United States: President Obama Continues To Loosen Cuba Sanctions

Last Updated: November 21 2016
Article by Andrea Fraser-Reid

In December 2014, President Obama announced a shift in U.S. policy to Cuba and initiated a process leading towards normalizing relations.  In the latest step in that process, the Office of Foreign Asset Controls ("OFAC") announced new amendments to the Cuban Assets Control Regulations ("CACR").1 The regulatory changes became effective on October 17, 2016 when they were published in the Federal Register.2  The changes include the following:

Health-related Transactions

The latest amendments authorize U.S. persons to engage in commercial and non-commercial medical research projects with Cuban nationals.  The regulations now also allow certain transactions incident to securing U.S. Food and Drug Administration approval for certain Cuba-origin pharmaceuticals.  Note that this general license does not authorize imports of sample quantities of Cuban-origin commodities for research purposes.

Humanitarian-related Transactions

The authorization has been expanded to include grants, scholarships and awards to Cuba or Cuban nationals related to scientific research and religious activities.  In addition, OFAC is now authorizing U.S. persons to provide to Cuba or Cuban nationals services relating to the development and repair of infrastructure, including, for example, public transportation, water and waste management, non-nuclear electricity generation and electricity distribution sectors, hospitals, public housing, and schools.

Travel-related Transactions

OFAC travel-related changes are intended to support people-to-people contact by facilitating authorized travel.  To that end, OFAC authorized persons subject to U.S. jurisdiction to make remittances to third-country nationals to cover travel by third-country nationals to, from or within Cuba provided the travel would be authorized if conducted by a U.S. person.

OFAC has removed its limits on the goods a traveler may hand carry from Cuba.  The limit for goods for personal use had been $400, with no more than $100 of such merchandise consisting of alcohol or tobacco products.  Note that the duty and tax exemptions normally applicable to travelers and their accompanying baggage apply.

The regulations have been revised to remove the requirement that the underlying reason behind authorized travel by U.S. persons to attend or organize professional meetings or conferences in Cuba not be for the promotion of tourism in Cuba. 

In an effort to support safe air travel, OFAC issued a new general license authorizing U.S. persons to provide services in connection with civil aviation safety to Cuba and Cuban nationals.

Trade and Commerce –

In an effort to further bolster trade and commercial opportunities in support of Cuba's private sector, OFAC has amended general licenses authorizing certain transactions incident to Bureau of Industry and Security ("BIS") authorized exports and reexports by deleting the reference to "100% U.S.-origin items."  In-so-doing, OFAC is endeavoring to minimize the circumstances requiring OFAC authorization for BIS-authorized transactions.

In an apparent effort to enable U.S. companies to prepare for further relaxation of restrictions, OFAC added a general license authorizing entry into certain contingent contracts for transactions prohibited by the CACR and to engage in transactions ordinarily incident to negotiating and entering into such contracts. The performance of such contracts would have to be contingent upon OFAC authorizing the underlying transactions or another development that results in the removal of any licensing requirement.  The same contingency requirement applies in the event that another agency of the U.S. government has to authorize the transaction.

OFAC has narrowed the definitions of "prohibited officials of the Government of Cuba" and "prohibited members of the Cuban Communist Party" to mean members of the Council of Ministers and flag officers of the Revolutionary Armed Forces, and members of the Politburo, respectively.

To further simplify authorized transactions, OFAC clarified that BIS-authorized exports and reexports of agricultural items, such as pesticides and tractors, are not subject to payment term restrictions.   U.S. depository institutions may provide financing, such as letters of credit for such exports and reexports. Exports of agricultural commodities, however, occur pursuant to the Trade Sanctions Reform and Export Enhancement Act3 which limits financing options to "payment of cash in advance" or financing by a third country banking.

OFAC has added a new general license authorizing imports into the U.S. or a third country of items previously exported or reexported to Cuba.  This essentially permits the return of goods for service and repair.  Returning the repaired item or providing a replacement would still need a license from OFAC in addition to any needed licensing from BIS.

Finally, OFAC has removed the "180 day" Cuba port restriction.  Previously, the Cuba program prohibited, absent specific authorization, foreign vessels that call on Cuban ports from entering U.S. ports for the purpose of loading or unloading freight for 180 days from the date they depart Cuba. OFAC has now waived this restriction for any vessel if the items carried onboard would be designated as EAR99 if subject to the EAR, or would be controlled on the Commerce Control List only for anti-terrorism reasons.

The latest revisions represent an ongoing relaxation of restrictions and provide opportunities to prepare for business opportunities and to engage with Cuba and the Cuban people.  However, the newly authorized conduct is somewhat specific, and it is important to remain aware of the continuing restrictions on activities in Cuba. Although these amendments further the Administration's efforts to ease sanctions on Cuba, normalizing trade with Cuba ultimately will require ending the embargo, and that will require Congressional action.

Footnotes

1 Office of Foreign Assets Control; Cuban Assets Control Regulations; Final rule, 81 Fed. Reg. 71,372 Oct. 17, 2016) available at https://www.federalregister.gov/d/2016-25032.

2 The Department of Commerce's Bureau of Industry and Security concurrently issued amendments to the Export Administration Regulations (EAR). The Final Rule amended a license exception to authorize cargo aboard aircraft to transit Cuba when that cargo is bound for destinations other than Cuba; authorized export and reexport of certain items sold directly to individuals in Cuba under a license exception; and, revised the lists of ineligible Cuban officials for purposes of certain license exceptions.   Bureau of Industry and Security; Cuba: Revisions to License Exceptions; Final rule, 81 Fed. Reg. 71,365 (Oct. 17, 2016) available at https://www.federalregister.gov/d/2016-25034

3 Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA), PL 106-387.

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