Since the 1960s, the U.S. has maintained an embargo against Cuba through various laws, regulations, and presidential proclamations that restricts trade, travel, and financial transactions.
Key legislation related to the embargo includes the following:
• Trading with the Enemy Act of 1917 (TWEA). TWEA granted the President broad authority to impose embargoes on foreign countries during times of war and was amended in 1933 to also grant this authority during times of a presidentially declared national emergency. The International Emergency Economic Powers Act of 1977 amended section 5(b) of TWEA, again limiting the President’s authority to times of war but allowing the President’s continued exercise of his national emergency authority with respect to the ongoing Cuba embargo. This act required that the President determine on an annual basis that maintaining the Cuba embargo is in the national interest of the U.S.
• Foreign Assistance Act of 1961. The Foreign Assistance Act contains provisions barring any assistance to Cuba and authorizing the President to establish and maintain an economic embargo on Cuba. Section 620(a) of the act, codified at 22 U.S.C. § 2370(a), prohibits any U.S. foreign assistance to the “present” government of Cuba and authorizes the President to establish and maintain a total embargo on all trade between the U.S. and Cuba as a means of carrying out the assistance prohibition.
• Cuban Democracy Act of 1992 (CDA). The CDA further restricted U.S. trade with Cuba and called on the President to encourage other countries to limit their trade with Cuba as well as their extension of credit and assistance to Cuba. The law permitted U.S. exports of medicine and medical supplies to Cuba, with certain exceptions. However, such exports must be authorized through specific licenses, and the U.S. government must be able to verify through onsite inspection and other appropriate means that the items are used for their intended purposes and for the benefit and use of the Cuban people. The law also restricted trade with Cuba by foreign subsidiaries of U.S. firms and prohibited any vessel unlicensed by the Department of the Treasury (Treasury) from (1) loading or unloading freight in a U.S. port within 180 days after leaving a Cuban port where it engaged in trade of goods or services or (2) entering a U.S. port while carrying goods or passengers to or from Cuba or goods in which Cuba or a Cuban national had an interest.
• Cuban Liberty and Democratic Solidarity Act of 1996 (LIBERTAD). Commonly known as the Helms-Burton Act, LIBERTAD defined and codified the embargo as it was in effect on March 1, 1996. LIBERTAD authorizes the President to suspend the embargo only if he or she determines that a transition Cuban government is in power. Furthermore, LIBERTAD requires the President to terminate the embargo if he or she determines that a democratically elected Cuban government is in power. In addition, the law prohibits U.S. persons, permanent resident aliens, and U.S. agencies from knowingly financing any transactions involving property of U.S. nationals confiscated by the Cuban government; permits U.S. nationals to sue in U.S. courts persons trafficking in such confiscated property (this authority has been suspended by the President since enactment); and provides for denying entry into the U.S. to aliens determined by the Secretary of State to be involved in such trafficking.
• Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA). TSRA prohibits the President from imposing new, unilateral agricultural and medical sanctions against any foreign country, including Cuba, unless approved by a congressional joint resolution, and requires termination of existing unilateral agricultural or medical sanctions unless continued by a congressional joint resolution.
In addition, TSRA authorizes, pursuant to a 1-year license and other requirements, the export of agricultural commodities (including food) to Cuba, subject to specific conditions. TSRA also prohibits the U.S. government from providing Cuba with foreign assistance, export assistance, and any credit or guarantees for exports. In addition, TSRA prohibits U.S. private financing or payment of agricultural commercial sales to Cuba, except where payment is made with cash in advance, interpreted by Treasury to mean payment before the transfer of title to, and control of, exported agricultural commodities, or where financing is from third-country financial institutions. Finally, TSRA prohibits the licensing of travel to Cuba for tourist activities by persons subject to U.S. jurisdiction.
Key regulations related to the embargo include the following:
• The Cuban Assets Control Regulations (CACR). The CACR, which Treasury issued in 1963 under the President’s broad authority in section 5(b) of TWEA and the Foreign Assistance Act, prohibit persons subject to U.S. jurisdiction from engaging in transactions involving property in which Cuba or a Cuban national has an interest, including transactions related to travel, remittances, humanitarian assistance, and financial services, without authorization from Treasury.
• The Export Administration Regulations (EAR). The Department of Commerce’s (Commerce) EAR are issued under the authority of the Export Administration Act of 1979 and the International Emergency Economic Powers Act. U.S. exports and reexports to Cuba subject to the EAR must be authorized by Commerce. Applications for licenses for export to Cuba of items subject to the EAR fall mostly under a general policy of denial, although some items are exempt from this policy. Over time, the embargo has been modified through legislation and regulatory amendments, which have alternately eased and tightened aspects of the embargo.
For example, as noted above, TSRA’s passage in 2000 loosened prohibitions on the export of U.S. agricultural commodities, including food, to Cuba. In 2004, the Bush administration made regulatory changes to tighten restrictions on travel, remittances, and gift parcels to Cuba. For example, Treasury reduced the permitted frequency of family visits to Cuba from once every 12 months to once every 3 years. Subsequently, the Obama administration made regulatory changes to loosen certain embargo restrictions in 2009 and 2011. For example, in September 2009, Treasury removed the previously established restrictions on the frequency and duration of travel to Cuba to visit close relatives.
Obama’s Changes Since 2014
The U.S. government has made a series of regulatory changes to the CACR and the EAR since the Obama administration announced its new Cuba policy in December 2014. Treasury and Commerce issued the first set of changes in January 2015 followed by additional changes in June and July 2015, September 2015, January 2016, March 2016, and October 2016.
These regulatory changes have eased restrictions on travel, remittances, financial services, and trade with Cuba and have also allowed for some limited forms of investment by U.S. companies in Cuba.
Key changes include the following:
Travel
Treasury has expanded the scope of travel that is allowed under some of the 12 categories of travel authorized by TSRA and has amended the regulations to allow U.S. travelers to use a general license, which requires no advance approval, for all 12 travel categories rather than having to apply for a specific license from Treasury prior to travel. For example, under the revised regulations, U.S. travelers may now travel to Cuba for people-to-people educational activities under a general license and without having to travel under the auspices of an organization that sponsors and organizes such programs. In addition, U.S. travelers may now travel under a general license to provide certain types of training to the Cuban private sector.
Remittances
Treasury has made regulatory changes to the CACR that removed caps on remittances to Cuban nationals that had been previously set at $500 a quarter. There are now no limits on the amount of remittances given as a donation that can be sent to Cuban nationals.
Financial services
Treasury has made a number of revisions to the CACR related to financial services. For example, Treasury has modified the CACR to remove financing restrictions on most types of exports and has modified the definition of “cash in advance,” a requirement for exportation of agricultural products, from “cash before shipment” to “cash before transfer of title and control.”
In addition, Treasury has allowed credit and debit cards issued by U.S. banks to be used in Cuba. Treasury has also modified the regulations to allow U.S. banking institutions to open and maintain bank accounts in the U.S. for Cuban nationals in Cuba to use for authorized transactions.
Trade
Commerce has revised the EAR to create a new “Support for the Cuban People” export license exception that authorizes exports (1) to improve living conditions and support independent economic activity in Cuba, (2) to strengthen civil society (3) to improve the free flow of information among, and with, the Cuban people, and (4) of items sold directly to individuals in Cuba for their personal use or their immediate family’s personal use. In addition, Commerce has made regulatory changes to broaden existing license exceptions available for Cuba.
For example, Commerce modified the license exception “Consumer Communications Devices” to allow for the commercial sale, lease, or loan of authorized items; previously, items covered by the exception could only be donated. Commerce has also modified its licensing policy to allow for the general approval of export licenses to Cuba for certain items, including telecommunications items and items that will support environmental protection. As part of the regulatory revisions, the U.S. government has also developed a list of items that are allowed for import into the U.S. from Cuba, if produced by independent Cuban entrepreneurs.
According to various agency officials, the U.S. government has sought to refine the regulations over time to reflect input from U.S. businesses and to reflect the realities of the Cuban system. For example, Treasury officials stated that as part of the third set of regulatory revisions, Treasury modified the CACR to allow U.S. businesses to procure legal services in Cuba after hearing from the U.S. business community that to successfully operate in Cuba they needed to be able to obtain such services.
Impact
U.S. regulatory changes have generated a significant amount of interest and exploratory work among U.S. businesses. An official at the U.S. embassy in Havana noted that the number of U.S. companies participating in a major trade fair in Cuba more than doubled from 2014 to 2015. There have also been several state and local U.S. trade missions to Cuba.
For example, the Governor of New York led a trade mission to Cuba in April 2015 that included more than a dozen business leaders from the state. The U.S.-Cuba Trade and Economic Council reported that, as of August 2016, more than 500 senior-level representatives of U.S. companies had visited Cuba during the since Obama’s policy was announcement in December 2014.
The regulatory changes have generated U.S. business interest, yet relatively few commercial deals have been completed. For example, the Department of Commerce created a new export license exemption to facilitate U.S. exports that support the Cuban people, including the private sector. In addition, U.S. trade with Cuba has decreased, driven by declining agricultural exports, which have been legal since 2000. Changes in remittance and travel regulations are expected to benefit the Cuban private sector through increased capital and purchases from U.S. visitors. Although the regulatory changes have created some new opportunities for U.S. businesses and the Cuban private sector, embargo restrictions and Cuban government barriers continue to limit U.S.-Cuba economic engagement.
