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Cuba Sanctions Are Changing – But Don’t Break Out the Cigars Yet

Loosened Cuba sanctions has meant more shipments of export cargo and import cargo in international trade.

Cuba Sanctions Are Changing – But Don’t Break Out the Cigars Yet

Since President Obama has returned from his historic trip to Cuba, can American tourists now also travel to Cuba to enjoy mojitos and cigars on the beach?

While such idyllic tourist travel is still prohibited, the U.S. and Cuba are closer than they have been in decades. President Obama’s trip was designed to “extend the hand of friendship to the Cuban people” and end the remnants of the Cold War, but significant differences remain between the U.S. and Cuba regarding security, opportunity and human rights. Until those differences are resolved and the U.S. embargo is lifted, some form of sanctions will remain in effect.

President Obama’s visit to Cuba is his latest effort to further a policy designed to engage and empower the Cuban people. That policy already has resulted in a number of amendments to the sanctions found in the Cuban Assets Control Regulations (CACR) and the Export Administration Regulations (EAR). Although the amendments are significant, the remaining sanctions under the CACR and the EAR are very broad, including the prohibition on tourist travel.

The latest amendments, made on the eve of President Obama’s trip, are intended to increase the ability of U.S. citizens to visit Cuba to engage with the Cuban people, expand trade and commercial activities, and further develop their private sector. The amendments include:


  • Authorizing additional categories of U.S. persons to establish a physical or business presence in Cuba, such as humanitarian organizations, private foundations, and educational institutions;
  • Allowing entities authorized to establish a physical or business presence in Cuba to export items used in relation to that presence; for example, now they can export pens and pencils for use in those authorized offices;
  • Making it easier to obtain a U.S. export license for items that enable or facilitate Cuba’s private sector exports;
  • Allowing U.S. persons to purchase and consume Cuban-origin items while in third countries;
  • Authorizing U.S. banks to open accounts for Cuban nationals in Cuba in order to receive authorized payments in the U.S. and remit payments back to Cuba;
  • Authorizing the importation into the U.S. of Cuban-origin software; and
  • Removing the requirement that people-to-people educational travel be conducted through a sponsoring organization; individuals may now travel so long as they meet the requirements.


By removing the requirement to conduct people-to-people travel through an organization, the amendments have made it cheaper and easier for U.S. citizens to travel to Cuba. But they must still keep detailed records that substantiate claims that they have maintained a full educational schedule. While these amendments relax the rules, significant sanctions still apply and companies remain broadly prohibited from engaging in transactions involving Cuba or exporting items subject to the EAR without a license or license exception.

Only time will tell whether President Obama’s visit will further encourage political and economic reforms within Cuba, regardless, all hope is not lost for those who long for mojitos and cigars. Even though tourism is still prohibited, if you are in Cuba for an authorized purpose, you can purchase and enjoy those legendary cigars and Cuban-made rum during your visit. And if you’re enjoying vacation time in a third country where Cuban cigars and rum are available, you can feel warm and fuzzy while consuming these products free from restrictions under U.S. sanctions.

Elsa Manzanares and Michelle Schulz are co-chairs of the International Trade group at Gardere Wynne Sewell LLP.

Companies and individuals must be careful not to violate sanctions regulations with respect to the shipment of export cargo and import cargo in international trade.

Sanctions Compliance Issues for Non-U.S. Companies

Foreign companies or affiliates of U.S.-based companies may not be aware that they may be subject to U.S. sanctions laws, including programs on Iran and Cuba, which are administered by the U.S. Department of the Treasury Office of Foreign Assets Control (OFAC).

Both of these programs not only apply to U.S. persons but to a much larger group, including those owned or controlled by U.S. persons and organizations. While there has been a recent loosening of the sanctions on Cuba, and a plan to potentially reduce sanctions against Iran, these sanctions are currently very broad and continue to prohibit most transactions.

As all U.S. persons must comply with the current sanctions involving Cuba and Iran, it is important to know whether your foreign affiliate or employees may be subject to these rules. For these purposes, a U.S. person includes the following: (1) all U.S. citizens and residents, wherever located, (2) any person acting within the U.S., (3) any corporation, partnership, association, or other organization organized under the laws of the U.S. or any state, territory or possession of the U.S., and (4) any corporation, partnership, association or other organization, wherever organized, that is owned or controlled by persons in (1) through (3).

Many American citizens and residents are currently employed by companies located outside of the United States. As a result, it is important to note that these sanctions follow all U.S. citizens “wherever located” and all citizens working abroad must ensure that they are not engaging in any prohibited activity despite the fact that they are neither in the U.S. nor working for a U.S. company. When facing work activities that may involve transactions with Cuba and Iran, it is especially important that these U.S. citizens and residents need ensure that their activities are authorized under a general or specific license.

Many foreign companies also do not realize that the prohibitions may apply to them if they are owned or controlled by a U.S. person, corporation, or other U.S. entity. Control includes 50 percent or more ownership, but may also be implicated if a U.S. person influences a foreign company’s operations. For example, if a U.S. citizen board member has control over the policies and personnel decisions of a foreign entity, then, depending on the facts, that entity may be considered “owned or controlled” by a U.S. person and therefore subject to U.S. sanctions regulations.

Finally, the OFAC regulations prohibit U.S. persons from “facilitating” transactions by non-U.S. persons engaged in activities that would be prohibited if engaged in by a U.S. person. For example, a U.S. citizen board member of a foreign entity cannot approve, finance, direct, or otherwise involve herself in a transaction by that foreign entity that the U.S. citizen is otherwise prohibited from engaging in. Identifying the types of activities that constitute facilitation under OFAC’s broad interpretation of the regulations is highly fact-specific and a frequent source of confusion for companies.

Foreign entities affiliated with U.S. companies should have procedures in place to determine whether their actions are subject to U.S. sanctions. If they are subject to U.S. jurisdiction, they should also determine to what extent they need to review their transactions to ensure that they and their U.S. affiliates remain compliant.

Elsa Manzanares and Michelle Schulz are co-chairs of the International Trade group at Gardere Wynne Sewell LLP.

Continued restrictions on U.S.-Cuba international trade means that large growth in shipments of export cargo and import cargo has not yet come about.

Is Cuba Really Open for Business?

Cuba is open for business! At least, that may be the impression that you get after listening to recent media reports, including those detailing visits by U.S. government officials.

In reality, despite the recent announcement of sanctions relief, most transactions with Cuba remain prohibited. So, while U.S. companies may apply for licenses for transactions involving Cuba, it remains unlikely they will be approved by the U.S. Department of the Treasury Office of Foreign Assets Control (OFAC) and the Commerce Department’s Bureau of Industry and Security (BIS).

That does not mean that the door remains closed to all potential business opportunities, it simply means U.S. persons must instead operate within the newly expanded—but still quite limited—scope of authorized travel and business transactions. The challenges to taking advantage of these changes are ensuring compliance, not only with the U.S. restrictions that remain in place, but also in navigating the regulatory landscape within Cuba.

The primary areas that have seen relaxed restrictions are telecommunications, banking and remittances, and travel. OFAC has issued general licenses that allow for increased internet and other telecommunications services to link Cuba to third countries, including the U.S. Internet-based services such as email, other messaging platforms, social networking, and web-hosting are also now authorized. Companies providing these authorized services may also establish a physical presence in Cuba, including sending U.S. employees to live and work in Cuba, and hiring local employees.

Banking transactions with Cuba have long been prohibited, but the recent changes allow U.S. persons to open and maintain bank accounts in Cuba for specific purposes, including authorized travel. The revised rules also permit unrestricted dollar amounts be sent to authorized Cuban persons. A new general license authorizes remittances from Cuba, or certain Cuban nationals located in third countries, to the United States.

Finally, travel is one of the most misunderstood categories of activities. A quick web search on travel companies will return countless advertisements that promise hassle-free options to enjoy the beaches and historic sites. However, tourist travel is still prohibited. Any travel must fall within one of 12 authorized categories of activities, including family visits, professional meetings, humanitarian projects and journalistic activity. Also, the description of each category must be carefully reviewed to ensure that your activity falls within the scope. Travelers should also keep in mind that although the travel may be permitted by OFAC, certain activities may require additional authorization from the Cuban government, posing a significant challenge.

While Cuba may represent a new market for U.S. business, companies should tread carefully to ensure compliance with existing restrictions. The export agencies have announced that they will continue to vigorously enforce those restrictions. We recommend approaching all Cuba-related transactions as prohibited unless authorized by a specific carve out in the regulations.

Elsa Manzanares and Michelle Schulz are co-chairs of the International Trade group at Gardere Wynne Sewell LLP.