On January 25, the Obama Administration made concurrent announcements about its evolving posture on the Cuban sanctions. On that date, the Office of Foreign Assets Control (OFAC) released more changes to the Cuban Assets Control Regulations (CACR), and the Bureau of Industry and Security (BIS) released changes to the Export Administration Regulations (EAR).
Overall, these CACR and EAR amendments will continue the expansion of opportunities for more U.S. persons to travel to Cuba without any prior written application to OFAC, allow more sectors of U.S. business to export their goods and services to Cuba, and increase the permissible trade financing options for certain types of authorized U.S. exports to Cuba. In making these changes, President Obama continues his efforts to mitigate or reduce the restraints of the historic Cuban sanctions to the greatest extent possible within the narrow discretion granted to the President by several sanctions statutes targeting the present Cuban regime.
More Travel-Related Transactions Allowed
OFAC’s recent efforts to loosen the restrictions on U.S. persons traveling to Cuba have been generally implemented by adding more “general licenses” for categories of authorized travelers that would obviate any need to file for and obtain a “specific license” from OFAC for such travel. In that same vein, OFAC has continued to augment its list of “general license” categories to expand opportunities for U.S. persons to travel to Cuba.
In the latest round of changes announced on January 25, OFAC will now permit travel-related and other transactions directly incident to media productions. More specifically, U.S. persons may now travel to Cuba for professional media or artistic productions of exempt “information or informational materials” that could be exported or transmitted to Cuba or imported or transmitted from Cuba, including the filming or production of such media programs (e.g., motion pictures or television programs), musical recordings, and the creation of artworks in Cuba by persons who are regularly employed in or have demonstrated professional experience in a field relevant to such professional media or artistic productions.
Additionally, OFAC has enlarged its existing general license for travel-related and other transactions that had previously only allowed U.S. persons to attend professional meetings or conferences held in Cuba to allow U.S. persons now also to organize such professional meetings or conferences in Cuba. Undoubtedly, this expansion will benefit the U.S. hospitality industry and many U.S.-based professional societies and groups.
Furthermore, OFAC has expanded its general license authorization for travel-related and other transactions for U.S. persons to set up amateur or semi-professional international sports federation competitions in Cuba and to arrange public performances, workshops, clinics, other athletic or non-athletic competitions, and demonstrations in Cuba. OFAC also has eliminated a former requirement that the U.S. proceeds derived from certain athletic events had to be donated to certain groups and that certain events held in Cuba had to be organized and supervised partly by U.S. persons.
OFAC also augmented an existing general license for Cuban travel to allow travel-related transactions directly related to market research, commercial marketing, sales or contract negotiation, accompanied delivery, installation, leasing, or servicing in Cuba of any items authorized for export or reexport to Cuba by the BIS under the EAR.
However, because the Cuban travel embargo mandated by U.S. statute still forbids general tourism travel to Cuba, all of the CACR general licenses, including the changes announced on January 25, carry a caveat that such authorized travel to Cuba is not to include tourism-type travel.
More Transactions for the Export of Goods and Services Allowed
The BIS said in its own January 25 announcement that it is terminating its “policy of denial” for EAR export license applications to Cuba (i.e., the EAR’s way to express that such applications would be automatically denied upon receipt without any substantive review). Instead, the BIS will now seriously consider such license applications on a case-by-case basis if the exports or reexports relate to items that serve the needs of the Cuban people. Importantly, the BIS has now explicitly said it will also entertain applications for exports and reexports for such purposes to Cuban state-owned enterprises and agencies and other Cuban Government organizations that offer goods and services to the Cuban people.
The BIS has identified these as illustrative situations that would be viewed as “serving the needs of the Cuban people:” agricultural production; artistic endeavors (including the creation of public content, historic and cultural works and preservation); education; food processing; disaster preparedness, relief and response; public health and sanitation; residential renovation or construction; public transport facilities; and infrastructure construction of direct benefit to the Cuban people (e.g., public facilities for the supply of sanitary water or electric power to the Cuban public).
The BIS also said it now will generally approve license applications for exports or reexports of items for telecommunications that would improve or enhance communications to, from, and among the Cuban people; certain agricultural items not eligible for a “license exception”-type shipment to Cuba under the EAR (e.g., insecticides, pesticides, and herbicides); and items necessary to ensure safe civil aviation and safe operation of commercial aircraft in international air travel.
Under the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA), OFAC must limit the permissible payment and financing terms for U.S. persons in their export and reexport of agricultural commodities and items, but that requirement did not extend by statute to non-agricultural items. Given that flexibility allowed the Administration under TSRA, on January 25, OFAC amended the CACR to eliminate such TSRA-based financing restrictions for most types of authorized non-agricultural exports. The trade financing options for permissible non-agricultural exports and reexports of U.S.-origin goods may now include cash payment in advance, open account sales, and third-country or U.S. financial institution loans.
Within the confines of existing statutes, the Obama Administration clearly continues to press forward to relax the Cuban sanctions as much as it can. However, because these changes are so new and thus so untested, U.S. companies should approach such new Cuban business opportunities with care and caution, mindful of the “fine print” in all of these regulatory changes.