Wednesday, November 8, 2017

The Hypocritical American Policy toward Cuba and What it Means for U.S. Business-Part II

Last week, I posted about the Trump Administration's hypocritical policy toward Cuba and how the U.S. embargo hurts American businesses (not to mention the Cuban people). The embargo, among other things, focuses on preventing human rights violators in Cuba from profiting from Americans. Wednesday, the Administration significantly rolled back some of the Obama-era changes making it much harder for Americans to travel and making it certain that even fewer U.S. airlines will try to make their fledgling Cuba itineraries work.

Ironically, the Administration released the new regulations while the President is in China and within days of his meeting with the President of Russia in Communist Vietnam. Both China and Russia have a significant number of state-owned enterprises and very few restrictions on U.S. firms conducting business with them. The new policy, which goes into effect Thursday, once again requires people under U.S. jurisdiction to travel under the OFAC  license of U.S. tour groups. As anyone who has traveled to Cuba before the Obama liberalization knows, this significantly increases the cost of the trip. The Trump Administration may not realize that those U.S. tour companies have no choice but to work with the Cuban government, which controls the tourism industry, so I'm not sure how this achieves the objectives of keeping American money out of the pockets of the government. The new rules also ban dozens of hotels, but not Starwood, which is run by the Cuban government. Although the policies aim to support the Cuban people directly, this will be difficult if Americans find it too onerous to get to the island. 

If you don't have time to read the new regulations, I have cut and pasted some of  Embassy's  key points below:

Financial Transactions

  • In accordance with the NSPM, the State Department is publishing a list of entities and subentities that are under the control of, or act for or on behalf of, the Cuban military, intelligence, or security services or personnel and with which direct financial transactions would disproportionately benefit the Cuban military, intelligence, or security services or personnel at the expense of the Cuban people or private enterprise in Cuba – the State Department’s List of Restricted Entities and Subentities Associated with Cuba (“Cuba Restricted List”). The Cuba Restricted List is maintained by the State Department and will be published and periodically updated as necessary in the Federal Register.
  • Persons subject to U.S. jurisdiction will now be prohibited from engaging in certain direct financial transactions with entities and subentities identified by the State Department on the Cuba Restricted List. Certain transactions will be excluded from this prohibition pursuant to exceptions detailed in the NSPM.
  • Consistent with the Administration’s interest in avoiding negative impacts on American business and travelers, commercial engagements in place prior to the State Department’s listing of any entity or subentity will continue to be authorized, as will most previously arranged travel. For example, businesses will be permitted to continue transactions outlined in contingent or other types of contractual arrangements agreed to prior to the issuance of the new regulations, consistent with other regulatory authorizations.

Trade and Commerce

  • In accordance with the NSPM, BIS is establishing a general policy of denial for license applications to export items for use by entities and subentities on the Cuba Restricted List unless the transaction is otherwise consistent with the NSPM.
  • Consistent with the Administration’s policy to support free enterprise in Cuba, BIS is simplifying and expanding its license exception that authorizes certain license-free exports to the Cuban private sector.

People-to-People Travel

  • In accordance with the NSPM, OFAC is requiring that (1) all people-to-people nonacademic educational travel be conducted under the auspices of an organization that is subject to U.S. jurisdiction and that sponsors such exchanges to promote people-to-people contact, and (2) such travelers be accompanied by a person subject to U.S. jurisdiction who is a representative of the sponsoring organization. Individual people-to-people nonacademic educational travel will no longer be authorized as announced by the President.
  • Consistent with the Administration’s interest in avoiding negative impacts on Americans for arranging lawful travel to Cuba, certain people-to-people travel that previously was authorized will continue to be authorized where the traveler had already completed at least one travel-related transaction (such as purchasing a flight or reserving accommodation) prior to the President’s June 16, 2017 announcement.

Educational Travel

  • In accordance with the NSPM, Americans engaging in certain authorized educational travel will now be required to do so under the auspices of an organization that is a person subject to U.S. jurisdiction.
  • These authorized educational travelers will now also be required to be accompanied by a person subject to U.S. jurisdiction who is a representative of the sponsoring organization, unless the traveler is the representative and obtains a certification letter from the sponsoring organization.
  • Consistent with the Administration’s interest in avoiding negative impacts on Americans for arranging lawful travel to Cuba, certain educational travel that previously was authorized will continue to be authorized where the traveler has completed at least one travel-related transaction prior to the publication of the regulations on November 9.

Support for the Cuban People Travel

  • In accordance with the NSPM, OFAC is requiring that each traveler under this travel category engage in a full-time schedule of activities that result in meaningful interaction with individuals in Cuba. Such activities must also enhance contact with the Cuban people, support civil society in Cuba, or promote the Cuban people’s independence from Cuban authorities. Renting a room in a private Cuban residence (casa particular), eating at privately owned Cuban restaurants (paladares), and shopping at privately owned stores run by self-employed Cubans (cuentapropistas) are examples of authorized activities; however, in order to meet the requirement of a full-time schedule, a traveler must engage in additional authorized Support for the Cuban People activities.

Prohibited Officials

  • In accordance with the NSPM, OFAC is amending the definition of the term prohibited officials of the Government of Cuba to include certain additional individuals. BIS is making conforming changes to three license exceptions that include the same definition. This definitional change will affect certain otherwise-authorized transactions with the expanded group of such officials.

Given the meetings in Asia this week, we won't likely see any sanctions, trade or travel restrictions against countries with similar human rights records. We will, however, see fewer Americans traveling to Cuba, and fewer U.S. businesses having the opportunity to export their products to the people that the President is trying to help. 

http://lawprofessors.typepad.com/business_law/2017/11/the-hypocritical-american-policy-toward-cuba-and-what-it-means-for-us-business-part-ii.html

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