Cuba and License Amendments to the Export Administration Regulations

By Beatriz B. Ramirez, Free Trade Agreement Specialist
Illinois, SBDC International Trade Center

After 60 years of embargo against Cuba, the United States is taking action by opening trade again, marking a new beginning. Since the embargo in 1961, many consumer products were subjected to a license requirement issued by the Bureau Industry and Security (BIS) before any item was shipped to Cuba. On December 17, 2014, President Obama asked the Department of Commerce Office of Assets Control Regulations (OFAC) and the BIS to make amendments to the Export Administration Regulations (EAR) to be able to export and re-export some commodities and services to support the Cuban people.

The five amendments to the EAR are:

  1. Creation of License Exception Support for the Cuban People (SCP)
  2. Expansion of License Exception Consumer Communication Devices
  3. Expansion of License Exception Gift Parcels and Humanitarian Donations (GFT)
  4. New Licensing Policy for Environmental Protection
  5. Technical and Conforming Changes

Section 740.21 of the EAR
The creation of License exception in Support for the Cuban People (SCP) authorizes export and re-export of items that are intended to support and improve living conditions of the Cuban people. Moreover, this amendment will kick start on economic activity, strengthen civil society and improve the free flow of information within Cuba.

The specific changes made are:

Improvement of living conditions and support of independent economic activity.

  1. a) Products for construction and renovation of buildings, businesses, private residences, places of worship, and private social/recreational institutions.
  2. b) Tools and equipment for agricultural activity within the private sector.
  3. c) *Tools, equipment, supplies, and instruments for use by private sector entrepreneurs.

*According to the Federal Register, “private sector entrepreneurs” refers to “auto mechanics, barbers, hairstylist and restaurateurs”. (www.federalregister.gov)

 

Strengthening of civil society.

  1. a) Certain donated items for use in scientific, archaeological, cultural, econological, educational, historical preservation, or sporting activities can now be sold or donated.  This new rule removes the ‘donation requirement’ that was created in 2009 since it was affecting the incentive to export and re-export computers, mobile phones, and digital cameras to Cuba.
  2. b) Temporary export of items by certain individuals.

            An individual from the U.S. may have his professional tools and equipment authorized for the development of a specific research directly related to his/her profession. Also, tools and equipment needed in a professional meeting, planned in advance may be authorized. Any item that travels with an individual must be returned to the United States in two years. Otherwise, the item must be consumed in Cuba. However, an exception can be granted if an individual asks for an extension on license from the BIS.

  1. c) Expansion of educational related travel.

               (i)      Faculty, staff, and students at U.S. academic institutions and secondary schools can engage in certain educational activities.

               (ii)     Students should be engaged in a full-time educational exchange activity intended to enhance contact with Cubans. This exception also includes individuals traveling with the intention of supporting human rights organization and non-governmental organizations intended to promote activities to strength civil rights.

               (iii)    Cuban universities can engage in non-commercial academic research.

               (iv)    It is no longer necessary to travel under the auspices of an organization that sponsors exchanges. The individual must retain records and documentation related to the authorized travel transactions while in Cuba.

Section 740.19 EAR
The expansion of License Exception Consumer Communication Devices (CCD), authorizes export and re-exports of CCDs, which are widely available for retail purchase. CCDs are used for exchanging and facilitating interpersonal communications as well as certain telecommunications and information security-related software. Previously, the only way these items could be sent to Cuba was under the guise of donations, but this has since changed. These items can now be sold or donated to the Cuban People. However, sales are not permitted to the Cuban government or its officials.

  1. a) In this License Exception, it is important to re-visit the EAR 749.19 for specific EAR and Export Control Classification Numbers (ECCN) that are assigned to the CCDs. The following items may be authorized for exports or re-exports to Cuba on a case-by-case basis: computers, consumer disk drives and solid state storage, input/output control units except industrial controllers designed for chemical processing, graphics accelerators and graphics coprocessors, monitors, printers, modems, network access controllers and communications channel controllers, keyboards, mice and similar devices, mobile phones - including cellular and satellite telephones, personal digital assistants, subscriber information module (SIM) cards and similar devices, memory devices, consumer “information security” equipment, “software” and peripherals except “encryption source code”; cameras and memory cards, recording devices, batteries, chargers, carrying cases, and accessories for the equipment described, and consumer “software” for the previous articles (bis.doc.gov/index.php/forms-documents/doc_view/986-740)

Section 740.12 of the EAR
The expansion of License Exception Gift Parcels and Humanitarian Donations (GFT) permits gift parcels and humanitarian donations. Previously, gifts were required to have single validated license applied to each gift parcel. The consolidate license will facilitate the transit of the gifts and will eliminate frustrations to the donor.

Section 746.2 of the EAR
New Licensing Policy for Environmental Protection adds a general policy of approval for exports and re-exports of items used for environmental protection, international air quality, waters, and coastlines including items for renewal energy or energy efficiency. It also includes the flexibility to authorize environmental protection-related transactions.

Part of Section 746 and 748 EAR
The Technical and Conforming Changes removes procedures for license applications for “Gift Parcels” that are no longer in effect.

Other amendments in Support of the Cuban People worth mentioning are:

  1. a) Payment of salaries: Cuban nationals in the United States that are in a “non-immigrant” status or other authorized non-immigrant status will be authorized to earn a salary, consistence with the type of visa. In addition, a U.S. company can begin to offer sponsorship or hire Cuban nationals to work or perform similar tasks to national and Cubans can be paid accordingly. Both recipients must demonstrate they are not subject to any tax assessment in Cuba.
  2. b) Cuban-origin merchandise: The Office of Foreign Assets Control (OFAC) will authorize “certain dealings” in reference to Cuban’s origin merchandise while an American is overseas (such as purchasing alcohol and tobacco for import to the U.S.).  
  3. c) Cuba private sector: BIS will adopt a licensing policy of case-by-case review for exports and re-exports of items that would facilitate exports from Cuba or items produced by the Cuban private sector.

The intention of creating these amendments facilitates a more positive trading environment between the U.S. and Cuba; hopefully, with the changes made to the EAR, Cuba’s trade relation will shift into a normalized state.

For more information, please contact Beatriz B. Ramirez at (309) 677-3075 or bramirez@bradley.edu.