The New U.S.-Cuba Policy: Summary of Amendments to CACR + EAR Regulations

Kegler Brown Global Business News

After more than 50 years of severed diplomatic relations, President Obama announced on December 17, 2014, a new path for U.S. relations with Cuba. To implement the President's new policy, the Treasury's Office of Foreign Assets Control (OFAC) and the Commerce Department's Bureau of Industry and Security (BIS) issued new regulations, amending the Cuban Assets Control Regulations (CACR) and the Export Administration Regulations (EAR). The Amendments to CACR and EAR (hereinafter "Regulations") are effective as of January 16, 2015. The stated purposes behind the new Regulations go beyond increasing opportunities for Americans to travel to Cuba and for the U.S. private sector to trade with Cuba, aiming also "to improve the living conditions of the Cuban people; support independent economic activity and strengthen civil society in Cuba; and improve the free flow of information to, from, and among the Cuban people."

Although the U.S.-Cuba embargo will remain in force, the new Regulations grant more flexibility to U.S. individuals to travel and enter into commercial transactions with Cuban nationals. Pursuant to the new measures, the U.S. government will allow U.S. financial institutions to open bank accounts in Cuba to simplify the processing of authorized transactions, grant general authorization for certain travels to Cuba, authorize transactions with Cuban nationals located in third countries, raise the limit on remittances to Cuba, allow certain activities relating to telecommunications, financial services, trade and shipping. Some of the activities allowed are restricted to the private sector, excluding the majority of the Cuban businesses that are controlled by the government. Violations of U.S. embargo laws will continue to subject the lawbreaker to penalties as provided by U.S. law.

We recommend the review of the OFAC and BIS fact sheets and FAQs on the new trade regulations for Cuba (OFAC Fact Sheet, OFAC FAQs, BIS Fact Sheet and BIS FAQs).

Major Changes on the U.S. Relations with Cuba

1. Travel
The following categories of travels to Cuba are now authorized by a general license, in other words, the below categories of travel are authorized without having to apply for a specific license before the trip: family visits; journalistic activities; professional research and professional meetings; educational activities; public performances; clinics, workshops, athletic and other competitions, and exhibitions; support for the Cuban people; activities of private foundations or research or educational institutes; exportation, importation, or transmission of information or information materials; and certain authorized export transactions.

Primarily touristic trips to Cuba are still forbidden.

All transportation-related transactions ordinarily incident to travel to and from Cuba remain authorized.

2. Credit + Debit Cards
American credit and debit cards are now authorized in Cuba for authorized travel-related and other transactions in Cuba. For compliance purposes persons subject to U.S., jurisdiction may rely on the traveler when processing credit and debit card transactions as long as they "do not know or have reason to know that a transaction is not authorized."

3. Per Diem Expenses and Importation of Goods and Services
The "maximum per diem rate" that travelers can spend on authorized expenses in Cuba is eliminated.

Transactions that are incident to travel within Cuba, like living expenses or the acquisitions of Cuban goods for consumption are authorized.

Travelers may now import up to $400 worth of goods acquired in Cuba for personal use, including no more than $100 in alcohol or tobacco products.

4. Insurance
OFAC added section 515.580 to the CACR Regulations to authorize insurance companies to provide health insurance, life insurance, and travel insurance-related services to cover third-country nationals traveling to Cuba. This also includes the possibility to receive emergency medical services and the making of related payments.

5. Educational Activities
Academic institutions will have more flexibility to send their faculty, staff and students to engage in educational programs and to sponsor Cuban educational programs.

The following categories of educational travels that were subject to specific authorization are now granted general license: people to people travel (educational exchanges not involving academic study), sponsorship or co-sponsorship of events involving Cuba, educational exchanges sponsored by Cuban or U.S. secondary schools involving secondary school students, preparation and facilitation of educational activities in Cuba.

6. Professional Research and Professional Meetings in Cuban Territory
Cuban travel involving professional research is no longer limited to non-commercial and academic trips, and will not require a likelihood of public dissemination. Persons engaging in a commercial professional research no longer need a special authorization to travel to Cuba, provided the additional limitations set forth on section 515.564 are observed.

7. Telecommunications
OFAC amended section 515.542 to allow transactions directed at facilitating the establishment of commercial telecommunication services connecting third countries and Cuba and within Cuba.

A new BIS regulation authorizes the export of items contributing to improving communications in Cuba. These items include 1) items, either sold or donated, for telecommunications, including access to the Internet, use of internet services, infrastructure creation and upgrades; 2) items used by news media personnel engaged in the dissemination of news to the public; and 3) items used by U.S. news bureaus engaged in the gathering and dissemination of news to the general public.

A new BIS regulation authorizes the commercial sales, or donation, of consumer communication devices, including consumer computers, consumer disk drives and solid state storage equipment, input/output control units, graphics accelerators and graphics coprocessors, monitors, printers, modems, network access controllers and communications channel controllers, keyboards, mice and similar devices, mobile phones, personal digital assistants, and subscriber information module (SIM), memory devices, consumer "information security" equipment, software and peripherals, digital cameras and memory cards, television and radio receivers, recording devices, batteries, charges, carrying cases and accessories for equipment, and consumer software.

OFAC also amended section 515.578 to authorize persons subject to U.S. jurisdiction to provide additional services related to internet-based communications and exportation of communication items.These include instant messaging, chat and email, social networking, sharing of photos and movies, web browsing, blogging, web hosting, and domain name registration services, as well as software design, business consulting, and information technology management services (including cloud storage), provided the restrictions of such section are observed.

8. Financial Services
Depository institutions are now authorized by new section 515.584 to open and maintain correspondent accounts at Cuban financial institutions to enable the processing of authorized transactions.

9. Remittances
The limitation on the remittances of money to Cuban nationals was raised from $500 to $2,000 per quarter.

The total amount of remittances that a traveler can carry was raised from $3,000 to $10,000.

10. Transactions with Cuban Nationals Living in Third-Countries
A new section 515.585 has been added to the Regulations to allow companies controlled or owned by persons subject to U.S. jurisdiction to provide, with limitations, goods and services to a Cuban national located outside Cuba, as long as such transaction is not classified as a commercial exportation to or from Cuba.

Cuban nationals who can demonstrate a permanent residence outside Cuba will have their accounts unblocked and will be granted an automatic unblocked status, with some limitations as provided by section 515.505.

11. Small Business Growth
Remittances by persons subject to U.S. jurisdiction to individuals and independent non-governmental entities in Cuba are now authorized in order to support the development of private businesses.

Persons subject to U.S. jurisdiction are now authorized to export construction and building materials, equipment and tools to the private sector under the new license exception "Support for the Cuban People" (SCP).

Commercial imports of certain goods and services produced by independent Cuban entrepreneurs as determined by the U.S. State Department will be permitted.

12. Cash in Advance
In order to allow exports to receive expanded financing, the regulatory interpretation of "cash in advance" was redefined from "cash before shipment" to "cash before transfer of title to, and control of."

Third country banks can provide financing and U.S. banks can confirm or advise on financing.

13. Environmental + Energy Matters
Persons subject to U.S. jurisdiction may now apply for a license to export or re-export items necessary for the environmental protection of U.S. and international air quality, waters, or coastlines, including items related to renewable energy or energy efficiency.