President Trump’s Cuba Policy Is Implemented
BIS, OFAC and State Department Issue Revised Regulations for Exports, Travel and Financial Transactions With Cuban Entities
Date: November 20, 2017
Publication: International Trade Update
In January 2015, the administration of then-President Obama undertook historic changes and amendments to ease sanctions toward Cuba, as discussed in a previous update. Cumulatively, these changes represented significant relief from the decades-long U.S. sanctions against Cuba. Additional relief was offered in January 2016, with further amendments and relaxation of the sanctions, as we previously reported. However, shortly after taking office, President Trump announced a foreign policy shift toward Cuba with the issuance of National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba (NSPM).
In announcing President Trump’s revised policy in June 2017 (see the June 20 update on our TrumpandTrade.com site), his administration stated that the United States would once again restrict certain travel and seek to limit providing any advantages to the Cuban military (particularly the Cuban military monopoly, Grupo de Administración Empresarial) while seeking to continue to allow “American individuals and entities to develop economic ties to the private, small business sector in Cuba.” The Bureau of Industry and Security, the Office of Foreign Assets Control and the State Department were tasked with revising and issuing new regulations to implement these policy changes. On November 9, 2017, these agencies released their newly implemented Cuba sanctions regulations.
Bureau of Industry and Security
The Commerce Department’s Bureau of Industry and Security (BIS) has established a general policy of denial for license applications to export or re-export goods to, or for use by, certain entities or subentities the State Department has identified on its Cuba Restricted List (see below), unless such transactions are determined to be consistent with the NSPM. This is an effort to further restrict any economic activity involving the Cuban government, military and related entities.
BIS’ revisions to its Cuba regulations also include amendments to the license exception available for exports and reexports to Cuba as Support for the Cuban People (SCP). Previously, this license exception identified certain types of items, such as tools and equipment, eligible for export without a license for use by the private sector in Cuba. The November 9, 2017 amendments removed this specific list of items and, instead, generally authorizes exports of items that “may not be used to primarily generate revenue for the state or used to contribute to the operation of the state, including through the construction or renovation of state-owned buildings. Additionally, eligible items are limited to those that are designated as EAR99 or controlled only for anti-terrorism reasons on the Commerce Control List.”
BIS has also re-instituted its earlier definition of “ineligible Cuban government officials” to include, among others, “Ministers and Vice-Ministers; members of the Council of State; members of the Council of Ministers; members and employees of the National Assembly of People’s Power; members of any provincial assembly; local sector chiefs of the Committees for the Defense of the Revolution; Director Generals and sub-Director Generals and higher of all Cuban ministries and state agencies; employees of the Ministry of the Interior (MININT); employees of the Ministry of Defense (MINFAR); secretaries and first secretaries of the Confederation of Labor of Cuba (CTC) and its component unions; chief editors, editors and deputy editors of Cuban state-run media organizations and programs, including newspapers, television, and radio; or members and employees of the Supreme Court (Tribuno Supremo Nacional).”
License exceptions for individual gift parcels (GFT) and consumer communications devices (CCD) have been amended to exclude exports of covered items to the above identified ineligible Cuban government officials. Finally, BIS clarified that the amended regulations do not affect previously issued licenses that were in place prior to November 9, 2017.
For a detailed review of the revised and amended BIS Cuba regulations, see 15 CFR parts 730-774.
Office of Foreign Assets Control
The Treasury Department’s Office of Foreign Assets Control (OFAC) has implemented changes to the authorizations allowing for travel to Cuba and related transactions, and has amended its regulations to restrict certain financial transactions. In announcing the amendments, Secretary Steven Mnuchin stated, “We have strengthened our Cuba policies to channel economic activity away from the Cuban military and to encourage the government to move toward greater political and economic freedom for the Cuban people.”
In connection with the State Department’s Cuba Restricted List (see below), OFAC has placed restrictions on direct financial transactions with Cuban entities placed on this list. Under the new regulation, OFAC has clarified that “a person engages in a direct financial transaction by acting as the originator on a transfer of funds whose ultimate beneficiary is an entity or subentity on the [Cuba Restricted List] or as the ultimate beneficiary on a transfer of funds whose originator is an entity or subentity on the Cuba Restricted List, including a transaction by wire transfer, credit card, check, or payment of cash.” There are limited exemptions to this prohibition, including exports of agricultural items, medicine and supplies, and items to provide telecommunications and Internet services to Cuba.
Regarding travel to Cuba, the Trump administration is placing restrictions on certain previously authorized categories of travel to Cuba. This includes requiring that (1) all “people-to-people nonacademic educational travel be conducted under the auspices of an organization that is subject to U.S. jurisdiction and that sponsors such exchanges to promote people-to-people contact” and (2) such travelers “be accompanied by a person subject to U.S. jurisdiction who is a representative of the sponsoring organization.” Thus, individual travel under the general license for “people-to-people travel” will no longer be authorized. Further, under the license exemption Support for the Cuban People, OFAC will now strictly require that such travelers “engage in a full-time schedule of activities that result in meaningful interaction with individuals in Cuba.” Such activities must also enhance contact with the Cuban people, support civil society in Cuba, or promote the Cuban people’s independence from Cuban authorities.
Travel under the general license of “educational travel” will also be further restricted by requiring persons to do so under the auspices of an organization that is a person subject to U.S. jurisdiction, such as a sponsoring accredited academic institution and subject to more restrictive requirements under this general license. Overall, these revisions to the various categories of authorized travel to Cuba will put in place a much more rigorous process for such travelers in order to be assured that their travels will be covered under these license exceptions.
For a detailed review of the revised and amended OFAC Cuba regulations, see 31 CFR part 515.
The State Department has compiled a list of entities under the control of, or acting for or on behalf of, the Cuban military, intelligence, or security services or personnel with which direct financial transactions are now prohibited “as it would disproportionately benefit such services or personnel at the expense of the Cuban people or private enterprise in Cuba.” This “Cuba Restricted List” includes various Cuban government ministries, state-owned holding companies, numerous hotels, tourist agencies and marinas, as well as multiple entities directly serving the defense and security sectors of the Cuban economy. The list will be updated as necessary, and State has clarified that entities or subentities that are owned or controlled by another entity or subentity on the Cuba Restricted List are not treated as restricted unless also specified by name on the list.
Thompson Hine will continue to monitor and report on any further adjustments the Trump Administration may undertake regarding United States foreign policy toward Cuba and ongoing economic sanctions.
FOR MORE INFORMATION
For more information, please contact:
Samir D. Varma
Scott E. Diamond
Senior Legislative & Regulatory Policy Advisor
Not licensed to practice law
or any member of our International Trade group.
This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.
This document may be considered attorney advertising in some jurisdictions.
© 2017 THOMPSON HINE LLP. ALL RIGHTS RESERVED.