United States: US Government Further Relaxes Trade Restrictions With Cuba

Last Updated: September 29 2015
Article by Louis Rothberg and Margaret M. Gatti

However, the new transaction rules leave the embargo largely in effect.

Early this week, the Department of the Treasury's Office of Foreign Assets Control (OFAC) and the Department of Commerce's Bureau of Industry and Security (BIS) amended their respective Cuban Sanctions Regulations to further relax Cuban sanctions, a move that was first announced by US President Barack Obama on December 17, 2014. The change in regulations went into effect on September 21.

OFAC and BIS coordinated their actions to increase travel, communications, and commerce between Cuba and the United States. The relaxed sanctions are designed to have the following effects:

  • Facilitate travel to Cuba for authorized purposes (including authorizing, by general license, the provision of carrier services by seagoing vessel)
  • Expand the telecommunications and Internet-based services general licenses
  • Authorize certain persons subject to US jurisdiction to establish a physical presence in Cuba to facilitate authorized transactions (i.e., with an office or warehouse)
  • Allow certain additional persons subject to US jurisdiction to open and maintain bank accounts in Cuba to use for authorized purposes
  • Allow certain additional financial transactions
  • Authorize all persons subject to US jurisdiction to provide goods and services to Cuban national individuals located outside of Cuba
  • Allow a number of other activities related to (among other areas) legal services, imports of gifts sent to the United States, and educational activities

Provided below is a snapshot of some of these key revisions by OFAC and BIS.

OFAC Amendments

Transportation, Travel, and Related Services

OFAC amended 31 CFR § 515.572 to authorize persons subject to US jurisdiction to provide carrier services by seagoing vessel (without the need for specific licenses from OFAC) and to add an authorization to provide certain lodging services aboard such vessels in connection with such transportation. This amendment added seagoing vessel service to aircraft carrier service, which was authorized earlier. OFAC also added language to § 515.572 to clarify which categories of persons may be transported between Cuba and the United States.

OFAC amended 31 CFR § 515.560 to allow all authorized travelers to open and maintain bank accounts in Cuba in order to access funds while located in Cuba for authorized transactions, and to close such accounts.

Telecommunications and Internet-based Services

OFAC amended 31 CFR § 515.542 and § 515.578 to authorize persons subject to US jurisdiction to 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 individual or entity) in order to provide authorized telecommunications and
Internet-based services. OFAC also authorized persons subject to US jurisdiction to enter into certain licensing agreements and to market such services.

Physical Presence in Cuba

OFAC amended 31 CFR § 515.573 to authorize certain persons subject to US jurisdiction to establish a physical presence (such as an office or other facility) in Cuba in order to facilitate authorized transactions. This authorization covers

  • news bureaus,
  • exporters of goods authorized for export pursuant to section 515.533 or 515.559,
  • providers of authorized mail and parcel transmission services and cargo transportation services,
  • providers of telecommunications or Internet-based services,
  • entities organizing or conducting certain educational activities,
  • religious organizations, and
  • providers of travel and carrier services.

In addition, OFAC is authorizing these individuals and entities to open and maintain bank accounts at financial institutions in Cuba for authorized transactions and the ability to close such accounts.

Educational Activities

OFAC expanded the general license in 31 CFR 515.565 to allow additional educational activities that are authorized in other sanctions programs administered by OFAC, including the provision of standardized testing services and Internet-based courses to Cuban nationals, as well as to authorize US and Cuban universities to engage in academic exchanges and joint non-commercial academic research.

Authorization of "Ordinarily Incident Transactions"

OFAC issued interpretive guidance in new 31 CFR 515.421 to clarify that, with certain exceptions, transactions ordinarily incident to a licensed transaction and necessary to give effect thereto are also authorized. A specific example in this section clarifies that such incident transactions include payments made using online payment platforms for authorized transactions.

BIS Amendments

BIS expanded the availability of Export Administration Regulations (EAR) License Exception Aircraft, Vessels, and Spacecraft (AVS) (15 CFR § 746.2(a)(1)(x)) to make License Exception AVS fully available for Cuba. Thus, new paragraph (d) was added to License Exception AVS to allow for the passage of certain categories of seagoing vessels destined for Cuba that are engaged in specified activities eligible for the license exception.

The types of vessels and activities eligible for temporary sojourn to Cuba are as follows:

  1. Cargo vessels for hire for use in the transportation of items.
  2. Passenger vessels for hire for use in the transportation of passengers and/or items. Vessels used to transport both passengers and items to Cuba may transport automobiles only if the export or re-export of the automobiles has been authorized by a separate license issued by BIS (i.e., not authorized by license exception). The export or re-export to Cuba of personally owned vehicles is not normally necessary to support authorized travel. However, if the need arises, the exporter or re-exporter may submit a license application to BIS for review pursuant to the licensing policy in § 746.2 of the EAR.
  3. Recreational vessels destined for Cuba that are used in connection with travel authorized by OFAC.

A vessel exported under License Exception AVS can remain in Cuba for no more than 14 consecutive days before it departs for a country to which it may be exported without a license or the United States. BIS says it selected the time periods of seven days for aircraft and 14 days for vessels based on its experience in licensing aircraft and vessels for temporary sojourn to Cuba. The vast majority of such licenses were for stays of seven days or less for aircraft and 14 days or less for vessels.

Expansion of EAR License Exception Support for the Cuban People (SCP), 15 CFR § 740.21

This rule revises § 740.21(b) and (d)(1) of the EAR to remove a requirement that items must be sold or donated when exported or re-exported to authorized end-users in Cuba under License Exception Support for the Cuban People (SCP). Now, leased or loaned items are also authorized.

The new paragraph (e) to License Exception SCP authorizes the export and re-export to Cuba of certain items for use by US Persons to establish, maintain, or operate a physical presence in Cuba.

The new paragraph (f) to License Exception SCP authorizes certain temporary (not to exceed one year) exports and re-exports to Cuba of EAR99 items and items controlled on the Commerce Control List only for anti-terrorism reasons. Paragraph (f) authorizes exports and re-exports of the following:

  • Commodities and software as tools of trade for use by the exporters or employees of the exporters to install, service, or repair items that are subject to the EAR and that have been exported or re-exported to Cuba under a license or license exception, or foreign-origin items that are not subject to the EAR but are owned and used exclusively by individuals or private sector entities, but not the Cuban Government, the Cuban Communist Party, or certain officials thereof in Cuba
  • Technology as tools of trade for use by certain persons for the installation, servicing, or repair of items that are subject to the EAR and that have been exported or re-exported to Cuba under a license or license exception, or foreign-origin items that are not subject to the EAR but are owned and used exclusively by individuals or private sector entities, but not the Cuban Government, the Cuban Communist Party, or certain officials thereof in Cuba
  • Kits of replacement parts or components for items that have been exported or re-exported to Cuba under a license or license exception, or foreign-origin items that are not subject to the EAR but are owned and used exclusively by individuals or private sector entities but not the Cuban Government, the Cuban Communist Party, or certain officials thereof in Cuba
  • Commodities and software for exhibition or demonstration at trade shows or to parties eligible to receive items under License Exception SCP
  • Containers that are necessary for shipment of commodities being exported or re-exported to Cuba under a license or license exception

This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.

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