On November 8, 2017, the US Treasury, Commerce, and State Departments announced amendments to the Cuban Assets Controls Regulations and the Export Administration Regulations to continue the Trump administration’s policy of restricting travel to and trade with Cuba, while easing export controls on US exports to the Cuban private sector (See the Treasury announcement containing links to the amendments.) These amendments focus on banning individual people-to-people travel to Cuba and prohibiting business transactions with entities controlled by the Cuban military, intelligence, or security services. These amendments implement President Trump’s June 2017 National Security Presidential Memorandum Strengthening the Policy of the United States Toward Cuba. Some of the most important changes implicated by these amendments are described below.
I. Restrictions on people-to-people exchanges and educational travel
Individual people-to-people travel, one of the categories of travel authorized under the prior administration, is now prohibited. This category allowed American travelers to visit Cuba for informal and non-academic cultural and educational exchanges without the need to purchase often-costly guided tours. American travelers who want to engage in people-to-people travel can now do so only under the auspices of a US organization that sponsors such exchanges to promote people-to-people contact and must be accompanied by a US representative of the sponsoring organization.
The amendments also provide for additional requirements in relation to educational travel. Americans planning to travel to Cuba to engage in educational activities may now be required to obtain a letter from a US educational institution making a number of statements as to the enrollment status of the student and the structure and duration of the program, among others. The amendments to the travel provisions will undoubtedly moderate the recent increases in US travelers to Cuba and the interactions between Cubans and individuals from the United States.
II. Prohibition on doing business with entities controlled by Cuban military, intelligence, and security services
The State Department has published a list of entities that are controlled by the Cuban military, intelligence, and security services, the “Cuba Restricted List.” US persons are now precluded by Treasury regulations from engaging in financial transactions involving listed entities, which include ministries, holding companies (notably GAESA), numerous hotels across the island, tourist agencies, marinas, stores, and manufacturing and logistics companies, among many others. The prohibition extends not only to US companies but also to US travelers visiting the island under authorized travel categories. Given the extensive role of the listed entities in the Cuban economy, including the hospitality industry, the restrictions on dealings with those on the Cuba Restricted List will greatly reduce Cuba-related opportunities for US businesses and travelers.
The new restrictions also prohibit US parties from entering into agreements with listed entities, even if they are made contingent upon obtaining appropriate US licenses; such contingent agreements were previously permitted. In addition, transactions ordinarily incident to authorized activities are also prohibited if they involve listed entities, unless expressly authorized. Financing of exports by US financial institutions, which was previously authorized (with the exception of exports of agricultural commodities), is now prohibited if it involves listed entities. Dealings to establish business and physical presence in Cuba that were permitted to certain categories of businesses under prior regulations are now authorized only for a narrower range of businesses.
Exceptions have been carved out for various transactions with listed entities including purchases of Cuban visas and transportation to, from, and within Cuba. Financing of exports involving listed entities is also permitted for medicines and medical devices, telecom and internet related items, and items associated with air and sea operations that support permissible travel, cargo, or trade.
III. Expansion of definition of “prohibited official of the Government of Cuba”
Pursuant to the recent amendments, the term “prohibited official of the Government of Cuba”—for whom certain authorized transactions are off-limits—has been expanded. While under the prior regulations the term applied only to members of the Council of Ministers and flag officers of the Revolutionary Armed Forces, it now applies to: ministers and vice-ministers; members of the Council of State and the Council of Ministers; members and employees of the National Assembly of People’s Power; members of any provincial assembly; local sector chiefs of the Committees for the Defense of the Revolution; directors general and sub-directors general and higher of all Cuban ministries and state agencies; employees of the Ministry of the Interior (MININT); employees of the Ministry of Defense (MINFAR); secretaries and first secretaries of the Confederation of Labor of Cuba (CTC) and its component unions; chief editors, editors, and deputy editors of Cuban state-run media organizations and programs, including newspapers, television, and radio; and members and employees of the Supreme Court (Tribunal Supremo Nacional).
IV. Export control restrictions on dealings with restricted entities
The Department of Commerce, Bureau of Industry and Security (BIS) has also amended its licensing policy with respect to the export/re-export of commercial and dual-use goods, software and technology subject to US export controls to Cuba. Under the new policy, license applications submitted to BIS that involve one or more parties included in the Cuba Restricted List will generally be denied unless BIS, in coordination with the Department of State, determines that the transaction is consistent with the administration’s Cuba policy, which aims to channel funds toward the Cuban people and away from the Cuban government. Furthermore, Commerce’s amendments expressly provide that export licenses for items to meet the needs of the Cuban people, which are regularly considered on a case-by-case basis, will be denied for transactions involving entities included in the Cuba Restricted List.
V. Loosening of export controls for exports to Cuban private sector
Under prior regulations, an export license was available for certain exports directed to the Cuban private sector, including exports for construction or renovation of privately owned buildings, for agricultural activities, and for use by entrepreneurs. Commerce’s amendments simplify and expand this license availability by authorizing the export and re-export to Cuba of items for use by the Cuban private sector for private sector economic activities, without specifying categories of items.
VI. Entry into effect
The regulatory amendments take effect on November 9, 2017. They will not affect travel arranged before June 16, 2017, however, nor business dealings entered into prior to the inclusion of the relevant entity in the Cuba Restricted List.