports and re-exports that meet the needs of the Cuban people may be authorized on a case-by-case basis, including:
- agricultural production, artistic endeavors (including the creation of public content, historic and cultural works and preservation), education, food processing, disaster preparedness, relief and response, public health and sanitation, residential construction and renovation and public transportation;
- wholesale and retail distribution for domestic consumption by the Cuban people; and
- construction of facilities for treating public water supplies, facilities for supplying electricity or other energy to the Cuban people, sports and recreation facilities, and other infrastructure that directly benefits the Cuban people.
3. Non-Agricultural Export Trade Financing
§515.533 of the Cuban Asset Controls Regulations (CACR) is amended to remove the previous limitations on payment and financing terms for all exports from the United States or re-exports of 100 percent U.S.-origin items from a third country that are licensed or otherwise authorized by the Department of Commerce, other than exports of agricultural items or commodities.
For non-agricultural products licensed or otherwise authorized by the DOC to export to Cuba, there are no payment and financing limitations. U.S. depository institutions (as defined in §515.333) are authorized to:
- issue, advise, negotiate, pay, or confirm letters of credit (including letters of credit issued by a financial institution that is a national of Cuba);
- accept collateral for issuing or confirming letters of credit; and
- process documentary collections.
4. Travel + Transactions Related to Authorized Exports or Re-exports
Travel to Cuba directly related to the conduct of market research, commercial marketing, sales or contract negotiation, accompanied delivery, installation, leasing, or servicing in Cuba of items authorized for export or re-export is now authorized by general license. The traveler must still have a full-time schedule of activities related to the travel and no free time in excess of that consistent with a full-time schedule of activities.
Travel to Cuba and additional transactions directly incident to facilitating the temporary sojourn of aircraft and vessels (including travel-related transactions for personnel required to operate and provide service on board and in port or for the aircraft on the ground) is authorized by general license.
Passengers on the aircraft or vessel on temporary sojourn to Cuba must also be traveling on authorized travel to Cuba. Moreover, the travel-related transactions of the crew and other necessary personnel "are limited to the duration and scope of their duties in relation to the particular authorized temporary sojourn."
5. Transactions Related to Information + Informational Materials
§515.545 is significantly amended to allow a general license for transactions relating to the creation, dissemination, and artistic or other substantive alteration or enhancement of informational materials. Before these amendments, the general license permitted only royalty and other payments for works already in existence. New works can now be created and Cuban nationals can be employed for the work. Also, royalties and other payments are authorized for both new and existing works. "Informational materials" include artworks and publications, films, posters, phonograph records, photographs, microfilms, microfiche, tapes, compact disks, CD ROMs, newswire feeds, and other information and informational articles.
A general license also authorizes the travel and related transactions directly incident to professional media or artistic productions of information or informational materials for exportation, importation, or transmission, provided that the traveler has a full schedule of activities related thereto and the traveler is regularly employed or has experience in the field, such as in making movies, television shows, recording music and/or in the creating artworks.
6. Professional Research + Professional Meetings in Cuba
§515.564 is amended to allow travel to Cuba per general license to organize professional meetings or conferences. Previously, only attendance at professional meetings or conferences was authorized by general license. The traveler’s schedule of activities cannot include free time or recreation in excess of that consistent with a full-time schedule of attendance at, or organization of, professional meetings or conferences.
7. Public Performance, Clinics, Workshops, Athletic + Other Competitions
§515.567 is amended to authorize by general license travel-related and other transactions to organize amateur and semi-professional international sports federation competitions and public performances, clinics, workshops, other athletic or non-athletic competitions, and exhibitions in Cuba. The organization of an athletic competition not held under the auspices of an international governing body can now qualify for the general license if it is open to the Cuban public. Organizing musical events, public performances, non-athletic competitions, clinics and workshops that are open to the Cuban public also qualify for a general license. OFAC is also removing the existing requirements that all U.S. profits from certain events be donated to an independent non-governmental organization in Cuba or a U.S.-based charity and that workshops and clinics be organized and run, at least in part, by the authorized traveler.
8. Travel Services, Carrier Services + Remittance Forwarding Services
In conjunction with the DOC’s amendment to EAR 746.2 respecting items necessary for the safety of civil aviation and the safe operation of commercial aircraft, OFAC amended §515.572 to authorize the entry into blocked space, code-sharing, and leasing arrangements to facilitate the provision of carrier services by air authorized pursuant to section §515.572(a)(2), including the entry into such arrangements with a national of Cuba.
OFAC also amended §515.533 to allow pursuant to general license travel related and other transactions directly incident to the facilitation of the temporary sojourn of aircraft and vessels as authorized by the DOC for travel between the United States and Cuba, including by personnel required for normal operation and service on board a vessel or aircraft or to provide services to a vessel in port or aircraft on the ground. Travel by such personnel is limited to the duration and scope of their duties in relation to the particular authorized temporary sojourn.
9. Humanitarian Projects
OFAC amended §515.575 to expand the list of authorized humanitarian projects to include disaster preparedness and response.
The new regulations expand opportunities for many U.S. exporters of goods and services and certainly further facilitate travel to Cuba to pursue possible export opportunities. Undoubtedly, media, television and film companies will now have greater freedom to pursue projects in Cuba. It will be easier for Americans to organize events in Cuba and to travel to Cuba to organize events. The embargo remains in place and Cuba will continue to react cautiously to a piecemeal approach to what is very much one-sided trade directed at only some sectors of its overall economy. Nevertheless, the easing of financing rules and allowing sales to state-owned enterprises that distribute to Cuban consumers may lead to some increase in U.S. business with Cuba as we continue the process to full normalization of trade and commerce.