OFAC Publishes New and Amended Cuba Sanctions Regulations


The U.S. regulations implementing the policy changes with regard to U.S. sanctions against Cuba announced on December 17 by President Obama were released by the Treasury Department’s Office of Foreign Assets Control (OFAC) yesterday and went into effect today. See 31 CFR Part 515. These regulations closely parallel the President’s earlier announcement.

For a detailed summary of the new policies, please see our previous Alert. A few points about the new regulations are particularly noteworthy.

I. Visiting Cuba without a specific license is still limited to 12 categories of travelers, and travel providers may be placed in the position of watchdog.

The 12 categories are: (1) family visits; (2) official business of the U.S. government, foreign governments, and certain intergovernmental organizations; (3) journalistic activity; (4) professional research and professional meetings; (5) educational activities; (6) religious activities; (7) public performances, clinics, workshops, athletic and other competitions, and exhibitions; (8) support for the Cuban people; (9) humanitarian projects; (10) activities of private foundations or research or educational institutes; (11) exportation, importation, or transmission of information or information materials; and (12) certain export transactions that may be considered for authorization under existing regulations and guidelines.

These activities do not include tourism, and OFAC warns, “Transactions related to activities that are primarily tourist-oriented, including self-directed educational activities that are intended only for personal enrichment, are not authorized pursuant to this section.” 31 CFR § 515.565(c).

OFAC states that although air travel to Cuba is currently limited to charter service, airlines will be able to petition the Department of Transportation for authority to provide scheduled service. In informal FAQs, OFAC says that “[o]nce scheduled service is restored, passengers purchasing a ticket for scheduled service to Cuba will be able to purchase their ticket directly from the airline offering the service.”

One question that arises is how will a travel arranger, or eventually an airline, know if a customer is someone whose travel falls into one of the 12 authorized categories or who has another valid reason for going to Cuba. The new regulations answer that question in part by stating, “Persons subject to U.S. jurisdiction providing services authorized pursuant to this section must retain for at least five years from the date of the transaction a certification from each customer indicating the section of this part that authorizes the person to travel or send remittances to Cuba.” 31 CFR § 515.572(b).

Unanswered at this point is whether the airline or travel arranger can merely accept the customer’s certification without further inquiry and without potential liability for the inevitable falsely certifying passengers, or whether the airline or travel arranger must do more. Will there be an implicit or even an explicit duty of care?

II. Several financial restrictions have been eased.

OFAC is authorizing the use of U.S. credit and debit cards in Cuba for travel-related and other transactions consistent with its new policies. U.S. financial institutions may now enroll merchants and process such transactions. U.S. financial institutions are also now permitted to open corresponding accounts at Cuban banks to process authorized transactions and money transfers. 31 CFR § 515.584. Among these transactions will be the payment by wire transfer to U.S. exporters of agricultural and other authorized goods upon the arrival of their shipments in Cuba, so long as payment is “before the transfer of title to, and control of, the exported items to the Cuban purchaser.” 31 CFR § 515.533(a)(2)(i). This is a significant easing of the prior definition of “cash in advance” which had required payment by the Cuban purchaser via a third-country bank before the shipment left the United States. It is anticipated that this modification will ease, speed and stimulate exports of U.S. agricultural goods to Cuba.

III. Oil and gas investments and activities will not take place anytime soon.

The new OFAC regulations do not address energy issues directly, although they constitute an important step in improving relations between the two countries and thus eventually opening the door to U.S. investment in Cuban energy exploration and production. In his December 17 statement of policy, the President noted a willingness to pursue discussions with the Cuban and Mexican governments on unresolved maritime boundaries in the Gulf of Mexico. This suggests that the Administration has its eye on long-term possibilities. However, in view of the opposition in Congress to a complete abandonment of the U.S. sanctions program, the reported difficulties and poor results obtained by third-country actors (Repsol and Petrobras), and the low price environment for oil, neither the present legal framework nor strong commercial incentives currently exist for U.S. investment, or arguably international investment in general, in the Cuban energy sector.

If you have any questions, please contact the Haynes and Boone lawyer with whom you regularly work or any of the following lawyers in the firm’s Americas Practice Group.

This information is provided by Haynes and Boone, LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.

Email Disclaimer