WHAT DO TRUMP’S CUBA CHANGES MEAN FOR CIGARS?

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WHAT DO TRUMP’S CUBA CHANGES MEAN FOR CIGARS?

 

In short: nothing yet, but it’s still unknown.

Today, President Donald Trump delivered a speech calling for a change on the U.S. government’s policy towards Cuba. That speech, and an accompanying policy memo, are the first in what will be a series of steps over the next few months to tighten restrictions for Americans visiting and engaging with Cuba.

The Trump administration is mainly focused on attempting to weaken the Cuban government through the Grupo de Administración Empresarial (GAESA), the state run Cuban military holding company that is believed to control over half of Cuba’s economic and the vast majority of its tourism business. Trump has argued that the deal, a series of negotiations and policy directives from the Obama administration, the U.S. has with Cuba is both unfair to the U.S. and allows the Cuban government to commit human rights’ abuses.

President Barack Obama made a number of changes regarding Cuba during the latter half of his administration. While the Cuban embargo remains in place, the Obama administration greatly eased restrictions on Americans visiting Cuba, reestablished the U.S. embassy in Cuba and notably for readers of this website, allowed for American travelers to bring back Cuban cigars to the U.S.

Trump’s new policy is not finalized. Various executive agencies are tasked with finalizing the exact specifics, which are expected to be be published and enacted over the coming months. As of now, there’s no official change in law, only an announcement that changes are coming soon and an outline of what those changes are expected to be.

The Department of Treasury’s Office of Foreign Assets Control (OFAC), one of the government’s key agencies when it comes to Cuba policy, has published a brief Q&A describing some of the specific changes expected, largely related to travel. However, it remains unknown what, if any, changes will take place regarding whether American travelers can bring Cuban cigars legally into the U.S.

CAN I STILL BRING CUBAN CIGARS BACK?

Yes, at least for now. No new regulations are in effect and the administration has not put out any policy directly relating to Cuban goods.

Bloomberg cited a senior administration official stating that there would be no changes to policies that allow Americans to bring back Cuban cigars and rum.

For reference, the current policy allows any traveler returning to the U.S. from a foreign country to bring up to 100 cigars, manufactured in any country including Cuba, valued at no more than $800 back to the U.S. every 31 days without paying taxes. Anymore are subject to the U.S. taxes and other restrictions.

CAN I BUY CUBAN CIGARS ONLINE AND HAVE THEM SHIPPED TO THE U.S.?

Not legally. That was never legal.

I’M GOING TO CUBA, CAN I BUY CUBAN CIGARS OR VISIT CIGAR FACTORIES?

Yes.

IS THERE ANY REASON TO BELIEVE CIGARS COULD BE AFFECTED?

Yes.

Is there a good chance there are changes? Who knows.

As mentioned above, there’s no word from the government that specifically deals with Cuban products. However, OFAC’s Q&A indicates, “travel-related transactions with prohibited entities identified by the State Department generally will not be permitted.”

Habanos S.A., the Cuban cigar monopoly is a joint venture between Imperial Brands, plc and the Cuban government. It’s one of Cuba’s most important companies and could be a target of the GAESA-focused rules. Beyond just banning the purchase of Cuban cigars, new rules could be enacted that would prevent American tourists from visiting cigar factories. Of note, this would likely not prevent American travelers from visiting Cuban tobacco farms, which are privately owned.

CAN I STILL GO TO CUBA?

Yes, with a few caveats.

The announcement today largely focused on new restrictions on travel, specifically an end to individual person-to-person trips.

After the new rules take place, American citizens will still be able to go. They will either need to have a special license—business, educational, journalist, etc.—or they will need to be part of a group person-to-person trip with a specific itenerary approved by the government and a licensed tour guide.

It is widely expected that Americans will no longer be able to stay at hotels or eat at restaurants owned by GAESA, which covers a lot of Cuba’s tourism industry. This means tourists will be regulated to casas particulares and Airbnb homes, as well as independently-owned restaurants. There will be loopholes for some GAESA businesses, notably, Americans will still be able to take direct commercial flights and cruise ships to Cuba.

Furthermore, new restrictions are likely to be imposed regarding record-keeping. A policy directive reviewed byPOLITICO indicates Americans will have to keep records of every transaction they make in Cuba for up to five years in the event the OFAC chooses to audit the citizen.

I MADE PLANS TO GO TO CUBA ALREADY, WHAT NOW?

Per OFAC’s Q&A, so long as you made at least one travel-related transaction, i.e. booking transport or lodging, prior to June 16, 2017, you will be able to go without any issue.

WHAT HAPPENS IF I HAVE NOT MADE THOSE PLANS YET?

Proceed with caution. The new rules are not in effect, but they could come into effect at any moment. That means if you book a reservation at a GAESA-owned hotel and the new rules take effect, you could be prevented from staying at the hotel. You also presumably could run into issues with licenses to go to Cuba, but that’s not covered in OFAC’s Q&A.

HOW ARE THESE RULES BEING ENFORCED?

Great question.

IS THE EMBASSY BEING CLOSED?

Nope. There are no plans to close the embassy at this time.

WHAT ABOUT AMERICAN COMPANIES THAT WANT TO DO BUSINESS IN CUBA?

That’s a bit more complicated, but per OFAC, businesses that were engaged in Cuba prior to June 16 seem to have been grandfathered. Anyone wanting to do business in Cuba in the future will need to get permission.

WHEN WE WILL KNOW ABOUT THESE NEW RULES?

It’s going to be a few months. The policy memo from the White House says Treasury and the Commerce Departments will begin meeting to discuss the new rules within the next 30 days. OFAC said it will be a few months before the rules are announced and enacted.

HOW IS THE CUBAN GOVERNMENT REACTING TO THIS?

Here’s Cuba’s ambassador to the U.S.:

Disclaimer: None of the above represents legal advice. Please contact an attorney and/or appropriate government agencies before making any decisions regarding Cuban travel or other transactions.

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