Two federal rules published this week make it easier for U.S. companies to do business in Cuba — particularly in the telecommunications, travel and carrier services, education, banking, and insurance sectors.
On 21 September 2015, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) and the U.S. Department of Commerce, Bureau of Industry and Security (BIS) published new rules building upon the earlier changes to the Cuba sanctions regime announced in January 2015. Both OFAC and BIS released FAQs addressing these changes as well.
The new rules (see the OFAC rules here, and the BIS rules here) expand the scope of activities in which U.S. companies may participate in Cuba. Certain authorizations apply more broadly and allow U.S. companies, under certain circumstances, to establish a physical presence in Cuba, employ Cuban nationals, and employ U.S. citizens and permanent residents to establish and operate facilities in Cuba. The rules also ease restrictions on the use of private vessels and aircraft to travel to Cuba.
The rules do not lift the overall trade embargo against Cuba, nor do they repeal the statutory prohibition on tourist travel. Moreover, while U.S. persons can open an office in Cuba under certain conditions, investment in Cuba and Cuban-owned enterprises remains broadly prohibited, with limited exceptions. Modification or repeal of the embargo would require future action by Congress.
The new regulations now authorize a number of categories of U.S. entities to engage in all transactions necessary to establish and maintain a physical presence in Cuba, and to export or re-export to Cuba items for use in such activities. The entities authorized to establish a physical presence include:
- news bureaus;
- exporters of goods that are licensed or otherwise authorized under the OFAC and BIS regulations (such as certain telecommunications equipment, consumers communications devices, building materials, medical products, and agricultural products);
- entities providing mail, parcel, or cargo transportation services authorized by OFAC;
- providers of telecommunications services;
- entities organizing or conducting certain educational activities;
- religious organizations engaging in certain religious activities;
- providers of travel and carrier services; and
- providers of certain internet-based services.
The authorized activities under the amended OFAC regulations related to establishing a physical presence include:
- leasing physical premises, including office space, warehouses, classrooms, and retail outlet space, and securing related goods and services (arguably including insurance as well);
- marketing related to the physical presence;
- employment of Cuban nationals in Cuba; and
- employment of individuals who are persons subject to U.S. jurisdiction.
Moreover, BIS has made complementary amendments to the Export Administration Regulations (EAR) to authorize exports and reexports to Cuba of certain office equipment and related items for use in establishing, maintaining, and operating a physical presence in Cuba.
Telecommunications and Internet-Based Services
The new OFAC and BIS regulations include a number of provisions intended to further expand the scope of authorized exports of telecommunications products and services to Cuba in order to facilitate the free flow of information to, from, and within Cuba.
- Providers of telecommunications and certain internet-based services are now authorized to establish a business presence in Cuba, including subsidiaries, branches, offices, joint ventures, franchises, and agency or other business relationships with any Cuban individual or entity, to provide authorized telecommunications and internet-based services.
- OFAC is also authorizing persons subject to U.S. jurisdiction to enter into licensing agreements related to the range of telecommunications and internet-based services authorized under the CACR, and to market such services.
- U.S. companies are now permitted to provide services related to a broader range of telecommunications equipment and devices lawfully exported to Cuba under Commerce Department licenses and license exceptions, and to provide services related to all such items exported to Cuba from third countries. This provision eliminates the need in some cases to obtain separate specific licenses from OFAC for the provision of services.
- U.S. companies may also employ Cuban nationals to develop mobile apps and may import Cuban-origin mobile apps into the United States.
The new OFAC regulations establish a general license authorizing the transportation of authorized travelers to and from Cuba by vessel. Such carrier services by vessel previously required a specific license. Similarly, U.S. companies that provide such carrier services by vessel are authorized to provide lodging services onboard such vessels to authorized travelers, including when docked at a port in Cuba. Moreover, under the amended OFAC regulations, vessels that have engaged in authorized trade with Cuba are no longer subject to a 180-day prohibition on entering U.S. ports, which may include vessels used to provide carriers services.
BIS no longer requires a license for the export of certain vessels on temporary sojourn to Cuba, including passenger vessels for hire for use in the transportation of authorized passengers and/or items, or recreational vessels used in connection with travel licensed by OFAC. However, such vessels may not remain in Cuba for longer than 14 consecutive days, and aircraft may not remain in Cuba for longer than seven consecutive days before departing for the United States or a third country to which the vessel or aircraft could be exported without a license.
The amended OFAC regulations also expand existing general licenses to cover a broader range of educational activities. These provisions may be of particular interest to universities and other academic institutions.
- Persons subject to U.S. jurisdiction, including academic institutions, faculty, staff, and students, are now authorized to attend, sponsor, and co-sponsor noncommercial academic seminars, conferences, symposia, and workshops related to Cuba or global issues involving Cuba.
- U.S. researchers are now authorized to participate in academic exchanges and joint noncommercial academic research projects with universities or academic institutions in Cuba.
- U.S. entities are now authorized to provide services to Cuba to support standardized testing and internet-based courses, including massive open online courses.
OFAC has removed the dollar limits on remittances that may be sent to Cuban nationals other than prohibited members of the Cuban Communist Party, and has issued a new general license authorizing the unblocking and return of certain remittances that were previously blocked for exceeding the quarterly limits, provided that the remittances would have been authorized under the regulations as amended on 21 September 2015. The dollar limit on authorized remittances travelers may carry to Cuba has also been removed.
Banking and Finance
OFAC has issued a general license permitting authorized travelers to open bank accounts in Cuba. Building on OFAC’s prior authorization allowing financial institutions to process credit and debit card transactions incident to authorized travel to Cuba, OFAC has clarified that such transactions may also be processed or facilitated by online payment platforms.
Although the OFAC rules did not include any new provisions directly related to insurance, the new rules benefit the insurance industry by expanding the potential pool of insureds for whom companies may be able to offer coverage, subject to certain restrictions on the types of policies that may be provided. The expansion of general licenses for carrier services, the use of private vessels and aircraft to travel to Cuba, air ambulance services, and the scope of authorized travelers to include “close relatives” of the persons traveling pursuant to some of the 12 categories of generally authorized travel has in turn expanded the scope of travelers to whom insurance companies may offer insurance.
Other Authorized Activities
In addition to these broader authorizations, OFAC and BIS have authorized a number of narrower, related transactions:
- Safety of flight: The BIS regulations have been amended to allow the issuance of specific licenses on a case-by-case basis for exports of aircraft parts and components and other items to help ensure the safety of civil aviation.
- Legal services: The new OFAC regulations expand the existing general license for the provision of certain legal services to Cuba to authorize the receipt of payments. Persons subject to U.S. jurisdiction are now authorized to receive and make payment for legal services from Cuba or from a Cuban national, including legal advice and counseling on the requirements of and compliance with the laws of Cuba or any jurisdiction within Cuba, provided that such advice and counseling relate to transactions authorized by OFAC.
- Expansion of temporary export authorizations: BIS has expanded and clarified the provisions of certain license exceptions in the EAR, including License Exceptions Support for the Cuban People (SCP) and Consumer Communications Devices (CCD), to allow for additional temporary exports to Cuba of items subject to the EAR. For example, SCP now authorizes temporary exports of certain “tools of trade” to install, service, or repair products authorized for export to Cuba. BIS also amended both SCP and CCD to remove language that had limited the scope of the authorizations to items “sold or donated” to Cuba. Accordingly, these provisions now cover temporary exports, including leases and loans of eligible items.
- Promotional items: Companies may give away for free as gifts for promotional purposes certain types of items (e.g. pens, notepads, hats, t-shirts, or other items normally given away for free as gifts for promotional purposes).
- Exhibitions and demonstrations: Subject to certain restrictions, certain commodities or software may be exported or re-exported on a temporary basis for demonstration at trade shows.
- Replacement parts kits: Replacement parts and components for items that have been exported or re-exported to Cuba under a license or license exception, or for certain foreign-origin items, may be exported or re-exported to Cuba on a permanent basis, provided that they are sent on a one-for-one replacement basis and meet certain other requirements.
- Deemed Exports and Re-exports of EAR99 technology and source code: A license from BIS is no longer required to release EAR99 technology or source code to a Cuban national in the United States or a third country.
Special thanks to Adam Berry and Deborah Wei for their contribution to this alert.