With what he described as “historic steps to chart a new course” and normalize relations between the United States and Cuba, President Barack Obama has announced an easing of decades-old sanctions against the island nation. Companies, however, will need to hold tight before taking advantage of any business opportunities.
Among the initiatives announced on Wednesday are the re-establishment of diplomatic relations with Cuba, severed in 1961, and re-opening an embassy in Havana. “Adjusting regulations to more effectively empower the Cuban people,” will include amendments to regulations of the Departments of Treasury and Commerce. Along with an easing of travel restrictions, remittance levels to Cuban nationals and humanitarian projects will be raised from $500 to $2,000 per quarter (excluding officials of the government or the Communist party). Remittance forwarders will no longer require a specific license. Licensed U.S. travelers to Cuba will be authorized to import $400 worth of goods from Cuba, of which no more than $100 can consist of tobacco products and alcohol combined.
A cornerstone of the changes is an expansion of commercial sales and exports. Items authorized for export from the U.S. will include building materials for private residential construction, goods for use by private sector Cuban entrepreneurs, and agricultural equipment for small farmers.
The commercial export of certain items that will “contribute to the ability of the Cuban people to communicate with people in the U.S. and the rest of the world” will be authorized. This will include the commercial sale of certain consumer communications devices, related software, applications, hardware, and services, and items for the establishment and update of communications-related systems. Companies will be allowed to provide commercial telecommunications and Internet services.
U.S. institutions will be permitted to open correspondent accounts at Cuban financial institutions to facilitate the processing of authorized transactions. Also, the regulatory definition of the statutory term “cash in advance” will be revised to specify that it means “cash before transfer of title. The change “will provide more efficient financing of authorized trade with Cuba,” the White House said in a statement. U.S. credit and debit cards will be permitted for use by travelers to Cuba.
U.S.-owned or -controlled entities in third countries will generally be licensed to provide services to, and engage in financial transactions with, Cuban individuals in third countries. Also, general licenses will unblock the accounts at U.S. banks of Cuban nationals who have relocated outside of Cuba; and permit U.S. residents to participate in third-country professional meetings and conferences related to Cuba.
“For U.S. businesses, the clearest winners under the changes announced today are companies in the telecommunications sector,” Judith Lee, chair of the law firm Gibson Dunn's International Trade Regulation and Compliance Practice, says. “U.S. telecommunications providers will also be allowed to develop infrastructure for commercial telecommunications and internet services, and should also be allowed to provide support for this infrastructure, although final details have not yet been released on this aspect.”
“Other specific U.S. businesses that will benefit under this policy shift are companies who manufacture residential building materials and agricultural equipment, but the export of goods for private sector Cuban companies has also been authorized, which essentially throws the market open to U.S. companies,” she adds.
Many of the details that will allow these business opportunities are forthcoming, as is guidance on how all this affects the current sanctions regime. Shortly after the White House announcement, The Treasury Department’s Office of Foreign Assets Control updated its online list of “Frequently Asked Questions,” to add the query: “How will OFAC implement the changes to the Cuba sanctions program? Are the changes effective immediately?”
The answer: It will implement the Treasury-specific changes via amendments to its Cuban Assets Control Regulations and the Department of Commerce will implement the remainder of the changes via amendments to its Export Administration Regulations. OFAC expects to issue its regulatory amendments in the coming weeks. It cautioned, however, that “none of the announced changes take effect until the new regulations are issued.”