Skip to site navigation Skip to main content Skip to footer content Skip to Site Search page Skip to People Search page

Bylined Articles

Trump's Cuba Policy May Have A Chilling Effect On Travel

By Jose A. Aquino
August 16, 2017
Law360

Trump's Cuba Policy May Have A Chilling Effect On Travel

By Jose A. Aquino
August 16, 2017
Law360

Read below

/
Jose A. Aquino

On June 16, President Donald Trump announced to an audience of Cuban-American exiles in Miami's Little Havana neighborhood: "Effective immediately, I am canceling the last administration's completely one-sided deal with Cuba." Although Trump's words were warmly received by an enthusiastic crowd that included veterans of the 1961 Bay of Pigs invasion, not all Americans, and in particular American businessmen and women, support the president's new agenda towards Cuba.

After the Obama administration commenced promulgating regulations to accommodate engagement with Cuba, Americans have become fixated with the evolution of new commercial and leisure markets just 90 miles south of Florida. Many U.S. industries and businesses have tried to establish a foothold in Cuba's economy. However, none has succeeded in penetrating the island nation to the degree of the travel and hospitality industries. This has largely been the result of the Obama administration's permitting 12 categories of travel to Cuba under a general license. Individuals seeking to travel to Cuba for any of the 12 specified activities are not required to obtain prior travel authorization from the U.S. government because their trip is governed by a general license, including travel to the island by U.S. residents on their own for "people-to-people" contacts.

Since the Obama administration announced that Americans would be allowed to make "individual people-to-people educational" trips to the island, without having to travel with authorized people-to-people groups, the U.S. airline, cruise ship and hotel industries have made significant inroads into the Cuban market: commercial flights between the U.S. and Cuba were reinstated in September 2016; U.S. cruise ships began to dock in Cuban ports in May 2016; and Americans found the comforts of home in Havana’s Four Points Sheraton, the first U.S. hotel to open in Cuba in more than half a century. Last year, there were a record 4 million visitors to Cuba, of which it is estimated more than 600,000 were from the United States, also a record and second only to Canada.

Although under the current regulations travel to Cuba for tourist activities remains prohibited, U.S. residents are permitted to travel to the island on their own for "people-to-people educational" trips. The "people-to-people" exception to the embargo permits a U.S. resident to buy an airline ticket to Havana without obtaining specific permission from the U.S. government or having to travel under the auspices of an approved program. Once in place, however, Trump's recently announced policy changes will make the rules for Americans visiting Cuba a little more complicated. Individual travel to Cuba will still be allowed for travelers that fit into one of 11 other categories of permissible travel, such as visits to take part in educational, sports, religious or cultural events, or visits by Cuban-Americans to see relatives, but the president's new policy would ban people-to-people travel for individuals. Trump's new policy, if and when implemented, is likely to have a chilling effect on travel to Cuba, as organized group trips will likely become the primary vehicle for Americans to visit Cuba.

Notwithstanding the president's policy changes, to date, there has been no significant change to U.S.-Cuba relations. The U.S. Treasury Department's website recognizes that the status quo remains in place: "The announced changes do not take effect until new regulations are issued." Thus, there has been no modification to diplomatic relations, commercial flights or cruise ships to Cuba, the 12 categories of authorized travel to Cuba, financial remittances from the United States to Cuba or agricultural exports to Cuba. Moreover, the U.S. will maintain its embassy in Havana, which reopened in 2015, after being closed for more than 50 years. More than 100 commercial flights a week remain available between Cuba and U.S. cities, including Miami, New York, Los Angeles, Tampa, Fort Lauderdale, Orlando and Atlanta on American Airlines, Southwest Airlines, Delta, JetBlue and Alaska Airlines. Several U.S. cruise lines are regularly visiting Cuban ports, and Starwood Hotels and Resorts has established a foothold in Havana with management agreements for the Hotel Inglaterra and Hotel Santa Isabel, and the Hotel Quinta Avenida, which is now open as a Four Points by Sheraton hotel.

Starwood received authorization from the U.S. Treasury Department's Office of Foreign Assets Control and the Cuban government to operate the three existing hotels in Cuba. The Starwood management deals are instructive because of the potential impact the upgrade of facilities can have on U.S. businesses. The Starwood management deals involve structural as well as service changes including upgrading rooms, new air conditioning systems, upgrading mechanical, electrical and fire safety systems, buying new furniture, and adding comfort to renovated rooms and public areas. Both the U.S. and Cuban governments permit Starwood to do business, hire local workers and artisans, and conduct transactions in U.S. dollars through American financial institutions. Trump's policy changes are not expected to affect Starwood's management agreements.

Although the president has spoken of immediate changes, none will go into effect until new regulations are issued by the Departments of Treasury and Commerce, a process that can easily take several months. This is a process that the Trump administration may not be anxious to expedite, given the potential negative impact on U.S. airline carriers and cruise ships, as well as the wider U.S. hospitality industry. It also remains to be seen how strictly the U.S. government will interpret and enforce both new and old rules.

The delay in implementing the new regulations and Trump's speech itself suggest that the president is open to further negotiations with Cuba. The president said: "We challenge Cuba to come to the table with a new agreement that is in the best interests of both their people and our people and also of Cuban Americans." President Trump left no doubt that the door remains open to further dialogue: "When Cuba is ready to take concrete steps to these ends, we will be ready, willing, and able to come to the table to negotiate that much better deal for Cubans, for Americans. Much better deal and a deal that's fair. A deal that's fair and a deal that makes sense. Our embassy remains open in the hope that our countries can forge a much stronger and better path."

The Cuban government's response to Trump’s speech also leaves open the possibility of continued engagement: "The government of Cuba reiterates its will to continue with a respectful dialogue and cooperation on topics of mutual interest, as well as the negotiation of bilateral issues still pending with the United States government."

Trump's Cuba policy, as announced, presents an impediment to the expansion of U.S.-Cuban business ties. If nothing else, the uncertainty of what is to come will likely have a detrimental effect on new investment and future travel. However, Trump, a skilled businessman, is also cognizant of the opportunities and mutual benefits of continued engagement.


Jose A. Aquino is a litigator with Duane Morris LLP in New York, and a member of the firm's Cuba business group.

Reprinted with permission of Law360.