On Friday, June 16, 2017, President Donald Trump announced changes to the US-Cuba policy for individual travel to the island nation and engaging in transactions with entities associated with the Cuban military, intelligence or security services.
Although the announcement of the changes included tough talk on Cuba’s human rights record and continued lack of political and economic freedom, the changes in policy really are more akin to a tightening up of existing regulations to better achieve pre-existing policy goals. However; the changes, particularly those related to Cuban military, intelligence or security service entities, will impact the ability of US individuals and businesses to pursue some business opportunities and does create an ongoing level of uncertainty in the market.
Limitations on Individual Travel to Cuba
The President instructed the Department of the Treasury, Office of Foreign Assets Control (OFAC) to issue regulations that will end individual “people-to-people” travel, which is educational travel that does not involve academic study pursuant to a degree program and does not take place under the auspices of an organization that is subject to US jurisdiction that sponsors such exchanges to promote people-to-people contact.
Under the Obama administration, individual people-to-people travel was permitted provided the individuals ensured that they met the conditions of the OFAC general license for people-to-people travel to Cuba. Now, individual people-to-people travel will end and instead, only group people-to-people travel will continue to be authorized.
Group people-to-people travel is educational travel not involving academic study pursuant to a degree program that takes place under the auspices of an organization that is subject to US jurisdiction that sponsors such exchanges to promote people-to-people contact.
Travelers utilizing the group people-to-people travel authorization will be required to maintain a full-time schedule of educational exchange activities that are intended to enhance contact with the Cuban people, support civil society in Cuba, or promote the Cuban people’s independence from Cuban authorities, and that will result in meaningful interaction between the traveler and those in Cuba. An employee, consultant, or agent of the group must accompany each group to ensure that each traveler maintains a full-time schedule of educational exchange activities.
The revocation of the individual people to people authorization addresses concerns that the requirements of the authorization were not being followed resulting in individuals engaging in prohibited general tourist travel. The Administration’s policy statement frames the revision in part as enhancing compliance with US law.
This new policy will not result in changes to any of the other (non-individual people-to- people) authorizations for travel.
Restrictions on Commercial Activities with GAESA, Potentially other Entities
The Administration also stated that it intends to shift economic activity away from the Cuban military monopoly, Grupo de Administración Empresarial (GAESA), including travel related transactions. While under the current regulations, activities with the Cuban military, intelligence and security services are subject to restrictions, the reach of those restrictions was not clarified and particular entities, such as GAESA, were not identified either by OFAC or the Department of Commerce, Bureau of Industry and Security (BIS), as being of concern. The Administration indicated it will continue to support US individuals and businesses in developing ties to the private, small business sector in Cuba.
OFAC has indicated that the State Department will soon publish a list of additional entities with which direct transactions generally will not be permitted in conjunction with the issuance of new regulations. OFAC has also indicated it will be issuing guidance to accompany the regulations. The new policy does not take effect until new regulations are issued via amendments to the Cuban Assets Control Regulations for OFAC-specific changes and the Export Administration Regulations for any BIS-specific changes. OFAC has stated in FAQs relating to the policy announcement that the changes will be prospective, and thus will not affect existing contracts and licenses. The new regulations are expected in the coming months. The full list of FAQs from OFAC can be found here.
Any travel-related arrangements that include direct transactions with entities related to the Cuban military, intelligence, or security services that may be implicated by the new Cuba policy will be permitted provided that those travel arrangements were initiated prior to the issue of the forthcoming regulations.
With respect to individual people-to-people travel however, the traveler must have already completed at least one travel-related transaction (such as purchasing a flight or reserving accommodation) prior to June 16, 2017, and the travel-related transactions must be consistent with OFAC’s regulations as of June 16, 2017, to qualify under the old individual people-to-people travel authorization.
Similarly, any Cuba-related commercial engagement that includes direct transactions with entities related to the Cuban military, intelligence, or security services that may be implicated by the new Cuba policy will also be permitted, provided that those commercial engagements were in place prior to the issuance of the forthcoming regulations and are in compliance with the current regulations.
It appears from the language used by OFAC that there may be some ability under the new regulations to engage in indirect transactions with GAESA and other restricted entities, although the scope of such authorization may be quite limited.
Individuals and companies currently engaging in business in Cuba will need to consider the impact of these revisions on their ongoing and future business – in particular as existing contracts end and specific licenses expire. Due diligence procedures may need to be enhanced to ensure GAESA or other companies restricted by the State Department are not involved in or benefiting from a transaction. Finally, it is unclear if the intent is to allow new Cuban companies of concern to be identified on an ongoing basis by the State Department, which if the case, would certainly create added uncertainty with respect to any otherwise licensed business transaction in Cuba.