The Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the Department of Commerce’s Bureau of Industry and Security (BIS) jointly announced on November 8, 2017 amendments to the Cuban Assets Control Regulations (CACR) and the Export Administration Regulations (EAR), effective upon publication in the Federal Register on November 9, 2017. See 82 Fed. Reg. 51983, 51998 and 52089. The amendments implement the National Security Presidential Memorandum on Strengthening the Policy of the United states Toward Cuba (Cuba NSPM) signed by President Trump on June 16, 2017, which seeks to channel economic activities away from the Cuban military, intelligence and security services and to support the private, small business sector in Cuba. The regulatory changes to the CACR and EAR effectively prohibit transactions with designated entities associated with these Cuban government activities and revise the scope and requirements for certain authorized categories of travel to Cuba.
The net effect of these changes will be to prohibit or otherwise restrict some of the types of travel and business opportunities afforded by the Cuba sanctions reforms adopted by the Obama Administration. U.S. persons and companies seeking to travel to Cuba and/or pursue commercial transactions with Cuba should review these amendments carefully and implement relevant changes to their compliance procedures, including screening all proposed travel and transactions against the new list of restricted entities.
Financial and Commercial Transactions
The most significant changes to the CACR and the EAR relate to the new List of Restricted Entities and Subentities Associated with Cuba (Cuba Restricted List) published and maintained by the Department of State. The Cuba Restricted List includes the Cuban entities and subentities that have been designated as being under the control of, or acting for or on behalf of, the Cuban military, intelligence or security services. It includes a number of Cuban ministries and agencies, holding companies (such as CIMEX, GAESA and Gaviota and their subentities), hotels, marinas and stores. (Unlike OFAC’s SDN and SSI Lists, which cover entities owned 50% or more by one or more SDNs or SSIs even if not designated themselves, entities or subentities owned or controlled by an entity or subentity on the Cuba Restricted List are not treated as restricted unless also specified by name on the list.)
Because financial transactions with entities or subentities on the Cuba Restricted List are presumed to disproportionately benefit the targeted Cuban government services or personnel, at the expense of the Cuban people or private enterprise in Cuba, persons subject to U.S. jurisdiction will be prohibited by the CACR from engaging in most direct financial transactions these entities and subentities. This new restriction means that, for example, persons conducting authorized travel to Cuba may not book a room at a listed hotel, and companies looking to lease office space or a plant in Cuba in order to establish a business or physical presence in accordance with relevant CACR general licenses may not engage a real estate company on the list.
BIS is amending its licensing policies to clarify that it will generally deny applications to export or reexport EAR items to designated entities and subentities on the Cuba Restricted List, unless such transactions are deemed to be consistent with the Cuba NSPM. BIS also amends its list of ineligible Cuban government officials, consistent with OFAC’s expansion of its definition of the term “prohibited officials of the Government of Cuba,” to include additional positions. BIS makes conforming changes to three license exceptions – License Exceptions Gift Parcels and Humanitarian Donations (GFT), Consumer Communications Devices (CCD), and Support for the Cuban People (SCP) – to reflect this new definition. License Exception SCP is further revised to create a single provision authorizing the export and reexport to Cuba of EAR items, without specifying types as in the prior rule, for use by the Cuban private sector for private economic activities.
Travel to Cuba has long been limited to a dozen categories of authorized activities, and had required OFAC to approve licenses in advance of traveling. The Obama reforms included converting these travel categories to self-executing and managed general licenses and relaxing the requirements for some of them. The regulatory changes adopted by OFAC in accordance with the Cuba NSPM maintain the general licenses, but roll back some of the Obama liberalizations that will restrict much of the increased travel to Cuba seen the past few years.
1. People-to-People Travel
Individual tourism to Cuba has always been banned, but the Obama reforms authorized individual unsponsored and unaccompanied travel to Cuba to engage in people-to-people nonacademic educational engagement with private Cuban citizens. The CACR amendments implementing the Cuba NSPM eliminate the individual people-to-people authorization and require, instead, that all people-to-people nonacademic educational travel (1) be conducted under the auspices of a U.S. organization that sponsors such exchanges and (2) be accompanied by a U.S. representative of the sponsoring organization.
2. Educational travel
Educational travel to Cuba will also have to be conducted under the auspices of a U.S. person, and travelers must be accompanied by a U.S. person who is a representative of that organization, unless the traveler is the representative and obtains a certification from the sponsoring organization.
3. Support for the Cuban People Travel
Travelers under this general license will have to engage in a full-time schedule of activities that “result in meaningful interaction” with individuals in the Cuba that will “enhance contact with the Cuban people, support civil society in Cuba, or promote the Cuban people’s independence from Cuban authorities.” Examples of such authorized activities include (1) renting a room in a private Cuban residence, (2) eating at privately-owned Cuban restaurants, and (3) shopping at privately-owned stores run by self-employed Cubans.