U.S. AND CUBA TO RESUME REGULARLY SCHEDULED AIRLINE FLIGHTS

On December 17, the United States and Cuba announced their agreement to restore regularly scheduled commercial airline service between the two countries for the first time in more than a half-century. The new arrangement will continue to allow charter operations which currently operate from several U.S. cities.

According to Thomas Engle, Deputy Assistant Secretary for Transportation Affairs at the U.S. State Department, the agreement allows 110 round-trip flights per day on U.S. carriers to Cuba, including 20 daily flights to Havana. The remaining 90 flights will be allocated throughout nine other international airports in Cuba. It is not yet clear when the regular flights will begin.

Several U.S. airlines, including American, Delta, JetBlue and United announced plans to request approval to begin scheduling regular flights to Cuba. Airlines will have to apply for permission from U.S. regulators and submit specific routes between the two countries. Miami is expected to be the major hub for flights to Cuba. Direct flights are also expected from New York and Tampa.

The agreement supports the Obama Administration’s policy of promoting human rights and political freedom on the island nation through people-to-people contacts. “We continue to have differences with the Cuban government, but we raise those issues directly, and we will always stand for human rights and the universal values that we support around the globe,” President Obama said in a written statement.

Similarly, the State Department reinforced the President’s policy in its statement announcing the agreement: “While U.S. law continues to prohibit travel to Cuba for tourist activities, a stronger civil aviation relationship will facilitate growth in authorized travel between our two countries- a critical component of the President’s policy toward Cuba.”

The U.S. trade embargo continues to prohibit travel to Cuba for general tourist activities. U.S. travelers still must meet at least one of 12 permitted criteria to visit the island.

Jose A. Aquino (@JoseAquinoEsq on Twitter) is a special counsel in the New York office of Duane Morris LLP, and a member of the Duane Morris Cuba Business Group. This blog is prepared and published for informational purposes only and should not be construed as legal advice. The views expressed in this blog are those of the author and do not necessarily reflect the views of the author’s law firm or its individual attorneys.

OBAMA EASES TRAVEL AND TRADE RESTRICTIONS WITH CUBA

The Obama administration announced wide-ranging changes to loosen travel, commerce and investment restrictions on Cuba. The new rules allow American companies to open locations and hire workers in Cuba. U.S. companies will be allowed to establish subsidiaries or joint ventures as well as open offices, stores and warehouses in Cuba. Additionally, the new rules will expand telecommunications services, facilitate financial transactions between the two countries, remove limits on the amount of money that can be brought to Cuba, and allow “certain persons” to open and maintain bank accounts in Cuba.

The changes will take effect when the regulations are published in the Federal Register on Monday, September 21, 2015, on the eve of Pope Francis’ visit to Washington. The Pope, who is scheduled to visit Cuba Sept. 19-22, has been a central figure in establishing the reconciliation between the United States and the island nation.

Jacob J. Lew, the Treasury secretary, said “Today’s announcement underscores the Administration’s commitment to promote constructive change for the Cuban people. These regulatory changes build on the revisions implemented earlier this year and will further ease sanctions related to travel, telecommunications and internet-based services, business operations in Cuba, and remittances,”

Commerce Secretary Penny Pritzker said, “The regulations published today are designed to support the emerging Cuban private sector and bring us one step closer to achieving President Obama’s historic policy goals. These actions build upon previous Commerce regulatory changes, and will ease travel restrictions, enhance the safety of Americans visiting the country, and promote more business opportunities between U.S. and Cuban companies. In addition to expanding our commercial engagement with the Cuban people, these additional adjustments have the potential to stimulate long overdue economic reform across the country.”

The revisions will be administered by Treasury’s Office of Foreign Assets Control (OFAC) and Commerce’s Bureau of Industry and Security (BIS). To see the Treasury regulations, which can be found at 31 Code of Federal Regulations (CFR), part 515, click here. To see the Commerce regulations, which can be found at 15 CFR parts 740, 746, and 772, click here.

The Department of Treasury summarized the revised regulations as follows:

Travel –

Facilitating authorized travel and commerce, increasing contact between Americans and Cubans, and supporting civil society in Cuba:

  • ​Transportation by vessel of authorized travelers – between the United States and Cuba only and without stops in third countries – will be authorized by general license. Certain related lodging services aboard vessels used for such travel will also be authorized.
  • License Exception Aircraft, Vessels, and Spacecraft (AVS) will authorize temporary sojourns to Cuba of certain categories of vessels. Eligible categories of vessels are cargo vessels for hire for use in the transportation of items; passenger vessels for hire for use in the transportation of passengers and/or items; and recreational vessels that are used in connection with travel authorized by the Treasury.
  • License Exception AVS will authorize aircraft on temporary sojourn to remain in Cuba for up to 7 consecutive days and authorizes vessels on temporary sojourn to remain in Cuba for up to 14 consecutive days.
  • Close relatives will be allowed to visit or accompany authorized travelers for certain additional activities. In the January changes, OFAC permitted close relatives to join visits related to official government business and certain educational activities, and to visit additional family members residing in Cuba. Close relatives now also will be allowed to visit or accompany authorized travelers for additional educational activities, journalistic activity, professional research, and religious activities, as well as activities related to humanitarian projects and activities of private foundations or certain research or educational institutes. For purposes of this provision, a close relative is defined as someone related to a person by blood, marriage, or adoption – and who is no more than three generations removed from that person or a common ancestor with that person.
  • All authorized travelers will be allowed to open and maintain bank accounts in Cuba in order to access funds for authorized transactions while in Cuba.

Telecommunications & Internet-Based Services –

Enhancing the free flow of information to, from, and within Cuba, and better providing efficient and adequate telecommunications services between the United States and Cuba:

  • ​Persons subject to U.S. jurisdiction will be allowed to establish a business presence in Cuba, including through joint ventures with Cuban entities, to provide certain telecommunications and internet-based services, as well as to enter into licensing agreements related to, and to market, such services.
  • Persons subject to U.S. jurisdiction will be allowed to import Cuban-origin mobile applications into the United States and to hire Cuban nationals to develop them.
  • An existing authorization for the provision of services related to certain consumer communications devices exported to Cuba will be expanded to authorize services related to additional types of items authorized by Commerce, and to add training related to the installation, repair, or replacement of those items.
  • License Exception Consumer Communications Devices (CCD) will no longer be limited to sales or donations. This change to License Exception CCD is intended to support other types of transactions, such as leases and loans of eligible items for use by eligible end-users.

Commercial and Financial Transactions –

Refocusing sanctions so they do not prevent day-to-day transactions by Cuban individuals who are outside of Cuba:

  • ​All persons subject to U.S. jurisdiction will be allowed to provide goods and services to individual Cuban nationals located outside of Cuba, provided there is no commercial exportation of goods or services to or from Cuba.
  • Banking institutions will be able to open and maintain accounts for Cuban individuals for use while the Cuban national is located outside of Cuba, and to close such accounts.

Physical Presence and Operations in Cuba –

Facilitating certain authorized activities involving Cuba:

  • Persons subject to U.S. jurisdiction engaging in the following categories of authorized activities will be allowed to establish and maintain a physical presence, such as an office, retail outlet, or warehouse, in Cuba: news bureaus; exporters of certain goods authorized for export or reexport to Cuba by Commerce and OFAC, such as agricultural products and materials for construction or renovation of privately-owned buildings; entities providing mail or parcel transmission services or certain cargo transportation services; providers of telecommunications or internet-based services; entities organizing or conducting educational activities; religious organizations; and providers of carrier and certain travel services. These individuals and entities will also be authorized to employ Cuban nationals, open and maintain bank accounts in Cuba, and employ persons subject to U.S. jurisdiction in Cuba.

Support for the Cuban People –

Improving living conditions, strengthening civil society, and supporting independent economic activity by the Cuban people:

  • ​License Exception Support for the Cuban People (SCP) will authorize certain exports and reexports of items to Cuba for use in establishing, maintaining, and operating a physical presence in Cuba. Eligible end-users of the items include certain persons providing telecommunications or internet-based services; establishing telecommunications facilities; providing travel or carrier services; organizing or conducting educational activities; or transporting authorized items between the United States and Cuba.
  • License Exception SCP will no longer be limited to sales or donations. This change to License Exception SCP is intended to support other types of transactions, such as leases and loans of eligible items for use by eligible end-users.
  • Certain temporary reexports from a foreign country to Cuba will be authorized by License Exception SCP when the items are for use in scientific, archeological, cultural, ecological, educational, historic preservation, sporting activities, or in the traveler’s professional research and meetings. Previously, this provision was limited to temporary exports by persons departing the United States.
  • Certain commodities and software for use in software development may be exported or reexported to eligible end-users in Cuba pursuant to License Exception SCP.
  • License Exception SCP will authorize temporary exports and reexports to Cuba of additional categories of items, including certain tools of trade to install, service, or repair items; and certain commodities and software for exhibition or demonstration.

Remittances –

Empowering Cubans with opportunities for self-employment, and in turn strengthening independent civil society:

  • ​The limits on donative remittances to Cuban nationals other than prohibited Cuban Government or Cuban Communist Party officials, currently set at $2,000 per quarter, will be removed entirely. The limits on authorized remittances that individuals may carry to Cuba, previously $10,000 for persons subject to U.S. jurisdiction and $3,000 for Cuban nationals, will also be removed entirely.
  • The unblocking and return of remittances that were previously blocked because they exceeded the then-applicable caps on periodic remittances, and of certain previously blocked funds transfers, will be allowed.
  • Depository institutions will be allowed to maintain accounts for certain Cuban nationals present in the United States in a non-immigrant status, and will no longer be required to block such accounts if not closed before the Cuban national’s departure. Access to such accounts will be limited to while the Cuban national is lawfully present in the United States, although the account may remain open while the Cuban national is not in the United States. The $250 monthly limit on payments from previously blocked accounts held in the name of such Cuban nationals will be removed to more adequately allow access to funds for living expenses.
  • Remittances from Cuba and from Cuban nationals in third countries to the United States will be authorized by general license, and financial institutions will be allowed to provide related services.
  • An expanded general license also will authorize additional remittances to Cuban nationals in connection with the administration of estates. This provision complements another general license authorizing all transactions incident to the administration and distribution of the assets of estates in which a Cuban national has an interest.

Legal Services –

Updating the legal services provisions:

  • OFAC’s existing general license authorizing the provision of certain legal services to Cuba and Cuban nationals will be expanded to allow the receipt of payment for such services. Certain limitations will apply, related to payments from prohibited Cuban Government or Cuban Communist Party officials. Additionally, a new general license will authorize persons subject to U.S. jurisdiction to receive, and make payment for, certain legal services from Cuba or Cuban nationals.

Civil Aviation Safety –

Supporting international aviation and passenger safety:

  • A case-by-case review policy will apply to license applications for exports and reexports to Cuba of items to help ensure the safety of civil aviation and the safe operation of commercial passenger aircraft. Items that are to be reviewed pursuant to this policy include aircraft parts and components; software and technology related to safety of flight; air traffic control, aviation communications, and aviation weather related equipment; airport safety equipment; and devices used for security screening of passengers and baggage.

Gift Imports –

Allowing certain gifts:

  • Imports of merchandise from Cuba or Cuban-origin merchandise from a third country intended as gifts, excluding alcohol and tobacco products, will be allowed to be sent to the United States provided that the merchandise is not carried by a traveler, the value of the merchandise is not more than $100, and the item is a type and in quantities normally given as a gift.

Educational Activities –

Increasing contact between American and Cubans and enhancing the free flow of information to, from, and among the Cuban people:

  • ​Under an expanded general license, additional educational activities involving Cuba and Cuban nationals, including the provision of standardized testing services and internet-based courses, will be authorized.
  • Academic exchanges and joint non-commercial academic research with universities or academic institutions in Cuba will also be authorized.
  • Travel-related transactions in connection with these activities will also be authorized.

Ordinarily Incident Transactions –

Clarifying the scope of authorized transactions:

  • OFAC is clarifying that the Cuba sanctions provisions that are already in place allow most transactions that are ordinarily incident and necessary to give effect to a licensed transaction. For example, certain payments made using online payment platforms are permitted for authorized transactions.

Air Ambulances and Emergency Medical Services –

Facilitating access to emergency medical services:

  • The provision of air ambulance and other related emergency medical services to travelers in Cuba will be authorized by general license, and a general license will clarify that the provision of nonscheduled emergency medical services to Cuban nationals in the United States is authorized.

Humanitarian Projects –

Facilitating aid to the Cuban people in times of need and preserving Cuban history:

  • The general license authorizing transactions related to specified humanitarian projects will be expanded to include disaster relief and historical preservation.

Supporting Diplomatic Relations –

Supporting the reestablishment of diplomatic relations with Cuba in accordance with the President’s announcement:

  • ​OFAC is expanding the general license authorizing transactions with official missions of Cuba to the United States to include international funds transfers.

Jose A. Aquino (@JoseAquinoEsq on Twitter) is a special counsel in the New York office of Duane Morris LLP, and a member of the Duane Morris Cuba Business Group. This blog is prepared and published for informational purposes only and should not be construed as legal advice. The views expressed in this blog are those of the author and do not necessarily reflect the views of the author’s law firm or its individual attorneys.

U.S. and Cuba To Announce Embassy Openings

President Barack Obama is expected to announce this morning that the United States and Cuba have reached an agreement to re-establish formal diplomatic relations and reopen embassies in each other’s capitals. President Obama proclaimed in December that he wanted to resume full diplomatic relations with Cuba and, after six months of negotiations, the two countries have worked out details of the new embassies. For the first time in over fifty years the Cuban flag will fly over its embassy in Washington and the U.S. flag will likewise hover over Havana.

The former U.S. embassy in Havana, now known as the U.S. Interests Section, will be reconverted into a fully operating embassy. The seven-story U.S. Embassy building on the Havana waterfront was constructed in 1953. The U.S. closed its embassy when then President Dwight D. Eisenhower broke off diplomatic relations with Cuba in January 1961. The former embassy building opened as the U.S. Interests Section in 1977 under President Jimmy Carter when he tried to re-establish diplomatic relations with Cuba. The State Department estimates that it needs $6.6 million to renovate the building to make it an operating embassy.

Secretary of State John Kerry is expected to travel to Cuba in July to oversee the embassy’s reopening. President Obama is also expected to travel to Cuba before leaving office in January 2017.

However, before it can reopen, the State Department must notify Congress of its intent to reopen the embassy in Havana. Congress then has 15 days to review the notification before the U.S. can open the embassy. Although certain factions in both houses of Congress continue to oppose widening ties with Cuba, there is unlikely to be a serious challenge to the reopening of the U.S. embassy in Havana.

Jose A. Aquino (@JoseAquinoEsq on Twitter) is a special counsel in the New York office of Duane Morris LLP, and a member of the Duane Morris Cuba Business Group. This blog is prepared and published for informational purposes only and should not be construed as legal advice. The views expressed in this blog are those of the author and do not necessarily reflect the views of the author’s law firm or its individual attorneys.

Puerto Rico And Peru Sign Memorandum To Reinforce Commercial Interactions

In a ceremony attended by President Ollanta Humala and Governor Alejandro García Padilla, on June 11th, the governments of Peru and Puerto Rico signed a memorandum of understanding aimed at promoting their commercial and educational dealings. Among other things, the memorandum indicates that they intend to “strengthen and promote business development, knowledge transfer and cooperation in medical services, education and infrastructure.” Further, Puerto Rico is looking to Peru to help it to expand medical tourism, agricultural trade and cultural projects. As part of the memorandum they will create a working group that will look to follow up on the agreements.

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Cuba Prepares For Its First Free-Trade Manufacturing Zone

The Cuban government recently issued rules and regulations for companies that will operate in the first free-trade manufacturing zone in Cuba. Located in the Port of Mariel, thirty miles west of Havana, the Mariel Special Development Zone will house manufacturing plants that assemble and make products for both domestic and international markets, as well as a megaport designed to eventually replace freight operations at the Port of Havana which cannot accommodate large ships. A highway and railroad infrastructure is also being built to provide access to the zone.

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Puerto Rico District Court Discusses Judicial Preference For Alternative Dispute Resolution

A recent decision of the United States District for the District of Puerto Rico examines the standard of review of an arbitration award. In Union de Periodistas de Artes Graficas y Ramas Anexas v. Telemundo de Puerto Rico, Inc.[i], Telemundo de Puerto Rico, Inc. (“Telemundo”), a Spanish language television network, centralized its Houston, San Antonio and Puerto Rico master control and editing work in Miami to take advantage of new technologies. The change made it possible for Telemundo’s Puerto Rico subsidiary to switch from a twenty-four hour manual operation to an automated system, such that personnel in Miami operate the automated system for the Puerto Rico Station, as well as the stations in San Antonio and Houston.

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Puerto Rico’s Public Energy Policy Continues To Seek Solutions To The High Cost Of Powering The Island

High energy costs has long been recognized as one of the biggest obstacles to doing business in Puerto Rico. The cost of energy on the island is almost twice as much as in the U.S. mainland. Mindful that Puerto Rico’s energy policy is a critical component of the island’s successful economic future, the government set in motion the certain steps to diversify power production by fostering renewable energy projects on the island. In July 2010, then governor Luis Fortuño signed into law the Act for a Public Policy for Energy Diversification Through Sustainable and Alternative Renewable Energy (the “Energy Diversification Act”) and the Green Energy Incentives Act (the “Incentives Act”) which firmed up Puerto Rico’s position regarding the need for clean renewable energy. The legislation set specific renewable energy production goals and established economic incentives to enable the island to meet those goals.

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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