In December 2014, President Obama announced that the United States would initiate diplomatic and trade relations with Cuba for the first time in decades. U.S. companies then saw a succession of new developments including revisions to certain travel and trade restrictions by the Office of Foreign Assets Control ("OFAC") and the Bureau of Industry and Security ("BIS"), the removal of Cuba from the list of state sponsors of terrorism and the opening of the U.S. embassy in Havana. On September 21, 2015, the BIS and OFAC made additional changes to the requirements for dealings with Cuba. Even though these changes show movement toward more liberalization of the rules, the embargo is still in place. Only new legislation will lift it completely. The following outlines the recommended initial steps for U.S. companies as well as some of the key new rules for dealing with Cuba.
1. Recommended First Steps
U.S. companies should first take time to educate themselves as to whether their proposed activities or products require prior authorization from the Commerce, Treasury or State Departments. They should also research the current commercial environment in Cuba and consider participating in trade missions. Companies intending to export products should confirm how they will enter Cuba and the import requirements that apply. It is important for them to identify the relevant Cuban government import agencies responsible for clearing the products in question. Further, there are still restrictions on U.S. financing of activities in Cuba. U.S. companies should consider how payment for their goods will be effected as Cuban buyers must pay cash in advance before taking possession of the goods.
2. Travel to Cuba
Specific Licenses from OFAC to travel to Cuba are no longer required for:
- U.S. persons and family members visiting close relatives (or accompanying a close relative traveling for official government business, journalistic activities, professional research, educational and religious activities, humanitarian projects, etc.); and,
- Travel that falls into one of twelve General Licenses, such as: official U.S. Government, foreign government of international organization business; journalistic activities; professional research and meetings; educational and religious activities; and, public performances, clinics, workshops, athletic competitions, and exhibitions.
Travelers may pay for living expenses, purchase goods for consumption in Cuba, and use U.S. credit and debit cards. Also, there are no longer any per diem spending limits. They may even open and maintain bank accounts in Cuba in order to access funds while they are there.
Travel agents and commercial airlines may now provide services to Cuba without OFAC Specific Licenses. Travelers will be required to present certificates to the airlines stating that they have authorization under a General License. As the certification procedures may vary from one airline to another, travelers should confirm the airline's requirements for travel to Cuba when making their reservations. Travelers themselves must also retain copies of their certifications and travel documentation for five years.
Travelers may also bring back goods purchased in Cuba as long as they are for their personal use and the value of the merchandise does not exceed $400 per person. Note that the total value of any alcohol or cigars cannot exceed $100.
3. Carrier Services, Lodging Services & Transportation to Cuba
U.S. companies may now, under an OFAC General License, provide carrier services without a Specific License, as well as provide lodging aboard the vessels. Under the EAR, License Exception Aircraft, Vessels and Spacecraft ("AVS") permits the temporary sojourn of aircraft, cargo and passenger vessels, and authorized recreational vehicles to Cuba without a license. AVS may also be used to ship equipment and spare parts for vessels and aircraft departing the United States as well as ship and plane stores. All items must be EAR99 or classified as an ECCN that is controlled for anti-terrorism reasons only.
4. Commercial Imports
OFAC permits imports into the U.S. of certain commercial goods produced by independent Cuban entrepreneurs. Eligible items are those that are not
on the State Department's "515.582 List," and documents must be obtained showing the Cuban entrepreneur's independent status. Cuba is still subject to Column 2 rates of duty under the Harmonized Tariff Schedule of the United States, which are significantly higher than the Column 1 rates applicable to goods of most other countries.
5. Consumer Communication Devices to Cuba
License Exception Consumer Communication Devices to Cuba ("CCD") permits the export or reexport to Cuba without a license of items that foster the free flow of information, including: computers and disk drives; monitors; printers; modems; keyboards; mice; mobile phones; SIM cards; digital cameras; batteries; etc. These items must be EAR99 or classified in ECCNs controlled only for anti-terrorism reasons. In addition, these items may not be exported to the Cuban government, its officials, or the Cuban Communist Party.
6. Exports and Reexports of Items for Support for the Cuban People
The EAR's License Exception Support for the Cuban People ("SCP") permits the export or reexport of certain items to Cuba if they are EAR99 or classified as an ECCN controlled for only anti-terrorism reasons, and will:
7. Internet-Based Services and Services Related to Authorized Exports
- Improve living conditions and support independent economic activity (e.g., building materials, equipment, and tools for use by the private sector for privately-owned buildings, residences, businesses, churches, etc. as well as tools and equipment for private sector agricultural activity or private sector entrepreneurs);
- Strengthen civil society (e.g., items for scientific, archaeological, cultural, ecological, educational, historic preservation or sporting activities; items for human rights organizations or NGOs promoting independent activity that strengthens civil society); or,
- Improve the free flow of information (e.g., telecommunications items, news gathering items, items used by the private sector to develop software that improves the free flow of information, etc.) – this exception may not be used where the end-users are the Cuban Government and its officials, as well as the Cuban Communist Party.
OFAC permits the export of services to Cuba (e.g., software design, business consulting, IT management, installation, repair, replacement, etc.) relating to:
- Non-US origin items outside the U.S.;
- Software not subject to the EAR; and,
- Items shipped under License Exceptions CCD or SCP, or an individual BIS license.
In addition, certain services may be provided to organizations controlled by the Cuban Government or the Cuban Communist Party (e.g., instant messaging, chat, email, social networking); however, they may not be provided to prohibited officials of the Government of Cuba or the Cuban Communist Party.
8. Establishing a Physical Presence in Cuba
U.S. persons may establish a physical presence in Cuba (i.e., offices, retail outlets, warehouses, etc.) for authorized activities. U.S. persons working in Cuba may also establish a domicile in Cuba for the duration of their employment and open bank accounts there. License Exception SCP permits the export of items to persons who have an authorized physical presence in Cuba; however, such items must be EAR99 or classified as an ECCN that is controlled only for anti-terrorism reasons.
9. Temporary Exports and Reexports to Cuba
The BIS permits temporary exports and reexports to Cuba without a license for:
10. Deemed Exports and Reexports
- Tools of trade for installing, servicing or repairing items owned by Cuban private sector entities – these items must remain under their effective control, must be EAR99 or classified as an ECCN controlled only for anti-terrorism reasons, and must be secured while in Cuba;
- Technology tools of trade for the installation, servicing or repair of the above-referenced items – again, security precautions must be secured while in Cuba;
- Kits of replacement parts or components for items that were lawfully exported to Cuba;
- Items for exhibition or demonstration at trade shows; and,
- Containers that would ordinarily require a BIS license.
Licenses are no longer required for the deemed export or deemed reexport of EAR99 technology or source code to Cuban nationals, wherever located.
11. Payments and Financing
U.S. banks and financial institutions may open correspondent accounts at Cuban financial institutions for authorized transactions. However, the only payment and financing terms permitted for exports to Cuba (or reexports of 100% U.S. origin products to Cuba) are cash in advance or financing by a banking institution that is located in a third country.
12. New License Application Review Policies
If no General Licenses apply to a proposed activity that is subject to the CACR then a Specific License from OFAC must be obtained. The same holds true under the EAR – a license from the BIS may be required if the proposed transaction does not qualify for a license exception. In addition, certain U.S. statutory restrictions on Cuba are still in place that cannot be modified by regulation. Nonetheless, license applications are generally reviewed favorably if they involve protection of the environment, civil aviation safety, medical devices and agricultural products.
Melissa Proctor is a Shareholder with Polsinelli, P.C. With significant experience in the customs laws and regulations, export controls, economic sanctions, and international trade, Melissa is committed to understanding companies' operations and providing assistance geared toward helping them reach their specific business and operational goals. She may be reached at (602) 650-2002 or via e-mail at email@example.com