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  • Addison Chan

New US Regulations are GOOD NEWS for boaters!

An In-depth Analysis by Addison Chan

Here are the bullets:

  1. Individuals can still self-certify their qualification for a general license to go to Cuba.

  2. The individual people to people sub-category of travel has been eliminated but the other 12 license categories have not changed and could well produce a much richer travel experience.

  3. There is a list of prohibited vendors which might create a problem for tour operators but is easily managed by individuals.

  4. For a trip of up to 14 days the only document required by a US flagged vessel is a CG3300.

Castillo Morro in Havana as viewed from the former HQ of the Bacardi Rum Company

Here is the whole enchilada:

When President Trump issued his National Strategic Presidential Memorandum (NSPM) to a partisan Miami audience in June of this year, the popular sentiment was that Cuba was being closed off from Americans once again. Indeed, much of the message of the day was to make good on a campaign promise to roll back on the diplomatic détente with Cuba that had been started during the Obama presidency. The objective was to punish the Castro government for their dictatorship, while concurrently encouraging and supporting democratic values and the business initiatives of private Cuban citizens. Much of the media attention seemed to be on the punishment of the government and less so on the support of private citizens. Indeed, there was skepticism that the two objectives could coexist, leading many to believe that the gates were being slammed shut that day.

The apparent conflict arises from the cancellation of the Individual People to People category of general license to curb rampant illegal tourism. Americans had been hopping on inexpensive flights to Cuba in rapidly increasing numbers during the 18 months preceding the NSPM and many new private Cuban businesses sprang up to support the travel boom. Air BnB had over $20 million in bookings of Cuban private casas in their first full year of operation and new small family run restaurants were opening every day. Shutting the gate would hurt, and I was concerned for my friends in Cuba who had invested in providing tourist services.

The influx of American travelers brought a noticeable improvement in the lives of many Cubans that was reflected in freshly painted houses, better clothes and the appearance of the ultimate status symbol the iPhone. The impending prohibition of individual people to people travel was seen by many as the end of an 18-month blip of prosperity and by hardliner anti-Castro expat Cubans as just punishment for nearly 60 years of dictatorial rule. The headlines of the day focused on the change of direction but not the substance of the change.

When the NSPM was issued I wrote that the devil would be in the details and that the details would be contained in the new OFAC regulations and in the list of prohibited entities that would be produced by the Department of State. I also suggested that given the timing of the announcement the details would not be forthcoming until well after Labor Day and that Thanksgiving was not out of the question. On Nov. 9, 2017 right on schedule the details were announced. Like all government documents the new regulations are a tedious read and OFAC thoughtfully produces a FAQ to make the 35+ pages of legalese more digestible, but as I have said in the past the FAQs do not tell the whole story.

My biggest fear was that the Department of State list of prohibited entities would be so onerous that it would be impossible to go to Cuba without breaking the law. Thankfully the list is not that restrictive and my initial prediction of business as usual (or almost) seems to be a reality. With only slight impediments Cuba is open for business and private American citizens are as welcome in Cuba now as they always have been. So how does my statement of open for business reconcile with the “get tough” position that was promised in the NSPM and that has been echoed by the popular press?

Let’s start by looking at the list of prohibited entities because this is the clearest indication of how the NSPM is to be implemented. The rules state explicitly that only those entities on the list are restricted. In other words, if an entity is not listed, it is permissible to have dealings with them which removes much of the responsibility of the individual traveler to find clarity in the murk of Cuban corporate structure. It should come as a huge relief to all travelers that if the sign on the door doesn’t correspond with an entry in the list than you are not in violation. There is even a procedure for dealing with an inadvertent violation of the list, but more on that later.

The list is impressive as it contains 2 government ministries, 87 corporate entities, 82 hotels, 2 travel agencies and 5 marinas with which Americans are prohibited from conducting direct financial transactions, unless those transactions are specifically authorized. Many of the organizations that are on the list are not public facing, so it is unlikely that an individual would ever encounter them. The hotels list is long but not exhaustive so any traveler wishing to stay in a hotel can still do so, it will simply cost more because the unembargoed hotels will see higher demand. Iconic properties such as the Habana Libre, Hotel Nacional and Hotel Granada in Santiago are not on the list and so are open for American business. The government souvenir shops are excluded so souvenir shopping will be limited to street vendors where the prices are normally better for the same or better merchandise. For most of us the exclusion of certain hotels and souvenir shops is not a show stopper.

But what about the five excluded marinas? The good news for American boaters is that if a marina is not on the list it is still permissible to use the facility. Marlin Group, the largest operator of marinas in Cuba is not on the list and therefore Marina Hemingway in Havana, Marina Tarara, Marina Darsena in Varadero, Marina Cayo Guillermo, Marina Punta Gorda in Santiago de Cuba, Marina Marlin Trinidad, Marina Marlin Cienfuegos, Marina Marlin Cayo Largo del Sur and Marina Siguanea in Isla de la Juventud are all open for business as usual.

Marina Hemingway during a rally from Florida

Now let’s look at the five marinas which are not permitted and how that will affect American boaters. Marina Gaviota Cayo Coco and Marina Gaviota Las Brujas are basically bases for deep sea fishing and snorkeling adventure cruises that are frequented by resort guests. Transient boaters are not permitted entry, so their inclusion has no impact. The other 3 marinas are ports of entry and are strategically located on the north Cuban coast so their inclusion is problematic for those boaters who prefer to use marinas. The inclusion of these marinas does not impact on their ability to serve as ports of entry and as fuel stops you just can’t stay to enjoy the facilities.

To understand how the paradox is developed one needs to examine the details of the federal register and untie the knots of legal language. I would encourage any American boater who is considering a trip to Cuba to familiarize themselves with the regulations in Part 515 of the federal register but here is the quick version.

It is made explicit in the first part of the rules that direct dealings with entities on the list are prohibited therefore there is no doubt that Marina Gaviota Varadero, Marina Puerto de Vita and Marina Cabo de San Antonio are prohibited for marina stays. It is a shame as sitting by the pool looking at the boats and bathing suits go by is a nice treat at Marina Gaviota Varadero. In another part of the rules it is explicitly stated that transactions for Visas and transportation to and from Cuba and within Cuba are permitted and may be conducted through the prohibited entities unless there is a specific prohibition to do so as defined by the class of general license under which travel is conducted. There are no such prohibitions in any of the other license categories therefore, if you are in Cuba for a legitimate reason you can still use the facilities on the prohibited list for the purposes of obtaining clearances and fuel, but you cannot stay for a sunset mojito.

It is vitally important however that your receipt for payment very clearly itemizes the permitted items and nothing else. If one is using the prohibited marinas simply for clearing out of the country, there is no transaction that is conducted with the marina so for example stopping at Marina Los Morros in Cabo de San Antonio to surrender your visa enroute to Mexico is a non-event as no financial transaction need to take place. It has also been suggested by admiralty lawyers familiar with Cuban travel that when using the marinas for permitted transactions that a receipt that does not bear the marina’s name and logo will provide a further degree of distance from any misunderstanding if you are challenged in the future. Do not throw out any receipts that are issued to you because to do so will put you in violation of the law. In a separate article I will discuss in more detail strategies to accommodate the restrictions.

The big elephant in the room is the ending of the general license sub-category of individual people to people travel which has been equated by the media with the prohibition of American citizens to travel independently and legally to Cuba.

It is categorically and unequivocally wrong to assume that individual travel to Cuba by Americans is now illegal because of this change. To understand the impact of the change It is useful to first understand what constitutes individual people to people travel.

Travel to Cuba that is classified as People to People is travel made under an Education general license, which is one of the 12 permitted categories. If one takes the time to dig into the fine print of the license category definitions it becomes apparent that People to People is an accommodation for those Americans who wish to study in Cuba but are neither pursuing formal academic credentials through academic institutions nor wishing to take courses that are at least 10 weeks in duration. There is no provision in the license definition for acceptable subjects of study so over the years cases have been established that permit a wide range of topics that range from language studies, Cuban history, endemic birds of Cuba, to Cuban underwater bio-diversity etc. Apparently, there are many aspects of Cuba that are worth studying and the list is growing.

There are three key stipulations for traveling under the people to people sub-category. Firstly, travel must take place under the auspices of a sponsoring organization that has the stated purpose of promoting people to people contact while also engaging in an educational activity. Secondly the level of educational activity must be consistent with a full-time schedule. And finally records documenting travel must be retained for up to 5 years to prove compliance if challenged by OFAC. The specificity of the three stipulations is a stark contrast to the absence of clarity in the definitions of what constitutes people to people contact or a full-time schedule.

In the early days of people to people travel, Cuba was still very much the forbidden fruit. The Helms Burton legislation of 1996 and Fidel Castro’s expulsion of the US dollar as a currency of trade in 2004 made travel a risky proposition. General licenses for travel had to be approved in advance of travel and the granting of a license was made by an OFAC official far removed from the realities of Cuba. To improve the odds for a favorable decision, the early people to people programs were very structured with well-defined programs of activities.

One of the first moves in the Obama détente was the removal of the provision that General licenses needed to be issued before travel commenced. The onus for determining whether travel met the terms of a general license now fell to the traveler or in the case of people to people travel, to the organization sponsoring the travel. The gray area created by the lack of clear definitions provided sponsoring organizations with much more leeway in structuring programs that in their “opinion” met both the “people to people” and “the consistent with a full-time schedule” requirement. Given the rising interest in Cuba caused by the shifting of the diplomatic winds, group travel to Cuba under people to people exploded and with the explosion much of the previous rigor in designing qualifying programs disappeared.

There were literally dozens of cruise ships and airplanes that disgorged groups of American citizens every week who had stated missions of studying and engaging in people to people travel. Money was spent freely. The tourist infra-structure organizations of the Cuban government, many of which were controlled by the military, enjoyed a huge boom in business. Everything was legal provided nobody stated that they were in Cuba for tourism and that their sponsoring organizations maintained records documenting their activities in Cuba for the next five years. It was amazing how much study took place in the tabernas of Habana Vieja and on the beaches of Varadero. School was never like that when I was studying!

The next big change for Cuba travel as the Obama détente gained momentum was the elimination of the sponsoring organization requirement for people to people travel. Now the onus for determining what qualified as people to people and consistent with a full-time schedule fell to the individual traveler and with that change, Cuba travel became a free for all provided one did not call it tourism.

Study hard! There will be a quiz later....

For a nearly 2-year period that ended on Nov. 9, 2017 any American who could spell studee was eligible to go to Cuba provided they did not go for tourism. They could stay in all-inclusive resorts, dance the night away in Cuban discos and work on lineless tans on certain beaches provided they had a stated purpose of studying an aspect of Cuba in a non-academic way. If group people to people travel was the professor’s private seminar course with a 100% participation component in grading, Individual People to People travel became the independent study, where the student determines the subject and then assigns their own passing grade.

The Trump NSPM is aimed at curtailing the travel free for all and simultaneously punishing the Cuban organizations that have links to the Military and Security side of the Cuban government. To that extent they have been successful and the political posture of being tough and meeting an election promise have been kept.

So what is the bottom line for private travel to Cuba?

Firstly, People to people travel is still alive and well. The Cruise ships and airplanes are still disgorging their passengers as they have for several years. The difference today is that organizations sponsoring groups of People to people travel must now navigate a commercial obstacle course of vendors that must be avoided when providing the services required by their group members. It will be a challenge for many to meet these requirements, but it is possible and undoubtedly the potential for continuing profits will provide sufficient motivation for the principals involved to find solutions. In any event you as a customer have a layer of protection from OFAC sanctions provided you have a bona fide belief that your sponsor is compliant. It is not a suit of armor, but it is no different than it was before the issuance of the NSPM.

Secondly, if groups are not your thing, you can still travel as an individual under the other 11 categories of General License. Travelers will have to be more focused in their activities in order to qualify, but many of the License definitions are broad enough to provide significant leeway. For example consider the scenario provided in the official guidance document under the Support for the Cuban people category:

…. A group of friends plans to travel and maintain a full-time schedule throughout their trip by volunteering with a recognized nongovernmental organization to build a school for underserved Cuban children with the local community. In their free time, the travelers plan to rent bicycles to explore the streets of Havana and visit an art museum. The travelers’ trip would qualify for the general license because the volunteer activities promote independent activity intended to strengthen civil society in Cuba and constitute a full-time schedule that enhances contact with the Cuban people and supports civil society in Cuba, and results in meaningful interaction between the travelers and individuals in Cuba…

The example provided by OFAC is general, but it provides valuable insight into the possible interpretations of the license qualifications. While there is still some ambiguity there is less than there was in the past which should serve to calm the fears of those who do not want to be the precedent setters in an enforcement action. In previous iterations of the regulations the examples for each of the license categories were not provided, or at least not to this level of detail which was likely one of the reasons most individuals gravitated towards the people to people classification of travel which had an anything but tourism definition.

Most of us in the boating community understand the concepts of sharing, camaraderie and extending a helping hand better than other segments of our society. Even though we are partisan in our choice of favorite anchors and chart suppliers, we also have the tacit understanding that when the chips are down we come together solve the problem and then celebrate the victory however small it might be. The drive away from individual people to people reinforces those values when we go to Cuba. Most of the boaters I meet are law abiding citizens who wish to follow the rules and wish to learn about Cuba while gaining deeper insights into the people and culture while sharing some of their own. In the free for all world of individual people to people travel, much of the good intentions was buried under the onslaught of rides in 57 convertibles and the haunting melodies of the Buena Vista Social Club. Under the new rules you can still play, but you also must do some good while you are in the country. I for one am delighted by the change.

Cuba is open for business and based on the volume of PM’s and emails that I receive from individuals wanting to contribute, little has changed except now you have to do more than just show up and assign your own grade.

The rules in no way prohibit individual travel and the entities on the prohibited list are relatively easy to avoid. It must be said however that there is still gray area in the rules governing Cuba travel although the gray has been mitigated by the recent changes. The definitions of critical terms have never been established and while the examples provided in the current rules provide important guidance, they do not constitute common law.

Under the doctrine of presumed innocence, the burden of proof for a violation is with the government. If you are a bona fide traveler following the rules as you understand them the risk is not in committing a violation but rather being called upon to defend yourself nevertheless.

Until the embargo is ended once and for all, the risk of being called upon to justify your travel will be present, and therefore Cuba will remain the province of those individuals ready to accept a degree of calculated risk. With the most recent rule change there is a welcomed improvement of clarity, but they are not guarantees. The safe play is to stay home, but the safe play may not be the most rewarding.

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