[1]The following guest post is from Timothy O’Toole [2], a Member of Miller & Chevalier who focuses on sanctions, export controls, and other international regulatory and compliance issues. Tim sat down with FCPAméricas to discuss the changing rules in the United States toward Cuba sanctions.
The press has reported widely on recent changes in Cuba sanctions policy. What can U.S. companies now do in Cuba?
The press surrounding President Obama’s announcement of changes to the Cuba policy has been a lot more dramatic than the changes themselves. That said, there have been substantial changes, which U.S. government agencies put into effect on January 15, 2015.
In terms of businesses, there have been three main changes to the Cuba policy. First, the changes make it easier for U.S. business people to travel to Cuba by removing barriers on scheduled air carrier service between the U.S. and Cuba, and generally authorizing 12 categories of travel without a specific license – i.e., without asking for and gaining the U.S. government’s permission for the trip beforehand. Second, the changes now provide a more favorable environment for certain types of exports to Cuba, where the exports are intended to improve the living conditions of the Cuban people, especially by increasing the information flow between the two countries. These newly permitted (or at least newly favored) exports include certain telecommunications equipment, including equipment that provides access to the internet, and personal communications devices. Third, and perhaps most important, the changes loosen restrictions on certain activities undertaken in the banking, finance, and insurance sectors.
This last change is critical for business people because it allows them to undertake certain forms of activities in Cuba and get paid, which they previously could not do. For example, even though previous U.S. policy allowed companies like Netflix to send streaming movies and videos to Cuba, the embargo made it impractical for those companies to get paid. The loosening of the embargo in the banking and financial sector makes it possible [3] for Netflix to now get paid, which is presumably why it recently announced [4] that it will start offering streaming services in Cuba.
What can U.S. companies still not do in Cuba?
The short answer is, there is a lot U.S. Companies still cannot do in Cuba. As a result, U.S. companies (and others subject to the sanctions, which include U.S. citizens, U.S. residents, any person physically within the U.S., any company organized under U.S. law, and any company controlled by U.S. persons), should exercise great care when considering doing business in Cuba. Most transactions between the U.S. and Cuba remain prohibited, and the controls on exports to Cuba remain extensive. Sales to Cuba or Cuban nationals of U.S. military items, and any U.S. goods that have potential military applications (such as aircraft, telecommunications equipment, night vision goggles, etc.) remain prohibited. And even for those exports that may be permitted to Cuba, U.S. exporters will be required to conduct and document their efforts to ensure that the products will be sold only to users approved by U.S. licensing authorities, that the products remain with the designated end-user, and that the product will be used only in a way permitted by law. Companies that decide to take advantage of the new policies will need to take care to ensure that they are complying with all of the conditions imposed by the U.S. government, which can be complicated and extensive.
You recently spoke [5] to the Wall Street Journal about how changes make it easier for Cuban baseball players to play in Major League Baseball. Who might else be directly affected in the short term?
The most obvious beneficiaries in the short term will be companies like Netflix, who were previously allowed to conduct certain activities in Cuba (such as providing streaming video), but as a practical matter could not get paid for doing do. The loosening of financial restrictions makes it more feasible to begin Cuban business activities for such companies. Companies that previously would have wanted to travel to Cuba for research and investigation purposes – for example, baseball scouts – could also benefit from recent changes. In addition, companies selling certain communications equipment and personal communications devices should see some potential immediate benefits from the changes.
The new policy also loosens some restrictions on foreign ships that have entered Cuba before heading to the United States, which may benefit the maritime industry. Finally, because the amendments make it easier to export items necessary for the environmental protection of U.S. and international air quality, waters, and coastlines, it is likely that companies doing business in those sectors will also be directly affected.
What will need to change to allow for broader Cuba investment?
The current changes are limited in nature and scope, in large part because there is only so much the President alone can do when it comes to Cuba. Modification or repeal of the entire Cuban Embargo will require action by the U.S. Congress. Until then, companies should exercise care in attempting to take advantage of the recent changes. And, companies should definitely be aware of what has NOT changed. The prohibition on travel to Cuba for tourism remains in place, as does the need for specific permission for many exports to Cuba, including those related to medicine, medical devices, and/or environmental protection.
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