Friday, March 9, 2012

OFAC Clarifies That Travel Can Be Promoted Through Agents and Organizers and Referral Fees Paid

Advertising Educational Exchange Travel to Cuba for People-to-People Contact


The Department of the Treasury’s Office of Foreign Assets Control has received inquiries concerning the advertising of travel to Cuba by organizations that have been granted licenses under section 515.565(b)(2) of the Cuban Assets Control Regulations, 31 CFR Part 515 (the “Regulations”). These licenses authorize individuals to engage in travel-related transactions involving Cuba that are incident to engaging in educational exchanges not involving academic study pursuant to a degree program provided these exchanges take place under the auspices of an organization that sponsors and organizes such programs to promote people-to-people contact.

OFAC does not prohibit persons subject to U.S. jurisdiction from designing or accepting an advertisement related to licensed Cuba travel and publishing the advertisement in any medium, including providing a link to the website of the licensed organization (the “Licensee”) whose services are being advertised. For example, a Licensee may post information concerning the licensed activity on its Internet website or hire another entity to produce a brochure promoting the licensed Cuba travel program and send it to the public, including retail travel agents for further distribution. In addition, the advertiser also may engage in activities involving informational outreach, such as the promotion of the Licensee’s licensed travel program by phone or at a travel exposition.

The advertiser may collect, organize, and provide to the Licensee basic contact information from individual potential travelers, and the Licensee may pay the advertiser a referral fee for doing so. However, unlicensed parties, including the advertiser and retail travel agents, are not authorized to provide Cuba travel-related services on behalf of the Licensee. For example, they may not register the travelers or collect funds from the travelers to forward to the Licensee. Only authorized persons may handle Cuba travel-related funds. The handling of funds was also addressed in a July 25, 2011 notice posted on the OFAC website.

OFAC also notes the following information with respect to advertising people-to-people travel: (1) all advertisements must state the name of the Licensee that is conducting the travel, and (2) Licensees must use the name under which their license was issued. A Licensee wishing to use an alternate name in its advertising or for other purposes associated with its people-to-people trips must notify OFAC in writing explaining the reason for the use of the alternate name and requesting a license amendment to reflect the name.

Finally, a requirement of all licenses issued under section 515.565(b)(2) is that each traveler must have a full-time schedule of educational exchange activities that will result in meaningful interaction between the travelers and individuals in Cuba. Advertising travel that appears to deviate from this requirement may prompt contact from OFAC to ensure that the people-to-people travel meets applicable requirements and thereby complies with current U.S. policy with respect to purposeful travel to Cuba. Advertisements for people-to-people travel that give the appearance that trips will focus on activities travelers may undertake off hours after their daily full-time schedule of people-to-people activities may give an incorrect impression and prompt contact from OFAC that may potentially result in a license suspension while we investigate. OFAC does not authorize transactions related to activities that are primarily tourist-oriented, including self-directed educational activities that are intended only for personal enrichment, as provided in paragraph (c) of section 515.565 of the Regulations. Licensees that fail to meet the requirements of their licenses may have their licenses revoked or be issued a civil penalty, which can range up to $65,000 per violation.


The takeaway is that travel agents and Cuba activists can work with a people-to-people or general licensee to design and promote a trip as long as the licensee's name is on advertising materials and no money passes through their hands.  They can in effect organize a group and present it to the licensee and be given a referral fee to compensate for their time and effort.  Structured within the cost of the trip can be the expense of the participation of the organizer (air fare, hotel, etc.) who will go as an agent of the licensee.   

The ability to "collect, organize, and provide to the Licensee basic contact information from individual potential travelers" which is OK and the stricture that the organizer/promoter "may not register the travelers or collect funds" is presumably the difference between a informational application and an actual registration to participate.

By implication, the explicit preclusion of travel that is, "primarily tourist-oriented, including self-directed educational activities that are intended only for personal enrichment" means that it is possible to do self-directed non-tourist oriented travel as long as it has a goal that is not exclusively for personal enrichment.  The required "meaningful interaction between the travelers and individuals in Cuba" is certainly an attribute of any visit that is personally enriching.

One does have to wonder why OFAC is so up-tight about an agent or organizer collecting funds and sending them in a lump sum to a people to people licensee or, on the licensee's behalf, to the Travel Service Provider.   The travel will still be within the parameter of the license regardless of who originally receives the funds.  This is another echo of the Bush era mind-set to make travel as difficult as the rules allow that seems to pervade some sectors of OFAC.

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