On Monday, September 21, 2015, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the Department of Commerce’s Bureau of Industry and Security (BIS) took coordinated action to further ease U.S. restrictions on trade with Cuba and Cuban nationals.
OFAC amended the Cuban Assets Control Regulations (CACR), 31 CFR Part 515, while BIS issued amendments to the Export Administration Regulations (EAR). The amendments affect a wide range of sectors and activities, but have particularly important implications for the travel industry, telecommunications and internet-based service providers, the banking sector, U.S. persons dealing with Cuban nationals located in third countries, and a range of profit and not-for-profit businesses whose activities in Cuba are authorized.
Carrier Service by Vessel
OFAC expanded the general license in Section 515.572 of the CACR to authorize persons subject to U.S. jurisdiction to provide carrier services by vessel in addition to the existing authorization for aircraft. Vessel carriers such as cruise lines are now permitted to provide lodging services for persons authorized to travel to Cuba, including when docked at a port in Cuba.
BIS also made available license exception Aircraft, Vessels and Spacecraft (AVS) (15 CFR 740.15) for temporary sojourns by vessels in Cuba. Passengers and private captains still must be authorized to travel to Cuba under the CACR and cargo must be authorized for export under the EAR. AVS now permits a vessel to remain in Cuba for up to 14 consecutive days, compared to 7 days for aircraft.
Telecommunications and Internet-Related Services
The U.S. government took further steps to support access to communication for the Cuban people and between the United States and Cuba. Under the CACR, persons subject to U.S. jurisdiction are now permitted to establish and maintain a business presence in Cuba in support of authorized telecommunications and internet-based services, including through subsidiaries, branches, offices, joint ventures, franchises, agents and other business relationships. Licensing agreements for marketing also will be permitted.
The CACR also expanded general licenses for the provision of services and training to parties in Cuba for items exported subject to U.S. license exceptions or licenses, or which arrived from third countries. In addition, U.S. persons may now provide certain no-cost and generally available internet-based services such as messaging, chat, email and social networking, to organizations administered or controlled by the Government of Cuba or the Communist Party, but may not provide such services not to prohibited officials of the Cuban government or prohibited members of the Cuban Communist Party.
BIS also further expanded License Exception Support for the Cuban People (SCP) and Consumer Communications Devices (CCD) and clarified that the license exceptions apply not only to sold or donated items, but broadly to a variety of business exchanges, including leased or loaned items.
Physical Presence in Cuba
OFAC amended CACR Section 515.573 to expand the existing authorization for news bureaus to permit all transactions in Cuba related to the gathering and dissemination of news to the general public. Other persons may establish and maintain a physical presence in Cuba to support the following activities: (1) News bureaus; (2) Exporters of goods authorized for export or reexport to Cuba; (3) Entities providing authorized mail or parcel transmission, or cargo transportation services; (4) Providers of telecommunications or internet-based services; (5) Entities organizing or conducting authorized educational activities; (6) Religious organizations engaging in authorized religious activities in Cuba; and (7) Providers of authorized travel and carrier services. Permitted activities include leasing physical space and securing related goods and services; marketing services, opening and maintaining bank accounts to facilitate authorized transactions; employing Cuban nationals in Cuba; and employing persons subject to U.S. jurisdiction, who may establish domicile in Cuba for the duration of their employment.
In line with the OFAC rule, BIS amended license exception SCP to allow exports and reexports of EAR99 items or items controlled solely for Anti-Terrorism (AT) reasons for use by U.S. persons in establishing, maintaining, or operating a physical presence in Cuba.
Goods and Services for Third Country Cuban Nationals
Prior to the most recent amendments, the CACR allowed companies in third-countries owned or controlled by U.S. persons to provide certain goods and services to Cuban nationals located outside of the United States and Cuba. See 31 C.F.R. 515.585. Now, this general license authorizes all persons subject to U.S. jurisdiction to provide goods and services to Cuban national individuals located in a third country, provided that the transaction does not involve commercial exportation to or from Cuba. In addition, OFAC has added an authorization to allow banking institutions to open, maintain, and close bank accounts for such Cuban nationals.
The OFAC and BIS amendments enhance the ability of U.S. persons to engage in financial transactions while in Cuba. Persons subject to U.S. jurisdiction who are traveling to Cuba pursuant to one of the twelve authorized categories of travel may open and maintain bank accounts in order to access funds while located in Cuba for authorized transactions and are authorized to close such accounts. See 31 C.F.R. 515.560(c)(6).
Similarly, financial institutions have increased flexibility in conducting banking transactions. Previously, depository institutions could maintain accounts for certain Cuban nationals present in the United States for the duration of their stay. The new amendments allow maintenance of these accounts while the Cuban national is located outside the U.S., provided that the account holder may only access the account while lawfully present in the United States. While U.S. depository institutions are permitted to open correspondent accounts at Cuban banks located in Cuba and in third countries, and at foreign banks located in Cuba, Cuban banks are not generally licensed to open such accounts at U.S. banks.
The OFAC amendments authorize the unblocking and return of previously blocked remittances that are currently authorized under the updated regulations, including funds blocked because they exceeded previously allowable remittance limits. For example, prior to OFAC’s January 2015 amendments, banks were required to block remittances exceeding $500 per quarter to non-family members. In January 2015, OFAC raised the allowable periodic remittance limit to $2,000 per quarter. With the most recent changes, financial institutions can now unblock and return previously blocked remittances that would now be authorized under the CACR. Finally, the $250 cap in CACR Section 515.571 on payments from blocked accounts held by Cuban nationals in the U.S. has been removed.
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The changes implemented by OFAC and BIS build on amendments earlier this year and present new opportunities for U.S. persons to conduct business in Cuba and with Cuban nationals. The U.S. trade embargo on Cuba, however, remains in place and only transactions specifically authorized by the new regulations are permitted. Other transactions outside the scope of the regulations, including new investment in Cuba, remain prohibited.