U.S.-Cuba Trade and Economic Council, Inc. New York, New York Telephone (917) 453-6726 • E-mail: [email protected] Internet: http://www.cubatrade.org • Twitter: @CubaCouncil Facebook: www.facebook.com/uscubatradeandeconomiccouncil LinkedIn: www.linkedin.com/company/u-s--cuba-trade-and-economic-council-inc- Inside US Trade Arlington, Virgina 14 October 2016 Business Left Wanting More From New Batch Of Cuba Regulatory Changes Representatives of the business community’s interests in Cuba and other observers are disappointed in new Commerce and Treasury department regulatory moves designed to facilitate trade between the U.S. and Cuba, claiming that the Obama administration is not tackling the most important issues. John Kavulich, senior policy adviser [corrected president] at the U.S.-Cuba Trade & Economic Council, told Inside U.S. Trade that despite constant pressure from the business community, the Obama Administration, in these regulatory changes, did not make meaningful progress on several key business priorities. During an Oct. 14 conference call on the regulatory changes, a senior administration official said “we're mindful of the clock. And this is certainly likely the last significant tranche of changes. But there are always additional refinements that we can do to our policies, as my Treasury and Commerce colleagues know well." For Kavulich, that is something that “is not what the United States business community wants to hear.” Similarly, attorney and Cuba analyst Robert Muse describes the latest regulatory changes as short of what was expected and lacking significance overall. The business community’s top four priorities, according to Kavulich, are: expanding imports of Cuban agriculture products; substantive options to expand U.S. exports to Cuba, which would require of the administration to allow more exports to government-operated companies; expanding the types of U.S. exports permitted to Cuba; and allowing for direct-correspondent banking agreements. Such agreements would require Treasury to allow Cuban banks to open accounts with U.S. banks. Today, every banking transaction between the two countries transit a third country, a process known as a U-turn transaction. Kavulich said that during today's conference call, a Treasury official avoided answering a question about why the new batch of regulations did not allow for direct-correspondent banking agreements and the official instead pointed to the allowance of U-turn transactions “They’re not answering the question,” Kavulich said, “and it’s increasingly problematic, because on the one hand the administration is saying we want to enhance the commercial relationship between the U.S. and Cuba, but then when companies are saying ‘okay, one of the big impediments from the Cuban side is cost and time involved in transactions because it has to go [through a third country], why not allow a straight line?’ They will not give a reason as to why they won’t permit that.” More generally, Muse said the success of Obama’s Cuba policy, and its place in his overall legacy, will be determined by the amount of bilateral trade and investment his policies spur. In that sense, these latest regulatory changes do little to cement his legacy, Muse said. Similarly, Muse questioned why the administration did not take a more ambitious approach to this latest tranche of changes when it often touts the popularity of its efforts to liberalize trade with Havana. Along those lines, National Security Adviser Susan Rice said this week that the Obama administration’s regulatory changes are unlikely to be undone because they have gained “traction” and popular support. At the same time -- and despite the growing support for the administration’s approach to Cuba -- Rice said Congress must vote to lift the embargo for true economic integration to occur, but conceded that is unlikely to occur in the lame-duck. She spoke at an Oct. 14 event, hosted by the Wilson Center, on the regulatory changes as well the release of a new presidential policy directive laying out a blueprint for Cuba policy moving forward Rice also said the business and personal ties created via the six tranches of regulatory changes issued by the administration will make it difficult -- and counter to commercial interests -- for any future administration to undo them. Overall, Kavulich said, “boardrooms and offices across the country are gratified that President Obama has continued to make changes to regulations governing commerce and travel to Cuba.” “However, the President has again chosen a less-then-dynamic regulatory path, and, as a result, challenged his legacy-building efforts with Cuba,” he added. “Legacy is about doing what's difficult, and he has, thus far, decided to leave, yet again, 'choices' for his successor rather than only laws that need be changed.” Kavulich also said another set of regulatory changes before the end of the Obama administration is not out of the question, but time is quickly running out. New developments have to be digested by the U.S. industry as well as U.S. and Cuban government agencies, he said. After a learning phase that comes with regulatory modifications, industry often requests tweaks and fixes to the regulatory adjustments. The length and complexity of that overall process leaves little time for another batch of substantive regulatory changes to be made under this administration, Kavulich noted. The most recent regulatory changes, announced on Oct. 14 and slated to come into force on Oct. 17, involve modifications to the Cuban Assets Control Regime via the Treasury Department’s Office of Foreign Assets Control; and the Export Administration Regulations via the Commerce Department’s Bureau of Industry and Security. One change that won some praise from observers is a waiver of a requirement that more than 180 days must pass after a foreign vessel ports in Cuba if it wishes to then make a port call in the U.S. That change will be made via the issuance of a general license by OFAC, and will allow the Cuban port of Mariel, one of the few that can handle massive Super-panamax vessels, to be a way point for commerce passing through the expanded Panama Canal on the way to the U.S. and other parts of the world. Beyond the commercial impact of that move, Kavulich said that allowing foreign ships to move through Cuba on the way to the U.S. removes a Cuban priority from the broader negotiating table -- reducing the number of policies Havana can point to when looking to decline other U.S. requests. Other new regulatory alterations would allow transactions to obtain in the U.S. FDA approved Cuban-origin pharmaceuticals; further OFAC authorization for grants and other awards for scientific research and religious activities; and allow U.S. citizens to provide services to Cuba or Cuban nationals related to developing, repairing, maintaining and enhancing certain Cuban infrastructure to benefit the Cuban people. The new regulations also remove the monetary value limit on what one can bring back to the U.S. from Cuba in personal baggage, including alcohol and tobacco products. Previously, a limit of $400 for all goods was in place, with a $100 cap on alcohol and tobacco products collectively. The products brought from Cuba to the U.S. are limited to personal use, as per the regulations. OFAC is also set to make a number of technical changes to streamline exports and re-exports from Cuba, as well as the process for imports to the U.S. of items previously exported to Cuba. Also, OFAC will issue a general license allowing U.S. persons to enter into certain contingent contracts for transactions that are otherwise prohibited under the embargo. Contingent contracts are agreements that take effect based on certain conditions being fulfilled. In the instance of the OFAC regulatory change, fulfillment of the contract would be contingent on OFAC or any other relevant federal agency granting authorization for the final deal itself. Muse said this change is significant because it allows Cuban and U.S. entities to enter into legally binding contracts. For example, in a situation where OFAC issues a specific license for a U.S. investment in Cuba agreed to by both parties but the U.S. does not follow through on the investment, the Cuban party has grounds for legal action via the contingent contract. Previously, U.S. and Cuban entities operated through memorandums of understanding or intent, which are not legally binding, Muse noted. Finally, BIS will allow air cargo to transit Cuba in the same fashion that earlier regulations, issued in the spring, allowed vessels carrying cargo to transit Cuba on the way to another port. -- Jack Caporal Marketplace Los Angeles, California 14 October 2016 Obama administration eases Cuba restrictions, again By Kim Adams A worker puts cigars in boxes at the H.Upman Cigar Factory in Havana, which hosts the world's largest Cuban cigar festival. Obama administration eases Cuba restrictions, again The Obama administration announced Friday that new tourists to Cuba can bring back as much rum and cigars as they can fit in their baggage. Normal duties apply, of course. Richard Feinberg, a non-resident fellow at Brookings, recently wrote a book on Cuba’s changing economy. He said the announcement “brings closer the day when you have a general availability in the United States of those iconic Cuban products.” But, he said there are still several limitations — the embargo is still technically in place, and “what U.S. businesses are waiting for and what the Cuban government is waiting for are really very clear and definitive signals that we will be moving definitively to a brand-new stage of the U.S.-Cuban relationship.” John Kavulich, president of the U.S.-Cuba Trade and Economic Council, is frustrated with what he sees as a slow pace of the changes, especially as they pertain to businesses.