On March 15, 2016, the US Treasury Department’s Office of Foreign Assets Control (“OFAC”) and the US Commerce Department’s Bureau of Industry and Security (“BIS”) announced further amendments (the “Amendments”) to the Cuban Assets Control Regulations (“CACR”) and the Export Administration Regulations (“EAR”), in a continuing effort to implement elements of the policy announced by President Obama on December 17, 2014 and to chip away at the decades-old embargo. The Amendments have been issued in anticipation of President Obama’s inaugural visit to Cuba next week and follow several earlier rounds of relaxation, including those made on January 15, 2015, September 18, 2015, and January 26, 2016. The Amendments went into effect on March 16, 2016.
Notable changes include a broad authorization for self-directed “people-to-people” travel to Cuba even as tourism officially remains prohibited, authorizations for certain additional categories of persons to establish business and/or physical presences in Cuba, and the opening up of certain financial transactions, including “U-turn” transactions. Despite these Amendments, the US embargo on Cuba remains in place and continues to prohibit many Cuba-related transactions due to ongoing statutory restrictions.
· Self-Directed People-to-People Travel: Despite the ongoing statutory ban on tourism, individuals subject to US jurisdiction are now authorized to travel to Cuba to engage in people-to-people educational activities in their personal capacities rather than being limited to travel under the auspices of a sponsoring organization, i.e, “self-directed” educational travel is now authorized. To qualify for this authorization, the traveler must still engage in a full-time schedule of educational exchange activities that are intended to enhance contact with the Cuban people and must maintain records sufficient to demonstrate compliance with the conditions of the authorization.
· Business Presence: OFAC has expanded the categories of persons subject to US jurisdiction authorized to establish a “business presence” in Cuba. Eligible categories now include: news bureaus; exporters of goods authorized for export or reexport (or otherwise exempt); entities providing authorized mail or parcel transmission services; entities providing cargo transportation services for cargo that is authorized or otherwise exempt; providers of telecommunication services; and providers of authorized travel and carrier services. Establishment of a business presence includes all transactions to establish and maintain a business presence, including: establishing and maintaining subsidiaries, branches, offices, joint ventures, franchises, and agency or other business relationships with any Cuban national; and entering into all necessary agreements or arrangements with such entity or individual. In a parallel change, the EAR has been amended to authorize the export or reexport to Cuba of eligible items required to establish a “business presence” in Cuba. Only items classified as EAR99 or controlled for anti-terrorism (“AT”) reasons on the US Commerce Control List are authorized.
· Physical Presence: OFAC has also broadened the category of persons subject to US jurisdiction authorized to establish a “physical presence” in Cuba, such as an office or facility, short of a “business presence”. The additional categories are: entities engaging in authorized non-commercial activities in support of the Cuban people; entities engaging in authorized humanitarian projects; and private foundations or research or educational institutes engaging in authorized activities. The EAR has been similarly amended to authorize exports or reexports to Cuba of eligible EAR99 or AT-controlled items subject to US jurisdiction required to establish a “physical presence” in Cuba.
· Financial Transactions Involving Cuba: US banking institutions are now authorized to engage in the following financial transactions involving Cuba: (i) processing of pass through or “U-turn” transactions from one non-US bank to another non-US bank provided neither the originator nor the beneficiary is a person subject to US jurisdiction; (ii) processing of US dollar monetary instruments, including cash and travelers’ checks, presented indirectly by Cuban financial institutions; and (iii) opening and maintaining bank accounts in the United States for Cuban nationals in Cuba to receive payments in the United States for authorized or exempt transactions and to remit such payments to Cuba.
· Other Amendments:
o Individuals subject to US jurisdiction located outside the United States are now authorized to purchase or acquire Cuban merchandise for personal consumption in a third country (not for import into the US). This would not permit purchases by third-country corporations or entities for commercial sale or internal use.
o Cuban nationals present in the United States may also now receive salary or other compensation beyond amounts covering living expenses and the acquisition of goods for personal consumption consistent with their non-immigrant status or travel authorization. In addition, transactions related to the sponsorship or hiring of a Cuban national to work in the United States are authorized, so long as the US entity hiring the individual does not make payments to the Cuban government in connection with such a hiring.
o The importation into the United States of Cuban-origin software is authorized.
o Vessels on temporary sojourn in Cuba are now permitted to transit Cuba with cargo from the United States or other countries without a license, provided the cargo departs with the vessel after its temporary sojourn, does not enter the Cuban economy, and is not transferred to another vessel while in Cuba.
o There is a new licensing policy of case-by-case review for exports and reexports of items that would enable or facilitate exports from Cuba of items produced by the Cuban private sector.
All of these provisions are subject to important caveats and limitations, and companies should carefully review the amended CACR and EAR before engaging in any new transactions with Cuba. Detailed information about the Amendments is available in the updated “Frequently Asked Questions” documents issued by OFAC and BIS as well as in a joint press release issued by both agencies.