By Melissa Miller Proctor
The Commerce Department’s Bureau of Industry and Security (BIS) and the Treasury Department’s Office of Foreign Assets Control (OFAC) recently amended the Export Administration Regulations (EAR) and Cuban Assets Control Regulations (CAFC), respectively, to further the Administration’s efforts toward normalizing bilateral relations with Cuba. The following provides a recap of the changes that were made:
- New OFAC General License for Joint Medical Research: OFAC added a new General License in Section 515.547 of the CACR to allow U.S. persons to engage in commercial and non-commercial joint medical research projects with Cuba.
- New OFAC General License for Cuban-Origin Pharmaceuticals: OFAC added a new General License in Section 515.547 of the CACR that authorizes transactions incident to obtaining approval from the FDA of Cuban-origin pharmaceuticals, including discovery and development, pre-clinical research, clinical research, regulatory review, regulatory approval and licensing, regulatory post-market activities, and the importation into the United States of Cuban-origin pharmaceuticals. This General License also authorizes imports into the United States (as well as the marketing, sale or other distribution in the United States) of FDA-approved, Cuban-origin pharmaceuticals. U.S. persons engaging in these activities may now also open, maintain and close bank accounts at Cuban financial institutions as long as the accounts are used solely for authorized activities.
- New OFAC General License for Trade and Commerce Transactions Incident to Exports and Reexports to Cuba: OFAC added a new General License in Section 515.533(a) of the CACR to authorize transactions ordinarily incident to certain exports and reexports to Cuba provided that they are also authorized under the EAR.
- Exception for Certain Vessel Transactions: Currently, Section 515.207(a) of the CACR prohibits foreign vessels that call on Cuban ports for trade purposes from entering U.S. ports for the purpose of loading or unloading freight for 180 days from the date they depart Cuba. However, OFAC created a new exception to this prohibition for foreign vessels that have transported (from third countries to Cuba) only items that were subject to the EAR and classified either as EAR99 or in an Export Control Classification Number (ECCN) that is subject only to anti-terrorism controls.
- New OFAC General License for Contingent Contracts: OFAC added a new General License authorizing U.S. persons to negotiate and enter into contingent contracts for transactions that are prohibited by the CACR, provided that the performance of such contracts is made contingent on OFAC or another U.S. agency authorizing the underlying transactions.
- OFAC Expansion of Humanitarian-Related Transactions Authorizations: Previously, Sections 515.565 and 515.575 of the CACR authorized the provision of grants, scholarships, and awards in which Cuba or Cuban nationals have an interest (including as recipients) with respect to educational and humanitarian activities. OFAC extended that authorization to the provision of grants, scholarships, and awards in scientific research and religious activities. Those authorizations were also moved to new Section 515.590 of the CACR.
- OFAC Authorization of Services Related to Developing Cuban Infrastructure: OFAC added new Section 515.591 to the CACR which authorizes U.S. persons to engage in services relating to developing, repairing, maintaining, and enhancing Cuban infrastructure. The term “infrastructure’’ means systems and assets used to provide the Cuban people with goods and services produced by the public transportation, water management, waste management, non-nuclear electricity generation, and electricity distribution sectors, as well as hospitals, public housing, and primary and secondary schools.
- Changes to License Exception AVS under the EAR: License Exception AVS (Aircraft, Vessels and Spacecraft) in Section 740.15 of the EAR was amended to apply to cargo destined for countries other than Cuba that are loaded aboard aircraft transiting Cuba. Such cargo may not be removed from the aircraft or vessel for use in Cuba, and may not be transferred to another vessel—rather, the cargo must leave on the same vessel when it departs.
- Changes to License Exception SCP under the EAR: License Exception SCP (Support for the Cuban People) in Section 740.21 of the EAR was expanded to also authorize exports and reexports of certain items sold directly to individuals in Cuba for their personal use or their immediate family’s personal use. The items must be classified as EAR99 or in an ECCN that is controlled only for anti-terrorism reasons. In addition, the purchasers and end users must not be members of the Council of Ministers, flag officers of the Revolutionary Armed Forces, or members of the Politburo. Accordingly, this change will facilitate direct, online retail sales to individuals in Cuba.
- Narrowing of the Definitions of Prohibited Officials and Communist Party Members: Both OFAC and the BIS narrowed the definition of “prohibited officials of the Government of Cuba” in the CACR and the EAR to refer to members of the Council of Ministers and flag officers of the Revolutionary Armed Forces. The definition of “prohibited members of the Cuban Communist Party” was also amended to mean members of Poltiburo in the CACR and EAR.
These changes took effect on October 17, 2016. If you have any questions pertaining to the new changes in the U.S. sanctions on Cuba, embargoes and economic sanctions generally, or other international trade issues, please feel free to contact a member of Polsinelli’s International Attorneys.