As promised by President Obama in December 2014, the Commerce Department's Bureau of Industry and Security (BIS) and the Treasury Department's Office of Foreign Assets Control (OFAC) today issued regulations that lessen the U.S. economic sanctions and export controls on Cuba—restrictions that have been in place for more than 50 years. Effective today, these regulations authorize more telecommunications-related transactions, including the sale of consumer communication devices and the provision of Internet services, to Cuba without having to apply for a license. The regulations also authorize travel-related transactions that previously required a specific license. The easing of sanctions is focused on facilitating Cubans ability to communicate with others around the world and obtain economic independence. Although these amendments reduce the Cuba sanctions and empower Cubans, they are not the "sweeping" measures being portrayed by certain media. Significant restrictions are still in place when doing business in Cuba or exporting products or technology to Cuba.
Overview of OFAC and BIS Changes
The changes to OFAC's Cuban Assets Control Regulations (CACR), 31 C.F.R. Part 515, center on the issuance of general licenses for travel, the increase in allowable remittances, and the provision of telecommunications and Internet services.
Highlights of the changes to BIS's Export Administration Regulations (EAR), 15 C.F.R. Parts 730-774, include the issuance of a new license exception, Support for the Cuban People (SCP), and the expansion of the Consumer Communication Devices license exception (CCD). BIS implemented license exception SCP authorizing the export and reexport of certain items to Cuba that are intended to improve the living conditions, support independent economic activity and civil society, and improve the free flow of information to, from, and within Cuba.
Some of the key changes in the BIS and OFAC regulations are described in more detail below.
The Regulations Do Not Authorize Additional Travel to Cuba but Instead Eliminate the Need for Specific Travel Licenses
Through the new regulations, OFAC is easing the administrative burden on travel by lifting the specific license requirement for 12 types of travel. OFAC is not authorizing travel to Cuba for tourism or any travel-related transactions for purposes not already authorized.
Travelers also will be allowed to engage in "transactions ordinarily incident to travel within Cuba," which include payment of living expenses and purchase in Cuba of goods for personal consumption in Cuba. Significantly, there is now no dollar limit on authorized expenses. This includes using U.S. credit and debit cards in Cuba, as long as the related financial institution has established the necessary mechanisms for its credit or debit cards to be used in Cuba.
Air travel still needs to be arranged through an authorized travel services provider. While the new OFAC regulations no longer preclude scheduled operations, the U.S. Department of Transportation needs to establish procedures for restoration of scheduled service before flights can be purchased directly from the airlines.
As to imports, U.S. travelers to Cuba will be allowed to import up to $400 worth of goods acquired in Cuba for personal use. However, this authorization is limited to the importation of no more than $100 of alcohol or tobacco products and they must be personal consumption. The purchase of Cuban-origin alcohol and cigars in a third-country or over the Internet by U.S. persons is still prohibited.
It is important to note that if the travel is not properly authorized under the general licenses then any related activity in Cuba, including paying for a hotel or for a meal, will also not be authorized. OFAC is the licensing agency for the travel to Cuba and related issues.
Telecommunications-Related Trade Expanded
Amendments have been made to both the EAR and the CACR to ease licensing requirements for telecommunications-related exports to Cuba. A new OFAC general license allows for the establishment of commercial telecommunications facilities linking third countries and Cuba and within Cuba. This is a significant relaxation as the prior exemption only applied to telecommunications services between the U.S. and Cuba—not Cuba and other countries. Further, the scope of the general license regarding telecommunications has been expanded as it now allows for the paid provision of services incident to internet based communications.
The new BIS license exception SCP allows for the export and reexport of sold or donated EAR99 and AT-controlled items for the access to the Internet, use of internet services, infrastructure creation and upgrades to Cuba. Further, license exception CCD now authorizes the commercial sale of certain consumer communications devices, related software, applications, hardware, and services, and items for the establishment and update of communications-related systems. CCD previously only covered donations of these items. (For a list of the items eligible for export under license exception CCD, please see the annex chart at the end of this alert.)
BIS is the licensing agency for exports of software and commodities to Cuba and OFAC is the licensing agency for the provision of services.
Exports of Technology and Software Under License Exception SCP
In addition to exports and reexports for access to the Internet, use of the Internet services, and infrastructure creation and upgrades to Cuba, license exception SCP allows for exports and reexports of:
-
Certain commercially sold or donated items if they are for building or renovating private buildings in Cuba
-
Tools and equipment for agricultural sector or for private businesses such as barbers, restaurant owners, and auto mechanics
-
Donated certain items for: 1) use in scientific, archaeological, cultural, ecological, educational, historic preservation or sporting activities; and 2) to human rights organizations, individuals or non-governmental organization that promote independent activity to strengthen civil society
-
Items for use by news personnel engaged in gathering and disseminating news to the general public
The scope of items authorized is EAR99 and AT-controlled-only items. Additionally, SCP authorizes the temporary export of certain items to persons leaving the U.S. for their own use in scientific, archaeological, cultural, ecological, educational, historic preservation or sporting activities.
Certain Cubans Nationals Outside of Cuba Are Now Unblocked
As a general rule, Cuban nationals who have applied to become U.S. Permanent Residents (i.e. applied for a "green card") or who are permanent residents of a third country are no longer considered blocked persons. Additionally, U.S.-owned or -controlled entities in third countries, including banks, can provide goods and services to an individual Cuban national located outside of Cuba, provided the transaction does not involve a commercial exportation of goods or services to or from Cuba. This was previously prohibited under the OFAC regulations.
Other Interesting Changes
-
Increased Remittances. OFAC has increased the limit on remittances from $500 to $2000 per quarter. These include remittances for humanitarian projects, human rights organizations, NGOs promoting peace, civil society and democracy, and the development of small businesses. Travelers will be allowed to carry $10,000 to Cuba in total family remittances, periodic remittances, remittances to religious organizations in Cuba, and remittances to students in Cuba pursuant to an educational license.
-
Authorization of Certain Financial Services. Cuban nationals may open and maintain accounts at U.S. depository institutions. Additionally, U.S. financial institutions will be able to enroll Cuba merchants and process credit and debit card transactions for authorized transactions including travel.
-
Definition of "Cash in Advance." The regulatory interpretation of "cash in advance" is being redefined from "cash before shipment" to "cash before transfer of title to, and control of," the exported items to allow expanded financing of authorized trade with Cuba.
-
Small Business Growth. Certain micro-financing projects as well as entrepreneurial and business training will be authorized along with commercial imports of certain independent Cuban entrepreneur-produced goods and services, as determined by the State Department on a list to be published on its website.
-
Environmental Protection Measures. BIS has announced favorable licensing policy approval for applications to export or reexport EAR99 and AT-only controlled items necessary for environmental protection or enhancement of U.S. and international air and water quality or coastlines (including items that enhance environmental quality through energy efficiency). Where BIS issues a license, an OFAC license is not needed.
Summary
While these measures take steps to ease the restrictions on doing business in Cuba, the changes are limited. If you have a specific transaction in mind, please consult with us to determine whether a license is required from the U.S. Government. Wilson Sonsini Goodrich & Rosati will continue to keep you informed of further significant sanctions developments.
Alert Annex: Items Covered by License Exception CCD
