Cuba Embargo: What New Rules Mean

The Obama Administration further relaxes Cuba embargo rules.

BY LES CARNEGIE, ANDREW GALDES
AND LAUREN BENNETT

For the second time this year, the agencies principally responsible for administering the US embargo against Cuba – the Treasury Department’s Office of Foreign Assets Control (OFAC) and the Commerce Department’s Bureau of Industry and Security (BIS) – have made meaningful changes to the US embargo against Cuba.  On September 21, 2015, OFAC amended the Cuban Assets Control Regulations (CACR) and BIS amended the Export Administration Regulations (EAR) to implement further the policy changes announced by President Obama on December 17, 2014. 

In announcing the new OFAC rules, Treasury Secretary Jacob Lew explained that these further changes underscore “the Administration’s commitment to promote constructive change for the Cuban people” and “[a] stronger, more open US-Cuba relationship has the potential to create economic opportunities for both Americans and Cubans alike.”

Here are some of the key takeaways from this week’s changes – which took effect immediately upon publication in the Federal Register on Monday, September 21. 

Having a Physical Business Presence in Cuba

• News bureaus, exporters of goods authorized by BIS for export or reexport to Cuba, certain providers of internet-based or telecommunications services, and travel service providers, among others, are now permitted to establish and maintain a physical presence in Cuba.  A physical presence includes an office, warehouse, or retail outlet.  They can also engage in transactions related to having such a presence in Cuba, including leasing physical space, marketing, and employing Cuban nationals and US persons.  In a Frequently Asked Question (“FAQ”) published by OFAC, the agency explains that US person employees working in Cuba under this provision may also “maintain a domicile in Cuba.”  Moreover, persons providing authorized telecommunications and internet-based services may 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 national,” and may “enter into all necessary agreements or arrangements with such entity or individual.”

• The Commerce Department made a corresponding change to the EAR to permit – through General License SCP (which stands for Support for the Cuban People) – the “export or reexport to Cuba of items for use by eligible end-users to establish, maintain, or operate a physical presence in Cuba.”  To be eligible, items must be classified “EAR99” (i.e., not identified on the Commerce Control List (CCL)) or controlled only for anti-terrorism (AT) reasons on the CCL.

  Civil Flight Safety

• BIS has established a case-by-case review policy with respect to license applications seeking authorization to export or reexport to Cuba items to help ensure the safety of civil aviation and the safe operation of commercial passenger aircraft.  Items eligible to be specifically licensed by BIS include 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. 

  Travel and Related Services

• Although tourist travel to the island by US-regulated persons remains prohibited, OFAC now permits travel to Cuba to visit or accompany a “close relative” (including a spouse, child, grandchild, niece, nephew, or cousin) who is traveling to Cuba pursuant to seven of the 12 authorized travel categories.  The seven travel categories allowing family members to accompany or visit the principal traveler are (1) official government business, (2) journalistic activity, (3) professional research, (4) educational activities, (5) religious activities, (6) humanitarian projects, and (7) activities of private foundations or research or educational institutes.

• OFAC authorized the provision of carrier services, including services by vessel, “to, from, or within Cuba in connection with travel or transportation between the United States and Cuba” and without stops in third countries.  This general license also covers the provision of certain lodging services aboard permissible vessels. 

• BIS also amended License Exception AVS (which stands Aircraft, Vessels and Spacecraft) to allow the temporary export and reexport of EAR-controlled vessels to Cuba.  As BIS explained in its own FAQs, this authorization permits “temporary sojourns of recreational vessels that are used in connection with travel authorized by” OFAC. 

  Hiring and Paying Lawyers in Cuba

• US-regulated persons may receive and pay for legal advice and counseling on the requirements of and compliance with the laws of Cuba or any jurisdiction within Cuba.  Such advice and counseling must relate to transactions authorized by, or exempt from, OFAC prohibitions. 

• In most cases, US persons no longer will need a specific license from OFAC to receive payment for authorized legal services provided to or on behalf of Cuba or a Cuban national. 

Financial Transactions

• The CACR now broadly authorize the receipt of financial remittances “in the United States from Cuban nationals, wherever located,” provided the sender is not a prohibited official in the Cuban Government or the Cuban Communist Party. 

• OFAC also removed a number of restrictions on financial remittances that persons can send to and bring from Cuba.  For instance, OFAC removed entirely the limits on donative remittances to eligible Cuban nationals (previously set at $2,000 per quarter) and on remittances that authorized travelers may carry to Cuba when departing the United States (previously set at $10,000 for persons subject to US jurisdiction and $3,000 for Cuban nationals permanently resident in Cuba)

• Telecommunications and Software

• Further to a new OFAC authorization, US-regulated persons may now import into the United States Cuban-origin mobile software applications and hire Cuban nationals to develop such applications.

• BIS is also authorizing the export and reexport of hardware and software for individuals and private sector entities in Cuba to use to “develop software that will improve the free flow of information” or that will support certain private sector activities.  The Cuban Government and the Communist Party of Cuba, and certain other governmental officials, may not receive these items.  Eligible commodities and software must be classified under “EAR99” pursuant to the EAR or controlled only for AT reasons on the CCL.

Cuban Goods as Gifts

• OFAC allowed by way of a general license the importation of merchandise into the United States from Cuba, or the importation of Cuban-origin merchandise in a third-country, provided the merchandise is intended as a gift and is not valued at more than $100.  Notably, this permission excludes Cuban-origin alcohol and tobacco products, the merchandise must be of a type and in quantities normally given as a gift, and the merchandise cannot be hand-carried by a traveler to the United States.

Online Payments Authorized

• OFAC has clarified that, with certain exceptions involving blocked property and dealings with certain prohibited Cuban government and Communist Party officials, transactions “ordinarily incident to a licensed transaction and necessary to give effect thereto” are authorized.  For instance, a general license to import certain goods from Cuban entrepreneurs “also authorizes funds transfers or payments that are ordinarily incident to the importation, including payments made using online payment platforms.”