On December 17, President Obama announced that he will take steps to normalize relations with Cuba, prompting questions about what this means for an island nation that has existed under a Cold War-era embargo for more than 50 years. The announcement indicates a dramatic shift in U.S. foreign policy toward Cuba, affecting not only diplomatic relations but also U.S.-Cuban economic ties and travel. Mr. Obama, however, carefully pointed out that the shift in U.S. policy will begin with executive action. The U.S. embargo against Cuba is codified in legislation, meaning that Congress must act to lift these sanctions entirely. Close observers of congressional politics may agree that this will probably present a challenge to normalization.
The White House outlined these changes in detail, but here are the highlights:
- Re-establishing diplomatic ties. The U.S. Department of State will re-establish an embassy in Havana in the coming months. The first diplomatic mission will take place in January 2015, when a U.S. delegation will meet with the Cuban leadership in the next round of U.S.-Cuba Migration Talks.
- Reviewing Cuba’s designation as a State Sponsor of Terrorism. Cuba was placed on this list in 1982, before the United States’ modern approach to terrorism. Secretary of State John Kerry must deliver to the president within the next six months a report regarding Cuba’s support for international terrorism. Inclusion on this list imposes strict sanctions against Cuba, such as controls over exports of dual-use items and restrictions on certain financial transactions.
- Facilitating remittances to Cuba by U.S. persons. Remittance levels will be raised from $500 to $2,000 per quarter for “general donative remittances to Cuban nationals” (typically remittances to family members); and remittances for humanitarian projects and “support for the Cuban people.” U.S. persons will no longer need specific licenses to forward remittances or support the development of private businesses in Cuba.
- Expanding travel for 12 categories of general licenses. Authorized travelers may avail themselves of general licenses for 12 existing categories. Such travelers may make arrangements through any service provider that complies with the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) regulations governing travel services to Cuba. General licenses will authorize travel providers to deliver these services. The 12 categories of travel are:
- i. Family visits
- ii. Official business of the U.S. government, foreign governments, and certain intergovernmental organizations
- iii. Journalistic activity
- iv. Professional research and professional meetings
- v. Educational activities
- vi. Religious activities
- vii. Public performances, clinics, workshops, athletic and other competitions, and exhibitions
- viii. Support for the Cuban people
- ix. Humanitarian projects
- x. Activities of private foundations or research or educational institutes
- xi. Exportation, importation, or transmission of information or information materials
- xii. Certain export transactions that may be considered for authorization under existing regulations and guidelines
- Authorizing certain sales and exports from the United States to Cuba. The United States will authorize the export of certain building materials for private residential construction, goods for use by Cuban entrepreneurs, and agricultural equipment for small farmers.
- Authorizing the importation of more Cuban goods. Licensed U.S. travelers will be allowed to bring $400 worth of goods from Cuba, but no more than $100 may consist of tobacco and alcohol products.
- Facilitating authorized transactions between financial institutions. U.S. financial institutions will be allowed to open correspondent accounts at Cuban financial institutions, which will facilitate the processing of authorized transactions. This will not authorize all the transactions that could be undertaken with those accounts, however. In addition, travelers in Cuba will be allowed to use their U.S. debit and credit cards there. Finally, the regulatory definition of the statutory term “cash in advance” will be revised to clarify that it means “cash before transfer of title,” which will allow more efficient financing of authorized trade with Cuba.
- Improving telecommunications services in Cuba. The United States will authorize the commercial export of certain telecommunications equipment, including the commercial sale of consumer communications devices, and related software, hardware, and services. Telecommunications providers will be allowed to develop infrastructure in Cuba to provide commercial telecommunications and Internet services.
- Allowing U.S.-owned or –controlled entities to provide services to Cubans. The U.S. government will generally license U.S.-owned or –controlled entities to provide services to, or engage in financial transactions with, Cuban individuals in third countries. Moreover, Cuban nationals who have relocated outside of Cuba will have their U.S. bank accounts unblocked, and foreign vessels will be allowed to enter the United States after engaging in certain humanitarian trade with Cuba.
None of the announced changes will take effect until new regulations are issued. OFAC will implement changes to its Cuban Assets Control Regulations in the near future. Similarly, the U.S. Department of Commerce will amend the Export Administration Regulations to expand its commercial diplomacy. Secretary Kerry has already asked his team to review Cuba’s designation as a State Sponsor of Terrorism. These U.S. agencies will likely amend some of their regulations in the coming weeks.
These amendments will probably create significant opportunities for people, businesses, and organizations that seek to establish or expand their commercial ties to Cuba, and the related rulemaking should therefore be closely monitored. You can find the White House’s page on U.S.-Cuban policy here.
Client Alert 2014-339