Easing the Cuban Embargo: Automotive Industry Unlikely to Realize Any Immediate Benefit

The president’s recent announcement of plans to ease the 54-year old embargo of Cuba engendered great excitement and anticipation on the part of U.S. companies eager to do business in Cuba. However, although these proposed changes are expected to create business opportunities in several key sectors, the automotive industry is unlikely to realize any immediate benefit. Current law prohibits the export of automobiles and auto parts to Cuba, and the president’s announcement included no proposal to ease or change that law. However, although there appear to be no immediate opportunities in Cuba for the American automotive industry, this situation is fluid and opportunities may arise in the future. 

The various federal statutes which together create what we commonly refer to as the Cuban embargo bestow the president with limited discretion to ease sanctions on Cuba. The measures announced last month likely represent the extent of that authority. Accordingly, any future attempt to ease restrictions on the export of automobiles will likely require Congressional approval. With Republicans now in control of the House and Senate, U.S. businesses are unlikely to see substantial changes in the Cuba sanctions until the next administration takes office.

The five business sectors expected to receive the most immediate benefit from the proposed changes are the banking, travel, agriculture, residential construction, and telecommunications industries. The president’s announcement included proposals to allow U.S. banks to open correspondent accounts at Cuban financial institutions, which will allow travelers to use U.S. credit and debit cards in Cuba and exporters to make and receive payments in Cuba without using bank accounts in third countries. In addition, while travel restrictions will remain in effect, those who qualify under one of twelve distinct categories, will be permitted to travel to Cuba without undergoing the time-consuming and laborious process of obtaining specific authorization from the Treasury Department. Finally, the direct sale of certain goods including agricultural equipment, materials for use in private residential construction, and telecommunications products and services, will be permitted. None of these proposed changes will take effect until the Treasury and Commerce departments issue new regulations and licenses implementing those changes. We currently expect these regulations and licenses to be published on an ongoing basis, beginning in January 2015.

Dealing with sanctioned countries like Cuba requires a thorough understanding of complex laws and regulations, some of which are constantly changing. Addressing these risks requires a clear understanding of the law and the way that U.S. government agencies interpret it. It also means implementing policies and procedures to ensure compliance. Accordingly, no dealings with Cuba should occur without first determining that such actions are allowed under the current restrictions, which to date largely remain in place. U.S. and multinational companies should consult with qualified attorneys to assess the state of the law and determine whether contemplated transactions are authorized.