Updated: OFAC Further Amends Cuban Sanctions

Practical Law Legal Update 6-596-2207 (Approx. 13 pages)

Updated: OFAC Further Amends Cuban Sanctions

by Practical Law Commercial Transactions

OFAC Amendments

OFAC's final rule amends multiple sections of the CACR to implement President Obama's December 17, 2014 policy changes. Among other things, these amendments:

Facilitate the reestablishment of diplomatic relations with Cuba.
Authorize:
- travel-related transactions and other transactions incident to activities within OFAC's 12 existing categories of permitted travel, without the need for case-by-case specific licensing (travel for tourist activities is still prohibited);
- the use of US credit and debit cards in Cuba for travel-related and authorized transactions;
- certain micro-financing activities and entrepreneurial and business training;
- commercial imports of certain specified goods and services produced by independent Cuban entrepreneurs;
- depository institutions to open correspondent accounts at Cuban financial institutions to process authorized transactions;
- US-owned or controlled entities in third countries to provide goods and services to Cuban nationals in third countries;
- insurance companies to offer global insurance policies that cover third-country nationals traveling to Cuba; and
- foreign vessels to enter the US after engaging in certain trade with Cuba.
Permit US parties, including travel agents and airlines, to provide authorized travel and carrier services.
Raise:
- the limits on remittances that may be sent to Cuban nationals from $500 to $2,000 per quarter; and
- the total amount of remittances that a traveler may carry to Cuba to $10,000.
Unblock accounts of Cuban nationals who have permanently relocated outside of Cuba.

For more information on these amendments, see FACT SHEET: Treasury and Commerce Announce Regulatory Amendments to the Cuba Sanctions.

BIS Amendments

The BIS' final rule amends the EAR by:

Creating a License Exception Support for the Cuban People (see a76158).
Amending the existing License Exception Consumer Communications Devices (see a471367).
Amending the existing License Exception Gift Parcels and Humanitarian Donations (see a285740).
Establishing a general policy of approval for exports and reexports to Cuba of items for certain environmental protections (see a842622).

License Exception Support for the Cuban People

This rule creates a new license, the License Exception Support for the Cuban People (15 C.F.R. § 740.21), to improve living conditions in Cuba, support independent economy activity, strengthen civil society and improve the free flow of information in Cuba. Under this new license, the US government now authorizes the export and reexport to Cuba of:

Commercially sold or donated:
- building materials, equipment and tools for use by the private sector to construct or renovate privately-owned buildings;
- tools and equipment for private sector agricultural activity; and
- tools, equipment, supplies and instruments for use by private sector entrepreneurs.
Certain donated items for use in scientific, archaeological, cultural, ecological, educational, historic preservation or sporting activities.
Certain items to human rights organizations, individuals or non-governmental organizations that promote independent activity intended to strengthen civil society.
Certain items for telecommunications, including access to the Internet, use of Internet services, infrastructure creation and upgrades.
Certain items for use by news media personnel and US news bureaus engaged in gathering and disseminating news to the general public.

This new license also authorizes the temporary export of certain items by persons from the US for their own use in scientific, archeological, cultural, ecological, educational, historic preservation or sporting activities or for their use in their professional research.

License Exception Consumer Communications Devices

This rule revises an existing license, License Exception Consumer Communications Devices (15 C.F.R. § 740.19) that permits the export and reexport of consumer communication devices and certain telecommunications and information security-related software. The former license permitted only donated items. However, the amendment removes the donation requirement and now permits items for commercial sale under this license.

License Exception Gift Parcels and Humanitarian Donations

This rule revises an existing license, License Exception Gift Parcels and Humanitarian Donations (15 C.F.R. § 740.12) by now authorizing the export of multiple gift parcels in a single shipment.

Environmental Protections

This final rule amends the licensing policy for Cuba in Section 746.2 of the EAR by adding a general policy of approval for exports and reexports of items that are necessary for the environmental protection of US and international air quality, waters and coastlines.

Update

On April 16, 2015, OFAC published a newly updated Frequently Asked Questions Related to Cuba. This newly published update discusses twelve frequently asked questions related to travel, commerce and finance.

Update II

On July 22, 2015, the BIS implemented the Secretary of State's removal of Cuba from the list of State Sponsors of Terrorism. The final rule, Cuba: Implementing Rescission of State Sponsor of Terrorism Designation:

Permits the reexport to Cuba of foreign-made products with up to 25% US-origin content (up from the current level of 10%).
Allows replacement parts to be exported for items legally exported to Cuba.
Allows general aviation, such as corporate jets, to use license exceptions for trips to Cuba (previously only charter flights were eligible).

(80 Fed. Reg. 43314 (July 22, 2015).)

Under the preexisting embargo on trade with Cuba, a BIS license is still required to export and reexport to Cuba all items subject to the EAR, unless authorized by a license exception specified in 15 C.F.R. § 746.2(a)(1) of the EAR.

Update III

On September 18, 2015, the US Department of the Treasury announced that it is making additional amendments to the CACR and EAR.

Among other things, these most recent amendments further:

Ease travel bans to facilitate authorized travel, commerce and contact between Americans and Cubans.
Permit telecommunication and internet-based services between the US and Cuba to enhance the free flow of information to, from and within Cuba.
Refocus sanctions so that they do not prevent day-to-day transactions by Cuban people who are outside of Cuba.
Expand the lists of authorized activities in which US citizens can participate while in Cuba.
Expand the general license authorizing the provision of legal services to Cuba and Cuban nationals to now also allow the receipt of payment for those services.

Treasury's latest amendments take effect on September 21, 2015.

Update IV

OFAC and BIS have published additional final rules to amend their respective Cuban sanctions regulations:

Both of these final rules became effective on January 27, 2016.

OFAC Final Rule

OFAC's new final rule amends the CACR by:

Removing the former restrictions on payment and financing terms for authorized exports and reexports, except for agricultural commodities and agricultural items.
Authorizing:
- the entry into blocked space, code-sharing, and leasing arrangements to facilitate the provision of certain carrier services by air;
- travel-related and other transactions directly incident to the facilitation of the temporary sojourn of aircraft and vessels as authorized by Commerce for travel between the US and Cuba;
- travel-related and other transactions to organize professional meetings or conferences in Cuba; and
- travel-related and other transactions to organize amateur and semi-professional international sports federation competitions and public performances, clinics, workshops, other athletic or non-athletic competitions, and exhibitions in Cuba.
Expanding the general license authorizing travel-related and other transactions that are directly incident to the export, import, or transmission of informational materials, including:
- media programs;
- music recordings; and
- artwork.
Increasing the list of authorized humanitarian projects to include disaster preparedness and response.

(Cuban Assets Control Regulations, 81 Fed. Reg. 4583-01 (Jan. 27, 2016).)

BIS Final Rule

BIS' new final rule amends licensing policies under the EAR by:

Identifying the following types of exports and reexports that are now subject to a general policy of approval:
- telecommunications items that would improve communications to, from, and among Cubans;
- certain commodities and software to human rights organizations or to individuals and non-governmental organizations that promote independent activity intended to strengthen civil society in Cuba;
- commodities and software to US news bureaus in Cuba whose primary purpose is to gather and disseminate news to the general public;
- certain agricultural items and commodities; and
- items that are necessary to ensure the safety of civil aviation and the safe operation of commercial aircraft engaged in international air transportation.
Adopting a case-by-case review policy for exports and reexports of certain items that meet the needs of Cuban people, including items:
- to state-owned enterprises, agencies, and other organizations of the Cuban government that provide goods and services for the use and benefit of Cubans;
- for agricultural production, artistic endeavors, education, food processing, disaster preparedness, relief and response, public health and sanitation, residential construction and renovation, and public transportation; and
- to wholesalers and retailers for domestic consumption by Cubans.

(Cuba Licensing Policy Revisions, 81 Fed. Reg. 4580-01 (Jan. 27, 2016).)

However, BIS will continue to apply a general policy of denial for applications to export or reexport items:

For use by state-owned enterprises, agencies, or other organizations of the Cuban government that primarily generate revenue for the state.
To the Cuban military, police, intelligence, and security services.

Update V

OFAC and BIS published additional rules to further amend the Cuban sanctions related to the:

CACR (see OFAC Final Rule).
EAR (see BIS Final Rule).

The amended rules continue to lift the restrictions on travel and trade between the US and Cuba. The final rules became effective on March 16, 2016.

OFAC Final Rule

OFAC has further relaxed the CACR's travel-related restrictions by authorizing:

Additional individual travel to Cuba, provided that:
- the traveler engages in a full-time schedule of people-to-people educational activities intended to enhance contact with the Cuban people and society;
- most of the traveler’s activities are not with certain Cuban government or Communist Party officials; and
- the traveler retains records of the authorized travel transactions.
Cuban nationals living in the US with non-immigrant status to receive salaries or other compensation (that is not subject to special taxation by the Cuban government).
All transactions related to the sponsorship or hiring of Cuban nationals to work in the US
Individuals subject to US jurisdiction to purchase, receive, and consume (but not import) Cuban-made goods while traveling in a third country.
Individuals subject to US jurisdiction to receive or obtain (but not import) services from Cuba or a Cuban national while traveling in a third country.

OFAC has amended the CACR's financial transaction provisions by authorizing US banks to:

Process U-turn transactions (fund transfers from foreign banks that pass through one or more US financial institutions before transfer to another foreign bank) in which Cuba or a Cuban national has an interest, if the originator and beneficiary are not subject to US jurisdiction.
Process US dollars and travelers' checks presented indirectly by Cuban financial institutions.
Open and maintain accounts solely in the name of Cuban nationals located in Cuba, if the purpose of the account is to receive payments in the US via authorized or exempted transactions.

OFAC also expanded the list of entities that may establish a presence in Cuba. The following entities may establish a:

Business presence in Cuba:
- exporters of goods already authorized for export or reexport to Cuba;
- mail or parcel services; and
- travel and carrier services.
Physical presence in Cuba:
- entities engaged in non-commercial services supporting the Cuban people;
- humanitarian projects; and
- private foundations or research/educational institutes.

Additionally, OFAC now:

Authorizes educational grants, scholarships, or awards to Cuban nationals or which benefit Cuba or the Cuban people.
Allows importation of Cuban-origin software.

(81 Fed. Reg. 13989.)

BIS Final Rule

BIS has amended licensing policies under the EAR by:

Authorizing cargo vessels carrying embargoed goods to make temporary stops in Cuba, if goods do not enter the Cuban economy or transfer vessels.
Creating a case-by-case review policy for the export of items aimed at allowing the exportation of privately-made Cuban goods that do not primarily generate revenue for the Cuban government.

(81 Fed. Reg. 13972.)

Update VI

OFAC and BIS have published additional rules to further amend the Cuban sanctions related to the:

The amended rules continue to lift the restrictions on travel and trade between the US and Cuba. The final rules became effective on October 17, 2016. Until the Code of Federal Regulations is updated on Westlaw, the text of the new and amended regulations can be found in OFAC’s and BIS’s Federal Register notices, linked above.

OFAC Final Rule

OFAC amended the CACR rules on health and medical constraints to permit:

Participation in joint medical research projects with Cuban nationals.
Transactions related to obtaining approval of Cuban-origin pharmaceuticals from the Food and Drug Administration (FDA), including:
- drug discovery and development;
- clinical research;
- regulatory review and approval;
- licensing;
- regulatory post-market activities; and
- importation into the US.
The import of FDA-approved pharmaceuticals of Cuban origin for marketing, sale, and distribution
Opening, maintaining, or closing bank accounts at Cuban financial institutions, provided the accounts are used exclusively for transactions related to authorized business described above.

(31 C.F.R. § 515.547.)

OFAC amended the CACR's trade and commerce regulations to:

Permit persons who have received authorized exports or reexports to Cuba to return these items to the US or a third country for purposes of return, service, or repair. Persons subject to US jurisdiction are also permitted to service and repair these items. However, the export or reexport of repaired or replacement parts must be separately authorized by OFAC or BIS. (31 C.F.R. § 515.533.)
Permit persons to execute certain contingent contracts for currently prohibited transactions if performance is contingent on:
- prior authorization by OFAC and any other regulatory agency; or
- the underlying transactions or authorization is no longer required.
- Examples of contingent transactions include bids or responses to tenders and the general license includes the authority to engage in transactions that relate to the negotiation of the contingent contracts. (31 C.F.R. § 515.534.)
Waive a prohibition that prevents foreign vessels from loading or unloading at a US port within 180 days of a trade visit to Cuba if the items carried to Cuba are already subject to EAR and would be:
- designated as EAR99; or
- controlled on the Commerce Control List (CCL) for anti-terrorism reasons only.

(31 C.F.R. § 515.550.)

Clarify that an OFAC general license which authorizes transactions related to BIS-authorized exports or reexports to Cuba is not limited to 100% US origin items (31 C.F.R. § 515.533).
Clarify that BIS-authorized exports and reexports of agricultural items (for example, pesticides and tractors) are not subject to limitations on payment and financing terms (31 C.F.R. § 515.533).

OFAC amended the CACR's civil aviation standards to authorize persons subject to US jurisdiction to provide Cuba and Cuban nationals with services aimed at ensuring safety in civil aviation and the safe operation of commercial aircraft (31 C.F.R. § 515.572).

OFAC amended the CACR's travel regulations to permit persons subject to US jurisdiction to:

Import Cuban merchandise acquired for personal use during authorized travel to Cuba subject to normal limits on duty and tax exemptions. The CACR previously limited the value of such imports to $400 or less generally and $100 or less for alcohol and tobacco products. (31 C.F.R. § 515.560.)
Import Cuban-origin merchandise acquired in third countries as accompanied baggage, provided the merchandise is for personal use only and subject to normal limits on duty and tax exemptions. The CACR previously allowed those individuals to acquire Cuban merchandise in third countries only if the merchandise was for personal consumption and was consumed abroad. (31 C.F.R. § 515.585.)
Travel to Cuba for any professional meetings and conferences. OFAC removed the restriction that the purpose of the meeting or conference not be for the promotion of tourism in Cuba. (31 C.F.R. § 515.564.)
Make remittances to third-country nationals for travel to, from, and within Cuba provided the travel would be authorized by a general license if the person were subject to US jurisdiction (31 C.F.R. § 515.570).

OFAC also amended the CACR's travel regulations to allow foreign passengers to import Cuban-origin alcohol and tobacco products as accompanied baggage, provided the goods are not in commercial quantities or imported for resale (31 C.F.R. § 515.569).

OFAC amended the CACR's regulations on humanitarian-related transactions to permit persons subject to US jurisdiction to:

Offer grants, scholarships, and awards in which Cuba or Cuban nationals have an interest (including as recipients) for scientific research and religious activities (31 C.F.R. § 515.590).
Provide services to Cuba and Cuban nationals related to developing, repairing, maintaining, or enhancing Cuban infrastructure (31 C.F.R. § 515.591).

BIS Final Rule

In coordination with OFAC's amendments to the CACR, BIS has amended the EAR license exceptions to:

Allow cargo aboard aircraft in transit to Cuba when that cargo is bound for destinations other than Cuba (15 C.F.R. § 740.15).
Authorize the export of consumer goods sold directly to individuals in Cuba for their personal use or their immediate family's personal use, provided that:
- the items are designated as EAR99 or are controlled on the CCL for anti-terrorism reasons only; and
- the purchasers and end users are not members of the Council of Ministers, flag officers of the Revolutionary Armed Forces, or members of the Politburo.

(15 C.F.R. § 740.21.)

Revise the list of Cuban Communist Party officials ineligible for provisions of three license exceptions (15 C.F.R. § 740.12, 15 C.F.R. § 740.19, and 15 C.F.R. § 740.21).

Update VII

On June 16, 2017, the White House released a presidential memorandum that provides changes to US policy toward Cuba. On the same day OFAC issued a Q&A that provides additional detail, including:

OFAC and the Department of Commerce expect to issue regulatory amendments in the coming months that:
- end individual people-to-people travel, which is defined as academic study pursuant to a degree program that does not take place under auspices of an organization that is subject to US jurisdiction that sponsors such exchanges to promote people-to-people contact (except for those individuals who have made a travel arrangement prior to June 16, 2017); and
- permit group people-to-people travel, which is defined as educational travel not involving academic study pursuant to a degree program that takes place under the auspices of an organization that is subject to US jurisdiction that sponsors such exchanges to promote people-to-people contact; and
- retain the non-individual people-to-people authorizations for travel, including OFAC's 12 existing categories of permitted travel; and
- restrict American individuals and companies from engaging in direct transactions with entities related to the Cuban military, intelligence, or security services; and
- permit American businesses to continue to engage in direct transactions with entities related to the Cuban military, intelligence, or security services that may be implicated in the Cuba policy, provided they were in place prior to the issuance of the forthcoming regulations.
The announced changes do not go into effect until OFAC and the Department of Commerce release amendments that formalize the new directives.

Update VIII

On July 25, 2017, OFAC issued updated Q&A on the Cuba policy to clarify certain aspects of the new policy announced in June 2017. These clarifications include:

Group people-to-people travel is not authorized unless travelers:
- maintain a full-time schedule of educational exchange activities;
- are accompanied by an employee, consultant, or agent of the sponsoring organization; and
- the predominant portion of activities is not with prohibited officials of the Government of Cuba or prohibited members of the Cuban Communist Party.
Organizations subject to US jurisdiction that sponsor exchanges will not be required to apply to OFAC for a specific license to continue these exchanges.
Once OFAC issues its regulations and the State Department publishes its list of entities with which direct transactions will not be authorized, no new transactions may be initiated with these entities. As previously announced, the new regulations will be prospective only and not impact existing contracts and licenses.

Update IX

On November 9, 2017, OFAC amended the CACR (82 Fed. Reg. 51998) to implement the National Security Presidential Memorandum titled Strengthening the Policy of the United States Toward Cuba, signed by the President on June 16, 2017 (see Update VII).

Updated: OFAC Further Amends Cuban Sanctions | Practical Law