Recent Updates to the U.S. Cuban Sanctions

by: Olga Torres, Managing Member

On June 16 2017, President Trump announced changes to the United States’ economic sanctions against Cuba. This article provides a brief synopsis of the announced changes and potential impact.

It is important to note that the announced changes may not be as comprehensive as they may appear at first glance.  The changes were announced via a Presidential Memorandum (“the Memorandum”). Most of the Cuba relaxation that was accomplished under the Obama administration remains. All 12 general licenses outlining “authorized travel” to Cuba remain. The U.S. embassy will continue operations in Havana.

The new changes will prohibit “direct financial transactions” with a specific list of entities linked to the Cuban military, intelligence, and security services. This restriction specifically covers Grupo de Administracion Empresarial S.A. (“GAESA”), which is said to control at least 60% of the Cuban economy. However, it is unclear if “indirect” transactions will also be prohibited e.g., through joint ventures or local agents. Importantly, consistent with the Administration’s interest in not negatively impacting American businesses for engaging in lawful commercial activities, preexisting business arrangements will continue to be permitted. At this time, this provision grandfathers past conduct; however, it is unclear if this interpretation could later be recanted or narrowed.

Importantly, there are exceptions to the prohibition on “direct financial transactions” with the military, intelligence and security services. Some of these exceptions concern:

  • programs to build democracy in Cuba
  • the acquisition of visas for permissible travel
  • the expansion of direct telecommunications and intern access for the Cuban people
  • support of the sale of agricultural commodities, medicines, and medical devices sold to Cuba
  • sending, processing, or receiving authorized remittances
  • programs which further the national security or foreign policy interests of the United States.

Another significant change relates to “people-to-people” travel. Individual people-to-people travel is travel that “(i) does not involve academic study pursuant to a degree program; and (ii) does not take place under the auspices of an organization that is subject to U.S. jurisdiction that sponsors such exchanges to promote people-to-people contact.” People-to-people travel has been controversial because it can easily be abused by people wishing to go to Cuba for pure tourism reasons. Therefore, the new changes will require that all educational travel be under the auspices of an organization subject to the Jurisdiction of the United States, and all such travelers must be accompanied by a representative of the sponsoring organization. As a result of these new changes, we will likely experience increased enforcement and targeted efforts to curtail “tourism.” In addition, Treasury will be required to take a more active role in auditing travel to Cuba to ensure that travelers are complying with relevant statutes and regulations. In fact, the Inspection General of the Department of Treasury will be required to provide an annual report regarding the implementation of this audit requirement.

These changes are not effective immediately. OFAC’s FAQ state that OFAC “expects to issue its regulatory amendments in the coming months.” The US Department of Commerce Bureau of Industry and Security issued parallel FAQs.

Torres Law will continue monitoring new developments in the Cuban sanctions or interpretations by the various enforcing agencies. If you have any questions on the impact of the announced changes to your current operations, please contact us.