On November 9, 2017, the Trump administration amended the Cuban Assets Control Regulations and Export Administration Regulations restricting travel to Cuba and trade with the island nation. The amendments implement the policy changes announced by President Trump last June.
The effect of the new Trump Doctrine will be to reverse the Obama administration’s policy of normalization?thus, tightening the economic embargo on Cuba. The amendments restrict travel to Cuba and restrict access to businesses, including hotels, tied to the Cuban military. The stated purpose of the changes is to channel economic activity away from the Cuban military, intelligence and security services, while maintaining certain authorized travel to Cuba and supporting the private, small business sector in Cuba.
Americans can still travel to Cuba, but most unrestricted individual travel will no longer be permitted. The new regulations remove the authorization for individual people-to-people educational travel, and add requirements to certain categories of educational travel and travel that qualify as support for the Cuban people. This, of course, could impact the hotel industry.
The most significant change under the new rules is the elimination of individual people-to-people educational travel, created under the Obama administration, which made individual travel to Cuba relatively easy; allowing individuals to book a flight to Cuba and travel freely to meet people and learn about life in Cuba. Americans will now have to travel with groups licensed by the Treasury Department through tour operators and be accompanied by a group representative of a sponsoring organization to ensure that each traveler has a full-time schedule of educational exchange activities. This will likely make such trips more expensive.
Similarly, Americans engaging in authorized educational travel, including study abroad programs, will be required to do so under the auspices of an organization that is subject to U.S. jurisdiction and must be accompanied by a person who is a direct representative of the sponsoring organization.
The regulations have also been amended for those wishing to travel to Cuba under a general license that authorizes travel and travel-related transactions and intended to provide support for the Cuban people, which include activities of recognized human rights organizations; independent organizations designed to promote a rapid, peaceful transition to democracy; and individuals and non-governmental organizations that promote independent activity intended to strengthen civil society in Cuba. From now on, each traveler must engage in a documented full-time schedule of permitted activities and cannot include free time in excess of that consistent with the full-time schedule.
Americans traveling to Cuba, like U.S. businesses, will be forbidden from engaging in business transactions with entities designated by the State Department as having ties to Cuban military, security or intelligence agencies. The list bans Americans from staying at more than 80 hotels in Cuba, including brands such as Meliá, Barcelo and Iberostar. Stores, marinas, tourist agencies, restaurants and the like are also on the list of prohibited entities.
The new rules will not apply to existing business relations. For example, Marriott International’s new Four Points by Sheraton Havana Hotel is excluded from the listing of prohibited hotels. Airline and cruise travel will also continue uninterrupted by the amendments. Additionally, existing travel and travel-related arrangements including financial transactions with companies that appear on the list of prohibited entities will be unaffected, provided that the arrangements were made prior to President Trump’s June announcement of the new policy or prior to the State Department’s addition of the entity to the list.
Although much of the Obama administration’s opening to Cuba remains in place, including diplomatic ties, President Trump’s policy will likely have an immediate impact on the number of Americans traveling to Cuba and on its hotels. The Cuban military controls much of the tourism and hospitality industry. Thus, American travelers will generally be limited to renting rooms and eating in restaurants located in privately owned Cuban homes. Americans will no longer be able to shop in popular Old Havana stores, book activities through Cuban tourist agencies or cruise by private yacht to Cuban marinas.
Last year, there were a record 600,000 visitors to Cuba from the United States, second only to Canada. The increase in visitors was largely due to the availability of the people-to-people educational travel exception, which permitted a U.S. traveler to buy a ticket, fly to Cuba and essentially travel at leisure, unrestrained as long as the stated purpose of the trip was to meet and talk to the Cuban people, and learn about life in Cuba. It is now unlikely, that the record number of visitors will continue if Americans are limited to traveling in organized groups under a regulated agenda at an increased cost.
Contributed by Jose Aquino, Duane Morris LLP, New York