By Evan C. Berquist and Aleida Ortega Conners
Fredrikson & Byron, P.A.
On September 18, 2015, the Obama administration announced significant changes to the U.S. sanctions regime that regulates commerce with Cuba. These regulatory changes will create several new areas of opportunity for U.S. businesses wishing to do business with the island. The new revisions to the Cuban Assets Control Regulations are being implemented by the Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the U.S. Department of Commerce’s Bureau of Industry and Security (BIS)—the two U.S. government agencies with principal responsibility for enforcing the embargo against Cuba. These new regulations make it legal for qualifying U.S. “persons” (both entities and individuals) to engage in several new types of commercial activity in Cuba, including, most notably, the following:
- Maintain a physical presence in Cuba;
- Open up bank accounts on the island;
- Employ Cuban nationals;
- Employ persons subject to U.S. jurisdiction in Cuba;
- Travel to Cuba by vessel;
- License and market telecommunications and internet-based services;
- And more.
Of course, these types of activities are only permitted for certain types of authorized activities on the island. Always check with an attorney before concluding that the activity you or your organization wants to pursue is in fact authorized by the regulations.
The new regulations apply to several key industries, including:
- News bureaus;
- Exporters of certain goods authorized for export; such as medicine or medical supplies, telecommunications equipment, and agricultural products;
- Providers of authorized mail and parcel transmission services;
- Providers of cargo transportation services, including ocean cargo;
- Providers of telecommunications or internet-based services;
- Entities organizing or conducting certain educational activities;
- Religious organizations; and
- Providers of travel and carrier services.
In addition, the regulations had particularly strong impacts on the following industries:
Telecommunications and Internet-based Providers
The amendments included authorization of certain activities that improve the free flow of information impacting providers of telecommunications and internet-based services. Imports into the United States of Cuban-origin mobile applications are now authorized. U.S. persons may also employ Cuban nationals to develop such mobile applications. In addition, telecommunications and internet-based service providers may enter into licensing agreements and engage in marketing activities in Cuba related to these authorized activities.
Travel and Related Services
Travel-related services are also positively impacted. The amendments have created a general license for transportation by vessel (including cruise ships) for persons authorized to travel to Cuba. On the financial side, U.S. authorized travelers are now permitted to open bank accounts in Cuba to be accessed while engaged in permissible activities. Because most Cuban hotels and businesses do not have the ability to accept credit cards, the ability to bank on the island will give frequent visitors and businesses greater flexibility to pay for goods and services.
Education
The amended regulations allow for academic exchanges and non-commercial joint academic research between U.S. and Cuban universities. The provision of standardized testing services and internet-based courses to Cuban nationals are also authorized.
Looking Forward
The relaxation of sanctions accompanies a general thaw in the relationship between the U.S. and Cuba. Whatever the reason for the apparent thaw, the trend line is clear: Further openings between the U.S. and Cuba now seem inevitable.
For the embargo to be fully lifted, of course, will require an act of Congress—something that in the near term, at least, seems unlikely. But until Congress does act to repeal the Cuban Assets Control Regulations, these administrative regulations offer an exciting opportunity for qualifying U.S. persons to gain a foothold in Cuba. We encourage clients to contact us to learn more about these changes and the opportunities they present for specific businesses and organizations.
Evan Berquist lived in Cuba in 2002 while attending classes at the University of Havana. He has also lived and worked in Puerto Rico and Central America, where he became fluent in Spanish. Evan practices in the firm’s International and Corporate Groups, where he assists companies with transactions, governance, and compliance-related topics.
Aleida Ortega Conners was born in Cuba and migrated to the United States at an early age. She currently practices in the firm’s International and Corporate Groups, using her multi-cultural background to help companies with business transactions in Latin American markets.