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”) recently announced additional rule amendments intended to continue improving relations between the United States and Cuba by allowing even greater commerce and humanitarian efforts between the two countries. These new OFAC and BIS rules take effect today. The new amendments build on previous amendments which Husch Blackwell LLP’s Technology Manufacturing & Transportation Industry Insider blog summarized here, here, and here.
The following list is not exhaustive, but key changes include authorizations allowing persons subject to U.S. jurisdiction to:
- Conduct joint medical research projects with Cuban nationals and engage in additional activities in order to obtain U.S. Food and Drug Administration (“FDA”) approval for Cuban origin pharmaceuticals. If persons subject to U.S. jurisdiction are successful in obtaining FDA approval for Cuban origin pharmaceuticals, the new rules will also allow such persons to market, sell and distribute the pharmaceuticals in the United States. However, any travel to or within Cuba in connection with these new medical authorizations must comply with OFAC’s existing general license for travel and incidental transactions for professional meetings and professional research in Cuba. Additionally, the Cuban sanctions might require specific BIS export licenses in order to export or re-export goods or technology to Cuba or to import Cuban-origin commodities into the U.S. in connection with the medical research allowed under the new rules.
- Enter into contingent contracts for transactions that would otherwise be prohibited by the Cuban export sanctions, provided that the performance of any such contingent contracts must be made expressly contingent upon receiving prior OFAC authorization or the authorization no longer being required. The contingent contract must also be subject to the approval of any other Federal agencies that might impose licensing requirements over the transaction or the removal of such Federal agencies’ licensing requirements. Previously, the rules only permitted these type of contingent contracts for transactions that would be potentially eligible for a BIS license, so the new rules significantly expand the scope of permitted contingent contracts.
- Transit cargo through Cuba on aircraft travelling to Cuba provided the aircraft has flown to Cuba for a purpose permitted under the rules and the cargo leaves with the aircraft upon its departure from Cuba, is not removed from the aircraft for use in Cuba or transferred to another aircraft or vessel while in Cuba (as we described here, OFAC, BIS and the U.S. Department of Transportation have now authorized daily flights between the U.S. and Cuba). These amendments are consistent with previous OFAC amendments that authorized similar cargo transit on sea vessels sailing through Cuba.
- Export certain consumer items directly to individuals in Cuba for their personal use or their immediate family’s personal use under an expansion of the BIS “Support for the Cuban People” License Exception. BIS has specifically indicated that online retailers are eligible to export qualifying consumer items directly to individuals in Cuba under these new rules.
- Provide grants, scholarships or awards to Cuban nationals relating to scientific research or religious activities (prior to these most recent amendments, the rules only allowed grants, scholarships or awards for educational activities or for certain humanitarian projects).
- Provide services to Cuba or Cuban nationals in order to develop, repair, maintain or enhance Cuban “infrastructure” in a manner that directly benefits the Cuban people. However, any services provided under these new rules must be consistent with pre-existing BIS export and re-export licensing policy, which may specifically require that interested service providers must first obtain an appropriate BIS license or identify an appropriate BIS license exemption for any items or technology to be exported in connection with such infrastructure services. Within the services context, these new rules broadly define the Cuban “infrastructure” as “systems and assets used to provide the Cuban people with goods and services produced or provided by the public transportation, water management, waste management, non-nuclear electricity generation, and electricity distribution sectors, as well as hospitals, public housing, and primary and secondary schools.” This authorization for “infrastructure” services also specifically includes services related to the environmental protection of U.S., Cuban and international air quality, waters and coastlines.
- Last but not least, the most recent rule amendments remove the monetary limitations on baggage that persons subject to U.S. jurisdiction may import into the U.S. upon their return from Cuba. In particular, these new amendments now allow U.S. persons to import greater than $100 in Cuban alcohol and tobacco products into the U.S. after traveling to Cuba. However, any imported baggage, alcohol or tobacco must be for personal use and must also comply with standard duty limits and tax exemptions.
Anyone subject to U.S. jurisdiction should carefully review the amended rules before traveling to Cuba or doing business with Cuba. Any travel to Cuba must comply with existing OFAC requirements and the rules continue to prohibit tourist travel under all circumstances. Exports or re-exports of goods or services to Cuba by persons subject to U.S. jurisdiction which are not permitted under the rules are subject to significant penalties. Husch Blackwell’s Cuba team will continue to closely monitor trade developments in Cuba.