December 18, 2014
On December 17, 2014, President Obama announced "the most significant changes to [U.S.] Cuba policy in more than 50 years." According to information released by the White House, the United States and Cuba will move to normalize diplomatic and economic relations and the United States will implement significant changes to its sanctions policies and regulations with respect to Cuba.[1]
On a broad diplomatic level, the U.S. announced that it will reopen its embassy in Havana and is planning high-level exchanges and visits by government officials to Cuba within the next few months. The two countries will also begin working together on common problems such as migration, narcotics and human trafficking, and environmental protection, and, in conjunction with the Mexican government, plan to discuss issues concerning the unresolved maritime boundary in the Gulf of Mexico.
While the broader U.S. embargo against Cuba remains in place and normal tourism is still prohibited, the announced policy shift will result in substantial changes to the implementation of the embargo and the ability of individuals residing in the U.S. to travel to Cuba for specified reasons, as well as for U.S. persons, individuals and businesses to engage in limited commerce with the Cuban people.
In addition, the President called for the State Department to review Cuba’s designation as a State Sponsor of Terrorism. Removing Cuba from this list would have a dramatic impact on any possible further relaxation of the trade and diplomatic sanctions currently in place against the country and its nationals.
The changes to current U.S. policy announced today fall into the following areas:
Expanding Travel by U.S. Persons to Cuba
General licenses will be made available for all authorized travelers traveling to Cuba for the following reasons: (1) family visits; (2) official business of the U.S. government, foreign governments, and certain intergovernmental organizations; (3) journalistic activity; (4) professional research and professional meetings; (5) educational activities; (6) religious activities; (7) public performances, clinics, workshops, athletic and other competitions, and exhibitions; (8) support for the Cuban people; (9) humanitarian projects; (10) activities of private foundations or research or educational institutes; (11) exportation, importation, or transmission of information or informational materials; and (12) certain export transactions that may be considered for authorization under existing regulations and guidelines. While general licenses currently exist for some individuals whose travel falls within some of the above listed categories, other individuals, such as those whose travel is described by categories 7, 8, 9, 10 and 11 currently must obtain specific licenses from the Office of Foreign Assets Control ("OFAC") in the U.S. Department of the Treasury authorizing such travel.[2] The issuance of these general licenses will significantly ease travel for qualified individuals by expanding authorization for those traveling to Cuba for these purposes.
Individuals whose travel to Cuba falls within the twelve categories authorized by the general licenses will be able to make travel arrangements through any service provider who complies with OFAC’s regulations concerning travel services to Cuba. General licenses authorizing the provision of such services will also be issued. This is another significant change from the current U.S. policy, which requires that providers of travel services to Cuba be specifically authorized by OFAC to provide such services.[3]
The Administration also announced that it would be exploring additional options for promoting the growth of entrepreneurship and the private sector in Cuba.
Facilitating Authorized Transactions Between the United States and Cuba
In another change from current policy,[4] U.S. institutions will be permitted to open correspondent accounts at Cuban financial institutions to facilitate the processing of authorized transactions, and U.S. credit and debit cards will be permitted for use by travelers to Cuba (currently the use of U.S. credit and debit cards must be specifically authorized).[5] The regulatory definition of the statutory term "cash in advance" will also be revised to specify that it means "cash before transfer of title," instead of the current definition which requires that payment be received by the seller prior to shipment of goods from the loading port.[6]
Updating the Application of U.S. Sanctions Towards Cuba in Countries Outside the U.S.
General licenses will be issued to authorize U.S.-owned or -controlled entities in third countries to provide services to, and engage in financial transactions with, Cuban individuals in third countries. Other general licenses will be issued to: (1) unblock accounts held at U.S. banks belonging to Cuban nationals who have relocated outside of Cuba; (2) permit U.S. persons to participate in third-country professional meetings and conferences related to Cuba; and (3) allow foreign vessels to enter the United States after engaging in certain humanitarian trade with Cuba, among other measures. Currently, U.S. persons who need to engage in any of these activities need to obtain a specific license from OFAC. [7]
Expanding Commercial Sales and Exports from the United States of Certain Goods and Services
Additional items will be authorized for export to Cuba, including certain building materials for private residential construction, goods for use by private sector Cuban entrepreneurs, and agricultural equipment for small farmers.
Increasing Cubans’ Access to Communications and Ability to Communicate Freely
To support U.S. efforts to increase the ability of the Cuban people to communicate freely and broaden their access to the Internet and other forms of telecommunications, the commercial export of certain consumer communications devices, related software, applications, hardware, and services, as well as items used for the establishment and update of communications-related systems, will be authorized. Telecommunications providers will be also be allowed to establish and provide commercial telecommunications and internet services, including the installation and support of necessary infrastructure. While the "freedom to communicate" has been a long term policy goal of the U.S. government, especially with respect to the access to communications and ability to communicate freely of individuals subject to repressive governments,[8] allowing U.S. telecommunications providers to actually provide such telecommunications services and infrastructure within Cuba itself is an unprecedented change in U.S. policy towards Cuba.
Authorizing Limited Imports of Cuban Goods
Licensed U.S. travelers to Cuba will be authorized to import $400 worth of goods from Cuba, with a limit of $100 in tobacco products and alcohol, combined. This is a change from the current regulations, which ban the import of almost all Cuban goods.[9]
Facilitating U.S. Remittances to Cuba
The level of general, non-family remittances to Cuban nationals will be raised from $500 to $2,000 per quarter, except for remittances to certain officials of the Cuban government or the Communist party, which are will still be prohibited. In addition, donative remittances for humanitarian projects, support for the Cuban people, and support for the development of private businesses in Cuba will no longer require a specific license from OFAC, nor will remittance forwarders.[10]
Please note that the new policy changes announced today will not go into effect until the regulations concerning Cuba (namely the Cuban Assets Control Regulations, administered by OFAC, and the Export Administration Regulations, administered by the Bureau of Industry and Security ("BIS") at the Department of Commerce) can be amended.[11] U.S. businesses and individuals should continue to ensure they comply with existing government licensing requirements and guidance concerning Cuba until such time as OFAC and BIS announce the regulatory amendments which will implement today’s changes.
Gibson, Dunn & Crutcher will continue to monitor and update you on further developments concerning today’s historic policy changes. If you have any questions concerning compliance with U.S. government regulations concerning Cuba or regarding the impact of today’s announcements, please do not hesitate to contact us.
[1] Press Release, The White House, Fact Sheet: Charting a New Course on Cuba (Dec. 17, 2014), http://www.whitehouse.gov/the-press-office/2014/12/17/fact-sheet-charting-new-course-cuba.
[2] Office of Foreign Assets Control, Comprehensive Guidelines for License Applications to Engage in Travel-Related Transactions Involving Cuba (May 10, 2012), http://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_tr_app.pdf, at 31-43.
[3] Office of Foreign Assets Control, Summary of Travel, Carrier, and Remittance Forwarding Service Provider Program (Circular 2012) (July 2012), http://www.treasury.gov/resource-center/sanctions/Programs/Documents/circ2012.pdf.
[4] 31 C.F.R. § 515.572(a)(3).
[5] 31 C.F.R. § 515.560(e)(1).
[6] 31 C.F.R. § 515.533(a)(2)(i)(A).
[7] 31 C.F.R. § 515.201 (financial transactions with Cubans in third countries); 31 C.F.R. § 515.505(b) (bank accounts); 31 C.F.R. § 515.564(a) (2) and (b) (conferences); 31 C.F.R. § 515.207 (vessels);
[8] Remarks by Secretary of State Clinton on Internet Freedom (Jan. 21, 2010), U.S. Department of State, http://www.state.gov/secretary/20092013clinton/rm/2010/01/135519.htm.
[9] 31 C.F.R. §§ 515.204 and 515.560(c)(3).
[10] See current restrictions on remittances at 31 C.F.R. § 515.570(b), 515.570(g) and 515.572.
[11] Office of Foreign Assets Control, Publication of New Cuba-Related FAQ (Dec. 17, 2014), http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20141217_33.aspx.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the above developments. Please contact the Gibson Dunn lawyer with whom you usually work or any of the following lawyers in the firm’s International Trade Group:
United States:
Judith A. Lee – Washington, D.C. (+1 202-887-3591, [email protected])
Jose W. Fernandez – New York (+1 212-351-2376, [email protected])
Marcellus A. McRae – Los Angeles (+1 213-229-7675, [email protected])
Daniel P. Chung – Washington, D.C. (+1 202-887-3729, [email protected])
Andrea Farr – Washington, D.C. (+1 202-955-8680, [email protected])
Stephenie Gosnell Handler – Washington, D.C. (+1 202-887-3517, [email protected])
Eric Lorber* – Washington, D.C. (+1 202-887-3758, [email protected])
Lindsay M. Paulin – Washington, D.C. (+1 202-887-3701, [email protected])
Michael Willes - Los Angeles (+1 213-229-7094, [email protected])
David A. Wolber – New York (+1 212-351-2384, [email protected])
Annie Yan – Washington, D.C. (+1 202-887-3547, [email protected])
Europe:
Peter Alexiadis – Brussels (+32 2 554 72 00, [email protected])
Attila Borsos – Brussels (+32 2 554 72 10, [email protected])
Patrick Doris – London (+44 (0)207 071 4276, [email protected])
Penny Madden – London (+44 (0)20 7071 4226, [email protected])
Mark Handley – London (+44 (0)207 071 4277, [email protected])
* Mr. Lorber previously served at the U.S. Department of Treasury on the Iran sanctions desk in the Office of Terrorist Financing and Financial Crime, as well as in the Chief Counsel’s Office at OFAC. He is not yet admitted to practice in the District of Columbia, and currently practices under the supervision of the Principals of the Firm.
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