A New Latitude: Charting a Course for Cuba J. Scott Maberry Sheppard Mullin Richter & Hampton LLP smaberry@sheppardmullin.com Momentum Events Webinar January 6, 2015 © Sheppard Mullin Richter & Hampton LLP 2014 Topics Diplomatic relations “State sponsor” designation Travel and transactions – Current status – Proposed changes Steps to lifting sanctions Opportunities Resources 2 Diplomatic Relations 1961-77: 1977-2015: 2015: no mission Interest Section U.S. Embassy Havana Photo: Wikipedia Commons 3 “State Sponsor” Designation Designated 1982 – Safe haven for ETA and FARC members – Harboring U.S. fugitives Effect – Arms embargo – Strict export controls – U.S. economic aid ban Joanne Chesimard Wikipedia Commons Joshua Hakken Wikipedia Commons 4 “State Sponsor” Designation Process Review support for acts of terror 6 months Determine if renounced use of terrorism Review ratification of anti-terrorism treaties Report to Congress (review only; 45 days) Recommend to President within 6 months 5 Current Status: Business with Cuba Comprehensive economic embargo All transactions prohibited unless authorized Jurisdiction reaches non-U.S. subsidiaries 6 Current Status: Business with Cuba General licenses – – – – Certain humanitarian gifts Mail Telecommunications services Protection of IP Favorable licensing policy – medical devices – Food – agricultural commodities 7 Proposed Changes: Transactions New treatment of certain exports – – – – Certain U.S. correspondent accounts U.S. credit cards for authorized travel Communications services, equipment Communications infrastructure Nature of changes not yet announced 8 Proposed Changes (Continued) General licenses – non-U.S. subsidiaries of U.S. companies may engage in certain transactions with Cuban individuals in third countries – Unblock accounts at U.S. banks of Cuban nationals who have relocated outside of Cuba – U.S. persons may participate in third-country professional meetings and conferences related to Cuba No measure is effective until regulations amended 9 Current Status: Travel to Cuba Travel prohibited unless authorized General licenses – strictly construed – – – – – – – – family visits official U.S. government business journalistic activity professional research and meetings full time schedule of educational activities full time schedule of religious activities telecom provider incident to marketing or selling licensed ag/med goods Specific licenses: case by case – – – – – – public performances support for the Cuban people humanitarian projects activities of private foundations or institutes Incident to publishing certain other Tourism travel prohibited 10 Proposed Changes: Travel to Cuba Travel prohibited unless authorized General licenses expanded for 12 categories – – – – – – – – – – – – family visits official U.S. government business journalistic activity professional research and meetings educational activities religious activities public performances support for the Cuban people humanitarian projects activities of private foundations or institutes Incident to publishing certain other Specific licenses: case by case Tourism travel prohibited 11 Proposed Changes: Travel to Cuba But can I bring back Cigars? Money $100 $0 Future 2004 1990 Time Image: Wikipedia Commons 12 Graphic: SMRH Steps to Lifting Sanctions Executive – – – – Diplomatic relations Executive Orders Treasury regulations Commerce regulations Legislative – Antiterrorism and Effective Death Penalty Act of 1996 – Cuban Liberty and Democratic Solidarity (Libertad) Act of 1996 – Cuban Democracy Act of 1992 – Sections 5 and 16 of the Trading With the Enemy Act 13 Next Steps OFAC will amend the Cuban Assets Control Regulations “in the coming weeks” Commerce will amend the Export Administration Regulations No changes take effect until new regulations are issued 14 Next Steps Congress may be ambivalent Lithograph: J.L. Magee (1855) Public Domain 15 What to Expect: OFAC “increase travel, commerce, communications and private business development” Secretary of Treasury Jacob Lew Wikipedia Commons “promote positive change for Cuba’s citizens” 16 Opportunities: Commercial Goods “Will be authorized for export” certain building materials for private residential construction goods for use by private sector Cuban entrepreneurs, agricultural equipment for small farmers 17 Opportunities: Financial Services U.S. institutions will be permitted to open correspondent accounts at Cuban financial institutions to facilitate the processing of authorized transactions The regulatory definition of the statutory term “cash in advance” will be revised to specify that it means “cash before transfer of title”; this will provide more efficient financing of authorized trade with Cuba U.S. credit and debit cards will be permitted for use by travelers to Cuba 18 Opportunities: Travel / Hospitality Travelers in the 12 categories “will be able to make arrangements through any service provider that complies with OFAC regulations governing travel services to Cuba” General licenses will authorize provision of travel services 19 Opportunities: Internet / Telecom Providers “will be allowed to establish the necessary mechanisms” for commercial telecommunications and internet services “Including infrastructure” 20 Opportunities: Rule of Law U.S. investors want rule of law Mutual incentives U.S. policy (e.g. sectoral reforms) will reinforce See LexisNexis / Atlantic Counsel Rule of Law Business Principles 21 Resources President Obama’s December 17, 2014 Speech LinkedIn: U.S. Cuba Business Forum GlobalTradeLawBlog.com Corporate Counsel Summit Cuba Opportunity Summit 22 Upcoming Events 23 Join Fellow Business Leaders and Corporate Counsel at two Forthcoming Cuba-Related Events U.S. - Cuba Corporate Counsel Summit – March 2015, NYC Legal, Regulatory & Compliance Focus www.momentumevents.com/cuba-counsel The Cuba Opportunity Summit: High-Velocity Growth – April 2015, NYC Business, Strategy and Operations Focus In Partnership with Knowledge@Wharton www.knowledge.whartonevents.com/cuba Register with the code WEBINAR200 for either event before Friday Jan 9th to receive a $200 discount.