International Law Advisory - President Obama Eases Restrictions on Cuban Commerce and Travel

On April 13, 2009, President Obama issued a press release outlining his plan to “reach out” to the Cuban people by increasing the communications links between Cuba and the U.S. and removing restrictions on Cuban-Americans’ ability to visit and send money to their family members.  This policy appears to be part of a broader federal effort to ease restrictions on commerce and travel between the two countries, as it comes on the heels of the pending Freedom to Travel to Cuba Act, which was introduced in both the House and the Senate in February.  The President has charged the Secretaries of State, Treasury and Commerce to begin authorizing U.S. telecommunications companies to enter into transactions necessary to provide telephone, cable, and satellite services into Cuba.  As discussed below, the easing of restrictions falls into three basic categories 1) the easing of restrictions related to telecommunications, 2) the lifting of travel and remittance restrictions for Cuban-Americans, and 3) the expansion of eligible humanitarian donations.  Specifically, the Secretaries have been tasked to:

Telecom Aspects

• Authorize U.S. telecommunications network providers to enter into agreements to establish fiber-optic cable and satellite telecommunications facilities linking the United States and Cuba;
• License U.S. telecommunications service providers to enter into roaming service agreements with Cuba’s telecommunications service providers;
• License U.S. satellite radio and satellite television service providers to engage in transactions necessary to provide services to customers in Cuba;
• License persons subject to U.S. jurisdiction to activate and pay U.S. and third-country service providers for telecommunications, satellite radio and satellite television services provided to individuals in Cuba; and
• Authorize, consistent with national security concerns, the export or re-export to Cuba of donated personal communications devices such as mobile phone systems, computers and software, and satellite receivers through a license exception.

Travel/Remittance Aspects

• Create a new general license (with specific parameters identified in the press release) lifting restrictions on travel-related transactions for visits to a person’s family member who is a national of Cuba; and
• Within defined parameters, remove restrictions on remittances to a person’s family member in Cuba.

Humanitarian Donations Aspects

• Expand the types of items that can be donated and listing those items – in some cases restoring certain eligible items that had been pared back under previous tightening of the embargo.

While the easing of travel restrictions is expressly to take the form of a general license following specific parameters, it is less clear how the potentially far-reaching easing of the telecommunications policy will be implemented.  Section 515.542(b) of OFAC’s current regulations, implemented after passage of the Cuban Democracy Act in 1992, already authorizes “all transactions incident to the use of cables, satellite channels, radio signals, or other means of telecommunications for the provision of telecommunications services between Cuba and the United States, including telephone, telegraph and similar services, and the transmission of radio and television broadcasts and news wire feeds between Cuba and the United States” provided payments to Cuba as a result of these transactions are authorized under a specific license issued by OFAC.  However, Section 515.418(a) states that such licenses will only be granted in connection with services and payments that are approved by the Federal Communications Commission (“FCC”) and that are consistent with the State Department guidelines discussed below.

The practical application of these regulations up to now has been limited by guidance issued by the State Department to the FCC in 1993, under which service to Cuba must terminate at an international gateway in Cuba where a Cuban service provider picks up the traffic and transmits it to the Cuban public-switched network.   The guidelines also have not permitted settlements to Cuba that are more favorable than a 50-50 split of the relevant accounting rate.  The guidelines established a presumption of approval for modes of communications already in place between the U.S. and Cuba (e.g., satellite and undersea cable); however, proposals involving new modes of communications (e.g., fiber optic cable) have been required to go through an inter-agency review by the appropriate agencies on a case-by-case basis. Since this guidance was issued, several U.S. companies have received FCC authority to provide international common carrier service, and the attendant Office of Foreign Assets Control (“OFAC”) authority to make payments, to Cuba.

Implementation of the President’s directive as set out in the April 13 press release may lead to a change in OFAC's regulations and a liberalization of the 1993 State Department guidelines.  Whether the Administration will accomplish this through a general license or through specific licenses remains to be seen.  U.S. telecommunications companies interested in providing service to Cuba may want to consider voicing their opinion to the Administration while the framework for implementation is under development.  We believe there will be opportunities to submit information to the agencies to inform their decision process.

As the agencies work to implement the President’s directive, we will continue to keep you apprised of developments on the Cuban sanctions.  In the mean time, if you have any questions about this development in Cuban policy, please contact Julia Court Ryan at (202) 429-6418, Petra Vorwig at (202) 429-6417 or Ed Krauland at (202) 429-8083.