Trump’s Cuba Course Clarified

Trade ConceptBy Susan Kohn Ross

“Trump cracks down on Cuba” or variations on that phrase have peppered the general press since Friday, when the President announced his policy towards Cuba.  When you read what was actually written, you come away with a more tempered reaction. Yes, there will be changes, and the most critical one is yet to come, but we focus here on what was actually written.

First, the format is not an Executive Order but rather a June 16, 2017 “National Security Presidential Memorandum on Strengthening the Policy of the United States Towards Cuba” accompanied by a Fact Sheet. The memo can be found here, and the Fact Sheet here. So, nothing changes right away.

Taken together, there are two points that could impact international traders. The first is the categories of authorized travelers remains the same, while the revised policy is to crack down on other types of travel.  The process for getting a visa to travel to Cuba is not changed, nor is the requirement to go with an authorized touring organization. So, not much impact is expected in this quarter.

The other focus of the new policy could, however,  cause some degree of grief for American companies trying to take advantage of the market opening which occurred under President Obama.  Relying on the “national security and foreign policy interests” of the United States, Mr. Trump states “we must channel funds toward the Cuban people and away from a regime that has failed to meet the most basic requirements of a free and just society.”  This policy change will result in the Trump Administration identifying the entities, subentities and individuals it determined are acting for or on behalf of the Cuban military, intelligence or security services, as well as their affiliates, subsidiaries and successors, immediately naming Group de Administracion Empresarial S.A. or  GAESA.

Pursuant to Trump’s memo, the denied parties will include:

… Ministers and Vice-Ministers, members of the Council of State and the Council of Ministers; members and employees of the National Assembly of People’s Power; members of any provincial assembly; local sector chiefs of the Committees for the Defense of the Revolution; Director Generals and sub–Director Generals and higher of all Cuban ministries and state agencies; employees of the Ministry of the Interior (MININT); employees of the Ministry of Defense (MINFAR); secretaries and first secretaries of the Confederation of Labor of Cuba (CTC) and its component unions; chief editors, editors, and deputy editors of Cuban state-run media organizations and programs, including newspapers, television, and radio; and members and employees of the Supreme Court (Tribuno Supremo Nacional).

Direct financial transactions with those parties will be prohibited. So, unless a U.S. company is already doing business with an individual who falls into one of the listed categories, until the new list is published, American companies seeking to or already doing business in Cuba will have no idea whether they will be permitted to do business with their current or intended business partners. The earliest that list could be published is 30 days, or by July 15, 2017. It is by then the Secretaries of Treasury, Commerce, State and Transportation are to coordinate their efforts and publish it.

The Havana mission and operations at Guantanamo are unaffected.  The delivery of mail between the countries or their cooperation in the case of rescue efforts are still permitted. Travel, cargo and trade are otherwise unaffected.  In terms of authorized travel, individuals are now required to keep records for a period of five years! Clamping down on travel will be accomplished over the next 90 days. Within that time frame, Treasury is directed to audit travel to Cuba to insure compliance and the Treasury Inspector General is to provide a report of those results within 180 days of the regulations being “adjusted”.

Particularly interesting is the focus on supporting telecommunications and internet connectivity. Having been in Havana last November, it is true the cost of connectivity is high and somewhat unstable, and many Cubans regularly congregate at the limited hotspots that exist. However, these have in many ways become the norm in every country that rolls out such services, and Cuba only started doing so in earnest in the last 18 months or so.  Trump’s memo goes on to direct the Secretary of State to convene a task force to look at the “technological challenges and opportunities for expanding internet access in Cuba, through Federal Government support… “

There are currently no specific general licenses issued relative to trade with Cuba. However,  31 CFR 515.542(d) provides one by regulation: “General license for telecommunications facilities. Transactions, including payments, incident to the establishment of facilities, including fiber-optic cable and satellite facilities, to provide telecommunications services linking the United States or third countries and Cuba, including facilities to provide telecommunications services in Cuba, are authorized”. Of course, 515.542(g) also requires reporting about those services twice a year.  Sadly, it is not clear how the Administration intends to accomplish improved connectivity with American support in the face of the latest policy shift.

Nonetheless, importantly, the sale of agricultural commodities, medicines and medical devices is allowed to continue. Of course, what the impact of the denied parties list might be on even these sales is unclear at this time.

If you are still in need of more details, a good source of general information continues to be the OFAC website where the latest Frequently Asked Questions re Cuba have been updated. OFAC’s answer to just about every question is “[t]he announced changes do not take effect until OFAC issues new regulations”  and that is likely to happen “in the coming months!” In other words, stay tuned – more developments to follow.

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