Introduction

President Obama has begun changes in policy regarding Cuba that he promised during the presidential campaign. The policy changes, made in conjunction with the President’s trip to the Summit of the Americas, are important, but much less sweeping than public reaction would suggest. Policies on travel and family remittances by Cuban-Americans are exactly as expected. The policies regarding broadening communications between the two countries are somewhat broader than expected, presenting U.S. businesses with interesting but still-undefined opportunities. We do not anticipate immediate further steps to relax the bulk of the economic sanctions against Cuba that remain in place.

The Omnibus Appropriations Act, which was signed into law March 11, 2009, began the policy adjustment process by easing travel restrictions applying to family members of Cuban residents and certain business travelers. [1] President Obama announced additional measures to liberalize the Cuba sanctions on April 13, 2009. Once implemented, these measures will further ease travel restrictions; permit unlimited family remittances from persons in the United States to relatives in Cuba; and allow U.S. persons to send additional humanitarian items to Cuba. The President also announced his intent to authorize and license U.S. telecommunications service and network providers to engage in significant activities in Cuba.

Key executive branch agencies already possess the legal powers needed to implement the April initiatives. No new legislation is required.

Background

Since 1963, U.S. persons’ interactions with Cuba have been subject to comprehensive regulations that prohibit virtually all commercial transactions and subject the few remaining areas of contact, including travel, to strict licensing requirements. The Office of Foreign Assets Control (OFAC), an agency within the Treasury Department, administers the main body of sanctions, the Cuban Assets Control Regulations (CACR). [2] Under the CACR, persons subject to the jurisdiction of the United States (U.S. persons) have been generally prohibited from engaging in transactions (including the exportation of services) to the Government of Cuba, Cuban nationals located outside of the United States and persons (individuals or entities) located in Cuba. [3] The U.S. Department of Commerce administers other laws that affect exports of goods and services to Cuba.

The CACR is based on the broad authority granted to the President in the Trading with the Enemy Act (50 U.S.C. App. § 5). Over the years, Congress has further amended these restrictions through various legislative initiatives including the Cuban Democracy Act of 1992 (CDA), [4] the Berman Amendment of 1994 and the Cuban Liberty and Democratic Solidarity (Libertad) Act of 1996 (also known as the Helms-Burton Act). [5]

Liberalization of Restrictions on Travel, Remittances and Commerce with Cuba

Although the CACR technically regulate travel-related transactions and operations rather than travel itself, the practical effect is to prohibit travel to Cuba without a license. U.S. persons with relatives in Cuba have consistently been allowed to travel to Cuba, but such travel has been subject to broad restrictions. Similarly, the amount of money U.S. persons may remit to family members in Cuba has been controlled. The President’s announcement of April 13 eases these restrictions significantly. Other travel will remain subject to specific licensing requirements.

The April announcement reaffirmed and further relaxed restrictions on travel to visit family members in Cuba. Once regulations are published, family visits will no longer be limited in either frequency or duration. Business travelers will be authorized to travel to Cuba for activities related to commercial sales of agricultural and medical products. [6] Other travel will remain subject to specific licensing requirements.

Travel to Cuba

The President intends to lift all restrictions on family visits to Cuba by:

  • Allowing visits to family members within three degrees of relationship (i.e., second cousins);
  • Removing limitations on the frequency of visits;
  • Removing limitations on the duration of a visit (already accomplished under the Omnibus Appropriations Act);
  • Authorizing expenditure amounts that are same as for non-family travel; and
  • Removing the 44 pound limitation on personal baggage. [7]

The current limitations on travel to Cuba are incorporated in the CACR. [8] Therefore, full implementation of the announced liberalization will require amendment of the CACR. [9]

Family Remittances

The President also seeks to remove restrictions on family remittances by:

  • Authorizing remittances to individuals within three degrees of family relationships;
  • Removing limits on frequency of remittances;
  • Removing limits on the amount of remittances;
  • Authorizing licensed travelers to carry up to $3,000 in remittances; and
  • Establishing a general license for banks and other depository institutions to forward remittances. [10]

As with travel, the current restrictions on family remittances are contained in the CACR, [11] so the CACR will have to be amended to implement the President’s announced changes in policy. As well as changing the regulations to provide a general license for family remittances, OFAC will probably also issue a general license for U.S. financial institutions to process qualifying family remittances to Cuba. [12] Currently, U.S. financial institutions require specific authorization from OFAC to act as remittance forwarders.

Telecommunications Liberalization

In addition to liberalization of the restrictions on travel and family remittances, the President announced several initiatives “to facilitate greater contact…and increase the flow of information” between the United States and Cuba. Among these proposals were several changes likely to affect U.S. telecommunications and satellite companies’ ability to serve customers in Cuba, including proposals to:

  • Authorize U.S. telecommunications network providers to enter into agreements to establish fiber-optic cable and satellite telecommunications facilities linking the United States and Cuba;
  • License U.S. telecommunications service providers to enter into and operate under roaming service agreements with Cuba's telecommunications service providers;
  • License U.S. satellite radio and satellite television service providers to engage in transactions necessary to provide services to customers in Cuba; and
  • License persons subject to U.S. jurisdiction to activate and pay U.S. and third-country service providers for telecommunications, satellite radio and satellite television services provided to individuals in Cuba (except to certain senior Communist Party and Cuban government officials). [13]

Fiber-Optic Cable and Satellite Services

The new policy allows OFAC to authorize U.S. telecommunications network providers to enter into agreements to establish fiber-optic cable and satellite telecommunications facilities linking the United States and Cuba. OFAC already has the authority to issue specific licenses for telecommunications under the CACR:

all transactions [of common carriers] incident to the use of cables, satellite channels, radio signals, or other means of telecommunications for the provision of telecommunications services between Cuba and the United States including telephone, telegraph and similar services, and the transmission of radio and television broadcasts and news wire feeds between Cuba and the United States, are authorized. [14]

Establishing cable or satellite links to Cuba presumes interaction with and, typically, some investment in facilities infrastructure in Cuba. The CDA, however, prohibits investment in the domestic Cuban telecommunications network. [15] OFAC licenses implementing the new policy will have to establish limits on U.S. companies' investments in network facilities that could be considered part of the Cuban domestic network. Any new submarine cable connection between the United States and Cuba will require a license from the Federal Communications Commission, with the review and approval of the State Department.

Roaming Service Agreements

The April 13 measures also direct OFAC to license U.S. telecommunications service providers to enter into and operate under roaming service agreements with Cuba's telecommunications service providers. The CDA currently provides that the “President may provide for the issuance of licenses for the full or partial payment to Cuba of amounts due to Cuba as a result of the provision of telecommunications services. . .” [16] Although the CDA does not expressly authorize the grant of licenses to pay Cuban providers for roaming services, OFAC officials have stated that such authority is implicit within the CDA, and that OFAC can grant these licenses as well.

Television and Radio Service Providers

The new policy directs OFAC to license U.S. satellite radio and satellite television service providers so that they can provide services to customers in Cuba. The actual broadcast into Cuba is likely to be considered “information and informational materials,” and as such is already exempt from regulation. [17] Service providers can also conduct the financial transactions connected with the transfer of information and informational materials, including the receipt of payment, under a general license. [18]

The provision of services implies additional activities, though, including the provision of technical services and possibly investment in physical facilities. These activities are not covered by the general license or exemptions of the current CACR. The President’s statement indicates that OFAC will license U.S. satellite radio and satellite television service providers to engage in these additional transactions. Given the technology potentially involved, we expect OFAC to require specific licenses for such services and transactions. The transfer of goods, services or technology subject to the Export Administration Regulations will require separate licenses from the Commerce Department’s Bureau of Industry and Security.

Payments for Radio, Telecommunications and Satellite Television Services

Finally, the President has requested that federal authorities license U.S. persons to activate and pay U.S. and third-country service providers for telecommunications, satellite radio and satellite television services provided to individuals in Cuba, with the proviso that such services cannot be provided to certain senior Communist Party and Cuban government officials. OFAC will need to issue licenses to U.S. persons to make payments to non-Cuban networks for services provided in Cuba. Because the CDA and Libertad Act do not prohibit such payments, it appears that the CACR can be amended to permit such licenses without additional statutory authority.

Cuban Role

President Obama's initiatives respond to frequent Cuban calls for relaxing U.S. economic sanctions, yet the telecommunications proposals require Cuban government cooperation. No new undersea cable or satellite earth station can be installed, nor can any roaming services be provided without active Cuban government support. Given the two countries' history of mistrust, it may take some time and many rounds of negotiations for Cuban authorities and American businesses to gain sufficient confidence in one another to proceed with projects requiring substantial capital investment in new infrastructure.