President Obama's historic announcement to ease the Cuba embargo raises many questions about potential business opportunities, risks, and pitfalls. The following Frequently Asked Questions examines key policy and business implications of the initial announcement. We will provide updates once the official regulations are issued.

How can the President make changes without Congressional approval?

U.S. sanctions on Cuba arise under several laws, including the Helms-Burton Act, the Trading with the Enemy Act, and other statutes. Some of these laws give the president greater discretion, while others require congressional action before certain restrictions can be lifted. President Obama will likely argue that any changes proposed fall within his discretion, while it is virtually certain that some members of Congress may challenge some or all of these measures as exceeding the limits of what can be changed under the Helms-Burton Act. One thing is clear: no dealings with Cuba should occur without first determining that such actions are allowed under the current restrictions, which to date largely remain in place. U.S. and multinational companies should consult with qualified attorneys to assess the state of the law and determine whether contemplated transactions are authorized.

How will the President make these changes?

Presidential action will proceed on three fronts:

  1. The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) will revise the Cuban Assets Control Regulations (CACR), which implements many of the sanctions imposed by statutes and executive order during the last 54 years.
  2. OFAC will issue general licenses to authorize certain types of activities that otherwise would be prohibited by the CACR.
  3. The Commerce Department will revise the Export Administration Regulations (EAR), which governs the export of most U.S.-origin goods, information, software, and technology. The Obama administration and other previous administrations have used similar methods to ease sanctions on countries like Burma and Libya. Any changes — especially if made through the form of general licenses — can be rescinded with little notice, so companies conducting transactions under such authorization should take steps to insulate themselves from sudden changes in the regulatory environment.

When will these changes go into effect?

Based on statements from the White House and media reports, we currently expect new regulations and licenses to be published on an ongoing basis, beginning in January 2015. Because the administration’s proposals will involve updating Treasury and Commerce Department regulations, issuing new general licenses, and perhaps negotiating with congressional leaders, the timetable for implementation is unknown, but will likely occur on a rolling basis with the least controversial measures, such as expanded access to Internet and communications equipment, occurring first.

What industries will be affected?

We anticipate changes in five key sectors: banking and financial services, travel and tourism, agriculture, construction services, and telecommunications.

  • Banking & Financial Services: U.S. banks will be able to open correspondent accounts at Cuban financial institutions and travelers will be able to use U.S. credit and debit cards in Cuba. Exporters also will be allowed to make and receive payments to Cuba without using banks accounts in third countries.
  • Travel & Tourism: OFAC will issue general license for 12 distinct categories of travel, including many cultural, educational, and family exchanges. These licenses will include business travel related to the import or export of certain newly authorized goods and services.
  • Agriculture & Construction: Direct trade will be allowed in some areas, including the sale of agricultural equipment to Cuban farmers. Companies that are currently exporting agricultural and medical products to Cuba also will be permitted to conduct transactions directly through U.S. banks.
  • Construction Services: The White House also has proposed measures that would authorize the direct export of building materials for private Cuban residences. Like agricultural and medical exports, U.S. businesses will be able to engage in these transactions using U.S. banks.
  • Technology & Telecommunications: OFAC plans to authorize the export of certain telecommunications products and services. These changes will likely expand exemptions for consumer electronics, software, and hardware used in telephone and Internet applications. The White House also is considering measures that would allow U.S. telecommunications companies to provide commercial telephone, Internet, and related services in Cuba, including through the construction of new communications infrastructure.

We stress that these planned changes to licensing have not yet taken effect. No reliance should be made on the anticipated issuance of these likely easings until they are formally issued. The current regulations remain in full effect at this time.

What are the implications for companies outside the United States?

According to White House sources, foreign affiliates of U.S.-based multinational corporations will be allowed to engage in approved transactions with Cuba and certain Cuban nationals. The Obama administration also is considering measures that would ease similar restrictions on Latin American and European corporations with U.S.-based affiliates. It is not clear how far these measures will go; however, as repealing certain extraterritorial sanctions imposed under the 1996 Helms-Burton Act would require congressional approval.

What are the long-term investment opportunities in Cuba?

Although the Obama administration’s announcement raised new hopes for trade and investment in Cuba, the initial changes are likely to be limited to the sectors identified above. Long-term opportunities will depend on congressional support, the state of U.S.-Cuban negotiations, and a host of other factors. Even so, the shift in U.S. policy may make it easier for U.S. companies to obtain “special licenses” for Cuba-related transactions that are not covered under the new regulations.

Will my family or company be able to reclaim lost property in Cuba?

The Obama administration’s proposals address future transactions, rather than past claims. The U.S. Foreign Claims Settlement Commission has not opened any new inquiries into past expropriations by the Castro regime. Addressing the $1.9 billion in unsettled claims by U.S. nationals against the Cuban government will depend on the ongoing negotiations between Washington, D.C. and Havana.

What can my company do to prepare for these changes?

With the new regulations expected in January, companies should consult with qualified attorneys and determine whether the proposed changes would benefit their business. Companies also should identify any restrictions that remain after the new rules are in place and evaluate the associated risks. Even the negotiation of future transactions that are conditional upon the lifting of the embargo can violate the CACR (unless in areas that open up under current or future general licenses). Finally, companies subject to U.S. jurisdiction should work with qualified lawyers to implement compliance policies, internal controls and procedures, training programs, and other measures to ensure compliance with all applicable sanctions regulations, export control, and other laws.

Can my company start doing business with Cuba now?

Although we anticipate changes in the next few weeks, companies should not enter into new transactions, contracts, or agreements involving Cuba unless they are already authorized under U.S. law. Companies also should avoid entering into any contingent agreements with Cuba or Cuban persons in anticipation of changes in the law. The Cuba sanctions explicitly prohibit such activities. Entering into agreements before they are authorized would expose companies to civil and criminal penalties.

How do I start doing business in Cuba?

Conducting business with Cuba and other sanctioned countries (such as Iran, North Korea, Sudan, and Syria) requires a thorough understanding of complex laws and regulations and an awareness of how OFAC and other regulators enforce them. Implementing policies and procedures to ensure compliance is also essential, particularly given the fluid state of these laws. Consulting with a qualified attorney to help your organization assess its risk exposure and to determine the best form of regulatory risk management is the best way to determine how to cope with these constantly changing regulations.