U.S. Treasury Department – dwkcommentaries

U.S. Extends Statute of Limitations for Crime of Violations of U.S. Embargo of Cuba

On July 22, the Office of Foreign Assets Control of the U.S. Treasury Department issued “Guidance on Extension of Statute of Limitations “ by the 21^st Century Peace through Strength Act, which was signed into law by President Biden on April 24, 2024. [1]

Section 3111 of that Act extended from five years to 10 years the stature of limitations for civil and criminal violations of the International Emergency Powers Act or the Trading with the Enemy Act. The latter statute codifies the operation of the U.S. embargo of Cuba.

Reactions

In this blogger’s opinion, this statutory change is an unfortunate development in light of this blog’s previous criticism and opposition to the embargo.[2]

Moreover, Cuba currently is experiencing horrendous economic problems unrelated to the embargo, thereby strengthening the need for the U.S. to abolish the embargo and adopt other measures to help alleviate these Cuban economic problems and the suffering of the Cuban people.[3]

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[1] US extends period for which violations of embargo on Havana will be crimes, Diario de Cuba (Aug. 5, 2024); U.S. Department of the Treasury (Office of Foreign Assets Control), Enforcement Release (Guidance on Extension of Statute of Limitations (July 22, 2024).

[2] E.g., posts listed in “U.S. Embargo of Cuba” section of List of Posts to dwkcommentaries—Topical: CUBA [as of 5/4/20]; List of Posts to dwkcommentaries—Topical: Cuba: 5/19.20-7.19.24.

[3] E.g., the following posts to dwkcommentaries.com: U.N. Experts Urge the U.S. to Stop Actions Adverse to Cuba (July 31, 2024) Another Indictment of the Cuban Economy (July 25, 2024); Cuban Expert: Cuba Progressively Closer to Implosion (July 23, 2024); Cuban Expert: Cuban Human rights Getting Worse (July 22, 2024); More Details Cuba’s Declining Population (July 20, 2024); Cuban Government Official Admits That Its Inefficient Political-Economic Model Is Responsible for Cuba’s Economic Problems (July 20, 2024); Nearly 90% of Cuba’s Population Affected by Extreme Poverty (July 17.2024); Cuba’s Poor Economic Outlook for 2024 (July 16, 2024).

More Reactions to New U.S. Regulations for Cuban Private Enterprise

On May 28, 2024, the U.S. Department of State held a Special Briefing on the Treasury Department’s new regulations on Cuban private enterprise.

First there were comments by three unnamed Senior Officials. Then there was Q&A with members of the press.[1]

Comments by Senior Officials

Senior Official One said, this development was “an important step to support the expansion of free enterprise and of . . . the entrepreneurial business sector in Cuba. . . . [We] recognize that this is a growing and dynamic sector of economic activity in Cuba, where people are gaining greater independence from the state, and we felt that it was essential as part of the Biden administration’s Cuba policy to ensure that this sector continues to expand and is supported.”

“We believe that the growth of an independent entrepreneurial private sector in Cuba is fully aligned with our values, is the best hope for generating economic development and employment in Cuba, and the growth of this sector is also consistent with the President’s guidance to implement measures that will benefit the Cuban people while continuing to minimize resources to the Cuban Government.”

“[P]roviding this support for Cuba’s private sector will help to stem irregular migration from the island by creating more economic opportunity on the island. It further allows Cuba to be self-sufficient without relying on their government for all of their daily necessities.

Senior Official Two added, “We know the Cuban economy is in dire straits. Amid recurring shortages of fuel, electricity, and increasingly even food, it’s clear the communist experiment in Cuba has failed and the government is no longer able to provide for its citizens’ most basic needs. In a country where there are no free elections, the Cuban people are voting with their feet, including by using dangerous irregular migration routes.”

“With over 11,000 private businesses registered – operating in diverse fields from food distribution, to construction, to auto repair – Cuba’s private sector is now responsible for nearly one-third of all employment on the island.”

“These changes have profoundly affected Cuban culture. Young Cubans are eager to earn private sector wages rather than work for the state. A class of independent business leaders is emerging. I know this because our team, including myself – both in Havana and in Washington – meets with these individuals. These entrepreneurs look to the United States for inspiration and to develop the necessary skills to run successful businesses. In an acute twist of irony, the island’s communist government must now rely on private enterprise to provide food and basic services for its people. It’s not an easy road for these entrepreneurs. The Cuban Government’s mismanagement of its economy has led to unparalleled high inflation. But because it is more nimble and efficient than the government, the private sector currently serves as a life preserver for the Cuban people without which they could not stay afloat. We believe the organic expansion of the private sector and evolution of the digital economy on the island – led by the Cuban people themselves, and not by any foreign government – is critical.”

“Above all, we must encourage the freedom of Cuban citizens to define their own economic future. Cuban entrepreneurs prefer U.S. values and our economic model and see the United States as their business partner of choice. We are focused on taking measures that inject a real sense of hope among the Cuban people and stem the tide of worsening humanitarian and migration conditions – all while remaining steadfast and promoting accountable for the Cuban’s Government’s continued abuses.”

Senior Official Three: “[These] updates to the regulations . . . support two priority policy goals: First, we wanted to increase support for the internet freedom in Cuba, but also increase economic support for the Cuban population. On internet freedom, we’ve added examples of authorized internet services and made updates to allow U.S. companies to provide services to install, repair, or replace certain items. So for example, some of the additional services that are now authorized include social media platforms, collaboration platforms, video conferencing, e-gaming and e-learning platforms, automated translation, web maps, and user authentication services.”

“[We] redefined the term ‘self-employed individual’ to ‘independent private sector entrepreneur’ to better reflect the types of individuals and entities that operate in the Cuban private sector. This new definition includes not only the definition of self-employed individual from our old regulations, but also includes private sector businesses, and private cooperatives, and sole proprietorships of up to 100 individuals – and this also includes farms.”

“By the latest count, there are over 11,000 registered private businesses in Cuba. It’s important to note that the new definition for independent private sector entrepreneurship excludes prohibited officials of the Cuban Government, such as the national assembly members, Cuban military officers, or certain ministry and staff regime propagandists, and prohibited members of the Cuban Communist Party. For a Cuban private sector business to qualify under this definition, its ownership cannot include such insiders.”

“[We] will also allow Cuban independent private sector entrepreneurs to establish and remotely access U.S. bank accounts, including through online payment platforms, to conduct authorized or exempt transactions. This will help facilitate independent private sector entrepreneurs in Cuba, importing food, equipment, and other goods that support the Cuban people. Third, to help facilitate remittances in payments for authorized transactions, including authorized transactions to and from the Cuban private sector, we have also reinstated authorization to allow U-turn transactions. These are funds transactions which start and end outside the United States but pass through the U.S. financial system, and they are a common occurrence in international commerce.”

“[Our] Cuba sanctions remain in place and the regulations continue to maintain restrictions on the Cuban Government and its military, intelligence, and security services. Today’s action is about support for greater freedom and expanded opportunities for the Cuban people.”

Responses to Questions

“On May 15^th the State Department determined that “Cuba’s continued certification as a not fully cooperation country [on terrorism] was no longer appropriate [and therefore terminated that designation].

Cuba, however, remains a State Sponsor of Terrorism under U.S. law, which “establishes a specific statutory criteria for rescinding the SST designations, and any review of Cuba’s status on the SST list would be based on the law and the criteria established by Congress.”

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[1] U.S. State Dep’t, Senior Administration Officials on the Cuba OFAC Rollout (May 28, 2024).

Other Reactions to New Treasury Department Regulations on Cuba Private Enterprise

A senior official of the Biden Administration said that it is “essential” for the Biden administration to make sure the private sector continues to expand on the island to encourage Cubans to become self-sufficient and more independent from the government. The official also said the policy would help to stem migration from the island and counter actions by other nations, hinting at Russia, which Cuban authorities tapped to help them manage the private sector on the island. ‘Providing support for Cuba’s private sector will help to stem irregular migration from the island by creating more economic opportunity,’ the official said. ‘We believe that engaging in support of Cuba’s independent private sector will ensure that these important continental actors are supported by the United States and make it more difficult for other state actors who wish to engage economically in Cuba only in support of the government and without supporting the private and entrepreneurial sector.’”

Now “Cuban software developers to have their apps available for download on the Apple or Google app stores.”

Another administration official observed, “In light of the ‘dire straits’ of the Cuban economy, it’s clear the communist experiment in Cuba has failed and the government is no longer able to provide for its citizens‘most basic needs in a country where there are no free elections.”

“The Cuban private sector has rapidly expanded since it was first allowed in 2021, and there are now more than 10,000 small and medium enterprises, employing a third of all Cuban workers. Because the government is almost bankrupt amid a severe economic crisis, the private sector has taken roles previously unthinkable in a communist island that once banned all private property. These enterprises, known by their acronym mipymes in Spanish, have become major importers of food and other necessities in the midst of the widespread scarcity. They have become significant suppliers of the flour that state-owned bakeries need to produce bread for the public.”

“’We can congratulate the Biden administration on its commitment to helping civil society,’ said former Congressman Joe García, who has pushed to step up U.S. support to private businesses on the island. ‘These new small independent players perhaps offer the only option for helping the Cuban people.’

Ric Herrero, the executive director of the Cuban Study Group, a Washington-based organization that provides training and support to Cuban independent entrepreneurs, said on X that the ‘excessive delay’ in publishing the regulations ‘due to congressional extortion tactics has caused undue harm to independent Cuban entrepreneurs and to efforts to expand internet access in Cuba.’

John Kavulich, the president of the U.S.-Cuba Trade and Economic Council, said ‘the measures are a step in the right direction but don’t go far enough in regularizing banking transactions. While Cuban entrepreneurs can operate their U.S. accounts, it will be difficult for them to transfer money from and to their accounts using Cuban banks because there are no direct banking relations between the two countries.”

Kavulich also said, “While useful for the Biden-Harris Administration to …authorize entrepreneurs to have bank accounts in the United States, there remains one glaring omission — the continuing prohibition upon direct correspondent banking. As long as financing, investment, and payments need to be routed through third countries, the Biden-Harris Administration will be constraining precisely the activity it professes to support.”

Pedro A. Freyre, a lawyer and chairman of international practice at a major law firm in Miami, said, “the new regulations will provide more clarity regarding the private sector.” Nevertheless, the U.S. continuation of the terrorism designation [for Cuba] “has a chilling effect and banks engage in overcompliance.”

Aldo Alvarez, a lawyer based in Havana who runs a private food wholesale business, said, “This announcement is very positive for the Cuban private sector, since it allows it to legally operate its payments collections in the U.S.”

Criticism of the new regulations came from U.S. Representatives Carlos Gimenez and Maria Elvira Salazar, both Republicans from Florida.\

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Adams, Biden Moves to Open U.S. Banks to Cuba’s Private Sector, N.Y. Times (May 28, 2024); DeYoung, Biden administration eases some economic restrictions on Cuba, Wash. Post (May 28, 2024); Torres, In a first, Cuba’s private business owners will be able to use U.S. banks, Treasury says, Miami Herald, (updated 3:15 pm, May 28, 2024).

U.S. Treasury Department Issues New Regulations To Promote Cuba’s Private Business Owners

On May 28, the U.S. Treasury Department announced that it has prepared new regulations “to increase support for the Cuban people [that} update and clarify authorizations in support of internet-based services to promote internet freedom in Cuba, support independent Cuban private sector entrepreneurs, and expand access to certain financial services for the Cuban people.”[1]

These new regulations “update and clarify the scope of authorized internet-based services, including by adding examples of authorized services incident to the exchange of communications over the internet and updating the authorization for services in support of such communication. Additional examples of authorized services include social media platforms, collaboration platforms, video conferencing, e-gaming and e-learning platforms, automated translation, web maps, and user authentication services. [They are] also clarifying that persons subject to U.S. jurisdiction may provide cloud-based services (including remote data storage, data transport service, content distribution networks, virtual machines, software-as-a-service, and infrastructure-as-a-service) to support services incident to the exchange of communications over the internet.”

The new regulations also “expand the authorization for services, including training, to install, repair, or replace items related to communication, or items used to develop software that improves the free flow of information or that will support private sector activities in Cuba consistent with the export or reexport licensing policy of the Department of Commerce, including by removing the requirement that referenced items fall within specific export control classification parameters. [They also are] further authorizing the export or reexport of Cuban-origin software and mobile applications from the United States to third countries, which will expand the ability for independent Cuban entrepreneurs to offer their software and mobile applications on global application stores.”

The new regulations add a “new term ‘independent private sector entrepreneur.’ The new term continues to include self-employed individuals, such as owners or employees of private businesses or sole proprietorships, but the amended definition now also includes private cooperatives or small private businesses that are wholly owned by or consisting solely of such individuals. In each case, the new term is limited to private cooperatives, small private businesses, and sole proprietorships located in Cuba of up to 100 employees. The amended definition better reflects Cuba’s non-state sector, as Cuba now authorizes the establishment of small- and medium-sized private enterprises. Finally, [the Department] is excluding prohibited Cuban officials and prohibited Cuban Communist Party members from the new term to ensure they do not take advantage of U.S. actions intended to benefit independent private sector entrepreneur.”

The new regulations authorize “independent private sector entrepreneurs who are Cuban nationals to open, maintain, and remotely use U.S. bank accounts, including through online payment platforms, to conduct authorized or exempt transactions, whether the independent private sector entrepreneur is physically located in the United States, Cuba, or another country.”

The new regulations reinstate “authorization for ‘U-turn’ transactions, which are funds transfers that originate and terminate outside the United States where neither the originator nor beneficiary is subject to U.S. jurisdiction. [The Department] previously removed the authorization for ‘U-turn’ transactions in September 2019. This reinstated authorization is intended to help the Cuban people, including independent private sector entrepreneurs, by facilitating remittances and payments for transactions in the Cuban private sector that are authorized by various provisions of the [regulations]. Under this reinstated authorization, U.S banks are authorized to process ‘U-turn’ funds transfers in which Cuba or a Cuban national has an interest, provided that neither the originator nor the beneficiary is a person subject to U.S. jurisdiction.”

Finally the new regulations authorize “the unblocking and return of any ‘U-turn’ funds transfer that was blocked prior to this reinstatement of the ‘U-turn authorization.”

A senior U.S. official “said that it was ‘essential’ for the Biden administration to make sure the private sector continues to expand on the island.”

Reactions

This is great news! Cuba’s private sector is helping ordinary Cubans cope with the extraordinary problems of the Cuban economy.

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[1] U.S. Treasury Dep’t, Treasury Amends Regulations to Increase Support for the Cuban People and Independent Private Sector Entrepreneurs (May 28, 2024); Torres, In a first, Cuba’s private business owners will be able to use U.S. banks, Miami Herald (May 28, 2024).

U.S. Reduces Permissible Remittances to Cuba

On September 6, the U.S. Treasury Department announced that effective October 9, one Cuban-American may remit no more than $1,000 per one family member on the island, per-quarter.[1]

In addition, the new rules forbid remittances to “close family members of prohibited Cuban officials and members of the Cuban Communist Party.” Also prohibited are remittances by non-family members.

On the other hand, the new rules will authorize remittances to certain individuals and independent non-governmental organizations in Cuba “to support the operation of economic activity in the non-state sector by self-employed individuals, in light of . . . [U.S.] policy to encourage the growth of the Cuban private sector independent of government control.”

Treasury’s new rules will also ban “banking institutions subject to U.S. jurisdiction . . . [from processing] certain funds transfers originating and terminating outside the United States, commonly known as “U-turn” transactions.”

Treasury Secretary Steven Mnuchin said, “We are taking additional steps to financially isolate the Cuban regime. The United States holds the Cuban regime accountable for its oppression of the Cuban people and support of other dictatorships throughout the region, such as the illegitimate Maduro regime. . . Through these regulatory amendments, Treasury is denying Cuba access to hard currency, and we are curbing the Cuban government’s bad behavior while continuing to support the long-suffering people of Cuba.”

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[1] U.S. Treasury Dep’t, Treasury Issues Changes to Strengthen Cuba Sanctions Rules (Sept. 6, 2019; Assoc. Press, US Limits Amounts of Money That Americans Can Send to Cuba, N.Y. Times (sept. 6, 2019).