JUST ANNOUNCED: Financing by US Depository Institutions of Export Transactions to Cuba and Further Loosening of Exportation and Travel Restrictions
by Gustavo J. Membiela, Uriel A. Mendieta, Rail Seoane
Published: January, 2016
Submission: January, 2016
In a continued effort to implementthe policy change announced by President Obama on December 17, 2014 to engage and empower the Cubanpeople, the Office of Foreign Assets Control (“OFAC”) and the Bureau of Industryand Security (“BIS”) have announced additional amendments to the Cuban AssetsControl Regulations (“CACR”) and the Export Administration Regulations (“EAR”),respectively, which will be published and effective in the upcoming days.
The regulatory changes discussed beloware more in the line of significant changes made to the regulations since they werelast updated on September 21, 2015. Overall, the regulatory changes provide additionalmethods for financing export transactions to Cuba, further loosen restrictions ontravel to Cuba and provide additional categories of items that will be generallyauthorized for exportation to Cuba. First, the regulatory changes allow alternativemethods of payment for authorized export transactions, including financing of suchtransactions by US depository institutions. Additionally, the regulatory changesalso make it easier for commercial airlines to travel to Cuba and expand some ofthe existing categories for which travel to Cuba was generally authorized. For itspart, BIS will subject new categories of items to a “general policy of approval”when a license is requested to export or reexport certain categories of items toCuba.
BIS Expands General Policy of Approvaland Creates Case-by-Case Licensing Policy
According to the sections of the EARgoverning exports to Cuba, items requiring a license to be exported or reexportedto Cuba are subject to a general policy of denial, except for certain items likeitems necessary for the environmental protection of US and international air quality,waters or coastlines, which are subject to a general policy of approval. The changesto the CACR now make telecommunications items, items necessary to ensure the safetyof civil aviation, and agricultural items outside the scope of the definition of“agricultural commodities” (i.e. insecticides, pesticides, etc.) subject to a generalpolicy of approval as well. These three broad categories of items were previouslysubject to a policy of “consideration on a case-by-case basis”, making it easierto export these items to Cuba now.
BIS is also creating a case-by-caselicensing policy relating to the exportation of items to meet the needs of the Cubanpeople, such as items for agricultural production, artistic endeavors, education,food processing, residential construction and renovation, the construction of infrastructure,and other related purposes. However, items for use by state-owned enterprises, agencies,or other organizations of the Cuban government that primarily generate revenue forthe state, including those in the tourism industry and those engaged in the extractionor production of minerals or other raw materials, will continue to be subject toa general policy of denial.
Financing for Exports and Reexports
US depository institutions are now authorized to provide financing for exportsand reexports of items to Cuba such as most of the ones now subjetc to ageneral policy of approval as set forth above.The provision of such financing by US depository institutions includes issuing,advising, negotiating, paying or confirming letters of credit (even those issuedby a Cuban financial institution), accepting collateral for issuing or confirmingletters of credit, and processing documentary collections.
However, the provision of such financing by US depository institutions hastwo limitations. First, financing may only be provided for the exportation or reexportationto Cuba of items authorized by BIS under the provisions of the Export AdministrationAct of 1979 and the EAR. Second, even for agricultural items or commodities thatare authorized for exportation or reexportation to Cuba by BIS, US depository institutions may not participate in the financing of such transactions becausethe Trade Sanctions Reform and Export Enhancement Act of 2000 continues to limitthe methods of payment authorized for the exportation or reexportation of such itemsto either cash in advance or financing by a third-country banking institution.
Further Loosening of Restrictionson Travel to Cuba
OFAC had formerly authorized travel to Cuba to attend professional meetingsor to conduct professional research. Changes to the CACR’s general license authorizingtravel to Cuba for professional research and professional meetings now clarifiesthat such travel is authorized not only to attend, but also to organize, professionalmeetings in Cuba. For a traveler organizing a professional meeting or conferenceon behalf of an entity, either the traveler’s profession must be related to theorganization of professional meetings or conferences or the traveler must be anemployee or contractor of an entity that is organizing the professional meetingor conference.
Similarly, the changes to the CACR’s general license authorizing travel toCuba for public performances, clinics, workshops and athletic and other competitionsand exhibitions now authorize travel to Cuba not only to participate in, but alsoto organize, such events. The changes to the regulations also clarify that transactionsincident to the organization of such events include marketing related to such eventsin Cuba.
The general license authorizing travel-related transactions to Cuba relatingto the exportation, importation or transmission of information and informationalmaterials was expanded to clarify that such authorized travel now also include transactionsas are directly incident to professional media or artistic productions of informationor informational materials for exportation, importation, or transmission, includingthe filming or production of media programs (i.e. movies or television shows), therecording of music and the creation of artworks in Cuba. A traveler taking advantageof this general license must be regularly employed in or demonstrate professionalexperience in a field relevant to such professional media or artistic productionsand the traveler’s schedule of activities must not include free time or recreationin excess of that consistent with a full-time schedule.
In relation to the deal reached between the US and Cuba to commence commercialflights to Cuba, OFAC’s changes to the CACR also include general authorizationsto enter into blocked space, code- sharing or leasing arrangements that facilitatethe provision of carrier serviced by air, including the entry into such arrangementswith a national of Cuba. As discussed above, in collaboration with OFAC’s changesto the CACR, BIS will also generally approve license applications for exports andreexports of items necessary to ensure the safety of civil aviation and the safeoperation of commercial aircraft engaged in international air transportation, includingthe export or reexport of such aircraft leased to state- owned enterprises.
The Latin America Group at Hunton & Williams LLP will continue to closelymonitor related developments. Please contact us if you have any questions or wouldlike further information regarding the recent changes to the CACR or the EAR, the normalization of US-Cuba relations orany regulation or sanction governing the Cuban embargo.
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