President Barack Obama and Cuban President Raúl Castro held a bilateral meeting at the United Nations General Assembly today, which was seen as another step in strengthening ties between the two nations. It was the second face-to-face meeting between the two leaders since the US and Cuba announced the restoration of diplomatic relations late last year.
In advance of the meeting, on September 18, 2015, the United States Departments of the Treasury and Commerce announced additional revisions to the Cuba sanctions regime, which became effective on September 21, 2015. These revisions build on the reforms initiated by the Obama administration in 2009, as well as the additional reforms announced in December 2014, which were supplemented with regulatory amendments earler this year. The revisions to the sanctions regime make it easier for US companies to begin to do business in Cuba.
Specifically, these revisions to the Cuban Assets Control Regulations (CACR) enforced by the Treasury Department’s Office of Foreign Assets Control (OFAC) and the Export Administration Regulations (EAR) administered by the Commerce Department’s Bureau of Industry and Security (BIS) permit US companies to:
- Establish a business presence in Cuba (including through joint ventures with Cuban entities) to provide certain telecommunications and internet-based services, and to market or license such services
- Provide goods and services to Cuban nationals located outside of Cuba (provided no commercial exportation of goods or services to or from Cuba takes place)
- Establish and maintain a physical presence in Cuba (such as an office, warehouse, or retail outlet) if the US company is a news bureau, an exporter of certain goods authorized for export or re-export to Cuba, a mail or parcel transmission service, a telecommunications or Internet-based services provider, an educational activities organizer, a religious organization, or a provider of certain travel services
Here is the list of the revisions announced last week.
The revisions most likely to affect US companies are summarized below.
Telecommunications and Internet-Based Services
Like the reforms announced in December 2014, the most recent revisions to the Cuba sanctions regime seek to improve telecommunications services between the US and Cuba and to encourage the free flow of information within Cuba. US companies are now permitted to establish a business presence in Cuba to provide certain telecommunications and Internet-based services. The revisions also allow US
companies to import Cuban-origin mobile applications, and to hire Cuban nationals to develop mobile applications. The existing authorization for US companies to provide certain consumer communications devices has also been expanded to cover additional services, as well as training related to the installation, repair or replacement of covered devices.
Business Presence in Cuba
For the first time in decades, the revisions allow US companies in certain industries to establish an office, retail outlet, or warehouse in Cuba. The US entities permitted to do so are: news bureaus; exporters of certain goods authorized for export or re-export to Cuba by OFAC or BIS, such as agricultural products and construction materials for privately-owned buildings; mail or parcel transmission services; certain cargo transportation services; providers of telecommunications or internet-based services; entities organizing or conducting educational activities; religious organizations; and providers of carrier or certain travel services. The revisions also permit US companies involved in those industries to employ Cuban nationals and to open and maintain bank accounts in Cuba.
The September revisions also expand the License Exception “Support for the Cuban People” (SCP), which authorizes the export and re-export of certain items to improve living conditions, strengthen civil society, and support independent economic activity in Cuba. Building on the license exception announced last winter, License Exception SCP now authorizes temporary exports and re-exports to Cuba of certain tools of trade to install, service, or repair specified items, as well as temporary exports and re-exports of commodities and software for exhibition or demonstration. License Exception SCP also authorizes temporary reexports from a foreign country to Cuba of items for use in “scientific, archaeological, cultural, ecological, educational, historic preservation, sporting activities, or in the traveler’s professional research and meetings,” and permits the export or re-export of certain items to support the establishment of a permitted physical presence in Cuba.
The revisions to the Cuba sanctions regime build on the Obama Administration’s initiative to increase commerce and people-to-people contact with Cuba. The announcement—much like the bilateral talks at the UN earlier today—is meant to spur progress of normalizing relations with the island. These latest reforms further loosen travel, commerce, and investment restrictions on Cuba – steps that many view as necessary to spur economic opportunity in Cuba. Although the embargo remains in place, certain US companies will be permitted to open locations and to hire workers in Cuba for the first time in decades. The revisions also pave the way for joint ventures between US and Cuban entities in the telecommunications and internet-based services industries. In the process to normalization, one would expect additional revisions to the Cuba sanctions regime during President Obama’s tenure.