On December 17, 2014, the Obama Administration announced the prospective easing of some restrictions in the U.S. economic embargo on Cuba (the “Economic Sanctions”). The Obama Administration had laid the groundwork for lifting some of these restrictions with its 2009 and 2011 actions to, among other things, permit U.S. citizens to travel to Cuba to visit family and send small amounts of money to family in Cuba. However, until recently, the Administration was unwilling to further ease the Economic Sanctions while Cuba had imprisoned Alan Gross, a U.S. citizen and USAID contractor, and an unnamed U.S. intelligence agent. At the urging of Pope Francis, and with the assistance of the Canadian Government, Cuba released both of these men to the United States in a prisoner exchange on December 17. That exchange was the direct impetus to President Obama’s historic announcement.

The Obama Administration’s new approach to Cuba is targeted at engaging and empowering the Cuban people. However, despite the proposed easing of the Economic Sanctions, the broader Cuba trade and investment restrictions will remain in place unless the Congress acts.

Summary of Proposed Changes

Although President Obama announced the proposed changes in a press conference on December 17, no actual legal changes have yet taken effect. Instead, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) has indicated that the changes will be implemented by OFAC through amendments to the Cuban Assets Control Regulations, which are found at 31 C.F.R. Part 515 (the “CACR”), and by the U.S. Department of Commerce via amendments to the Export Administration Regulations found at 15 C.F.R. Part 700 (the “EAR”). Typically, such regulatory changes are announced through publication in the Federal Register.

In advance of these formal regulatory amendments, the White House issued a press release that briefly summarizes those impending changes:

  • Re-establishing full and formal diplomatic relations between the United States and Cuba, including reopening the U.S. Embassy in Cuba and reopening the Cuban Embassy in Washington, D.C.;
  • Asking the Secretary of State to reconsider Cuba’s current designation as a “State Sponsor of Terror” and possible removal from that list of countries, which would then create additional options for Cuban trade under U.S. export control laws;
  • Facilitating an expansion of travel both to Cuba and by the Cuban people, including the issuance of general licenses for travelers in connection with following activities:

      • Family visits;
      • Official business of the U.S. Government, foreign governments and certain intergovernmental organizations;
      • Journalistic activity;
      • Professional research and professional meetings;
      • Educational activities;
      • Religious activities;
      • Public performances, clinics, workshops, athletic and other competitions and exhibitions;
      • Support for the Cuban people;
      • Humanitarian projects;
      • Activities of private foundations, research or educational institutions;
      • Exportation, importation or transmission of information or information materials; and
      • Certain export transactions that may be considered for authorization under existing regulations and guidelines;
  • Authorizing expanded sales and exports of some limited categories of goods and services to Cuban private sector and entrepreneurial buyers (e.g., building materials, agricultural equipment and telecommunications equipment) from the United States to Cuba;
  • Authorizing U.S. travelers to import up to US$400 of Cuban origin-goods from Cuba, of which not more than US$100 can be either Cuban tobacco or alcohol products;
  • Allowing U.S. credit and debit cards to be used by travelers in Cuba and allowing U.S. financial institutions to open correspondent accounts with Cuban financial institutions to facilitate permitted transactions; and
  • Permitting U.S. telecommunications providers to establish more telecommunications infrastructure in Cuba.

In the parlance of OFAC, a “general license” is one that is announced in writing by OFAC and that can be used by eligible persons without any prior written application to or approval by OFAC, in contrast to a “specific license” for which a written application to OFAC is necessary and that can be granted or denied in OFAC’s discretion.

Implications and Prospects for Greater Easing of Economic Sanctions

President Obama’s December 17 announcement draws upon the President’s broad authority to make changes to the Economic Sanctions under the relevant authorizing legislation. In that regard, the U.S. Supreme Court has affirmed the primacy of the President in the conduct of the nation’s foreign affairs, including the Court’s decision to uphold President Roosevelt’s proclamation of an embargo on Bolivia in United States v. Curtiss-Wright Export Corp., 299 U.S. 304 (1936), and its refusal to intervene in President Carter’s decision to normalize diplomatic relations with China in Goldwater v. Carter, 444 U.S. 996 (1979). However, the President’s executive authority is not unlimited. Despite the announced changes outlined on December 17, President Obama cannot unilaterally terminate the Economic Sanctions.

The Economic Sanctions are based upon several different federal laws, including the Cuban Liberty and Democratic Solidarity (Libertad) Act of 1996 (the “Helms-Burton Act”), the Cuban Democracy Act of 1992 and the Trading with the Enemy Act. Economic sanctions administered by OFAC are frequently imposed by authority of the Executive Branch under the discretion granted by an enabling act of Congress, but Title II of the Helms-Burton Act expressly requires the Executive Branch to enforce the Economic Sanctions against Cuba until such time as the Cuban Government evolves to certain statutorily-specified American requirements. Thus, only Congress may act to repeal the Economic Sanctions or to allow the President to lift them altogether. Likewise, several of the proposed changes, including the re-opening of the U.S. Embassy in Havana, will require future funding appropriations from Congress.

Based on Congress’ mixed initial reactions to President Obama’s announcement and the Republicans taking control of both houses of Congress when it begins its new term in January 2015, Congress is unlikely to change these underlying statutes to roll back the Economic Sanctions. Indeed, Congress may well try to act to nullify some or even all of the President’s announced changes, either through yet more mandatory legislation such as the Helms-Burton Act or through refusal to fund certain actions that require Congressional appropriations. Much will undoubtedly depend on the particular details of the regulatory changes yet to be formalized by OFAC and the Department of Commerce. Much will also depend on the predictable statutory and constitutional “chess game” that will be played out in the coming months between the White House and the Republican-dominated but not quite veto-proof Congress and possibly even in some federal court litigation.

President Obama’s December 17 announcement thus provides a new glimmer of hope for improved future political and economic relations with Cuba and, if not frustrated by counter-moves in Congress, the proposed changes could well lead to some new opportunities for certain U.S. companies to do business selectively in Cuba. Dorsey’s teams of National Security Law experts led by partners Nelson Dong and Larry Ward and Latin America experts led by partner Chris Bercaw stand ready to assist with such potential opportunities presented by, and concerns with, these proposed changes.