Yesterday, OFAC issued an update to the Frequently Asked Questions (“FAQs”) on the Cuban Assets Control Regulations (“CACR”) and in classic OFAC fashion, simply published an entirely new document that does not in any way indicate any changes or additions. Luckily, we have gone thorough the new FAQs and separated the wheat from the chaff, so that you don’t have to. So what has changed?

14. What is an “organization” in the people–to-people context?

In the people-to-people context, an organization is an entity subject to U.S. jurisdiction that sponsors educational exchanges that do not involve academic study pursuant to a degree program and that promote people-to-people contact. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.565(b).

It appears that this new FAQ was added in order to further differentiate the general license for educational activities directly linked to academic study at § 515.565(a) with the general license for non-academic people-to-people travel at § 515.565(b).

22. May an individual authorized traveler use his or her private boat to travel to Cuba?

A person subject to U.S. jurisdiction engaging in authorized travel pursuant to an OFAC general or specific license may use a personal boat for his or her travel, and the travel of the boat’s crew, to Cuba provided that he or she obtains a license from the Bureau of Industry and Security (BIS) for the temporary sojourn of the vessel. Goods exported to Cuba also require a license or must be eligible for a license exception from BIS.

With the increased interest by U.S. persons in taking advantage of the various general licenses for travel to Cuba and given Cuba’s proximity to U.S. harbors, it comes as no surprise that OFAC has been getting questions from people wishing to sail to Cuba using personal vessels. However as this FAQ makes clear, individuals wishing to travel to Cuba using private boats must seek a license from the Commerce Department’s Bureau of Industry and Security. While there is a general policy of denial for exports to Cuba, license applications for vessels on temporary sojourn and accompanying goods are reviewed on a case-by-case basis.

23. Are U.S. vessels, including private boats and commercial passenger ferries, permitted to carry passengers to Cuba?

The new general license allowing the provision of carrier services between the United States and Cuba is limited to the provision of such services by aircraft; it does not authorize providing carrier services by vessel. Providing carrier services by vessel would require a specific license from OFAC. This would include an individual using his or her own personal boat to transport passengers to Cuba. Vessels on temporary sojourn to Cuba also require a license from the Bureau of Industry and Security (BIS). Goods exported to Cuba also require a license or must be eligible for a license exception from BIS.

This FAQ makes clear that, as noted above, individuals traveling to Cuba pursuant to a general or specific license may travel using their personal vessels, they cannot carry passengers with a specific license from OFAC. The same licensing requirement applies to commercial passenger ferries.   While the CACR does contain a general license for the provision of carrier services, this authorization only applies to aircraft. Separate from OFAC’s licensing requirement, private vessels and commercial passenger vessels also require a license from BIS.

One item missing from this FAQ is how OFAC defines “passengers.” While excluding commercial ferries makes some sense, the fact that private vessels cannot carry any individuals other than the vessel-owner seems to severely limit the impact of the previous FAQ.

35. Can U.S. financial institutions permit the use of credit and debit cards they issue by, and process credit and debit card transactions for, third-country nationals whose travel to, from, or within Cuba may not fall within the 12 categories of authorized travel?

Yes. Section 515.584(c) of the CACR authorizes all transactions incident to the processing and payment of credit and debit cards transactions for third-country nationals traveling to, from, or within Cuba.

FAQ #35 provides some much-needed clarity on the scope of the authorization for U.S. financial institutions to facilitate credit and debit card transactions to Iran. As currently written § 515.584(c) states that “All transactions incident to the processing and payment of credit and debit cards involving travel-related and other transactions consistent with §515.560 are authorized” (emphasis added). §515.560 relates to travel-related transactions to, from, or within Cuba by individuals subject to U.S. jurisdiction.

While § 515.560(c)(5) does state transactions related to the processing and payment of credit and debit cards used in Cuba by any person authorized to engage in financial transactions in Cuba under Part 515 are authorized, some may have interpreted this provision to exclude third-country nationals who are not governed by the CACR. This FAQ further clarifies that U.S. banks may process credit and debit card transactions in Cuba.

38. May foreign branches of U.S. banks open and operate accounts for newly unblocked Cuban nationals in third countries?

Yes, however all funds transfers to or from such an account involving Cuba or a national of Cuba (other than an unblocked national) must be authorized or exempt.

515.505 provides a general license unblocking Cuban nationals that are either 1) U.S. citizens, permanent legal residents, or in the United States; 2) a Cuban national who has taken up permanent residence in a third country; or 3) any entity that otherwise would be a national of Cuba solely because of the interest of these unblocked individuals. As a substantial number of previously blocked Cubans are now unblocked, this FAQ is intended to clarify that foreign branches of U.S. banks are authorized to open and operate accounts on their behalf, with the caveat that any Cuba-related transactions must be authorized or exempt.

41. Should financial institutions apply for a specific license to release funds transfers or accounts previously blocked solely because of the interest of an individual who has now become an unblocked national under the recent amendment to the CACR?

The CACR include general licenses authorizing as unblocked nationals certain Cuban nationals who have taken up permanent residence in the United States or a third country. For a complete description of what these general licenses authorize and the restrictions that apply, please see 31 CFR § 515.505(a). The CACR also include a general license authorizing banking institutions to unblock any account that had been previously blocked solely because of the interest therein of one or more persons now licensed as unblocked nationals. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.505(b).

If your situation appears to meet the terms of these general licenses, we suggest that you contact the U.S. financial institution blocking the funds transfer or account to request that they review your situation within the context of the terms of the appropriate general license. If the terms of a general license apply, there is no need to seek specific authorization from OFAC, and it is OFAC’s policy not to grant specific licenses authorizing transactions for which the provisions of an outstanding general license are applicable. See 31 C.F.R. § 501.801(a).

Given that prior to January 16, 2015, Cuban nationals with permanent residency in third countries were still considered blocked persons, it is safe to assume that at some point some of them tried to open accounts at foreign branches of U.S. banks and subsequently had these accounts blocked. § 515.319 defines the term “Blocked Account” as “an account in which any designated national has an interest.” §515.319 also clarifies that “the term blocked account shall not be deemed to include accounts of unblocked nationals.”

As third country Cuban nationals are unblocked pursuant to § 515.505, any funds that had been previously blocked may be released without specific authorization from OFAC. This is because these accounts are no longer considered blocked property, as §515.505 has removed any interest of blocked parties in these accounts.

42. Do banking institutions need to apply for a specific license to release funds transfers or accounts previously blocked pursuant to the CACR that are now authorized by general license?

If a transaction was previously blocked pursuant to the CACR at the time of the transaction, and the CACR was later amended to allow similar transactions, the earlier transaction is not unblocked unless the CACR amendment includes a general license unblocking previously blocked funds. Transactions must be authorized pursuant to the CACR at the time they are processed. To the extent not authorized by a general license, a specific license would be required to release funds transfers or unblock accounts previously blocked.

The authorization to unblock accounts of newly unblocked Cuban nationals does not extend to transactions blocked because the transaction itself was in violation of the CACR.  This applies even if the type of transaction that precipitated the blocking is now authorized.  For instance, if a U.S. financial institution blocked an unlicensed payment related to the exportation of a Consumer Communications Device, any funds blocked may not be unblocked without a specific license, even though the transaction would now be authorized under §515.533.

45. Can U.S. trade delegations travel to Cuba?

Trade delegations are authorized to travel to Cuba only if each member of the delegation meets the criteria of an applicable general license authorizing travel to Cuba or has obtained a specific license from OFAC. Authorized trade delegations generally fall under one of two general licenses for travel authorization; either (1) 31 CFR § 515.533(d), which authorizes travel-related and other transactions incident to the exportation of certain authorized goods from the U.S. to Cuba, specifically the conduct of “market research, commercial marketing, sales negotiation, accompanied delivery, or servicing in Cuba of items consistent with the export or report licensing policy of the Commerce Department,” or (2) 31 CFR § 515.564(a), which authorizes transactions related to professional research or professional meetings in Cuba. For a complete description of what these general licenses authorize and the restrictions that apply, please see 31 CFR §§ 515.533(d) and 515.564(a).

Neither of the aforementioned general licenses authorizes the establishment of a permanent physical presence in Cuba.

We’ve heard a number of questions from the business and legal communities regarding the scope of the authorizations for travel to Cuba in order to conduct market research or other professional meetings. FAQ #45 expands upon what was previously a very limited explanation in then-FAQ #38 to more fulsomely describe the scope of the authorizations contained in §§515.533(d) and 515.564(a).

47. May U.S. insurers issue policies and pay claims related to group health, life, and travel insurance on behalf of third-country nationals traveling to or within Cuba?

Yes, provided that the insurance policy is as global policy. Section 515.580 of the CACR authorizes persons subject to U.S. jurisdiction to issue or provide global health, life, or travel insurance policies for individuals ordinarily resident in a country outside of Cuba who travel to or within Cuba, regardless of whether the insurance policy is issued only to that individual or to a group, such as to all employees of a particular company. For instance, a U.S. insurer may pay medical claims pursuant to a group health insurance policy to or on behalf of a covered third country national injured while traveling in Cuba. However, this provision does not authorize a person subject to U.S. jurisdiction to issue an insurance policy that is specific to travel to Cuba. A separate provision of the CACR, 31 CFR § 515.560, authorizes the provision of health, life, and travel insurance-related services for authorized U.S. travelers.

With the addition of §515.580, the CACR now authorizes U.S. persons to service Cuba-related claims for global health, life or travel insurance policies held by third-country nationals.  This does not authorize U.S. companies to provide Cuba-specific insurance policies to third country-nationals.  This may cause some frustration at Florida-based Bupa Insurance Company, which settled with OFAC in October 2014 in part for violations of the CACR related to reimbursements for medical services performed in Cuba. Not too much frustration however as the majority of the penalty was for dealings with Specially Designated Nationals (“SDN”).

48. Are insurance policies that are issued to a “group” (e.g., an employer and its employees) authorized by the CACR?

Section 515.580 of the CACR authorizes global insurance policies covering individuals ordinarily resident in a country outside of Cuba traveling to Cuba. The policy may be issued to a group, such as all employees of a company.  The “global” requirement means it cannot be specific to travel to Cuba. For example, it does not authorize an individual travel policy issued to a traveler specifically to cover a planned trip to Cuba.  It also does not authorize issuing a policy to a non U.S. travel agent specifically to cover its traveler clients where the travel agency is solely in the business of planning trips to Cuba.

This FAQ expands on #48 by clarifying that §515.580 also covers global insurance policies issued to groups, such as employees of a company.

49. What types of Cuban-origin goods are authorized for importation into the United States?

Persons subject to U.S. jurisdiction authorized to travel to Cuba may import into the United States as accompanied baggage merchandise acquired in Cuba with a value not to exceed $400 per person, including no more than $100 in alcohol and tobacco products.

Persons subject to U.S. jurisdiction are also authorized to import certain goods produced by independent Cuban entrepreneurs as determined by the State Department, to be set forth in the State Department’s Section 515.582 list.

The importation into the United States from Cuba of information and informational materials is exempt from the prohibitions of the Cuban Assets Control Regulations. The definition of “information and informational materials” may be found at 31 CFR § 515.332.

On February 13, 2015, the State Department issued the Section 515.582 list outlining the types of goods produced by independent Cuban entrepreneurs that may by imported into the United States pursuant to §515.582. The revised FAQ #49 updates what was previously #40 to reflect the publication of the list.

55. What type of projects would fall within the authorization in 31 CFR § 515.575 for microfinancing projects?

Among other things, the provision for microfinancing projects in Section 515.575 of the CACR authorizes the provision of certain financial services to unemployed, underemployed, and low income Cubans who have little or no access to conventional banks or comparable resources, and which may include a limited return on investment. In addition, Section 515.570(g)(1) of the CACR authorizes remittances to individuals and independent non-governmental entities in Cuba to support authorized microfinancing projects. These provisions would authorize, for example, relatively limited contributions of funds to support individual entrepreneurs in sectors that need access to working capital, investment loans, insurance, or training in order to start or expand their operations. Sections 515.575 and 515.570(g)(1) of the CACR do not authorize loans, extensions of credit or other financing related to transactions involving confiscated property the claim to which is owned by a U.S. national, which are prohibited by 31 CFR § 515.208. For additional guidance or fact-specific questions, we would encourage you to contact OFAC.

515.575 contains a general license for humanitarian projects in Cuba designed to directly benefit the Cuban people. Included in this general license is an authorization for “microfinancing projects, except for loans, extensions of credit, or other financing prohibited by § 515.208.” Although “microfinancing” is undefined in the regulations, OFAC appears to be encouraging the provision of microfinance in order to support the development of private Cuban entrepreneurs or non-governmental organizations.

56. If a person had applied for a specific license from OFAC before the CACR was revised but now believes that the proposed activity is authorized pursuant to a general license, does that person need to wait for his or her specific license application to be adjudicated?

No. If persons meet the qualifications listed in the general license, then they do not need to wait for an official determination from OFAC regarding their specific license application. Persons who have determined they may proceed under a general license may wish to contact OFAC Licensing to withdraw existing applications.

FAQ #56 appears to be an attempt by OFAC to lessen the burden on its licensing division by suggesting that persons who have submitted specific license requests for activity that is now generally licensed.  This would be a big help to OFAC, however, self-determining whether you qualify for a general license is not without risk.  Unless you are certain that your transactions fall under a general license, you may want to wait until OFAC responds and indicates that it is already authorized.  Remember, the belief that you fall under a general license is not a bar to liability for violating the CACR.

57. What types of goods and services produced by independent Cuban entrepreneurs are authorized for importation into the United States from Cuba pursuant to 31 CFR § 515.582?

Pursuant to Section 515.582 of the CACR, certain goods and services produced by independent Cuban entrepreneurs, as set forth in a list maintained by the State Department on its website, are authorized for importation, and persons subject to U.S. jurisdiction may engage in associated transactions necessary to import these authorized goods and services. The State Department list provides details of the goods and services authorized for importation into the U.S. from Cuba pursuant to this provision.  This list references sections and chapters of the Harmonized Tariff Schedule (HTS) of the United States to indicate categories of goods that are not eligible for importation into the United States pursuant to 31 CFR § 515.582, even if such goods were produced by independent Cuban entrepreneurs; any other goods produced by independent Cuban entrepreneurs and not covered by the listed sections and chapters of the HTS may be imported, as provided in the State Department’s Section 515.582 List and subject to compliance with all other relevant requirements under state and federal law and regulations. Section 515.582 of the CACR authorizes the importation of all services supplied by independent Cuban entrepreneurs, again, as provided in the State Department’s Section 515.582 List and subject to compliance with other requirements in state and federal law and regulations.

FAQ #57 is a reminder that while §515.582 authorizes the importation of certain goods produced by independent Cuban entrepreneurs, the State Department’s 515.582 list excludes goods identified under certain chapters of the Harmonized Tariff Schedule of the United States (“HTS”).

As with all things OFAC, answers often lead to more questions.  While the FAQs are always welcome, they are not a substitute for legal advice, or from seeking guidance from OFAC.  We will continue to update you on changes to the CACR and how OFAC interprets it, but in the meantime you would be wise to contact a legal professional, or OFAC itself, if you are intending on transacting in relation to Cuba.