Going Global Defense Initiative - Virginia Economic Development Partnership

  What the U.S.-Cuba Policy Means for Exporters

September 10, 2015

On January 16 2015, the U.S. Treasury Department, Office of Foreign Assets Control (OFAC) amended its Cuban Assets Control Regulations and the U.S. Department of Commerce’s, Bureau of Industry and Security (BIS) amended the Export Administration Regulations with a “Support for the Cuban People” license exception. The revised regulation will have an impact for some U.S. exporters.

Specific licenses to Cuba are not necessary if you are traveling as one of the 12 authorized travelers. The authorized travelers will be able to travel to Cuba under a general license. The major difference between a specific license and a general license is that under a general license, authorized travelers can travel without the requirement of having to apply to the OFAC and receive a license prior to travel. A few examples of the 12 authorized traveler categories are: professional research and professional meetings; activities of private foundations or research educational institutes; exportation, importation, or transmission of information or information materials; and certain export transactions that may be considered for authorization under existing regulations and guidelines.

The following are all transactions that are now authorized without a license.

  • Exports to Cuba of certain consumer communications equipment and related items, such as mobile phones, televisions, batteries, hardware, and applications.
  • Exports of items for the establishment and update of communications-related systems will also be authorized. Access to the Internet, use of Internet services, infrastructure creation and upgrades is now authorized.
  • All transactions, including payments, incidental to the provision of telecommunications services involving Cuba, including roaming agreements, are authorized.
  • All transactions, including payments, relating to the establishment of telecommunications facilities, including fiber-optic cable and satellite facilities connecting Cuba with the U.S. or third countries are also now authorized.

Building materials, tools, equipment and supplies for certain projects may now be exported to Cuba without a license.

  • For example, building materials, and tools for use by the private sector to construct or renovate privately-owned buildings, including privately-owned residences, businesses places of worship and buildings for private sector social or recreational use and tools and equipment for private sector agricultural activity.
  • Tools, equipment, supplies, and instruments for use by private sector entrepreneurs will allow the export of such items to entrepreneurs, such as auto mechanics, barbers, and restaurateurs.

While the U.S.-Cuba policy brings positive opportunities for U.S. businesses, there are still challenges that a U.S. exporter would have to face.

Cuba and the U.S. still do not have direct mail services and the U.S. embargo prohibits many global providers (UPS, FedEx) from shipping between the two countries.

The regulatory changes permit the use of debit and credit cards and allow U.S. financial institutions to open correspondent accounts in Cuba to facilitate the processing of authorized transactions. Not only does this take time to implement, it also required that Visa, Mastercard, major U.S.-based banks, etc. be prepared to take the risk given the uncertain regulatory environment in Cuba. Most Cubans deal in cash rather than through the Cuban state banking system. Until financial institutions set up the necessary infrastructure, it may be difficult to issue payment for goods and services.

Cuba also remains one of the lowest ranked countries in terms of internet access, making it difficult to receive and fill orders, communicate with buyers, or establish call centers. However, the new regulations allow U.S. telecommunications companies to enter into the Cuban market.

John Kavulich, president of the New York-based U.S.-Cuba Trade and Economic Council, believes Cuban officials will often lean toward states and businesses with whom they already have a relationship. He said that Virginia shipped $225 million worth of goods to the island from 2010 to 2014. As the relationship with the U.S. and Cuba evolves, this puts Virginia in a good place moving forward.

For more opportunities and challenges for U.S. exporters to Cuba, check out Revised Cuba Regulations, U.S. Takes a Positive Negative Approach to Trade With Cuban Entrepreneurs, and New York Plays Catch Up On Trade With Cuba.

The post What the U.S.-Cuba Policy Means for Exporters appeared first on Virginia Economic Development Partnership.

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