Global Business Law

Trump Changes Cuba Policy

On June 16, 2017, President Trump announced that he was reversing several Obama-era policies regarding Cuba. 

Against the backdrop of a Miami museum that celebrates the unsuccessful Bay of Pigs invasion, Trump’s announcement was intended to make good on campaign promises he made to Cuban expatriates that he would rollback Obama’s attempted rapprochement with the Cuban government.

The actual details behind the policy-change, however, are complex, and the Trump announcement may not be as far-reaching as the headlines might suggest.

The President’s policy is set forth in a National Security Presidential Memorandum, directing several cabinet secretaries to adopt regulations consistent with the policy goals outlined in the Memorandum. 

One of the key directives in the Memorandum requires the Secretary of State to identity any entities that “are under the control of, or act for or on behalf of, the Cuban military, intelligence, or securities services personnel . . . and publish a list of those identified entities and sub entities with which direct financial transactions would disproportionately benefit such services or personnel at the expense of the Cuban people or private enterprise in Cuba.”

The Memorandum states that it will interpret the existing statutory embargo of Cuba to prohibit “direct financial transactions” with the entities and subentities identified on the Secretary of State’s list.

Since the revolution, the Cuban government has been the primary owner of private property in Cuba. Nearly every factory, workplace and significant piece of real estate on the island is either owned by the Cuban government, an instrumentality of the government or a joint venture between the Cuban government and a private party. It remains to be seen how broadly the Secretary of State will identify the “entities and subentities” on the prohibited list. If the concept is interpreted broadly, it could effectively prohibit nearly all financial transactions between U.S. persons and businesses in Cuba.

The Memorandum outlines several categories of permissible financial transactions, including transactions that “support programs to build democracy, those that relate to sending, processing or receiving authorized remittances, and those that “support the sale of agricultural commodities, medicines, and medical devices sold to Cuba.” In each case, permissible transactions determined by the Secretary of the Treasury, the Secretary of Commerce or the Secretary of State to be consistent with the policy established in the Memorandum.

The Memorandum also rolls back the Obama administration’s permissive approach to tourism in Cuba. That approach had permitted a broad range of tourist activities and U.S. airlines had expanded services to the island in response.

The Memorandum directs the Secretary of the Treasury to “initial a process to adjust current regulations to ensure adherence to the statutory ban on tourism to Cuba” so that future travel must be for educational purposes and must be organized by licensed sponsoring organizations. Individual travel will not be permitted.

While these are significant changes, the Trump Memorandum does not change several Obama-era policies. In particular:

  1. The embassies in Havana and Washington, D.C. that were reopened in 2015 will stay open;
  2. U.S. airlines and cruise ships will still be allowed to serve Cuba;
  3. Cuban-Americans will still be able to visit their families in Cuba and will continue to be allowed to send remittances of cash to their families in Cuba. The average monthly wage in Cuba is estimated to be only $100, so remittances from family members in the U.S. is often a primary source of income for some Cubans.
  4. The “wet foot, dry foot” policy that was terminated by the Obama administration will remain terminated. Cuban immigrants who arrive in the U.S. without a visa will not automatically be permitted to stay in the U.S. as was the case under the pre-Obama policy.

During the Presidential campaign, candidate Trump staked-out positions on several topics, including the southern border wall, NAFTA, and the Trans-Pacific Partnership. While he has taken action on nearly all of these topics, his action on some has been preliminary (such as the border wall) while action on others has indicated that his initial move may only be a preface to further negotiation (such as the recent suggestion that President Trump will “re-negotiate” NAFTA).

It remains to be seen whether the Trump Administration’s change in Cuban policy will represent a long-term change or whether it is merely a pre-cursor to a rejuvenated negotiation.

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