On September 21, 2015, the Treasury Department’s Office of Foreign Assets Control (OFAC) and the Commerce Department’s Bureau of Industry and Security (BIS) published final rules that further implement President Obama’s policy of liberalizing U.S. relations with Cuba. These rules build on previous coordinated initial steps taken by OFAC and BIS to ease the comprehensive sanctions regime, and reflect an increased willingness to broaden the scope of authorized activities with Cuban individuals and entities.
These rules, which are effective immediately, cover many of the same areas as the previous set of Cuba sanctions amendments – travel, telecommunications, financial services, and transactions with Cubans located in third countries. They also permit U.S. companies to establish a physical presence in Cuba in certain limited circumstances. While the general U.S. embargo on Cuba remains in place (and will continue to do so absent congressional action), the Obama Administration has shown a continued commitment to incremental liberalization of the Cuba sanctions program in certain key sectors subject to executive discretion.
We have summarized below the important provisions of OFAC’s and BIS’s new rules as well as key takeaways from these policy changes.
OFAC has amended the Cuban Assets Control Regulations (CACR) to ease numerous restrictions on Cuba-related activities. The amendments expand permissible travel to Cuba, facilitate the increased provision of certain telecommunications and internet-based services, allow certain U.S. persons to establish a physical presence in Cuba, and broaden the scope of authorized financial transactions with Cuba and Cuban citizens. The final rule is being released in conjunction with updates to OFAC’s Frequently Asked Questions on Cuba.
Travel to Cuba
OFAC’s amendments to the CACR build on its previous relaxation of restrictions on travel to Cuba in several important ways. The amendments (1) eliminate the current requirement that U.S. persons providing carrier services by vessel obtain a specific license from OFAC, (2) expand the scope of permissible family visits, and (3) permit individuals authorized to travel in Cuba to establish, access, and close Cuban bank accounts. Notably, travel to Cuba for tourism purposes remains prohibited; any person who wishes to travel to Cuba must meet the requirements of one of the twelve categories currently authorized by general license under the CACR.
Telecommunications and Internet-Based Services
OFAC’s regulations authorize increased activities in the telecommunications and internet-based services sectors in order to promote the flow of information within Cuba as well as between Cuba and other countries. Specifically, the regulations allow persons subject to U.S. jurisdiction to (1) provide authorized telecommunications and internet-based services, (2) enter into licensing agreements, and engage in marketing efforts, related to such services, and (3) employ Cuban nationals to create mobile applications. The new rule also permits the import of Cuban mobile applications. Finally, the regulations build on OFAC’s previous amendments to increase the scope of services that may be provided for consumer communication devices and software development, and to support the private sector.
Establishment of a Physical Presence within Cuba
OFAC’s final rule authorizes various persons – including news bureaus, travel and carrier service providers, mail and cargo transportation service providers, and certain exporters – to establish and maintain a physical presence in Cuba (such as an office) in order to engage in authorized transactions. In addition to establishing and maintaining a physical presence in the country, such individuals and companies may also hire Cuban citizens and open and access Cuban bank accounts for authorized transactions.
The final rule also includes provisions that facilitate increased financial transactions within Cuba as well as with Cuban citizens, including those located in third countries. First, OFAC eliminated the upper limit for remittances by individuals wishing to send money to Cuban citizens. The January 2015 amendments raised the cap on remittances to non-family members from $500 to $2,000 per quarter. OFAC’s new amendments allow for the unblocking of remittances that had been blocked due to surpassing the previous caps, but would be permissible under the new regulations. Second, the amendments relax restrictions on bank accounts held by Cuban citizens present in the United States. Third, persons subject to U.S. jurisdiction may now provide goods and services to Cubans in third countries. Finally, the amendments permit persons subject to U.S. jurisdiction to accept payment for legal services rendered to Cuba or Cuban citizens who are not otherwise prohibited.
The BIS rule, titled “Enhancing Support for the Cuban People,” amends the Export Administration Regulations (EAR) to enlarge certain license exceptions, facilitate travel to Cuba, and modify the current license requirement for deemed exports and re-exports.
Because the United States continues to impose a comprehensive trade embargo on Cuba, individuals and entities must obtain a license from BIS for the export or re-export to Cuba of all items subject to the EAR, unless a license exception applies. The BIS rule expands License Exception Support for the Cuban People (SCP), which it created in January 2015. The modifications to License Exception SCP are intended to promote the flow of information within Cuban society and the financial independence of Cuban citizens from the Cuban government. Specifically, they include increased authorization for:
- the temporary export or re-export of items “for use in scientific, archeological, cultural, ecological, educational, historical preservation, or sporting activities, or in the traveler’s professional research,” so long as the item remains in the traveler’s “effective control”;
- the export and re-export of items used to support certain private sector activities and support the flow of information;
- the export and re-export of certain items for establishment of a permitted physical presence in Cuba; and
- export and re-export of gifts.
Furthermore, the rule enables certain temporary exports and re-exports to Cuba of items designated as EAR99 or listed on the CCL solely for anti-terrorism reasons, in order to further strengthen the Cuban private sector and civil society. The rule also clarifies that License Exception Consumer Communication Devices (CCD) covers items that were leased or loaned.
The BIS rule also contains several measures intended to ease travel to Cuba. First, it amends License Exception Aircraft, Vessels, and Spacecraft (AVS) to authorize temporary stays by cargo and passenger vessels in the country. Second, it adopts a new policy of case-by-case review of license applications related to aviation safety.
Finally, the BIS rule changes the current requirement for deemed exports and re-exports by specifying that the deemed export or deemed re-export of technology or software source code designated as EAR99 to a Cuban national does not require a license.
The coordinated steps by OFAC and BIS reflect further implementation of President Obama’s initiative to bolster U.S. relations with Cuba. While the OFAC and BIS rules are intended to increase commercial opportunities for both U.S. and Cuban parties, it is important to note that significant restrictions remain in place. In particular, there is still a general embargo on Cuba, including a prohibition on tourist travel to Cuba. Businesses wishing to take advantage of the changes should pay careful attention to the changing boundaries of permissible activities, and structure their compliance programs accordingly.