President Trump Announces Increased Regulations for Doing Business in Cuba

“Travel is fatal to prejudice, bigotry, and narrow-mindedness, and many of our people need it sorely on these accounts. Broad, wholesome, charitable views of men and things cannot be acquired by vegetating in one little corner of the earth all one’s lifetime.” – Mark Twain, The Innocents Abroad


Earlier today, President Trump announced his intent to roll back regulatory changes to U.S. sanctions against Cuba that have been implemented by President Obama since December 2014. President Obama’s changes had significant impact on business for travel and tourism, finance and banking, agriculture, telecommunications, and insurance companies. This client alert focuses on what President Trump’s announcement may mean for travel to Cuba and the travel and tourism industry.

Announced Changes to Cuba Regulations
The Administration is expected to stop permitting individuals to self-license and travel to Cuba solo under the people-to-people educational activities general license. As changes to the regulations evolved under President Obama’s directive to work toward normalization of relations with Cuba, individual travelers were permitted to self-license and travel to Cuba without the previously required reliance on a tour operator. The easing of the regulatory process for travel to Cuba with licensed tour companies or other licensed organizations (universities, religious organizations, etc.) is expected to remain at or near the status quo.

Financial transactions with Cuba’s military and intelligence services will also be a focus of the changes. According to The Wall Street Journal, the Grupo de Administración Empresarial SA (GAESA) is one target of this policy. GAESA is a conglomerate owned by Cuba’s armed forces with many companies in the tourism industry, one of Cuba’s stronger industries, including hotels. Whether this is an actual change in law, or instead a revival of enforcement, which has decreased over the past two years, remains to be seen. Financial transactions with members of the Cuban government have remained illegal under the sanctions laws.

Tours Already Set to Go
The Office of Foreign Assets Control of the U.S. Department of Treasury and the Department of Commerce will have 30 days to draft the new regulations, and then the regulations will not go into effect until the process is complete. There is no estimate on how long that process may take. However, because the announced changes are a redirection emphasizing enforcement, now is the time to prepare and begin shifting business relationships and financial transactions that are expected to be targeted.

The Law
Tourism for U.S. citizens, residents, and companies to Cuba is illegal under U.S. law. This fact never changed. Likewise, all financial transactions with Cuba or Cubans are prohibited by U.S. sanction laws: the Trading With The Enemy Act (TWEA), the Trade Sanctions Reform & Export Enhancement Act of 2000, and the Cuban Assets Control Regulations. (22 USC 7201-7209; 31 C.F.R. 515 et seq.) These Acts and Regulations govern the sanctions imposed against trade with Cuba and regulate transactions and licensing that are exceptions to the prohibitions.

Travelers Will Want to Know…
Can an individual U.S. citizen or resident go to Cuba through Canada or Mexico?
If and when the changes in regulations are implemented, it is expected that a U.S. citizen or resident may travel to Cuba only if they travel with an OFAC licensed tour operator. Tourism to Cuba and unlicensed financial transactions with Cubans remain a violation of U.S. federal law. The regulations that enforce the sanctions against Cuba apply to all U.S. citizens and residents regardless of their point of departure. Travel through Canada or Mexico or another point of departure does not avoid these regulations.

Potential Penalties
I have worked with companies and travelers whose assets have been frozen in violation of the Trading with the Enemies Act and sanctions regulations. A worst case scenario includes freezing of all assets for an extended period, with no recourse if the Department determines no wrong-doing. A more common situation is the freezing of the payment while en route through the banking system (which has strict regulations to file reports of potential Cuba and sanction related transactions).

Violations of the sanctions laws, including unlicensed travel to and/or financial transactions with Cuba face civil penalties of up to $85,000 and criminal penalties that range up to 20 years in prison, $1,000,000 in corporate fines, and $250,000 in individual fines. (31 CFR 501.701(a)(3); 50 USC App. 16.) These are increases in the penalties over the past few years.

We expect additional ripple effects from the announcement and will be following and reporting on them for our entire network.

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