Today, the Department of the Treasury’s Office of Foreign Assets Control (OFAC)issued amendments to the Cuban Assets Control Regulations (CACR) to further implement the President’s foreign policy on Cuba. These amendments complement changes to the Department of Commerce’s Bureau of Industry and Security (BIS) Export Administration Regulations (EAR), which Commerce is also unveiling today. These regulatory changes were announced on April 17, 2019 and include restrictions on non-family travel to Cuba.
These actions continue to strengthen sanctions against Cuba in the implementation of the National Security Presidential Memorandum (NSPM) signed by the President on June 16, 2017 titled “Strengthening the Policy of the United States Toward Cuba.” These policies continue to work to channel economic activities away from the Cuban military, intelligence, and security services. The Treasury changes will take effect on June 5, 2019 when the regulations are published in the Federal Register.
The Treasury regulations, which can be found at 31 Code of Federal Regulations (CFR) part 515, are here.
The State Department also issued a press release on the new sanctions.
The Commerce regulations, which can be found at 15 CFR parts 730-774, are here.
Major elements of the changes in the revised regulations include:
ENDING GROUP PEOPLE-TO-PEOPLE TRAVEL
OFAC is amending the regulations to remove the authorization for group people-to-people educational travel hat was conducted under the auspices of an organization that is subject to U.S. jurisdiction and that sponsors such exchanges to promote people-to-people.
There is a “grandfathering” provision, which provides that certain group people-to-people educational 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 June 5, 2019.
Travel-related transactions continue to be permitted by general licenses for certain categories of travel and certain authorized export transactions. For more on authorized travel to Cuba, please click here.
A general license permits travel-related transactions for certain travel related to the following activities, subject to the criteria and conditions in each general license: family visits; official business of the U.S. government, foreign governments, and certain intergovernmental organizations; journalistic activity; professional research and professional meetings; educational activities; religious activities; public performances, clinics, workshops, athletic and other competitions, and exhibitions; support for the Cuban people; humanitarian projects; activities of private foundations or research or educational institutes; exportation, importation, or transmission of information or information materials; and certain authorized export transactions.
In accordance with the NSPM, OFAC is adding a new prohibition to restrict certain direct financial transactions with entities and subentities identified on the State Department’s Cuba regulations.
ENDING EXPORTS OF PASSENGER VESSELS, RECREATIONAL VESSELS, AND PRIVATE AIRCRAFT
BIS, in coordination with OFAC, is amending the EAR to make passenger and recreational vessels and private and corporate aircraft ineligible for a license exception and to establish a general policy of denial for license applications involving those vessels and aircraft.
The new sanctions will eliminate most of the travel authorized by the Obama Administration. Since the Obama administration had authorized 12 general categories of travel, a new travel industry has arisen in the U.S. for persons wanting to travel to Cuba, including direct flights from various U.S. cities by various airlines, passenger ferries, and a number of boutique travel groups mainly offering trips about Cuban culture. Although it purports to target the Cuban government, it will hurt the middle-class Cubans who sponsored many of the people-to-people exchanges through hosting U.S. travelers in bed- and -breakfasts from converted homes and participated in U.S. tourism.
The sanctions will further isolate the U.S. government in the Western Hemisphere, since opposition to U.S. unilateral sanctions against Cuba have been the most important policy matter in the region.
It will increase opposition in much of the world, especially Western Europe to U.S. unilateral sanctions.
Coming only a few days after the threatened tariffs on Mexico for immigration reasons, the raised sanctions further undermine trade and investment in the Western Hemisphere. Since the sanctions take effect June 5, essentially immediately although with a grandfather for people who have already put into place certain travel by air, the new regulations will disrupt and cause losses for airlines, cruise lines, and travel industry persons who have invested substantially in Cuba travel. The lack of a transition for the sanctions is a blow to this part of the U.S. economy. Yesterday Goldman Sachs downgraded their Q2 2019 economic growth forecasts for the U.S. due to risks stemming from trade conflicts with China and Mexico. JP Morgan said the probability of a U.S. recession in the second half of this year had risen to 40% from 25% a month ago.
The next issue of the IELR will discuss the developments further.