On June 16, 2017 during a speech in Miami, President Trump announced changes to US sanctions targeting Cuba. The speech announced two substantial changes to the previous administration’s Cuban sanctions regime: first, the new policy will restrict business transactions with any entity affiliated with the Cuban military and second, the new policy will restrict people-to-people travel to Cuba. The outlines of the policy were announced in a Presidential Memorandum; however, the true shape of these changes will depend on yet to be issued amendments to the Cuban Assets Control Regulations. For businesses looking to understand the impact the new policy will have, the devil will be in those details.
Background on Trump’s Announcement
President Trump’s speech was before a supportive crowd at the Manuel Artime Theater in the Little Havana neighborhood of Miami. The new policy is designed to impose new restrictions on business entities with ties to the Cuban military, intelligence, and security services and personnel and to partially reverse the Obama Administration’s easing of travel restrictions relating to Cuba. The new policy also expands support for internet services, free press, free enterprise and free association in Cuba. At this time, however, the details of the new policy remain undefined; the Presidential Memorandum and the Office of Foreign Assets Control’s new Cuban “FAQ” provide only the broad parameters of the President’s new Cuba policy.
These policies will not go into effect until new regulations are issued. Within 30 days of the signing of the Presidential Memorandum, the Department of Treasury will initiate the process to adjust the Cuba sanctions program, and we expect the Department to promulgate new regulations within the next two to three months. While the new regulations will impact future business decisions, the FAQs suggest that existing licenses and previously permitted commercial engagements will be grandfathered, including those related to Cuba’s military.
Restrictions on Dealings With the Cuban Military
In his public remarks, President Trump decried profits from investment and tourism flowing directly to the Cuban military. Grupo de Administración Empresarial (GAESA) and other institutions connected to the Cuban military commonly play a role in Cuba’s tourist business and in hotels, and reportedly control between 40% and 60% of Cuba’s foreign exchange earnings. To restrict the flow of dollars to Cuban military-related groups, specifically GAESA, the Presidential Memorandum directs the Secretary of State to identify entities and sub-entities that are under the control of or act on behalf of the Cuban military, intelligence, or security services or personnel, such as GAESA and its affiliates. To comply with the newly announced measures, businesses will have to expand their due diligence to specifically review any potential connections to GAESA or any other entity included on the list which will ultimately be published by the Department of State.
Restrictions on People-to-People Travel
While the Obama Administration eased travel restrictions related to Cuba by allowing people to self-report compliance with the permitted categories of travel to Cuba, the Trump Administration announced stricter travel restrictions, including limiting travel for non-academic educational purposes to group travel only. Self-directed travel previously permitted under the Obama Administration will be prohibited once the new regulations are promulgated. Non-academic educational travel will require the accompaniment by a representative of a sponsorship organization subject to US jurisdiction. In conjunction with these new policies, the President has ordered the Departments of State, Treasury, Commerce and Transportation to review their oversight of permissible travel to Cuba within 90 days from the issuance of the new regulations.
Although the policy statements issued by the President do not currently have any legal effect, future amendments to the Cuban sanctions regulations will expand the existing prohibited activity involving Cuba. In the next several months, as the amendments are being drafted, the impact on activity involving Cuba may in fact be more or less restrictive than what is currently anticipated. Ultimately, the impact of President Trump’s new Cuba policy on businesses will turn on the language of the new regulations and changing enforcement priorities.