Cuban Trade Regs Loosened


Treasury's Office of Foreign Assets Control (OFAC) is amending the Cuban Assets Control Regulations (the “Regulations”) to further implement elements of the policy announced by the Administration on May 16, 2022,

Cuban entrepreneurs' access to internet-based services and banking facilities are improved, while the restrictions on transactions with state-owned entities remain fully in force.

"This is a tweaking of the Regs," says Pedro Freyre a partner with Akerman's Miami Office.  

"I don't think this is revolutionary , but it does move the agenda forward a little bit, in that in it affords greater transparency and and certainty as to how to deal with and what rights do the new Cuban small companies have."

"I think having the ability to open bank accounts in the US is helpful to everybody and transparent and better for the financial system," Freyre continued.  

Noting that large scale ventures with state-owned entities remain blocked, he notes " we're not there yet. I don't see that happening anytime soon, unless there is a dramatic change in the policy of the Cuban government."

"I think that I think the ball is now in the in the court of the Cuban government," said Freyre.  "I will say this. Everything we hear, everything we know is that the Cuban government is in a very tough position Their economy is in the tank. They they have oil shortages, they have blackouts, they have food shortages. They're in a dire moment and therefore they're a lot more receptive to stuff like this."

Internet-Based Services

Internet-Based Services. OFAC is amending § 515.578(a)(1) to provide additional examples of authorized services incident to the exchange of communications over the internet and to include and expand certain services to support the exchange of such communications. 

Authorized services include social media platforms, collaboration platforms, video conferencing, e-gaming and e-learning platforms, automated translation, web maps, and user authentication services.

Cloud-based services may be exported to Cuba to support the exchange of communications over the internet.

OFAC also expands the authorization for services (including training) to install, repair, or replace certain items, including by removing the requirement that referenced items fall within specific export control classification parameters.

OFAC is retaining the requirement in § 515.578(a)(2) that for services (including training) related to any items subject to the Export Administration Regulations, 15 CFR parts 730 through 774, such items must be licensed or otherwise authorized by the Department of Commerce for exportation or reexportation to Cuba.

OFAC is also amending § 515.578(d) and (e) to authorize the export or reexport of Cuban-origin software and mobile applications, respectively, from the United States to third countries.

The employment of Cuban nationals to develop mobile applications is authorized.

Definition of Independent Private Sector Entrepreneurs

Definition of Independent Private Sector Entrepreneurs. OFAC is amending § 515.340 by replacing the term “self-employed individual” with the term “independent private sector entrepreneur” and limiting the term to exclude a Cuban national who is a prohibited official of the Government of Cuba, as defined in § 515.337, or a member of the Cuban Communist Party, as defined in § 515.338.

The term continues to include self-employed individuals ( cuentapropistas), such as owners or employees of a private business or a sole proprietorship, but the amended definition now also includes cooperatives and other private businesses wholly owned by or consisting solely of such individuals.

Private businesses or sole proprietorships of up to 100 employees are covered by the term “independent private sector entrepreneur.” OFAC is also replacing the term “independent Cuban entrepreneurs” with “independent private sector entrepreneurs” in § 515.582, replacing the term “self-employed individuals” with “independent private sector entrepreneurs” and adding farms of up to 100 employees as an example of private businesses.

Insiders Out

It’s important to note that the new definition for independent private sector entrepreneurship excludes prohibited officials of the Cuban Government, such as the national assembly members, Cuban military officers, or certain ministry and staff regime propagandists, and prohibited members of the Cuban Communist Party.   For a Cuban private sector business to qualify under this definition, its ownership cannot include such insiders. 

US Bank Accounts

U.S. Bank Accounts for Independent Private Sector Entrepreneurs. OFAC is amending § 515.584(h) to authorize independent private sector entrepreneurs in Cuba, as defined in § 515.340, to maintain and use a U.S. bank account to conduct authorized or exempt transactions.

U-Turn” Transactions. OFAC is amending § 515.584(d) to reinstate an authorization for “U-turn” transactions to help the Cuban people, including independent private sector entrepreneurs, by facilitating remittances and payments for authorized transactions in the Cuban private sector.

This amendment allows any banking institution, as defined in § 515.314, that is a person subject to U.S. jurisdiction to process funds transfers in which Cuba or a Cuban national has an interest if the funds transfers originate and terminate outside the United States, provided that 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 amending § 515.584(e) to authorize the unblocking and return of any transfer that would have been authorized pursuant to the reinstated authorization.   Parties that had funds involving Cuba blocked in recent years could seek to unblock and recover those funds if the underlying transactions would be permissible under the U-turn transaction authorization, notes the sanctions team at Miller & Chevalier.

FAQs Updated

 OFAC is also issuing six new, Cuba-related Frequently Asked Questions (FAQs 1174-1179) and amending eight Cuba-related Frequently Asked Questions (FAQs 732, 736, 745, 748, 757, 769, 770, and 785).

See Export Practitioner feature June 2023 "Can Cuba Deliver" [10542]


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