U.S. Authorities Amend Cuba Sanctions Regulations

by Reed Smith

Reed Smith

On October 17, 2016, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) and the Commerce Department’s Bureau of Industry and Security (BIS) issued new amendments to the Cuban Assets Control Regulations (31 CFR Part 515), and Export Administration Regulations (EAR), respectively (31 CFR Parts 730-774). The changes, which were effective as of yesterday, are an extension of the Obama administration’s policy, announced in December 2014, of building a stronger, more open U.S.-Cuba relationship.1 As summarized below, the new regulations authorize:

  • Certain transactions related to Cuban-origin pharmaceuticals and joint medical research
  • Additional grants and humanitarian-related services
  • Civil aviation safety-related services
  • A broader array of import and export transactions

I. Health-related Transactions

In an effort to expand U.S.-Cuban opportunities for scientific collaboration, OFAC issued a new authorization that allows persons subject to U.S. jurisdiction to engage in joint medical research projects with Cuban nationals. This authorization encompasses both non-commercial and commercial research. In the past such projects would require U.S. persons to obtain a specific license from OFAC.

OFAC has also amended its regulations to authorize transactions incident to obtaining approval from the U.S. Food and Drug Administration (FDA) for Cuban-origin pharmaceuticals. An additional authorization has allowed the importation into the United States, and the marketing, sale, or other distribution in the United States, of FDA-approved Cuban-origin pharmaceuticals.

To facilitate these newly authorized health-related activities, persons subject to U.S. jurisdiction will be permitted to open bank accounts in Cuba for use in conducting this business.

II. Humanitarian-related Transactions

To better promote humanitarian activities in Cuba, OFAC has expanded the current authorizations to permit new grants, scholarships, and awards to Cuba or Cuban nationals related to educational, scientific research, humanitarian and religious activities. OFAC has also authorized all persons subject to U.S. jurisdiction to provide infrastructure services to Cuba (or to Cuban nationals), including the developing, repairing, maintaining, and enhancing of certain Cuban infrastructure in order to directly benefit the Cuban people such as public transportation, water management, waste management, non-nuclear electricity generation, and electricity distribution sectors, as well as hospitals, public housing, and primary and secondary schools. This authorization includes the ability of U.S. persons to engage in such transactions with the Cuban government.

III. Travel-related Transactions

To broaden interpersonal contact through travel and commerce, OFAC has repealed the monetary value limitations on what authorized travelers may import from Cuba into the United States as accompanied baggage. This includes removal of the value limits on tobacco and alcohol products. Also authorized is the importation of Cuban-origin merchandise obtained in third countries when brought in as accompanied baggage. All such imports must be for personal use subject to the normal limits on duty and tax exemptions.

Persons subject to U.S. jurisdiction will be authorized to make remittances to third-country nationals for travel by third-country nationals to, from, or within Cuba, provided the travel would be authorized by general license for a person subject to U.S. jurisdiction.

IV. Civil Aviation

In an effort to support aviation safety, OFAC has added a new authorization to allow the provision of services related to civil aviation safety to Cuba and Cuban nationals, including services related to the operation of commercial aircraft. This authorization further advances cooperation in the area of civil aviation after BIS articulated a new policy in February 2016 of approving export licenses for items to ensure safe operation of commercial aircraft engaged in international air transportation.

V. Trade and Commerce

OFAC and BIS are working together to make several regulatory changes intended to bolster trade and commercial opportunities.

  • Authorized Exports. OFAC has amended the general license authorizing certain transactions incident to exports and reexports authorized by BIS to eliminate references to “100% U.S.-origin items.” This is intended to minimize and clarify the circumstances in which an export or reexport authorized by BIS requires additional licensing by OFAC.
  • Export of Consumer Goods. BIS has announced it will generally authorize exports of certain consumer goods that are sold online or through other means directly to eligible individuals in Cuba for their personal use.
  • Import of Previously Exported Goods. OFAC is authorizing imports into the United States of goods that were previously exported or reexported to Cuba pursuant to a BIS or OFAC authorization. This authorization will also permit the service and repair of such items. It should be noted, however, that the export or reexport of replacement items or items that have been repaired or serviced must be separately authorized by OFAC and/or BIS.
  • Contingent Contracts. OFAC has issued a general license that will authorize persons subject to U.S. jurisdiction to enter into certain contingent contracts for transactions currently prohibited by the embargo. Under such contingent contracts, performance must be made expressly contingent on prior authorization by OFAC and any other relevant federal agency, or on authorization no longer being required. This authorization covers transactions ordinarily incident to negotiating and entering into such contracts.
  • Agricultural Items. OFAC has made a technical correction to the current regulations to make clear that agricultural items (e.g., pesticides and tractors) authorized by BIS for export or reexport to Cuba are not subject to restrictions on payment terms. Note, however, that authorized exports to Cuba of agricultural commodities (e.g., poultry and corn) are still subject to the limited payment and financing terms of cash in advance or third country financing.
  • Air Cargo. BIS has announced that it will generally authorize air cargo to transit Cuba, complementing an existing general authorization for cargo transiting Cuba aboard vessels.
  • Vessel Transactions. OFAC has issued a general license to lift the restrictions that prohibit foreign-flag vessels from calling at U.S. ports for 180 days after they have called at a Cuban port, provided the items carried to Cuba would either: (1) be classified as “EAR99” under the EAR; or (2) controlled on the Commerce Control List only for anti-terrorism (AT) reasons.

With these new and expanded authorizations, U.S. authorities hope U.S. and Cuban citizens will have greater opportunities to exchange goods and services, thereby strengthening ties between the two countries. These amendments appeared in their entirety in the Federal Register yesterday. We recommend careful examination of the amended regulations before entering into any Cuba-related transactions.

  1. For guidance on prior amendments to the Cuba Sanctions Regulations, see our prior client alerts on the subject: https://www.reedsmith.com/Recent-Amendments-to-the-Cuba-Sanctions-Ease-Restrictions-for-Travel-and-Shipping-Sectors-03-22-2016/ (March 22, 2016 ); https://www.reedsmith.com/cuba-and-the-united-states-a-continuing-shift-in-export-and-travel-policy-02-02-2016/ (February 2, 2016); https://www.reedsmith.com/White-House-Announces-Next-Steps-in-Easing-of-Cuban-Embargo-But-Broad-Restrictions-Remain-in-Place-09-21-2015/ (September 21, 2015); https://www.reedsmith.com/Normalizing-US-Relations-with-Cuba-What-is-ahead-12-19-2014/ (December 19, 2014).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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