By: Mimi Whitefield
Just days before President Barack Obama’s historic trip to Cuba, the administration announced new regulations Tuesday that will allow individuals to travel to the island on their own people-to-people trips, permit the use of U.S. dollars in more transactions with the island and further relax restrictions on doing business.
The new regulations, the fifth round of changes in a little more than a year, will take effect Wednesday.
All of the changes have been undertaken so the United States is better able to support engagement with the Cuban people and “build bridges between our two countries,” said Ben Rhodes, a deputy national security adviser.
He said that the United States hopes the new regulations will nudge Cuba toward undertaking its own changes to encourage more commerce between the two countries. But he said the policy shift toward Cuba also is in “America’s national interest.”
Among changes Cuba could make to increase the impact of the new U.S. rules, said Rhodes, would be eliminating the 10 percent penalty charge on converting U.S. dollars to Cuban convertible pesos (CUCs) and allowing foreign firms operating in Cuba to directly hire their Cuban workers.
The new regulations include:
- Individual travel — Americans on people-to-people educational tours to the island used to have to travel in organized groups. Now they can plan their own itineraries as long as they keep records for five years showing they’ve engaged in a full-time schedule of educational exchanges.
Individual travelers can also make trips under the auspices of an organization that sponsors people-to-people exchanges in which case the burden of record-keeping falls to the sponsor.
“These changes, coupled with the arrangement recently announced by the Departments of State and Transportation allowing up to 110 non-stop flights daily between the United States and Cuba, will significantly increase the ability of U.S. citizens to travel to Cuba to directly engage with the Cuban people,” said White House spokesman Josh Earnest.
“We have enormous confidence in the American people to act as ambassadors for the things we care about,” said Rhodes.
But Americans still aren’t allowed to go to Cuba to lounge on the beach. “Travel for tourist activity remains prohibited by statue,” said Andrea Gacki, acting deputy director of Treasury’s Office of Foreign Assets Control.
▪ Banking regulations — Treasury outlined a series of new banking regulations that could ease bankers’ reluctance to engage with Cuba. The new rules make it clear that U.S. financial institutions will be able to process cash, travelers checks and other U.S. dollar-denominated monetary instruments indirectly presented by Cuban financial institutions.
Correspondent accounts at third-country financial instruments also may be denominated in U.S. dollars, and U.S. banks will be allowed to open and maintain bank accounts for Cuban citizens in Cuba who receive payments in the United States for authorized transactions and send those payments to Cuba.
Funds may also be transferred from a bank outside the United States, pass through U.S. financial institutions and then be transferred to a bank outside the United States without worry about the stiff penalties of the past.
Decriminalizing the use of U.S. dollars in third-party transactions with Cuba has been a big issue for financial institutions that have been subject to billions of dollars in U.S. fines over the years. Rhodes said previous U.S. restrictions had “shut Cuba out from parts of the international financial community.”
As more Americans travel to Cuba, these U.S. visitors “will be dropping more and more dollars in Cuba and Cuba wants to be able to spend them,” said Augusto Maxwell, a Miami attorney who heads Akerman’s Cuba practice.
“Now they’re afraid of spending these dollars around the world because whenever they’re routed to a U.S. financial institution, the banks have seized them,” he said. With the rule change, now Cubans and the Cuban government “can use these dollars directly,” said Maxwell.
The changes also will “improve the speed, efficiency and oversight” of U.S. financial transactions with Cuba, said Gacki.
▪ Hiring — U.S. companies can hire Cuban nationals, in a non-immigrant status, to work or perform in the United States provided that no additional payments are made to the Cuban government related to their sponsorship or hiring. That means Cuban athletes, artists, performers and others who obtain the necessary visas will be allowed to come to the United States and earn salaries and stipends above their basic living expenses.
▪ Cargo — Vessels and aircraft leaving the United States with cargo for Cuba and for other destinations will now be able to call on Cuba and continue on their routes to make further deliveries without applying for a specific license.
▪ Exports — U.S. companies were allowed to open offices and establish a physical presence in Cuba under a previous rule change. Now they can export or reexport items to Cuba to establish and maintain those offices. The United States also will adopt a policy of case-by-case review of U.S. exports and reexports to Cuban entrepreneurs that would help the private sector export its own products.
▪ Grants and scholarships — Under a new provision, educational grants, scholarships and awards may be granted to Cubans.
Since the United States and Cuba began normalizing relations on Dec. 17, 2014, the United States has issued a series of regulations that make it easier to do business with Cuba and for Americans to travel to the island — even though the U.S. embargo still remains in place.
“Today’s amendments build upon President Obama’s historic actions to improve our country’s relationship with Cuba and its people,” said Commerce Secretary Penny Pritzker. “These steps not only expand opportunities for economic engagement between the Cuban people and the American business community, but will also improve the lives of millions of Cuba’s citizens.”
President Obama is scheduled to travel to Cuba March 20-22 on the first visit to the island by a sitting American president in nearly 90 years.
“This is what historic change looks like,” said James Williams, president of Engage Cuba, which supports normalized trade and travel with Cuba. “The new regulations will speed up a process that is now all but inevitable. It will lift important obstacles to the full normalization of relations. And now it is up to Congress to do its job and support the will and wishes of the majority of the American people by ending the trade and travel ban with Cuba.”