Bureau of Industry and Security (BIS)

Effective today, January 27, 2016, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) and the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) have further reduced sanctions affecting U.S. relations with Cuba.  The amendments to the Cuban Assets Control Regulations (CACR) and Export Administration Regulations (EAR) represent significant steps toward the liberalization of commerce and travel which were first announced by the Obama administration in December 2014.

Cuba's flag
Copyright: mishchenko / 123RF Stock Photo

Among the reductions in current regulations are new allowances for financing, exportation, and travel.

  • Financing  – Restrictions on payment and financing terms for authorized non-agricultural exports and reexports have been removed and U.S. banking institutions are now permitted to provide financing for such transactions.  The U.S. Department of Commerce has indicated that payments of cash in advance; sales on an open account; and financing by third-country financial institutions or U.S. financial institutions will all permissible under the newly revised regulations.
  • Exports – OFAC and BIS have expanded general licenses for goods and services which aid the Cuban people.  General licenses related to the export and reexport of telecommunications items, agricultural items, civil aviation safety items, and news gathering software and technology items have all be expanded.  OFAC and BIS have also announced a case-by-case licensing policy which will facilitate the exportation of goods (including artistic and cultural endeavors as well as education, infrastructure, public health, and sanitation items) which will benefit the Cuban people even if their exportation necessarily involves the Cuban government or other state-owned enterprises with whom commercial interaction is generally prohibited under current U.S. regulations.
  • Travel – OFAC authorized travel for additional business-related reasons as well as authorizing additional transactions which are incident to authorized travel.  Among the newly authorized reasons for travel are the production of media and artistic programs (including, television programs, films, music recordings, the creation of artworks by Cuban artists), and the organization of professional conferences, sports competitions, artistic exhibitions, and public performances, as well as additional types of humanitarian projects such as disaster preparedness projects. It is now also permissible to travel to Cuba and engage in market research, marketing, sales and contract negotiation, delivery, installation, and leasing of items which are incident to otherwise authorized activities in Cuba.

Although relations between the U.S. and Cuban continue to take strides toward liberalization, numerous sanctions regulations remain in full effect and can carry significant penalties if violated.  Accordingly, companies looking for opportunities in Cuba must, with the the help knowledgeable counsel, remain vigilant in their adherence to existing regulations despite the progress of the past year and the promising trend of rapid deregulation.

Cuba's flag
Copyright: mishchenko / 123RF Stock Photo

On September 21, 2015, both the Department of Treasury’s Office of Foreign Assets Control (OFAC) and the Department of Commerce’s Bureau of Industry and Security (BIS) announced significant reductions in the regulation of transactions between US individuals and entities and Cuban nationals.

OFAC Regulatory Changes

The revised regulations and interpretive guidance are effective immediately and demonstrate substantial progress in the normalization of relations between the United States and Cuba which were historically first announced earlier this year.  Among the most significant changes to OFAC’s Cuban Assets Control Regulations include new permissions that:

  • US entities may establish a physical presence, as well as Cuban bank accounts, to further authorized businesses related to mail, parcel and cargo services, news bureaus, telecommunications and internet-based services, educational services, religious organizations, and travel and carriers services.
  • US entities may operate carrier services via vessels to and from Cuba, though travel to Cuba for tourism remains prohibited.
  • US entities may provide goods and services to Cuban nationals who are located outside of Cuba.
  • US entities may engage in legal services, emergency medical services, humanitarian, and diplomatic activities for the benefit of Cubans and Cuban nationals.

BIS Regulatory Changes

Similarly, the BIS has revised and clarified the Export Administration Regulations to facilitate the movement of authorized goods and people to and from Cuba by:

  • Expanding the categories of vessels which are authorized to temporarily sojourn in Cuba to include cargo, transport and recreational vessels.
  • Expanding the time aircraft can sojourn in Cuba.
  • Permitting export and reexport of: software to improve the “free flow of information” to, from and around Cuba; items incidental to establishment of authorized businesses; and, on a temporary basis, certain proprietary “tools of the trade” necessary to establish and support authorized business ventures.

Although these substantial revisions to OFAC and BIS regulations indicate that the Obama administration is committed to rapid liberalization, many significant regulations remain.

With limited guidance on how these new regulations will be interpreted and implemented, any U.S. individual or entity considering entry into the Cuban market should seek specific advice as to whether their proposed venture complies with all current regulations before they agree to any transactions with Cuban nationals.