The U.S. Department of the Treasury Office of Foreign Assets Control ("OFAC") and the Department of Commerce Bureau of Industry and Security ("BIS") published amendments to the Cuban Assets Control Regulations ("CACR") and Export Administration Regulations ("EAR") to implement the National Security Presidential Memorandum released by President Donald J. Trump in June 2017 (see OFAC amendments; OFAC FAQ; BIS amendments; Fact Sheet on the amendments). The amendments impose new restrictions on dealings related to Cuban military, intelligence, and security services, while still allowing travel to Cuba and commercial ties with the country – albeit with added limitations. The new restrictions take effect on November 9, 2017, and commercial engagements, travel, and other transactions initiated before that date will generally continue to be authorized.
Most significantly, the U.S. Department of State published a list of restricted entities and sub-entities controlled by or otherwise connected with the Cuban military, intelligence, and security services (the "Cuba Restricted List"), and the OFAC amendments to the CACR generally prohibit direct financial transactions with parties on this list. In addition, BIS established a general policy of denial for license applications to export items for use by entities and sub-entities on the Cuba Restricted List.
With respect to travel, the CACR amendments remove the authorization for individual people-to-people educational travel, instead requiring that such travel be conducted under the auspices of a sponsor organization that is subject to U.S. jurisdiction. Such travelers generally must be accompanied by a person who is subject to U.S. jurisdiction and is a representative of the sponsoring organization. Finally, all travelers subject to U.S. jurisdiction are prohibited from certain direct financial dealings with entities and sub-entities on the Cuba Restricted List – including dozens of hotels and other parties operating in the travel industry.
Commentary / James Treanor
The long-awaited CACR amendments and other changes to the Cuba sanctions regime do not entirely roll back the Obama administration's opening to Havana, but they do impose significant limitations on commercial and travel-related activities related to Cuba. Companies and financial institutions with current or planned dealings in Cuba will be relieved to learn that OFAC's "50 percent rule" does not apply to the Cuba Restricted List. The prohibitions on dealings with Cuba Restricted List parties, therefore, do not apply to entities owned or controlled by such parties, unless those entities are themselves specified by name on the list (see OFAC FAQ #75). In addition, U.S. financial institutions continue to be generally permitted to engage in "U-turn" transactions (i.e., transactions that originate and terminate outside the United States) in which Cuba or a Cuban national has an interest. Such transactions do not fall within the scope of the prohibition on dealings with parties on the Cuba Restricted List (see OFAC FAQ #70). Thus, the new Cuba sanctions regime does not shut the door on dealings with that country – but that door may continue to swing based on the ups and downs of the U.S.-Cuba relationship.
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