During his presidential campaign, President Obama indicated that, if elected, he would ease travel-to-Cuba and personal remittance restrictions for family members in Cuba. The 2009 Omnibus Appropriations Act (“Omnibus Act), signed into law on March 11, 2009, included three sections targeting travel and remittance restrictions to Cuba. While these Cuba-related provisions may mark the beginning of a shift in U.S. sanctions policy toward Cuba, they also established that any substantive changes to the Cuba embargo would not be made without a fight. In particular, Senators Robert Menendez (D-N.J.) and Bill Nelson (D-FL) opposed these provisions until Treasury Secretary Geithner assured them in writing that any changes would be minor and well-regulated. Congressman Jose E. Serrano (D-NY) who introduced the provisions, has indicated that the House appropriations committee will not permit Treasury to find ways around the new provisions. [1]

As discussed in greater detail below, the Omnibus Act makes the following changes to the United States’ Cuba sanctions program: (1) Section 620 authorizes U.S. persons to travel to Cuba for activities relating to commercial sales of agricultural and medical goods; (2) Section 621 prevents the use of appropriated funds for administering, implementing, or enforcing certain Cuba-related travel restrictions; and (3) Section 622 prohibits the use of appropriated funds for administering, implementing, or enforcing payment restrictions on certain exports to Cuba. On March 11, the Office of Foreign Assets Control (“OFAC”) issued a general license implementing the family-related travel provisions of the Omnibus Act. OFAC also issued Guidance On Implementation of Cuba and Trade-Related Provisions of the Omnibus Appropriations Act, 2009 (“Guidance”) that affirms Secretary Geithner’s comments in his correspondence with Senators Menendez and Nelson. [2]

Section 620: TSRA-related Travel

Section 620 of the Omnibus Act amends the Trade Sanctions Reform and Export Enhancement Act of 2000 (“TSRA”), a statute regulating the export of agricultural commodities to Cuba and other sanctioned countries, by authorizing travel relating to commercial sales of agricultural and medical products. The section requires the Secretary of the Treasury to “promulgate regulations under which the travel related transactions listed in paragraph (c) of section 515.560 of title 31, Code of Federal Regulations, are authorized by general license for travel to, from, or within Cuba” for selling agricultural and medical products. These travel-related transactions include transportation to and from Cuba, living expenses in Cuba, carrying remittances to Cuba, and processing certain financial instruments.

The Cuban Assets Control Regulations (“CACR”) currently require parties to obtain a “specific license” before traveling to Cuba for TSRA-related activities. In practice, such licenses are rarely granted. Senators Menendez and Nelson initially objected to this section of the Omnibus Act out of concern that lifting the specific license requirement would substantially increase travel to Cuba, both TSRA-related and “arguably TSRA-related,” as it would be difficult to police the distinction. In a March 9 letter, Treasury Secretary Geithner assured Senators Nelson and Menendez that Treasury would issue new regulations that tailor language in the Omnibus Act by making clear that changes apply only to a narrow class of business travelers going to Cuba to sell agricultural and medical goods. Moreover, Geithner indicated that any business using the general license:

would be required to provide both advance written notice outlining the purpose and scope of the planned travel and, upon return, a report outlining the activities conducted, including the persons with whom they met, the expenses incurred, and business conducted in Cuba. [3]

Congressman Jose Serrano of New York reacted to Secretary Geithner’s letter by commenting that there would be a showdown between the House appropriations committee and Treasury if Treasury were to implement regulations taking advantage of loopholes in the Omnibus Act. [4]

OFAC’s March 11 Guidance states that the TSRA provision will be implemented in the coming weeks and, until that time, travel-related transactions must be authorized by specific license as required under the CACR section 515.533(e). [5]

Section 621: Family Travel

Section 621 prevents the use of funds made available in the Act from being used “to administer, implement, or enforce amendments made to section 515.560 and section 515.561 of title 31, Code of Federal Regulations, related to travel to visit relatives in Cuba, that were published in the Federal Register on June 16, 2004.” Until March 11, 2009, these amendments restricted U.S. travel to Cuba for the purpose of visiting immediate family members.

As drafted, the CACR section 515.561 prohibited persons subject to U.S. jurisdiction from traveling to Cuba to visit family members unless under a specific license. Specific licenses were issued for travel to Cuba to visit an immediate family member [6] but such trips were restricted to once every three years and could be no longer than 14 days in duration. Travelers were also restricted in the funds they are authorized to provide to relatives in Cuba.

As a result of Section 621, OFAC issued a General License on March 11 which reinstates the authorization for family travel to Cuba that existed prior to June 16, 2004. U.S. residents are now authorized to travel to Cuba to visit family members who are nationals of Cuba [7] and close relatives. [8] Additionally, pursuant to the General License, travelers may now visit Cuba once every 12 months for an unlimited duration but are restricted in their travel-related transactions to the maximum per diem established by the State Department.

This section of the Omnibus Act is less controversial than Sections 620 or 622 and neither Secretary Geithner nor Senators Menendez and Nelson commented on this provision in their correspondence.

Section 622

Section 622 attempts to reverse a 2005 rule promulgated by the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), a rule which requires that payment for TSRA exports to Cuba be made prior to shipment (“cash in advance”). As Section 622 states, “None of the funds made available in this Act may be used to administer, implement, or enforce the amendment made to section 515.533 of title 31, Code of Federal Regulations, that was published in the Federal Register on February 25, 2005.”

As now drafted, Section 908(b)(1) of the TSRA prohibits U.S. persons from providing payment or financing terms for permitted sales of agricultural commodities to Cuba or any person in Cuba other than through “payment of cash in advance.” In 2004, U.S. financial institutions requested guidance from Treasury on the meaning of “payment of cash in advance.” OFAC responded by promulgating a rule defining this phrase to mean that “payment is received by the seller or the seller’s agent prior to shipment of the goods from the port at which they are loaded.” The 2005 CACR amendment reflecting this definition reduced the financing available for agricultural and medical sales, reducing the volume of such sales. Section 622 is intended to prohibit enforcement of OFAC’s 2005 interpretation.

In his March 5 letter to Senators Menendez and Nelson, Secretary Geithner commented that, because the term “cash in advance” is found in the Trade Sanctions Reform and Enhancement Act of 2000 and Section 622 only refers to the regulations, it does not in fact amend the TSRA. As a result, “exporters will still be required to receive payment in advance of shipment and will not be permitted to export to Cuba on credit other than through third-country banks.” [9] Consistent with this statement, the March 11 Guidance states that “because the Omnibus Act does not amend the requirement in TSRA that agricultural exports to Cuba be either paid for by ‘cash in advance’ or financed using a third-country bank, TSRA’s statutory provision remains in place.” [10] It remains unclear whether and how Congressman Serrano and the House appropriations committee will respond to Treasury’s position.