Beyond Rum And Cigars: Further Easing Of Sanctions Paves Way For Increased Business Opportunities In Cuba

On October 17, 2016, the U.S. government further eased the economic sanctions and trade embargo against Cuba to implement the administration's policy of increasing engagement and commerce to benefit the Cuban people and American businesses. In coordinated revisions that reflect their overlapping jurisdiction over the U.S. embargo of Cuba, the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC") and the U.S. Department of Commerce's Bureau of Industry and Security ("BIS") released revisions to the Cuban Assets Control Regulations, 31 C.F.R. Part 515 ("CACR"), and the Export Administration Regulations, 15 C.F.R. Parts 730-774 ("EAR"). The revised regulations are effective immediately.

While initial headlines have highlighted the relaxation of limitations on the importation of Cuban-origin rum and cigars, other aspects of this latest round of eased sanctions are much more significant for those planning to expand their business opportunities in Cuba.

This Commentary summarizes key provisions that will increase flexibility for trade with Cuba. These provisions will most directly benefit the following entities:

Pharmaceutical manufacturers and distributors; Medical researchers; Infrastructure development firms; Direct-to-consumer retailers, including online retailers; Manufacturers of "agricultural items"; Air and maritime cargo operators; and Civil aviation safety services providers. In addition, all entities exploring future opportunities in Cuba can now lay contractual groundwork for future operations through contracts contingent on OFAC authorization or further relaxation of the sanctions.

Although these revisions provide U.S. companies with an increased array of opportunities in Cuba, the long-standing comprehensive U.S. trade embargo on Cuba remains in force. As a result, U.S. citizens and U.S. companies—as well as foreign-incorporated entities owned or controlled by such persons (collectively in CACR parlance, "persons subject to U.S. jurisdiction")—must remain vigilant in their trade compliance. This could prove more challenging as compliance programs adapt to the expanded scope of authorized activities in and exports to Cuba.

Medical Research and Pharmaceuticals

The amended CACRthrough a new general license at § 515.547have opened significant opportunities in medical research and pharmaceuticals manufacturing in Cuba and with Cuban partners. First, persons subject to U.S. jurisdiction may now engage in joint medical research projects with Cuban nationals, including both commercial and non-commercial medical research. Second, persons subject to U.S. jurisdiction may also engage in all transactions incident to obtaining approval for Cuban-origin pharmaceuticals from the U.S. Food and Drug Administration ("FDA"). This authorization includes: discovery and development; pre-clinical research; clinical research; regulatory review, approval, licensing, and post-marketing activities; and the importation into the United States of Cuban-origin pharmaceuticals. Third, transactions incident...