By Joan Koenig and Mollie Sitkowski
Today, in response to Cuba’s release of American prisoner Alan Gross, President Obama announced that his administration will begin taking steps to normalizing relations with Cuba. While the Obama administration can ease the impact of sanctions against Cuba, it cannot unilaterally end the U.S. embargo of Cuba. Much of the U.S. embargo against Cuba is legislatively based, and its dismantling would require an act of Congress.
President Obama’s plan begins with establishing diplomatic relations with Cuba, including re-establishing a U.S. embassy in Havana. The Administration also plans to modify the existing Cuban Assets Control Regulations to empower the Cuban people and facilitate an expansion of travel to Cuba. The Administration will raise remittance levels and authorize expanded commercial sales from the United States to Cuba. Specifically, items that may be authorized for export include building materials for private residential construction, goods for use by private entrepreneurs, and agricultural equipment for small farmers.
The Administration further plans on authorizing U.S. citizens to import additional goods from Cuba, facilitating authorized transactions between the United States and Cuba, and initiating new efforts to increase Cubans’ access to communications. The Cuban Assets Control Regulations will be amended to provide a general license for U.S.-owned or -controlled entities in third countries to engage in certain transactions with Cuban individuals in third countries (which is currently prohibited). Finally, President Obama has instructed the Secretary of State to launch a review of Cuba’s designation as a “State Sponsor of Terrorism.”
Many of these changes will require amending the Cuban Assets Control Regulations. The Department of the Treasury’s Office of Foreign Assets Control (OFAC), which administers the Cuban Assets Control Regulations, has updated its Cuba-related FAQs. OFAC clarified that it expects to issue regulatory amendments in the coming weeks, but none of the announced changes will take effect until the new regulations are issued.
Thus, while we can expect the Administration to authorize increasing types of commercial transactions with Cuba, these changes will not occur immediately. However, when OFAC does finalize its amendments to the Cuban Assets Control Regulations, any transaction or activity that can be licensed or authorized can be insured. In addition, removing some of the restrictions on U.S.-owned or -controlled entities in third countries should open up many more opportunities for international insurance companies. For more information on the Cuba sanctions, or sanctions in general, please contact one of the authors listed above or any other member of Drinker Biddle’s Customs and International Trade team.