Turning Back the Clock on Cuba

Turning Back the Clock on Cuba…Kind Of

On Friday, June 16th, President Trump announced changes to the U.S. policy towards Cuba. His new Cuba policies seek to enhance compliance with U.S. law, hold the Cuban regime accountable for human rights abuses, further U.S. national security and foreign policy interests and those of the Cuban people, and lay the groundwork for empowering the Cuban people to develop greater economic and political liberty. Although much of the Obama Administration’s policies remain intact (such as the sending of remittances to Cuba, the expansion of telecommunications and internet access for Cuban people, support for the sale of agricultural commodities, medicine, and medical devices, and the end of the “Wet Foot, Dry Foot” immigration policy), President Trump’s policies are likely to impact two key areas:

  1. trade/business as it seeks to end economic practices that benefit Cuban military, intelligence, or security agencies or personnel; and
  2. travel-related transactions as it seeks to enforce the ban on U.S. tourism to Cuba.

To curtail economic practices benefiting the Cuban military, intelligence, or security services or personnel (such as the Grupo de Administración Empresarial S.A. (GAESA) and its affiliates, subsidiaries, and successors), the State Department has been tasked with publishing a list of entities with which direct financial transactions disproportionately benefit these military-linked enterprises at the expense of the Cuban people or private businesses. This might be difficult to implement as GAESA is reported to control 40-60% of the Cuban economy, including hotels, restaurants, stores, and supermarkets.

Regarding travel-related transactions, the Obama Administration authorized travel-related transactions for 12 categories of identified activities. Outright travel for tourism purposes was prohibited. Individuals seeking to travel to Cuba could travel for educational purposes pursuant to the general license for people-to-people travel. Under this license, each traveler was required to maintain a full schedule of educational exchange activities resulting in meaningful interactions between the traveler and Cuban people and retain records demonstrating such. Those traveling under the auspices of an organization sponsoring exchanges to promote people-to-people contact were able to rely on the sponsoring entity for record-keeping purposes. However, in practice, it’s not clear how effective enforcement of this general license was. Under President Trump’s new policies, individual “people-to-people” travel will be prohibited but group “people-to-people” travel may continue. Individuals may travel to Cuba as part of programs that take place “under the auspices of an organization that is subject to U.S. jurisdiction that sponsors such exchanges to promote people-to-people contact.” Representatives of the group must accompany each group to make sure that travelers maintain a full-time schedule.

The departments of Treasury and Commerce are now on a 30-day clock to begin the process of issuing new regulations addressing these policy changes. The regulatory amendments are expected to be issued “in the coming months.” In the interim, the announced policy changes will not take effect until those departments have finalized their new regulations.

To provide greater detail on President Trump’s Cuba announcement, OFAC released responses to Frequently Asked Questions.

Regarding the commercial aspects, businesses currently engaged in the Cuban market that may undertake direct transactions with these parties are also authorized as long as the commercial engagements are in place prior to the issuance of the forthcoming regulations. Further, new regulations will not affect existing contracts and licenses. Once the State Department publishes its list of prohibited entities with which direct transactions generally will not be permitted, U.S. companies should be sure check the list to determine if transacting with their Cuban counterpart is permitted.

For those lucky individuals traveling under an individual people-to-people trip that began booking their travel arrangements (flights, hotels, rental cars, etc.) prior to June 16, all future travel-related transactions are authorized regardless of whether the trip occurs before or after OFAC’s new regulations are issued as long as the travel-related transactions were consistent with the Obama-era regulations. Travel arrangement transactions that may include direct transactions with entities related to the Cuban military, intelligence, or security services (GAESA essentially) will also be permitted if they’re made prior to the forthcoming regulations. Once the new regulations enter into effect, travel-related transactions with parties identified by the State Department generally will not be permitted.

While you may not see changes when you purchase airline tickets or book a cruise, know that new policies are coming and travel-related transactions with prohibited entities identified generally will not be permitted. Individuals making travel arrangements after June 16 do so at their own risk.  Since there is no specific timeline as to when OFAC’s new regulations will be announced, it is entirely possible for the rules to change while the travelers are in Cuba.

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