Cuba

Administration moving to further liberalize rules on trade with Cuba

Cuban Foreign Minister Bruno Rodriguez holds up the government's annual report on what Cuba loses due to the U.S. embargo, as he gives a news conference in Havana, Cuba, Wednesday, Sept. 16, 2015. Bruno reiterated that the continuation, or ceasing, of the U.S. embargo depends on the U.S., not Cuba, but that talks between the two countries to normalize relations are on the right track.
Cuban Foreign Minister Bruno Rodriguez holds up the government's annual report on what Cuba loses due to the U.S. embargo, as he gives a news conference in Havana, Cuba, Wednesday, Sept. 16, 2015. Bruno reiterated that the continuation, or ceasing, of the U.S. embargo depends on the U.S., not Cuba, but that talks between the two countries to normalize relations are on the right track. AP

The Obama administration on Friday moved to further change U.S.-Cuba trade rules, ushering in what experts called a major development that would significantly open the door to expanded business on the island.

The rules will be formally published and take effect Monday. And Treasury Secretary Jacob J. Lew said they underscore “the administration’s commitment to promote constructive change for the Cuban people.”

“A stronger, more open U.S.-Cuba relationship has the potential to create economic opportunities for both Americans and Cubans alike,” he added in a statement. “By further easing these sanctions, the United States is helping to support the Cuban people in their effort to achieve the political and economic freedom necessary to build a democratic, prosperous and stable Cuba.”

The rules amend existing ones to boost engagement between American and Cuban people, accelerate the free flow of information to and from Cubans, and ramp up independent economic activity generated by Cubans.

Experts who have reviewed the new rules described them as significant and sweeping, as the administration intended. The rules significantly chip away at the embargo that has governed trade with Cuba for some five decades.

Still, that doesn’t mean trade between the U.S. and the island will be free and open.

For starters, current trade law still restricts major commercial activity between the U.S. and Cuba. And whatever the intent of U.S. rulemakers – and the hopes of U.S. companies – actually getting businesses open on the ground in Cuba will require the assent of the Cuban government.

In a press call with reporters Friday morning, administration officials – unnamed according to the ground rules of the call – said that the U.S. has taken major steps. But that’s not all that is necessary to actually establish a business presence on the island.

“That is beyond our control, in terms of determining what the government of Cuba is going to allow to happen,” a senior administration official said. “But we … have done what we can to lower all barriers to allow U.S. companies to go down there and really figure out how to get this done with the government of Cuba.”

Lawmakers began to react to the moves early Friday. There are still major steps that can be taken to further open trade with Cuba, and Congress has so far shown little inclination it is going to act on the issue any time soon.

U.S. Rep. Ileana Ros-Lehtinen, a Republican from Miami, said in a statement that the rule changes announced Friday “naively fuel expectations of a non-existent new Cuba.”

“The mislabeled private sector in Cuba is part of a police state that is under military control and maintaining its closed economy is the only way the regime will survive,” she said. “These new regulations are another desperate attempt to ignore the iron grip that the Castro regime maintains on the island’s economy and will only serve to benefit the coffers of the regime. By repeating the lie that Cuba has a private sector, the administration is using U.S. regulations to advance the regime's political agenda in the United States.”

According to the administration, the rules will allow further travel to Cuba for authorized purposes; allow certain businesses to establish a physical presence, such as an office or other facility, in Cuba to facilitate authorized transactions; allow certain persons to open and maintain bank accounts in Cuba to use for authorized purposes; and authorize additional financial transactions, including those related to remittances. The rules make several other technical changes to current regulations.

In many ways, the rules are a continuation of the process begun Dec. 17, when President Barack Obama announced that the U.S. was seeking to thaw the five-decade freeze in its relations with the island nation 90 miles from Florida.

After that momentous December announcement, the Commerce and Treasury departments in January took steps to put in place parts of the president’s policy. The new rules announced Friday amend the terms of existing license exceptions available for Cuba, create new licensing policies, and take other steps to further promote economic activity in Cuba.

Robert L. Muse, a Washington-based lawyer and expert on Cuba trade, said the moves were significant.

“They’re greater than the ones in January,” he said in an interview. “The rules in January were important – they established the precedent. But it was more of a beachhead, and it was a bit murky. Now they are engaging the business community in a way that’s going to be interesting and important to them. It begins to give them some real commercial traction.”

Among the key changes, Muse said, was that companies engaged in exporting authorized items to Cuba will be able to establish, maintain and operate physical premises in Cuba.

“Maintaining a presence is brand new – that’s the big further step they have taken here,” Muse said. “The intention is to bring American businesses to the island.”

An example, he said, would be an agricultural commodity company allowed to export to Cuba that would now be able to establish a sales office – or possibly even a warehouse – on the island, thus furthering its prospects.

Several other types of businesses could also be affected, including aircraft; telecommunications equipment; medicine; and materials, equipment, tools and supplies.

According to John S. Kavulich, president of the U.S.-Cuba Trade and Economic Council, the new regulations could permit a U.S. company to open a distribution center within the Mariel free trade zone; or shipping companies such as FedEx to have drop-off locations; U.S. airlines to have a ticket office; home renovation chains to sell building materials and supplies; or rice companies to have a sales office.

“And the companies can hire Republic of Cuba nationals as employees,” he said.

He added that regulations “would permit the most comprehensive trade and investment changes to the United States relationship with the Republic of Cuba in decades.”

However, just because the U.S. is authorizing such activity doesn’t mean the Cuban government will allow it.

“This is the U.S. saying to U.S. companies and individuals: You can do these things,” Kavulich said. “You will now have to convince the Cuban government to let you do them.”

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