Trade Compliance Flash: OFAC and BIS Final Rules Revise Financing, Travel and Licensing Policies under the Cuba Sanctions Regulations

International Alert
01.27.16

Following historic changes to the Cuba Sanctions Regulations in January and September 2015, on January 26, 2016, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) and the Department of Commerce's Bureau of Industry and Security (BIS) jointly announced the release of amendments that take another step toward implementing the Obama Administration's shift in U.S. political and economic policy towards Cuba.

The OFAC Rule

On January 26, 2016, OFAC released a final rule amending the Cuban Assets Control Regulations (CACR). The new amendments do two basic things:

1. Remove and ease some export and financing restrictions:  

  • While the CACR previously limited the forms of financing permissible for all transactions ordinarily incident to licensed exports and reexports of U.S.-origin items, the January 26th amendments remove financing restrictions for authorized exports and reexports of non-agricultural items or commodities. The restrictions on financing for export and reexports of agricultural goods, required by the Trade Sanctions Reform and Export Enhancement Act of 2000, will stay in place. 
     
  • Depository institutions are now authorized to provide financing for non-agricultural exports or reexports, including issuing, advising, negotiating, paying, or confirming letters of credit, including those from Cuban institutions, accepting collateral for issuing or confirming letters of credit and processing documentary collections.
     

2. Facilitate through additions to the general license of 31 C.F.R. 515.572(a) authorized travel and exports to Cuba, including:

  • By allowing blocked space, code-sharing and leasing arrangements with Cuban airlines. 
     
  • By allowing additional travel-related and other transactions directly incident to the temporary sojourn of aircraft and vessels, when authorized by 15 CFR 740.15, License Exception AVS, or pursuant to other BIS or OFAC authorization. 
     
  • By authorizing additional transactions related to professional meetings and other events, disaster preparedness and response projects and information and informational materials, including transactions incident to professional media or artistic productions in Cuba.

OFAC supplemented this Final Rule with FAQs and Guidance Regarding Travel between the United States and Cuba.

The BIS Rule

In a corresponding final rule of January 27, 2016, BIS revised the Export Administration Regulations (EAR) to amend the exceptions to its general policy of denial of licenses for exports and reexport to Cuba. Most notably, the BIS final rule:

  • Establishes a policy of general approval for the export and reexport for items, including telecommunications items that could enhance communications to, from, and among the people of Cuba, and items necessary to ensure the safety of civil aviation and the safe operation of commercial aircraft engaged in international air transportation.
     
  • Establishes a case-by-case license application review policy for other categories of items for export and reexport, including applications for exports or reexports of aircraft or vessels temporarily in Cuba to deliver humanitarian goods or services.

Early Takeaways

  • Much is still the same under the Cuba Sanctions Regulations, but this week's final rules from OFAC and BIS are another small step towards opening Cuba to U.S. markets. 
     
  • It remains to be seen whether or how quickly financial institutions will respond to OFAC and BIS's encouragement to finance transactions pursuant to these new rules. 
     
  • The finalization of the civil aviation arrangement between Cuba and the United States, and the related code share provisions between American and Cuban airlines, will likely increase the number of parties seeking to avail themselves of the new financing, travel and licensing policies established by this week's final rules. 
     
  • The export of items necessary to safe civil aviation should increase as a result of the new BIS licensing policies, although additional questions remain about the scope of those policies and how they will be applied in practice. 
     
  • In general, authorized exports and reexports into Cuba should become easier, but the agencies' implementation of these rules, and how companies are able to respond, is yet to be seen.   
     

For questions or comments about this article, please contact the following authors:

Larry E. Christensen, lchristensen@milchev.com, 202-626-1469

Barbara D. Linney, blinney@milchev.com, 202-626-5806

Timothy P. O'Toole, totoole@milchev.com,  202-626-5552

Abigail E. Cotterill, acotterill@milchev.com, 202-626-5824

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