Shortly before President Obama’s upcoming visit to Cuba, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) and U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) have released new rule amendments in order to permit increased travel, financial transactions and trade between the two countries.
These amended rules remove the sponsoring organization requirement from OFAC’s general license allowing “people to people” travel to Cuba. As a result, U.S. persons may now to travel to Cuba much more easily on their own accord under the “people to people” program. However, persons doing so must still must maintain a full-time schedule of meaningful interactive activities, keep appropriate documentation and satisfy other requirements. Travel to or within Cuba for tourism purposes remains prohibited.
The amended rules also provide Cuba and Cuban nationals with greater access to the U.S. banking sector. Subject to certain restrictions, U.S. financial institutions may now:
- Process funds transfers to Cuba originating from foreign financial institutions;
- Open bank accounts for Cuban nationals for receiving and remitting payments to Cuba; and
- Process U.S. dollar denominated instruments presented by foreign financial institutions in connection with qualifying Cuban transactions.
Additionally, the new rules authorize additional exports of goods and services to Cuba. Under the amendments:
- Vessels traveling from the U.S. to Cuba may now carry additional foreign-destination cargo and transit such foreign cargo through Cuba without obtaining the previously required BIS license;
- BIS and OFAC have expanded their existing authorizations allowing establishment of a physical presence in Cuba and clarified that companies who qualify to establish a physical presence may also assemble exported items at their Cuban physical presence;
- Qualifying companies may establish a Cuban business presence, which includes forming Cuban subsidiaries and entering into joint ventures, franchises or similar business relationships with Cuban nationals;
- BIS may now issue licenses on a case-by-case basis authorizing exports to Cuba in order to enable or facilitate exports from Cuba of items produced by the Cuban private sector; and
- U.S. companies may now pay salaries or other compensation in excess of basic living expenses to Cuban nationals residing within the U.S.
In many instances, companies subject to U.S. jurisdiction will need to first obtain appropriate BIS export licenses in order to fully utilize the authorizations described above. As previously reported, in amendments made earlier this year, BIS is now generally approving Cuban export licenses for items which include telecommunications equipment, aviation safety equipment, items necessary for environmental protection and items related to renewable energy. BIS is also approving Cuban export licenses on a case-by-case basis for other items that may benefit the Cuban people, such as equipment for use in agricultural production, residential construction, public transportation and other infrastructure projects. There are also a limited number of instances where the rules permit exports to Cuba without a license (e.g., License Exception SCP (Support for the Cuban People) , which permits exports supporting private sector agricultural activity or private sector entrepreneurs).
Although the amendments issued over the past 15 months have established a wide range of potentially permissible exports to Cuba, the U.S. continues to maintain its general Cuban trade embargo and still imposes significant penalties on trade with Cuba that is not authorized under the amended rules or an appropriate license. Exporters and re-exporters subject to U.S. jurisdiction are therefore advised to review the amended rules carefully before traveling or exporting goods or services to Cuba.