25 March 2016
U.S. Allows Importation of Cuban Software, Eases Other Restrictions
Two federal agencies took action to further relax U.S. commercial restrictions on Cuba several days ahead of President Obama’s historic visit to the island nation. The Treasury Department’s Office of Foreign Assets Control and BIS have issued final rules amending the relevant U.S. regulations on Cuba with immediate effect to allow the importation into the United States of Cuban-origin software, authorise additional business and physical presence in Cuba, further facilitate travel to Cuba for authorised purposes, relax the rules for vessels on temporary sojourn to Cuba, and expand the range of authorised financial transactions.
Software. OFAC has amended section 515.578 of the Cuban Assets Control Regulations to allow the importation of Cuban-origin software.
Business and Physical Presence. The current authorisation to establish a business presence in Cuba has been expanded to include the following additional categories of persons subject to U.S. jurisdiction (all of whom were previously authorised to establish a physical presence): (i) exporters of goods authorised for export or re-export to Cuba by section 515.533 or section 515.559 or that are otherwise exempt; (ii) entities providing mail or parcel transmission services authorised by section 515.542(a) or providing cargo transportation services in connection with trade involving Cuba authorised by or exempt from certain prohibitions; and (iii) providers of travel and carrier services authorised by section 515.572. OFAC has clarified that the business and physical presence authorisation for providers of Internet-based services extends to persons engaged in transactions authorised by section 515.578(e).
The current authorisation to establish a physical presence in Cuba has also been expanded to include the following additional categories of persons subject to U.S. jurisdiction: (i) entities engaging in non-commercial activities authorised by section 515.574 (support for the Cuban people); (ii) entities engaging in humanitarian projects set forth in section 515.575(b) (humanitarian projects); and (iii) private foundations or research or educational institutes engaging in transactions authorised by section 515.576. OFAC has clarified that the activities that may be carried out by exporters of items exported or re-exported pursuant to authorisation by the DOC or OFAC, or that are otherwise exempt, at an authorised physical presence include the assembly of such items.
Temporary Vessel Sojourns to Cuba. BIS has issued a final rule that allows vessels departing the United States on temporary sojourn to Cuba with cargo for other destinations to travel to Cuba under a licence exception rather than having to obtain a licence for the cargo bound for those other destinations to transit Cuba, provided that such cargo departs with the vessel at the end of its temporary sojourn, does not enter the Cuban economy and is not transferred to another vessel in Cuba.
The BIS rule also authorises exports of certain items to persons authorised by the Treasury Department to establish and maintain a physical or business presence in Cuba and adopts a licencing policy of case-by-case review for exports and re-exports of items that would enable or facilitate export of items produced by the private sector in Cuba, subject to certain limitations.
Travel and Related Transactions. OFAC has removed the requirement that people-to-people educational travel be conducted under the auspices of an organisation that sponsors such exchanges. As a result, individuals are now authorised to travel to Cuba provided that, among other things, the traveller engage while in Cuba in a full-time schedule of educational exchange activities that are intended to enhance contact with the Cuban people, support civil society in Cuba, or promote the Cuban people’s independence from Cuban authorities, and that will result in meaningful interaction between the traveller and individuals in Cuba. The predominant portion of the activities engaged in by the traveller must not be with certain government of Cuba or Cuban Communist Party officials, however. Persons relying upon this authorisation must retain records related to the authorised travel transactions, including records demonstrating a full-time schedule of authorised activities.
OFAC has also eliminated the limitation on the receipt of compensation in excess of amounts covering living expenses and the acquisition of goods for personal consumption by a Cuban national present in the United States in a non-immigrant status or pursuant to other non-immigrant travel authorisation issued by the U.S. government. New section (a)(5)(i) explicitly authorises the receipt of any salary or other compensation consistent with the individual’s non-immigrant status or other non-immigrant travel authorisation, provided that the recipient is not subject to any special tax assessment by the Cuban government in connection with the receipt of the salary or other compensation. Moreover, new section 515.571(e) authorises all transactions related to the sponsorship or hiring of a Cuban national to work in the United States and provides that an employer may not make additional payments to the Cuban government in connection with the sponsorship or hiring of a Cuban national. Also authorised are transactions in connection with the filing of an application for non-immigrant travel authorisation.
Finally, OFAC has added section 515.585(c) to authorise individuals who are persons subject to U.S. jurisdiction and who are located in a third country to engage in the purchase or acquisition of merchandise subject to the prohibitions in section 515.204, including Cuban-origin goods, for personal consumption while in a third country, and to receive or obtain services from Cuba or a Cuban national that are ordinarily incident to travel and maintenance within a third country. This provision does not authorise the importation of such merchandise into the United States, including as accompanied baggage.
Financial Transactions. U-turn transactions in which Cuba or a Cuban national has an interest to be conducted through the U.S. financial system are now authorised. This provision allows funds transfers from a bank outside the United States that pass through one or more U.S. financial institutions before being transferred to a bank outside the United States where neither the originator nor the beneficiary is a person subject to U.S. jurisdiction. Transactions through the U.S. financial system that do not meet these criteria, including all transactions where the originator or beneficiary is a person subject to U.S. jurisdiction, remain prohibited unless otherwise authorised or exempt under the regulations.
OFAC is also authorising U.S. banking institutions to process U.S. dollar monetary instruments presented indirectly by Cuban financial institutions. Correspondent accounts used for authorised transactions may be denominated in U.S. dollars. Banking institutions subject to U.S. jurisdiction may not open correspondent accounts for banking institutions that are nationals of Cuba, however.
In addition, banking institutions may now open and maintain accounts solely in the name of a Cuban national located in Cuba for the purposes only of receiving payments in the U.S. in connection with transactions authorised pursuant to or exempt from certain prohibitions and remitting such payments to Cuba. This provision would allow, for example, a Cuban national author located in Cuba to open an account with a bank or online payment platform in the United States to receive payments for sales of his or her book. This provision is in addition to the two existing authorisations for banking institutions to operate certain accounts on behalf of certain Cuban nationals.
Grants and Awards. OFAC has authorised the provision of educational grants, scholarships or awards to a Cuban national or in which Cuba or a Cuban national otherwise has an interest. This could include, for example, the provision of educational scholarships for Cuban students to pursue academic studies for a degree. Additionally, OFAC has clarified that the existing authorisation includes provision of grants or awards for humanitarian projects in or related to Cuba that are designed to directly benefit the Cuban people.