Further Expansion of Permitted Trade Between the United States and Cuba

By George W. Thompson

usa cuba tradeThe Bureau of Industry and Security (BIS)  and Office of Foreign Assets Control (OFAC) have announced yet another round of changes to their regulations regarding trade with Cuba. These  revisions build on previous ones adopted in January and September 2015 and January 2016, discussed here. While trade relations with Cuba are hardly normalized, the new regulations do expand the scope of activities  permitted to U.S. companies and individuals.

Physical and Business Presence in Cuba Now Authorized

An OFAC general license now permits persons subject to its Cuban Assets Control Regulations, which include U.S. companies and their owned and controlled foreign affiliates as well as U.S. citizens and permanent resident aliens, to establish both a business and a physical presence in Cuba. The authorized enterprises are those engaged in export and reexport activities, internet and telecommunications services, and mail, parcel and transportation services authorized elsewhere in the regulations. The forms of enterprise include “subsidiaries, branches, offices, joint ventures, franchises, and agency or other business relationships with any Cuban individual or entity.

Additionally, specified organizations engaged in qualifying news reporting, educational, religious, humanitarian and research activities and non-commercial support for the Cuban people may establish a physical presence in Cuba.

As with past reforms, BIS has made a complementary change to its regulations permitting export and reexport to Cuba of items to be used in accordance with the expanded OFAC general license; the BIS authorization is License Exception SCP (Support for the Cuban People). Covered items are limited to those classified as EAR99 or in a Commerce Control List provision for which the only reason for control is AT1.

Expanded Travel to Cuba

While leisure travel to Cuba remains prohibited, OFAC loosened the definition of educational  travel to include “people to people” activities. Qualifying sojourns must involve contacts with individual Cubans, support for civil society or promotion of people’s independence from Cuban authorities on a full-time basis, and must have minimal contact with officials of the Cuban government or Communist party. The traveler must keep supporting records.

Additional Financial Transactions Authorized

OFAC now permits funds transfers by banks within the regulations’ jurisdiction to “process funds transfers originating and terminating outside the United States, provided that neither the originator nor the beneficiary is a person subject to U.S. jurisdiction.” These are so-called “u-turn payments” between foreign banks that get processed through U.S. banks.

Also, U.S. banks are allowed to “process U.S. dollar monetary instruments presented indirectly by Cuban financial institutions.” The third-country bank must have received the payment in connection with activities otherwise authorized by OFAC. While U.S. banks may open correspondent accounts with third-country banks for this purpose, they cannot do so with Cuban banks.

Additional Exports to Cuba Also Are Authorized

Aside from the expansion of License Exception SCP to complement the OFAC changes, BIS amended License Exception AVS (Aircraft, Vessels, and Spacecraft) authorizing vessels to transit Cuba with cargo destined for other countries. The vessel must be on a temporary sojourn to Cuba that is otherwise covered by AVS, and the cargo must depart from Cuba on the same vessel without having entered the Cuban economy.

Finally, BIS announced a new policy of case by case review of license applications to export or reexport “items that will enable or facilitate export from Cuba of items produced by the private sector.” The intended purpose of this change is to provide private-sector Cuban manufacturers with materials for use in their production activities, and it appears broad enough to encompass both input parts and materials and capital equipment. As with previous revisions permitting exports for Cuba’s private business sector, license applications to export to the Cuban government are generally disfavored.


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