Cuban Embargo Archives - The National Law Forum

The Future of Business Relations in Cuba – Commentary from a Seasoned Customs Attorney

cuba_800_11429 Since the December 2014 reopening of diplomatic relations, access to Cuba has been greatly widened, with new changes to regulations taking place as recently as late January. These developments signal opportunities for legal service providers to assist clients who are seeking advice on business development opportunities in Cuba. However, effective advising requires a thorough understanding of the history of the U.S. embargo on Cuba and the changes in the laws themselves.

Peter Quinter, Chair of the Customs and International Trade Law Group at GrayRobinson P.A., offers a unique perspective regarding U.S. and Cuban relations as a former attorney in the Office of Chief Counsel for U.S. Customs in Miami. As a South Florida resident surrounded by the stories about the 1959 Cuban Revolution and Fidel Castro, Peter was fascinated with the unique relationship between the two countries. As an attorney with U.S. Customs, he was also responsible for enforcing the U.S. embargo of Cuba. I recently had the opportunity to discuss his perspective on the progress of reopening relations with Cuba following his participation in a panel discussion at the recent Marketing Partner Forum.¹

Since the imposition of the U.S. embargo on Cuba 55 years ago, Cuba’s economy has remained relatively stagnant in growth. I was initially focused on the idea that only the U.S. refused to trade with Cuba, and that despite access to everywhere else in the world, their economy did not grow. Mr. Quinter corrected my assumption, stating “[t]here were multiple embargoes, but they disappeared long ago. Only the U.S. retains the embargo, and it was U.S. policy to punish any country doing business with Cuba.” In fact, the UN General Assembly has nearly unanimously voted to condemn the embargo every year since 1992. The U.S. only garnered support from one other nation –Israel– in the most recent vote on the embargo in October 2015.

Despite the standing embargo, the U.S. is now poised to begin contributing to the significant growth of the Cuban economy. Although most U.S. companies are still prohibited from doing business in Cuba, the relaxed rules and opening of embassies in D.C. and Havana have allowed a few major companies to start doing business in Cuba including Verizon, Netflix, and AirBNB. Mr. Quinter believes many industries have the opportunity to rapidly develop in Cuba due to the expansion of diplomatic relations: “Logistics, warehousing, hospitality, aviation, travel agents, sports, education..to name a few.” These developments signal new opportunities for U.S. law firms to advise companies in their up-and-coming dealings in Cuba.

Like business dealings in any country, it is imperative to understand and work within the laws of Cuba’s socialist government. Mr. Quinter’s extensive experience in advising clients on OFAC regulations and policies (Office of Foreign Assets Control) for 26 years makes him uniquely positioned to comment on the current state of U.S. law firm involvement in this rapidly evolving area. During the presentation, he stated that few firms are approaching this opportunity in the appropriate manner. In our follow up discussion, he called attention to this error: “Suddenly, numerous law firms are ‘experts’ in this, and are attempting to be business brokers, instead of legal advisors.”

As a legal advisor, Mr. Quinter elaborated that law firms’ focus should remain on advising U.S. persons and companies about the relevant legal requirements that allow these entities to travel to, trade with, or invest in Cuba. A major part of this practice is determining whether a license is required to do any of these things, and if so, obtaining the license from the U.S. Treasury for the client. Once the appropriate license is obtained, then the firm will need to assist the client in working with the Cuban government.

Law firms can add value to their practice by beginning to form new partnerships now so they can be better equipped to help their clients establish businesses down the line. Mr. Quinter advises that traveling to Cuba, experiencing the culture, and introducing themselves to the community is an excellent way for law firms to equip themselves to guide clients who are looking to do business in Cuba. In May 2015, Mr. Quinter, as Chair of the Florida Bar’s International Law Section, led the largest lawyer delegation ever to visit Cuba. While the group was in Cuba, they met with lawyers, journalists, and dissidents to get a better lay of the land and to help move toward opening up business relationships. Mr. Quinter has since returned to Cuba in October 2015 on behalf of a client meeting with government officials.

The upcoming 2016 presidential elections could greatly impact the progress being made in Cuba. Several presidential hopefuls have made their sentiments toward the embargo known: Republican candidate Marco Rubio staunchly for the embargo, and Democratic candidate Hillary Clinton ardently against it. However, Mr. Quinter posited, “What has happened to date is legally reversible, but realistically not.” He believes the embargo will eventually meet its end: “As more investment in and trade with and authorized travel by Americans occur to Cuba, even the few people who support the U.S. embargo (Cubans call it a ‘blockade’) will realize the embargo is counterproductive, and a leftover from the Cold War of the 1950’s and 1960’s.”

At the moment, Mr. Quinter acknowledges that in the short term, OFAC regulations continue to make it difficult to do business in Cuba. However, he is hopeful for the future: “In 10 years, we will look back and wonder why the U.S. did not terminate the U.S. embargo of Cuba decades ago, and we will recognize the leadership of President Obama in having the courage and vision to starting the process.” In fact, President Obama has recently announced that he will be the first sitting U.S. president to visit Cuba in over the 85 years. This is a signal of the U.S.’s overall sentiment toward Cuba, but only time will tell how U.S.-Cuban relations are progressing.

Article By Nicole Cudiamat Minnis of The National Law Review / The National Law Forum LLC

¹ Mr. Quinter was a part of a panel at the Legal Executives Institute 23rd Annual Marketing Partner Forum, held January 20-22nd in Orlando. He was joined by Eddy Arriola, Chairman of the Board & Chief Executive Officer, Apollo Bank for the presentation, “From Swords to Plowshares: Cuba, Legal Business Development and Industrial (R)evolution (Breakout)”.

What Cuba Wants From Investors

American investors have made their way into Cuba. What Cuba Wants From Investors

Just this week, the U.S. Treasury Department has approved the first significant U.S. business investment in Cuba since 1959: the Oggun tractor factory. This plant represents a $5 million to $10 million investment by an American company in Cuba.

Both countries seem serious about moving their recently-resurrected commercial relationship forward. The U.S. and Cuba have entered into an agreement to resume commercial flights between the two countries the same week Cuba’s Minister of Foreign Trade and Investments, along with other officials from the Ministry of Foreign Affairs, Cuba’s Central Bank, and the Cuban Chamber of Commerce, have come to meet with the U.S. Secretary of Commerce to discuss how the two countries could further bilateral commercial relations.

While the focus of politicians’ rhetoric and scholars’ analysis has been on either what Americans are allowed to do, or on what Americans should want to do in Cuba, attention should be paid to what Cuba wants from its investors.

Cuba Wants Investors

First, there can be no doubt that Cuba wants investors.

In September 2013, Cuba created a Special Development Zone at Mariel (Zona Especial de Desarrollo Mariel). This $900 million port was formed in November 2013, 30 miles west of Havana, with the express purpose of attracting foreign investment. Many Americans are already familiar with Mariel, but remember it for the 1980 mass boatlift that carried thousands of Cuban refugees to America’s shores. Instead of being a point of departure, Mariel is now a destination for foreign capital.

A few months after the creation of the Special Development Zone, Cuba’s National Assembly unanimously passed the Foreign Investment Act (Law 118) on March 29, 2014. Law 118 promises foreign investors tax breaks and legal protections for their investments.

These far-reaching overtures to potential foreign investors were not made, however, without certain conditions.

Cuba Wants Investments in Particular Sectors

The Foreign Investment Act delineates, among other things, which investment vehicles are permissible, how investment shares may be transferred, who may be hired to work on the investment projects, and how disputes may be resolved.

Cuba has also specified in what it wants foreigners to invest. Last year, Cuba published a Portfolio of Opportunities for Foreign Investment detailing 326 projects in twelve sectors ripe for foreign investment:

Tourism – 94 Projects
Oil – 86 Projects
Agriculture and Food – 40 Projects
Renewable Energy – 22 Projects
Industrial – 21 Projects
Mining – 15 Projects
Transportation – 15 Projects
Construction – 14 Projects
Biotechnology and Medicine – 9 Projects
Business – 4 Projects
Health – 3 Projects
Audiovisual – 3 Projects

The highest number of projects was, not surprisingly, in the tourism sector. Cuba’s official policy on tourism investment is to direct foreign capital towards building or reconstructing new hotels and corresponding infrastructures. The President of Cuba’s Chamber of Commerce has noted the need to increase hotel capacities and standards in Havana and other heritage cities. So far, 74 hotel marketing and administration contracts have been signed, and these include almost 20 contracts with foreign firms.

Interestingly, Cuba has expressed a desire to attract foreign chains to its coasts, and is reportedly working on establishing agreements with renowned international chains across 58 facilities. Cuba is also promoting real estate development, including golf courses, marinas, and theme parks. Cuba has predicted that it will be one of the Caribbean’s top golfing destinations, and has already created two joint ventures, with British and Chinese investors, responsible for hotel construction. These projects are said to be worth over $400 million.

Furthering its efforts to attract investment in its tourism sector, Cuba is hosting its 36th International Tourism Fair (FITCUBA 2016) this year, which will be dedicated to Cuba’s culture and will feature Canada as the guest of honor. Canada represents one of the highest sources of visitors to Cuba each year.

Notably, the Beacon Council, Miami-Dade County’s official economic development partnership, has identified seven target industries Miami’s business leaders should focus on:

Aviation
Banking and Finance
Creative Design
Hospitality and Tourism
Information Technology
Life Sciences and Healthcare
Trade and Logistics

The overlap between Cuba’s and Miami’s lists of target industries, along with Miami’s geographical proximity to Cuba and supply of Spanish-speaking professionals make the city an obvious key player in the development of Cuba’s business sector.

There are certain sectors, however, in which Cuba will not allow private ownership.

Cuba Does Not Want Investments in Particular Sectors

Notably, last December, Cuba’s official newspaper, the Granma, published an article titled, “Open Also Your Mind to Foreign Investment,” encouraging the Cuban people to embrace foreign investment. Cuban officials have reiterated that these changes in economic policy will not threaten the country’s socialist regime. Cuba’s policies expressly prohibit investment in sectors that may threaten Cuba’s political landscape.

For example, the Foreign Investment Act makes it illegal for a foreigner to invest in education services for Cubans and in the armed forces. Cuba’s Constitution also states that Cuba’s press, radio, television, film industry, and other mass media can never be privately owned.

These carve-outs are consistent with the Cuban government’s assurances to its people: Cuba is importing only capitalists’ capital, not their ideologies.

While it has been said that profit is apolitical, investors should not ignore the political contours of Cuba’s budding foreign investment regulations, as these may impact their investment opportunities.

ARTICLE BY Jose M Ferrer & Yasmin Fernandez-Acuña of Bilzin Sumberg Baena Price & Axelrod LLP

Further Relaxation of Sanctions for Commercial Aircraft Operations in Cuba

cuba_800_11429 On January 27, the US Department of Commerce’s Bureau of Industry and Security (BIS) and the Treasury Department’s Office of Foreign Assets Control (OFAC), took steps to further ease trade restrictions against Cuba, including transactions relating to the export and operation of civil aircraft in Cuba.^[1] In order to sell or lease a commercial aircraft to an airline in Cuba, a US national must obtain licenses for each transaction from BIS and OFAC. The changes by BIS relax its licensing policies for certain transactions with Cuba and Cuban nationals, while OFAC lifted financing and payment restrictions for authorized exports, and broadened the scope of authorizations for travel to and from Cuba.

On February 16, the United States and Cuba announced the resumption of scheduled commercial air services between the two countries, and the US Department of Transportation (DOT) invited US air carriers to apply for permission to operate scheduled flights to and from Cuba.

As outlined below, these actions may lead to easier opportunities to provide aircraft leasing and related services to prospective customers in Cuba. They also will facilitate travel between the United States and Cuba by allowing US and Cuban airlines to fly scheduled flights between the two countries.

BIS Eases Licensing Policy for Exports of Items Necessary to Ensure Civil Aviation Safety

In light of moves earlier in 2015 to loosen restrictions on trade with Cuba, air travel to and from Cuba has significantly increased in that time. The policy change announced by BIS on January 27 emphasizes “the importance of civil aviation safety and . . . recognize[s] that access to aircraft used in international air transportation that meet US Federal Aviation Administration and European Aviation Safety Agency operating standards by Cuban state-owned enterprises contributes to that safety.”

In its notice, BIS indicated that it would move to generally approve license applications for the export of items for the safe operation of commercial aircraft in lieu of reviewing such applications on a case-by-case basis. This policy includes approving license applications for the export of commercial aircraft leased to Cuban state-owned enterprises.

Both commercial passenger and cargo aircraft are eligible for treatment under this revised policy of license approval. However, BIS will continue to generally deny license applications for exports or re-exports of goods (including aircraft) for use by the Cuban military, police, intelligence and security services. BIS also will generally deny such license applications for the export or re-export of goods for use by Cuban government or state-owned entities that primarily generate revenue for the state, including those engaged in tourism and extraction of minerals or raw materials.

BIS also will move from a general policy of denial to a policy of case-by-case review for applications to export certain items to “meet the needs of the Cuban people,” including those to Cuban state-owned entities that provide goods and services for the use and benefit of the Cuban people. This policy covers a number of categories, including goods for agricultural production, artistic endeavors, education, food processing, disaster preparedness, public health and sanitation, and public transportation.

OFAC Authorizes Certain Arrangements With Cuban Airlines to Facilitate Authorized Travel to Cuba

In conjunction with BIS, OFAC published its own regulatory amendments to ease restrictions on certain transactions with Cuba and Cuban nationals, including measures to facilitate air carrier services with Cuban airlines.^[2] OFAC’s amendments authorize the entry by US persons into blocked space, code-sharing and leasing arrangements with Cuban nationals to facilitate the provision of authorized air carrier services. OFAC also is allowing travel-related and other transactions directly incident to the facilitation of the temporary sojourn of aircraft authorized for travel to Cuba. This allows US companies to engage with Cuba for services by personnel required for normal aircraft operation, such as aircraft crew, or to provide services to an aircraft on the ground in Cuba. These allowances are part of a larger expansion of authorized travel to Cuba—from organizing professional meetings, professional sports competitions and other events, to the creation and dissemination of artwork and informational materials.

Resumption of Scheduled Air Service Between the United States and Cuba

The memorandum of understanding signed by the United States and Cuba on February 16 allows for the re-establishment of scheduled commercial air service between both countries. For more than 50 years, there have been no scheduled flights between the United States and Cuba. As a result of the new agreement, a total of 110 daily scheduled round trip flights between the countries will be allowed to be conducted by each country’s carriers. Each country will be able to operate up to 20 daily roundtrip flights between the United States and Havana, and up to 10 daily roundtrip flights between the United States and each of nine other destinations in Cuba.

Immediately upon the announcement of the agreement, the DOT invited US carriers to apply for allocation of the new flight opportunities.^[3] Applications from the US carriers are due to the DOT by March 2. The DOT is to answer those applications by March 14 and carrier replies are due March 21. The scheduled services are expected to begin in the fall 2016. All US carriers to which frequencies are eventually allocated will still be required to comply with all applicable regulations and requirements of the DOT and other US agencies and all US laws. US carriers’ ability to provide US–Cuba service through licensed charter flights continues unchanged.

Department of Transportation Matters Regarding Blocked Space, Code-Sharing and Wet-Leasing

The new amendments announced on January 27 allow blocked space, code-sharing or wet-leasing arrangements. As is the case with such arrangements with foreign carriers in general, any proposed blocked space, code-sharing or wet-leasing arrangement between a US air carrier and a Cuban carrier will require the DOT’s advance authorization. The DOT must determine whether the proposed operations are in the public interest, by assessing whether such operations meet an acceptable level of safety and security, and whether they will adversely impact competition in the US airline industry.

A US carrier seeking to conduct the activities allowed pursuant to the most recent OFAC amendments must first apply to the DOT for specific authorization for such planned operations.^[4] The DOT will grant authorization only if the foreign carrier is from a country that complies with the safety standards of the US Federal Aviation Administration’s (FAA) International Aviation Safety Assessment (IASA) program and the proposed foreign carrier partner meets the requisite safety standards.^[5] As part of the DOT’s analysis, the FAA will assess the safety oversight functions of the national aviation authority having jurisdiction over the proposed foreign partner’s operations.

Based on publicly available information, to date, the safety oversight function of Cuba’s national aviation authority has not been assessed by the FAA.^[6] In assessing the safety oversight provided by any country’s civil aviation authority, the FAA will determine whether such oversight meets the minimum international safety standards established by the International Civil Aviation Organization (ICAO). Cuba is an ICAO member state and, according to the currently available ICAO information, in regard to the ICAO Universal Safety Oversight Audit Programme (USOAP), was audited by ICAO between February 19, 2008 and February 28, 2008, and meets the ICAO minimum safety standards. If the FAA determines that Cuba’s USOAP rating satisfies the requirements of the IASA program, it should approve the first prong of the safety assessment of the proposed code-sharing arrangement.

With respect to the proposed foreign carrier, the US carrier seeking authorization for such operations must have an existing FAA-accepted code-share safety program and must conduct safety audits on the proposed foreign partner in accordance with that program. The FAA will review the US carrier’s safety audit program, its initial safety audit report on the foreign carrier, and its statement that the foreign carrier is in compliance with international safety standards. Additionally, after authorization is granted, the US carrier must monitor its foreign partner’s safety programs for continued compliance during the existence of the approved arrangement. The DOT authorization process also includes review of the terms of the parties’ agreement for the proposed operations.

As for arrangements with foreign carriers that will provide service directly to the United States or to US territories, the Transportation Security Administration will provide the DOT with information regarding the security of the foreign carrier and its home country to aid the DOT in its assessment.

In assessing the impact of a proposed arrangement on competitiveness, the DOT will determine whether the agreements are adverse to the public interest because they would substantially reduce or eliminate competition.^[7] In addition to serving the application for authorization on the requisite US government agencies, the US carrier seeking such authorization also must serve the application on each US-certificated carrier authorized to serve the general area in which the proposed transportation is to be performed. These other carriers may file any comments for consideration by the DOT.^[8]

Of course, since most of the restrictions under the embargo remain in effect, operations under any such code-sharing, blocked space or wet-leasing arrangement, even if authorized by the DOT, may only be conducted within the scope of authorized US–Cuba transactions noted above.

Conclusion

The actions by BIS and OFAC and the announcements by the DOT will allow for a further expansion of trade activity and facilitate opportunities between the United States and Cuba. However, OFAC and BIS have made clear that they intend to continue enforcing existing sanctions on and trade embargoes with Cuba. Many restrictions will remain in place until US legislators vote to end or modify the embargo against Cuba. For example, the saleor lease by US persons of aircraft or related services to Cuba without a license continues to be restricted. Furthermore, as it stands now, any aircraft owned by the Cuban government arriving in the United States is subject to immediate seizure in settlement of the billions of dollars in judgments reached in US courts against Cuba in connection with Cuba’s nationalization of property owned by Americans and other civil judgments against the Cuban government. Thus, we remind those looking to take advantage of opportunities to sell or lease aircraft or related services to review all licensing applications and potential transactions with Cuba carefully to ensure that they are in compliance with federal laws and regulations.

_{[1] See Cuba Licensing Policy Revisions, 81 Fed. Reg. 4,580 (Dep’t Commerce, Jan. 27, 2016); Cuban Assets Control Regulations, 81 Fed. Reg. 4,583 (Dep’t Treasury, Jan. 27, 2016).}

_{[2] OFAC now allows for financing and payment of authorized transactions through US banks or through sales on an open account. These changes were made to address the inability of customers in Cuba to obtain financing or for authorized transactions with the United States, due to more restrictive payment and financing arrangements.}

_{[3] See, Order Instituting Proceeding and Inviting Applications, 2016 U.S. – Cuba Frequency Allocation Proceeding, issued by the US Department of Transportation, Docket DOT-OST-2016-0021, February 16, 2016.}

_{[4] The foreign carrier also must comply with all other relevant regulations, and hold all requisite DOT authorizations, prior to conducting any of the newly-allowed operations.}

_{[5] See Department of Transportation Office of the Secretary and Federal Aviation Administration Code-Share Safety Program Guidelines, 12/21/2006, Revision 1.}

_{[6] As Cuban carriers have not provided service to the US or participated in code-sharing arrangements with US carriers, and the Cuban national aviation authority has not significantly interacted with the FAA, for a four-year period, Cuba is not included on the publicly available IASA program summary listing, in accordance with standard FAA procedures. Before Cuba can be rated in the IASA program, a full reassessment of its aviation safety oversight must be conducted by the FAA.}

_{[7] 49 U.S.C. 41309(b). Further, in accordance with 49 U.S.C. 41308(b), if it is determined that competition would not be reduced or eliminated, the DOT must approve the proposed agreement. If it is determined that competition would be adversely affected, but the DOT finds that (1) the arrangement is nevertheless necessary to meet a serious transportation need or to achieve important public benefits, including US foreign policy goals, and (2) those public benefits cannot be met or achieved by reasonably available and materially less anticompetitive alternatives, the DOT must approve the agreement.}

_{[8] The DOT, the FAA, the Department of Defense, the Anti-trust division of the Department of Justice and any other US agency the DOT deems necessary must be served, in addition to the other carriers. 14 C.F.R. 212.10(d)(6). See also, Code-Share Safety Program Guidelines, infra at n. 5.}

Article By Jane M. Cavanaugh, Stewart B. Herman & Timothy J. Lynes of Katten Muchin Rosenman LLP

Cuba: Further Easing of the U.S. Sanctions

Following up on the historic changes in 2014 and 2015 to the five-decade U.S. trade embargo on Cuba, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the Department of Commerce’s Bureau of Industry and Security (BIS) have announced new amendments to the Cuban Assets Control Regulations (CACR) and Export Administration Regulations (EAR), effective January 27, 2016.

What U.S. Companies Need to Know About the Easing of Restrictions

Payment Terms for Authorized Exports to Cuba No Longer Restricted
OFAC restrictions have been lifted on payment and financing terms for authorized exports and reexports to Cuba, except for agricultural commodities and items. U.S. banks will be authorized to provide financing by third-country or U.S. financial institutions (e.g., letters of credit, payment of cash in advance, sales on an open account). Payment for agricultural exports will still be limited to cash in advance or financing by third-country banks only. “Authorized exports and reexports” include those authorized under a BIS license exception (e.g., products and materials exported to private sector entrepreneurs under License Exception “SCP” – Support for the Cuban People), as well as export transactions permitted by BIS under a specific license.
Most Cuban Embargo Restrictions Remain in Place
Although the amendments to the CACR and EAR signify further relaxing of Cuba sanctions, the U.S. embargo on Cuba remains largely in place; most transactions between the U.S. and Cuba continue to be prohibited.

In addition, a general policy of denial will still apply to exports and reexports of items for use by state-owned enterprises, agencies, or other organizations of the Cuban government that primarily generate revenue for the state. Additionally, applications to export or reexport items destined to the Cuban military, police, intelligence and security services remain subject to a general policy of denial.
More Favorable Licensing Policies for Certain Exports and Reexports
The following transactions still require a license application, but the chances of approval for such licenses have improved:

Exports to Cuban Government Agencies Meeting the Needs of the People: BIS is now considering, on a “case-by-case” basis, license applications for exports and reexports to Cuban state-owned enterprises and government agencies that provide services and goods to meet the needs of the Cuban people. Previously, such license applications were subject to a policy of denial. The new case-by-case policy applies to items for construction of facilities for public water treatment, electricity or other energy; sports and recreation; agricultural production; food processing; disaster preparedness, relief and response; public health and sanitation; residential construction and renovation; public transportation; wholesale and retail distribution for domestic consumption by the Cuban people; and artistic endeavors.

New Policy of Approval for Certain Exports and Reexports: License applications for the following exports and reexports are now subject to a “general policy of approval,” an upgrade from “case-by-case” consideration:

Environmental protection items: U.S. and international air quality, water, or coastline

Telecommunications items: To improve communications to, from, and among the Cuban people.

Civil aviation and commercial aircraft safety items: Those necessary to ensure the safety of civil aviation and safe operation of commercial aircraft engaged in international air transportation, including the export or reexport of civil aircraft leased to state-owned enterprises.

Agricultural items: Such as insecticides, pesticides, and herbicides, as well as other agricultural commodities (e.g., tractors and other farm equipment) not eligible for License Exception AGR

Commodities and software: To human rights organizations or to individuals and non-governmental organizations that promote independent activity intended to strengthen civil society in Cuba; also to U.S. news bureaus in Cuba whose primary purpose is the gathering and dissemination of news to the general public.

4. Travel Authorized for Additional Purposes Including Film Making
U.S. persons are still prohibited from traveling to Cuba for tourism, but OFAC now permits travel to Cuba for additional purposes as highlighted below.

Travel related to information and informational materials now includes travel for the filming of movies and TV programs, music recordings, and artwork creation.

Organization of professional meetings, public performances, clinics, workshops, and athletic and other competitions and exhibitions in Cuba, in addition to the previously authorized attendance at such events.

5. Air Carrier Services Expanded to Permit Code-Sharing and Leasing
U.S. companies can now enter into blocked space, code-sharing, and leasing arrangements to facilitate the provision of carrier services by air, in connection with travel or transportation between the U.S. and Cuba, including such arrangements with a Cuban national.

Article By Global Services of Barnes & Thornburg LLP

Havana Hold Your Hand: Reaching Out to Cuban Entrepreneurs

New regulations on Cuba enter into force today, only 29 days after President Obama promised them. The liberalized provisions focus on support for private sector actors in Cuba.

As we described here, the President announced on December 17, 2014 that his administration would release regulations liberalizing the rules on travel, financial services, remittances, and other areas. Today those provisions are a reality. Both the U.S. Departments of Commerce and Treasury issued regulations today. The Commerce Federal Register notice is available here; OFAC’s notice is available here.

Cuba As a result, the United States is now “one step closer to replacing out-of-date policies” on Cuba, said Treasury Secretary Jacob Lew. Specifically, the new regulations include these provisions:

New general license for exports of goods to entrepreneurs. The newly created License Exception SCP (for “Support for the Cuban People”) includes specific authorization to export to Cuba the following items so long as the items are designated as EAR99 or are controlled on the U.S. Commerce Control List for antiterrorism reasons only:

(1) Building materials, equipment, and tools for use by the private sector;

(2) Tools and equipment for private sector agricultural activity; or

(3) Tools, equipment, supplies, and instruments for use by private sector entrepreneurs.

General license for telecommunication equipment. License Exception SCP also permits export of items for telecommunications, including access to the Internet, use of Internet services, infrastructure creation and upgrades.
Financial transactions. Accepting payment for authorized exports is permitted. Under existing OFAC regulation, all transactions ordinarily incident to lawful exports are authorized.
Travel to Cuba: Transactions incident to travel within 12 categories are permitted, including travel for educational activities (including people-to-people travel), journalistic and religious activities, professional meetings, and humanitarian projects. The travel must fulfill all the explicit provisions of the general licenses set forth in the regulations. Travel for tourist activities remains prohibited by statute, and will not be permitted under these general licenses.
Travel services: Travel agents and airlines may provide authorized travel and carrier services.
Credit and Debit Cards: U.S. credit and debit cards may be used in Cuba for travel-related and other transactions, and U.S. financial institutions are permitted to enroll merchants and process such transactions.
Per Diems: The per diem limitation on authorized travelers’ spending in Cuba has been eliminated.
Imports: Authorized travelers may import into the United States up to $400 worth of goods from Cuba (including up to a total of $100 in alcohol or tobacco products).
Microfinancing: Microfinancing projects for humanitarian purposes are permitted, so long as they do not violate the existing ban on certain loans involve Cuban-government confiscated property.
Family remittances: Remittances of up to $2,000 in any consecutive three-month period are now permitted. Authorized travelers to Cuba may carry up to $10,000 in total remittances. Additionally, banking institutions, including U.S.-registered brokers or dealers in securities and U.S.-registered money transmitters, are authorized to provide services in connection with the collection or forwarding of remittances to Cuba.
Correspondent Accounts: U.S. depository institutions are authorized to open correspondent accounts at Cuban financial institutions to facilitate the processing of authorized transactions.
“Cash in Advance” Interpretation: The regulatory interpretation of “cash in advance” is revised from “cash before shipment” to “cash before transfer of title or control” to allow expanded financing options for authorized exports to Cuba.
Telecommunications: Transactions to provide commercial telecommunications services that link third countries to Cuba and within Cuba are generally authorized.
Transactions with Cuban Nationals Outside of Cuba: U.S.-owned or -controlled entities in third countries may provide, with some limitations, services (and goods) to Cuban nationals in third countries. The accounts of Cuban nationals who have permanently relocated outside of Cuba are unblocked.
Insurance: A new interpretation permits the provision of health insurance, life insurance, and travel insurance and related services to authorized travelers.

Some critics in Congress have questioned the legality of the President’s actions, citing the myriad statutes that constitute the Cuban embargo (including things like the Trading with the Enemy Act, the LIBERTAD Act, and the Cuban Democracy Act). But all the new provisions published today appear carefully crafted to stay within the President’s powers, and not to fall afoul of those many statutory boundaries of the decades-old embargo. For more fundamental change, we must await legislative action.

ARTICLE BY

J. Scott Maberry

Fatema K. Merchant

Sheppard, Mullin, Richter & Hampton LLP

Tag: Cuban Embargo

The Future of Business Relations in Cuba – Commentary from a Seasoned Customs Attorney

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