The U.S. Government today announced changes to U.S. sanctions against Cuba to implement various policy changes announced by President Trump in July 2017 (for additional background, see our prior OnPoint from June 2017).
While the modifications leave most aspects of Cuba sanctions unchanged, they are intended to have a significant impact on transactions involving entities affiliated with the Cuban military, prohibited Cuban government officials, certain previously-authorized individual travel, and Cuba-related license exceptions under U.S. export control laws.
The key changes implemented as a result of today’s announcements are:
- Restrictions on Transactions with Certain Entities Owned or Controlled by the Cuban Military: The State Department published the “Cuba Restricted List,” a list of entities that it has determined: (1) are under the control of, or act for or on behalf of, the Cuban military, intelligence, or security services or personnel and (2) with which direct financial transactions would disproportionately benefit such services or personnel at the expense of the Cuban people or private enterprise in Cuba (list available here). U.S. persons generally are prohibited from engaging in “direct financial transactions” with such entities, even if the underlying activity otherwise would be permitted under U.S. sanctions (e.g., authorized travel to Cuba to engage in educational-related activities).
- In addition to identifying two Cuban Government ministries (Ministerio del Interior and Ministerio de las Fuerzas Armadas Revolucionarias), the list also contains entities that are not clearly connected to the Cuban military, including five major Cuban corporations (e.g., CIMEX S.A. and Grupo de Administración Empresarial S.A.) and certain of their subsidiaries, more than 80 hotels(including the Gran Hotel Manzana Kempinski and various Melia hotels throughout Cuba), two tourist agencies, five marinas, and ten stores. Notably, unlike the List of Specially Designated Nationals or other U.S. sanctions lists, restrictions do not apply to subsidiaries of listed entities unless such subsidiaries are themselves listed.
- U.S. persons are permitted to engage in direct financial transactions with listed entities in certain circumstances, such as with respect to certain transactions related to: telecommunications; sales of food, medicine, and medical devices; personal remittances; U.S. Government operations; democracy-building programs; travel visa acquisition; and certain air and sea operations. Prohibitions also do not apply to direct financial transactions with listed entities related to travel or other commercial engagements as long as the underlying activities were initiated or in place priorto the date that an entity was added to the list.
- Export license applications submitted to the Commerce Department’s Bureau of Industry and Security (BIS) that involve one or more parties on the Cuba Restricted List generally will be denied.
- A prohibited “direct financial transfer” includes any transaction in which a U.S. person acts as the originator on a transfer of funds whose ultimate beneficiary is an entity on the Cuba Restricted List or as the ultimate beneficiary on a transfer of funds whose originator is an entity on the Cuba Restricted List, including a transaction by wire transfer, credit card, check, or payment of cash.
- Restrictions on Certain Individual Travel to Cuba: Pursuant to changes enacted under the Obama Administration, U.S. persons had been permitted travel to Cuba for individual “people-to-people” exchanges, which allowed U.S. persons to design their own itineraries and travel to Cuba independently. This authorization now has been removed due to concerns from the Trump Administration that U.S. travelers were abusing the authorization in order to circumvent the U.S. ban on tourist travel (which remains in place). U.S. persons still are permitted to travel to Cuba for “people to people” exchanges, but only as part of an organized group, and significant restrictions and requirements will apply.
- U.S. persons who were planning to travel to Cuba under the now-revoked individual “people-to-people” general license still are permitted to engage in such travel if they had already completed at least one travel-related transaction, such as booking a flight or reserving accommodations, prior to President Trump’s June 2017 announcement. Otherwise, the revocation of this category of travel is effective immediately, and U.S. persons now are prohibited from traveling to Cuba to engage in individual people-to-people exchanges unless specifically authorized by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC).
- In addition, U.S. persons traveling to Cuba under any travel authorization now available are prohibited from engaging in direct financial transactions with any of the more than 80 hotels on the Cuba Restricted List published today, unless such arrangements already were in place prior to the announcement of the list.
- Changes in Export Control License Exceptions: Certain License Exceptions available under the Export Administration Regulations ("EAR") authorizing exports to Cuba also have been changed. Most notably, License Exception Support for the Cuban People (“SCP”) previously authorized the export to Cuba of certain, specified tools, equipment, and other items for use by the private sector to construct or renovate private buildings, for private sector agricultural activities, and for private sector entrepreneurs. The revised License Exception SCP removes the list of specified items and authorizes the export to Cuba of most items for use by the Cuban private sector for private sector economic activities. In order to be eligible for this authorization, however, the items at issue: (i) must be classified under the EAR as EAR99 items or otherwise controlled only for anti-terrorism column 1 reasons; (ii) may not be used to primarily generate revenue for the state or used to contribute to the operation of the state; and (iii) cannot include food, medicine, or medical devices (these items are subject to special controls under other U.S. laws, though different license exceptions may apply).
- Expanded Scope of Prohibited Cuban Government Officials: U.S. sanctions prohibit otherwise-authorized transactions that involve “prohibited officials of the Government of Cuba.” The scope of this term was narrowed in 2016, but it now has been expanded to its prior form to include not only members of the Council of Ministers and flag officers of the Revolutionary Armed Forces, but also members of any provincial assembly and certain employees of Cuban ministries, state agencies, and state-owned enterprises. Even if the underlying activity would have been authorized under general licenses and license exceptions to U.S. sanctions and export control laws, U.S. persons generally are prohibited from engaging in activities that involve such officials absent specific authorization.