Jan. 16, 2015
On Jan. 16, 2015, the U.S. Department of the Treasury’s Office of Foreign Asset Control (OFAC) and the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) issued regulations implementing the president’s announced policy changes on Cuba. While these changes are historic in terms of future diplomatic relations between the two countries, the changes that took effect are a limited first step in removing the longstanding U.S. travel and economic sanctions on Cuba.
Despite many press reports to the contrary, Cuba is not open for U.S. business or U.S. investment, and U.S. citizens remain prohibited from traveling to Cuba as tourists.
The Cuba-related changes that took effect on Jan. 16, 2015 will impact travel and business transactions in the following ways:
- The existing categories of authorized travelers to Cuba (such as family visits and journalists) will not have to obtain specific licenses from OFAC prior to traveling to Cuba.
- Travel agents and tour group operators will not have to obtain approval from OFAC to offer Cuba-related travel services.
- While agricultural and medical products have been authorized for sale to Cuba for many years, the recent changes increase the types of products eligible to be sold to Cuba, such as consumer communication devices, certain telecommunications equipment and certain types of tools and equipment for use by private entrepreneurs in Cuba. All other U.S. exports to Cuba and U.S. investments in Cuba remain prohibited.
- U.S. banks will be able to open correspondent accounts with Cuban banks and process credit card transactions in Cuba, which will make it easier for authorized payments to occur.
- Per diem limits on authorized travelers have been lifted, and importing personal goods in value up to $400, including up to $100 in alcohol and tobacco products, has been authorized.
While there is substantial interest in flying to Cuba, most of the restrictions on business aviation flights to Cuba remain unchanged. In particular:
- U.S. private operators operating under Federal Aviation Regulations (FAR) Part 91 would still need advance authorization from both BIS and OFAC to fly to Cuba.
- Air carriers, including Part 135 air taxi operators, can now more easily operate to Cuba, but there are a number of regulatory hurdles outlined below.
Because the existing penalties remain in place, private operators and U.S. companies could be subject to significant civil or criminal penalties for violating the travel and economic sanctions on Cuba that remain in place.
- Overview of Jan. 16, 2015 Changes
- Impact of U.S. Sanctions on Travel to Cuba
- Aircraft Operations Involving Cuba
The following is a more detailed summary of the changes that went into effect on Jan. 16, 2015:
Prior to these rule changes, individuals subject to U.S. jurisdiction could only travel to Cuba if they were authorized under one of a limited number of “general licenses” (for example, allowing Cuban-Americans to travel to Cuba to visit family members) or “specific licenses” issued by OFAC to particular licensees (for example, to travel companies to conduct licensed people-to-people educational exchange trips to Cuba). Under the new rules, certain categories of travelers to Cuba are generally authorized to travel (meaning any person who meets the general license requirements can travel to Cuba).
The 12 main categories of generally licensed travelers to Cuba are:
- Family visits
- Official business of the U.S. government, foreign governments and certain intergovernmental organizations
- Journalistic activity (with news organizations for freelance journalists)
- Professional research and professional meetings
- Educational activities (including people-to-people exchange trips)
- 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 institutions
- Exportation, importation or transmission of information or informational materials
- Travel related to export transactions authorized by BIS
The new regulations are not intended to promote tourism in Cuba, and tourist-related travel by U.S. persons remains prohibited.
OFAC’s new regulations authorize U.S. banks to process payments related to authorized transactions in Cuba, and the use of U.S. credit and debit cards in Cuba for authorized travel to Cuba is permitted. However, banks and credit card companies are not required to process such transactions, and there will likely be a transition period as U.S. banks begin to process such payments/debits.
The new OFAC regulations also authorize health, life and travel insurance agencies to cover travel to Cuba. Any passengers should check with their insurance provider for coverage prior to their trip.
BIS’s amended regulations expand the types of exports allowed to Cuba under a general license. In addition to medical and agricultural products, most consumer communication devices, certain telecommunications equipment and certain types of tools and equipment for use by private entrepreneurs in Cuba can be exported under a new license exception. Nearly all imports from Cuba remain prohibited.
The following is a high-level overview for air carriers and private operators. However, given the complexity of the regulations, we recommend members seek advice on the specifics of their proposed operations before undertaking flights.
There is no change in the restrictions on private (FAR Part 91) operations to Cuba. Private operations of aircraft from the U.S. or on any N-registered aircraft will still require an advance “temporary” sojourn license from BIS, even if the passengers are authorized to travel under one of the categories above. Because this authorization can take several months to obtain, it is difficult to arrange private flights to Cuba. In addition, a private operator would need to comply with the FAR and customs requirements discussed below for air carriers.
Example: Telco operates a business jet under Part 91. Telco wishes to fly a team to Cuba to hold discussions with Cubacel on the sale of telecommunications equipment.
- The travelers would be authorized to travel under a general license to Cuba.
- The temporary export (flight) of a private jet to Cuba would require a BIS temporary sojourn license.
- Telco could provide its own travel services in making flight arrangements or use a third-party provider.
- Compliance with filing requirements are set forth in FAR 91.709.
- Operations restrictions to/from certain portal airports must be considered. In particular, U.S. Customs and Border Protection (CBP) has issued a list of airports authorized to handle customs clearance to/from Cuba. Operations to/from Cuba from other airports of entry in the U.S. must be pre-approved by CBP. Flights departing/arriving at other locations should be pre-cleared through Customs.
In general, most restrictions/requirements for air carriers (including air taxi operators) remain unchanged. These special requirements include:
- Required amendments to FAA operations specifications (opspecs) to allow operations to Cuba (Opspec B050)
- Compliance with filing requirements set forth in FAR 91.709
- Operations restrictions to/from certain portal airports. In particular, CBP has issued a list of airports authorized to handling customs clearance to/from Cuba. Operations to/from Cuba from other airports of entry in the U.S. must be pre-approved by CBP. Flights departing/arriving at other locations should be pre-cleared through Customs.
- Air carriers required to have TSA-approved security plans should check with TSA regarding any special requirements for Cuba flights.
- Compliance with recordkeeping requirements of carrier service provider and travel service provider provisions
Prior to the rule changes, any authorized traveler needed to arrange travel to Cuba through an OFAC-Licensed carrier service provider (CSP) or travel service provider (TSP). However, the OFAC regulatory changes permit air carriers to act on their own behalf.
The rule change does not remove the requirements for companies providing carrier or travel services to confirm travelers are authorized to travel, nor does it remove recordkeeping requirements, but rather now generally licenses any provider to offer such service without the need to apply for a specific license.
As a practical matter, previously licensed CSPs/TSPs, including business aviation flight routing companies, have practical experience in arranging landing rights for air carriers, making payments for landing fees and other charges in Cuba and providing other technical and logistic support.
Example: Telco owns a business jet operated by an air taxi operator. Telco wishes to fly a team to Cuba to hold discussions with Cubacel on the sale of telecommunications equipment.
- The travelers would be authorized to travel to Cuba under a general license.
- An air carrier flight from the U.S. to Cuba would not require a BIS temporary sojourn license.
- The air taxi operator would need to comply with all special FAA, TSA, CBP requirements.
- The owner or operator could arrange with a pre-existing CSP/TSP to make payments, arrange flight clearances and conduct vetting to ensure the passengers were authorized to travel.
Note: Under the new rules, the operator could make its own arrangements for some or all of the activities performed by the CSP/TSP, but should do so only if the regulatory requirements are thoroughly understood.
The export to Cuba, even on a temporary basis, of replacement parts and equipment to repair a civil aircraft are not authorized under any license or license exception. Thus, an operator would need a license from BIS for the export of replacement parts and equipment to an aircraft in Cuba. Air carriers that routinely fly to Cuba may be able to obtain advance approval for such contingency.
The U.S. embargo on Cuba remains largely in place, and operators considering flights to Cuba need to carefully review the requirements and limitations on flight operations to Cuba, as well as the types of travel authorized. In addition, OFAC has specific recordkeeping requirements related to travel to Cuba that apply to the operator, the individual authorized traveler and, for group trips, the travel agency operating under a general license.
Many aircraft loans and leases contain express prohibitions on operations to Cuba or other U.S. sanctioned countries, in some cases without any provision for “authorized flights” to Cuba, and operators should review such restrictions.
Similarly, while a U.S. insurer could lawfully insure a flight if such flight was “authorized,” operators should check their policies and check with their insurance broker before assuming such flights are not excluded.