My take on OFAC regulations for telecommunications and Internet-based services to/from Cuba

_{mmisof / Pixabay}

The U.S. government's policy towards Cuba consists of two essential fronts. One of them has already been introduced here, and is defined by the implementation of a program aimed at political regime change. The second, which I've so far only discussed by way of reference, is oriented towards the maintenance of a regime of economic, commercial and financial sanctions that dates back to 1960, when Eisenhower banned US exports to Cuba.

In both dimensions of U.S. policy, the management of access to and use of telecommunications and IT services has differed —due to its relative flexibility— from the way in which the rest of interest areas are handled. Today I want to focus on the regulatory aspect, so I'll be introducing here the normatives on telecommunications and Internet-based services access as currently enforced by the Office of Foreign Assets Control (OFAC), with my own assessment at the end.

Regulations on telecommunications: a condensed history from 1959 to 1992.

After John F. Kennedy announced "an embargo on all trade with Cuba" in February 3, 1962, telecommunications services were not affected with the issuance of the Cuban Import Regulations, a measure signed by Douglas Dillon —then Secretary of the Treasury— and filed in the Federal Register on February 6, 1962, at 10:19 am.

_{From left to right, first is a facsimile from one draft of Proclamation 3447 —announcing a total embargo on Cuba— with handwritten notes, and in the second and third pictures are facsimiles with the final version. Source: JFK Library.}

When the Cuban Assets Control Regulations (CACR) were issued on July 8, 1963, a general license allowing telecommunications services was included as follows:

§ 515.542 Communications.

All transactions of common carriers incidental to the receipt or transmission of mail and telecommunications with [Cuba] are hereby authorized.

The CACR controls to this day the financial and commercial transactions related to Cuba and its nationals, and are codified in Title 31, Part 515 of the Code of Federal Regulations. In October 1966, although the CACR were not modified, OFAC rescinded the referred general license, issuing specific licenses in favor of U.S. companies then with interests in the telecommunications services market in Cuba (the International Telephone & Telegraph and American Telephone & Telegraph).

On September 29, 1979, Jimmy Carter signed the Export Administration Act. Through this legislation, U.S. Congress declared that United States would continue to use export controls to restrict trade in goods and technology where necessary to advance its foreign policy goals. In a letter to congressional majority leaders, Carter specified that —with certain exceptions— a validated license was required to export any product or technical data to Cuba, with a policy of denying applications for such a license by default.

On another trend, the growing interest of the media in operating satellite transmissions from Cuba to the United States led to an update —on September 5, 1980— of section 542 of the CACR, which authorized the use of satellite channels for the transmission of television news and news programs from Cuba. OFAC also made official the revocation of the general license that allowed, since 1963, transactions related to telecommunications services.

By 1990, telephone calls between Cuba and the United States were managed by means of a tropospheric scatter transmission system, activated in 1957. The service provided by two submarine cables installed in 1950 had collapsed in April 1987, and, although the Treasury Department authorized their replacement, the connection was not reactivated at that time for lack of bilateral agreement.

In August 1992, the tropospheric scatter transmission system was severely damaged, and only a few U.S. Government circuits were repaired. So after this eventuality, there were no direct links left for telephone communications between Cuba and the United States.

Then the Cuban Democracy Act came into play, which solved —from the American perspective— two problems: the losses that AT&T was reporting on Canadian companies that had direct links to Cuba; and the consensus around that the state of telecommunications relations didn't contribute to erode the Cuban political regime, and that so it was necessary to work towards increasing the means of communication.

The act was passed as part of the National Defense Authorization Act for Fiscal Year 1993, and authorized telecommunications services and facilities necessary "to provide efficient and adequate telecommunications services between the United States and Cuba". The legislation was a major game changer, because it enabled too the issuance of licenses "for the full or partial payment to Cuba of amounts due Cuba as a result of the provision of telecommunications services," an economic relationship prohibited since 1966.

On October 4, 1994, the Federal Communications Commission approved the application of five companies to provide direct telecommunications services between the United States and Cuba. Earlier, on June 10, 1994, Sprint had received authorization to provide direct packet data services through the operation of a digital satellite circuit. Two years later, this company would facilitate Cuba's permanent connection to the Internet.

On August 2, 1995, OFAC updated the CACR with a general license that authorized all transactions associated with the use of cables, satellite channels, radio signals and other means of communication to provide telecommunications services between the two countries —services included: telephone, telegraph and similar services, as well as the transmission of radio and television programs and cable news service between the two countries—. The execution of the payments corresponding to Cuba was conditioned upon obtaining a specific license from the U.S. companies, ensuring that the transactions were consistent with the "public interest" and U.S. foreign policy.

Current OFAC regulations on telecommunications services

_{OFAC is located at Freedman's Bank Building in Washington. Photo obtained via Wikimedia Commons (credited to APK) under CC BY-SA 3.0 license.}

Since the CACR was established, section 515.542 has contained the general policy for telecommunications services. Each administration has modified it according to the context, with Barack Obama going the furthest in its relaxation. Neither Donald Trump —whose policy was extremely aggressive— nor Joe Biden have so far altered the wording it had at the end of Obama's term in the White House. This tells us that there is consensus on the strategic nature of this issue, on both sides of the aisle. Its relevant subsections below:

§ 515.542 Mail and telecommunications-related transactions.

(a) All transactions, including payments, incident to the receipt or transmission of mail and parcels between the United States and Cuba are authorized, provided that the importation or exportation of such mail and parcels is exempt from or authorized pursuant to this part.

(b) All transactions, including payments, incident to the provision of telecommunications services related to the transmission or the receipt of telecommunications involving Cuba, including the entry into and performance under roaming service agreements with telecommunications services providers in Cuba, by persons subject to U.S. jurisdiction are authorized. This paragraph does not authorize any transactions addressed in paragraphs (c) or (d) of this section, nor does it authorize the entry into or performance of a contract with or for the benefit of any particular individual in Cuba.

(c) All persons subject to U.S. jurisdiction are authorized to enter into, and make payments under, contracts with telecommunications service providers, or particular individuals in Cuba, for telecommunications services provided to particular individuals in Cuba, provided that such individuals in Cuba are not prohibited officials of the Government of Cuba, as defined in § 515.337 of this part, or prohibited members of the Cuban Communist Party, as defined in § 515.338 of this part. The authorization in this paragraph includes payment for activation, installation, usage (monthly, pre-paid, intermittent, or other), roaming, maintenance, and termination fees.

(d) General license for telecommunications facilities. Transactions, including payments, incident to the establishment of facilities, including fiber-optic cable and satellite facilities, to provide telecommunications services linking the United States or third countries and Cuba, including facilities to provide telecommunications services in Cuba, are authorized.

This is the most open area of the U.S. sanctions regime targeting Cuba. Note that even any person under U.S. jurisdiction is allowed to make payments for contracting telecommunications services to individuals in Cuba. In 2015, in the context of the thaw following December 17, 2014, OFAC introduced section 515.578, aimed at facilitating bilateral commerce of certain internet-based services and software. Its relevant subsections below:

§ 515.578 Exportation, reexportation, and importation of certain internet-based services; importation of software.

(a) Except as provided in paragraph (b) of this section, the following transactions are authorized:

(1) Certain internet-based services. The exportation or reexportation, directly or indirectly, from the United States or by a person subject to U.S. jurisdiction to Cuba of services incident to the exchange of communications over the internet, such as instant messaging, chat and email, social networking, sharing of photos and movies, web browsing, blogging, web hosting provided that it is not for the promotion of tourism, and domain name registration services.

(2) Services related to certain exportations and reexportations. To the extent not authorized by paragraph (a)(1) of this section or by § 515.533, the exportation or reexportation of services, including software design, business consulting, and information technology management services (including cloud storage), that are related to the following items, or of services to install, repair, or replace such items, and training related to installation, repair, or replacement of such items:

(i) Items subject to the Export Administration Regulations (15 CFR part 730 through 774) (EAR). Items exported or reexported to Cuba pursuant to 15 CFR 740.19 (License Exception Consumer Communication Devices (License Exception CCD)), pursuant to 15 CFR 740.21(d)(4) (paragraph (d)(4) of License Exception Support for the Cuban People (License Exception SCP)), or pursuant to an individual license issued by the Department of Commerce for the export of other consumer communication devices that fall outside License Exception CCD or commodities or software used to develop software that fall outside paragraph (d)(4) of License Exception SCP;

(ii) Items not subject to the EAR because they are of foreign origin and are located outside the United States. Items that are of a type described in License Exception CCD provided that the items would be designated EAR99 if they were located in the United States or would meet the criteria for classification under the relevant ECCN specified in License Exception CCD if they were subject to the EAR or items of a type described in paragraph (d)(4) of License Exception SCP, provided that the items would be designated EAR99 or controlled on the Commerce Control List for anti-terrorism reasons only if they were located in the United States; and

(iii) Software not subject to the EAR because it is described in 15 CFR 734.3(b)(3). Software not subject to the EAR because it is described in 15 CFR 734.3(b)(3) that is exported, reexported, or provided, directly or indirectly, by a person subject to U.S. jurisdiction to Cuba and that is of a type described in License Exception CCD or paragraph (d)(4) of License Exception SCP.

In a more interesting move, see how this subsection deals with the importation of Cuban-origin software and mobile applications, as well as the employment of Cuban nationals to develop the latter:

(d) Software. The importation into the United States of Cuban-origin software is authorized.

(e) Mobile applications.

(1) The importation into the United States of Cuban-origin mobile applications is authorized.

(2) The employment of Cuban nationals to develop mobile applications is authorized.

As long as I know the CACR, we're talking about one of the three activities in which persons subject to U.S. jurisdiction are permitted to hire Cuban nationals, the others being contained in subsections 515.545(a) and 515.573(a).

It's important to highlight the fact that service providers covered by sections 515.542 and 515.578 are authorized in section 515.573 to establish and maintain a physical and business presence in Cuba. Very few persons subject to U.S. jurisdiction —all covered in the referred section 515.573— can advance that kind of physical presence in Cuba.

My take on all this.

The specific nature of the regulation of telecommunications and Internet services within the U.S. sanctions regime aimed at Cuba can only be understood by taking into account how the rest of the interest areas are managed, where the default prohibitive nature predominates. One of the main problems with the discussion around US-Cuba relations is that people tend to talk without ever having reviewed the relevant legislation and regulations.

Everything translates into polarization and rhetoric, without paying attention to any evidence, so my interest as a researcher is to put in the spotlight the "just the facts" side of this business. That's why I've never been very interested in the debate on whether the sanctions regime qualifies as an embargo or a blockade —although it is not a minor issue, and it's still interesting—, but in the specific letter of the executive measures and congressional findings and guidance.

The quotations I have made from the CACR include references to the Export Administration Regulations administered by the Department of Commerce's Bureau of Industry and Security, which I don't deal with directly here. But now, why do the CACR have this particular configuration exposed as it relates to telecommunications and Internet services? Since 1959, the governmental decision-making process has understood them as strategic, first with the radio and ending today in technologies such as the Internet, and within this more specific approaches such as the use of big data, digital journalism (with its versions of data journalism, investigative journalism). So much so as to allow the Cuban government to obtain hard currency as part of its necessary relationship with U.S. telecom providers.

At the same time, leaving aside the subversive character that the mere use of technologies immanently possesses, enabling a relatively flexible channel for the United States itself to support its massification in Cuba, contributes to the other front —that of supporting democracy projects supervised by USAID, State Department and the National Endowment for Democracy, very much oriented to promote the "free flow of information from, to and within Cuba"— having greater chances of success. In other words, we separate the policy into two fronts to better understand it, but everything obeys an exquisitely coordinated and coherent planning, which is implemented as a clockwork mechanism.

So much for my contribution today, whose length makes me thank more than ever those interested readers who made it to the end. See you next time!