U.S. Secretaries of Commerce and of Treasury Comment on Developments Regarding Cuba   

At the request of President Obama, the outgoing heads of various federal government departments and agencies have submitted “exit memos” to review progress over the last eight years of his administration and to provide roadmaps to the future. A previous post reviewed the comments about Cuba in the exit memo by Secretary of State John Kerry.

Here are the comments about Cuba in the exit memos from U.S. Secretary of Commerce Penny Pritzker and U.S. Secretary of Commerce Jacob J. Lew. [1]

Secretary of Commerce

“The Department has taken a lead role to fundamentally change U.S. policy toward Cuba. We launched the U.S.-Cuba Regulatory Dialogue and, in coordination with the Department of the Treasury’s Office of Foreign Assets Control, the Department has published six sets of regulatory changes aimed at empowering the Cuban people through increased economic engagement. From January 2015 through September 2016, we issued 738 licenses for proposed exports and re-exports to Cuba valued at $9.4 billion. In addition, we worked with the private sector to identify the most effective ways to increase economic engagement and ultimately benefit the Cuban people.”

Secretary of Treasury

“And, as we chart new courses with other countries, such as Cuba, we should be mindful of how we can use our economic tools to create the conditions for a changed relationship.”

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[1] White House, Exit Memo, Department of Commerce (Jan. 5, 2017); White House, Exit Memo, Department of The Treasury (Jan. 5, 2017).
 

Conference on “Prospects for United States Cuba Normalization, Commerce and Investment”

On February 18, 2016, the Cuba Consortium hosted its first annual Washington Conference: “Prospects for United-States Cuba Normalization, Commerce and Investment.” [1]

The speakers at the Conference included Penny Pritzker, U.S. Secretary of Commerce; Rodrigo Malmierca, Cuban Minister of Foreign Trade and Investment; Tom Vilsack, U.S. Secretary of Agriculture; Benjamin Rhodes, Assistant to the President and Deputy National Security Advisor for Strategic Communications and Speechwriting; and Andrea Gacki, Assistant Director, Compliance and Enforcement, Office of Foreign Asset Control, U.S. Department of Treasury. Here is a summary of their remarks.

Secretary Pritzker

Secretary Pritzker
Secretary Pritzker

In her speech, Pritzker said that she and the U.S. delegation on their visit to Cuba last October learned more about how the Cuban economy works, including the rules and regulations that govern the import, export, and distribution of goods across the island. This information helped to guide the most recent (January 2016) U.S. regulatory changes regarding Cuba.

Those new U.S. regulations created a general policy of approval of exports for purposes such as: disaster preparedness and relief, education, agricultural production, artistic endeavors, food processing, public transportation, Cuban civil society, enhanced communications on the island, and civil aviation safety.

Those new regulations also provided that the Commerce Department’s Bureau of Industry and Security will now review on a case-by-case basis proposed exports from U.S. companies to Cuban state-owned enterprises and government entities to determine if the export will meet the needs of the Cuban people. We had learned in our visit that in Cuba – as in many of our other trading partners around the world – it is necessary to work with state-owned enterprises in order to support the local private sector.

The corresponding new regulations from the U.S. Department of the Treasury permit financing for most authorized exports and travel authorizations.

In sum, whether environmental goods, telecommunications equipment, or products that private sector entrepreneurs need, the U.S. government’s regulatory changes permit a wide variety of trade and commercial activities.

However, if the U.S. is to truly maximize the benefits of our regulatory changes for the Cuban people, the Cuban government needs to make it easier for Cuban citizens to start their own businesses, purchase goods through wholesale markets, engage in external trade, secure credit, and access information online. These steps include making Cuban economic and business regulations publicly available; providing clear public guidance on the relevant government units and officials that are empowered to make decisions on potential transactions; and authorizing Cuban imports of U.S. products that are now allowed by U.S. regulations.

The bilateral civil aviation agreement signed on February 16 is an example of what we have accomplished together.

“The U.S. embargo continues to be a roadblock to increasing engagement between our countries. As President Obama reaffirmed during his State of the Union address, our Administration strongly supports lifting the embargo, and we will continue to call on Congress to repeal it immediately.”

Minister Malmierca

Minister Malmierca
Minister Malmierca

Malmierca asserted that President Obama has the legal authority to adopt additional regulations that would permit Cuba to use the U.S. Dollar in international financial transactions, authorize Cuban exports to the U.S. and allow U.S. companies to invest in other Cuban sectors besides telecommunications.

The U.S. regulatory changes to date are positive, but they are not enough. For example, he said, since the December 2014 joint U.S.-Cuba announcement of normalization, six financial institutions have been fined nearly two billion dollars for trading with Cuba. These fines and the ban on the use of the U.S. Dollar have had serious negative effects on Cuba.

The previous day (February 17), Malmierca led a Cuban delegation at a meeting with Secretary Pritzker and other officials of the U.S. Department of Commerce. [2] On that occasion he made many of the same points just mentioned. He also pointed out that Cuba does not apply any coercive measures against U.S. companies or businesspeople and, in fact, welcomes them to do business on the island.

At that prior meeting in response to a question by Secretary Pritzker, Malmierca said that the next meeting of the Congress of the Communist Party of Cuba will seek to define the priority economic sectors for long-term development. “The most complex issue is that Cuba wants all these changes to be implemented without affecting the population; we do not want to apply shock measures or measures that may have a negative effect.”

This upcoming Congress will address the role of the market in the Cuban economy and the role of foreign investment in its economic development. This will seek to further consolidate changes adopted by Cuba before December 17, 2014, which are irreversible. “All the measures we are adopting, and which were sovereignly chosen long before December 17, 2014, . . . will also contribute to making the decisions we are making together more feasible,” he concluded.

Secretary Vilsack

Secretary Vilsack
Secretary Vilsack

Secretary Vilsack also criticized the U.S. embargo (blockade), noting that it restricts opportunities for trade between Cuba and the U.S. One area of such negative impact was the U.S. helping Cuba’s organic and urban farming practices.

The U.S. Agriculture Department is looking to identify business opportunities through a fund to which several U.S. agricultural companies voluntarily contribute. This fund, however, cannot use federal resources to explore business opportunities with the island, as is common practice, thus obstructing U.S. companies’ access to the Cuban market.

Although a U.S. law in 2000 authorized sales of agricultural products to Cuba, it required Cuba to pay in cash in advance, which has had a severe negative impact on such U.S. exports.

Associate Director Gacki

Associate Director Gacki
Associate Director Gacki

Gacki was unable to identify the specific law which prohibits Cuba’s use of the U.S. Dollar in international transactions, but said the Treasury Department currently was investigating whether there were other executive measures President Obama could adopt to reduce the adverse impacts on Cuba of restrictions on its use of the U.S. Dollar.

Assistant to the President Rhodes

Assistant to President Rhodes
Assistant to President Rhodes

Rhodes confirmed that Obama still has broad executive powers to make further and more substantial modifications to the U.S. embargo (blockade) policy.

Rhodes said that while the embargo policy may have had relevance in the past, the island is changing as are opinions of some Cuban-Americans. In addition, the increased numbers of Americans visiting Cuba are seeing why the embargo should be ended.

The Obama Administration, he added, is reviewing other potential regulatory changes that could be made within the existing legal framework.Thus, he believed it is possible to do more before the end of this administration to generate the necessary momentum to definitively end the embargo.

Conference Background

The Cuba Consortium is an assembly of companies, non-profit organizations, investors, academics, and entrepreneurs organized to track and examine the normalization process in both countries and to inform and prepare its members for opportunities to engage Cuba. They are complemented by foreign policy, political, economic, international development, legal, and cultural experts who have specialized knowledge of the diplomacy, politics, and economics of the normalization process.

The Consortium’s Advisory Board is co-chaired by Senators Nancy Kassebaum Baker and Tom Daschle and includes Dr. Michael Adams, Lon Augustenborg, Richard Blum, Sheila Burke, Tomas Diaz de la Rubia, Senator Byron Dorgan, Rodney Ferguson, Senator Bill Frist, Dr. Helene Gayle, Maurice Greenberg, Senator Bob Kerrey, Linda Klein, Fred Malek, Janet Napolitano, Thomas Ross, Senator Olympia Snowe, The Honorable Ellen Tauscher, Bill Weldon, and Rob Wilder.

The Consortium was organized by the Howard Baker Forum, which was founded by former Senator Howard Baker to provide a platform for examining specific, immediate, critical issues affecting the nation’s progress at home and its relations abroad under a philosophy of reasoned consensus, founded upon an agreed set of facts.

Conclusion

The Consortium and its conference join the U.S. Agricultural Coalition for Cuba and Engage Cuba as important bipartisan U.S. efforts to promote U.S.-Cuba reconciliation. I applaud all of their efforts.

On the same day of this conference, the White House announced that President Obama and Michelle Obama will be visiting Cuba on March 21 and 22. The White House Press Secretary said, “In Cuba, the President will work to build on the progress we have made toward normalization of relations with Cuba – advancing commercial and people-to-people ties that can improve the well-being of the Cuban people, and expressing our support for human rights. In addition to holding a bilateral meeting with Cuban President Raul Castro, President Obama will engage with members of civil society, entrepreneurs and Cubans from different walks of life.”

The previously mentioned Benjamin Rhodes also issued a similar statement that also reviewed the various steps towards normalization since December 17, 2014.

Before President Obama’s trip, I anticipate and hope that the U.S. will announce additional steps in the process of normalization, including:

  • issue new regulations allowing or expanding Cuba’s ability to use the U.S. Dollar in international transactions, authorize Cuban exports to the U.S. and allow U.S. companies to invest in other Cuban sectors besides telecommunications;
  • announce the ending of special U.S. immigration benefits for Cubans, including the policy of allowing entry without visas into the U.S. of Cubans arriving by land (the dry feet policy); and
  • announce further steps in the process of resolving U.S. claims against Cuba for expropriation of property owned by U.S. persons without compensation.

In addition, it is hoped that before President Obama’s trip Cuba will make Cuban economic and business regulations publicly available; provide clear public guidance on the relevant government units and officials that are empowered to make decisions on potential transactions; and authorize Cuban imports of U.S. products that are now allowed by U.S. regulations. In addition, some improvement in Cuban human rights would be helpful, an objective apparently to be pursued in Havana next week by Secretary of State John Kerry. ==========================================

[1] Gomez, Rapprochement moving forward, Granma (Feb. 22, 2016). Amazingly a 2/23/16 Google search of “Cuba Consortium” did not reveal any U.S. media coverage of this Conference. Secretary Pritzker’s speech was on the website of the U.S. Treasury Department.

[2] Gomez, Malmierca: Obama has support to continue dismantling the blockade, Granma (Feb. 18, 2016).

 

 

 

 

U.S. Loosens Certain Restrictions on Transactions with Cuba

On January 26, the U.S. Departments of the Treasury and Commerce released additional amendments to regulations regarding export payment and financing and airline travel with Cuba that will be effective on January 27.[1]

The changes will authorize financial transactions regarding professional meetings, disaster preparedness, information and informational materials and professional media or artistic productions in Cuba.

Other changes will allow U.S. airlines to have blocked space, code-sharing and leasing arrangements with Cuban airlines.

Treasury Secretary Jacob J. Lew said, “Today’s amendments to the Cuban Assets Control Regulations build on successive actions over the last year and send a clear message to the world: the United States is committed to empowering and enabling economic advancements for the Cuban people.  We have been working to enable the free flow of information between Cubans and Americans and will continue to take the steps necessary to help the Cuban people achieve the political and economic freedom that they deserve.”

Commerce Secretary Penny Pritzker said, “Following the first ever U.S.-Cuba Regulatory Dialogue and my fact-finding trip to Cuba in October, we have been working tirelessly to maximize the beneficial impact of U.S. regulatory changes on the Cuban people.  Today’s Commerce rule builds on previous changes by authorizing additional exports including for such purposes as disaster preparedness; education; agricultural production; artistic endeavors; food processing; and public transportation.  These regulatory changes will also facilitate exports that will help strengthen civil society in Cuba and enhance communications to, from and among the Cuban people.  Looking ahead, we will continue to support greater economic independence and increased prosperity for the Cuban people, as we take another step toward building a more open and mutually beneficial relationship between our two nations.”

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[1] Reuters, U.S. Eases Air Travel, Export Financing Sanctions on Cuba, N.Y. Times (Jan. 26, 2016); U.S. Treasury Dep’t, Treasury and Commerce Announce Further Amendments to the Cuba Sanctions Regulations (Jan. 26, 2016).

 

U.S. Announces Concrete Improvements in Relations with Cuba

Today, September 18, the United States announced new regulations to improve U.S. trade and travel with Cuba. Additional positive changes also are expected over the next several months.[1]

New Trade and Travel Regulations

The U.S. Departments of the Treasury and Commerce on Friday announced new regulations, to be effective on September 21 upon their publication in the Federal Register, that will ease restrictions on U.S. companies seeking to do business in Cuba and on U.S. citizens traveling to the island.

The new rules target travel, telecommunications, Internet-based services, business operations, banking and remittances. They also will allow U.S. companies to establish a presence in Cuba with offices, stores, warehouses and Cuban employees.

Although the new rules do not change who can travel to Cuba, the rules do ease movement of authorized travelers there by licensing transportation providers. They also lift the cap on remittances and allow U.S. travelers to open and maintain bank accounts there.

The new regulations also increase educational opportunities by allowing Internet-based courses and further expand humanitarian efforts by allowing disaster relief.

Treasury Secretary Jacob J. Lew said, “Today’s announcement underscores the Administration’s commitment to promote constructive change for the Cuban people.  These regulatory changes build on the revisions implemented earlier this year and will further ease sanctions related to travel, telecommunications and internet-based services, business operations in Cuba, and remittances.  A stronger, more open U.S.-Cuba relationship has the potential to create economic opportunities for both Americans and Cubans alike.  By further easing these sanctions, the United States is helping to support the Cuban people in their effort to achieve the political and economic freedom necessary to build a democratic, prosperous, and stable Cuba.”

Commerce Secretary Penny Pritzker added, “The regulations published today are designed to support the emerging Cuban private sector and bring us one step closer to achieving President Obama’s historic policy goals.  These actions build upon previous Commerce regulatory changes, and will ease travel restrictions, enhance the safety of Americans visiting the country, and promote more business opportunities between U.S. and Cuban companies.  In addition to expanding our commercial engagement with the Cuban people, these additional adjustments have the potential to stimulate long overdue economic reform across the country.”

According to the president of the U.S.-Cuba Trade and Economic Council, the two departments have “gone farther at one time than most anyone expected. Not only are companies able to establish a physical presence in Cuba and hire Cuban workers, but . . . [the new rules] are also extending loans and lease payment terms for authorized products.

Other Future Changes

The U.S. and Cuba will open regular postal mail service. Initially it will be a “pilot program” allowing Cubans and Americans to send mail directly to one another using the Miami and Havana airports.

The two countries soon should finalize an agreement on resuming direct, commercial airline routes although the first flights will not happen until next year.

Progress before year-end is expected on counter-narcotics cooperation that will expand Coast Guard interdiction efforts to include the U.S. Drug Enforcement Agency partnering with its Cuban counterpart; joint environmental work involving the National Oceanic and Atmospheric Administration; and setting up maritime passenger routes.

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[1] U.S. Dep’t of Treasury, Treasury and Commerce Announce Further Amendments to the Cuba Sanctions Regulations (Sept. 18, 2015); Davis, Restrictions on Cuba Travel and Business Lifted by U.S., N.Y. Times (Sept. 18, 2015); Reuters, U.S. Moves to Open Up Business With Cuba, Ease Embargo, N.Y. Times (Sept. 18, 2015); Davis, U.S. to Announce Loosening of Business and Travel Restrictions on Cuba, N.Y. Times (Sept. 17, 2015); Assoc. Press, US, Cuba to Resume Mail Service This Year; Other Steps Near, N.Y. Times (Sept. 17, 2015).