The U.S. Commerce and Treasury Departments announced on January 26, 2016, actions to ease certain restrictions on transactions involving Cuba. The new actions do not significantly expand the types of activities in which U.S. persons can engage with Cuba; rather, they:

• Ease restrictions on payment and financing terms for authorized exports to Cuba;

• Establish a favorable licensing policy for exports of certain types of items to Cuba; and

• Ease restrictions regarding travel to Cuba by certain U.S. persons and regarding the provision of related services by air carriers that transport authorized travelers between the United States and Cuba.

The changes to the Cuban Assets Control Regulations (“CACR”) and Export Administration Regulations (“EAR”) are being made to further implement President Obama’s December 2014 announcement regarding significant shifts in U.S. policy toward Cuba, which included the resumption of U.S.-Cuba diplomatic relations and the easing of certain restrictions on travel, commerce and the flow of information to and from Cuba. For additional information regarding previous actions taken by the U.S. Government in this regard, please see our prior updates here and here.

Despite these recent actions, the United States still maintains a relatively comprehensive embargo prohibiting U.S. persons, U.S. companies and non-U.S. subsidiaries of U.S. companies from engaging in most transactions with Cuba – including restrictions prohibiting U.S. persons from traveling to Cuba for tourism purposes.

Overview of Recent Actions

Effective January 27, 2016, the CACR and EAR are amended to authorize the following additional activities involving Cuba:

• Favorable Licensing Policy for Certain Exports to Cuba: Under the changes announced last year, the U.S. Government implemented license exceptions permitting exports of certain items to Cuba as well as a favorable licensing policy with respect to applications involving exports of items for additional purposes. Under the new actions, a general policy of approval now applies for license applications related to the export of certain items to Cuba that are intended for purposes related to agriculture, news gathering, improvement of communications, civil aviation safety and the strengthening of civil society in Cuba.
  • Applications will be considered on a case-by-case basis for the export of items in order to “meet the needs of the Cuban people,” which includes items related to agricultural production and food processing, among other activities.¹ This case-by-case review policy will apply even if the contemplated activities involve Cuban government agencies or state-owned enterprises.
  • Otherwise, a policy of denial will continue to apply for all other applications involving items intended for use by the Cuban government, state-owned enterprises, or entities in the Cuban tourism or mining industries. In addition, a policy of denial will remain in place with respect to applications involving the export of most other items to Cuba.
• Expansion in authorized travel categories: U.S. persons remain prohibited from traveling to Cuba for tourism purposes. However, building on the general licenses implemented in September 2015 authorizing U.S. persons to travel to Cuba in connection with any of twelve categories of activity, U.S. persons now are eligible to travel to Cuba and engage in related transactions for certain additional purposes, including in connection with:
  • The organization of professional meetings/conferences, public performances, clinics, workshops, athletic and other competitions and exhibitions in Cuba (previously, only attendance at such events was authorized);
  • The filming, production or creation in Cuba of movies, television programs, music recordings, artworks and other media by professionals in such industries; and
  • The operation or servicing of aircraft and other vessels used to transport authorized travelers between the United States and Cuba.
• Financing: Previously, payments and financing terms related to authorized exports to Cuba were limited to cash-in-advance and third-country financing. Now, U.S. persons are authorized to engage in a broader scope of financing activities, including sales on an open account and other financing from U.S. financial institutions (including letters of credit for authorized exports). We note, however, that the expanded financing authorization does not apply to sales of agricultural products to Cuba (as the existing limitations on such arrangements are required by statute and can only be lifted by the U.S. Congress). Moreover, it is not clear whether and to what extent U.S. financial institutions will be interested in participating in newly-permitted financing arrangements.
• Air Carrier Services: Expanding on the scope of authorized activities that can be engaged in by U.S. persons seeking to provide authorized air carrier services to Cuba, U.S. air carriers now are permitted to enter into blocked space, code-sharing, and leasing arrangements with Cuban persons to facilitate the provision of air carrier services to Cuba. However, such arrangements must be related to “authorized travel,” meaning that passengers can include only U.S. persons who qualify for the categories of generally-authorized travel (e.g., professional research meetings, educational activities, etc.) or who otherwise have a specific license authorizing the travel, as well as certain Cuban and other non-U.S. persons who are eligible for carrier services. All U.S. persons remain prohibited from engaging in any activities related to tourist travel in Cuba.

How Dechert Can Assist

While these most recent actions are less significant than those implemented last year, they reflect the continuing thaw in U.S.-Cuba relations. Many practical considerations continue to apply to transactions with Cuba. Meanwhile, only the U.S. Congress can fully lift the U.S. embargo of Cuba, and this is not anticipated in the near future. We also note that depending on the result of the upcoming U.S. presidential election, many of these newly-eased restrictions may be re-imposed through executive action.

Dechert will continue to provide up to date information regarding the sanctions.