Ahead of White House Visit, BIS and OFAC Ease More Sanctions

5 min

Previewing President Obama's historic visit to Cuba, the U.S. government has unveiled further sanctions relaxations that normalize relations with Cuba and Cuban nationals. Effective March 16, 2016, these changes continue the series of coordinated relief measures adopted over the past year by the Office of Foreign Assets Control (OFAC) and the Bureau of Industry and Security (BIS) as part of a broader warming in bilateral relations.

The most significant regulatory changes expand travel authorizations and permitted exports, eliminate a ban on Cuban access to global banking, provide additional flexibility in routing cargo vessels temporarily through Cuba, allow certain entities to establish and maintain a business or physical presence in Cuba, and enable the compensated employment of Cuban nationals in the United States. In particular, the latest developments include:

  • Expanding Carrier Services and Routing of Vessel Cargo Destined for Third Countries. Vessels may now depart the United States with cargo for Cuba and other destinations onboard without further licensing. License Exception Aircraft, Vessels, and Spacecraft (AVS) authorizes cargo destined for third countries to transit Cuba temporarily if the cargo remains onboard the vessel, does not enter the Cuban economy, and is not transferred to another vessel while in Cuba.
  • Amending General Prohibition 8. In parallel, BIS revises General Prohibition 8 of the Export Administration Regulations to state explicitly that the rule does not prohibit cargo laden on board a vessel from transiting certain destinations, including Cuba, when a license or license exception authorizes the in-transit shipment.
  • Promoting Cuban Trading Industry. BIS now considers applications for the export of items that "enable or facilitate export of items produced by the private sector in Cuba" on a case-by-case basis subject to certain end-user, end-use, and reexport limitations. Consistent with prior licensing policy, BIS will impose licensing conditions that prohibit reexports from Cuba to any other destination or for uses that facilitate the export of goods or services by state-owned entities that primarily generate revenues for the Cuban government.
  • Establishing Business Arrangements and Noncommercial Presence. Exporters, courier delivery services, cargo transportation providers, and travel and carrier service providers can establish a business presence in Cuba through a variety of arrangements. Similarly, human rights organizations, certain nongovernmental organizations, private foundations, and noncommercial research and educational institutions may establish offices, warehouses, retail outlets, and similar facilities in Cuba.

    These entities may employ Cuban nationals and U.S. persons in Cuba, and open bank accounts. Building upon prior authorizations, U.S. persons may now export or reexport items for use by those establishing and maintaining a business or physical presence in Cuba under License Exception Support for the Cuban People (SCP).

  • Expanding People-to-People Educational Travel. For the first time in decades, U.S. persons can independently plan travel to Cuba for people-to-people educational exchange activities that include meaningful interactions and predominant contact with Cuban individuals other than government or community party officials. These trips no longer require a U.S. organization sponsor. Travelers must maintain a full-time nonrecreational schedule and keep careful records and documentation of their travel.
  • Employing Cuban Nationals in the United States. U.S. companies can employ and compensate nonimmigrant Cuban nationals working in the United States. Hiring is permissible only when the employer does not compensate the Cuban government and the employee is not assessed any special tax by Cuban authorities as a result of his or her employment.
  • Allowing Personal Purchases Abroad. U.S. persons can purchase Cuban-origin merchandise, including alcohol and tobacco products, for personal use while traveling outside the United States or Cuba. Travelers must consume the goods while in the third country where the purchase or acquisition occurs. Importation into the United States remains prohibited.
  • Access to International Banking and Financial Services. Several significant easing of financial restrictions facilitates Cuban access to U.S. and global financial systems:
    • Authorizing U-Turn Transactions Using the U.S. Financial System. U.S. depository institutions may clear U-turn transfers in which Cuba or a Cuban national has a pecuniary interest to or from any Cuban bank, state-owned or private, except those transfers involving U.S. persons (or Specially Designated Nationals). U.S. financial institutions may unblock and return previously prohibited U-turn transfers that are now authorized, subject to reporting requirements.
    • Unblocking of Previously Blocked Funds. U.S. financial institutions may unblock and return official operating expenses of foreign embassies and certain intergovernmental organizations, as well as personal expenses in Cuba by their employees and contractors, and the family members who reside with such persons.
    • Processing U.S. Monetary Instruments. U.S. banking institutions may process U.S. dollar monetary instruments presented indirectly by Cuban financial institutions in correspondent accounts in U.S. currency.
    • U.S.-Based Bank Accounts for Cuban Nationals. U.S. banks may now open and maintain accounts for Cuban nationals located in Cuba to receive limited payments in the U.S. and to remit deposited funds to Cuba.
  • Providing Educational Grants. U.S. persons, including academic institutions and charitable organizations, may provide educational scholarships and similar awards to Cuban nationals.
  • Importation of Cuban Software. Individuals may now import Cuban-origin software into the United States.

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Despite this further easing of U.S. sanctions, a number of Cuban regulatory restrictions remain in force and continue to restrict trade, investment, and travel in Cuba. Venable's International Trade and Customs Group is closely monitoring the ongoing changes to regulatory restrictions on Cuba, and is available to provide further information and guidance.