Ending several weeks of speculation about a shift in U.S. policy towards Cuba, on June 16, 2017, President Trump announced changes reversing some of the steps undertaken by the Obama administration to ease the decades-long U.S. embargo of that country. He has directed U.S. government agencies, including the Treasury Department’s Office of Foreign Assets Control (“OFAC”), which is responsible for the administration of the U.S. sanctions against Cuba, to “initiate a process to adjust” their respective regulations within 30 days to implement the changes. Importantly, FAQs issued by OFAC clarify that the 30-day deadline is only to begin the process of amending the regulations and that the announced changes will not take effect until new or amended regulations are issued. Otherwise, no deadline for when the regulations must be amended is specified and OFAC states only that it “expects to issue its regulatory amendments in the coming months.”
The primary effects of these changes will be to: (i) curtail self-directed individual travel to Cuba by persons subject to U.S. jurisdiction for purposes of people-to-people educational activities intended to enhance contact with the Cuban people, which is currently authorized pursuant to a general license in OFAC’s Cuban Assets Control Regulations (“CACR”) as described in our prior post here; and (ii) to prohibit certain transactions with entities controlled by the Cuban military that operate large portions of the Cuban tourist economy. Travel and business transactions commenced before the CACR are amended, however, will be permitted and White House officials have stated that exceptions for airports and seaports will allow airlines and cruise lines to continue to operate in Cuba.
Group people-to-people educational travel authorizations for travel under the auspices of a sponsoring organization will remain unaffected, as will individual travel authorizations for, amongst other things, professional research and meetings, family visits, and humanitarian projects. Existing specific licenses issued by OFAC prior to the amendment of the CACR will also not be affected. Also unaffected are the agricultural commodities and medicine/medical device (or “Ag/Med”) licensing provisions permitting the export of such products to Cuba and associated transactions consistent with the Trade Sanctions Reform and Export Enhancement Act of 2000 (“TSRA”) and the Cuban Democracy Act of 2002.
While the CACR already require authorized travelers to Cuba to maintain records for five years showing that their travel conforms to the regulations, the President also directed OFAC to implement regular auditing of those records, meaning that travelers will need to be diligent in maintaining documents that show that their travel to Cuba included a full-time schedule of activities that conform to the particular CACR general authorization under which they are traveling.
In addition to the amendment of the CACR by OFAC, the State Department will publish a list of entities and sub-entities that it deems to be under the control of, or act for or on behalf of, the Cuban military, intelligence, or security services or personnel (such as Grupo de Administracion Empresarial S.A. (“GAESA”), its affiliates, subsidiaries, and successors) with which transactions by persons subject to U.S. jurisdiction will generally be prohibited. GAESA is heavily involved in the tourism sector in Cuba and the amended regulations are expected to prohibit new business with it and other prohibited entities going forward.
Because the amended regulations have not yet been issued, the exact nature of the new restrictions and which Cuban entities will be blocked remain unknown. However, the OFAC FAQs make clear that the changes are limited in scope and, as noted above, will not affect business or travel-related transactions commenced prior to the issuance of the new regulations. The FAQs also state that OFAC will issue additional guidance at the time the regulatory changes are issued regarding travel by cruise ship or passenger vessel and how to identify whether a Cuban party is affiliated with a prohibited entity or sub-entity.
Additional action to effectuate the new policies may also be taken by the U.S. Commerce Department’s Bureau of Industry and Security (“BIS”), which administers regulations governing the export of goods, software, and technology subject to U.S. jurisdiction to Cuba, including the travel to Cuba of U.S.-origin airplanes and vessels. As noted above, the President’s actions only direct the relevant agencies to begin the process of reviewing and issuing new or amended regulations and the agencies expect that this will take some months. Beyond this it is unclear when these amended regulations will actually be issued. Baker McKenzie will continue to closely monitor the situation and provide updates, and encourages companies with questions to contact us to determine if they will be affected by these changes.