Cuba – The Door Opens Wider

Friday, February 20, 2015 - 13:18
Introduction

On December 17, 2014, President Obama announced a re-establishment of diplomatic relations with Cuba that would ease sanctions of the half-century-long Cuba embargo. Since the early 1960s, the economic embargo on Cuba enacted stringent restrictions on travel and trade for persons and organizations subject to U.S. jurisdiction. Specifically, these included the need for case-by-case licenses for travel authorization, prohibition of U.S. credit and debit card use in Cuba, and limits on exports, among others.

Effective January 16, 2015, The Department of Treasury’s Office of Foreign Assets Control (OFAC) amended the Cuban Assets Control Regulations (CACR) and Export Administration Regulations (EAR) to implement the President’s policy changes. While the embargo remains in place, and it can only be removed by Congress, several noteworthy changes impacting both individuals and organizations have been enacted.

Impacts on Travel

The regulatory amendments have greatly streamlined the process of attaining travel authorization for certain individuals. Previously, travel-related transactions within 12 categories of authorized travel required a “specific license” – that is, a time-consuming process requiring an application and case-by-case determination. Under the new amendments, OFAC has now issued “general licenses” so that persons engaging in travel-related transactions within the 12 existing categories of authorized travel no longer need to submit a written request to OFAC. These authorized categories of travel include

  1. family visits;
  2. official business of the U.S. government, foreign governments and certain intergovernmental organizations;
  3. journalistic activity;
  4. professional research and professional meetings;
  5. educational activities;
  6. religious activities;
  7. public performances, clinics, workshops, athletic and other competitions, and exhibitions;
  8. support for the Cuban people;
  9. humanitarian projects;
  10. activities of private foundations or research or educational institutes;
  11. exportation, importation, or transmission of information or information materials; and
  12. certain authorized export transactions.

In addition, airlines and travel agents subject to U.S. jurisdiction are authorized to provide air carrier services to authorized travelers without the need to apply for a specific license from OFAC, and JetBlue has already announced its plans to provide charter flights to Cuba. Travel for tourist activities, however, remains prohibited.

Furthermore, the recent amendments have changed spending limits for authorized U.S. travelers while in Cuba. The per diem rate previously imposed on authorized travelers no longer applies, and there is no specific dollar limit on authorized expenses. Travelers are now able to use U.S. credit and debit cards in Cuba and are advised to check with their financial institution before traveling to determine whether the institution has established the necessary mechanisms for credit or debit card use in Cuba. In addition, authorized travelers are now able to import up to $400 worth of goods and up to $100 of alcohol or tobacco products acquired in Cuba for personal use.

Impacts on Business

The regulatory amendments also impact U.S. financial institutions. Under the new general licenses, U.S. banking institutions, brokers or dealers in securities, and money transmitters are permitted to process authorized remittances to Cuba without having to obtain a specific license, subject to recordkeeping and reporting requirements. Remittances that may be sent to Cuban nationals have been increased from $500 per quarter to $2,000 per quarter. The amount of authorized remittances travelers to Cuba may carry has also been increased to $10,000 per authorized trip. As mentioned above, U.S. financial institutions are authorized to enroll merchants and process credit and debit card transactions for travel-related and authorized transactions. In addition, U.S. depository institutions are permitted to open and maintain correspondent accounts at Cuban banks and foreign banks located in Cuba. Cuban banks, however, are not generally licensed to open such accounts in U.S. banks.

While the Department of Commerce still prohibits various exportations from the United States to Cuba, OFAC has notably issued an expanded general license permitting U.S. companies to export telecommunications equipment and services to Cuba. Pursuant to these amendments, Netflix, the online video-subscription service, will become one of the first U.S. companies to operate in Cuba after these recent changes.

Future Outlook

There is a likelihood of forthcoming immigration changes such as the establishment of embassies and consular services, availability of visas for travelers to and from Cuba, and possible elimination of streamlined adjustment procedures that allow Cubans nationals to seek permanent residency on an accelerated basis. Specifically, the Obama administration has announced efforts to reopen a U.S. embassy in Havana as a fundamental step towards productive diplomatic talks.

The new regulations are the latest step toward fully normalized relations with Cuba, but it may be a long while until any congressional action is taken to formally end the embargo. Many restrictions on travel and trade between the United States, or persons subject to U.S. jurisdiction, and Cuba remain. Because violation of these rules can have significant consequences for organizations and individuals – including immigration consequences for non-citizens – any proposed activities with Cuba must be carefully evaluated in advance. 

Michael D. Patrick is a partner at Fragomen, Del Rey, Bernsen & Loewy, LLP, resident in its New York office. He may be contacted via email at mpatrick@fragomen.com. Heather Klein, associate, Henna Jung, law clerk and Nancy Morowitz, counsel at the firm, assisted in the preparation of this column. To learn more about Fragomen, please visit http://www.fragomen.com