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U.S. Allows Importation of Cuban Software, Eases Other Restrictions

Wednesday, March 16, 2016
Sandler, Travis & Rosenberg Trade Report

Two federal agencies are taking action to allow the importation of Cuban-origin software, authorize additional business and physical presence in Cuba, further facilitate travel to Cuba for authorized purposes, relax the rules for vessels on temporary sojourn to Cuba, and expand the range of authorized financial transactions. Among the changes being made by the Treasury Department’s Office of Foreign Assets Control and the Commerce Department’s Bureau of Industry and Security in final rules that will take effect March 16 are the following.

Software. OFAC is amending section 515.578 of the Cuban Assets Control Regulations to allow the importation of Cuban-origin software.

Business and Physical Presence. The current authorization to establish a business presence in Cuba is being expanded to include the following additional categories of persons subject to U.S. jurisdiction (all of whom were previously authorized to establish a physical presence): (i) exporters of goods authorized 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 authorized by section 515.542(a) or providing cargo transportation services in connection with trade involving Cuba authorized by or exempt from certain prohibitions; and (iii) providers of travel and carrier services authorized by section 515.572. OFAC is clarifying that the business and physical presence authorization for providers of Internet-based services extends to persons engaged in transactions authorized by section 515.578(e).

The current authorization to establish a physical presence in Cuba is also being expanded to include the following additional categories of persons subject to U.S. jurisdiction: (i) entities engaging in non-commercial activities authorized 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 authorized by section 515.576. OFAC is clarifying that the activities that may be carried out by exporters of items exported or re-exported pursuant to authorization by the DOC or OFAC, or that are otherwise exempt, at an authorized physical presence include the assembly of such items.

Temporary Vessel Sojourns to Cuba. BIS has issued a final rule that allows vessels departing the U.S. on temporary sojourn to Cuba with cargo for other destinations to travel to Cuba under a license exception rather than having to obtain a license 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 authorizes exports of certain items to persons authorized by the Treasury Department to establish and maintain a physical or business presence in Cuba and adopts a licensing 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 organization that sponsors such exchanges. As a result, individuals are now authorized to travel to Cuba provided that, among other things, the traveler 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 traveler and individuals in Cuba. The predominant portion of the activities engaged in by the traveler must not be with certain government of Cuba or Cuban Communist Party officials, however. Persons relying upon this authorization must retain records related to the authorized travel transactions, including records demonstrating a full-time schedule of authorized 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 U.S. in a non-immigrant status or pursuant to other non-immigrant travel authorization issued by the U.S. government. New section (a)(5)(i) explicitly authorizes the receipt of any salary or other compensation consistent with the individual’s non-immigrant status or other non-immigrant travel authorization, 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) authorizes all transactions related to the sponsorship or hiring of a Cuban national to work in the U.S. 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 authorized are transactions in connection with the filing of an application for non-immigrant travel authorization.

Finally, OFAC is adding section 515.585(c) to authorize 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 authorize the importation of such merchandise into the U.S., 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 authorized. This provision authorizes funds transfers from a bank outside the U.S. that pass through one or more U.S. financial institutions before being transferred to a bank outside the U.S. 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 authorized or exempt under the regulations.

OFAC is also authorizing U.S. banking institutions to process U.S. dollar monetary instruments presented indirectly by Cuban financial institutions. Correspondent accounts used for authorized 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 authorized 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 U.S. to receive payments for sales of his or her book. This provision is in addition to the two existing authorizations for banking institutions to operate certain accounts on behalf of certain Cuban nationals.

Grants and Awards. OFAC is authorizing 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 is clarifying that the existing authorization includes provision of grants or awards for humanitarian projects in or related to Cuba that are designed to directly benefit the Cuban people.

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