On January 16, 2015 the U.S. Department of Commerce, Bureau of Industry and Security (BIS) and U.S. Department of Treasury, Office of Foreign Assets Control (OFAC) issued amendments to their respective regulations to substantially ease U.S. sanctions against Cuba. Their joint actions follow President Obama’s announcement on December 17, 2014to begin opening up relations with Cuba. Among the changes effected, the amendments ease restrictions on travel and travel services, allow exports to Cuba in certain sectors, ease prohibitions on U.S. financial institutions, reduce the restrictions regarding transactions with Cuban nationals in third countries and allow other activities in certain key areas such as telecommunications.
The amendments do not constitute a complete dismantling of the Cuban sanctions, but they could provide possible commercial openings that many U.S. businesses may be able to pursue. However, because the new regulatory parameters are untested, companies should proceed with caution and seek advice of counsel as appropriate.
The following is not a complete list of the regulatory changes, but a summary of some that may be of interest to U.S. companies seeking to initiate or expand business in Cuba.
Expansion of travel licenses. The amendments effectively remove travel restrictions for U.S. persons for a number of authorized purposes:
- Family visits
- Journalistic activity
- Professional research and professional meetings
- Official business of the U.S. government, foreign governments and certain intergovernmental organizations
- Educational activities
- Religious activities
- Public performances, clinics, workshops, athletic and other competitions, and exhibitions
- Support for the Cuban people
- Humanitarian projects
- Activities of private foundations or research or educational institutes
- Exportation, importation or transmission of information or information materials
- Certain export transactions that may be considered for authorization under existing regulations and guidelines
Absent from the above list is travel purely for tourism or for business generally. In the latter case, it is unclear whether business travel related to some of the specifically authorized commercial transactions is authorized – e.g., under “support for the Cuban people.” Also, since now pre-approval for travel is not required, it is not clear how these new travel parameters will be enforced.
Travel and carrier services authorized. Travel agents and airlines are allowed to carry authorized passengers (see above), baggage and cargo. However, notwithstanding this OFAC authorization, scheduled air service requires separate authorization from the U.S. Department of Transportation (DOT). DOT announced on January 15 that the U.S. government will engage with the Cuban government to assess aviation relations between the two countries. DOT has deferred activation of any previously authorized, unused scheduled air service to Cuba. It has also stated that any carrier holding long-dormant U.S.-Cuban authorization will not have an advantage over carriers seeking authorization for the first time. It is not certain when DOT will entertain requests for authorization to commence scheduled service. Nothing in DOT’s notice is intended to interfere with U.S.-Cuba charter services as previously authorized or as now possible under the revised OFAC regulations.
Expansion of commercial exports of certain goods and services. The BIS amendments create two new license exceptions: Support for the Cuban People (SCP) and Consumer Communications Devices (CCD). These two exceptions authorize export or reexport of certain items without an export license, albeit with some restrictions and limitations for each. Under the SCP exception, the following items may be exported or reexported:
- Building materials for private residential construction or renovation
- Tools, equipment and supplies for use by private sector Cuban entrepreneurs
- Tools, equipment and supplies for private sector agricultural activity
The CCD exception authorizes export and reexport of certain specified consumer communications devices (e.g., PCs, mobile phones, digital cameras) and certain telecommunication and security-related software.
Facilitation of authorized transactions. OFAC’s amendments to its Cuban Assets Control Regulations (CACR) now permit U.S. financial institutions to open correspondent bank accounts at Cuban financial institutions. In addition, U.S. financial institutions will be allowed to process U.S. debit and credit cards for authorized travel-related transactions and other authorized transactions.
Restrictions eased on transactions with Cuban nationals in third countries. OFAC’s amendments now authorize U.S.-owned or -controlled entities in third countries to provide, with some limitations, services to Cuban persons in third countries, along with a number of other third-country measures. However, this new flexibility for U.S.-owned or ‑controlled entities in third countries only applies when the transaction is with an individual Cuban national in a third country – i.e., the transaction must not involve export of goods or services to or from Cuba.
Telecommunications-related transactions authorized. As part of its amendments, OFAC issued a general license authorizing transactions related to establishing and providing telecommunications services, both within Cuba and between Cuba and the United States or third countries. However, as with many parts of these amendments, this authorization carries certain restrictions that can trip up the unwary company. For example, transactions with telecommunications service providers or “particular individuals in Cuba” are authorized, but are prohibited if such individuals are Cuban government officials or members of the Cuban Communist Party. It remains unclear whether telecommunications services that are generally available – including to the above noted prohibited individuals – are permitted.