|Brad Lehigh, Trade compliance analyst||With President Obama’s recent announcement relating to US-Cuba diplomacy, the biggest since the cold war, it is important to highlight what changes will affect global trade and compliance and how they could increase business opportunity on the largest island in the Caribbean. With most of the media currently focused on the exchange of intelligence assets, and the political ramifications in the United States; here we will take a look at how the relaxing of certain rules may help business, and how the new policies will be implemented into law.
While the announcement is certainly positive, the most important thing to understand is until changes are made to legislation, it will be business as usual with respect to the Cuban embargo. Even though President Obama can use an executive order to end the half-century standoff by raising remittance levels, easing travel restrictions, and opening an embassy in Havana; the actual embargo (overall trade ban) against Cuba can only be removed with the approval of Congress. As the Republicans control both the House and the Senate, this could prove more difficult than not, and it is possible the concessions revealed in the initial announcement may be all we see in the near future. Industry experts have hinted it may take longer than expected for the US Treasury to sort everything out and enact the new policies into actual regulations. The Office of Foreign Assets Control (OFAC) has said in the coming weeks it will implement the Treasury-specific changes by issuing amendments to its Cuban Assets Control Regulations.
One big aspect of the announcement is that the export of telecom devices and services will be authorized and providers will be able to offer internet services and commercial telecom within Cuba. Section 6004(e) the 1992 Cuban Democracy Act (“CDA”) allowed for telecommunications services between the US and Cuba for the purposes of supporting the Cuban people. The new announcement is welcome as companies are now permitted to establish commercial telecommunications and internet services within Cuba. Internet connectivity in Cuba is and has always been very limited, so access to consumer devices such as smartphones, software, or hardware for telecom infrastructure will be a big opportunity for both Cuba and the companies who provide them.
The opportunity for investment in Cuba will be significant. Cruise lines such as Carnival Corporation, and Norwegian Cruise Line saw shares jump almost immediately (1.5%-3%) following the announcement, and a mutual fund that invests in companies which would do well in a relaxed trading environment with Cuba saw its value shoot up approximately 24%.
There are other aspects of the agreement that should be recognized such as:
Looser Export Restrictions
Expanded banking and remittance limits
State Sponsor of Terrorism
Easing of travel restrictions for Americans travelling to Cuba
The United States will open an embassy in Havana, Cuba