US & Cuba To Hold 3rd Bilateral Commission Meeting On 16 May 2016... Compare The Media Release From Each Government- What Is Mentioned And What Is Not Mentioned

United States and Cuba to Hold Third Bilateral Commission Meeting in Havana, Cuba

Media Note
Office of the Spokesperson
Washington, DC
May 12, 2016

The United States and Cuba will hold the third Bilateral Commission in Havana, Cuba on Monday, May 16. Following the successful visit of President Obama to Havana in March 2016, Secretary Kerry asked Ambassador Kristie Kenney, the Counselor of the U.S. Department of State, to lead the delegation.

The Secretary places a top priority on deepening our dialogue with the Government of Cuba, the primary mechanism for which is the Bilateral Commission. Deputy Assistant Secretary John S. Creamer will also attend for the United States. The Cuban delegation will be led by Josefina Vidal, the Foreign Ministry’s Director General for U.S. Affairs.

The meeting will provide an opportunity to review progress on a number of shared priorities since the last Bilateral Commission meeting in November 2015, including progress made during the President’s historic trip to Cuba in March.

The United States and Cuba expect to plan continued engagements on environmental protection, agriculture, law enforcement, health, migration, civil aviation, direct mail, maritime and port security, educational and cultural exchanges, telecommunications, trafficking in persons, regulatory issues, human rights, and claims for the remainder of 2016.

Cuba and United States to hold Third Meeting of the Bilateral Commission

HAVANA, May 12th, 2016. The third meeting of the Cuba-United States Bilateral Commission will be held next Monday, May 16th, in Havana.

The Cuban delegation will be headed by Director General for United States affairs at the Ministry of Foreign Affairs, Josefina Vidal Ferreiro, and United States delegation will be led by Counselor to the Secretary of State, Kristie Kenney.

During this meeting, the parties will review the accords of the second Commission, held on November 10th, 2015, in Washington, and the results achieved since then.

Likewise, the meeting will serve to define the actions both parts will carry out during the rest of the year to advance the process to improve the relations, including, the celebration of technical meetings and the adoption of cooperation agreements on issues of common interest, the realization of high-level visits in both ways and the celebration of dialogues on issues of bilateral and multilateral interest in which we have similar positions.

The need to lift the blockade, to return the territory illegally occupied by the Guantanamo Naval Base to Cuba, and to eliminate other policies which are harmful to Cuba’s sovereignty, will be reiterated by the Cuban delegation as essential to have normal relations between Cuba and the United States.

The Bilateral Commission was created in August, 2015, as a mechanism to follow up the ties between the two countries following the re-establishment of the diplomatic relations. The first meeting was celebrated on September 11th, 2015.

Want To Have A Legislative Victory? Then Be Specific... Define Payment Terms

Want To Have A Legislative Victory?

Then Be Specific… Define Payment Terms

An increasing number of United States-based companies, advocacy groups, lobbyists, and Members of Congress are supporting a repeal of the Trade Sanctions Reform and Export Enhancement Act (TSREEA), signed into law in October 2000 by President William J. Clinton and first implemented in November 2001 by President George W. Bush. 

The TSREEA re-authorized the direct export of food products and agricultural commodities from the United States to the Republic of Cuba, albeit on cash-in-advance payment terms.

Since the first exports in December 2001, the government of the Republic of Cuba has purchased more than US$5.1 billion in TSREEA-authorized products.

The Cuban Democracy Act (CDA) of 1992 regulates the export from the United States of medical equipment, medical instruments, medical supplies, medicines and pharmaceuticals to the Republic of Cuba; there are no restrictions on payment terms.

Primary impediments to moving revisionist TSREEA-legislation through the United States Congress have been a) the absence of the government of the Republic of Cuba stating what payment terms it would seek if permitted to do so for food products and agricultural commodities and b) the absence of United States-based companies that have, are or desire to export food products and agricultural commodities to the Republic of Cuba stating publicly what payment terms they would provide, today, to Republic of Cuba government-operated entities.

Is the issue for the government of the Republic of Cuba about simply wanting the prohibition on payment terms to be removed from the TSREEA or is there a grander progressive strategy? 

Once the TSREEA restrictions are removed, and normal commercial terms are permitted (from companies and from financial institutions), will the response from the government of the Republic of Cuba be, “this is good, but….”  This is especially likely if the payment terms offered by United States-based companies are reflective of the Republic of Cuba’s commercial payments legacy with non-United States-based companies and governments.

The “but” being the Republic of Cuba remains as a discriminated party because of an inability by it and United States-based companies and United States-based financial institutions to access programs administered by the United States Department of Agriculture (USDA), Export-Import Bank (Ex-Im), Overseas Private Investment Corporation (OPIC), and Small Business Administration (SBA), as well as, remaining subject to provisions of Platt Amendment (Lease for Guantanamo Bay) of 1901; Trading With The Enemy Act of 1917; Cuban Democracy Act of 1992; Libertad Act of 1996; Trade Sanctions Reform And Export Enhancement Act of 2000; and Cuban Assets Control Regulations (CACR).  So, friends in the United States, you have more work to do…

Government of Vietnam-operated Vinafood 1 and Vinafood 2 have provided payment terms to Republic of Cuba government-operated Empresa Cubana Importadora Alimentos (Alimport), under the auspice of the Ministry of Foreign Trade of Cuba (MINCEX), of up to two years to pay for rice (25% to 30% broken); and there have been reports of payment arrears.  United States-based producers can provide this product.  Payment terms, however, without the use of United States government programs, would be, according to United States-based companies, cash-on-delivery to 30 days; and for credit-worthy customers, generally not exceed sixty days to ninety days.

The United Kingdom Trade & Investment Office reported in February 2016 that “despite the increasing opportunities for UK companies in Cuba, the market still offers challenges which include: very slow decision-making, with most important business decisions being referred to high-level government; all sales in Cuba are public sales, controlled by heavy regulation; payment delays are common; standard practice for the Cuban state to expect to buy on credit terms of 1 to 2 years; potentially increased market competition due to easing of US sanctions.”

For United States-based companies, the lack of public statements relating to what payment terms they would be prepared to offer to Alimport and other Republic of Cuba government-operated companies has created an unnecessary self-inflicted credibility wound.  Is Minnesota-based Cargill, Arkansas-based Riceland Foods, Maryland-based Perdue Grain and Oilseed, Georgia-based AJC International, and Illinois-based PCS Sales among others prepared to provide payment terms of 180 days to 720 days?  

The Obama Administration has authorized payment terms for other products, including agricultural equipment.  What payment terms is Illinois-based Caterpillar willing to provide to Republic of Cuba-based authorized entities?  Specifics would encourage other companies to follow and present the government of the Republic of Cuba with commercial opportunities- and commercial accountability. 

There is some self-serving incrementalism to the process.  Advocates advocate for removing the TSREEA payment terms knowing that as a result the government of the Republic of Cuba may, perhaps, incrementally increase selected commodity purchases.  Then, the advocates pivot to seeking for the government of the Republic of Cuba and for United States-based companies access to programs administered by the United States government.  A multi-year advocate full-employment initiative.

That’s not going to happen until the government of the Republic of Cuba has created a financial payments record of compliance with United States-based companies and United States-based financial institutions.   

There would be far greater support for a TSREEA-related legislative initiative if those United States-based companies that have and are and desire to export food products and agricultural commodities from the United States to the Republic of Cuba would be on-the-record with what payment terms they would offer for contracts with Alimport and other Republic of Cuba government-operated entities.

Memories seem selective… 

In 1999 and throughout 2000, United States-based companies were not supportive of including authorization for payment terms other than payment of cash in advance.  This was due to a concern that with the Republic of Cuba’s commercial credit issues- delays and defaults in payments to companies and to governments, and despite best intentions there would likely be a delay or default to a United States-based company; and there was fear that a Chief Executive Officer (CEO) having to explain to reporters during a television interview on CNBC why the company provided payment terms to a Republic of Cuba government-operated entity and there was delay or default that impacted quarterly earnings… would simultaneously watch the share price of the company decrease and with it the expectation that other companies would provide payment terms to Republic of Cuba government-operated entities.

The position of United States-based companies was that advocacy would be more productive if there was no risk to the companies; they would have the benefit of exports and would be able to promote that the Republic of Cuba was “the safest export market in the world.”  Always known was there would be a limit to which the government of the Republic of Cuba would spend valuable currency when long-term financing options were available through non-United States-based government programs.   

The government of the Republic of Cuba put pressure upon United States-based advocacy groups to lobby for payment terms other than cash in advance to be included in the TSREEA.  The United States-based companies prevailed.

When President Clinton signed the TSREEA into law in 2000, the government of the Republic of Cuba responded that it would not purchase a grain of rice or a kernel of corn because of the payment restrictions.  The result was a year during which the United States business community and advocacy groups ignored the Republic of Cuba; the feeling was after a two-year effort (initially led by United States-based rice producers) to achieve a change in United States law, there would be some moment of gratitude from the government of the Republic of Cuba.  There wasn’t. 

It was the fall of 2001, after a hurricane, that the government of the Republic of Cuba shared that it would make a “one-off” purchase of some products to replenish stockpiles damaged during the hurricane.  The list of products to be purchased included wood. 

The Bush Administration worked cooperatively with the United States business community to arrange for the timely export of the first commodities in December 2001 (corn and poultry valued at US$4,318,906.00).  And the wood? … it would not be purchased until 2003.  

What does the government of the Republic of Cuba want, and need, but may not receive for a while? 

Rescind relevant provisions:

Platt Amendment (Lease for Guantanamo Bay) of 1901
Trading With The Enemy Act of 1917
Cuban Democracy Act of 1992
Libertad Act of 1996
Trade Sanctions Reform And Export Enhancement Act of 2000
Cuban Assets Control Regulations (CACR)

United States Department of Agriculture (USDA)
Commodity Credit Corporation
Export Credit Guarantee Program
Facilities Guarantee Program

Export-Import Bank (ExIm)
Export Working Capital Program
Working Capital Guarantee Program
Loan Guarantee Program
Direct Loan Program
Finance Lease Guarantee Program

Overseas Private Investment Corporation (OPIC)
Direct Loans and Loan Guarantees

Small Business Administration (SBA)
Export Express Program
International Trade Loan Program

Are Cuba's Hotel Operators Balancing Supply vs. Demand Or Becoming Greedy And Risking Reputational Harm

Are Cuba’s Hotel Operators Balancing Supply Vs. Demand Pricing?  Becoming Greedy?  Precipitating Backlash?

Hotel Mecure Sevilla Habane Has Increased Prices 50% Since 2015; Expects Increase Of 56% By November 2016 For A Total One Year Increase Of 133%... With No Change In Guest Experience

Hotel Mercure Sevilla Habane (operated by Paris, France-based AccorHotels) located in the city of Havana, Republic of Cuba, was US$120.00 per night (with buffet breakfast) in 2015, is US$180.00 per night (with buffet breakfast) since the beginning of 2016, and will be US$280.00 per night (with buffet breakfast) by November 2016, representing an increase of 133% in twelve months.

Might there be a negative result in that the customer experience has not improved 50%, 56% or 133%. The concept of supply and demand is at play, but there should be a concern about reputational damage from a perception of price-gouging... and creating a negative social impact upon employees who are Republic of Cuba nationals.

The increase in room rates at hotels located throughout Havana are primarily impacting visitors subject to United States law, as restrictions implemented by the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury upon individual and group itineraries necessitate Havana-based land and sea arrivals/departures amongst other activities.

Individuals subject to United States law have the highest net profit margin of any visitor to the Republic of Cuba. 

A substantial increase in hotel room rates without a corresponding increase in the quality of hotel services is unsustainable and inadvisable. 

An opinion from a hotel industry executive: “… the incumbent hotels will take advantage of the short-term supply and demand imbalance while new hotels will obtain their fair-market share; the aging properties will be forced to upgrade (and improve guest experience) to survive or decrease their rates.”

Unsustainable because with an increase in cruise ship activity, visitors will be able to have the services that they desire, are comfortable with, and equate with value, without feeling taken advantage of by either Republic of Cuba government-operated properties or properties managed by companies located outside of the Republic of Cuba, in this instance, AccorHotels. 

Melia Cohiba and Melia Habana, hotels located in Havana that are managed by Palma de Mallorca, Spain-based Melia Hotels International, have also increased room rates substantially as have the hotels Saratoga (rack rate nearing US$500.00 per night), Parque Central, Nacional (reported at more than US$500.00 per night), Capri, Inglaterra, Telegrafo, Plaza and Presidente.  There may be a reputational impact upon AccorHotels and Melia Hotels International.  A room at the Habana Libre was reported at US$450.00 per night.

NOTE: Some owners of homes that are licensed to host guests, Casa Particulars, have increased pricing per night from 60% to 100% during the last twelve months.  Guests are generally more forgiving to owners of private residences as there is a belief that supporting private enterprise is worth the sometimes difference between price and value.

With the implementation of regularly-scheduled commercial airline service between the United States and the Republic of Cuba, there will also be opportunities for travelers to make day-trips and avoid hotels. 

Inadvisable because a substantial increase in gross revenues and lack of corresponding increase in the guest experience, or the salaries of Republic of Cuba nationals who work at the property, does nothing to encourage the government of the Republic of Cuba to make changes to the operations of its hospitality sector; rather, the hospitality sector is at risk of becoming another revenue stream to redirect to other priorities of the economy with property maintenance neglected based upon a belief that regardless of the guest experience the demand for hotel rooms is sustainable so pricing can continue to increase irrespective of corresponding quality issues.

Stamford, Connecticut-based Starwood Hotels & Resorts Worldwide (2015 revenues exceeded US$5.7 billion) will be managing three properties in the Republic of Cuba (Gran Caribe-owned Hotel Inglaterra; Habaguanex-owned Hotel Santa Isabel and Gaviota-owned Hotel Quinta Avenida, which will be re-branded as a Four Points by Sheraton).  Gaviota is controlled by the Revolutionary Armed Forces of the Republic of Cuba.  Bethesda, Maryland-based Marriott International (2015 revenues exceeded US$14 billion), which is acquiring Starwood Hotels & Resorts Worldwide, is also in discussions with Republic of Cuba government-operated companies to identify properties to manage within the Republic of Cuba.

When Starwood Hotels & Resorts Worldwide begins management of its properties, and Marriott International begins management of its properties, there will be equilibrium between the price of a room and the guest experience… as the traditional model is to have the guest experience be perceived as exceeding the price of the room. 

Thus, properties that are perceived as maintaining an imbalance between price and value will be avoided, resulting in potentially fewer visitors to the Republic of Cuba.

T-Mobile Joins Verizon, Sprint, AT&T With Cuba Roaming Agreements

Un-carrier reaches interconnect and roaming agreement with Cuban telecom to offer roaming for customers traveling to Cuba

Bellevue, Washington — May 9, 2016 —T-Mobile [NASDAQ: TMUS] today announced it has signed an interconnect and roaming agreement with Empresa De Telecomunicaciones De Cuba, S.A. (ETECSA), the Cuban telecommunications company. The new deal enables the Un-carrier to do its part to open communications between the U.S. and the island nation, delivering more affordable voice calling for customers who want to keep in touch with friends and family in Cuba, as well as voice, text and data roaming for customers traveling to Cuba starting this summer.
 
“The historic opening of Cuba is a natural opportunity for us to take action, and we are.  That’s the Un-carrier way!” said John Legere, president and CEO of T-Mobile.  “We have more customers of Cuban descent than any other wireless provider – so connecting them with family and friends in Cuba is a message we heard loud and clear!”
 
More than a third (36.6%) of Cuban-born wireless customers are with T-Mobile, more than AT&T and triple the number of Verizon customers. And, customers in Cuban-American hubs like Miami are choosing T-Mobile and MetroPCS nearly twice as often as AT&T or Verizon. Not surprisingly, Cuba is the #1 requested addition to T-Mobile’s international roaming on social media. Naturally, the Un-carrier is listening and responding to its customers.
 
As a result of today’s agreement, T-Mobile Simple Choice customers will be able to: Call landlines and wireless phones in Cuba from the U.S. for just $0.60 per minute – 65 percent less than today – with the popular monthly “Stateside International Talk” feature ($15 per month) and Use voice, text, and data while traveling in Cuba, starting this summer. 

For more information on T-Mobile’s industry-leading global roaming services, please visit www.t-mobile.com/international.
 
About T-Mobile

As America's Un-carrier, T-Mobile US, Inc. (NASDAQ: TMUS) is redefining the way consumers and businesses buy wireless services through leading product and service innovation. The Company's advanced nationwide 4G LTE network delivers outstanding wireless experiences to more than 65.5 million customers who are unwilling to compromise on quality and value. Based in Bellevue, Washington, T-Mobile US provides services through its subsidiaries and operates its flagship brands, T-Mobile and MetroPCS. For more information, please visit http://www.t-mobile.com.

ETECSA also has roaming agreements with New York-based Verizon Wireless, Kansas-based Sprint, and Texas-based AT&T.

The Commercial & Political Impact Of Cruise Ships From The U.S. To Cuba

Full Cruise Ship Schedule Could Mean US$300 Million In Revenues To Cruise Operators

Full Cruise Ship Schedule Could Deliver US$88 Million To Cuba

Delays with Authorizations From Cuba Could Reduce Revenues To Cuba By US$40+ Million

On 1 May 2016, Miami, Florida-based Carnival Corporation & plc (2015 revenues US$15.7 billion), through its Fathom subsidiary, commenced seven-day itineraries with the 700-passenger MV Adonia (launched in 2001; 594ft; 30,000 tons; 356 staterooms) directly from/to the United States (Port of Miami, Florida) for individuals subject to United States law who are authorized to visit the Republic of Cuba under regulations (twelve categories) issued by the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury in Washington, DC.  The first sailing carried 700 passengers for a load factor of 100%.

The April 2016 decision by the government of the Republic of Cuba to change policy relating to the means by which individuals of Cuban descent may visit the Republic of Cuba was politically significant, but equally important were the reasons:  Not doing so jeopardized the implementation (already delayed) of regularly-scheduled cruise ship schedules; jeopardized the global political and public relations value already received from marketing by the cruise ship companies; and jeopardized significant revenues that would be earned, directly and indirectly, by the government of the Republic of Cuba.

Since 17 December 2014, approximately sixteen (16) companies (United States-based and non-United States-based) have announced intentions to operate OFAC-authorized (even when not departing from or returning to the United States) and non-OFAC-authorized (at this time) Republic of Cuba-focused itineraries.  Some of the companies may not initiate schedules reflecting initial marketing efforts.  

To date, Carnival Corporation & plc and Marseille, France-based Companie du Ponant have reported receiving required approvals from the government of the Republic of Cuba to operate itineraries originating and ending in the United States.

Geneva, Switzerland-based MSC Cruises SA (US citizens not permitted by company)
Guilford, Connecticut-based Pearl Seas Cruises
Ipswich, United Kingdom-based Fred Olsen Cruise Lines
Lakewood, Colorado-based Haimark Line (filed Chapter 11 bankruptcy)
London, United Kingdom-based Noble Caledonia
London, United Kingdom-based Thomson Cruises
Marseille, France-based Companie du Ponant (for authorized travelers)
Miami, Florida-based Carnival Corporation & plc
Miami, Florida-based Norwegian Cruise Lines Holdings Ltd.
Miami, Florida-based Royal Caribbean
Monaco, Monte Carlo-based Star Clippers (for authorized travelers)
New York, New York-based Group IST
New York, New York-based Lindblad Expeditions-National Geographic
Park Helena, Alabama-based International Expeditions
Piraeus, Greece-based Celestyal Cruises (for authorized travelers)
Seattle, Washington-based Zegrahm Expeditions

Thus far, Fathom has announced eighteen (18) sailings from 1 May 2016 through 13 November 2016.  Depending upon passenger demand and the infrastructure capacity of the Republic of Cuba (immigration processing, customs processing, port facilities, ground transportation, etc.), the number of sailings is likely to expand from eighteen (18) to twenty-six (26) and as many as forty (40) encompassing the 2016/2017 sailing season (May through April).

To The Companies

If Fathom operates its announced and potential twelve-month schedule at full capacity, the company could deliver 12,600 to 28,000 passengers to the Republic of Cuba with per person pricing from US$1,908.00 to US$8,975.00, which includes “estimated taxes, fees and port expenses” of US$208.00 per person.  Fathom expects to operate near or at capacity for its scheduled/anticipated 2016/2017 sailing season.

If each Fathom sailing operates at full capacity, the total revenue from each sailing could range from US$1.8 million to US$2.5 million with a total 2016/2017 sailing season gross revenue estimate of US$39 million to US$86 million.  The gross revenue estimate does not include incidental passenger expenditures while aboard the vessel.  

If those companies having announced intentions to operate OFAC-authorized itineraries receive required approvals from the government of the Republic of Cuba to implement their respective sailings for the 2016/2017 season, and the vessels operate near or at capacity, more than 100,000 individuals subject to United States law could arrive to the Republic of Cuba by 150 or more cruise ship sailings.

If those companies having announced intentions to operate OFAC-authorized itineraries receive required approvals from the government of the Republic of Cuba to implement their respective sailings for the 2016/2017 season, combined gross revenues for the companies could be US$300 million.   

To The Republic Of Cuba

Projected sailing season gross revenues to the Republic of Cuba (government-operated entities and self-employed) if the cruise ship operators engage their intended schedules and use their desired vessels could be US$80 million or more.  Large vessels could spend more than US$400,000.00 per sailing.

Projected sailing season total per passenger expenditures (souvenirs, snacks, meals, gratuities, etc.) while they are in the Republic of Cuba (at government-operated entities and at self-employed operations) could be US$8 million to US$16 million or more.  The average per person per port expenditure in Caribbean Sea-area countries is US$75.00.  Individuals subject to United States law are authorized to return from the Republic of Cuba to the United States with merchandise not exceeding US$400.00 in value, provided that no more than US$100.00 of the merchandise consists of alcohol or tobacco products and the merchandise is imported for personal use only.

Policy Observations:

The implementation of regularly-scheduled cruise schedules from the United States to the Republic of Cuba is the third leg of land, sea and air efforts by the Obama Administration to cement its regulatory policy changes- the goal is to make the initiatives big and loud so that they are harder to dislodge.

For the cruise ship industry, the Republic of Cuba provides another destination- and new destinations attract new passengers which result in more revenue and greater economic benefit to the United States.  

There is a multiplier economic impact for cruise ship passengers.  They may use credit cards to make payment for their cruise (banks earn interest and customers earn points/miles); may use airlines to reach the port of departure; may stay in a hotel prior to departure and upon returning to the point of departure; may dine in restaurants; may use a taxi; may purchase sundries and souvenirs.  The ports have additional activity.  The vessels purchase provisions, including fuel.  

Since 17 December 2014, President Obama has used visitors as an army, airlines as an air force, cruise ships as a navy and, to a lesser extent thus far, companies as marines to create a beachhead in the Republic of Cuba that can't be pulled or pushed off the island- either by political forces in the United States or in the Republic of Cuba. The armada is digging in; not quite with a permanent foundation, but closing in....

In Internet terms, The Obama Administration is creating CubaLegacy 2.0- too big to roll back, too visible to hide, too collaborative, too many participants to remove, too bilateral to untangle... The perfect presidential legacy vehicle.

The government of the Republic of Cuba needs to do its part. More cruise line companies need to be authorized. A ferry needs to be tested. Imports of products from the United States need to increase. A distribution center needs to be authorized.  Tractors need to be assembled.  Coffee needs to be exported.  Currencies need to be unified.  Certified claims need to be settled.  There are 262 days remaining (visit www.cubatrade.org to view the countdown clocks).

President Obama wants to bring change to the Republic of Cuba far more and far faster than President Raul Castro wants change to arrive in the Republic of Cuba.  For both men, the issue is legacy.

That's where the similarity ends- President Obama wants more and needs more so that there can be more- and he can continue with regulatory changes and, perhaps, limited (though unlikely) legislative changes by 20 January 2017.  

President Castro wants to withstand everything that is coming his way, yet find a means to gain value from it and not be perceived as rejecting it by governments and companies that are needed to fund what the government of the Republic of Cuba requires; a complex series of juggling maneuvers. 

Connections Of Cuban-Americans To Family In Cuba

The Republic of Cuba has approximately 11.3 million residents.

There are approximately 1.8 million individuals of Cuban descent residing in the United States.

One estimate is 20% to 30% of individuals subject to United States law of Cuban descent residing in the United States have immediate family residing in the Republic of Cuba.

Perhaps, another 30% to 40% has more distant family residing in the Republic of Cuba.

So, perhaps 50% to 70% have some family members residing in the Republic of Cuba.

Approximately 65% of all individuals of Cuban descent who reside in the United States are located in the State of Florida- and this grows more concentrated over time.

Next is New Jersey then California, Louisiana, Texas, and Illinois.

What The United Kingdom Thinks About Commercial Opportunities With Cuba

United Kingdom Trade & Investment

London, United Kingdom

18 February 2016

Excerpts From Cuba Export Overview

Cuba has one of the world’s few remaining centrally planned economies. The state controls 90% of the economy and employs around 85% of the total workforce.

Contact a UKTI Cuba export adviser for a free consultation if you are interested in exporting to Cuba.

Contact UK Export Finance (UKEF) about trade finance and insurance cover for UK companies. You can also check the current UKEF cover position for Cuba.

There have been recent discussions between the US and Cuba to restore diplomatic ties and open freer travel and shipping terms. In addition, Cuba was removed as a ‘state sponsor of terrorist activities’ On 29 May 2015. This has led to more interest by international business due to the reduction of risks doing business in Cuba.

Cuba is mostly a service-based economy. Its main export earnings come from healthcare, biotechnology, pharmaceuticals, tourism and nickel.

1. Strengths of the Cuban market include:

English is widely spoken and accepted as a business language, strategic position in the Caribbean and Central America, highly educated and skilled workforce, low labour costs, low crime and pollution rates

2. Challenges doing business in Cuba

Despite the increasing opportunities for UK companies in Cuba, the market still offers challenges which include: very slow decision-making, with most important business decisions being referred to high-level government; all sales in Cuba are public sales, controlled by heavy regulation; payment delays are common; standard practice for the Cuban state to expect to buy on credit terms of 1 to 2 years; potentially increased market competition due to easing of US sanctions

2.1 Extra-territorial fines

The US Government has imposed extra-territorial fines on some companies in third countries that have done business with Cuba in breach of the Helms-Burton Act. However, these sanctions conflict with the UK Protection of Trading Interests Act which makes it illegal for UK based companies to comply with extraterritorial legislation. The Act contains a provision for fines to be levied against companies and individuals that fail to comply with this stipulation.  This UK provision is also supported by an EU Blocking Statute which makes it illegal to comply with the US’s extra-territorial sanctions.

3.1 Economic Growth

Cuba reported 4% economic growth in 2015. This is amongst the most dynamic in the region and takes place during a transition process from a state-run economy to one that has more private sector involvement. Growth is mostly linked to an increase in domestic and foreign investment, and a recent boom in the tourist industry with an increase of 17.8%.

3.2 Free trade agreements

Cuba is a co-founder of the Bolivarian Alliance for the Americas (ALBA). It integrates the countries of Latin America and the Caribbean.

Cuba maintains special links with Venezuela. Since late 2000, Venezuela has provided Cuba with oil on preferential terms. Oil is partly paid for with the services of Cuban personnel, including some 20,000 medical professionals.

There are also commercial agreements with China, Russia, Brazil and Vietnam.

4. UK and Cuba trade

In 2015, exports of UK goods to Cuba saw an increase of approximately 32% from 2014. However, total trade figures do not include the significant UK-Cuba trade that is undertaken through countries such as Spain, the Netherlands, France, Venezuela, Mexico and Panama. The UK remains underrepresented in the market compared to other EU countries.

Top UK exports to Cuba:

dairy produce, nuclear reactors, boilers, machinery and mechanical appliances, pharmaceutical products, paper, paperboard and articles of paper pulp, instruments and apparatus, plastics and plastic products, electrical machinery and equipment, beverages, spirits and vinegar, organic chemicals, aluminium and articles

5. Opportunities for UK businesses in Cuba

UK Trade and Investment (UKTI) provides free international export sales leads from its worldwide network. Search for export opportunities.

5.1 Biotechnology and healthcare

The medical industry is currently responsible for one of the largest shares of imports from the UK. Biotechnology has the largest potential in the Cuban market.  Health services to ALBA countries account for 60% of all exports from Cuba. The maintenance of this sector is a priority for the government.  There are opportunities for UK companies in: high-tech products, lab supplies, partnerships for production and commercialisation

5.2 Renewable energy

In 2013, a £140 million investment project was signed by UK Havana Energy and Cuban Azcuba for the construction of 5 biomass power stations linked to the sugar industry. Other projects are currently under discussion.  A number of other opportunities have been approved and are now available to interested companies.  These opportunities are available for UK companies with expertise in the following areas: solar energy, wind parks, biomass, hydro-energy

5.3 Tourism

Tourist numbers have steadily increased over the last decade to over 3.5 million in 2015. The rapid increase in tourist arrivals has proved the urgency to develop tourism infrastructure.

Opportunities exist for: development and management of hotels, development of tourism, facilities, such as golf courses and water parks, tourism services, hotel supplies

5.4 Mining

The Cuban nickel industry is one of the primary sources of income for Cuba. It produces about 70 thousand tons of nickel per year and accounts for more than 30% of the world’s known nickel reserves.

The Cuban government is interested in speeding the exploitation of gold, silver, chrome, copper and zinc, resources. This may provide opportunities for UK companies.

5.5 Transport

Cuba is in need of a modernised transport infrastructure. Opportunities exist for UK companies in the following areas: development of ports, enlargement of airports, road construction, ship building and repair, energy efficient cargo and public transport

6.1 Selling from offshore

You can obtain a business visa and travel to Cuba to do business. You can contract with a Cuban importing agent to ship to a duty-free warehouse and distribute from there.

You cannot have an office in Cuba and your executives cannot take up residence there. Cuban authorities take a broad view of what constitutes an illegal office. Exporters have been punished for operating unauthorised offices from residences and hotels.

6.2 Registered agency or office

Representative offices of foreign companies are permitted under Decree Law 206 of 1996. Permits are issued by the Cámara de Comercio de la República de Cuba.  The application requires considerable detail about:

the legal status of your company

its technical capabilities

financial stability

Foreign documents must be legalised in Cuba.

Licences are for 5 years and are renewable for 3 year terms.

The licence will not allow your company to carry on wholesale or retail distribution. Your company can be the consignee of an import shipment, but it cannot take possession directly. You must employ a registered agent to physically handle the goods.

To register, you must have:

3 years experience making sales to Cuba of at least USD 500,000 annually

a minimum paid up capital of USD 50,000

at least 5 years business history

You should seek legal advice as the tax and legal obligations of each business structure can differ.

7. Legal considerations

There is Cuban legislation that has a direct impact on business development. Law 77 on Foreign Investment establishes the rules for most trade and Investment activities.

7.1 Standards and technical regulations

Suppliers and manufacturers have an obligation to make sure products are safe. Products must meet relevant safety standards, have clear instructions for proper use and include warnings against possible misuse.

The Oficina Nacional de Normalización (NC) is responsible for standards and technical regulation in Cuba.

7.2 Intellectual property

The National Office of Industrial Property (OCPI) is responsible for intellectual property rights in Cuba.

Cuba is also signatory to the Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS). This has specific requirements, enforcement procedures, remedies, and dispute resolution procedures.

8.1 Goods and Services Tax (GST)

The rates for the GST vary depending on the goods, sector, and currency. A rate of 2% applies to wholesalers and 10% to retailers.

Raw materials for industrial production and exported goods and services are exempted from GST.

8.2 Company tax

Companies established in Cuba are subject to 35% of their taxable net profits. This may increase to 50% for the exploitation of natural resources. There are exemptions from company tax.

Foreign companies without legal domicile in Cuba are subject to a 4% rate on their gross income from a Cuban source.

8.3 Individual income tax

Permanent residents in Cuba are subject to 4% income tax on their worldwide income.

Temporary Residents are liable for a personal income tax rate of 15% on their income obtained or generated in Cuba.

8.4 Customs

A tax will be levied on all natural and legal persons importing products into the national territory. The tax rates and payment procedures are established by the Cuban Customs Law that can be accessed at the Cuban Customs Authority website.

You can find more about import tariffs in the Market Access Database (MADB).

9. Entry requirements

All visitors require a tourist card which is usually issued with your air ticket. This can also be bought at airports.

Business visitors need to apply for a business visa at the Cuban Embassy in London.

9.1 Travel advice

If you’re travelling to Cuba for business, check the Foreign and Commonwealth Office (FCO) travel advice page beforehand.

What Do President Obama, Governors Cuomo & McAuliffe Have In Common?

Why Require Use Of The FOIA, FOIL, And VFOIA Process?

The President

The Obama Administration has required that the Freedom of Information Act (FOIA) be used to request a) the names and titles of all employees of the United States government who have visited the Republic of Cuba and b) the names and titles of all representatives of the government of the Republic of Cuba who have visited the United States for the purpose of official discussions with representatives of the government of the Republic of Cuba.  Yet, the United States Department of State confirms that such information is not considered to be classified, secret or top secret; just generally not provided.

With more than one hundred forty (140) employees of the United States government having visited in 2015 and thus far in 2016, and approximately seventy (70) representatives of the government of the Republic of Cuba having visited the United States during the same period, there would seem to be a disconnect…. The Obama Administration actively markets the process of the revisions in the relationship between the United States and the Republic of Cuba, yet does not want everyone to know who is participating in the process.

The Governors

Why have The Honorable Andrew Cuomo (D), Governor of the State of New York, and The Honorable Terence McAuliffe (D), Governor of the Commonwealth of Virginia, used the Freedom of Information Law (FOIL) and the Virginia Freedom of Information Act (VFOIA), respectively, to shield, delay and prevent the disclosure of all financial and operational information relating to their visits to the Republic of Cuba?

Governor Cuomo visited the Republic of Cuba from 20 April to 21 April 2015.  Governor McAuliffe visited the Republic of Cuba from 3 January 2016 to 6 January 2016.

Both governors have released limited information without use of the FOIL/VFOIA process; Governor McAuliffe’s staff provided meaningful information, although the staff knew that a VFOIA request would be used if the information was not provided.  Governor Cuomo’s visit concluded more than one year ago, yet FOIL requests remain unfulfilled.  

Each governor has used their respective laws to shield, delay and prevent the disclosure of amounts, sources, and uses of state/commonwealth taxpayer funds and operational information (contracts, etc.) relating to their visits to the Republic of Cuba.  

That the governors (and their staffs) know the information should be disclosed, likely will be obtained and disclosed, creates an unnecessary adversarial relationship between them and their employers, the taxpayers, and media representatives who seek to publish information. 

When the governors and their staffs spent considerable time and taxpayer resources marketing their visits to the Republic of Cuba- in advance, during, and upon return, reasonable to expect that all information relating to the visit be disclosed in a timely manner- without requiring the FOIL/VFOIA process.  

If the effort is considered easily worthwhile to promote, it should be considered easily worthwhile to defend. 

Who Should Be The Next Governor To Visit Cuba? Hint: The State Nut Is Pecan

Who Should Be The Next Governor To Visit Cuba?
The Honorable Robert Bentley of the State of Alabama
Why?  The State’s companies and entities have strived to be first.

The State of Alabama has no peer when it comes to commercial engagement with the Republic of Cuba…    

Since 2001, Alabama-based companies have been exporters of food products and agricultural commodities (poultry) from the United States to the Republic of Cuba under provisions of the Trade Sanctions Reform and Export Enhancement Act (TSREEA) of 2000.

During the last six years, the Port of Mobile, Alabama, has ranked 8th of 34 United States ports that have processed exports from the United States to the Republic of Cuba.

The city of Mobile, Alabama, has been a part of the Sister Cities International program (Society Mobile-La Habana) with the city of Havana, Republic of Cuba.  In October 1993, The Honorable Michael Dow was the first mayor of a city in the United States to sign a twinning agreement with a city in the Republic of Cuba.

Paint Rock, Alabama-based Cleber LLC received authorization from the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury and the Bureau of Industry and Security (BIS) of the United States Department of Commerce to create a tractor warehouse/assembly facility in Mariel Special Development Zone located near the city of Havana, Republic of Cuba.  The government of the Republic of Cuba has authorized the assembly facility.  The first year investment is US$1.4 million (which has been obtained according to the company); total long term investment US$5 million.

Foley, Alabama-based GulfWise Commerce LLC (www.gulfwisecommerce.com), affiliated with 100-year-old Foley, Alabama-based The Woerner Companies (2015 revenues exceeded US$40 million; www.woerner.com), received a license from the BIS on 31 March 2016 to export advanced planting and harvesting equipment valued at US$108,184.00.  The BIS application was submitted at the end of January 2016.

The purchaser is Republic of Cuba government-operated Tecnotex SA for use by the Republic of Cuba government-operated Indio Hatuey Research Station, a Matanzas, Republic of Cuba-based agricultural research institution.  Tecnotex SA (affiliated with the Revolutionary Armed Forces of the Republic of Cuba) imports equipment, technology, and construction materials.  

The equipment, which is being manufactured in Alabama and expected to be delivered soon through the Port of Mobile, Alabama, will assist in establishing grass-covered areas for purposes ranging from erosion control to the creation of pasturage and the establishment or improvement of parks and recreational areas, such as playgrounds and sport facilities.

The discussions commenced in 2014 when GulfWise Commerce LLC initiated a dialogue with researchers at the University of Matanzas regarding multiple agriculture production issues in the Republic of Cuba.  That dialogue led to an assessment of specialized equipment needed and to subsequent negotiations for a possible sale, which led to an application to the BIS.  

Representatives of GulfWise LLC and The Woerner Companies have made five (5) visits to the Republic of Cuba; the first in 2012.  Two representatives of the Indio Hatuey Research Station visited Alabama in 2015.

Significant about the transaction is the decision by the government of the Republic of Cuba to not focus upon a United States-based multinational (for example, Illinois-based Caterpillar or Illinois-based John Deere), but rather have the first export to the Republic of Cuba of durable (non-healthcare-related) commercial equipment be from a private company.

GulfWise Commerce LLC is also seeking to import fruit (papayas, mangoes, pineapples, bananas, and coffee beans) from the Republic of Cuba to be processed at a dehydration and food ingredient facility under construction (completion date June 2016) near the Port of Mobile.  The United States Department of State added coffee to its list of authorized imports from the Republic of Cuba in April 2016, provided the coffee is grown/processed/marketed by independent cooperatives as defined by the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury.

“Woerner Companies, Inc. is opening a new division called Bon Secour Valley Ingredients (BSVI) in Foley, Alabama. This new division will diversify the family to focus on sustainable agriculture by producing prepared foods and ingredients. BSVI is opening a 40,000 sq.ft. facility that will operate multiple dehydration, roasting, and extrusion lines to convert perishable fruits and vegetables into a more sustainable dehydrated form that will not require refrigeration, maintain a longer shelf life all while providing an all-natural product with healthy nutritional value. The main ingredients for the initial plant production will consist of: chicory, sweet potatoes, bananas, carrots, sweet corn, bread fruit, butternut squash, kale and pumpkin. Our focus is to go straight from the farm to BSVI for dehydration and then to your home in the form of a dehydrated banana, smoothie mix, powdered chicory and so much more.”

Mr. Robert L. Muse, the Washington, DC-based attorney who represented GulfWise Commerce LLC in the BIS equipment-licensing process, said the significance of the transaction is “… the government of Cuba clearly rewarded the patient efforts of a privately-owned company willing to invest the time to identify and fill the needs of Cuba’s rapidly changing rural economic landscape.”

Starbucks (And Other Companies) Can Now Import Coffee From Cuba... With Some Restrictions

With the United States Government now permitting the importation of coffee from the Republic of Cuba, Seattle, Washington-based Starbucks Corporation (2015 revenues exceeding US$14 billion) may now have the option to import coffee from the Republic of Cuba for inclusion in beverages and for bulk retail sale, if the company has an interest.  Importing coffee to the United States would place Starbucks in a first-tier position to operate locations within the Republic of Cuba.

Regardless of whether Starbucks Corporation decides to import bulk or packaged coffee (preferred by the government of the Republic of Cuba so as brand names become recognized), a United States-based company will almost certainly secure an agreement to import coffee from the Republic of Cuba within the next three months.  France and Japan are two of the primary export markets for coffee grown in the Republic of Cuba.

A question to be answered is whether the government of the Republic of Cuba will find greater economic value and political value from authorizing the production and export of coffee (roasted or non-roasted or processed) through what the United States defines as entrepreneurs or retain the majority of production and export through Republic of Cuba government-operated entities.  

And in the future......

There is little doubt that Starbucks Corporation will eventually have a presence within the Republic of Cuba, perhaps at properties to be managed in the Republic of Cuba by Stamford, Connecticut-based Starwood Hotels & Resorts Worldwide (2015 revenues exceeded US$5.7 billion) and Bethesda, Maryland-based Marriott International (2015 revenues exceeded US$14 billion).  Starwood Hotels & Resorts Worldwide is being acquired by Marriott International.

Starbucks has a presence within many branded properties managed by Starwood Hotels & Resorts Worldwide and Marriott International.  While Starbucks would be expected to seek stand-alone location(s) within the Republic of Cuba, with a focus upon resort properties, there would likely be operations within non-resort properties- both for retail and foodservice (restaurants, room service, in-room coffee makers, etc.).

Starwood Hotels & Resorts Worldwide will be managing three properties in the Republic of Cuba (Gran Caribe-owned Hotel Inglaterra; Habaguanex-owned Hotel Santa Isabel and Gaviota-owned Hotel Quinta Avenida, which will be re-branded as a Four Points by Sheraton).  Gaviota is controlled by the Revolutionary Armed Forces of the Republic of Cuba.

Marriott International is in discussions with Republic of Cuba government-operated companies to identify properties to manage within the Republic of Cuba.

Today, the U.S. Department of State updated its “Section 515.582 List,” which sets forth the goods and services produced by independent Cuban entrepreneurs that are authorized to be imported into the United States pursuant to Section 515.582 of the Cuban Assets Control Regulations (CACR).

As of April 22, persons subject to U.S. jurisdiction may also import coffee and additional textiles and textile articles produced by independent Cuban entrepreneurs, in addition to the items previously authorized. Also, imports of these items no longer need to be made directly from Cuba. These changes allow for more engagement with Cuba’s private sector through new business opportunities. The State Department will continue to update this list periodically.

Empowering the Cuban people and Cuban civil society is central to our approach to Cuba. Expanding commercial ties between independent Cuban entrepreneurs and the United States creates new opportunities for such empowerment. As President Obama stated during the March 21 entrepreneurship summit in Havana, Cuba’s economic future partly depends on growth in the private sector, and the United States wants to be a partner as Cuba moves forward.

The State Department's Section 515.582 List
Bureau of Economic and Business Affairs
April 22, 2016

Goods and Services Eligible for Importation

In accordance with the policy changes announced by the President on December 17, 2014, to further engage and empower the Cuban people, Section 515.582 of the Cuban Assets Control Regulations (31 CFR Part 515 – the CACR) authorizes the importation into the United States of certain goods and services produced by independent Cuban entrepreneurs as determined by the State Department as set forth on the Section 515.582 List, below.

Goods

The goods whose import is authorized by Section 515.582 are goods produced by independent Cuban entrepreneurs, as demonstrated by documentary evidence, that are imported into the United States, except for goods specified in the following sections/chapters of the Harmonized Tariff Schedule of the United States (HTS):

    Section I: Live Animals; Animal Products
        All chapters
    Section II: Vegetable Products
        All chapters, except Chapter 9 heading 0901 (coffee)
        **Please note that exporters will be required to prove that they have met all sanitary and phytosanitary standards, including food safety.
    Section III: Animal or Vegetable Fats and Oils and their Cleavage Products; Prepared Edible Fats; Animal or Vegetable Waxes
        All chapters
    Section IV: Prepared Foodstuffs; Beverages, Spirits, and Vinegar; Tobacco and Manufactured Tobacco Substitutes
        All chapters
    Section V: Mineral Products
        All chapters
    Section VI: Products of the Chemical or Allied Industries
        Chapters 28-32; 35-36, 38
    Section XV: Base Metals and Articles of Base Metal
        Chapters 72-81
    Section XVI: Machinery and Mechanical Appliances; Electrical Equipment; Parts Thereof; Sound Recorders and Reproducers, Television Image and Sound Recorders and Reproducers, and Parts and Accessories of Such Articles
        All chapters
    Section XVII: Vehicles, Aircraft, Vessels, and Associated Transportation Equipment
        All chapters
    Section XIX: Arms and Ammunition; Parts and Accessories Thereof
        All chapters

Persons subject to U.S. jurisdiction engaging in import transactions involving goods produced by an independent Cuban entrepreneur pursuant to § 515.582 must obtain documentary evidence that demonstrates the entrepreneur’s independent status, such as a copy of a license to be self-employed issued by the Cuban government or, in the case of an entity, evidence that demonstrates that the entrepreneur is a private entity that is not owned or controlled by the Cuban government. 

This list does not supersede or excuse compliance with any additional requirements in U.S. law or regulation, including the relevant duties as set forth on the HTS.

For travelers importing authorized goods into the United States pursuant to § 515.582 as accompanied baggage, the $400 monetary limit set forth in § 515.560(c)(3) does not apply to such goods, but goods may be subject to applicable duties, fees, and taxes.
Services

The authorized services pursuant to 31 CFR 515.582 are services supplied by an independent Cuban entrepreneur in Cuba, as demonstrated by documentary evidence. Persons subject to U.S. jurisdiction engaging in import transactions involving services supplied by an independent Cuban entrepreneur pursuant to § 515.582 are required to obtain documentary evidence that demonstrates the entrepreneur’s independent status, such as a copy of a license to be self-employed issued by the Cuban government or, in the case of an entity, evidence that demonstrates that the entrepreneur is a private entity that is not owned or controlled by the Cuban government. Supply of services must comply with other applicable state and federal laws.

Note 1: All payments in settlement of transactions authorized by § 515.582 should reference this section in order to avoid having them rejected.

Note 2: The authorization in §515.582 of the CACR does not supersede or excuse compliance with U.S. laws or regulations or any other additional requirements.

Note 3: The Department of State, in consultation with other federal agencies, reserves the right to update this document periodically. Any subsequent updates will take effect when published on the webpage of the Bureau of Economic and Business Affairs’ Office of Sanctions Policy and Implementation (http://www.state.gov/e/eb/tfs/spi). Updates will also be published in the Federal Register. For further information, please contact the State Department at 202-647-7489.

Note 4: For provisions relating to recordkeeping and reports, see 31 CFR §§ 501.601 and 501.602 and 19 CFR Part 163.

LINK: What May Be Imported From Cuban Entrepreneurs To The United States

Has A Lobbying Organization Created A "Tainted Proceeding" For Air Carriers With USDOT Applications?

Has A Lobbying Organization Created A “Tainted Proceeding” For Air Carriers With USDOT Applications?

Washington, DC-based EngageCuba may have created a basis for litigation against the United States Department of Transportation (USDOT) by United States-based air carriers that do not receive from the USDOT desired routings for the Republic of Cuba.

The USDOT application criteria (https://www.regulations.gov/#!documentDetail;D=DOT-OST-2016-0021-0001) does not include a measure relating to the advocacy/lobbying activities by an air carrier as a means test for awarding routes:

“The Department’s principal objective in this proceeding will be to maximize public benefits. In this regard, the Department will consider which applicants will be most likely to offer and maintain the best service for the traveling and shipping public. The Department will also consider the effects of the applicants’ service proposals on the overall competitive environment, including effects on market structure and competition in the U.S.-Cuba market, and any other market(s) shown to be relevant.  In addition, where relevant, the Department will consider other factors historically used for carrier selection.”

A relevant portion of a 22 March 2016 letter from EngageCuba to The Honorable Anthony Foxx, Secretary of United States Department of Transportation in Washington DC, includes:

"While many U.S. companies have expressed interest in doing business in Cuba, [Atlanta, Georgia-based] Delta [Air Lines] is one of the select few who, by supporting Engage Cuba, have signaled a true commitment to public policy change. We are proud to offer our support of Delta’s proposal to offer scheduled passenger service to Cuba."

That the letter includes the statement, "... is one of the select few who, by supporting Engage Cuba…" can be inferred as creating a political litmus test, rather than a purely commercial context, for the designation of routing authorities.

This effort may be construed as a lobbying organization seeking to influence the USDOT by conveying that a supporting company is doing what others are not, or have not been invited (permitted) to do, relating to advocating for a change in United States policy, and should thus be awarded route authority instead of a company that is not a (financial) supporter of the lobbying organization, but may have a superior business plan.

If Delta Air Lines receives a route authority, might another air carrier have a basis for (administratively) litigating that a lobbying organization supported by Delta Air Lines wrote a letter to the United States Secretary of Transportation stating that Delta Air Lines should be awarded route authority(s) not because of market analysis or competitive analysis or superior business plan, but because the company is lobbying for a "public policy change."

From an executive at an air carrier: "… a business risk… they will contact me for something and I will remind them of their support for Delta Air Lines."

From an executive at an air carrier: "We will carefully review all DOT route decisions to confirm that they were awarded on the commercial merits."

OFAC Updates Frequently-Asked Questions List

Publication of New Cuba-Related Frequently Asked Questions

Today, the Department of the Treasury's Office of Foreign Assets Control (OFAC) updated its Frequently Asked Questions regarding Cuba to issue the following new FAQS: # 62, 63, 67, 68, 80, 81, 93, and 97

One Year Later... What Did New York Companies Get From Governor Cuomo's Visit To Cuba

One Year Later…. What Did New York State Companies Get For Governor Cuomo’s Estimated US$200,000.00 One-Night Visit To Cuba?

One year ago today, The Honorable Andrew Cuomo (D), Governor of the State of New York, returned from a 20 April 2015 to 21 April 2015 visit to the Republic of Cuba.

He traveled with representatives of seven (7) New York-based companies and fifteen (15) members of his staff- seven (7) of whom had a focus upon relations with the media. 

What have the companies reported….

108,000 New Hotel Rooms In 14 Years..... That's 7,714 Rooms Per Year

The government of the Republic of Cuba has reported a goal of constructing 108,000 hotel rooms throughout the country during the next fourteen (14) years.  

There was no mention as to the number of rooms for each property. 

There was no mention as to what categories (one star to five star) of properties would be created.

That's 7,714 new hotel rooms per year...

If each property has two hundred (200) rooms, that's 38 hotels per year...

If each property has three hundred (300) rooms, that's 26 hotels per year.....

The government of the Republic of Cuba has not indicated whether these properties would be owned by Republic of Cuba government-operated companies, managed by Republic of Cuba government-operated companies, managed as joint ventures with non-Republic of Cuba-based companies, or owned and managed by non-Republic of Cuba-based companies.

In May 2016, H.E. Manuel Marrero, Minister of Tourism of the Republic of Cuba, shared the following:

• Gross tourism revenue in 2015 was US$2.8 billion [of which approximately 16% was reported by Palma de Mallorca, Spain-based Melia Hotels International].
• 127 new investment projects are in progress of which 76 are foreign management hotel joint ventures signed with 17 international companies.  Another 23 contracts are expected to soon be authorized.
• The Republic of Cuba approximately 66,000 hotel rooms [primarily of one-star to three-star categories based upon international standards].
• Currently, hotel rooms are being contructed at a rate of 2,400 per year; by 2019 the rate should exceed 5,000 per year.
• 33% of current and future tourism capacity will be managed by Republic of Cuba government-operated Gaviota, controlled by the Revolutionary Armed Forces of the Republic of Cuba.  Gaviota expects to add 30 new hotels by 2018.
• The Republic of Cuba has 16,000 rooms operated as privately-owned residencies (Casa Particulars) and 1,700 privately-owned restaurants (Paladares).

USITC Releases 449-Page Report On Trade (Potential) With Cuba

18 April 2016
United States International Trade Commission
Washington, DC

U.S. EXPORTS OF AGRICULTURAL, MANUFACTURED GOODS TO CUBA COULD INCREASE IF U.S. TRADE RESTRICTIONS WERE LIFTED, BUT SIGNIFICANT CUBAN BARRIERS TO FOREIGN TRADE AND INVESTMENT WOULD REMAIN

This report examines Cuban imports of goods and services from 2005 to the present; the effects of U.S. restrictions on trade with and travel to Cuba; and Cuban nontariff measures, institutional and infrastructural factors, and other barriers that may inhibit or otherwise affect the ability of firms to conduct business in and with Cuba. It also presents a qualitative and quantitative sectoral analysis of potential U.S. exports of goods and services to Cuba in the event that U.S. restrictions are lifted and Cuban import barriers are reduced. 

The U.S. International Trade Commission (Commission or USITC) conducted this investigation at the request of the U.S. Senate Committee on Finance. To produce this report, the Commission used information from a variety of sources, including publicly available literature and data, interviews and fieldwork, and the Commission’s public hearing. The Commission used qualitative and quantitative measures to analyze the effects of U.S. restrictions and to estimate the potential for increased U.S. exports of goods and services to Cuba in the event that statutory, regulatory, or other trade and travel restrictions are lifted.

CLICK HERE FOR COMPLETE REPORT IN PDF FORMAT

US Department Of State Issues Report On Cuba (The Report Contains Commercial Information)

2015 Country Reports on Human Rights Practices
13 April 2016

Media Note
Office of the Spokesperson
Washington, DC

On April 13, 2016, Secretary Kerry submitted the 2015 Country Reports on Human Rights Practices (commonly known as the Human Rights Reports) to the U.S. Congress. The reports, now in their 40th year, document the status of human rights conditions in 199 countries and territories around the world.

Mandated by Congress, the Human Rights Reports help inform U.S. foreign policy and congressional allocation of foreign aid and security sector assistance. They also serve as a reference for other governments, international institutions, non-governmental organizations, legal professionals, human rights advocates, scholars, interested citizens, and journalists.

The 2015 Reports highlight the intensified global crackdown by an increasing number of states on members of civil society. Government efforts to stifle civil society were achieved through overt or direct means including through harassment, intimidation, detention, and restrictions on their ability to operate; through the implementation of overly broad counterterrorism or national security laws to control the freedom to assemble and to suppress dissent; and through more nuanced yet burdensome bureaucratic procedures such as the passage of NGO legislation that restricts the operating space for human rights organizations. The collective result of these measures has led to the silencing of independent voices, a growing impoverishment of political discourse, and diminishing avenues for peaceful expression and change.

CLICK HERE FOR COMPLETE TEXT IN PDF FORMAT

Economic Eye On Cuba Newsletter- US Food/Ag Exports To Cuba Increase 32%

ECONOMIC EYE ON CUBA©
April 2016

Cuba Purchasing Agricultural Equipment; Gulfwise LLC Receives 1st BIS License- 1
Google Opens Technology Center In Havana; High-Speed Internet For 40 At A Time- 2
US Department Of Commerce Misstates Colgate-Palmolive’s Timetable In Cuba- 2
February 2016 Food/Ag Exports Increased 32% Compared To February 2015- 3
No Exports Of Products Authorized By 2015/2016 Initiatives- 3
February 2016 Healthcare Product Exports- 4
February 2016 Humanitarian Donations- 5
U.S. Port Export Data- 15
Speaking Schedule- 16

CLICK HERE FOR COMPLETE DOCUMENT IN PDF FORMAT

US Department Of Commerce Misstates Colgate-Palmolive's Timetable in Cuba

Information provided by the United States Department of Commerce on 21 March 2015, in conjunction with the visit to the Republic of Cuba by President Barack Obama, was not accurate:

21 March 2016
United States Department of Commerce

“DEPARTMENT OF COMMERCE FACT SHEET: Economic development in the wake of President Obama’s regulatory changes on exports and travel to Cuba

Colgate-Palmolive: Colgate-Palmolive implements its Bright Smiles program, which provides free dental care and dental hygiene products to children in Havana.”

Republic of Cuba activity by New York, New York-based Colgate-Palmolive Company (2015 revenues US$16.034 billion) commenced prior to the 17 December 2014, the date upon which President Obama announced changes to the commercial, economic and political relationship with the Republic of Cuba.  

From the company on 5 April 2016:

“Colgate Palmolive’s Bright Smiles, Bright Futures program provides oral health education and screening to millions of children in more than 80 countries as part of an effort to reduce and prevent cavities among children. The global program, celebrating its 25th anniversary, has reached more than 850 million children around the world with its education curriculum. This award-winning curriculum is translated into 30 languages. Colgate’s well-established partnerships with governments, schools and communities -- combined with a committed network of volunteer dentists and educators -- make the program work. 

With government approval, we brought a humanitarian program modeled on Bright Smiles, Bright Futures to Cuba in 2014. In our first year, we ran the program in one municipality of Havana and reached approximately 10,000 children. Additionally, we presented our plan to dentists and representatives from the Ministry of Health at the Cuban Dental Congress in November 2015. 

Today, we’re extending our reach in Havana as well as expanding the program to the provinces of Cienfuegos and Pinar del Río in partnership with the Ministry of Health. With this expansion, we expect to reach more than 170,000 children by the end of 2016.” 

A question is why would the United States Department of Commerce include Colgate-Palmolive Company in its Fact Sheet when it knew that the activities of the company pre-dated 17 December 2014.

Given that the government of the Republic of Cuba presents its healthcare system as encompassing and an accomplishment on behalf of its 11.3 million citizens in spite of United States laws and regulations, surprising that it would authorize a United States-based company to engage in a country-wide humanitarian dental program.  

However, a goal of the authorization may be to encourage Colgate-Palmolive to both export products to the Republic of Cuba and eventually manufacture products within the Republic of Cuba, as does London, United Kingdom-based Unilever (2015 revenues approximately US$73 billion), an Anglo-Dutch multinational consumer goods company co-headquartered in Rotterdam, Netherlands, and in the United Kingdom.  Its products include food, beverages, cleaning agents and personal care products.

On 22 January 2016, Unilever reported plans to "invest in Mariel, Cuba’s Special Development Zone. Partnering with state-owned company Intersuchel, we will build a $35 million homecare factory to open in 2017.  Cuba has a new overseas investor in its Mariel Special Development Zone and a new joint venture to celebrate.

Unilever and state-owned firm Intersuchel have signed a deal which will see the formation of a new company, Unilever-Suchel S.A. and a $35 million investment (equivalent to €32.3 million) in a personal and homecare factory which is set to open in 2017.

The factory will manufacture some of our top-selling personal and homecare international brands, including Sedal shampoo, Rexona deodorant, Omo detergent, Lux soap and Close-Up toothpaste. Unilever will take a 60% stake in the venture, and Intersuchel will hold 40%. The factory is expected to generate 300 direct jobs.

Unilever will invest in Mariel’s Special Development Zone, which allows foreign and domestic companies to trade and invest with fewer regulations and is designed to encourage overseas investment.

The signing ceremony for the joint venture was attended by Dutch Foreign Trade Minister Lilianne Ploumen, Ana Teresa Igarza, General Director of the Mariel Special Development Zone, Fabio Prado, President of Unilever Mexico & Greater Caribbean and Pedro Fraga, President of Intersuchel S.A."

Unilever reported that a company in a joint venture with a Republic of Cuba government-operated entity that expects to market the products of the joint venture to Republic of Cuba government-operated companies, need to be prepared to accept up to 720 days for account receivables.  Unilever reports that its operations have had a maximum wait of 180-days to receivable a payment.

Google Opens Technology Center In Havana... High Speed Internet For 40 At A Time

California-based Google has opened is technology center in the city of Havana, Republic of Cuba.  The facility has twenty Chrome notebooks, one hundred Google cardboard virtual reality visors, and two cameras for transmitting video to YouTube, owned by Google.

Republic of Cuba government-operated Empresa Nacional de Telecomunicaciones de Cuba S.A. (ETEC S.A.) is providing the facility with high-speed Internet, which is not available to the public.  The facility will be open five days a week and can accommodate forty customers (limited to one hour per session).

Reportedly, the partner in the Republic of Cuba is paying approximately US$900.00 per month to ETEC SA for high-speed Internet access- which provides the users of Chrome notebooks with a connection approximately seventy-times that of existing Wi-Fi locations throughout the Republic of Cuba.

According to ETEC SA, as of March 2016, an average of 200,000 people per day access the Internet from eighty-five (85) public Wi-Fi hotspots located throughout the country; in December 2015, the number was 150,000 users per day.  ETEC SA plans to create an additional sixty (60) wi-fi hot spots and establish one hundred (100) Internet cafes in 2016.  As of 31 December 2015, there were three hundred and forty-five (345) Internet cafes with a combined 11,187 computers.  The Republic of Cuba has 11.3 million citizens.

The Republic of Cuba accesses the Internet through an undersea fiber-optic cable connected to Venezuela in 2011, which became fully-operational in 2013.

From Google on 21 March 2016:

"¡Adelante! We’re thrilled to partner with the Museo Orgánico Romerillo in Havana, Cuba, which is showcasing the work of local artist Kcho. It will also feature some of the latest Google products including Cardboard and Chromebooks, connected to local carrier ETECSA’s Internet network. We hope this installation will enable people for whom Internet access is scarce to browse the web and find information.

We’re excited that Cuban children will be able to try out virtual reality to explore sites from around the world -- from Stonehenge to Port Hercule -- the same way that children in other countries do. These efforts, which are all led by our Access team, are just a start, but an important one. They demonstrate what might be possible in the future.

They come as other US technology firms and other companies increase their efforts in Cuba to bring a variety of services to the island -- including potentially WiFi and broadband providers as well. We’re also exploring additional possibilities around increasing and improving internet access, but they’re at early stages. We’ve always been very open about the fact that we want to make available as many of our products as possible throughout the world, because we believe that access to information and technology can improve lives.

In 2014, we launched Google Chrome, Google Play for Free Apps, and Google Analytics in Cuba. Later, after steps were taken toward normalizing relations between Cuba and the US, we introduced Toolbar in Cuba in January 2015 to help people search the web more easily.

We know, from the experience of many countries around the world, that new technologies and improved internet access can help people in their daily lives, provide new information and experiences, and help harness a country’s creativity and ingenuity. We hope to have the chance to offer more services to the Cuban people in the future."