November 12, 2009
Earlier this year, the Obama administration announced a number of changes in U.S. policy toward the Republic of Cuba in four main areas: (1) family visits to Cuba; (2) remittances to family members in Cuba; (3) telecommunications services; and (4) gift parcels. Although these regulatory changes are significant, the Cuba embargo remains the most restrictive sanctions program administered by the U.S., leading many observers to wonder whether additional changes will be forthcoming.
Removal of Restrictions on Family Visits to Cuba: The Cuban Assets Control Regulations, 31 C.F.R. Part 515 (“CACR”), administered by the Treasury Department’s Office of Foreign Assets Control (“OFAC”), were amended to include a “general license” authorizing U.S. persons to visit “close relatives” without restrictions on the frequency or duration of the visits. The regulations define “close relative” as “any individual related to that person by blood, marriage, or adoption who is no more than three generations removed from that person or from a common ancestor.” Qualifying travelers, for example a second cousin or great grandchild, no longer need to obtain specific authorization from OFAC before every trip. All transactions ordinarily incident to travel within Cuba are now authorized including living expenses and personal consumables up to the State Department’s per diem rate for Havana, currently $179. (See https://aoprals.state.gov/web920/per_diem_action.asp?MenuHide=1&CountryCode=0000). Further, the Commerce Department’s Bureau of Industry and Security (“BIS”) has revised the Export Administration Regulations, 15 C.F.R. Parts 730-774 (“EAR”) to remove the weight limit for accompanied personal baggage under the “BAG” license exception.
Removal of Restrictions on Family Remittances: The revised CACR place no limits on the frequency and amount of family remittances, and incorporate the definition of “close relative” for purposes of eligibility. Unlimited remittances also are authorized from inherited blocked accounts in the U.S. to the account holder where the account holder is a “close relative” of the decedent. Further, the regulations establish a general license for depository institutions to forward remittances.
Authorization of Payments Incident to Telecommunications: Certain licensing requirements for payments incident to the provision of telecommunications services between the United States and Cuba have been eliminated. In addition, the revised CACR authorizes payments incident to the provision of satellite radio or satellite television services to Cuba and permits entry into and performance under (including making payments) roaming services agreements with telecommunications services providers in Cuba. This authorization does not permit the entry into or performance of a contract with or for the benefit of any particular individual in Cuba.
Authorization of Telecommunication Services to Particular Individuals in Cuba: Under the revised CACR, persons subject to U.S. jurisdiction may contract with and pay “non-Cuban telecommunications services providers” to provide services to “particular individuals” in Cuba (i.e., persons other than prohibited officials of the Government of Cuba or prohibited members of the Cuban Communist Party). Contracts with particular individuals in Cuba to provide telecommunications services to such individuals are also permitted. For example, an individual in the United States may contract with and pay a U.S. or third-country telecommunications company to provide cellular telephone service for a phone owned and used by that individual’s friend in Cuba. In addition, a U.S. telecommunications services provider may enter into a contract with a particular individual in Cuba to provide telecommunications services to that individual. This authorization does not appear to apply to the provision of telecommunication services to businesses or organizations in Cuba. This is consistent with the intent of the new rules, which was to “reach out to the Cuban people in support of their desire to freely determine their country’s future, promote greater contact between separated family members in the United States and Cuba, and increase the flow of remittances and information to the Cuban people.” (See https://www.treasury.gov/press-center/press-releases/Pages/tg273.aspx).
Authorization Related to Telecommunications Facilities: The revised CACR authorize transactions incident to the establishment of facilities to provide telecommunications services linking the United States and Cuba, including but not limited to fiber-optic cable and satellite facilities.
Relaxed Export Restrictions for Certain Telecommunications Equipment: BIS will now consider license applications for exports of items needed to provide “efficient and adequate telecommunications links between the United States and Cuba” on a case-by-case basis. In addition, BIS has also revised the EAR to include license exception “CCD,” which allows exports of specified types of donated consumer communications devices, software, and other items related to interpersonal communications, provided such exports are to eligible persons (i.e., individuals in Cuba, other than certain Cuban Government and Communist Party officials, and independent non-governmental organizations in Cuba). Organizations administered or controlled by the Cuban Government or the Cuban Communist Party, including schools and hospitals, are not eligible recipients under the CCD exception. In addition, restrictions on reexports of foreign produced commodities by U.S.-owned or -controlled entities in third countries remain in place.
New Travel Authorization for Telecommunications Services Providers: Two new authorizations for travel-related transactions in connection with telecommunications services have been added to the CACR. The first is for transactions that are directly incident to the commercial marketing, sales negotiation, accompanied delivery, or servicing in Cuba of telecommunications-related items that have been authorized for commercial export to Cuba by BIS. The second is for travel-related transactions that are directly incident to participation in professional meetings for the commercial marketing of, sales negotiation for, or performance under contracts for the provision of the telecommunications services, or the establishment of facilities to provide telecommunications services, which are authorized under the CACR. These provisions only apply to travelers who are regularly employed by a telecommunications services provider subject to U.S. jurisdiction or an entity “duly appointed to represent such a provider.”
Notice and Reporting Requirements: Many of the new telecommunications authorizations carry mandatory notice and reporting obligations.
Revision of Gift and Humanitarian Donations: BIS also expanded the scope of items eligible for export through license exceptions, augmented the list of items eligible for inclusion in gift parcel donations, and increased the value limit on non-food items from $400 to $800 per parcel. EAR license exception “GFT” has been revised to remove the requirement that the donee be related to the donor, and the exception authorizes a donor to send one gift parcel per month to any eligible individuals, charities, educational or religious organizations. Eligible gift parcel recipients include any individual other than Cuban Communist Party officials, Cuban government officials, and government-controlled entities.
* * * * * * *
Although the regulatory changes ease restrictions on certain transactions involving Cuba, many limitations remain. For example, the travel benefits have been expanded only with respect to a narrow portion of the U.S. population and industry. Persons wishing to send funds to non-family members are still prohibited from doing so without prior authorization.
The Cuban government could also thwart any efforts of the U.S. government to expand telecommunications between the U.S. and Cuba. Dan Restrepo, Special Assistant to the President, stated as much during a White House briefing that followed the policy announcement: “if anyone [stands] in the way of the Cuban people getting information it is the Cuban government . . . not some outside technical problem . . . . [t]he Cuban government could stop this.”
Finally, U.S. telecommunications providers could meet with fierce competition from various Latin American and international operators. Many such operators may already have business relationships with Cuba, and possibly equipment and other resources positioned in the area. Thus, U.S. providers could already be at a disadvantage upon entering the Cuban market.
These developments present potential opportunities for the establishment and expansion of services by U.S. telecommunications companies and other U.S. industries implicated in the implemented policy changes. Care must be taken, however, to ensure that in maximizing opportunities presented by the regulatory changes, U.S. companies do not inadvertently violate the still significant and often complex restrictions that compose the U.S. embargo on Cuba. Whether the Obama Administration will take further steps to ease the embargo remains to be seen.
Gibson, Dunn & Crutcher lawyers are available to assist in addressing any questions you may have regarding these developments. If you have any questions, please contact the Gibson Dunn attorney with whom you work or any of the following attorneys in the firm’s Washington, D.C. office:
International Trade Regulation and Compliance Practice Group
Daniel J. Plaine (202-955-8286, [email protected])
Judith A. Lee (202-887-3591, [email protected])
John J. Sullivan (202-955-8565, [email protected])
Jim Slear (202-955-8578, [email protected])
Andrea Farr (202-955-8680, [email protected])
© 2009 Gibson, Dunn & Crutcher LLP
Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.