Baby Steps to Business in Cuba?

February 14, 2011

On January 28, 2011, new rules on travel and money transfers to Cuba took effect, which amend portions of the Cuban Assets Control Regulations, 31 CFR part 515 (the “Regulations”). The Regulations are part of a comprehensive program related to the long-running U.S. embargo imposed against Cuba in response to the 1959 Cuban Revolution.

The new rules provide for more travel to Cuba for educational, cultural, religious, and journalistic activities. The following are some of the highlights of these changes:

• Section 515.565 of the Regulations now provides a general license authorizing academic institutions to engage in travel-related transactions for certain educational purposes, instead of the previous and more restrictive requirement of a specific license.
• The new general license also lets U.S. students study in Cuba through any sponsoring academic institution for a longer period of time than previously allowed.
• A new category of travel under this section authorizes travel for educational purposes through organizations that promote “people-to-people” contact, not necessarily through academic institutions.
• Section 515.566 also provides a general license to religious organizations to engage in travel-related transactions for religious purposes.

While the new rules on travel clearly implement policy changes designed to increase people-to-people contact and enhance the free flow of information between the two nations, some of the new rules on remittances, or cash payments, to Cuba reveal an intent to promote private enterprise in Cuba, which could lay the groundwork for further relaxing of trade restrictions. The new rules generally expand licensing of remittances to Cuba under section 515.570. Now under a general license, anyone subject to U.S. jurisdiction can make periodic payments of $500, up to four times a year, to Cuban nationals, not just family members, provided the recipient is not an official of the Government of Cuba or a prohibited member of the Cuban Communist Party, as defined by the Regulations. The new paragraph (b) explicitly allows for investments “to support the development of private businesses.” Moreover, paragraph (g)(1) under the new rules states that specific licenses may be issued on a case-by-case basis for remittances to individuals or independent non-governmental entities “to support the development of private business, including small farms.”

Although the new rules appear to ease the Cuba travel ban, it remains unclear what the effect on the overall trade embargo will be, specifically as it relates to U.S. business. A close reading of the new rules on remittances suggests that encouraging business in Cuba is part of the agenda. However, as with anything, things are always more complicated than they appear, and it will take greater efforts from both sides of the Florida Straits to really open up business between the two nations.