In one of the most significant changes to the American business relationship with Cuba in a half-century, new rules that take effect Friday will greatly expand travel and trade between the close neighbors and former adversaries.
The rules, which chip away at the U.S. trade embargo, come as part of the White House’s decision to reestablish diplomatic relations with Cuba. Talks to begin the process are scheduled next week in Havana. The administration has said that engagement is the best way to leverage change on the island.
President Barack Obama would actually like to eliminate all restrictions on travel to Cuba, said White House spokesman Josh Earnest but can only go so far in changing the U.S. relationship with Cuba using executive authority.
“We certainly would welcome congressional action that would make it possible for people to travel to Cuba solely for the purposes of spending time on the beach in Cuba,” he said.
The Cuban-American delegation in Congress reacted quickly to the new guidelines and suggested Obama had overstepped his executive authority.
Rep. Mario Diaz-Balart, R-Miami, said the embargo and travel restrictions need to stay in place until Havana meets certain conditions.
“Despite this administration’s worst intentions, sanctions against the Castro regime remain codified in U.S. law and will remain in force until all political prisoners are released, independent labor unions, press, and political parties are legalized, and free, fair elections are scheduled,” Diaz-Balart said.
The sweeping rules — 66 pages of regulations from the Office of Foreign Assets Control and 23 pages from Commerce — touch on banking, credit and ATM cards, and allow for commercial exports and imports as long as they’re bought or sold by private Cuban entrepreneurs.
“What we’re trying to do is to provide incentives for greater people-to-people exchanges with the hope of empowering average Cubans so they can pursue with greater flexibility, greater chances of success, their individual dreams for small businesses or for contacts with family members or business contacts in the U.S.,” said a senior U.S. official.
Lawyers are still digesting the rules, but here’s a sample of what commerce between the two countries might look like: a private Cuban farmer who grows coffee will be able to import roasting equipment from the United States, a Cuban fashion designer could sell clothes to a Miami boutique, and a U.S. company could send paint and building supplies to a Cuban who wants to build or repair a home.
Gone are much of the bureaucracy and paperwork for travel providers that accompanied a visit to Cuba. Previously there were only a handful of cases in which Americans were allowed to visit Cuba without getting prior approval from OFAC.
Now there are 12 categories of travelers who may legally visit the island but tourism still won’t be allowed, nor will a trip that would combine three days at the beach with an educational trip. A previous provision that allows Cuban Americans to travel to the island freely to visit family remains in place.
Currently, only a limited number of travel service providers and air charter operators licensed by OFAC handle Cuba travel arrangements. But the door swings open Friday. Any organization or travel agent may sell tickets and arrange legal travel to Cuba.
Bob Guild, vice president of Marazul Charters, said the company has been inundated with calls since the new regulations were announced Thursday morning. “People think that anyone can go to Cuba any time now and that is not true,” he said.
The categories now authorized for travel to Cuba without applying for a license are: family visits; official business of the U.S. government, foreign governments, and certain intergovernmental organizations; journalistic activity; professional research and professional meetings; educational activities; religious activities; public performances, clinics, workshops, athletic and other competitions, and exhibitions; support for the Cuban people; humanitarian projects; activities of private foundations or research or educational institutes; exportation, importation, or transmission of information or information materials; and certain authorized export transactions.
Guild said he expects limited vetting by travel agents of whether travelers actually fall into the 12 categories but the rules are clear that only legal travel is allowed. Anyone couldn’t attend a geologists’ conference in Cienfuegos, for example, just because they had a passing interest in rocks.
“The rules say they have to have an established professional interest; it can’t just be casual interest,” Guild said.
John McAuliff, who has organized more than a dozen groups of licensed people-to-people travelers to Cuba, doesn’t think the new travel regulations go far enough. He believes Americans in some of the categories will still be forced into “non-spontaneous escorted group tours.”
In general, Guild said he expects a lot less paperwork and a lot more competition among those who provide travel services to Cuba.
United Airlines, for example, said Thursday that, pending government approvals, it hoped to offer service to Cuba from Newark and Houston. Other commercial airlines also expressed interest in providing air service to the island.
Currently there’s no regularly scheduled commercial air service to Cuba — just charter flights.
Travel will be easier going forward. Not only will travelers be able to use U.S. credit and debit cards in Cuba in the future but there also is no per diem rate for how much they can spend once they reach the island. The limit was $188 per day.
In a new twist, U.S. insurers will be authorized to provide coverage for global health, life, or travel insurance policies for individuals living in third countries who travel to or within Cuba.
Travelers also will be able to bring back up to $400 worth of Cuban goods but no more than $100 worth of alcohol or tobacco products. These products must be for personal use only.
Cubans living in the United States will still be able to send unlimited remittances to their families in Cuba, but other Americans will be allowed to send $2,000 per quarter to Cubans, except for certain prohibited Cuban government and Cuban Communist Party officials. The previous limit was $500 per quarter for non-family remittances.
But remittances for humanitarian projects or for development of private businesses will generally have no limit. Such remittances must “directly benefit the Cuban people,” according to OFAC.
Consumer telecommunications equipment, which until now could only be donated, will also be available for sale. Items destined to groups that are trying to establish independent civil society organizations will be allowed. Finally, a wide range of items will be allowed to be donated for organizations supporting science, culture and sports.
A big change, said Augusto Maxwell, who heads the Cuba practice at the Akerman law firm in Miami and returned from the island Thursday night, is that some commercial imports from Cuba will be allowed as long as they are produced by independent entrepreneurs.
More clarification on this is expected perhaps as early as Friday, but he said it appears, for example, that a private entrepreneur who refurbishes vintage cars in Havana for a living might be able to sell the cars in the United States.
Even so, “most imports and exports between U.S.-Cuba will remain prohibited,” a senior U.S. official said.
“It’s a very heady time in Cuba right now,” said Maxwell, who was there to check out what the new relationship with the island might mean for his clients.
Now, with the lifting of per diem rates and the potential to use ATM and credit cards and have better cell phone service at some point, he said, “going to Cuba will be more like regular business travel to any other part of the world.”
The new rules also permit U.S. banks to establish correspondent accounts in Cuban banks.
When Maxwell worked on negotiations for the sale of U.S. cattle to Cuba in 2004, he said it took a week to make the financial arrangements so the cattle could be paid for. “The new rules lubricate the process,” he said.
The Cuban government allows workers in scores of categories to be self-employed and more recently allowed workers at formerly state-owned small and medium-sized businesses to form their own cooperatives and run the businesses themselves.
Cuban Americans often send supplies for these small businesses as part of gift parcels or ferry them to the island as part of their “luggage.”
“I’ve heard of a grandmother who bought a stove in Miami and brought it back to Cuba in her ‘luggage,’” Maxwell said. “On the U.S. side now this process will be much more rational.”
Asked how the United States would ensure that the newly authorized exports would go into private Cuban hands and not to the Cuban government, a senior U.S. official said it would be up to American exporters to satisfy themselves their products are reaching the proper destination in case the U.S. government checks up on them.
The official said that violators will be prosecuted.
A previous liberalization of rules under Obama allowed remittances to Cuba to help support fledgling small businesses. “Previous efforts without a question helped expand the number of Cubans who have their own small businesses independent of the Cuban government,” said a senior administration official. “And we believe that this is a trend that is in our national interest to reinforce.”
In a move that should facilitate trade between the U.S. and Cuba and make it easier to finance trade, the term “cash in advance” is being redefined from “cash before shipment” to “cash before transfer of title to, and control of,” the exported items.
Even though the new regulations take effect Friday, other government agencies will need to be involved, including the Department of Transportation, the Federal Aviation Administration and Homeland Security. But officials said those department had been consulted. “They know the changes are coming,” said a senior administration official. “They will announce the next steps.”
Florida Republican Sen. Marco Rubio called the changes “a windfall for the Castro regime that will be used to fund its repression against Cubans, as well as its activities against U.S. national interests in Latin America and beyond.
“Given existing U.S. laws about our Cuba policy, this slew of regulations leave at least one major question President Obama and his administration have failed to answer so far: what legal authority does he have to enrich the Castro regime in these ways?” Rubio said in a statement.
But there was praise for the new policy from the Cuba Study Group, which supports engagement with Cuba.
“After over half a century of waiting for the U.S. policy of isolation and confrontation to bring about change in Cuba, it’s time to give this new policy the opportunity it deserves,” the Washington-based group said in a statement.
Rubio and Sen. Dan Coats, a Republican from Indiana, have asked Treasury Secretary Jacob Lew to detail how Obama plans to lawfully implement the new provisions.
In a letter sent Wednesday, the senators expressed concern over “stark differences between the letter of the law and the administration’s announcement.”
However, a senior U.S. official said the new rules had been carefully vetted by officials from Treasury, the Commerce Department and the State Department to make sure they are in accordance with all relevant U.S. laws.
The regulations are just part of a process aimed at “longer-term policy change” toward Cuba, said Marie Harf, a State Department spokesperson. “We’ll keep hitting milestones as we go.”
Miami Herald Staff Writers Jim Wyss and Marc Caputo contributed to this report.