Against the backdrop of a dramatic prisoner swap and almost eighteen months of “secret” negotiations between the U.S. and Cuba—facilitated by Canada, the Vatican, and others—President Barack Obama announced on December 17, 2014, a set of “historic steps to chart a new course in our relations with Cuba and to further engage and empower the Cuban people,” which indeed reflect a seismic shift in United States foreign policy toward Cuba.
The key components of the President’s new policy approach include establishing diplomatic relations with Cuba, facilitating an expansion of travel, raising general donative remittance levels to most Cuban nationals, authorizing expanded commercial sales and exports to Cuba in certain sectors, authorizing licensed American travelers to Cuba to import additional goods, enabling smoother financial transactions between the countries, and enhancing Cuba’s access to the Internet by allowing the sale of certain telecommunications technology. Longer-term actions include discussions with the governments of Cuba and Mexico to discuss unresolved maritime boundary issues in the Gulf of Mexico and review of Cuba’s designation as a state sponsor of terrorism, which has existed since 1982.
The President argued that “decades of U.S. isolation of Cuba have failed to accomplish our enduring objective of promoting the emergence of a democratic, prosperous, and stable Cuba.” He also noted that, at times, “long-standing U.S. policy toward Cuba has isolated the United States from regional and international partners, constrained our ability to influence outcomes throughout the Western Hemisphere, and impaired the use of the full range of tools available to the United States to promote positive change in Cuba.” The President acknowledged that although existing U.S. policies toward Cuba were “rooted in the best intentions,” they have had little effect, as evidenced by the fact that “today, as in 1961, Cuba is governed by the Castros and the Communist Party.”
Diplomatic ties between the United States and Cuba were severed in 1961. The President has ordered the Secretary of State to immediately discuss with Cuba the re-establishment of diplomatic relations between the two countries. The U.S. also intends to re-establish an embassy in Havana and to engage in high-level diplomatic exchanges and visits in the coming months.
The U.S. will make general licenses available for all authorized travelers in these categories: (1) family visits; (2) official business of the U.S. government, foreign governments, and certain intergovernmental organizations; (3) journalistic activity; (4) professional research and professional meetings; (5) educational activities; (6) religious activities; (7) public performances, clinics, workshops, athletic and other competitions, and exhibitions; (8) support for the Cuban people; (9) humanitarian projects; (10) activities of private foundations or research or educational institutes; (11) exportation, importation, or transmission of information or information materials; and (12) certain export transactions that may be considered for authorization under existing regulations and guidelines. Travelers in these categories will be able to make arrangements through any service provider that complies with the OFAC regulations governing travel services to Cuba, and general licenses will authorize provision of such services.
For general donative remittances to Cuban nationals (except to certain officials of the government or the Communist Party), remittance levels will be raised from $500 to $2,000 per quarter. Donative remittances for humanitarian projects, support for the Cuban people, and support for the development of private businesses in Cuba will no longer require a specific license, and remittance forwarders will no longer require a specific license.
Commercial Sales, Exports, and Imports
In an effort to stimulate certain areas of the Cuban private sector, the U.S. will authorize the export of certain building materials for private residential construction, goods for use by private sector Cuban entrepreneurs, and agricultural equipment for small farmers. In addition, licensed U.S. travelers to Cuba will be authorized to import $400 worth of goods from Cuba, of which no more than $100 can consist of tobacco products and alcohol combined.
To facilitate the processing of authorized transactions between the United States and Cuba, U.S. institutions will be permitted to open correspondent accounts at Cuban financial institutions. In addition, the regulatory definition of the statutory term “cash in advance” will be revised to specify that the phrase means “cash before transfer of title,” in order to provide more efficient financing of authorized trade with Cuba. This change would permit U.S. agricultural exporters to avoid the long-standing requirement that Cuban companies pay cash in advance for food shipments, usually through third-country banks. Travelers to Cuba will be permitted to use U.S. credit and debit cards.
To enhance Cubans’ access to modern telecommunications and the Internet, the U.S. will authorize the commercial sale of certain consumer communications devices, related software, applications, hardware, and services and items for the establishment and update of communications-related systems. Telecommunications providers will be permitted to establish the necessary mechanisms, including infrastructure, in Cuba to provide commercial telecommunications and Internet services.
U.S.-owned or -controlled entities in third countries will be generally licensed to provide services to, and engage in financial transactions with, Cuban individuals in other countries. General licenses will (1) unblock the accounts at U.S. banks of Cuban nationals who have relocated outside of Cuba; (2) allow U.S. persons to participate in third-country professional meetings and conferences related to Cuba; and (3) allow foreign vessels to enter the United States after engaging in certain types of humanitarian trade with Cuba.
The Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury will implement Treasury-specific changes through amendments to its Cuban Assets Control Regulations. OFAC expects to issue its regulatory amendments in the coming weeks. The Department of Commerce will implement other changes through amendments to its Export Administration Regulations. None of the announced changes will take effect until the new regulations are issued.
Predictably, reaction to the proposed changes to long-standing U.S. foreign policy was mixed. Some critical commentators viewed the changes as concessions to Cuba’s communist government without securing any promises for democratization in return. Other observers applauded the changes as a departure from the Cold War mentality that has dominated U.S. thinking for decades.
Although it appears that this policy shift will have a positive impact on the U.S. agricultural, construction, and tourism industries, it will be quite some time before the impact of these changes can be measured fully. While the executive branch has wide latitude in shaping the current sanctions regime, ending the broader trade embargo will require congressional action.