On September 21, 2015, the U.S. Departments of Commerce and Treasury published the most expansive exemptions to the Cuban embargo since President Obama commenced the process to liberalize engagement with Cuba in December of 2014. Like the regulations issued in January of this year, not all is clear and undoubtedly numerous questions will arise in their analysis over the next weeks and months.
Moreover, to truly gauge the impact of these new regulations we will need to wait for the Cuban reaction. The Cuban economy is primarily a state run economy in the hands of state owned companies. More U.S. openings directed at the small private sector in Cuba still need to be approved by the Cubans to make any headway. Additionally, the purchasing power of the Cuban private sector market is limited. To truly make a difference, the U.S. needs to end the embargo and allow full and unrestricted trade with the entirety of the Cuban economy, state and private sector.
Nevertheless, one overall point is clear from the U.S. regulatory perspective: the opportunities for some Americans to do additional business in Cuba have been significantly expanded. It will also be easier for close family members to travel to Cuba and to fund private business operations in Cuba. Also, the logistics of travel and shipping to Cuba may improve.
The highlights of changes most relevant to U.S business interest and travelers are as follows:
Physical Presence in Cuba + Supporting Exports and Transactions
The new regulations will allow U.S. businesses that are allowed to export goods and services to Cuba to establish an office or other facility in Cuba “to facilitate authorized transactions.” This covers exporters of agricultural products, exporters of allowed consumer communications devices, and exporters of permissible items intended to support the private entrepreneur sector, which includes building materials, equipment, tools, supplies and agricultural equipment for private sector agriculture. Other affected businesses that will also be allowed to open offices or other facilities in Cuba include: news bureaus, providers of authorized mail, parcel transmission and cargo transportation services, providers of telecommunications or internet-based services, entities organizing or conducting educational activities, religious organizations and providers of carrier and certain travel services. These individuals and entities will also be authorized to employ Cuban nationals, open and maintain bank accounts in Cuba and employ persons subject to U.S. jurisdiction in Cuba.
To support the offices and other facilities of permitted U.S. business in Cuba, certain exports and re-exports of items (i.e. those designated as EAR 99) to Cuba will be allowed for establishing, operating and maintaining the facilities.
Certain temporary re-exports from a foreign country to Cuba will be authorized by License Exception SCP when the items are for use in scientific pursuits, archeology, cultural application, ecology, education, historic preservation, sporting activities, or in the traveler’s professional research and attendance at professional meetings. Previously, this provision was limited to temporary exports by persons departing the United States. Eligible items continue to be articles subject to the EAR, but not specified in any Export Control Classification Number (ECCN) or controlled on the Commerce Control List (CCL) only for anti-terrorism reasons.
Telecommunications + Internet-Based Services
In addition to being able to open and maintain offices in Cuba for the provision of telecommunications and internet-based services, persons subject to U.S. jurisdiction are allowed to enter into business relationships with Cubans, including but not limited to forging joint ventures with Cubans, hiring Cuban nationals, and opening and maintaining bank accounts in Cuba. In the case of “mobile applications,” the new regulations authorize the export to the U.S. of mobile applications developed in Cuba by Cubans hired develop the applications in Cuba by persons subject to U.S. jurisdiction. The new regulations will allow the export and re-export to Cuba of a general purpose software development kit as long as: 1) the kit is EAR99 or controlled in an ECCN in which the only reason for control is antiterrorism; and 2) the kit’s use in Cuba is to develop software that will improve the free flow of communications or support the private activities of license exemption SCP, such as private entrepreneurs, small farmers, etc.
The new regulation clarifies that certain consumer communication devices authorized to be sold or donated to Cuba can also be sent to Cuba pursuant to other types of transactions, such as loans or leases. Moreover, the new regulations expand permissible services related to these devices to include training, installation, repair and replacement. The regulations enacted in January 2015 permitted services such as software design, business consulting and information management. Consumer communication devices includes mobile phones, consumer computers and related hardware and software, digital cameras, recording devices, television and radio, batteries, chargers, carrying cases, accessories, etc.
Already permissible educational activities are expanded to include the provision of standardized testing and the provision of internet-based courses. Academic exchanges and joint non-commercial academic research with universities or academic institutions in Cuba will also be authorized. All travel-related transactions connected to these new activities are also authorized.
Persons authorized to travel to Cuba can be transported in vessels between the U.S. and Cuba as long as there are no stops in third countries; certain lodging services onboard the vessels will be authorized. These services are authorized by general license without any need for the carriers to apply for specific licenses.
The type of vessels that can be taken to Cuba are cargo vessels for hire for use in the transportation of items, passenger vessels for hire used to transport passengers and items, and recreational vessels. All passengers traveling on these vessels must do so in conjunction with authorized travel to Cuba. The vessels cannot remain in Cuba for more than 14 consecutive days, while aircraft will be able to remain in Cuba up to 7 consecutive days.
The new regulations expand the ability of “close relatives” to travel to Cuba for more than family visits. For example, persons subject to U.S. jurisdiction and persons traveling with them who share a common dwelling as a family may now accompany a close relative traveling to Cuba pursuant to sections 515.562 (official government business), 515.563 (journalistic activity), 515.564(a) (professional research), 515.565(a)(1) through (4) and (6) (educational activities), 515.566 (religious activities), 515.575 (humanitarian projects), or 515.576 (activities of private foundations or research or educational institutes).
Authorized travelers will be able to open and maintain bank accounts in Cuba in order to access funds while located in Cuba for authorized transactions, and to close such accounts.
Limits have been removed on donative remittances to Cuban nationals who are not prohibited officials of the Government of Cuba or prohibited members of the Cuban Communist Party. Also removed are the limitation on certain authorized remittances that authorized travelers may carry to Cuba and the limitation on the amount of remittances that a Cuban national permanently resident in Cuba who is departing the United States may carry to Cuba.
Remittances from Cuba to the United States or from certain Cuban nationals in third countries are now authorized by general license and financial institutions are authorized to provide services to receive those remittances. Similarly, depository institutions are authorized to maintain accounts for Cuban nationals while the Cuban-national account holder is located outside the United States, provided that the account holder may access the account only while lawfully present in the United States.
The new regulations generally authorize receipt of payment for the provision of authorized legal services to Cuba or a Cuban national other than prohibited officials of the Government of Cuba and prohibited members of the Cuban Communist Party. However, the new regulations will authorize payments from funds outside the United States for the provision of authorized legal services to or on behalf of prohibited officials of the Government of Cuba and prohibited members of the Cuban Communist Party. Finally, the regulations will permit persons subject to U.S. jurisdiction to receive and make payments for certain legal services from Cuba or Cuban nationals, subject to certain conditions.
Air Ambulances + Emergency Medical Services
A new general license is established for air ambulances and emergency medical services to travel to and from Cuba and to evacuate individuals requiring medical care.
Ordinarily Incident Transactions
The Office of Foreign Assets Control (OFAC) is issuing interpretive guidance in a new section, 515.421, to clarify that, with certain exceptions, transactions ordinarily incident to a licensed transaction and necessary to give effect thereto are also authorized. In response to public inquiries, OFAC is providing a specific example in this section to clarify that ordinarily incident transactions include payments made using online payment platforms for authorized transactions.