On the eve of President Barack Obama's March 2016 visit to
Cuba, the U.S. government has once again eased trade restrictions
with the island nation. The U.S. Department of the Treasury and the
U.S. Department of Commerce issued final rules this week that,
among other measures, (i) increase the scope of authorized to
travel by U.S. persons to Cuba; (ii) expand the categories of
businesses authorized to have a physical or business presence in
Cuba; (iii) authorize U.S. financial institutions to engage in an
increased array of financial transactions involving Cuban
individuals and entities; and (iv) lift certain restrictions on the
payment of salaries to certain Cuban nationals in the United
States.
These measures expand on earlier amendments to the Cuban Assets
Control Regulations ("CACR") administered by the U.S.
Department of the Treasury's Office of Foreign Assets Control
("OFAC"), and relevant provisions of the Export
Administration Regulations ("EAR") administered by the
U.S. Department of Commerce's Bureau of Industry and Security
("BIS"). The measures were discussed in our Alerts:
"
OFAC and BIS Issue Revised Cuba Regulations" (January
2015), "
Although Embargo Remains in Place, U.S. Government Continues to
Expand Allowable Trade with Cuba" (September 2015 ), and
"
U.S. Continues Easing of Trade Restrictions on Cuba, but Embargo
Remains" (January 2016).
Notwithstanding the continued expansion of permissible trade
activity with Cuba since December 2014, however, the U.S. embargo
against Cuba remains in place, and U.S. companies and their
non-U.S. subsidiaries remain generally prohibited from engaging in
business with Cuba, absent a license or license exception.
This Alert provides an overview of the more notable changes
resulting from the most recent amendments.
Travel
Although U.S. persons still cannot engage in tourist travel to
Cuba, OFAC has amended its people-to-people educational travel
general license to authorize individual people-to-people
educational travel. As a result of this amendment, U.S. persons are
no longer required to engage in people-to-people educational travel
through an authorized travel organization. According to the U.S. Treasury Department,
U.S. persons now can travel to Cuba provided that they engage in a
"full-time schedule of educational exchange activities
intended to enhance contact with the Cuban people, support civil
society in Cuba, or promote the Cuban people's independence
from Cuban authorities and that will result in a meaningful
interaction between the traveler and individuals in Cuba." A
trip that includes conversations with Cuban vendors while relaxing
at the beach, however, will not qualify for this general
license.
U.S. persons who take advantage of this change to the general
license to engage in authorized individual travel must retain all
records relating to their travel, including documents that will
demonstrate a full-time schedule of authorized activities. U.S.
persons who engage in such travel through an authorized travel
organization can continue to rely on the organization to retain
such records.
OFAC also has authorized U.S. persons located in third countries to
purchase Cuban-origin goods for personal consumption while in the
third countries. This means, for example, that U.S. persons can
smoke Cuban cigars and drink Cuban rum in Mexico but cannot then
bring any leftover goods back to the United States with them. This
authorization does not allow the importation of the Cuban-origin
goods into the United States from third countries, including as
accompanied baggage.
Finally, U.S. persons in third countries also now may receive or
obtain services from Cuba or a Cuban national that are ordinarily
incident to travel and maintenance in the third counties.
Shipping
BIS has revised the License Exception Aircraft, Vessels and Spacecraft, or "AVS," in the EAR to allow vessels that carry cargo destined for other countries to transit through Cuban territory without obtaining a license for that cargo. However, the cargo must leave with the vessel at the end of the temporary sojourn. The cargo can neither enter the Cuban economy nor be transferred to another vessel while in Cuba.
Physical and Business Presence
In September 2015, OFAC amended the CACR to permit certain
categories of organizations, including U.S. news bureaus, telecom
providers, and travel and carrier service providers, to establish
an office or other facility in Cuba to conduct authorized
transactions. OFAC now has further amended the CACR to allow
entities engaged in authorized humanitarian projects, entities
engaged in authorized noncommercial activities under the Support
for the Cuban People, or "SCP," general license, and
private foundations or research or educational institutions
engaging in certain authorized activities to establish a physical
presence in Cuba.
OFAC also has amended the CACR to authorize additional categories
of businesses to establish a business presence in Cuba (all of
which were previously authorized to establish a physical presence
in Cuba). Specifically, with this latest round of amendments, OFAC
has authorized providers of certain authorized mail or parcel
transmission services, cargo transportation services, travel and
carrier services, and exporters of certain goods that are licensed
or otherwise authorized by BIS for export or re-export to Cuba to
establish a business presence in Cuba. Previously, only providers
of certain authorized telecommunications services and
internet-based services were permitted to establish a business
presence. This amendment authorizes the above-listed categories of
businesses to establish and maintain subsidiaries, branches,
offices, joint ventures, franchises, and agency or other business
relationships with any Cuban national, and to enter into all
necessary arrangements with such entity or individual.
BIS has correspondingly amended the EAR to allow exports and
re-exports of EAR99 items or items only controlled for
anti-terrorism purposes to Cuba for use by organizations authorized
by OFAC to establish and maintain a physical and/or business
presence in Cuba. OFAC's revised CACR also permits such goods
to be assembled in Cuba.
Financial Services
With these recent amendments, OFAC has authorized U.S. financial
institutions to engage in three additional categories of financial
transactions involving Cuba or Cuban nationals.
U.S. financial institutions are now authorized to process U-turn
transactions in which Cuba or a Cuban national has an interest.
U-turn transactions are those that originate at a financial
institution outside of the United States but then pass through a
U.S. financial institution before being sent to another financial
institution outside of the United States, often so that the
transaction can be completed in U.S. dollars. For these newly
authorized transactions, neither the originator nor the beneficiary
of the transaction can be a U.S. person.
U.S. financial institutions are now also permitted to process U.S.
dollar monetary instruments presented indirectly by Cuban financial
institutions in connection with an underlying transaction that is
authorized, exempt, or not prohibited by the CACR. This
authorization, however, does not permit U.S. financial institutions
to open correspondent banking accounts for Cuban banking
institutions.
Finally, U.S. financial institutions may open and maintain bank
accounts for Cuban nationals in Cuba solely to receive payments in
the United States for authorized transactions, or transactions
exempt from the CACR, and to remit payments to Cuba for such
transactions.
Salaries
The recent amendments authorize Cuban nationals in the United States with nonimmigrant status or pursuant to other nonimmigrant travel authorization to receive a salary or compensation in excess of basic living expenses, consistent with the Cuban national's visa, as long as the Cuban national is not subject to any special tax assessments in Cuba. In addition, U.S. companies can engage in transactions related to the sponsorship or hiring of Cuban nationals for employment or performance in the United States, as long as no payments are made to the Cuban government in connection with the sponsorship or hiring. Pursuant to these amendments, U.S. persons also now can engage in transactions on behalf of a Cuban national in connection with the filing of an application for nonimmigrant travel authorization issued by the U.S. government.
Technology
U.S. persons may now, in addition to importing Cuban-origin mobile applications, import Cuban-origin software.
Grants and Awards
OFAC also has expanded the scope of authorized educational
activities under the CACR to authorize the provision of educational
grants, scholarships, or awards to Cuban nationals or in which Cuba
or a Cuban national has an interest, including, for instance, the
provision of scholarships to Cuban students so that they might
pursue academic studies.
Jones Day will continue to monitor developments associated with the
U.S. government's trade policy with respect to Cuba.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.