Shifting Course: Expanding the Scope of Permissible Cuba Transactions

Shifting Course: Expanding the Scope of Permissible Cuba Transactions


Shifting Course: Expanding the Scope of Permissible Cuba Transactions

The Treasury Department’s Office of Foreign Assets Control (“OFAC”) has issued its first set of amendments to the Cuban Assets Control Regulations (“CACR”) to begin implementing a major policy shift in United States–Cuba relations, as announced by the President on December 17, 2014. Concurrently, the Commerce Department’s Bureau of Industry and Security (“BIS”) amended the Export Administration Regulations (“EAR”) to authorize certain exports to Cuba. These amendments became effective on January 16, 2015. Although these amendments represent the liberalization of certain Cuba sanctions, it is important to note that the basic sanctions in effect against Cuba remain in place.

The CACR amendments authorize a wide range of activities pursuant to general licenses. These include: (1) certain categories of travel to Cuba (excluding general tourism) and related services; (2) U.S. financial institutions establishing correspondent accounts at Cuban financial institutions to facilitate the processing of authorized transactions; (3) expanding permissible telecommunications activities; (4) increasing the amount of remittances that may be sent to Cuba; and (5) permitting non-U.S. subsidiaries of U.S. companies to engage in certain transactions with Cuban nationals located outside of Cuba.

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Client Alert
FINANCIAL SERVICES
Correspondent Accounts: OFAC has added a general license authorizing U.S. depository institutions (including
financial institutions) to open correspondent accounts at Cuban financial institutions to facilitate authorized
transactions. However, Cuban banks are not generally licensed to open such accounts at U.S. banks.
Credit/Debit Card Use: Authorized travelers in Cuba are permitted to use their credit or debit cards issued by a
U.S. financial institution for transactions authorized under the CACR. Thus, U.S. financial institutions can enroll
Cuban merchants and process such transactions. It is important for travelers to confirm with their financial
institution before traveling to Cuba that their credit or debit card can in fact be used in Cuba, and the
establishments at which it can be used.
Rejected and Permitted Financial Transactions: U.S. depository institutions are authorized to reject funds
transfers in which Cuba or a Cuban national have an interest (rather than blocking the transaction) that originate
and terminate outside the United States, provided that: (1) neither the originator nor the beneficiary is a person
subject to U.S. jurisdiction; and (2) certain prohibited individuals do not have an interest in the transfer. However,
U.S. depository institutions can process such funds transfers, provided that the underlying transaction would be
authorized pursuant to the CACR if the originator or beneficiary were a U.S. person.
Remittances: The limits on generally licensed periodic remittances that may be sent by a U.S. person to a
Cuban national, other than a prohibited official of the government of Cuba or a prohibited member of the Cuban
Communist Party, have been raised from $500 per quarter to $2,000 per quarter. U.S. banking institutions, U.S.-
registered brokers or dealers in securities, and U.S.-registered money transmitters are permitted to process
authorized remittances to Cuba, subject to certain recordkeeping and reporting requirements.
TELECOMMUNICATIONS
Telecommunications: To further the policy objectives of providing efficient and adequate telecommunications
services between the United States and Cuba, OFAC has generally authorized transactions that establish
mechanisms to provide commercial telecommunications services linking third countries and Cuba and in Cuba.
Persons subject to U.S. jurisdiction may provide additional services incident to Internet-based communications
and related to certain authorized exportations and re-exportations of communications items. The range of such
services has been expanded to coincide with changes to the EAR, and such services can now be provided for a
fee to certain end-users. For example, transactions incident to providing fee-based Internet communications
services such as email or other messaging platforms, social networking, VOIP, webhosting, or domain-name
registration are now authorized in most circumstances.
Services related to many kinds of software (including applications) used on personal communications devices
such as personal computers and cell phones are also authorized, along with other services related to the use of
such devices. In addition, OFAC has authorized services such as cloud storage, software design, business
consulting, and the provision of IT management and support related to the use of hardware and software exported
or re-exported to Cuba under the BIS License Exception CCD.

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Client Alert
TRADE – PERMISSIBLE U.S. EXPORTS
New License Exception – Support for the Cuban People: License Exception SCP was implemented to
support improved living conditions and independent economic activity in Cuba. This license exception authorizes
the export and re-export of commercially sold or donated: (1) building materials, equipment, and tools for use by
the private sector to construct or renovate privately owned buildings, including privately owned residences,
businesses, places of worship, and buildings for private-sector social or recreational use; (2) tools and equipment
for private-sector agricultural activity; and (3) tools, equipment, supplies, and instruments for use by private-sector
entrepreneurs, such as auto mechanics, barbers, hairstylists, and restaurateurs. License Exception SCP also
authorizes the export and re-export to Cuba of certain items for human rights organizations, individuals, or
nongovernmental organizations that promote independent activity intended to strengthen civil society. To improve
the free flow of information to, from, and among the Cuban people, this License Exemption also authorizes the
export and re-export to Cuba of certain items for telecommunications, including access to the Internet, use of
Internet services, and infrastructure creation and upgrades. Moreover, License Exception SCP authorizes the
export and re-export to Cuba of certain items for use by news media personnel and U.S. news bureaus engaged
in the gathering and dissemination of news to the general public. It is important to note that items eligible for
export and re-export to Cuba under these provisions of License Exception SCP are limited to those designated as
“EAR 99” (i.e., items subject to the EAR but not specified by any Export Control Classification Number, or
controlled only for antiterrorism reasons).
In addition, to strengthen civil society in Cuba, License Exception SCP authorizes the export and re-export to
Cuba of certain donated items for use in scientific, archaeological, cultural, ecological, educational, historic-
preservation, or sporting activities. License Exception SCP also authorizes the temporary export of certain items
by persons departing the United States for their use in the same set of categories, or for their use in their
professional research (limited to research directly related to the traveler’s profession, professional background, or
area of expertise) and must be returned to the United States within two years unless consumed in Cuba, or
unless the exporter has applied for and obtained, prior to the expiration of the two-year period, a license from BIS
authorizing the items to remain in Cuba longer than two years. It is important to note that items eligible for export
under these two provisions of License Exception SCP may not relate to the development, production, use,
operation, installation, maintenance, repair, overhaul, or refurbishing of any item enumerated or otherwise
described on the United States Munitions List or on the Commerce Control List (except for items controlled solely
for anti-terrorism reasons).
Expansion of License Exception – Consumer Communications Devices & Gift Parcels and Humanitarian
Donations: License Exception CCD was originally implemented on September 8, 2009, to help enhance the free
flow of information to and from Cuba. At the time, License Exception only CCD authorized the export and re-
export to Cuba of certain donated consumer communications devices that are widely available for retail purchase
and that are commonly used to exchange information and facilitate interpersonal communications, including
computers, communications equipment, and related items, such as personal computers, mobile phones,
televisions, radios, and digital cameras, as well as certain telecommunications and information security–related
software. This rule has been amended to remove the donation requirement in License Exception CCD, thereby
allowing export or re-export of eligible items for commercial sale or donation to eligible recipients in Cuba.

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Client Alert
At the time it was implemented, License Exception GFT excluded from eligibility consolidated shipments of
multiple parcels for delivery to individuals residing in a foreign country, thereby requiring parties exporting multiple
gift parcels in a shipment to obtain individual validated licenses. This amendment removes this requirement and
allows the export and re-export of multiple gift parcels in a single shipment, pursuant to License Exception GFT.
New Licensing Policy – Environmental Protection: This rule amends the licensing policy for Cuba to add a
general policy of approval for exports and re-exports of items necessary for the environmental protection of U.S.
and international air quality, waters, and coastlines, including items related to renewable energy or energy
efficiency.
OTHER TRANSACTIONS
Humanitarian Activities: The CACR contains a general license (incorporating prior specific licensing policy and
authorizations) permitting certain travel-related and other transactions that are related to humanitarian projects in
or related to Cuba. These authorized humanitarian projects include medical and health-related projects,
construction projects intended to benefit legitimately independent civil society groups, environmental projects,
projects involving formal or non-formal educational training (specific to entrepreneurship and business, civil
education, journalism, advocacy and organizing, adult literacy, or vocational skills), community-based grassroots
projects, projects suitable to the development of small-scale private enterprise, projects related to agricultural and
rural development that promote independent activity, and micro financing projects (excluding loans, extensions of
credit, or other financing involving confiscated property the claim to which is owned by a U.S. national).
Transactions with Cuban Nationals Located Outside Cuba: U.S.-owned or controlled entities in third
countries may now provide goods and services to Cuban nationals in third countries, provided that the transaction
does not involve a commercial exportation, directly or indirectly, of goods or services to or from Cuba.
Payment for Authorized Transactions: The CACR has long permitted the export of U.S.-origin items to Cuba
pursuant to a BIS license, provided that the payment terms were “cash in advance.” Prior to the CACR
amendments, it was necessary for the U.S. exporter to have the cash before shipment. To allow expanded
financing options for authorized exports to Cuba, cash payment can now be received after shipment but before
transfer of title and control to the Cuban party.
Insurance Coverage: U.S. insurance companies can now offer global insurance policies that cover third-country
nationals traveling to Cuba.
TRAVEL
General Licenses for Specific Activities: While the amendments to the CACR do not fully permit travel to
Cuba, they permit travel to Cuba for authorized purposes. Travel-related transactions are permitted by general
license for travel related to the following 12 activities, subject to criteria and conditions in each general license:
(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 informational

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Client Alert
materials; and (12) certain authorized export transactions. U.S. companies, travel agents, and airlines are
permitted to provide authorized travel and carrier services.
The per-diem spending limitation while traveling in Cuba previously imposed no longer applies, and there is no
specific dollar limit on authorized expenses. Authorized travelers may engage in transactions ordinarily incident
to travel within Cuba, including the payment of living expenses and the acquisition in Cuba of goods for personal
consumption there. Other expenditures not directly incident to the traveler’s authorized activities in Cuba are not
authorized. In addition, for most categories of authorized travel, the traveler’s schedule of activities must not
include free time or recreation in excess of that consistent with a full-time schedule in Cuba for the authorized
activity.
Travelers are authorized to acquire in Cuba, and import as accompanied baggage into the United States,
merchandise with a value not to exceed $400 per person, provided that no more than $100 of the merchandise
consists of alcohol or tobacco products and the merchandise is imported for personal use only.
Significantly, travel for tourist activities remains prohibited.
CONCLUSION
While the amendments to CACR and EAR represent a significant easing of the sanctions, it is important to
emphasize that the bulk of the Cuba sanctions remain in place. Thus, persons and entities engaging in business
in Cuba or with Cuban persons will need to remain aware of the remaining sanctions, and have appropriate
compliance procedures to prevent engaging in prohibited transactions that could result in the imposition of
potentially significant fines.

Contact:
Nicholas Spiliotes
(202) 887-1579
nspiliotes@mofo.com
Aki Bayz
(202) 887-8796
akibayz@mofo.com
Betre Gizaw
(202) 887-8744
bgizaw@mofo.com

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Because of the generality of this update, the information provided herein may not be applicable in all situations
and should not be acted upon without specific legal advice based on particular situations. Prior results do not
guarantee a similar outcome.

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