U.S. Treasury and Commerce Release Revised Cuba Sanctions Regulations

HIGHLIGHTS:

• On the morning of Jan. 16, 2015, the U.S. Treasury Department, Office of Foreign Assets Control (OFAC) and the U.S. Department of Commerce Bureau of Industry and Security (BIS) will publish revised Cuba sanctions regulations opening trade with Cuba for the first time in decades. Those changes are the first step in moving toward normal relations with Cuba.
• The revised regulations ease certain limitations on travel to Cuba and certain associated services (e.g., insurance services), broaden exports and imports, and make financial transactions related to authorized transactions easier. The biggest impacts appear to be in travel, telecommunications, financial services and exports to the Cuban private sector.

A pre-release of the revised regulations from the U.S. Treasury Department, Office of Foreign Assets Control (OFAC) and the U.S. Department of Commerce Bureau of Industry and Security (BIS) identifies the extensive changes in the relations between the United States and Cuba. This alert provides a brief summary of these changes to the Cuba sanctions implemented by the regulations.

For an analysis of the pertinent issues surrounding the monumental change in economic and diplomatic relations with Cuba announced on Dec.17, 2014, see our Holland & Knight alert, "U.S. Begins Easing Cuba Embargo: New Opportunities and Challenges," Dec. 23, 2014.

Financial Services

Correspondent Accounts

• New authorizations allowing U.S. depository institutions to open and maintain correspondent accounts at Cuban financial institutions to facilitate the processing of authorized transactions and to permit U.S. financial institutions to reject and process certain funds transfer transactions. However, these new authorizations do not apply to an account established in the U.S. or with a person subject to U.S. jurisdiction by, on behalf of, or for the benefit of, Cuba or a Cuban national.
• Processing of Certain Financial Instruments (credit cards, debit cards, stored value cards, etc.)
  • All transactions incident to the processing and payment of credit cards, debit cards, stored value cards, checks, drafts, travelers' checks and similar instruments used or negotiated in Cuba by any person authorized to engage in financial transactions in Cuba will now be authorized.
  • Persons subject to U.S. jurisdiction may rely on the traveler with regard to compliance with this authorization, provided that such persons do not know or have reason to know that a transaction is not authorized. Accordingly, U.S. financial institutions will now be authorized to enroll merchants and process credit and debit card transactions for travel-related and other authorized transactions.

Remittances

• Limits on generally licensed remittances to Cuban nationals (other than certain prohibited Cuban government and Cuban Communist Party officials) will be increased from $500 to $2,000 per quarter provided that:
  • They are not made from a blocked source.
  • The recipient is not a prohibited official of the government of Cuba or the Cuban Communist Party.
  • They are not made for emigration purposes.
  • The remitter, if an individual, is at least 18 years old.
• Certain remittances to Cuban nationals for humanitarian projects, support for the Cuban people, development of private businesses (including small farms) or to students in Cuba pursuant to an educational license will be generally authorized without limitation.
• Carrying Remittances to Cuba. Authorized travelers will be allowed to carry with them to Cuba $10,000 in total family remittances, periodic remittances, remittances to religious organizations in Cuba and remittances to students in Cuba pursuant to an educational license.
• Under an expanded general license, banking institutions, including U.S. registered brokers or dealers in securities and U.S. registered money transmitters, will be authorized to provide services in connection with collection or forwarding of remittances to Cuba without having to apply for a specific license. Although this authorization expands those who may engage in remittance forwarding services without a specific license, these parties will be subject to special recordkeeping requirements that include, among others, obtaining certain certifications from authorized travelers/remitters as well as certain material information which must be maintained for at least five years.

Insurance

• U.S. insurers are authorized to issue and provide coverage for insurance policies covering life, health and travel for individuals ordinarily resident in a country outside of Cuba traveling to and within Cuba (including authorized U.S. person travelers to Cuba). Such policies can be serviced and related claims can be paid.

Telecommunications

• All transactions, including payments, incidental to the provision of telecommunications services involving Cuba, including roaming agreements, are authorized.
• All transactions, including payments, relating to the establishment of telecommunications facilities, including fiber-optic cable and satellite facilities connecting Cuba with the U.S. or third countries are authorized.
• "Telecommunications services" include data, telephone, Internet, radio, television and news wire feeds, regardless of medium of transmission.

Travel

• Air carrier services. Persons subject to U.S. jurisdiction are authorized under a general license to provide air carrier services to, from, or within Cuba in connection with authorized travel. However, although OFAC has lifted the ban on scheduled service to Cuba, the Federal Aviation Administration (FAA) is beginning its process of considering whether to authorize scheduled service to Cuba.
• It is no longer necessary to use a licensed travel service provider license – this opens up the travel field considerably.
• Removal of the traveler's expense per diem. There is no dollar limit on expenses. It is allowable to import $400 worth of goods, including $100 of alcohol or tobacco.
• Expanded travel to Cuba. Travel to Cuba is permitted by general license (i.e., an authorization to undertake activities as long as the person meets the required criteria) related to the following:
  • 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 or research or educational institutes
  • exportation, importation, or transmission of information or information materials
  • certain authorized export transactions
• The general license travel categories have been expanded to include business trips for market research, commercial marketing, sales negotiation and servicing related to authorized exports.

Export

• Payment terms. For authorized exports to Cuba, the regulatory interpretation of "cash in advance" has been changed from "cash before shipment" to "cash before the transfer of title to, and control of, the exported items to the Cuban purchaser. This will provide a U.S. exporter with more payment flexibility in its dealings with Cuban parties.
• Creation of a new export licensing exception. Support for the Cuban People (SCP) allows for the export of the following without a license:
  • building materials, equipment and tools for use by the private sector for privately owned buildings
  • tools and equipment for private sector agricultural activity
  • tools, equipment, supplies and instruments for use by private sector entrepreneurs
• Although vague, the scope of this license exception appears to be quite broad, meaning that any sale to a non-government entity in Cuba is now allowable. Therefore, the only limitations will be financing issues and how the Cuban government responds to this potential flood of U.S. products.

Next Steps for Expanding Relations with Cuba

As the revised regulations are implemented, it is likely that further clarifications – and possibly adjustments – will be necessary. There will be many other areas affected by this history-making change in U.S. relations with Cuba, including the likely participation of Cuba in the 2015 Summit of the Americas.

Holland & Knight Cuba Action Team

Holland & Knight’s Cuba Action Team has dealt with Cuba-related issues for more than 20 years. The Cuba Action Team includes a number of lawyers from our robust Latin America Practice, International Trade Practice and our Financial Services Practice. We have extensive experience assisting a wide range of U.S. and non-U.S. clients on Cuban trade embargo issues across diverse industries, including airlines, shipping lines, insurers, agricultural, and pharmaceutical companies and organizations. In addition, Holland & Knight has a Cuban licensed/trained lawyer. Please feel free to contact our team leaders:

Cuba Action Team Leader, Financial Services
Andy Fernandez | 305.789.7433 | andres.fernandez@hklaw.com

International Trade (Economic Sanctions/Export Control) Practice
Ron Oleynik | 202.457.7183 | ron.oleynik@hklaw.com
Jonathan Epstein | 202.828.1870 | jonathan.epstein@hklaw.com

Latin America Practice Team Chair
Roberto Pupo | 305.789.7750 | roberto.pupo@hklaw.com