On October 17, 2016, the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) and the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) published final rules further easing U.S. economic sanctions against Cuba. This development follows several previous rounds of sanctions relaxations since President Obama announced a new Cuba policy in December 2014. The last round of regulatory amendments to ease the Cuba sanctions program (on which we reported previously) took place on March 16, 2016. Yesterday’s final rules, which are effective immediately, reflect additional efforts by OFAC and BIS to ease the comprehensive Cuba sanctions program in limited ways and specific sectors, consistent with previous efforts. The new rules provide additional commercial authorizations related to medicine and pharmaceuticals, commerce and trade, travel, and humanitarian activities.
We note that the Cuban embargo largely remains in place. Most transactions in or with Cuba continue to be prohibited for persons subject to U.S. jurisdiction (i.e., U.S. persons as well as foreign companies owned or controlled by U.S. persons). Congressional action will be required to undo the main embargo regime.
We summarize below the important provisions of the new rules and key takeaways from these policy developments.
OFAC amended the Cuban Assets Control Regulations (CACR) in furtherance of the Obama Administration’s stated goal of liberalizing U.S.-Cuban relations.
Medicine and Pharmaceuticals
The amendments to the CACR expand the ability of persons subject to U.S. jurisdiction to operate in the healthcare and pharmaceutical sphere involving Cuba and Cuban nationals by making the following changes:
- Revised the current specific license related to Cuban-origin research samples into a more expansive general license. Persons subject to U.S. jurisdiction may now engage in both non-commercial and commercial joint medical research with Cuban nationals.
- Transactions incident to obtaining approval from the U.S. Food and Drug Administration of Cuban-origin pharmaceuticals and the importation into the United States and marketing, sale, or other distribution of FDA-approved Cuban-origin pharmaceuticals in the United States are now authorized.
- Persons taking advantage of this general license are also authorized to open, maintain, and close bank accounts at Cuban financial institutions so long as the accounts are used only for the authorized activities.
Commerce and Trade
OFAC has altered or expanded several provisions dealing with commercial and trade-related transactions relating to Cuba.
- Items that were previously exported or re-exported to Cuba pursuant to authorizations in the CACR may now be imported into the United States or a third country, including for service and repair. Persons subject to U.S. jurisdiction are authorized to service and repair such items, whether they were involved in the original export or the importation from Cuba.
- Vessels that have carried from a third country to Cuba cargo that would be designated as EAR99 or controlled on the Commerce Control List only for anti-terrorism reasons may now enter U.S. ports for the purpose of loading or unloading freight without waiting 180 days from the date the vessel departs Cuba.
- Persons subject to U.S. jurisdiction are now authorized to provide Cuba and Cuban nationals, wherever located, with services aimed at ensuring safety in civil aviation and the safe operations of commercial aircraft.
- Persons subject to U.S. jurisdiction may now enter into contingent contracts for transactions prohibited by the CACR and engage in transactions ordinarily incident to negotiations and entering into such contracts. The performance of these contracts must be made contingent on OFAC authorization being granted or no longer being required. If the contracts would require approval from another U.S. government agency, such as the Department of Commerce or the Department of State, the contract must also make performance contingent on authorization or removal of the licensing requirement by that agency.
Travel and Travel-related Transactions
The amendments to the CACR further expand existing authorizations related to travel and travel-related transactions, including importation of Cuban-origin items.
- The general license authorizing travel to Cuba for purposes of attending or organizing professional meetings or conferences in Cuba has been expanded to allow meetings or conferences related to the promotion of tourism in Cuba.
- Persons subject to the jurisdiction of the United States may now make remittances to third-country nationals for their travel to, from, and within Cuba, provided that such travel would be authorized by a general license if the traveler were a person subject to U.S. jurisdiction.
- OFAC has removed the monetary value limits on Cuban merchandise imported into the United States for personal use by those returning from Cuba after engaging in authorized travel. Previously, the limit was $400, with no more than $100 of such merchandise consisting of alcohol or tobacco products.
- Persons subject to U.S. jurisdiction may now import Cuban-origin merchandise from a third country to the United States. Previously, the CACR authorized the purchase of such merchandise but required it to be consumed while abroad and not imported into the United States. Foreign persons may also import all Cuban-origin merchandise to the United States. In all cases, the merchandise must still be for personal use only and be imported as accompanied baggage.
- The general license authorizing the provision of grants, scholarships, and awards to Cuban nationals with respect to educational or humanitarian activities has been expanded to cover scientific research and religious activities.
- A new general license authorizes the provision of services to Cuba or Cuban nationals related to developing, repairing, maintaining, and enhancing Cuban infrastructure. This includes systems and assets used to provide the Cuban people with goods and services relating to public transportation, water management, waste management, non-nuclear electricity generation, electricity distribution, hospitals, public housing, and primary and secondary schools. All transactions must be consistent with BIS licensing policy.
The regulatory ban on transacting business with prohibited officials of the Government of Cuba or prohibited members of the Cuban Communist Party has been further narrowed. This regulatory ban now includes only members of the Council of Ministers, flag officers of the Revolutionary Armed Forces, and members of the Politburo. All other OFAC regulations regarding prohibited transactions remain in effect, including those of Cuban persons and entities on the Specially Designated Nationals and Blocked Persons List (SDN List).
BIS issued minor revisions to its license exceptions to complement OFAC’s amendments to the CACR.
- Air cargo may now transit Cuba in the same way that cargo may transit Cuba aboard seafaring vessels.
- Exports or re-exports of consumer goods to individuals in Cuba are now authorized, so long as the items are for personal use or the personal use of the purchaser’s immediate family.
- Items exported pursuant to this license exception must be designated as EAR99 or controlled on the Commerce Control List only for anti-terrorism reasons. This facilitates the online sale of consumer products directly to Cuban end-users.
- BIS also altered the lists of prohibited Cuban governmental officials and Cuban Communist Party members in order to harmonize with the OFAC amendments discussed above.
President Obama’s stated policy of liberalizing U.S.-Cuban relations continues as OFAC and BIS further relax the Cuba economic sanctions program. However, liberalization remains limited to narrow sectors and authorizations where the Administration has the unilateral ability to set policy. Most restrictions on U.S.-Cuban commerce remain in place, including a general prohibition on tourist travel to Cuba and business transactions with Cuba and Cuban nationals for persons subject to U.S. jurisdiction. Fundamental changes to the Cuba sanctions program would require congressional action, which we do not expect in the near future. Moreover, both congressional and executive policy with respect to Cuba may well change after the U.S. presidential election next month.