Articles Posted in Cuba Sanctions

OFAC removal of 45 parties from the list of Specially Designated Nationals deserves attention.

On March 24, 2015, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the removal of 45 parties from the list of Specially Designated Nationals (SDN List). All had previously been designated in relation to U.S. Cuba sanctions. On closer review, it appears that none of these removals are particularly important or newsworthy—dead persons, dissolved companies, sunken ships and so on. U.S. officials reported to media sources that this was a routine exercise in cleaning up out-of-date sanctions listings.

So why the fuss? Under U.S. Cuba sanctions, in addition to the broad embargo, there is a lengthy list of SDNs. This includes a number of major companies, key individuals and vessels. This can present another obstacle in Cuba in areas where sanctions are relaxed (even where activities are newly permitted, SDNs remain off limits normally). Thus, both companies interested in Cuba and the sanctioned parties themselves are watching for any signals that the Obama administration will update the SDN List as part of its Cuba sanctions reforms.

What should we expect? Based on past practice, it is likely that the U.S. government will be slow and deliberate in removing parties from the SDN List. Removal is an important carrot, and U.S. officials will likely seek changes in behavior and specific actions in advance of de-listing (reparations, privatization, remedying human rights practices, distancing from the regime and so on depending on the party). This is the approach that the U.S. has taken with SDNs in Myanmar/Burma as sanctions reform has proceeded in that market.

How do sanctioned parties come off the SDN List? There are two paths:

First, the U.S. government can remove the party on its own initiative—this is an area of executive discretion and the President or OFAC can take action without the need for any process or Congressional action in most cases.

Second, sanctioned parties can seek removal under a formal procedure for de-listing conducted by OFAC under 31 C.F.R. § 501.807. Under the procedure, the SDNs “provide arguments and evidence as to why “insufficient basis exists for the designation” and may “propose remedial steps … such as corporate reorganization, resignation of persons from positions in a blocked entity, or similar steps, which the person believes would negate the basis for designation.” The precedents are few, and there is no set time limit for the process. However, OFAC has de-listed SDNs in the past based on formal requests under § 501.807.

Where the revised Cuba sanctions permit activities or trade, it will be important for companies and individuals to be vigilant for SDN involvement. However, should a situation arise where an SDN is the only, or most capable, partner for a U.S. company, that company can reach out to counsel in Washington, D.C., to discuss the potential for de-listing. There are paths to engage with U.S. policy makers to gauge the prospects for a given party, and the SDN can petition for removal. U.S. officials also may consider licenses to authorize specific business with SDNs. The involvement of U.S. companies can make a significant difference in the U.S. response versus an SDN approaching on its own. However, persons subject to U.S. jurisdiction should be careful not to transact with or facilitate on behalf of any SDN. This requires careful compliance planning.

Given the above, expect those interested in Cuba to continue to carefully watch any changes to the SDN List for clues to U.S. policy, even if it only turns out to be a defunct company or sunken ship.

The following deletions have been made to OFAC’s SDN List:

ABASTECEDORA NAVAL Y INDUSTRIAL, S.A. (a.k.a. ANAINSA), Panama [CUBA].
ANAINSA (a.k.a. ABASTECEDORA NAVAL Y INDUSTRIAL, S.A.), Panama [CUBA].
ABDELNUR, Nury de Jesus, Panama (individual) [CUBA].
AGENCIA DE VIAJES GUAMA (a.k.a. GUAMA TOUR; a.k.a. GUAMATUR, S.A.; a.k.a. VIAJES GUAMA TOURS), Bal Harbour Shopping Center, Via Italia, Panama City, Panama [CUBA].
VIAJES GUAMA TOURS (a.k.a. AGENCIA DE VIAJES GUAMA; a.k.a. GUAMA TOUR; a.k.a. GUAMATUR, S.A.), Bal Harbour Shopping Center, Via Italia, Panama City, Panama [CUBA].
GUAMATUR, S.A. (a.k.a. AGENCIA DE VIAJES GUAMA; a.k.a. GUAMA TOUR; a.k.a. VIAJES GUAMA TOURS), Bal Harbour Shopping Center, Via Italia, Panama City, Panama [CUBA].
GUAMA TOUR (a.k.a. AGENCIA DE VIAJES GUAMA; a.k.a. GUAMATUR, S.A.; a.k.a. VIAJES GUAMA TOURS), Bal Harbour Shopping Center, Via Italia, Panama City, Panama [CUBA].
ALEGRIA DE PIO (Naviera Maritima de Arosa, Spain) (vessel) [CUBA].
AVALON, S.A., Colon Free Zone, Panama [CUBA].
BEWELL CORPORATION, INC., Panama [CUBA].
CARBONICA, S.A., Panama [CUBA].
CARIBBEAN HAPPY LINES (a.k.a. CARIBBEAN HAPPY LINES CO.), Panama [CUBA].
CARIBBEAN HAPPY LINES CO. (a.k.a. CARIBBEAN HAPPY LINES), Panama [CUBA].
CARIBSUGAR, S.A., Panama [CUBA].
CARISUB, S.A., Panama [CUBA].
CASTELL VALDEZ, Osvaldo Antonio, Panama (individual) [CUBA].
CHAMET IMPORT, S.A., Panama [CUBA].
COMPANIA PESQUERA INTERNACIONAL, S.A., Panama [CUBA].
DELGADO ARSENIO, Antonio, Panama (individual) [CUBA].
DUQUE, Carlos Jaen, Panama (individual) [CUBA].
FAMESA INTERNATIONAL, S.A., Panama [CUBA].
GLOBAL MARINE OVERSEAS, INC., Panama [CUBA].
HERMANN SHIPPING CORP., INC., Panama [CUBA].
HYALITE (Whiteswan Shipping Co., Ltd., Cyprus) (vessel) [CUBA].
INVERSIONES LUPAMAR, S.A. (a.k.a. LUPAMAR INVESTMENT COMPANY), Panama [CUBA].
LUPAMAR INVESTMENT COMPANY (a.k.a. INVERSIONES LUPAMAR, S.A.), Panama [CUBA].
KOL INVESTMENTS, INC., Miami, FL, United States [CUBA].
LOUTH HOLDINGS, S.A., Panama [CUBA].
PADRON TRUJILLO, Amado, Panama (individual) [CUBA].
PESCADOS Y MARISCOS DE PANAMA, S.A. (a.k.a. PESMAR S.A.; a.k.a. PEZMAR S.A.), Panama City, Panama [CUBA].
PESMAR S.A. (a.k.a. PESCADOS Y MARISCOS DE PANAMA, S.A.; a.k.a. PEZMAR S.A.), Panama City, Panama [CUBA].
PEZMAR S.A. (a.k.a. PESCADOS Y MARISCOS DE PANAMA, S.A.; a.k.a. PESMAR S.A.), Panama City, Panama [CUBA].
PIRAMIDE INTERNATIONAL, Panama [CUBA].
RADIO SERVICE, S.A., Panama [CUBA].
RECICLAJE INDUSTRIAL, S.A., Panama [CUBA].
ROSE ISLANDS (Shipley Shipping Corp., Panama) (vessel) [CUBA].
SIBONEY INTERNACIONAL, S.A., Edificio Balmoral, 82 Via Argentina, Panama City, Panama; Venezuela [CUBA].
STERN, Alfred Kaufman, Prague, Czech Republic (individual) [CUBA].
TALLER DE REPARACIONES NAVALES, S.A. (a.k.a. TARENA, S.A.), Panama City, Panama [CUBA].
TARENA, S.A. (a.k.a. TALLER DE REPARACIONES NAVALES, S.A.), Panama City, Panama [CUBA].
TECHNIC DIGEMEX CORP., Calle 34 No. 4-50, Office 301, Panama City, Panama [CUBA].
TEMIS SHIPPING CO., Panama [CUBA].
TRAVEL SERVICES, INC., Hialeah, FL, United States [CUBA].
TREVISO TRADING CORPORATION, Edificio Banco de Boston, Panama City, Panama [CUBA].
HEYWOOD NAVIGATION CORPORATION, c/o MELFI MARINE CORPORATION S.A., Oficina 7, Edificio Senorial, Calle 50, Apartado 31, Panama City 5, Panama [CUBA].
POCHO NAVIGATION CO. LTD., c/o EMPRESA DE NAVEGACION MAMBISA, Apartado 543, San Ignacio 104, Havana, Cuba [CUBA].
BROTHERS (f.k.a. TULIP ISLANDS) (C4QK) Bulk Carrier 25,573DWT 16,605GRT Cyprus flag (Ciflare Shipping Co. Ltd.) (vessel) [CUBA].
TULIP ISLANDS (a.k.a. BROTHERS) (C4QK) Bulk Carrier 25,573DWT 16,605GRT Cyprus flag (Ciflare Shipping Co. Ltd.) (vessel) [CUBA].
CARIBBEAN SALVOR (9H2275) Tug 669DWT 856GRT Malta flag (Compania Navegacion Golfo S.A.) (vessel) [CUBA].
HARNMAN H (f.k.a. PEONY ISLANDS) (5BXH) Bulk Cargo 26,400DWT 15,864GRT Cyprus flag (PEONY SHIPPING CO. LTD. (SDN)) (vessel) [CUBA].
PEONY ISLANDS (a.k.a. HARNMAN H) (5BXH) Bulk Cargo 26,400DWT 15,864GRT Cyprus flag (PEONY SHIPPING CO. LTD. (SDN)) (vessel) [CUBA].
NEW GROVE (f.k.a. KASPAR) (P3QJ3) General Cargo 1,909DWT 754GRT Cyprus flag (Oakgrove Shipping Co. Ltd.) (vessel) [CUBA].
KASPAR (a.k.a. NEW GROVE) (P3QJ3) General Cargo 1,909DWT 754GRT Cyprus flag (Oakgrove Shipping Co. Ltd.) (vessel) [CUBA].
PINECONE (f.k.a. GRETE) (P3QH3) General Cargo 1,941DWT 753GRT Cyprus flag (Pinecone Shipping Co. Ltd.) (vessel) [CUBA].
GRETE (a.k.a. PINECONE) (P3QH3) General Cargo 1,941DWT 753GRT Cyprus flag (Pinecone Shipping Co. Ltd.) (vessel) [CUBA].
RAVENS (9H2485) General Cargo 2,468DWT 1,586GRT Malta flag (ATAMALLO SHIPPING CO. LTD. (a.k.a. ANTAMALLO SHIPPING CO. LTD.) (SDN)) (vessel) [CUBA].
TEPHYS (f.k.a. PAMIT C) (H2RZ) General Cargo 15,123DWT 8,935GRT Cyprus flag (Tephys Shipping Co. Ltd.) (vessel) [CUBA].
PAMIT C (a.k.a. TEPHYS) (H2RZ) General Cargo 15,123DWT 8,935GRT Cyprus flag (Tephys Shipping Co. Ltd.) (vessel) [CUBA].
WEST ISLANDS (C4IB) General Cargo 15,136DWT 9,112GRT Cyprus flag (WEST ISLAND SHIPPING CO. LTD. (SDN)) (vessel) [CUBA].

On February 12, Sen. Amy Klobuchar (D-MN) introduced Senate Bill 491, the Freedom to Export to Cuba Act. This bipartisan bill is intended to lift the broad embargo on U.S. trade and investment in Cuba, but leaves in place many of the restrictions related to human rights and property claims, as well as those imposed by other laws and regulations for other reasons other than the embargo, such as Cuba’s state sponsorship of terrorism. In proposing this type of legislation, its sponsors hoped to take an incremental step to open up U.S.-Cuba trade without addressing the most sensitive issues.

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In December 2014, President Obama made an unexpected announcement signaling a “new course” for Cuba after more than fifty years of comprehensive U.S. sanctions. The changes to U.S. sanctions and export policy under the Cuban Assets Control Regulations and Export Administration Regulations (EAR) implemented in January 2015, although limited, opened new business opportunities for U.S. companies. Further liberalization may be considered in the future with Congressional support, although that is the subject of heated discussions in Washington, D.C. For now, it will make sense for many companies to consider strategic first steps in Cuba, including for intellectual property protection.

When change comes, chance favors the prepared.

First, under current Cuban law, certain U.S. persons and entities are allowed to file a trademark application in Cuba, even when one is not using the trademark in Cuba. Second, being first to file under Cuba’s regime will help preempt opportunists who may seek to file a trademark application for your own trademark. Third, the Cuban trademark application process is protracted, taking months or years, and will slow as the system floods with new applications in the expectation Cuba will soon become an eagerly sought market. Fourth, the adversarial process of eradicating pirated marks will be protracted.

Assuming there are no already-existing blocking marks, the costs to register a mark are relatively low. Protection of your valuable intellectual property—your brand and the customer goodwill it symbolizes—will allow your company to be in a position to conduct business in this new market, whenever it opens, and defend your rights against pirates looking to cash in on your own brand.

With this client alert, we hope to inspire you to file for your trademarks in Cuba, before someone else does and you have to pay to acquire what is rightfully yours.

Cuban Economic Embargo

The current U.S. sanctions program authorizes U.S. persons to apply for and maintain trademark registrations in Cuba, as well as to take certain specified actions necessary to protect their intellectual property. Usually, independent “trademark agents” in Havana are used to file the applications. Under the sanctions system, transmitting payment to the agents for their services has in some cases been difficult, but the financial transactions restrictions may be easing presently.

What If Someone Has Filed An Application For Your Trademark?

The Cuban trademark system is mostly untested from the United States perspective, obviously because of the general sanctions. Even though the U.S. regulations permit trademark registration in Cuba, many U.S. companies have not seen the economic motivation to protect trademarks, being unable to trade in Cuba. Now that the prospects are rising, so is interest in owners registering their marks, and so, too, the interest in pirates exploiting their opportunities.

The Cuban trademark system, described by the International Trademark Association (INTA), is basically like most other countries in the world. Cuba and the United States both are parties to the same major trademark treaty systems. Like most countries, Cuba has a “first to file” system, giving preference to those who are first to file an application for a mark. As a general rule, U.S. trademark law, based on “common law,” is quite unusual in that it recognizes rights in unregistered marks. Most of the rest of the countries in the world, including Cuba, do not generally recognize “common law” or unregistered rights. Thus owning a registration there is crucial to effectively protecting your brand.

Cuban law does provide various procedures to object to applications or registrations of conflicting marks. Such procedures have not been much used by U.S. companies to date. As with applications, one can expect adversarial proceedings to be increasingly protracted. The costs are relatively low at this point, but delay in itself is costly, particularly if there are infringers and counterfeiters at large in the marketplace.

Generally, the more famous your brand is internationally, the higher your chances of blocking a mark in a country where you do not have your own prior registration. The fame of a brand, however obvious it may seem, is usually a question of fact requiring proof, often substantial proof, to satisfy a tribunal in a first-to-file jurisdiction. Also, however obvious it might seem, it can be difficult to prove that an opportunist is in fact a “bad faith” pirate. In “first to file” systems around the world, the first to file has the benefit of the doubt.

Conclusion

For all these reasons, it is highly advisable to verify your eligibility under federal regulations to engage in trademark protection activities in Cuba; to apply to register your important brands in Cuba if you hope to do business there; and to initiate proceedings to try to expunge pirated marks which have already been registered in Cuba by others.

Among the amendments to the Cuban Assets Control Regulations published by OFAC on January 16 is a provision (section 515.582) that provides that “[p]ersons subject to U.S. jurisdiction are authorized to engage in all transactions, including payments, necessary to import certain goods and services produced by independent Cuban entrepreneurs as determined by the State Department as set forth on the State Department’s Section 515.582 List ….” At the time of the CACR revisions, the State Department had not yet published that list.

On February 13, the State Department published the Section 515.582 List. The State Department’s announcement actually is a negative list of categories of the U.S. tariff schedules that are not authorized. Items covered by non-listed categories are permitted.

In fact, the majority of tariff categories are excluded. The categories that are allowed cover product categories such as leather goods, wood items, shoes and works of art. Cigar imports remain prohibited.

The United States does not grant any tariff benefits to Cuba, and imports from that country are subject to relatively high “Column 2” rates. Persons carrying authorized items in their luggage when returning from Cuba may be able to apply the personal use exemption, but purchases of products in commercial quantities will remain complicated.

Note that the State Department’s notice emphasizes that persons importing goods under Section 515.582 “must obtain documentary evidence that demonstrates the entrepreneur’s independent status, such as a copy of a license to be self-employed issued by the Cuban government or, in the case of an entity, evidence that demonstrates that the entrepreneur is a private entity that is not owned or controlled by the Cuban government.”

In a January 14 segment of the British news program, “The Briefing” (on British Internet radio channel, Monocle.com), host Nancy Durham spoke with Pillsbury partner Matias Travieso-Diaz on potential obstacles and practical implications in play in the reestablished diplomatic relations between the U.S. and Cuba.

Download Transcript: An Interview with Matias Travieso-Diaz on U.S.-Cuba Relations

(For further information on the legal considerations of doing business in Cuba, contact any member of Pillsbury’s International Trade Group.)

The Obama administration implemented its promised changes to U.S. sanctions and export controls for Cuba effective January 16, 2015. Although most trade and transactions still are prohibited, the revisions to the Cuban Assets Control Regulations (CACR) and Export Administration Regulations (EAR) ease licensing requirements in a number of areas, including exports to and imports from Cuba of certain types of goods and services, telecommunications and Internet services, travel and travel services, financial services, remittances, and treatment of Cuban nationals in third countries.

Presidential Action to Relax the U.S. Cuba Embargo

The CACR, administered by the U.S. Department of Treasury, Office of Foreign Assets Control (OFAC) implements a comprehensive trade, investment, financial and travel embargo on Cuba prohibiting U.S. persons, including owned or controlled foreign subsidiaries of U.S. companies, from engaging in transactions in which Cuba or a Cuban national has a property interest. The EAR, administered by the Commerce Department’s Bureau of Industry and Security (BIS), control the export or reexport of goods, software and technology that are U.S. origin or contain more than de minimis U.S. content. Like the CACR, the EAR broadly prohibit trade with Cuba.

The CACR were first implemented in July 1963 under the authority of the Trading with the Enemy Act (TWEA). The sanctions were strengthened by the Cuba Democracy Act of 1992 which, among other things, prohibited the issuance of licenses for U.S.-owned foreign companies to trade with Cuba. The Cuban Liberty and Democratic Solidarity Act of 1996 (Helms/Burton) codified the CACR, requiring the President to instruct the Treasury and Justice Departments to enforce fully the CACR and prescribing conditions for the termination of the embargo including a determination that a transition government in Cuba is in power.

Both OFAC and BIS have retained licensing authority to permit certain types of transactions on a case-by-case basis. Also, the CACR incorporate exceptions that allow certain types of transactions, such as limited remittances to family members in Cuba, without requiring specific approval. OFAC and BIS have previously used their discretion to allow certain travel transactions, temporary sojourns of aircraft, agricultural exports and telecommunications services for Cuba, among other activities.

On December 17, 2015, President Obama made an unexpected announcement signaling a “new course” for Cuba after more than fifty years of comprehensive U.S. sanctions. Because of the statutory framework of the Cuba embargo, the changes are restricted to those the administration can implement within its executive discretion. Larger changes will require Congressional approval.

Announced Changes in U.S. Policy
OFAC and BIS both issued final rules amending their regulations for Cuba on January 15, 2015, which were published and became effective on January 16. See 80 Fed. Reg. 2286 and 80 Fed. Reg. 2291 (Jan. 16, 2015). Both agencies have issued additional guidance in the form of Frequently Asked Questions (FAQ). The key changes to U.S. policy are as follows:

Expanded exports of certain goods to Cuba’s private sector (§ 515.533; EAR § 740) – CACR § 515.533 permits transactions incident to the export or reexport of goods to Cuba that are authorized by BIS under the EAR. BIS has expanded authorizations for trade with Cuba via two license exceptions.

• License Exception “Support for the Cuban People” (SCP) authorizes a range of exports from the United States and reexports from third countries to the private sector in Cuba involving:
  • Sale or donation of (1) building materials, equipment and tools to construct or renovate privately owned buildings, residences, and religious or social/recreational facilities; (2) tools and equipment for private sector agricultural activity; and (3) items for private sector entrepreneurs, such as auto mechanics, barbers and restaurateurs.
  • Donation or temporary export for less than two years of items for use in scientific, archeological, cultural, ecological, educational, historic preservations or sporting activities (and, in the case of temporary exports, use in professional research).
  • Sale or donation of certain items for telecommunications, including Internet access and services, infrastructure creation and upgrades (including for the Cuban government and government-related entities in some cases).
  • Use for human rights organizations, individuals or NGOs for civil society purposes, or by news media personnel engaged in newsgathering and dissemination.

• License Exception “Consumer Communications Devices” (CCD) – Established for Cuba in 2009, this license exception was expanded to allow sales in addition to donations of consumer electronics and software. Authorized items listed by specific export control classification numbers (ECCNs) for each category include certain computers and related equipment; input-output control units; network equipment; mobile phones; memory devices; consumer information security equipment and software; digital cameras; televisions and radios; recording devices; accessories for the above; and consumer software. BIS expanded the range of computers previously authorized and adjusted some other eligible categories. CCD may be used to sell authorized items to the Cuban government and related entities for resale to the Cuban people.

For exports and reexports authorized by BIS, OFAC eased the permitted terms of payment, allowing cash to be received before transfer of title and control. Previously, the regulations required that exporters be paid in cash prior to shipment, which created significant obstacles. Financing is permitted by non-U.S. banking institutions located in third countries, and can be confirmed or advised by U.S. banks. Further easing the burden on exporters, BIS provided guidance that Cuban government import agencies and other government-owned, -operated or -controlled companies may receive, deliver and act as consignees of items exported under the two license exceptions so long as the end user is a private party. The existing license exception for agricultural commodities (AGR) continues unchanged and BIS still will require licenses for medicine and medical devices.

Telecommunications Services (§ 515.542) – OFAC expanded the existing general license for telecommunications to authorize transactions to establish facilities to provide telecommunications services linking Cuba and third countries, in addition to Cuba and the United States, and to provide those services. Persons subject to U.S. jurisdiction also are authorized to enter into and make payments under contracts with all telecommunications providers in Cuba (not just non-Cuban providers) in order to provide such services to a particular individual in Cuba.

Internet Services and Exports (§ 515.578) – The export or reexport of Internet-related services incident to communication over the Internet continues to be authorized (e.g., messaging, chat, email, social networking, photos/movies, web browsing and blogging) and has been expanded to include domain registration and web hosting, except for the promotion of tourism. This includes providing free and widely available Internet services to otherwise prohibited officials or organizations. The CACR also now authorize software design, business consulting and IT management services related to or in support of items exported or reexported under EAR license exception CCD; foreign items that are not subject to the EAR but are reexported to Cuba and would meet the CCD criteria if subject to the EAR; and publicly available software not controlled by the EAR for that reason. Such items also may be imported back into the United States.

Imports of Cuban Goods and Services (§ 515.560, 578 & 582) – Imports of certain goods and services produced by independent Cuban entrepreneurs (as identified by the State Department on a list to be issued) are authorized under CACR § 515.582. Section 515.578 permits import to the United States of consumer electronics or software eligible for license exception CCD (or which would be eligible if U.S. controlled) and publicly available software not subject to the EAR. Finally, persons returning to the United States after authorized travel to Cuba may import merchandise not to exceed $400 in value, including up to $100 in alcohol or tobacco products.

Travel and Travel Services (§ 515.560, 572 & 580) – Tourist travel still is not permitted, but general licenses are available for twelve categories of travel: (1) family visits; (2) official business of U.S./foreign government and intergovernmental organizations; (3) journalistic activities; (4) professional research and meetings (e.g., telecommunications, agricultural and medical sales); (5) educational activities; (6) religious activities; (7) public performances, clinics, workshops and competitions; (8) support for the Cuban people; (9) humanitarian; (10) private foundations and research/educational institutes; (11) export/import or transmission of information or informational materials; and (12) certain export transactions which may be authorized under the EAR. The per diem rate for authorized travelers will no longer apply. All transactions ordinarily incident to travel within Cuba, including payment of living expenses and the acquisition in Cuba of goods for personal use, are authorized. Travel Service Providers (TSPs) and Carrier Service Providers (CSPs) are now authorized under a general license to provide travel services to persons who self-identify as qualifying under the regulations. The prior special licenses and annual reporting requirements no longer apply, but businesses operating under the new general licenses will need to maintain careful records. Finally, U.S. insurance companies are authorized to issue global health, life or travel insurance policies to cover non-Cuban residents traveling to or within Cuba.

Banking and Credit Cards in Cuba (§ 515.560, 571, 579 & 584) – U.S. depository institutions are permitted to open correspondent accounts at Cuban financial institutions to support financial transactions permitted under the CACR. Authorized travelers to Cuba may use U.S. credit, debit and stored value cards, and instruments such as checks, drafts and travelers’ checks. U.S. financial institutions are authorized to process such transactions, and U.S. persons providing such services may rely on the traveler with regard to compliance unless they know or have reason to know that the transaction is not authorized. The revised CACR also permit depository institutions to process transfers for authorized business in Cuba of third-country official missions; intergovernmental organizations in which there is U.S. participation or observer status; and employees, grantees, contractors of the same or their co-habitant family members.

Remittances (§ 515.560 & 570) – Remittance levels for a single Cuban national have been raised from $500 to $2,000 per quarter (except for certain officials of the government or Communist party). Authorized travelers to Cuba may carry up to $10,000 for remittances. Certain remittances may be made without limit for relatives who are students in Cuba; humanitarian projects in or related to Cuba; human rights, democracy or civil society groups related to Cuba; and support for the development of private business. Remittance forwarders and banks no longer require a specific license to process such remittances.

Other Support for Private Business (§ 515.570 & 575) – U.S. persons may make remittances without limit to individuals or privately owned entities “to support the development of private businesses, including small farms” (CACR § 515.570(g)(3)). This section does not authorize investment with respect to Cuba, thus the remittance cannot be used to obtain an ownership interest. Section 575(a) authorizes a broad general license for humanitarian projects, including transactions related to such projects as construction projects to benefit independent civil society groups; environmental projects; projects suitable for the development of small-scale private enterprise; agricultural and rural development that promotes independent activity; and micro financing projects, except for loans, extensions of credit or other financing prohibited by CACR 515. § 208.

Cuban Nationals in Third Countries or the United States (515.505 & 585) – Cuban nationals who take up permanent residence outside of Cuba are now considered unblocked parties under section 515.505(a)(2). U.S.-owned or controlled entities operating outside the United States are authorized to engage in services and financial transactions with Cuban individuals in third countries, regardless of residency. Banks are authorized to unblock any account that was blocked solely due to the prior status of a now unblocked person, provided they obtain adequate documentation. Cuban nationals were already eligible to be unblocked when moving to the United States. New section 515.571(a)(5) authorizes U.S. depository institutions to open and maintain accounts for Cuban nationals present in the United States with non-immigrant status, although such accounts must be closed prior to the Cuban national’s departure or blocked.

Next Steps and Challenges
President Obama has directed the State Department to review Cuba’s status as a “state sponsor of terrorism” over the next six months, and removal from that list could open the door to further potential export control changes. Congress, however, is divided on Cuba sanctions reform, and a number of senators and representatives have strongly criticized the Administration’s policy. As discussed above, broader relaxation of the Cuba embargo will require congressional action. There are strong constituencies that will fight reform efforts, especially as the United States heads into a presidential election cycle.

A number of useful FAQs, notices and rules documents have been released by U.S. government agencies following President Obama’s December 17, 2014, announcement of plans to normalize relations with Cuba. Below, you will find several useful links to those documents.

From the U.S. Department of Commerce:

Bureau of Industry and Security – Final Rule

Bureau of Industry and Security – FAQ

From the U.S. Department of the Treasury:

Office of Foreign Assets Control – Final Rule

Office of Foreign Assets Control – FAQ Related to Cuba

From the U.S. Department of Transportation:

Notice on Expanded Flight Implementation to Cuba

For legal guidance on the many regulatory and compliance issues involved with doing business in Cuba, contact any of the professionals in Pillsbury’s International Trade Group.

President Obama made an unexpected announcement this week signaling a “new course” for Cuba after more than fifty years of comprehensive U.S. sanctions. Reestablishing diplomatic relations is a major change. In terms of business impact, however, the announcement signaled small openings and incremental extensions of existing licensing policy. Existing legislation mandates the embargo and codifies the Cuban Assets Control Regulations at 31 C.F.R. Part 515 (CACR), limiting what the President can accomplish without support from Congress. Thus, major changes to U.S. sanctions and export control policy will not happen in the short term. However, the President does have limited licensing discretion and the signaled changes may open business opportunities for certain exports markets including telecommunications, building materials, agricultural equipment, and certain goods for use by Cuban entrepreneurs. Simplification of existing travel authorizations as well as authorization for certain banking and credit card services are also planned. None of these anticipated changes will be effective until regulations are issued by the relevant U.S. agencies.

Background on U.S. Cuba Embargo

The CACR, administered by the U.S. Department of Treasury, Office of Foreign Assets Control (OFAC) implements a comprehensive trade, investment, financial and travel embargo on Cuba prohibiting U.S. persons, including owned or controlled foreign subsidiaries of U.S. companies, from engaging in transactions in which Cuba or a Cuban national has a property interest. First implemented in July 1963 under the authority of the Trading with the Enemy Act (TWEA), the sanctions have been strengthened by the Cuba Democracy Act of 1992, which, among other things, prohibited the issuance of licenses for foreign U.S.-owned companies to trade with Cuba. The Cuban Liberty and Democratic Solidarity Act of 1996 (Helms/Burton) codified the CACR, requiring the President to instruct the Treasury and Justice Departments to enforce fully the CACR and prescribing conditions for the termination of the embargo including a determination that a transition government in Cuba is in power.

However, despite these statutory provisions, OFAC has licensing authority under the CACR to permit certain transactions within the scope of the sanctions and the Commerce Department’s Bureau of Industry and Security (BIS) has licensing authority for exports and re-exports of U.S. origin goods and technology to Cuba. This allows some limited degree of executive discretion which both OFAC and BIS have used to issue licenses and to establish license exceptions for certain travel transactions, temporary sojourns of aircraft, agricultural exports and telecommunications services for Cuba, among other activities.

Announced Changes in U.S. Policy

On December 17, 2014, President Obama announced his intent to make licensing changes for Cuba which include:

• Expanded exports of goods/services to Cuba’s private sector – This authorization is expected to allow exports of building materials for private residential construction, goods for use by private sector Cuban entrepreneurs, and agricultural equipment for small farmers. Existing agricultural sales programs also may be expanded by loosening the definition of “cash in advance.”
• Telecommunications – Additional exports relating to telecommunications and internet will be authorized. Although the scope is unclear, this change in policy will reportedly pertain to (a) certain consumer communications devices, related software, applications, hardware, and services, (b) items to establish and update communications-related systems; and (c) telecommunication infrastructure to provide telecommunications and internet services between the United States and Cuba.
• Banking and Credit Cards – U.S. financial institutions will be permitted to open correspondent accounts at Cuban financial institutions to support permitted financial transactions. Travelers to Cuba will be able to use U.S. credit and debit cards. This opening may permit U.S. companies to issue cards for use in Cuba and to establish merchant relationships.
• Travel – Tourist travel still will not be permitted, but general licenses will be available for twelve categories of travel. General licenses are already available for a number of these categories, which may be expanded (e.g., family visits; official business of U.S./foreign government and intergovernmental organizations; journalistic activities; professional research and meetings; educational activities; religious activities; and travel related to certain authorized transactions and business such as telecommunications, agricultural and medical sales). Other travel categories requiring specific licenses will be authorized under general licenses (e.g., public performances, clinics, workshops and competitions; support for the Cuban people; humanitarian; private foundations and research/educational institutes; and export/import or transmission of information or informational materials). There will be a new general license for travel service providers, although it is unclear how much this would expand OFAC’s existing travel service provider licensing program. There have been no statements yet from the Administration regarding how or whether other licensing policies relating to travel, travel services and exports of aircraft and vessels may change.
• Remittances – Remittance levels will be raised from $500 to $2,000 per quarter (except for certain officials of the government or Communist party). Remittances for humanitarian projects, support for the Cuban people and support for the development of private businesses in Cuba will not require a specific license. Remittance forwarders will not require a specific license.
• Application of Cuba Sanctions in Third Countries – U.S. owned or controlled entities will be permitted by general license to engage in services and financial transactions with Cuban individuals in third countries. This permission would not apply to persons or companies in Cuba, but could ease business with the many Cubans who have moved to other countries. There would be additional allowances for Cuba-related meetings in third countries and foreign vessels engaging in humanitarian trade with Cuba.

Next Steps and Challenges

All of the proposed changes must be implemented and are not yet in effect. It will be important to review the specific language of the planned general licenses and regulatory updates. OFAC has announced that it intends to issue regulatory amendments to the CACR in the coming weeks, and BIS will implement changes to the Export Administration Regulations. Among these changes, President Obama has directed the State Department to review Cuba’s status as a “state sponsor of terrorism” over the next six months, and removal from that list could open the path for potential relaxation of export control restrictions.

Congress is divided on Cuba sanctions reform. A number of legislators, including the chairs and ranking members of key committees, are opposed to the President’s announcement. As discussed above, broader relaxation of the Cuba embargo will require congressional action. There are strong constituencies that will fight reform efforts, especially as the United States heads into a Presidential election cycle.