On September 21, 2015, new amendments that further relax restrictions in the Cuban Assets Control Regulations (CACR) and the Export Administration Regulations (EAR) will take effect. In anticipation of the amendments’ official publication in the Federal Register, the Treasury Department’s Office of Foreign Assets Control (OFAC) and the Commerce Department’s Bureau of Industry and Security (BIS) released guidance on September 18, 2015 describing the expected changes.
Background – U.S. ‘Charting New Course’ With Cuba On December 17, 2014, President Obama announced a sea-change in U.S. foreign policy towards Cuba, fueled by the release of Americans detained in Cuba and the diplomatic efforts of His Holiness Pope Francis.1 Going forward, the White House promised that the U.S. would reestablish diplomatic ties with Cuba – which had been severed since 1961 – reopen a U.S. embassy in Cuba and welcome a Cuban embassy in Washington, D.C., review Cuba’s designation as a State Sponsor of Terrorism, readjust regulations to empower the Cuban people and facilitate travel between the U.S. and Cuba.2
In January 2015, the Treasury Department and Commerce Department announced the first set of amendments easing the CACR restrictions. In May 2015, the U.S. officially removed Cuba from the state sponsor of terrorism list. In July 2015, Cuba opened an embassy in Washington, D.C. and in August 2015, Secretary of State John Kerry raised the U.S. flag over the American embassy in Cuba for the first time in fifty-four years.
January 2015 Amendments In January 2015, OFAC and BIS amended the CACR and EAR to implement the new U.S. policy for Cuba.3 These changes, inter alia, eased restrictions on travel to Cuba for the twelve listed categories, modified a general license authorizing personal remittances to Cuba, added new general licenses for activities in support of the Cuban people, for humanitarian activities, and for professional research and attendance of professional meetings, allowed U.S. financial institutions to open correspondent accounts at Cuban financial institutions to facilitate the processing of authorized transactions, authorized certain transactions with Cuban nationals located outside of Cuba, and allowed a number of other activities related to telecommunications, financial services, trade, and shipping.
September 2015 Amendments The official text of the amendments will be published today (September 21, 2015) in the Federal Register. Below we have provided a summary of the expected changes that highlights key aspects of the amendments based on OFAC’s and BIS’s joint announcement made on September 18, 2015.4 Broadly, the new amendments work to facilitate already authorized activities, expand the scope of certain general licenses, and further remove restrictions on remittances. The new amendments are not a wholesale overhaul of the Cuba sanctions and export control programs – the embargo is largely still in place.
Travel Much of the amended regulations, now in effect, will focus on facilitating the travel of already authorized travelers. In this respect, the CACR amendments will now authorize direct transportation by vessel of authorized travelers – between the United States and Cuba – and certain lodging services. Concurrently, BIS’s License Exception Aircraft, Vessels, and Spacecraft (AVS) will authorize temporary sojourns to Cuba of cargo vessels for hire for use in the transportation of items; passenger vessels for hire for use in the transportation of passengers and/or items; and recreational vessels that are used in connection with travel authorized by OFAC. License Exception AVS will also authorize aircraft on temporary sojourn to remain in Cuba for up to seven consecutive days and authorizes vessels on temporary sojourn to remain in Cuba for up to 14 consecutive days.
All authorized travelers will be allowed to open and maintain bank accounts in Cuba in order to access funds for authorized transactions while in Cuba.
Telecommunications & Internet-Based Services The U.S. continues its trend in loosening restrictions related to information-exchanges. Prior to these amendments, the CACR already exempted transactions related to informational materials from the embargo and provide for a general license authorizing certain telecommunications services.
The new amendments will now allow persons subject to U.S. jurisdiction “to establish a business presence in Cuba, including through joint ventures with Cuban entities, to provide certain telecommunications and internet-based services, as well as to enter into licensing agreements related to, and to market, such services.”
Significantly, BIS’s License Exception Consumer Communications Devices (CCD)5, which authorizes the export and reexport of such items as keyboards, modems, and network access controllers, will no longer be limited to sales or donations. This change to License Exception CCD is intended to support other types of transactions, such as leases and loans of eligible items for use by eligible end-users.
Additionally, the amendments will expand the type of consumer communication devices-related items that can be serviced and to add under such authorization the training related to the installation, repair, or replacement of those items.
Lastly, the U.S. has eased restrictions on Cuban-origin imports with respect to mobile devices; persons subject to U.S. jurisdiction “will also be allowed to import Cuban-origin mobile applications into the United States and to hire Cuban nationals to develop them.”
Commercial and Financial Transactions U.S. persons will now be able to provide goods and services to individual Cuban nationals located outside of Cuba, as long as the goods or services are not commercially exported to or from Cuba. Likewise, banks will be able to open and maintain accounts for Cuban nationals while outside Cuba. This amendment does not cover corporate Cuban entities outside of Cuba as it only references individual Cubans.
Physical Presence and Operations in Cuba The amendments authorize certain listed activities to maintain physical presence (e.g., office space, warehouse, and outlet space) in Cuba. The list of activities authorized for physical presence includes: news bureaus; exporters of certain goods authorized for export or reexport to Cuba by Commerce and OFAC, such as agricultural products and materials for construction or renovation of privately-owned buildings; entities providing mail or parcel transmission services or certain cargo transportation services; providers of telecommunications or internet-based services; entities organizing or conducting educational activities; religious organizations; and providers of carrier and certain travel services.
In addition to allowing for physical presence, these individuals and entities will also be authorized to employ Cuban nationals, open and maintain bank accounts in Cuba, and employ persons subject to U.S. jurisdiction in Cuba.
Support for the Cuban People License Exception Support for the Cuban People (SCP)6 currently allows exports and donations to Cuba of specified items subject to the EAR in three areas: improving living conditions and supporting independent economic activity; strengthening civil society; and improving communications.
BIS has further expanded the scope of its License Exception SCP. After the amendments take effect, SCP will authorize certain exports and reexports of items to Cuba for use in establishing, maintaining, and operating a physical presence in Cuba, will no longer be limited to sales or donations, and will expand the categories of items eligible for export or reexport. Certain commodities and software for use in software development may be exported or reexported to eligible end-users in Cuba pursuant to License Exception SCP.
Remittances The amendments remove all restrictions on certain categories of remittances, including all restrictions placed on donative remittances to Cuban nationals other than prohibited Cuban Government or Cuban Communist Party officials and authorized remittances that individuals may carry to Cuba for persons subject to U.S. jurisdiction and for Cuban nationals. Previously blocked remittances can now be unblocked.
- Legal Services – A general license will now allow receipt of payment for certain legal services.
- Civil Aviation Safety – BIS will now apply a case-by-case review policy to license applications for exports and reexports of civil aviation safety items, including aircraft parts and components; software and technology related to safety of flight; air traffic control, aviation communications, and aviation weather related equipment; airport safety equipment; and devices used for security screening of passengers and baggage.
- Gift Imports – U.S. persons can now import Cuban gifts from outside of Cuba, as long as the merchandise is not carried by a traveler, the value of the merchandise is not more than $100, and the item is a type and in quantities normally given as a gift. This does not cover tobacco or alcohol products.
- Educational Activities – The educational activities general license will be expanded to include the provision of standardized testing services and internet-based courses.
- Ordinarily Incident Transactions – OFAC is clarifying that the Cuba sanctions provisions that are already in place allow most transactions that are ordinarily incident and necessary to give effect to a licensed transaction. For example, certain payments made using online payment platforms are permitted for authorized transactions.
- Air Ambulances and Emergency Medical Services – The provision of air ambulance and other related emergency medical services to travelers in Cuba will be authorized by general license, and a general license will clarify that the provision of nonscheduled emergency medical services to Cuban nationals in the United States is authorized.
- Humanitarian Projects – The general license authorizing transactions related to specified humanitarian projects will be expanded to include disaster relief and historical preservation.
- Supporting Diplomatic Relations – OFAC is expanding the general license authorizing transactions with official missions of Cuba to the United States to include international funds transfers.
- Tanya Somanader, President Obama Charts a New Course on Cuba: 5 Things to Know, White House Blog (December 17, 2014), available at https://www.whitehouse.gov/blog/2014/12/17/president-obama-charts-new-course-cuba-5-things-know.
- Press Release, FACT SHEET: Treasury and Commerce Announce Regulatory Amendments to the Cuba Sanctions (January 15, 2015), available at http://www.treasury.gov/press-center/press-releases/Pages/jl9740.aspx.
- Press Release, FACT SHEET: Treasury and Commerce Announce Further Amendments to the Cuba Sanctions Regulations (September 18, 2015), available at http://www.treasury.gov/press-center/press-releases/Pages/jl0169.aspx.
- 15 C.F.R. §740.19
- 15 C.F.R. §740.21
Client Alert 2015-256