Doing Business in Cuba FAQ

1. Why Cuba?

In a word: Opportunity! There is enormous potential in the Cuban market. Cuba is the largest Caribbean Island and is a natural gateway to Latin America and the United States, lying just 90 miles off the coast of Florida. With its 3,700 km of coastline, Cuba presents unrivaled opportunities in tourism, real-estate, and related industries. Cuba has large tracts of arable land and contains a number of natural resources such as chromium, cobalt, copper, gold, iron ore, nickel, petroleum, salt, silica, and timber. Additionally, there is a great need for improvements to Cuban infrastructure, and the Cuban population is the most skilled in the Region with a 97% literacy rate and offers highly trained technicians for technological industries.

2. What are the restrictions governing exports to and imports from Cuba?

Exports from the United States to Cuba are severly limited by the U.S. Embargo against Cuba and subsequent “Cuban Assets Control Regulations” outlined by the U.S. Treasury’s Office of Foreign Assets Control. According to Title 31 Part 515 of the U.S. Code of Federal Regulations, no services, products, or technology may be exported to Cuba or any Cuban national from the United States. The assisting or brokering of these exports are also prohibited. This includes direct, as well as indirect exports. If the exported product, service, or technology is under U.S. jurisdiction, and/or if the person or company exporting is under U.S. Jurisdiction, they must comply with these regulations.

Additionally, any person under U.S. jurisdiction is prohibited from dealing in any property in which Cuba or any Cuban national has an interest. This includes purchasing Cuban products outside of the U.S. and entering into any business deal or contract that includes Cuba-related provisions. This also includes doing business with a Cuban national that, though not physically on the island, is acting on behalf of Cuba. For a list of these “Specially Designated Nationals” refer to the Federal Register, an unofficial U.S. government publication.

Finally, no goods or services may be imported from Cuba except for publications, artwork, and similar informational material.

3. Are there any exceptions?

There are a few exceptions in which U.S. businesses may export to Cuba. Legal exports to Cuba include informational materials such as publications, CD’s, and works of art; some kinds of donated food; and certain goods licensed for export by the U.S. Dept. of Commerce, including medical supplies, and food and agricultural commodities. (Cuban Democracy Act of 1992, Trade Sanctions and Export Enhancement Act of 2000)

In addition, there is a small exception to indirect investments. OFAC has written that “Persons subject to the jurisdiction of the United States may invest in a third country company that has commercial activities in Cuba, provided that (i)such investment does not result in control in fact of the third country company, and (ii) the majority of the revenues of the third country company do not result from the commercial activities in Cuba”

4. What changes have been made by the Obama Administration?

On April 13, 2009, President Obama announced a further easing of the embargo against Cuba. Among other things, he gave the authorization for U.S. telecommunications network providers to provide some services within Cuba. Other changes that were made regard the removal of limits on individuals who wish to visit family members and of a number of limitations regarding funds sent to family members, as well as a greater number of humanitarian items that can be donated to Cuba.

5. What can U.S. Telecommunications network providers now do?

The April 2009 directives will provide a number of business opportunities for U.S telecommunications network providers. U.S. telecommunications companies will be allowed to enter into agreements to establish fiber-optic cable and sattelite telecommunications between the U.S. and Cuba; to enter into and operate under roaming service agreements with Cuba’s telecommunications service providers with the appropriate license; allow satellite radio and satellite television providers to attain a license to provide service to potential customers in Cuba; allow persons under U.S. jurisdiction to obtain a license to activate and pay U.S. and third-country service providers for telecommunications, satellite radio and satellite television services provided to individuals in Cuba, with the exception of senior Communist Party and Cuban government officials; and finally, through a license exception, the authorization of the export or re-export to Cuba of donated personal communication devices, including mobile phones systems, computers and software, and satellite receivers.

For more specific information regarding the changes made, please refer tohttp://www.whitehouse.gov/the_press_office/Fact-Sheet-Reaching-out-to-the-Cuban-people/

6. How do you attain a valid license to export to Cuba?

In order to legally export products to Cuba you must first obtain authorization from the Commerce Deptartment’s Bureau of Export Administration. The applications are submitted electronically. Once approved, commerce export licenses are valid for 24 months. Exporters may bundle a few transactions under one license and all transactions must be paid in advance of export and in U.S. dollars.

For further information refer to the Export Administration Regulations or for guidance on specific license applications you may contact the US Commerce Department’s Office of Strategic Trade & Foreign Policy Controls, Bureau of Export Administration. You can also contact the US State Department’s Office of Cuban Affairs, Bureau of Inter-American Affairs as well as contact the US Treasury Department’s Office of Foreign Assets Control.

7. As an exporter to Cuba, what documents are required?

Exporters need to have at least two copies of the airport bill if goods are sent by air or at least two copies of a bill of lading if the goods are sent using a freight company or similar transporter. The exporter must also have the Commercial Invoice and a Packaging List, which must contain information regarding the origin, content, and weight.

8. How long will the Embargo last?

With the April 2009 directives, businesses have greater opportunities to invest in Cuba, however, the Obama administration has maintained that the directives are meant “to advance the cause of freedom of the Cuban people.” The Obama administration maintains that there is no agenda to lift the embargo and that the changes made are simply measures taken to increase the likelihood of a democratic Cuba.

Still, there are a number of changes that suggest an increase in relations between the U.S. And Cuba. President Obama explained in a meeting with the Mexican president that relations between the U.S. and Cuba would continue to thaw if Cuba exhibited a desire to portray certain democratic principles such as allowing more free speech, free practice of religion, free travel, and the release of political prisoners. Even current Cuban president Raul Castro announced that in order to advance the revival of trade relations with the U.S. he is willing to discuss some of those very topics. Though these discussions have yet to materialize, such language leads many to analyze the possibility of an end to or at least a further easing of the embargo.

9. What are the Cuban laws regarding investment?

In 1982, Decree Law 50 was enacted as Cuba’s first foreign investment act in order to promote investment in Cuba. However, Law 50 was very vague and did little to facilitate investment. After the fall of the Soviet Union the Cuban government worked toward increasing investment and in 1995 the National Assembly approved Law 77, or “Ley de la Inversion Extranjera” (The Foreign Investment Act). Under this law three kinds of foreign investments are allowed: international association contracts, joint ventures(which can be entirely foreign-owned), and totally foreign-owned companies. Foreign investments must be approved by a government commission of the Council of Ministers. Certain investments must be approved by the Council of Ministers’ Executive Committee, including Investments larger than $10 million US dollars, investments entirely under foreign ownership, investments that involve a foreign country, investments that use natural resources, and investments that involve government property or are in special sectors. Decisions for approval of foreign investments are given within 90 days.

Law 77 maintains that investors are guaranteed the ability to transfer profits to foreign countries, the right to transfer or sell shares, and no expropriation unless under extreme circumstances in which case compensation would be given. Additionally, it provides protection against third party claims under Cuban law. Moreover, Law 77 approves the creation of duty-free zones and industrial parks open to foreign investment. Though law 77 set up a special system covering each aspect, Law 165, enacted in 1996, created more flexible investment rules for free trade zones and industrial parks. Finally, it enables foreigners to gain ownership and property rights over real estate in Cuba. However, the real estate investments are limited to the development of the tourism sector, foreign company housing or offices, and other living structures dedicated to private residences or private tourism activity for temporary residents.

Other relevant Cuban laws include Decree Law 124, which define Cuba’s tariff system by outlining the conditions for import permits, by establishing import tariffs and by creating the procedures for custom clearance as well as Decree Law 162, which discusses the functions of the customs system.

10. What are the main sectors of Cuba’s economy?

According to “Ley de la Inversion Extranjera” (The Foreign Investment Act) of 1995, Cuba allows foreign investment to all sectors of the economy with the exception of defense, public healthcare, and education. It also promotes investment by giving incentives for investment in tourism, manufacturing, nickel and mining, agriculture, information technology, pharmaceuticals, and telecommunication. The largest sector in Cuba’s market is tourism, followed by manufacturing, construction, agriculture, and mining.

Although mining is final on the above list, there is much potential in the extraction of oil from Cuba’s untapped offshore reserves. According to estimates by U.S. geological surveys, there are undersea deposits containing 4.6 billion barrels of oil and 9.8 trillion cubic feet of natural gas off the northwest coast of Cuba. Geologists from Cuba claim that there may be quadruple the findings of U.S. surveys found in hydrocarbon pools within Cuban-regulated waters even further into the Gulf. Although the U.S. embargo against Cuba prohibits such business, the Castro government has invited foreign oil companies, including U.S.-owned companies, to sign deals with them.

Also, U.S. Treasury officials for the first time have given U.S. oil company representatives permission to travel to Cuba. The International Association of Drilling Contractors (IADC) had been previously denied permission by the Obama Administration to travel to Cuba, however, after the BP oil spill in the Gulf of Mexico, the Obama Administration licensed the Houston-based IADC to travel to Cuba in order to aid in the prevention of future oil-related environmental catastrophes. Discussing safety measures of off-shore oil drilling is especially prioritized since there will be exploratory drilling as soon as the end of this year by the Spanish-owned Repsol YPF. The IADC’s delegation will discuss oil-spill prevention as well as the prospects of drilling in offshore Cuba.

11. What are the travel restrictions to Cuba?

With the April 2009 directives, the Obama administration removed all travel restrictions for Cuban-Americans to visit and send money to family members in Cuba. However, for those Americans who are not of Cuban descent or have no family in Cuba, there are still ways to travel to Cuba. According to the Cuban Assets Control Regulations, individuals who are subject to U.S. jurisdiction (even if traveling through a third country) must first obtain a license before engaging in travel to, from, and within Cuba.

General licenses are given to certain kinds of travelers including those who are visiting a close relative who is a national of Cuba (including third-country nationals residing in Cuba), journalists and supporting personnel, government officials on official business, members of international organizations (of which the U.S. is a member) traveling on official business, full-time professionals traveling for non-commercial research, full-time professionals traveling for a professional non-commercial meeting or conference organized by an international organization, employees or representative of a U.S. telecommunications services provider, and individuals regularly employed by a producer or distributor of agricultural commodities or medicine.

For those individuals who do not fall under the scope of the general licenses, they may be eligible to obtain a specific license from OFAC. Specific OFAC licenses are given to those who wish to visit a close relative in Cuba who is not a Cuban national, to educational institutions, religious organizations, and other specific licenses are approved on a case-by-case basis.

To apply for a specific license, individuals need to send a letter requesting the specific license and with the details of the potential visit. Academic institutions must send a similar letter and include proof that the institution is accredited by an appropriate association. Religious organizations must send the detailed letter as well and include examples of religious activities they will host in Cuba. The letters must be sent to: Licensing Division, Office of Foreign Assets Control, U.S. Department of Treasury, 1500 Pennsylvania Ave, NW, Washington, DC 20220. More specific guidelines can be found athttp://www.treas.gov/offices/enforcement/ofac/programs/cuba/cuba_tr_app.pdf

12. Once a license has been obtained, what’s next?

Once a proper license has been obtained the traveler must have a valid passport and visa. American citizens are issued visas (tourist cards) upon arrival to Cuba or can attain a visa from the Cuban Interest Section in Washington D.C., however make sure to have received the appropriate type of visa for your visit. Additionally, as of May 2010 Cuba requires that all visitors be covered by a non-U.S. medical insurance. Cuba will sell a temporary policy to visitors who do not have a non-U.S. insurer.

Also, keep in mind that credit cards issued by U.S. banks cannot be used in Cuba and the U.S. dollar has not been accepted for commercial transactions since November of 2004. However, there are specially designated Cuban banks that accept major U.S. travelers checks and U.S. dollars can be converted to convertible or non-convertible Cuban pesos (the effective exchange rate including the 10 percent fee for exchanging US dollars to convertible Cuban pesos results in 1 USD = 0.80 CUC) Additionally, keep in mind that there will be a $20 Cuban departure tax that must be paid before leaving the country. The maximum Per Diem rate, or max that can be spent per day of travel in Cuba is $179. Some general and specific licenses, such as for journalists, allow for a higher rate depending on the necessary equipment.

For the actual flight to Cuba the U.S. Treasury’s OFAC has issued a list of authorized providers of air, travel, and remittance forwarding services to Cuba. The list can be found athttp://www.ustreas.gov/offices/enforcement/ofac/programs/cuba/cuba_tsp.pdf

Other Useful Links
American Chamber of Commerce of Cuba
http://www.amchamcuba.org/

Camara de Comercio de Cuba
http://www.camaracuba.cubaweb.cu/

CEPEC: Sition del Comercio Exterior de Cuba’
http://www.cepec.softcal.cu/

CUBAINDUSTRIA, El Portal de la Industria Cubana
http://www.cubaindustria.cu/

REDSOLAR
http://www.cubasolar.cu/

U.S.-Cuba Trade and Economic Council, Inc.
http://www.cubatrade.org/index.html

Cuban Interests Section
http://embacu.cubaminrex.cu/Default.aspx?alias=embacu.cubaminrex.cu/sicw