How to do business with Cuba
This feature is based upon some research work of the Hong Kong Trade Development Council. TextileFuture publishes these facts in view to the upcoming interest for the Cuban market, and in order that our readers can prepare themselves for the evolving future market
Products imported into Cuba for consumption are generally subject to taxes such as (1) import duties; (2) sales tax; and (3) special tax on certain products. The general scope of the sales tax and the special tax on certain products is normally set out in the annual budget prepared by the Cuban government, and includes any related regulations issued by the Ministry of Finance and Prices. As for import duties, Cuba affords at least most favoured nation (MFN) tariff treatment to most of its trading partners, including World Trade Organization (WTO) members and countries with which Cuba has signed a bilateral agreement.
Cuba’s Import Taxes
According to the WTO, Cuba applied a simple average MFN tariff rate of 10.6% in 2014. The average applied tariff for both agricultural and non-agricultural products was 10.6%. The Cuban tariff schedule has about 5,891 tariff lines, of which 390 (or 6.6%) have a duty rate of zero. Duties range from zero to 30%, and average applied duties are highest for beverages and tobacco (23.4%), clothing (22.7%), dairy products (22.7%), and sugars and confectionery (20.9%). More detailed tariff information on individual tariff lines in Cuba can be obtained from the WTO’s Tariff Download Facility.
Import taxes aside, Cuba maintains few prohibitions on imports. It has no import quotas in place, does not impose any traditional licensing requirements on imports, and has no pre-shipment inspection requirements. The World Trade Organization (WTO) has also no record of Cuba applying any anti-dumping, countervailing or safeguard measures on imports in the past five to six years.
According to Joint Resolution 33/2000, Cuba determines the customs value on the basis of the CIF value of a product, which in turn must be based on the transaction value except in specified cases. The other valuation methods must be applied in the order prescribed in the WTO Customs Valuation Agreement. Payment of import duties must be effected in non-convertible Cuban pesos (CUPs) or in convertible Cuban pesos (CUCs), depending on the entity carrying out the importation. In the case of mixed companies (Cuban companies with a foreign partner), payment of import duties is effected in CUCs or foreign exchange.
Cuba’s Sales Tax
Cuba applies a one-time sales tax (impuesto sobre ventas) of 10% on goods intended for use and consumption that are traded, imported, or wholly or partially produced in Cuba. The sales tax is added to the price of goods commercialised by the domestic retail and wholesale sectors. The Cuban government has the authority to wholly or partially exempt entities and/or products from this tax.
For example, Ministry of Finance and Prices Resolution 18/2015 concerning the application of the sales tax on retail sales and services, and Ministry of Finance and Prices Resolution 19/2015 concerning the application of the sales tax on wholesale sales, exempt certain entities as well as the retail and wholesale sale of books, newspapers, magazines, educational and scientific materials, and any other materials related to the educational and cultural development of the Cuban people.
Payment of the sales tax on retail sales and services must be effected in CUPs after the applicable amount has been converted at the official exchange rate from the CUC rate.
Special Tax on Certain Products
Cuba also applies a special tax (impuesto especial a productos y servicios) on certain merchandise and services, and which is subject to modification. Currently, this tax is assessed on the retail sale of motor vehicles by authorised entities as well as on beer and alcoholic beverage producers for the wholesale sale of beer and rum.
 CUPs are used mainly for Cubans paying for basic necessities such as food, rent, electricity and transport.
 CUCs are used mainly by foreigners paying for all goods and service in Cuba.
On Import Prohibitions
Cuba maintains certain prohibitions on the importation of psychotropic substances, drugs, weapons, explosives and certain other items, in accordance with Article XX of the General Agreement on Tariffs and Trade. Also generally prohibited are precursor substances, blood products, pornographic literature and obscene articles, and literature or articles that go against the general interests of the nation. Any prohibitions or restrictions will normally be communicated to the foreign exporter by the authorised Cuban importing company.
Cuba maintains more comprehensive restrictions on non-commercial importations made by persons travelling to the country. In addition to the products described above, prohibitions are in place for air conditioners with a capacity higher than one tonne, or 12,000 British thermal units (BTU), most electric cookers and stoves, electric ovens (except microwave ovens with an electrical consumption not exceeding 2000 watts), electrical resistances of any kind, light motor vehicles, motor vehicle frames and certain animal products.
Moreover, prior authorisation is required for a range of products imported by persons travelling to Cuba, including wireless fax equipment; telephone whiteboards; routers and switches; RLAN and similar wireless access points; wireless phones not operating within the 40-49 megahertz (MHz), 2.4 gigahertz (GHz) or 5 GHz bands; wireless microphones and articles thereof; radio transmitters of any kind; radio transceivers; professional radio reception apparatus; earth stations and satellite communication terminals; equipment for the mass dissemination of data, text or voice through wireless means; satellite positioning systems used for determining geographical co-ordinates, for hydrographic and geodetic purposes; biological and pharmaceutical products of animal origin for veterinary use; flora, fauna and any remains thereof; food products that do not comply with applicable sanitary and phytosanitary regulations; representative works of Cuban or foreign artists edited by the Ministry of Culture; live animals, plants and parts thereof, and products of animal or plant origin, whether or not processed, which are subject to inspection and authorisation by Cuban sanitary and phytosanitary authorities; firearms and ammunition, which require specific authorisation by the Ministry of Interior; and species protected under the Convention of International Trade in Endangered Species of Flora and Fauna (CITES), which require a special permit.
On Quotas and Licensing Requirements
Cuba does not have any import quotas in place, nor does it impose any traditional licensing requirements on imports or have any pre-shipment inspection requirements. However, import operations in Cuba may only be conducted by an authorised Cuban importing company or trade agent, and imports by non-authorised entities are prohibited.
The importation of certain products is also subject to sanitary/phytosanitary requirements or other restrictions, generally in the interests of national security, consumer health or environmental protection. In the case of food products, for example, a health registration must be obtained from the Cuban Ministry of Public Health’s Institute of Nutrition and Food Safety (INHA) before any such products can be imported into the country. Exporters of consumer food products to Cuba must normally ensure that their product undergoes sanitary product registration with the INHA prior to shipment.
The following information is required for purposes of sanitary product registration: (1) company name; (2) product name; (3) commercial name; (4) name of the manufacturer; (5) country of origin; (6) physical and chemical specifications of the product; (7) composition (list of ingredients); (8) product label in accordance with Cuban Standard NC108:2001 or CODEX STAN 1-1985; (9) date marking (date of minimum durability); (10) packaging; (11) food additives; (12) limits of metal contaminants; (13) limits of microbiological contaminants; (14) other contaminants; (15) storage instructions; (16) information required to decipher the lot code, if applicable; (17) certificates (certificate of free sale and operating certificate or sanitary licence of the manufacturing establishment); and (18) instructions for use and any other pertinent information about the product.
In addition to the above, three product samples are also required. While there are no requirements for sample sizes for testing, exporters should provide samples in quantities or sizes big enough for laboratory analysis. Registration usually takes about 15 days from the time that all the documents and samples have been received.
Cuba has adopted specific technical requirements for certain products, while the National Standards Office (NSO) sets regulations for the labelling and packaging of consumer goods. In preparing for entry into the Cuban market, Hong Kong traders should also be aware of the country’s documentation requirements.
On Product Standards / Certification Requirements
Cuba has adopted specific technical requirements for certain products. The Oficina Nacional de Normalización (NC) is responsible for standards and technical regulation in Cuba. For example, certain electrical and mechanical products must be tested in Cuban laboratories to demonstrate their suitability for use in Cuban weather conditions.
Household and similar electrical appliances must comply with the standard NC COPANT IEC 60335-1. This sets forth general requirements for such electrical appliance with a rated voltage of not more than 250 volts for single-phase appliances and 480 volts for others.
Medical equipment and drugs must obtain a registration from the Ministry of Public Health’s State Centre for the Control of Drugs, Equipment and Devices (CECMED). Moreover, a range of products such as various types of lamps and luminaires, lamp ballasts, personal protective equipment, motorcycle helmets, medical electrical equipment, and construction and safety glass must also comply with specific standards.
Aside from food items, the following products must obtain certification from the Cuban Ministry of Public Health’s Institute of Nutrition and Food Safety (INHA) before they can be imported into the country: food additives, food-contact materials, and equipment and utensils for food use; toys; cosmetics, personal care products, household cleaning products, and environmental products and technologies; and tobacco products. In addition to complying with all relevant requirements, these products must comply with good manufacturing and hygiene practices.
Toys are subject to the requirements of NC ISO 8124-1 (safety aspects relating to mechanical and physical properties), NC ISO 8124-2 (flammability) and NC ISO 8124-3 (migration of certain elements). Among other things, the first of these outlines acceptable criteria for the structural characteristics of toys, such as their shape, size, contours (including sharp points and edges) and spacing (for example, hinge-line clearances) as well as the acceptable criteria for properties peculiar to certain toy categories (for example maximum kinetic energy values for non-resilient-tipped projectiles and minimum tip angles for certain ride-on toys).
NC ISO 8124-2 specifies the categories of flammable materials that are prohibited in all toys as well as requirements concerning flammability of certain toys when subjected to a minor source of ignition. It also includes general requirements relating to all toys and specific requirements and test methods relating to toys presenting the greatest hazards.
NC ISO 8124-3 specifies maximum acceptable levels and methods of sampling and extraction prior to analysis for the migration of antimony, arsenic, barium, cadmium, chromium, lead, mercury and selenium from toy materials and parts. The maximum daily bioavailability levels in effect in Cuba are as follows: antimony (0.2 microgram or μg), arsenic (0.1 μg), barium (25.0 μg), cadmium (0.6 μg), chromium (0.3 μg), lead (0.7 μg), mercury (0.5 μg) and selenium (5.0 μg).
In general, most of the abovementioned Cuban standards are essentially transpositions of the respective international standards such as ISO standards. Compliance with the applicable international standards should therefore be sufficient in most cases even if the analogous Cuban standards may not be absolutely identical. To ensure smooth and effective customs clearance in Cuba, Hong Kong companies can consider engaging a testing laboratory or agency such as Bureau Veritas (which has a business presence in Cuba) to further control hiccups.
The National Standards Office (NSO) sets regulations for the labelling and packaging of consumer goods. Pre-packaged products other than food products or products subject to more specific standards should include at least the following information, in accordance with standard NC OIML R 79:1997: (i) the identity of the product; (ii) the name and place of business of the manufacturer, packer, distributor, importer or retailer; and (iii) the net quantity of the product. The identity of the product shall be expressed in line with at least one of the following designations: (i) the name specified in or required by any applicable national law or regulation; (ii) the common or usual name of the product; and/or (iii) the generic name or other appropriately descriptive term, such as a specification that includes a statement of function.
All pre-packaged food products are required to be labelled in Spanish. Multi-lingual labels are acceptable as long as Spanish is one of the languages used on the label. The information required by Cuban law on all pre-packaged food product labels includes: (i) the name of the food product; (ii) the country of origin; (iii) the commercial brand name; (iv) the name and address of the manufacturer; (v) ingredients and additives; (vi) net content and drained weight; (vii) instructions for use; (viii) storage instructions; and (ix) the date of manufacture or lot number/code and expiration date.
The following documentation is normally required for goods imported into Cuba for consumption: (i) a customs declaration; (ii) a shipping document (for example, an original bill of lading, or export certification); (iii) an original copy of the commercial invoice; (iv) an original copy of the packing list; (v) a certificate of origin; (vi) sanitary/phytosanitary certificates, whenever applicable, and a fumigation certificate in the case of wood; and (vii) any other certificate or document that may be required by Cuban authorities.
All documents must be translated into Spanish. Cuban Customs provides flexibility in certain instances, including by temporarily accepting pro-forma invoices. Importers may also submit customs declarations in advance of the arrival of the goods and make temporary or incomplete declarations when all the information necessary for clearance is not readily available.
What traders should know
For traders who are planning to visit Cuba and introduce Cuban importers to their samples, the rules on temporary entry and samples must form part of their pre-trip research. Meanwhile, the Mariel Special Development Zone, which faces the Florida Straits and was established in September 2013, may also be key to success in the Cuban market.
On Temporary Entry and Samples
Cuba has several temporary import regimes in place. Under the same-state temporary importation and exportation regime (admisión temporal de mercancías para su reexportación y reimportación en el mismo estado), it is possible to obtain relief from the payment of import duties and taxes on (i) goods imported into Cuba intended to be re-exported in the same state, and (ii) goods exported from Cuba intended to be re-imported in the same state. Goods must normally be re-exported or re-imported no later than one year from the date of temporary admission or temporary exit, although this deadline may be extended by an additional year if a request is made no later than 30 days from the date of expiration of the original deadline.
Extensions that involve the temporary admission into Cuba of goods for more than two years may only be granted under exceptional circumstances. Such extensions may be granted for equipment, machinery and other non-consumable materials admitted as part of risk contract operations as well as other goods of special interest for the development of the country.
Goods eligible under Cuba’s same-state temporary importation and exportation regime include:
– technical materials and equipment used to exercise a specific profession or trade which are introduced into the country or taken out of the country to perform a specific job or function;
– goods to be exhibited or used in fairs, exhibitions or other events of a technical or cultural nature, including the necessary elements for decorating any stands and advertising materials to promote the goods;
– animals, plants, materials and equipment used in exhibitions or sporting or recreational events;
– apparatus, materials and equipment for laboratories as well as for research, diagnostic and medical/surgical activities;
– construction equipment and other goods for construction activities;
– musical instruments, technical materials, props and other equipment used by artists, orchestras, bands, theatre groups, circuses and the like;
– equipment for mining or geological prospecting and research;
– production equipment and machinery and parts thereof imported or exported to replace similar equipment and machinery that has suffered damage, provisionally provided to the importer or exporter free of charge while repairs on the damaged equipment and machinery are performed in Cuba or overseas;
– packaging that can be identified for re-exportation or re-importation, as long as it is (i) imported or exported full to be re-exported or re-imported empty or full, or (ii) imported or exported empty to be re-exported or re-imported full;
– motor vehicles, airplanes, yachts and other vehicles and vessels; containers; and other articles of interest to Cuba.
Meanwhile, goods entering into Cuba under the temporary admission for inward processing regime (admisión temporal para perfeccionamiento activo) also benefit from duty/tax relief if they are temporarily imported for further processing in Cuba and re-exported in accordance with certain conditions. Goods must be re-exported in accordance with the specific timeframes established on a case-by-case basis by Cuban authorities. Extensions of up to 120 days may be granted provided a request for an extension is submitted at least one month from the date of expiration of the original deadline. Any duties and taxes owed on the temporarily imported goods must be paid if the required exportation does not take place.
Cuba also operates a duty drawback scheme whereby exporters receive a partial or total reimbursement of any duties paid on imports that are re-exported after undergoing a process of transformation, production or repair in the country, as long as (i) the exportation is beneficial to the national economy, (ii) the exportation is intended to meet export commitments that have not been met through other means, or (iii) the advantages granted to the imported goods do not affect the use of domestic goods in the goods to be exported. Any drawback claims must be made within one year from the date of acceptance of the export declaration. Such claims will only be accepted in instances where the time between the date of import and export is no longer than one year.
Furthermore, the Ministry of Foreign Trade and Foreign Investment (MINCEX) may issue a temporary code, valid for a period of three months, to an authorised Cuban importing company to allow it to import samples from new suppliers. Commercial samples with an insignificant value imported via courier are normally exempt from import duties. In addition, foreign companies with a commercial presence in Cuba may request authorisation to import commercial samples and promotional materials, although duties may be assessed on any such imports.
The Mariel Special Development Zone
Established in September 2013, the Mariel Special Development Zone, which faces the Florida Straits, is a special zone located about 45 kilometres west of Cuba’s capital, Havana. It was created to promote sustainable economic development by attracting foreign investment and fostering technological innovation and the emergence of industrial clusters. The zone operates under a special tax and customs regime but differs from a free trade zone in that goods produced by a company authorised to operate in Mariel may either be exported or sold in the domestic market to a Cuban legal entity, but not to Cuban persons.
Foreign investments in the zone benefit from certain tax benefits, including exemptions from tax on profits and on labour. In addition, companies benefit from a one-year exemption from sales tax and a reduced 1 % rate thereafter. While inputs and raw materials imported into the zone are subject to import duties, exemptions may be obtained under the available customs regimes for goods that are subsequently exported. Imports of equipment and machinery for use in production activities in the zone are, in principle, exempt from import duties.
Priority sectors within the zone include biotechnology and pharmaceuticals; renewable energy; agriculture and agro-industrial; tourism; real estate; packaging; telecommunications and information technology; and infrastructure investments.