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U.S. Treasury and Department of Commerce ease sanctions on Cuba

Sanctions, and the risks associated with their compliance, continue to feature high on the agenda of financial institutions operating globally.

U.S. and EU sanctions in respect of Ukraine, Syria, North Korea and other jurisdictions continue to require close and ongoing scrutiny to ensure compliance. However, financial institutions may be interested to note a degree of relaxation in regulatory prohibitions in respect of one jurisdiction, namely Cuba.

On January 15, 2015, the U.S. Department of the Treasury and the U.S. Department of Commerce announced the publication of the revised Cuban Assets Control Regulations (CACR) and Export Administration Regulations (EAR). These revised regulations implement the changes to the Cuba sanctions administered by the Treasury’s Office of Foreign Assets Control (OFAC) and Commerce’s Bureau of Industry and Security (BIS) announced by U.S. President Barack Obama on December 17, 2014.

  1. facilitate travel to Cuba for authorized purposes;
  2. facilitate the provision by travel agents and airlines of authorized travel services and the forwarding by certain entities of authorized remittances;
  3. raise the limits on and generally authorize certain categories of remittances to Cuba;
  4. authorize certain transactions with Cuban nationals located outside of Cuba; and
  5. allow a number of other activities related to, among other areas, telecommunications, financial services, trade, and shipping.
  6. allow a number of other activities related to, among other areas, telecommunications, financial services, trade and shipping.

The revised regulations are effective as of January 16, 2015.1 Below is an overview of the major changes to the regulations:

Travel to Cuba

  • OFAC has amended the CACR to authorize, under a general license, travel-related transactions and other transactions incident to activities within the 12 existing categories of authorized travel to Cuba, subject to appropriate conditions. Formerly, such travel was approved through case-by-case specific licensing:
  • These 12 categories include: (i) family visits; (ii) official business of the U.S. government, foreign governments, and certain intergovernmental organizations; (iii) journalistic activity; (iv) professional research and professional meetings; (v) educational activities; (vi) religious activities; (vii) public performances, clinics, workshops, athletic and other competitions, and exhibitions; (viii) support for the Cuban people; (ix) humanitarian projects; (x) activities of private foundations or research or educational institutes; (xi) exportation, importation, or transmission of information or information materials; and (xii) certain authorized export transactions.
  • Travel for tourist activities remains prohibited.
  • The per diem rate previously imposed on authorized travelers will no longer apply, and there is now no specific dollar limit on authorized expenses while in Cuba. Authorized travelers may engage in transactions ordinarily incident to travel within Cuba, including personal consumption and living expenses. Travelers may use U.S. credit and debit cards in Cuba.
  • Authorized U.S. travelers to Cuba may import up to USD 400 worth of goods acquired in Cuba for personal use, subject to a USD 100 limit for alcohol or tobacco products.

Travel Services

  • Persons subject to U.S. jurisdiction, including travel agents and airlines, may provide authorized travel and carrier services without the need for a specific license from OFAC.

Remittances

  • The limits on generally licensed remittances to Cuban nationals, other than to certain prohibited Cuban Government and Cuban Communist Party officials, has been increased from USD 500 to USD 2,000 per quarter.
  • Remittances to Cuban nationals for humanitarian projects, support for Cuban people, or development of private businesses in Cuba are authorized without limitation.
  • Authorized travelers may carry up to USD 10,000 to Cuba.
  • Banking institutions, including U.S.-registered brokers or dealers in securities and U.S.-registered money transmitters, may now process authorized remittances to Cuba under an expanded general license.

Certain Financial Transactions

  • Depository institutions are permitted to open and maintain correspondent accounts at a financial institution that is a national of Cuba to facilitate the processing of authorized transactions pursuant to a general license.
  • U.S. financial institutions may enroll merchants and process credit and debit card transactions for authorized travel-related and other transactions.
  • A financial institution that is a person subject to U.S. jurisdiction is now authorized to reject (rather than block) funds transfers originating and terminating outside the United States where neither the originator nor the beneficiary is a person subject to U.S. jurisdiction, provided that no prohibited person has an interest in the transfer.
  • A financial institution that is a person subject to U.S. jurisdiction is authorized to process funds transfers originating and terminating outside the United States relating to a transaction that would be authorized pursuant to this part if the originator or beneficiary were a person subject to U.S. jurisdiction.

Transactions with Cuban nationals located outside of Cuba

  • U.S.-owned or controlled entities in third countries may provide, subject to certain limitations, goods and services to Cuban nationals in third countries.
  • OFAC has authorized the unblocking of accounts of certain Cuban nationals who have permanently relocated outside of Cuba.
  • Under a general license, transactions by Cuban nationals related to third-country conferences are authorized.
  • Under a general license, foreign vessels are authorized to enter the United States after engaging in certain trade activities with Cuba.

Certain Micro-financing, business, and commercial import activities

  • Certain micro-financing activities and entrepreneurial and business training, such as for private businesses and agricultural operations, are permitted.
  • Commercial imports of certain specified goods and services produced by independent Cuban entrepreneurs are authorized.

Telecommunications

  • A new general license facilitates the establishment of commercial telecommunications facilities in Cuba which link third countries and Cuba.
  • Under a new Department of Commerce license exception, the commercial export of certain items that will contribute to the ability of the Cuban people to communicate with people within Cuba, in the United States, and the rest of the world is permitted without requiring a license.
  • Additional services related to internet-based communications and related to certain exportations and re-exportations of communication items are authorized.

Consumer Communications Devices

  • The amended Department of Commerce’s Consumer Communications Devices (CCD) license exception removes the donation requirement and now allows for the export and re-export of certain consumer communications devices (through commercial sales or donations) that enable the flow of information to, from and among the Cuban people.

Insurance

  • U.S. insurers may provide coverage for global health, life, or travel insurance policies for individuals ordinarily resident in a third country who travel to, or within, Cuba.Health, life, and travel insurance-related services continue to be permitted for U.S. travelers authorized to go to Cuba.

“Cash in Advance”

  • The regulatory interpretation of “cash in advance” has been redefined from “cash before shipment” to “cash before transfer of title to, and control” to allow expanded financing options for authorized exports to Cuba.

Supporting Diplomatic Relations and U.S. Government Official Business

  • Under a general license, transactions with Cuban official missions and their employees in the United States are authorized.
  • An expanded general license authorizes Cuba-related transactions by employees, grantees, and contractors of the U.S. government, foreign governments, and certain international organizations.

Support for Cuban People

  • Exports and re-exports to provide support for the Cuban people in the following three areas is permissible under a license exception granted by the Department of Commerce:
  • Improving living conditions and supporting independent economic activity;
  • Strengthening civil society; and
  • Improving communications.
  • Items on the Commerce Control List will not be authorized for export.

Gift Parcels

  • Consolidated shipments of gift parcels are eligible for the same Department of Commerce license that authorizes individual shipments. Liberalizing License Application Review Policy

The U.S. Department of Commerce has instituted a general policy of approval for applications to export or re-export items necessary for the environmental protection or enhancement of the U.S. and international air and water quality.

On the same day as the announcement of changes to the CACR and the EAR, OFAC published a comprehensive list frequently asked questions (FAQ) on its website regarding the amended regulations. The FAQ list is available here.

Despite the changes to the CACR and EAR discussed above, the United States’ Cuba embargo remains in place. Most transactions between the United States, or persons subject to U.S. jurisdiction, and Cuba continue to be prohibited, and OFAC and the Commerce Department will continue to enforce the prohibitions of the CACR and the EAR, respectively.

Allen & Overy’s U.S. sanctions team is closely monitoring developments in this area and will continue to monitor the implementation of these regulations.

Footnotes

1 31 CFR part 515), please see here while the revised EAR (15 CFR parts 730-774) are available here.

Legal and Regulatory Risk Note
United States