Continuing the implementation of President Obama's Cuban policy announced in December 2014, the U.S. Department of the Treasury and Department of Commerce have further revised the Cuban Assets Control Regulations ("CACR") and the Export Administration Regulations ("EAR") respectively. These revisions are effective as of September 21, 2015. Although the comprehensive embargo remains in place, these changes expand allowable activities in the travel, financial services, and telecommunications industries, among others. The following is a summary of some of the key changes.
The Department of the Treasury's Office of Foreign Assets Control ("OFAC") amended the CACR to allow persons subject to U.S. jurisdiction to provide carrier services to Cuba via vessel without the need for a specific license. 31 C.F.R. § 515.572. Vessel carriers also are authorized to provide lodging services.
Unlike many of the other sanctions programs, the Cuba sanctions are jointly administered by the Department of the Treasury and the Department of Commerce. Because of this, the Department of Commerce's Bureau of Industry and Security ("BIS") had to amend many of its own regulations to give effect to the OFAC amendments. For example, BIS has expanded License Exception Aircraft, Vessels, and Spacecraft ("AVS") to allow cargo vessels used to transport authorized items, passenger vessels used to transport authorized travelers and items, and recreational vessels used in connection with OFAC-authorized travel to depart for Cuba and dock in Cuba for up to 14 consecutive days. 15 C.F.R. § 740.15.
These amendments begin to open Cuba to service by cruise lines. The travel to Cuba still must be allowed under the other provisions of the CACR, however, meaning U.S. cruise lines cannot provide leisure travel services. In addition, the authorization allows only the transportation of authorized travelers directly between the United States and Cuba and does not permit stops in other countries. Vessel carriers also are required to obtain certifications from each passenger stating the general license category under which he or she is eligible to travel. If a passenger is traveling pursuant to a specific license, the carrier must obtain a copy of that specific license. These certifications and related paperwork must be retained by the carrier for five years.
In another expansion of permissible travel to Cuba, a person subject to U.S. jurisdiction may now accompany a close relative traveling to Cuba provided that the close relative is traveling pursuant to one of the following general licenses: official government business, journalistic activity, professional research, educational activities, religious activities, humanitarian projects, or activities of private foundations or research or educational institutes. 31 C.F.R. § 515.561. The definition of "close relative" is any individual related to a person "by blood, marriage, or adoption who is no more than three generations removed from that person or from a common ancestor with that person." 31 C.F.R. § 515.339.
The amendments permit certain U.S. news bureaus, telecom providers, mail and parcel service providers, cargo transportation service providers, educational providers, religious organizations, travel and carrier service providers, and exporters of certain goods (including certain building materials and equipment for enumerated private sector projects and agricultural commodities) to establish an office or other facility to conduct authorized transactions in Cuba. 31 C.F.R. § 515.573. In order for such entities to function in Cuba, the amended regulations specifically authorize those entities to lease physical premises in Cuba, such as offices, warehouses, or retail outlets, and make payments related to the operation of those premises. They also permit entities to conduct marketing activities related to the physical presence of the entity in Cuba and to hire Cuban nationals and U.S. persons to work at the Cuban location(s). Such entities will be allowed to open, maintain, and close bank accounts at Cuban financial institutions for use in authorized transactions.
BIS has expanded License Exception Support for the Cuban People ("SCP") to allow for the export or reexport of certain items in order for such authorized entities to establish, maintain, or operate their physical presences in Cuba. This is limited to EAR99 items and items controlled on the Commerce Control List only for antiterrorism reasons. BIS also has expanded License Exception SCP to allow for the temporary (i.e., one year or less) export or reexport of such items where the items are "tools of trade," kits of replacement parts or "components," or items for exhibition and demonstration. This includes commodities and software used by an exporter or reexporter related to the installation, servicing, or repair of items that were lawfully exported or reexported to Cuba.
Telecommunications and Internet-Based Services
Continuing the U.S. government's encouragement of investment in the telecom industry in Cuba, persons subject to U.S. jurisdiction may now establish and maintain a commercial presence in Cuba to provide authorized telecommunications and internet-based services. This can be conducted through subsidiaries, branches, offices, joint ventures, franchises, or other business relationships with Cuban persons or entities, including the Cuban government telecommunications company ETECSA. 31 C.F.R. §§ 515.542, 515.578. This follows the January 2015 expansion of a general license authorizing transactions that create mechanisms to provide commercial telecommunications services in Cuba or between Cuba and third countries. These new amendments also will allow persons subject to U.S. jurisdiction to license and market telecommunications services.
In addition, OFAC amended the CACR to authorize the importation of Cuban-origin mobile applications to the United States and to authorize persons subject to U.S. jurisdiction to hire Cuban nationals to develop mobile applications. 31 C.F.R. § 515.578.
Also building on the January 2015 amendments, OFAC amended the CACR to expand permitted services to include training services related to the installation, repair, or replacement of items exported pursuant to License Exception Consumer Communications Devices ("CCD"). 31 C.F.R. § 515.578. The amendments allow services related to the export of consumer communications devices that are not covered by License Exception CCD but have been authorized by BIS for export through a specific license. They also allow services related to exports of commodities and software now authorized by BIS's expanded License Exception SCP to be used by persons and private sector entities to develop software to improve the free flow of information or to support certain private sector activities.
Previously, certain depository institutions were allowed under the CACR to open and maintain accounts for Cuban nationals in the United States in a nonimmigrant status, but those accounts had to be closed before the Cuban national left the United States or the account would be blocked. Now, depository institutions can maintain such accounts even when the Cuban national account holder is outside of the United States, with the restriction that the account may be accessed by the account holder only when he or she is lawfully located in the United States. 31 C.F.R. § 515.571.
Transactions with Cuban Nationals in Third Countries
Persons subject to U.S. jurisdiction are now authorized under the CACR to provide goods and services to Cuban nationals (individuals, not entities) located in third countries as long as the transaction does not involve a direct or indirect export of commercial goods or services to or from Cuba. 31 C.F.R. § 515.585. Banking institutions also are authorized to open and maintain accounts for Cuban nationals (again, individuals, not entities) located in a third country, with the requirement that the accounts be used only when the Cuban nationals are not in Cuba and not for transactions involving the commercial export of goods or services to or from Cuba. Id.
Civil Aviation Safety
BIS has amended the EAR to change its licensing policy for export and reexport of items that ensure safety in civil aviation and safe operation of commercial passenger aircraft to one of case-by-case review. 15 C.F.R. § 746.2. This includes such items as aircraft parts and components related to flight safety, weather observation stations, airport safety equipment, and items used for security screening of passengers.
Ordinarily Incident Transactions
Unlike many of the other sanctions programs administered by OFAC, the CACR previously did not explicitly authorize transactions ordinarily incident to a licensed transaction and necessary to give it effect. OFAC now has issued interpretive guidance making clear that, with certain exceptions, ordinarily incident transactions are authorized. 31 C.F.R. § 515.421. This includes the use of online payment platforms for payments related to authorized transactions.
U.S. persons no longer need a license to release EAR99 technology or source code to a Cuban national located in the United States or a third country. 15 C.F.R. § 746.2.
The amendments to the CACR and EAR also make changes to the regulations related to family visits, remittances, estate-related transactions, legal services, gift imports, educational activities, air ambulances and emergency medical services, humanitarian projects, Cuban official missions, and the reexport of License Exception SCP items.