Pros and Cons of Doing Business with Cuba: Today & Tomorrow

Transcription

1 CUBA EDUCATIONAL FORUM PUERTO RICO MANUFACTURERS ASSOCIATION (PRMA) Cuba: Reality Today and Opportunities in the Future Pros and Cons of Doing Business with Cuba: Today & Tomorrow Jay Brickman, Crowley Maritime Corp. Jose Raul Perales, U.S. Chamber of Commerce, AACCLA Marco A. Gonzalez, Jr., Esq., Duane Morris, LLP.

2 Pros and Cons of Doing Business in Cuba: Overview Overview Summary of U.S. law on licensed business and travel-related transactions with Cuba under the embargo Marco A. González, Jr., Esq. Business with Cuba: on-the-ground analysis and practical perspectives on doing business with Cuba Jay Brickman Opportunities in Cuba and prospects for future business growth José R. Perales Q&A

3 U.S. licensed business and travel-related transactions with Cuba under the embargo Summary of the U.S. trade and travel restrictions under the embargo. U.S. law prohibits persons subject to the jurisdiction of the U.S. from engaging in transactions with Cuba or Cuban nationals, including travel. First restrictions went into effect in Still in effect today, and apply to: All U.S. citizens and permanent residents wherever they are located; All people and organizations physically in the United States; All branches and subsidiaries of U.S. organizations throughout the world; and Any business entity, wherever organized or doing business, that is owned or controlled by a person subject to U.S. jurisdiction. HOWEVER.

4 U.S. licensed business and travel-related transactions with Cuba under the embargo Current provisions in U.S. federal law contain exceptions that allow for specific business transactions, including travel to, from and within Cuba. How? ~ Trade Sanctions Reforms & Export Enhancement Act of 2000 (TSRA) Agricultural Commodities Cuba Democracy Act (1992) Medical devices and medicine Department of the Treasury OFAC (2011) Travel Licensing

5 U.S. licensed business and travel-related transactions with Cuba under the embargo The Trade Sanctions Reform & Export Enhancement Act Agricultural Commodities Allows exports and certain re-exports of agricultural commodities to Cuba. Agricultural Commodities include food, feed, fish, shellfish and fish products; beer, wine and spirits; soft drinks Livestock Fiber, including cotton, wool and other fibers Tobacco and tobacco products Seeds and reproductive materials such as fertilized eggs and embryos Vitamins, minerals and food additives and dietary supplements

6 U.S. licensed business and travel-related transactions with Cuba under the embargo Agricultural Commodities (License Exception AGR - 15 CFR ) (1) Must meet definition of agricultural commodities in Part 772 of the Export Administration Regulations (EARs); (2) The commodity is EAR99. If your item falls under the jurisdiction of the USDOC and is not listed on the CCL, it is designated as EAR99; (3) The export/re-export is made pursuant to a written contract, except for donations and commercial samples; (4) The export/re-export is made within 12 months of the signing of the contract or within 12 months of notification that no objections were raised (if no contract is required). In the case of multiple partial shipments, all such shipments must be made within the 12 months of the signing of the contract or within 12 months of notification that no objections were raised (if no contract is required); and (5) You notify BIS prior to exporting/re-exporting according to the procedures set forth in the regulations. If you intend to engage in multiple shipments during the one-year period after the signing of the contract, you need only notify BIS prior to the first shipment.

7 U.S. licensed business and travel-related transactions with Cuba under the embargo Agricultural Commodities (License Exception AGR - 15 CFR ) Restrictions No export/re-export to any individual or entity designated as a Specially Designated Terrorist or Foreign Terrorist Organization may be made under License Exception AGR (see part 744 of the EAR). No export/re-export to or for use in biological, chemical, nuclear warfare or missile proliferation activities may be made under License Exception AGR (see part 744 of the EAR). No U.S.-owned or controlled foreign firm may export from abroad to Cuba a foreign produced agricultural commodity containing more than 10% U.S.-origin content. Such U.S.-owned or controlled foreign firms require a specific license from BIS as well as from OFAC.

8 U.S. licensed business and travel-related transactions with Cuba under the embargo The Trade Sanctions Reform & Export Enhancement Act Agricultural Commodities

9 U.S. licensed business and travel-related transactions with Cuba under the embargo The Cuban Democracy Act and Licensed Export of Eligible Medicines and Medical Devices Medicines are drugs as per the Federal Food, Drug and Cosmetics Act. Medicines include prescription medicines/otc medicines for humans and animals. Medical devices include medical supplies, instruments, equipment, equipped ambulances, institutional washing machines capable of sterilizing hospital clothing and bedding, and vehicles with installed medical testing equipment. The definition of medical devices does not include general purpose furniture (e.g., tables, desks or lamps that may be used in hospital offices or reception/waiting areas). Certain vaccines, immunotoxins, medical products, diagnostic and food testing kits that are controlled on the DOC Control List are not eligible for export under the expedited procedures.

10 U.S. licensed business and travel-related transactions with Cuba under the embargo Travel- related transactions involving Cuba Persons traveling to Cuba to engage in activities directly related to marketing, negotiation of sales, delivery or servicing of licensed exports of medical products or other approved exports such as agriculture commodities, or certain TELECOM services, may be considered for authorization under existing law. General licenses: Journalists and support personnel Full-time professionals conducting professional research/attending certain professional meetings Faculty, staff, students of accredited U.S. academic degree-granting institutions U.S. religious organizations Employees of U.S. TELECOM services provider or entity representing such provider Employees of a producer/distributor of certain agricultural commodities, medicine, or medical devices or and entity representing such a producer or distributor

11 U.S. licensed business and travel-related transactions with Cuba under the embargo Travel- related transactions Specific licenses: Persons engaged in activities incident to exports to Cuba not covered by a general license. Persons engaged in activities related to the exportation, importation or transmission of informational materials. Educational exchanges not involving academic study pursuant to a degree program and that take place under the auspices of an organization that promotes people-topeople contact. Persons providing support for the Cuban people or humanitarian projects Persons participating in professional research or professional meetings not covered under general license. Persons participating in public performances, clinics, workshops, athletic or other competitions, or exhibitions. Free-lance journalists. Persons participating in activities of private foundations, research or educational institutes.

12 U.S. licensed business and travel-related transactions with Cuba under the embargo - Exporting Exporting to Cuba requires dealing in property in which Cuba or a Cuban national has an interest. Unless the transaction is covered under an exception, exports of other products, technology or commodities are not allowed, either directly or through third countries, without a license. Transactions ordinarily incident to the exportation of items from the U.S. to Cuba, or the re-exportation of 100% U.S.-origin items from a third country to Cuba are generally authorized provided the export is licensed or otherwise authorized by the U.S. Dept. of Commerce (e.g., medicines, medical devices, food, and agricultural commodities) or by OFAC. Licensed sales must be either by payment of cash in advance, or by a third-country bank that is not a U.S. person/entity or an entity of the Government of Cuba. Sales may need the ok from DOC s Bureau of Industry and Security. Per diem restrictions must be observed when conducting licensed travel to Cuba. Full work schedule must be observed when traveling to Cuba under an OFAC general or specific license.

13 U.S. licensed business and travel-related transactions with Cuba under the embargo - TELECOM President s April 2009 TELCOM Directive intended to increase flow of information to the Cuban people. Cuba has the lowest rate of cellular telephone use in Latin America. Sept Amendments to OFAC Regulations implement President s Directive to authorize all transactions incident to: the provision of TELCOM services between U.S. and Cuba; the provision of satellite radio and TV to Cuba; or the entry into and performance under roaming service agreements of TELCOM providers in Cuba.

14 U.S. licensed business and travel-related transactions with Cuba under the embargo - TELECOM Apparently, a pricing issue between the U.S. and Cuba allowed Venezuela to lay down a 1,600 km, $70m underwater fiber-optic cable between the countries. The new fiber optic data connection from Venezuela came online earlier this year, apparently providing simultaneous phone connections and data download speeds 3,000 times faster than Cuba s current satellite links.

15 U.S. licensed business and travel-related transactions with Cuba under the embargo Enforcement 2013 AMEX-TRS paid $5.2m(US) to settle potential civil liability for apparent violations of the Cuban Asset Control Regulations (CACRs) for booking unlicensed travel between Cuba and other countries. Self-disclosed violations 2008 U.S. v. Platt River Assoc., Inc. (D. Colo.) Company pleaded guilty to criminal violation of the Cuban embargo by providing data/software services to a Spanish company for the ultimate benefit of a Cuban mining company. Previously warned by government 2005 U.S. v. Brodie (Third Circuit) U.S. Citizen who owned/controlled foreign company that engaged in unlicensed trade with Cuba was found guilty of criminal violation of the CACRs. Previously warned by government

16 July 2011 Cuba Travel Advisory Travel to Cuba and People-to-People Groups: OFAC aware of misstatements in the media suggesting that U.S. Foreign policy... now allows for virtually unrestricted group travel to Cuba. Amendments to Jan 2011 travel regulations still contain significant travel restrictions. Educational exchange programs to promote contact with Cuban people, people-to-people groups, must adhere to requirements in Section of the regulations. Authorized activities by people-to-people groups are not tourist activities under the TSRA. Travelers subject to spending limits and cannot bring souvenirs or other good into the US, except information and informational materials.

17 U.S. Trade with Cuba: Resources U.S. Dept. of State: Background Note on Cuba Dept. of Agriculture: List of Eligible Export Commodities: OFAC Cuba Travel Advisory: Marco A. Gonzalez, Jr.

18 Asociación de Industriales de Puerto Rico Jay S. Brickman August 02, 2013

19 Crowley Maritime Corporation Profile

20 How to Trade with Cuba U. S. Commerce License OFAC License Cuba Business Visas Cuban Imports Authorization Alimport Cuban Interest Section Comercio Exterior MINCEX Transition Other Entities

21 Millions US Dollar Value of TSRA - Authorized Exports to Cuba Source: U.S. Cuba Trade and Economic Council, Inc Exports to Cuba Year USD 4318, , , , , , , , , , , ,35 Total TSRA Sales US $3,364,148, Ranking Based on Export Markets 2001 US$4,318,906 (December) 144 th (of 226) 2002 US$138,634, th (of 226) 2003 US$256,901, th (of 219) 2004 US$391,990, th (of 228) 2005 US$350,218, th (of US$340,433, th (of 227) 2007 US$437,564, th (of 230) 2008 US$710,086, th (of 228) 2009 US$528,482, th (of 232) 2010 US$366,467, th (of 225) 2011 US$358,457, th (of 225) 2012 US$457,318,357 3

22 U.S. Export Trend International Competition Credit Direct Banking TSRA limits items Politics 4

23 5 What s Happened to Trade

24 Cuba Balance of Trade Cuba recorded a trade deficit of 7915 Million CUC in Cuba runs consistent trade deficits as a result of low exports and dependence on food and petroleum imports. Cuba primarily exports: nickel, cane sugar, cigars, fuel, beverages, metallic ores, fish, cement, oil and thyroid extract. Cuba primarily imports food, cereals, petroleum, diesel engines, vehicles, motor parts and vegetable oils. Cuba s main trading partners are Venezuela(30.3%), EU(20.1%) China(11.2%), Canada(6.2%), Brazil (4.5%), the United States (3.2%), México (2.7%).

25 Cuba Balance of Trade Foreign Income Reduced by Global Recession Still Recovering from Hurricanes U.S. Regulations Requiring Cash in Advance Easier Trade Terms with other Countries Change in Cuban Emphasis to buy in the U.S.

26 What s Happening to Balance of Payments? Cuba finances its trade deficit with inflow of remittances, export of medical services and earnings of the tourist sector. Cuba s 2012 balance of payments showed a surplus of $2.5 billion dollars.

27 Cuba in Transition Objectives Reactivate Economic Growth Retain Political Structure and Social Benefits

28 Transformation of Structure and Institutions Convert Tourism Industry to be greater Economic Driver for Domestic Growth Unify Currency and Exchange Policies Develop more Professional Services and High Tech Goods for Export More Private Enterprise and Employment More opening for Foreign Investment

29 Outlook Political Relations - Key Trade in Present Environment Unstable Progress of Private Sector very important Potential Goods, Services, Green Energy, Franchises No es fácil Paciencia!

30 Pros and Cons of Doing Business with Cuba: Today & Tomorrow Opportunities in Cuba and prospects for future business growth.

31 Congratulations to: Asociación de Industriales de Puerto Rico Thank You