Thursday, October 15, 2015

Trying to clarify the latest U. S. opening to Cuba -- and failing

One way to get clarification is to offer some Cuban software for sale and see what happens -- in the U. S. and in Cuba.

Last September, the Office of Foreign Assets Control (OFAC) eased restrictions on trade with Cuba. Restrictions were reduced in many areas -- travel, commercial and financial transactions, support for and remittances to people in Cuba, etc., but the one that caught my eye was an easing of restrictions on telecommunications and Internet-based services, including this statement:
Mobile applications. To further enhance the free flow of information to, from, and among the Cuban people, OFAC is adding a provision in section 515.578 to authorize the importation into the United States of Cuban-origin mobile applications. In addition, OFAC is authorizing the employment of Cuban nationals by persons subject to U.S. jurisdiction to develop such mobile applications.
It sounds like the US government will now allow Cuban programmers to sell mobile apps in the US. (Recall that computer programmer is one of the jobs authorized for self employment by the Cuban government).

Could a Cuban programmer now offer apps for sale in places like the Apple, Google, Amazon and Microsoft app stores?

The new rule leaves several things unclear, so I asked the Treasury department for clarification, as follows:
  • Why is the regulation limited to "mobile" apps and how do they define "mobile" app since Microsoft (Windows 10) and Google (Android) are moving to software that can run on a phone, tablet, laptop or desktop PC -- it seems that mobility is a property of the device running the app, not the app itself.
  • Can the application be developed for a U. S. business, as opposed to an individual?
  • Does the Cuban programmer have to be a self-employed individual (a "cuentapropista") or could the app be developed by a Cooperative or a government enterprise?
Here are the answers:
  • The application can be developed for a U. S. business.
  • OFAC does not have a definition of "mobile" and, if an individual has a specific question as to whether certain software qualifies for the general license, they can contact OFAC.
  • They have no comment on the reason for limiting the ruling to mobile apps.
  • They have no comment on the question of dealing with cooperatives or Cuban government enterprises.
I also sent queries to Google, Amazon, Microsoft and Apple asking whether they had plans to offer paid Cuban apps in their online stores and none of them replied.

Cubans are allowed to offer free apps in the Google Play Store, but not paid apps.

During a recent, somewhat frustrating, trip to Cuba, U.S. Commerce Secretary Penny Pritzker stated that "There is much we in the United States do not fully understand about the Cuban economic system." While I would not want to suggest that U. S. regulations are as hard to understand as Cuba's, this one seems muddy.

One way to get clarification is to offer some Cuban software for sale and see what happens -- in both the U. S. and in Cuba.

Update 10/17/2015

Reader Rodney Hernandez pointed out that there is at least one free Cuban app in the Google Play store, the AlaMesaCuba restaurant guide. The publisher says an iTunes version will be available soon. The FAQs on the Google Play site state that AlaMesaCuba "Has been created and developed by Cubans living in Cuba" and their domain name registrant has a Cuban address and phone number, so Cubans are working on the app.

But there is a US tie as well. The Web site says the app is "offered by" ISLA Management LLC and the "developer" address is that of Inca Investments, a Miami investment firm that specializes in Latin America.

One more thing -- I could not find the AlaMesaCuba app by searching on my Nexus phone, but I was able to install it from the Web site. When I first ran it, it downloaded the current database. I guess the database is maintained in Cuba and updated periodically.

I've never encountered an app that was listed online, but not on my phone before -- is that common? Does it have something to do with fuzzy regulations?

Update 10/22/2015

I've got two Cuban apps on my phone now, AlaMesaCuba and KickRajoy. KickRajoy is written by a Cuban living out of the country and AlaMesaCuba is written by programmers living in Cuba, but distributed with the help of people in the US.

Both are free, but KickRajoy has ads at the bottom of the screen. I assume that the programmer gets a portion of that ad revenue. Does AlaMesaCuba generate revenue in fees for listings? Have their US partners paid the developers as an investment?

Are there other apps being sold in the US with payments going to Cuba? Note that Cubans are now allowed to write apps for companies and clients -- they do not have to be in Google's store or anyone Else's.

Update 10/29/2015

There is a discussion of this post at Slashdot.

Update 3/18/2016

Silicon Valley payments startup Stripe will make it possible to give Cuban entrepreneurs access to the US financial system. Cubans will be able to incorporate a US company, set up a US bank account, and start accepting payments from the US.

Stripe CEO Patrick Collison said the expansion into Cuba came together quickly after White House officials recently visited with aspiring Cuban entrepreneurs who requested such a service.

Well, I guess that puts the ball squarely in Cuba's court. Will they allow cuentapropistas or cooperatives to open those accounts?

When will we see a Cuban version of Stripe? Global Stripes?

Update 3/19/2016

When I posted this note, officials I spoke with were not sure how to interpret the changes, but the administration is sending an unambiguous signal to US companies that payment to Cuba is authorized by inviting Stripe CEO Patrick Collison to join the White House delegation to Cuba. Stripe was valued at $5 billion before the trip -- I bet it will be a lot more after the trip.

Update 3/11/2016

On March 15, 2016, the U.S. Department of the Treasury and the U.S. Department of Commerce issued new amendments to regulations governing travel, trade, and financial transactions with Cuba. They include the following changes:
  • Cuban origin software is now authorized for importation into the United States.
  • Non-immigrant Cuban nationals in the United States will be permitted to earn a salary or compensation consistent with their visa status. U.S. companies are now also authorized to sponsor or hire Cuban nationals to work or perform in the United States.
That should clear the way for Cuban apps in Google, Apple and Microsoft stores as well as outsourcing.

Update 5/12/2016

While there may be some ambiguity with respect to software products like mobile apps, there is none with respect to software services, which I assume includes offshore programming. The State Department's Section 525.582 List of Goods and Services Eligible for Importation states that U. S. citizens may import services provided by independent Cuban entrepreneurs with licenses to be self-employed issued by the Cuban government.

I personally know a Cuban who has obtained a license as an independent computer programmer and I am confident that there are others. This document seems to make it clear that software written by my friend or other Cubans with computer programmer licenses could be leally imported into the U. S. It does not apply to programs written by employees of Cuban state software companies.

The same holds for "entities" that are not owned or controlled in whole or in part by the Cuban government. That would seem to allow a licensed computer programmer to hire employees for offshore programming or for a licensed Cuban cooperative to do offshore programming.

(Posts related to this topic)

Update August 9, 2016

I have a belated followup to this post regarding the ambiguity of the US position with respect to software import from Cuba. Earlier they had authorized the import of mobile software, but they subsequently dropped the qualifier "mobile" in this release, which states that "The CACR currently authorizes the importation of Cuban-origin mobile applications. OFAC will expand this authorization to allow the importation of Cuban-origin software."

The rule change was announced last March, ahead of President Obama's trip to Cuba. I'm not a lawyer, but it sounds like offshore programming and application development by self-employed Cubans and Cooperatives is authorized. The ball is in Cuba's court -- will they allow it?

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