MARCH 16, 2016
SIDLEY UPDATE
Obama Administration Eases Sanctions Further in Advance of
Trip to Cuba: More Opportunities for U.S. Businesses in Cuba?
In advance of President Obama’s historic visit to Havana next week, the Obama administration announced
yesterday the easing of yet another set of sanctions on Cuba. The changes to the existing sanctions policy are
effective today, March 16, 2016, through regulatory amendments to the Cuban Assets Control Regulations
(CACR), administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC),
and the Export Administration Regulations (EAR), administered by the U.S. Department of Commerce’s
Bureau of Industry and Security (BIS), along with additional explanatory material including the joint
BIS/OFAC fact sheet, OFAC FAQs and BIS FAQs.
This marks the fourth set of amendments to the CACR and EAR since President Obama began efforts to
normalize relations with Cuba in December 2014. For example, previous amendments to the CACR took
effect in January 2015, September 2015 and January 2016.Touted as a further step by the administration to
“engage and empower” the Cuban people, the latest amendments will facilitate authorized travel to Cuba by
persons subject to U.S. jurisdiction, reduce barriers to financial transactions by Cuban nationals and
increase the flow of information to, from and within Cuba.
What specific changes come into effect on March 16?
Prior amendments to the CACR and EAR introduced changes in a number of sectors, including travel,
banking and finance, telecommunications and trade and business. Through today’s amendments, the United
States has made additional, modest changes in most of these same sectors:
1. Lifting of travel and travel-related restrictions
a. “People to People” educational travel
Individuals are now authorized to travel to Cuba for individual “People to People” educational travel. In the
past, a general license was applicable for educational trips only where such trips were planned through a U.S.
organization and travelers were accompanied by a representative of a sponsoring organization. The scope of
the general license has been broadened, but an individual still must engage in a full-time schedule of
educational exchange activities designed to enhance contact with the Cuban people and result in meaningful
interaction between the traveler and individuals in Cuba. U.S. persons continue to be prohibited from
traveling to Cuba as tourists.
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b. Salary payments in the United States
Restrictions have also been lifted for non-immigrant Cuban nationals in the United States — such as Cuban
athletes, artists or performers — to earn a salary or compensation, provided that the recipient is not subject
to any special tax assessments in Cuba and that no additional payments are made to the Cuban government.
c. Cuban merchandise
Transactions involving U.S. persons purchasing Cuban-origin merchandise for personal consumption in a
third-country, or receiving travel-related services from Cuba or Cubans in a third country, are now
authorized by OFAC.
2. Easing restrictions on certain banking and financial services, including those in U.S.
dollars
a. U-turn payments through the U.S. financial system
U.S. banking institutions can now process U-turn transactions in which Cubans have an interest, which will
therefore allow fund transfers from a bank outside the United States to pass through one or more U.S.
financial institutions before being transferred to a bank outside the United States, where neither the
originator nor the beneficiary is a person subject to U.S. jurisdiction.
b. Processing of U.S. dollar instruments
U.S. banking institutions can now process U.S. dollar monetary instruments, including cash and travelers’
checks, presented indirectly by Cuban financial institutions. Correspondent accounts at third-country
financial institutions used for such transactions may be denominated in U.S. dollars.
c. U.S. bank accounts for Cuban nationals
U.S. banks can now open and maintain U.S. bank accounts for Cuban nationals in Cuba who receive
payments in the United States for authorized or exempt transactions and wish to remit such payments back
to Cuba.
3. Expansion of trade and commercial opportunities
a. Physical and banking presence
The revised regulations authorize a “physical presence” in Cuba (through an office, retail outlet or
warehouse) for entities involved in authorized humanitarian projects, non-commercial activities intended to
provide support for the Cuban people and private foundations or research or educational institutes engaging
in certain authorized activities. In addition, the regulations authorize a “business presence” in Cuba (through
subsidiaries, joint venture, branches or franchises) for exporters of goods that are authorized for export or
re-export to Cuba or that are exempt entities providing mail or parcel transmission services or cargo
transportation services and providers of carrier and travel services to facilitate authorized transactions. The
revised regulations also clarify that the physical and business presence authorizations permit exporters and
re-exporters of authorized or exempt goods to assemble such goods in Cuba. They do not authorize the
incorporation of Cuban-origin goods into items assembled pursuant to the relevant section of the
regulations, or the processing of raw materials into finished goods in Cuba.
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b. Importation of software
In addition to Cuban-origin mobile applications, imports of Cuban-origin software to the United States will
now be allowed.
c. Shipping services to the United States
Vessels will be permitted to transport authorized cargo from the United States to Cuba and then sail to other
countries with any remaining cargo on-loaded in the United States.
d. Exports and re-exports from the Cuban private sector
BIS will conduct a case-by-case review to determine whether to issue licenses for the export and re-export of
items that would enable or facilitate exports from Cuba of items produced by the Cuban private sector.
4. Grants and awards for education and humanitarian projects
OFAC has authorized grants and awards that enable U.S. support for educational projects in Cuba and U.S.
participation in philanthropic efforts.
Are there more business opportunities for U.S. companies?
While the intended beneficiaries of the Obama administration’s change in policy continue to be the “Cuban
people,” the cumulative effect of the amendments will be to increase business opportunities for U.S.
companies that are already trading with and those wishing to trade with and invest in Cuba.
1. Providers of airline and transport services
In January 2015, OFAC authorized through general licenses 12 categories of travel that had previously been
permitted only by specific licenses. Although tourist-related and other unauthorized travel remains generally
prohibited even after today’s amendments, the recent inclusion of “People to People” educational travel
serves to increase the potential for cheaper and less cumbersome travel by U.S. citizens to Cuba. For
instance, U.S. persons are now able to book educational trips on their own.
The most immediate beneficiaries of these changes are providers of airline and transport-related travel
services. OFAC had already published general licenses to authorize U.S. carriers to provide carrier services
by vessel or aircraft in connection with authorized travel. The entry into blocked space, code-sharing or
leasing agreements to facilitate the provision of carrier services by air is also now authorized. Moreover,
travel carriers may now set up a business presence in Cuba. These changes, coupled with the arrangement
recently announced by the Departments of State and Transportation allowing up to 20 daily, scheduled
round-trip flights for each country, will significantly increase the ability of U.S. citizens to travel to Cuba to
directly engage with the Cuban people. A number of U.S. carriers have already applied for an allocation of
the new opportunities to provide scheduled passenger and cargo flights.
2. Banks and Financial institutions
A second major class of beneficiaries is U.S. banks and other financial institutions. U.S. financial institutions
can now participate in many more activities as a result of the March amendments: U-turn transactions,
processing of U.S. dollar-based instruments and opening of U.S.-based accounts for Cuban nationals.
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Previous amendments increased the value of remittances that can be sent to Cuba and permitted authorized
U.S. travelers to use their U.S issued credit and debit cards while travelling in Cuba.
Greater commercial opportunities with Cuba and Cubans also open up possibilities for funding transactions.
Banks are also now authorized to finance certain transactions involving U.S. exports and re-exports of 100
percent U.S-origin items from a third country other than agricultural items or commodities.
3. Businesses wishing to trade with Cuba and Cubans, especially in the telecommunications,
educational and entertainment sectors
U.S. companies providing telecommunications and internet-based services, express courier services and
travel and carrier services can now set up a business in Cuba, through subsidiaries or joint ventures, and
employ Cuban nationals and U.S. persons in Cuba. More generally, U.S. companies can also export or reexport items that do not incorporate Cuban-origin goods or process raw materials into finished goods in
Cuba. The BIS policy to consider on a case-by-case basis items produced by the Cuban private sector may
open up some business opportunities for U.S. companies interested in Cuban exports.
Telecom and internet businesses based in Cuba may seek to create more synergies with Cuban software and
mobile companies that can now export to the United States; express courier companies based in Cuba may
now provide greater after-sale and customer-care services through access to internet and telecommunications
services.
The emphasis on educational services and exchanges, through educational grants and de-restrictions on
educational travel, may well improve the collaboration between Cuban and U.S. educational institutions and
lead to research that can be commercially exploited and encourage the demand for U.S.-based education
services among Cuban students.
Finally, the recent amendments now make it possible for U.S. sports, media and entertainment companies to
sponsor and compensate athletes, performers and entertainers who have been granted visas to the United
States. In their joint fact sheet, BIS and OFAC explain that Cuban nationals who are able to secure legal nonimmigrant status in the United States will be authorized to earn a salary or compensation (i.e., in excess of
basic living expenses). That is consistent with the terms of the particular visa, provided that the recipient is
not subject to any special tax assessments in Cuba which would presumably cause any U.S.-sourced
compensation to pass to the Cuban Government, thereby undermining U.S policy.
If you have any questions regarding this Sidley Update, please contact the Sidley lawyer with whom you usually work, or
Jan Yves N. Remy
Foreign Lawyer
[email protected]
+1 202 736 8151
Andrew W. Shoyer
Partner
[email protected]
+1 202 736 8326
Robert Torresen
Partner
[email protected]
+1 202 736 8570
Carlos A. Rodriguez
Partner
[email protected]
+1 212 839 5857
Alyssa A. Grikscheit
Partner
[email protected]
+1 212 839 8509
Sidley Economic Sanctions Practice
Lawyers in our Sanctions Practice advise companies on the applicability of U.S. sanctions programs to corporate and banking
transactions, insurance contracts and the sale of goods and services. We handle license applications for agricultural
commodities, medical devices and medicines under the Trade Sanctions Reform and Export Enhancement Act of 2000. We
also represent companies in enforcement actions involving U.S. sanctions, assist with internal investigations and the
development of compliance programs, and counsel clients on voluntary disclosures. For more information about our Sanctions
Practice please contact Robert Torresen ([email protected], +1 202 736 8570) or Andrew Shoyer ([email protected], +1
202 736 8326)
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