On March 16, 2016, the Obama Administration further loosened sanctions on Cuba in accordance with President Obama’s policy previously announced on December 17, 2014, and partially implemented thus far, to engage and empower the Cuban people. To effect these latest policy changes, the Office of Foreign Assets Control (OFAC) released more amendments to the Cuban Assets Control Regulations (CACR), and the Bureau of Industry and Security (BIS) released conforming and additional minor amendments to the Export Administration Regulations (EAR).
Overall, these CACR and EAR amendments will continue to expand the opportunities and accessibility for U.S. persons to travel to Cuba without any prior written application to OFAC, expand Cuba’s and Cuban nationals’ access to U.S. financial institutions, and permit more U.S. business sectors to maintain a physical and business presences in Cuba to facilitate authorized transactions. In making these changes, President Obama continues his efforts to mitigate or reduce the restraints of the historic Cuban sanctions to the greatest extent possible within the narrow discretion granted to the President by several sanctions statutes targeting the present Cuban regime.
More Travel-Related Transactions Allowed
In the latest round of changes, OFAC has expanded its general license authorization for educational travel to Cuba by removing the requirement that educational travel be sponsored by an organization and that a representative of the organization accompany the traveler. Now, individuals may travel to Cuba without a sponsoring organization or sponsor representative, provided that the traveler still satisfies the education-related requirements.
These requirements include, among other things, the traveler engaging while in Cuba in a full-time schedule of educational exchange activities intended to enhance contact with the Cuban people, support civil society in Cuba, or promote the Cuban people’s independence from Cuba authorities. Further, each traveler must have a full-time schedule of educational exchange activities that will result in meaningful interaction between the traveler and individuals in Cuba. Moreover, the predominant portion of the activities must not be with certain prohibited officials of the Government of Cuba or Cuban Communist Party. Persons conducting educational travel to Cuba must retain records related to the authorized travel showing compliance with the above requirements. Any travel not satisfying the educational requirements is deemed tourist-oriented and is not authorized. Overall, this change is designed to increase opportunities for educational travel to Cuba and facilitate the direct engagement between U.S. citizens and Cubans.
Additionally, OFAC has removed certain limitations on receipt of compensation by Cuban nationals who are in the United States in a non-immigrant status or pursuant to other non-immigrant travel authorization. Previously, such individuals could only receive compensation in amounts covering living expenses and the acquisition of goods for personal consumption. Now, such individuals may receive a salary or other compensation, consistent with the terms of the particular visa, unless the individual is subject to any special tax assessments in Cuba. Furthermore, the changes authorize all transactions related to the sponsorship or hiring of a Cuban national to work in the United States, including transactions in connection with the filing of an application for non-immigrant travel authorization issued by the U.S. Government, provided that an employer does not make additional payments to the Cuban Government in connection with the sponsorship or hiring of a Cuban national.
OFAC has also added a section in the CACR authorizing persons subject to U.S. jurisdiction to purchase or acquire certain merchandise, including Cuban-origin goods, for personal consumption while in a third country, and to receive or obtain services from Cuba or a Cuban national that are ordinarily incident to travel and maintenance within that third country. For example, such persons subject to U.S. jurisdiction may purchase or acquire Cuban-origin alcohol and tobacco products while in a third country as long as such products are consumed while in a third country. However, this new section does not authorize the importation of such merchandise.
More Physical Presence and Business Presence Allowed
The latest round of changes also greatly expanded the authorization of “physical presence” in Cuba for persons subject to U.S. jurisdiction. Under the CACR, persons can establish and maintain a physical presence in Cuba, such as an office, retail outlet, warehouse or other facility, to facilitate authorized transactions. Previously, the following persons were authorized to establish and maintain a physical presence in Cuba:
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News bureaus whose primary purpose is the gathering and dissemination of news to the general public;
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Entities organizing or conducting authorized educational activities;
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Religious organizations engaging in authorized religious activities;
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Providers of authorized telecommunications services;
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Providers of authorized internet-based services;
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Exporters of goods authorized for export or reexport to Cuba or that are exempt;
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Entities providing authorized mail or parcel transmission services or cargo transportation services; and
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Providers of authorized carrier and travel services.
Now, additional persons are authorized to establish and maintain a physical presence in Cuba:
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Persons engaged in the importation of Cuban-origin mobile applications;
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Entities engaging in authorized non-commercial activities;
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Entities engaging in humanitarian projects; and
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Private foundations or research or educational institutes engaging in authorized transactions.
OFAC also expanded the authorization of “business presence” in Cuba for persons subject to U.S. jurisdiction. Persons can establish and maintain a business presence in Cuba, including through subsidiaries, branches offices, joint ventures, franchises, and agency or other business relationships with any Cuban individual or entity, to facilitate the provision of authorized telecommunications and internet-based services. Previously, the following persons were authorized to establish and maintain a business presence in Cuba:
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Providers of authorized telecommunications services; and
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Providers of authorized internet-based services.
Now, additional persons are authorized to establish and maintain a business presence in Cuba:
Further, the assembly in Cuba of items exported or reexported pursuant to authorization by the U.S. Department of Commerce or OFAC, or that is otherwise exempt, is also authorized.
More Financial Transactions Allowed
OFAC also amended several sections of the CACR pursuant to the expansion of Cuba’s and Cuban nationals’ access to U.S. financial institutions. Specifically, OFAC amended a section now authorizing U.S. financial institutions to process “U-turn” transactions in which Cuba or a Cuban national has an interest. U-turn transactions are those in which funds transfer from a bank outside the United States, pass through one or more U.S. financial institutions, and transfer to a bank outside the United States. These transactions are now allowable, provided that neither the originator nor the beneficiary is subject to U.S. jurisdiction.
OFAC also added a new section authorizing U.S. banking institutions to process U.S. dollar monetary instruments, such as cash and travelers’ checks, presented indirectly by Cuban financial institutions. Also, correspondent accounts at Cuban financial institutions used for such transactions may be denominated in U.S. dollars. However, this new section does not allow U.S. banking institutions to open correspondent accounts for Cuban banking institutions.
The amendments to the CACR also expand the authorizations for U.S. banking institutions to open and maintain accounts for certain Cuban nationals. A new section to the CACR authorizes U.S. banking institutions to open and maintain bank accounts in the United States solely in the name of a Cuban national located in Cuba to receive payments in the United States for authorized or exempt transactions and to remit such payments back to Cuba. This section adds to two similar existing authorizations. First, for Cuban nationals present in the United States in a non-immigrant status or pursuant to other non-immigrant travel authorization, U.S. banking institutions may continue to open and maintain accounts for use while the Cuban national is located in the United States and close such accounts prior to departure. Second, for a Cuban national located in a third country who is an individual, U.S. banking institutions may continue to open and maintain accounts provided that such accounts are used only while the Cuban national is located outside of Cuba and may not be used for transactions that involve commercial exportation of goods or services to or from Cuba.
Grants and Awards Allowed
OFAC also amended sections in the CACR authorizing grants and scholarships for educational activities. Specifically, the amended provisions allow for educational grants, scholarships and awards by sponsoring U.S. academic institutions to Cuban nationals. More generally, the amended provisions also allow for educational grants, scholarships and awards to a Cuban national or in which Cuba or a Cuban national otherwise has an interest. For example, this authorization includes educational scholarships for Cuban students to pursue an academic degree. Additionally, it also includes the provision of grants or awards for Cuban humanitarian projects directly benefiting the people of Cuba.
Other Transactions Allowed
The amendments to the CACR clarified the language regarding the general license for travel-related transactions. This general license allows certain travel related transactions directly incident to market research, commercial marketing, sales or contract negotiation, accompanied delivery, installation, leasing or servicing in Cuba of exports.
The amendments also now permit the importation of Cuban-origin software.
Conclusion
Within the confines of existing statutes, these changes advance the Obama Administration’s policy of relaxing the Cuban sanctions. However, because these changes are new and currently untested, U.S. companies should approach such new Cuban business opportunities with care and caution, mindful of the “fine print” in all of these regulatory changes.
