Introduction

The US Department of the Treasury Office of Foreign Assets Control (OFAC) and the US Department of Commerce Bureau of Industry and Security (BIS) have amended the Cuban Assets Control Regulations and the Export Administration Regulations, respectively, effective on September 21 2015. The changes further align the regulations with President Obama's policy shift towards engaging and empowering the Cuban people, which he announced on December 17 2014.

Among the more significant measures, these new regulatory changes:

  • allow certain US companies to establish offices in Cuba for the first time in decades;
  • expand authorised travel and banking activities; and
  • eliminate limits on the amount of money that can be brought to Cuba.

This is the second time that OFAC and BIS have amended their regulations regarding trade with Cuba since the president's announcement (for further details please see "Commerce and Treasury implement Cuba-related changes"). The first round of changes took effect on January 16 2015 and the latest changes largely expand on those amendments.

Travel and related services

The new amendments authorise persons subject to US jurisdiction to provide carrier services by vessel and to provide certain lodging services aboard such vessels in connection with such transport. BIS licence exception "Aircraft, vessels and spacecraft" will be amended to authorise temporary sojourns to Cuba for certain categories of vessel and will authorise aircraft on temporary sojourn to remain in Cuba for up to 14 days.

In addition, the Cuban Assets Control Regulations now allow persons subject to US jurisdiction and persons travelling with them who share a common family dwelling to visit a close relative in Cuba, or to accompany a close relative travelling to Cuba pursuant to certain general licences related to official government business, journalistic activity, professional research, educational activities, religious activities, humanitarian projects or activities of private foundations or research or educational institutions. Travellers wishing to visit or to accompany an authorised traveller family member are no longer limited to visiting family members who will be travelling in Cuba for more than 60 days. The Cuban Assets Control Regulations have also been amended to allow authorised travellers to open and maintain bank accounts in Cuba.

In the January 2015 amendments OFAC created 12 categories of general licence allowing travel to Cuba and authorised travel agents and airlines subject to US jurisdiction to provide certain travel and air carrier services. Importantly, tourism travel to Cuba remains prohibited.

Telecoms and internet-based services

The January 2015 amendments expanded the commercial telecomns links between Cuba and the United States by expanding BIS licence exception "Support for the Cuban people" (discussed below) and authorising persons subject to US jurisdiction to provide services incident to internet-based communications and related to certain exports and re-exports of communications items. The January 2015 amendments also expanded BIS licence exception "Consumer communication devices" to authorise the sale of communication devices (eg, personal computers, mobile phones, and televisions) and related services.

In its most recent notice, OFAC has expanded the list of services that may be exported to Cuba relating to communications devices exported to Cuba under BIS licence exception "Consumer communication devices". The new regulations now allow the export of training services related to the installation, repair or replacement of such items. In addition, OFAC has licensed the export of services related to consumer communication devices exported to Cuba that are authorised by individual licence (instead of qualifying for the "Consumer communication devices" licence exception).

BIS has also expanded the scope of the "Consumer communication devices" licence exception: while the January 2015 amendments extended its scope from consumer communications devices donated to Cuba to those that were donated or sold to Cuba, the new amendments make clear that the licence applies to other types of transaction (eg, leases and loans).

OFAC is also authorising persons subject to US jurisdiction to establish and maintain a business presence in Cuba – including through subsidiaries, franchises, joint ventures or other business relationships with Cuban persons – to provide telecommunications and internet-based services. OFAC is further authorising licensing agreements to market such services. The import of Cuban-origin mobile applications is also now permitted and US persons may hire Cuban nationals to develop such mobile applications.

Exports in support of Cuban people

BIS expanded the scope of the "Support for the Cuban people" licence exception. It will now authorise certain exports and re-exports of items to Cuba for use in establishing, maintaining and operating a physical presence in Cuba. Eligible recipients of such goods include certain persons providing telecommunications or internet-based services, establishing telecommunications facilities, providing travel or carrier services, organising or conducting educational activities or transporting authorised items between the United States and Cuba. As with the "Consumer communication devices" licence exception, the "Support for the Cuban people" licence exception will no longer be limited to sales or donations but will extend to support transactions such as leases and loans. In addition, the "Support for the Cuban people" licence exception will authorise certain temporary re-exports from third countries when the items are for use in scientific, archeological, cultural, ecological, educational, historic preservation, sporting activities or in the traveller's professional research and meetings. Before the new amendments, this licence exception was limited to temporary exports by persons departing the United States. The "Support for the Cuban people" licence exception will be further expanded to apply to:

  • certain commodities and software exported to Cuba for use in software development;
  • temporary exports and re-exports to Cuba of certain trade tools used to install, service or repair items; and
  • certain commodities and software for exhibition or demonstration.

OFAC has licensed the export of services related to commodities and software exported under the "Support for the Cuban people" licence exception.

Physical presence in Cuba

The new amendments will now allow certain US businesses to have a physical presence (eg, an office, retail outlet or warehouse) in Cuba to facilitate authorised transactions. This authorisation applies to:

  • news bureaux;
  • exports of certain authorised goods (eg, agricultural products and materials for construction or renovation of privately owned buildings);
  • providers of authorised mail, parcel and cargo services;
  • providers of telecoms or internet-based services;
  • entities organising or conducting certain educational activities;
  • religious organisations; and
  • providers of travel and carrier services.

These persons may also open and maintain bank accounts at Cuban financial institutions.

Financial transactions

OFAC eased its rules on remittances in January 2015 by increasing the limits on remittances to certain Cuban nationals and authorising banks to process the authorised remittances. In the latest round of amendments OFAC has removed the limit on donative remittances to Cuban nationals who are not prohibited Cuban government officials or members of the Cuban Communist Party. In addition, OFAC has removed the cap on remittances that authorised travellers may carry to Cuba and the cap on remittances that Cuban nationals permanently residing in Cuba may carry with them on their return to Cuba from the United States. OFAC has also unblocked certain remittances and funds transfers that were blocked for exceeding the now-defunct thresholds. The new Cuban Assets Control Regulations will also authorise remittances from Cuba or certain Cuban nationals abroad to the United States, and will authorise certain estate-related transactions (eg, the transfer of shares of a Cuban estate to a US beneficiary).

US depository institutions may open accounts for non-immigrant Cuban nationals present in the United States and may keep those accounts open even after the Cuban national returns to Cuba. Previously, such accounts would become blocked once the Cuban national departed the United States. Under the new rules, the account remains in use, but the account holder may access the account only while lawfully in the United States. In addition, OFAC has removed the cap on payments from blocked accounts held by non-immigrant Cuban nationals in the United States to enable these funds to be used for living expenses.

Cuban nationals in third countries

Under the January 2015 amendments, US-owned or controlled entities – including banks – in third countries could provide goods and services to Cuban nationals in third countries. The new amendments expand that authorisation to allow all persons subject to US jurisdiction to provide goods or services to Cuban nationals in third countries. In addition, the new Cuban Assets Control Regulations allow banking institutions to open, maintain and close bank accounts for such Cuban nationals.

Other amendments

OFAC has also liberalised a number of other rules. For example, the receipt of payment for legal services provided to Cuba or a Cuban national is now generally authorised. Gifts valued at under $100 that are from Cuba or are of Cuban origin may generally be imported to the United States. BIS will apply a case-by-case review policy to licence applications for exports and re-exports to Cuba of items to ensure the safety of civil aviation and the safe operation of commercial passenger aircraft. OFAC has expanded the scope of the general licence for travel relating to educational activities. OFAC has also provided an interpretation under the Cuban Assets Control Regulations (which exists under other sanctions regimes) clarifying that, with certain exceptions, transactions that are ordinarily incident to a licensed transaction and necessary to give effect thereto are authorised. OFAC has also amended the Cuban Assets Control Regulations to:

  • include its favourable licensing policy for air ambulances and emergency medical services;
  • include disaster relief and historical preservation explicitly as authorised humanitarian projects; and
  • authorise funds transfers to official missions of the Cuban government in the United States.

For further information on this topic please contact Andrew Shoyer, Robert Torresen or Lana Muranovic at Sidley Austin LLP by telephone (+1 202 736 8000) or email (ashoyer@sidley.com, rtorresen@sidley.com or lmuranovic@sidley.com). The Sidley Austin LLP website can be accessed at www.sidley.com.

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