Prepared by Michael J. Kelleher and Eric McClafferty
Cuba banned all private enterprise and foreign investment following Fidel Castro's 1959 revolution. For more than 50 years, the U.S. has imposed an almost total embargo on all trade with the largest Caribbean island nation. Recent actions by the U.S. Executive Branch, however, signal the opening of a bevy of opportunities for those in certain industries.
More specifically, President Obama met with President Raul Castro of Cuba on September 29th to discuss advancing relations between the two countries. At this meeting, the President highlighted several recent regulatory changes to allow more Americans to do business with and travel to Cuba. This meeting was followed up with a two day visit in October between U.S. Secretary of Commerce Penny Pritzker and Cuba’s ministers of foreign affairs and investment. "The government officials I have met with have been very forward leaning and wanting more American direct investment," Pritzker told CNN. "We obviously have limitations under what we can do under our own laws. So we are trying to find places where we can do things together now."
Before discussing the amendments, it’s important to remember that the United States continues to maintain a comprehensive embargo on trade with Cuba. The Cuban Assets Controls Regulations (“CACR”) prohibit almost all transactions with Cuba and Cuban nationals. There are, however, some important exceptions, and there is a reasonable likelihood that more trade liberalization in the future. That said, the export and reexport to Cuba of items that are sensitive from a national security perspective, including all items subject to the Export Administration Regulations (“EAR”) of the Department of Commerce’s Bureau of Industry and Security (“BIS”), still require a BIS license, unless authorized by a license exception.
On January 16, 2015, components of the U.S. Commerce and Treasury Departments, the BIS and the Office of Foreign Assets Control (“OFAC”) respectively, published regulations to implement certain elements of the President’s Cuba policy. See 80 Fed. Reg. 2286 (BIS Jan. 16, 2015) and 80 Fed. Reg. 2291 (OFAC Jan. 16, 2015). More specifically, the January 16th BIS rule, in part, created the License Exception ‘Support for the Cuban People’ (“SCP”), which among other provisions, seeks to encourage private enterprise on the island by authorizing the export and reexport of U.S.-origin items to Cuba, without a license, of certain commercially sold categories of items including:
* building materials, equipment, and tools for use by the private sector to construct or renovate privately-owned buildings, including privately-owned residences, businesses, places of worship, and buildings for private sector social or recreational use;
* tools and equipment for private sector agricultural activity; and
* tools, equipment, supplies, and instruments for use by private sector entrepreneurs.
See 80 Fed. Reg. 2286 (BIS Jan. 16, 2015).
On September 21, 2015, the same Departments took additional steps by publishing amendments to their respective regulations on Cuba. See 80 Fed. Reg. 56,898 (BIS Sept. 21, 2015) and 80 Fed. Reg. 56,915 (OFAC Sept. 21, 2015). The September amendments expand the range of permissible commercial, travel, financial, and export-related transactions in certain areas, including but not limited to:
- Allowing transportation by vessel of authorized travelers between the United States and Cuba.
- Expanding License Exception Aircraft, Vessels, and Spacecraft (“AVS”) to authorize temporary sojourns to Cuba of certain categories of vessels in connection with authorized travel and the transportation of cargo to Cuba.
- Authorizing certain persons subject to U.S. jurisdiction to establish and maintain a physical presence, such as an office, retail outlet, or warehouse in Cuba to facilitate authorized activities, as well as certain exports and re-exports to Cuba related to such physical presence in Cuba.
- Authorizing persons subject to U.S. jurisdiction to establish and maintain a business presence in Cuba, including through subsidiaries, branches, offices, joint ventures, and franchises, to provide certain authorized telecommunications and internet-based services.
- Allowing the importation of Cuban-origin mobile applications into the United States; the hiring of Cuban nationals to develop such applications; and the export or re-export to Cuba of certain commodities and software for use by eligible end-users in software development.
- Permitting banking institutions to open and maintain accounts for individual Cuban nationals located in third countries, subject to certain conditions.
- Establishing a case-by-case review policy for the export or re-export to Cuba of items to help ensure the safety of civil aviation and the safe operation of commercial passenger aircraft.
- Clarifying that the use of online payment platforms is permitted for the facilitation or completion of authorized transactions.
- Allowing authorized U.S. travelers to open and maintain bank accounts while in Cuba in order to facilitate authorized activities.
- Expanding the general license for family visits to allow U.S. persons to visit or accompany their close relatives travelling to Cuba pursuant to additional categories of authorized travel, and expand the general license for travel and other transactions to Cuba for humanitarian projects to include disaster relief and historical preservation.
- Removing the cap on donative remittances to Cuban nationals other than prohibited Cuban Government or Cuban Communist party officials.
- Authorizing the import by mail of gifts from Cuba or Cuban-origin merchandise from a third country intended as gifts, excluding alcohol and tobacco products, provided that the value of the merchandise does not exceed $100, and subject to other conditions.
- Authorizing certain additional educational activities involving Cuba and Cuban nationals, including the provision of standardized testing services and certain internet-based courses, and the establishment of academic exchanges and joint non-commercial academic research projects with universities or academic institutions in Cuba.
For additional information, please contact Eric McClafferty.