US Relaxes Restrictions On Cuba, But A Maze Of Hurdles Remains

The Obama administration’s new rules on U.S. travel and business with Cuba, which went into effect Friday, are the first concrete steps toward softening the 50-year-old embargo on the island. But that doesn’t mean Cuba is flinging open its doors to Americans just yet.

The U.S. Treasury Department and Commerce Department announced Thursday that they would lift certain restrictions on U.S. remittances, exports and travel to Cuba, one month after President Obama announced the U.S. would be resuming diplomatic relations with the island's government. But the new regulations only pertain only to U.S. entities, and analysts say the actual effect of these changes is still largely in Cuba’s hands.

New rules on U.S. travel to Cuba make up perhaps the biggest change. Tourist travel to Cuba is still prohibited, but travelers going to Cuba under 12 existing categories – including family visits, educational trips and traveling for religious reasons – will no longer require a special license.

Effectively, this means an American citizen can now book a trip to Cuba and simply sign an affidavit affirming that he or she is going under one of the 12 approved travel categories. In theory, a traveler could go for tourist activities while citing a different reason on the affidavit. But travel agencies are required to keep those documents for five years in case federal authorities ever want to check those visits. Travelers also must still get a Cuban visa to travel to the country, and approval times vary; visas for journalists can take much longer to obtain than those for educational trips.

It will also be a while before Americans can purchase plane tickets directly via Kayak or Orbitz. Armando Garcia, president of Marazul, a charter and travel agency that specializes in travel to Cuba, explained that while the new rules allow airlines to start running their own regularly scheduled flights to Cuba – charter companies are currently the only ones operating those flights, some in agreement with American Airlines, Delta Air Lines and JetBlue – Cuban government approval is still needed.

“There needs to be more negotiations between Cuba and the U.S. in order to begin transportation with regularly scheduled airlines,” he said. “In order to operate a charter to Cuba, you need the permission of the U.S. and landing rights with Cuba.” For now, U.S. travelers can book trips through a number of travel agencies. And because those agencies no longer need special licenses to organize trips, travelers now have a wealth of new companies to choose from. But Garcia noted that even if flights increase, Cuba's hotel capacity remains limited.

For business dealings with Cuba, the situation gets trickier. The new regulations open opportunities for U.S. businesses to export certain goods to Cuba, including telecommunications equipment and building materials for private residents and small businesses. But the Cuban government still must allow permission for those exports to come through, and satisfying its requirements has proven cumbersome.

“It sounds easy on paper and policy, but it’s not necessarily so,” said Kirby Jones, president of Alamar Associates, a consulting firm that specializes in U.S. trade with Cuba. He noted that under Cuban law, nongovernmental entities cannot import goods into the country without Havana's approval. “So when we say we’re going to sell construction materials to private residences, to whom are we going to sell those?” he asked.

Jones noted that the problem of identifying Cuban recipients of exports had already been an issue. “If you read the fine print under [export rules around medicines], it says medical products can be sold to Cuba if the exporter proves who the end user is and is not,” he said. “How do you do that? Well, you can’t. Who’s to say who the patient is that’s going to use that machine or take those pills?” Those questions, he said, still have to be hashed out between the U.S. and Cuban governments.

Under the new regulations, U.S. banks may also open direct corresponding accounts inside Cuba. But John Kavulich, senior policy adviser for the U.S.-Cuba Trade and Economic Council, said they would wait to take advantage of the new regulations, even though doing so immediately would greatly speed financial transactions between the two countries. The reason for the hesitation is the fact that banks have already been hit with billions of dollars in fines due to violations of Cuban sanctions.

“It potentially is going to take some time for U.S. banks to make certain that the Treasury Department, the [Office of the Comptroller] and the Federal Reserve are all on board,” he said. “Because if you do a Cuba transaction now within what’s authorized, and you get a decimal out of place, you can get hit with a $100,000 fine, even if it’s a $700 transaction.”

Kavulich agreed with Jones that U.S. businesses would not be getting an immediate foothold in Cuba, despite the new U.S. rules. But he also said the Castro government remained the main obstacle to increased engagement. “The Cuban government generally will permit what it believes it can control,” he said. “The perception that Cuba is Dubai, 93 miles south of Key West, Florida, waiting with piles of money to buy product from the U.S., is illusory at best.”