Foreign Trade Controls

Transcription

1 Foreign Trade Controls September 16, 2009 TREASURY AND COMMERCE DEPARTMENTS ISSUE NEW REGULATIONS ON CUBA TRADE RESTRICTIONS SUDAN SANCTIONS REGULATIONS ALSO CLARIFIED On September 8, 2009, the Treasury and Commerce Departments published final regulations in the Federal Register that relax U.S. trade restrictions for Cuba in significant ways. The regulations principally implement changes in Cuba policy announced by President Obama in April 2009 (see our e-alert U.S. Further Relaxes Sanctions on Cuba, April 14, 2009), but they also make changes prompted by provisions in the Omnibus Appropriations Act, 2009 (see our e-alert Summary of Cuba-Related Provisions, March 14, 2009). Separately, the Treasury Department issued regulations to resolve inconsistencies in the Sudan sanctions relating to exports and reexports of food, medicine, and medical devices to those areas of Sudan that have been removed from the scope of the U.S. economic sanctions. The key features of these regulatory changes include the following: A range of telecommunications services in or for Cuba are authorized by general license (equipment exports require separate licensing). Business travel related to these telecommunications sales and services, or related to sales of medical or agricultural products, is authorized by general license. Limits on family travel to visit relatives in Cuba and on sending funds to those relatives are substantially relaxed. Donations of communications devices and computers to individuals and nongovernment entities in Cuba are authorized. Agricultural and medical products are authorized for export to selected areas in southern Sudan by a general license. RELAXED OFAC RESTRICTIONS ON TELECOMMUNICATIONS; TRAVEL FOR AGRICULTURAL, MEDICAL, OR TELECOMMUNICATIONS SALES; AND FAMILY TRAVEL AND REMITTANCES FOR CUBA The Cuban Assets Control Regulations ( CACR ) impose comprehensive economic sanctions that prohibit virtually all trade involving Cuba. The new CACR amendments promulgated by the Treasury Department s Office of Foreign Assets Control ( OFAC ) relax restrictions concerning (i) telecommunications services and related travel, (ii) travel related to agricultural and medical sales, and (iii) travel and remittances for family members. TELECOMMUNICATIONS SERVICES Consistent with President Obama s April announcement, the new OFAC regulations establish a general license that authorizes transactions that are incident to the provision of telecommunications services between the United

2 States and Cuba. The general license covers, for example, transactions related to the provision of satellite radio and television services to Cuba, and mobile phone roaming service agreements. The regulations also establish a general license authorizing transactions that establish facilities to provide telecommunications links between the United States and Cuba, including fiber-optic cables and satellite facilities. The regulations state that OFAC will consider applications on a case-by-case basis for specific licenses authorizing transactions that establish telecommunications links between Cuba and third countries. Another new general license authorizes contracts with non-cuban telecommunications providers to provide telecommunications services to individuals in Cuba. This general license authorizes, for example, payment of activation, usage, roaming, and termination fees associated with providing mobile telephone service to an individual in Cuba. (As with most Cuba-related regulations, certain Cuban government officials and Communist Party members are excepted from the scope of the general license.) These new OFAC regulations also authorize travel transactions that are related to these telecommunications activities, as described in the next section. Note that these OFAC general licenses authorize transactions related to specified services in or for Cuba, but they do not authorize exports or reexports of equipment or other products to Cuba even if they may be necessary to carry out those services. Exports of equipment, software, or technology from the United States to Cuba, or reexports of items of U.S.-origin or with more than de minimis U.S. content (>10% by value) from third countries to Cuba, still require separate export licensing or other authorization from the Commerce Department under the Export Administration Regulations ( EAR ). Likewise, persons subject to U.S. jurisdiction, including U.S.-controlled foreign entities, are prohibited from supplying even non-u.s. equipment, software, or technology to Cuba without an OFAC license. TRAVEL FOR AGRICULTURAL/MEDICAL SALES AND FOR TELECOMMUNICATIONS BUSINESS In the Omnibus Appropriations Act passed in March 2009, Congress directed the Secretary of the Treasury to issue regulations establishing a general license for travel to Cuba for the marketing and sale of agricultural and medical goods. Such travel has until now been authorized only by specific OFAC licenses issued on a case-by-case basis. The new regulations implement the statutory directive with a general license that authorizes travelrelated transactions in connection with agriculture and medical sales. In addition, the new regulations create corresponding general licenses that authorize travel-related transactions in connection with authorized telecommunications services and products. The new general licenses are similar in scope. The medical and agricultural products general license authorizes travel-related transactions directly incident to commercial marketing, sales negotiations, and delivery to and servicing in Cuba of agricultural commodities, medicines, and medical devices, provided that the sales are consistent with the Commerce Department s export licensing policy. Telecommunications travel is authorized in two separate, but potentially overlapping, new general licenses that authorize travel-related transactions directly incident to (1) professional meetings for commercial marketing, sales negotiations, and performance under contracts for telecommunications services and facilities authorized by the OFAC amendments described 2

3 above; and (2) commercial marketing, sales negotiations, and delivery to and servicing in Cuba for telecommunications items, provided that the items have already been authorized for export or reexport to Cuba by the Commerce Department. (As these conditions reflect, exports of medical products and telecommunications equipment or software must still be separately authorized.) Both general licenses share the same limitations and requirements: The travel expenses must comply with the standard restrictions for such expenses (e.g., the State Department s maximum per diem expense limit). The traveler must be regularly employed by (1) a producer or distributor of the medical or agricultural products, (2) a telecommunications services provider or supplier, or (3) an entity appointed to represent such an authorized producer, distributor, or service provider. The travel must be limited to the authorized business purpose; the traveler s schedule must not include free time, personal travel, or recreation in excess of that consistent with a full work schedule. In addition, under both general licenses, the traveler must submit reports to OFAC at least 14 days before departing for Cuba and within 14 days of returning from Cuba. The departure report must identify the traveler, the authorized producer, distributor, or service provider, and the purpose of the travel. The report following the travel must identify the business activities conducted, persons met, and the expenses incurred. TRAVEL FOR FAMILY MEMBERS Following a provision of the Omnibus Appropriations Act that blocked Treasury from enforcing more stringent limitations on family-related travel to Cuba that were adopted in 2004, OFAC issued (in March 2009) a general license that reverted to the looser travel restrictions that existed before In the regulations issued this month, OFAC codified the pre-2004 restrictions, and further expanded the authorization by removing limitations on the frequency of travel and on the authorized expenses. This new general license permits travel to Cuba to visit close relatives. More specifically, persons subject to U.S. jurisdiction, and any person sharing a common dwelling as a family with the authorized traveler, are authorized to engage in transactions related to travel to visit qualifying close relatives in Cuba. Close relative is defined more broadly than before to include relatives by blood, marriage, or adoption who are no more than three generations removed from a common ancestor (e.g., to the level of second cousins). The authorization applies not only to visits to close relatives who are Cuban nationals, but also close relatives who are U.S. government employees of the Special Interest Section in Havana. (Travel to visit a close relative in Cuba who is a national of a third country would be authorized only by a specific license.) There is no limit on the duration or frequency of the visits, and the authorized expenditures are expanded to match the levels authorized for all other Cuba travel (e.g., the State Department s per diem limit). REMITTANCES FOR FAMILY MEMBERS In the April 2009 announcement, President Obama directed the lifting of limitations on remittances to family members who are Cuban nationals. The new regulations implement this policy by removing limitations on both the dollar amount and the frequency of remittances to close relatives in Cuba (not just to immediate family, as in the past). Remittances to close relatives may be made even from certain kinds of blocked accounts. (As with most Cuba-related regulations, the authorizations do not apply to certain Cuban 3

4 government officials and Communist Party members.) Some limits remain: The total amount of family remittances that a traveler may bring along during any particular trip to Cuba is capped at $3,000 (a ten-fold increase from prior regulations). Remittances for purposes of emigration are also capped, but at an increased level: The new rules permit no more than two remittances of $1,000 each (up from $500 each) for expenses related to emigration from Cuba to the United States. Finally, the regulations authorize banks and other depository institutions to engage in remittance-related transactions. OTHER PROVISIONS The new OFAC regulations also authorize most transactions by Cubans lawfully present in the United States (but not visitors on a time-limited visa) and simplify the documentary requirements to unblock assets of Cubans who permanently reside outside Cuba. RELAXED EXPORT RESTRICTIONS ON GIFTS, BAGGAGE, AND COMMUNICATIONS DEVICES TO CUBA The Commerce Department s Bureau of Industry and Security ( BIS ) has also issued new rules that relax restrictions governing the export of donated communications devices and computers to Cuba, gift parcels, and personal baggage carried by an individual traveling to Cuba. COMMUNICATIONS DEVICES AND COMPUTERS Consistent with President Obama s intent to facilitate communications with Cuba, BIS created License Exceptions to authorize gifts and donations but not sales of consumer communications devices, computers, and software, without limitation on the value or frequency of the donations. The new License Exception CCD authorizes exports and reexports, for donation to individuals and independent nongovernmental organizations in Cuba, of specified personal communications devices that are widely available for retail purchase. (As with most Cubarelated regulations, the License Exception does not authorize exports to certain Cuban government officials and Communist Party members.) No export sales are authorized; the items must be donated free of charge (although the authorized end-user may pay handling charges arising in Cuba). The list of covered items is extensive and includes mobile phones, SIM cards, personal digital assistants, laptop and desktop computers, satellite television and radio receivers, digital music and video players, personal two-way radios, digital cameras and memory cards, batteries, and battery chargers. The regulations indicate that the computer exception covers (1) the computer, (2) computer operating systems and software, (3) peripherals such as monitors, graphics accelerator cards, disk drives, flash drives, writable compact disks and floppy disks, keyboards, mice, and printers, and (4) communications capabilities such as Bluetooth, Internet connectivity, and wireless networking (Wi-Fi and WiMax). Certain encryption items that do not qualify as mass market products are outside the scope of the License Exception, however. GIFT PARCELS The new rules expand the existing License Exception GFT, authorizing gifts by individuals (i.e., as distinct from corporate entities) of food, medicine, and certain limited items to an individual or to a religious, educational, or charitable organization for the use of the donee 4

5 or the donee s immediate family. First, the scope of the gift parcels authorized for export is expanded by adding clothing, personal hygiene items, seeds, fishing equipment, and all other items normally sent as gifts between individuals, including the communications devices eligible for License Exception CCD discussed above. (License Exception CCD is specific to Cuba, while License Exception GFT has application to other countries in addition to Cuba.) The regulations also eliminate the requirement that the items be exported to an immediate family member in Cuba, and they double the allowable total value of the gift parcel. Under the new rules, a donor may send one gift parcel per month to any individual donee with a total value of no more than $800 (excluding food), up from $400 under prior regulations. (Once again, gifts to certain Cuban government officials and Communist Party members are not authorized.) PERSONAL BAGGAGE The new regulations remove the prior limitation on personal baggage that precluded baggage weighing more than 44 pounds. The regulations continue to require that a traveler return to the United States with all property that is not consumed or otherwise authorized for export to Cuba (such as, for example, the authorized gifts and donations described above). TREASURY CLARIFIES SUDANESE SANCTIONS REGULATIONS The Sudanese Sanctions Regulations ( SSR ), administered by OFAC, impose comprehensive economic sanctions that prohibit virtually all trade involving Sudan. On September 9, 2009, OFAC issued rules to expand the scope of the existing SSR authorization for exports and reexports to Specified Areas of Sudan (Southern Sudan, southern Kordofan/Nuba Mountains State, Blue Nile State, Abyei, Darfur, and marginalized areas in and around Khartoum). The new OFAC amendments rectify tensions between two sets of applicable restrictions. Executive Order 13412, signed by President Bush in 2006, and the Darfur Peace and Accountability Act of 2006 exempted the Specified Areas of Sudan from the scope of the Sudan sanctions, thus authorizing most exports and reexports and other trade transactions in those Specified Areas without licensing. OFAC accordingly amended the SSR to authorize most exports and trade transactions with the Specified Areas as mandated by these statutory and executive measures. But OFAC interpreted these measures to leave unchanged the existing licensing requirements of the Trade Sanctions Reform and Export Enhancement Act of 2000 ( TSRA ) with respect to exports and reexports of medical and agricultural products, even to the Specified Areas of Sudan. The result has been that medical and agricultural products could not be exported to the Specified Areas of Sudan without a specific license from OFAC under the TSRA program, even though most other items could be exported and reexported to those Specified Areas without specific licensing. OFAC revisited its interpretation and determined that, because Congress and the President have eliminated economic sanctions for the Specified Areas, this anomaly should be eliminated and specific licenses for medical and agricultural exports to the Specified Areas should no longer be required. As a result, OFAC adopted a general license in the SSR that authorizes the export or reexport of medical products, including medicines and medical devices, and agricultural products to the Specified Areas of Sudan. Consistent with Executive Order and the Darfur Peace and Accountability Act, the new general license does not apply to transactions involving the government of Sudan or the petroleum 5

6 industry of Sudan. To qualify for the license, the exports or reexports must be shipped within 12 months of signing the contract to supply the goods. While pharmaceutical and other medical suppliers may be able to take advantage of this new general license to supply humanitarian organizations and others in the Specified Areas, many large-scale purchasers of medical products in Sudan are either located outside the Specified Areas, or are affiliated with the government of Sudan, or both. Such sales will continue to require licensing under the TSRA program. If you have any questions concerning the material discussed in this client alert, please contact the following members of our international public policy practice group: Peter Flanagan Corinne Goldstein David Addis Brian Smith Adam Smith This information is not intended as legal advice, which may often turn on specific facts. Readers should seek specific legal advice before acting with regard to the subjects mentioned herein. Covington & Burling LLP is one of the world s preeminent law firms known for handling sensitive and important client matters. This promotional communication is intended to bring relevant developments to our clients and other interested colleagues. Please send an to unsubscribe@cov.com if you do not wish to receive future s or electronic alerts. Covington & Burling LLP is located at 1201 Pennsylvania Avenue, NW, Washington, DC Covington & Burling LLP. All rights reserved. 6