On Sept. 5, 2009, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a final rule amending its Cuban Assets Control Regulations, 31 C.F.R. Part 515 (CACR), in order to implement measures announced by President Obama on April 13, 2009. (Please see our previous advisory, U.S. Loosens Policies on Telecommunications Links with Cuba, for more information.) The amendments modify regulations governing, among other matters, transactions, remittances and travel incident to the provision of telecommunications services between the United States and Cuba, entry into and performance of roaming service agreements with telecommunications service providers in Cuba, and the provision of satellite television, satellite radio services and news wire feeds to Cuba. The new regulations are intended to increase the flow of information from the United States to the people of Cuba.

New opportunities under revised telecommunications regulations

The CACR were issued by the U.S. government in 1963 under the authority of the Trading With the Enemy Act, 50 U.S.C. App. 5 et seq., and have been strictly enforced over the past 45 years. Under those regulations, only limited telecommunications-related transactions by companies subject to U.S. jurisdiction have been authorized by OFAC, pursuant to “specific licenses” granted sparingly on a case-by-case basis.

OFAC’s new amendments are the most significant liberalization of the CACR in their nearly half-century history, and are expected to provide significantly greater opportunities for telecommunications and media companies seeking to provide international telecommunications services to Cuba. The regulations do not, however, authorize companies subject to U.S. jurisdiction to provide purely domestic services or facilities within Cuba.

Changes to the CACR include the following new provisions:

  • A general license has been issued authorizing “all transactions” incident to the provision, by a telecommunications service provider subject to U.S. jurisdiction, of telecommunications services between the United States and Cuba, the entry into and performance under roaming agreements with telecommunications service providers in Cuba, and the provision of satellite radio or satellite television to Cuba. Most importantly, the regulations now authorize the making of payments incident to these transactions. Such payments were prohibited prior to OFAC’s Sept. 5, 2009, amendments.
  • All persons subject to U.S. jurisdiction are now authorized to enter into contracts with non-Cuban telecommunications service providers, or with particular individuals in Cuba, for services provided to particular individuals in Cuba, so long as such individuals are not prohibited officials of the Cuban government or the Cuban Communist Party. This authorization includes payment for activation, installation, usage (monthly, prepaid, or other), roaming, maintenance and termination fees for cellular telephone service for a phone owned and used by an individual in Cuba.
  • A general license has been issued authorizing transactions incident to the establishment of telecommunications facilities linking the United States and Cuba. Such facilities may include fiber-optic cable and satellite telecommunications facilities.
  • A new provision provides for the grant of specific licenses on a case-by-case basis authorizing transactions incident to the establishment of telecommunications facilities, including fiber-optic cable and satellite facilities, linking Cuba with third countries. Such facilities must be necessary to provide efficient and adequate telecommunications services between the United States and Cuba.

Companies should be aware, however, that nothing in the amended OFAC telecommunications provisions authorizes the exportation or re-exportation of any items to Cuba.1 Furthermore, parties relying on the general license authorizations set forth in the CACR amendments to conduct business with Cuba will be subject to a variety of new notice and semiannual reporting requirements.

Travel to Cuba for telecommunications-related business is now permitted

Travel to Cuba is now permitted when such travel is incident to the new authorizations outlined above. Under the new amendments, a general license authorization has been granted for travel when directly incident to participation in professional meetings concerning the marketing, sales negotiation for or performance under contracts for the provision of telecommunications services, or for meetings concerning the establishment of facilities to provide telecommunications services. The regulations impose restrictions on travel and expenditures that are not directly related to the work-related purpose of the trip, and require reports to be filed both before and after the completion of the travel.

Travel to Cuba also will be permitted under general license authorization where the travel-related transactions are incident to sales of telecommunications-related items that have been authorized for commercial export or re-export to Cuba by the U.S. Department of Commerce. Activities that are considered directly incident to the sales of such items include commercial marketing, sales negotiations, accompanied delivery, or servicing in Cuba of the telecommunications-related items.

FCC "214 authorization" still required

As we have previously reported, there is a second, distinct element involved in initiating telecommunications service to Cuba—securing international "214 authorization" from the Federal Communications Commission (FCC). (Please see our prior advisory, FCC Awaiting Instructions on Easing of Restrictions on Telecom Services to Cuba, for additional information.) The FCC enforces regulations and guidelines that, as currently constituted, impose onerous application, operating and compliance requirements on U.S. carriers that seek to serve Cuba.

To date, unlike the Department of Treasury, the FCC has not been instructed by the Obama administration to relax its enforcement procedures in accord with President Obama's pronouncement on liberalization of the flow of information to Cuba. The FCC's staff has indicated that, until such instructions are received, it intends to apply the more burdensome regulatory guidelines that have been in force since the passage of the Cuban Democracy Act of 1992.