Earlier this month, Major League Baseball eliminated a burdensome requirement that made it difficult for MLB franchises to sign Cuban nationals. Until last month, a Cuban national wanting to sign with a MLB franchise as a free agent was required to obtain a specific license from the United States Treasury’s Office of Foreign Assets Control (OFAC). Obtaining a specific license from OFAC can be a time-consuming process, to say the least. Now, however, Cuban national prospects need only provide the following sworn statement in order to sign with a MLB franchise:
“I have taken up permanent residence outside of Cuba. In addition, I hereby state that I do not intend to, nor would I be welcome to, return to Cuba. Further, I hereby state that I am not a prohibited official of the Government of Cuba ... and am not a prohibited member of the Cuban Communist Party.”
This change follows President Obama’s recent announcement about a change in the United States’ policy towards Cuba and amendments made to the regulations last month. Part of that policy change included easing the restrictions on the ability of Americans to travel to and do business with Cuba. Historically, or at least since 1963, the ability of a person subject to U.S. jurisdiction to do business with Cuba was governed by the Cuban Assets Control Regulations (Regulations). The Regulations generally provided that a person subject to U.S. jurisdiction must have a license to do business with a Cuban national.
A general license does not require any paperwork. If a company subject to U.S. jurisdiction satisfied the criteria for a general license, that company could do business with a Cuban national without any further approval from OFAC or the United States government. If a company did not qualify for a general license, it could qualify for a specific license, but that required filing an application for a specific license with OFAC and ultimately getting that application approved.
Interestingly, the Regulations provided a general license authorizing any person subject to U.S. jurisdiction to do business with a Cuban national who had taken up permanent residence outside of Cuba. That means a MLB franchise could contract with a Cuban-born player who had taken up residence outside of Cuba. In order to prove he had taken up residence outside of Cuba, the Cuban-born player was only required to provide two documents issued by a governmental authority from the new country of residence showing permanent residence—i.e., a passport, voter registration card, permanent resident alien card, or national identity card.
MLB essentially followed that policy until sometime in 2012. While the ability to rely on a Cuban national providing two forms of permanent-residency documents is convenient, it also creates an incentive for fraud. How difficult would it be to acquire fraudulent documents when there are millions of dollars at stake? And while MLB investigates the ages and identities of Latin American amateur signings, it doesn’t have the same resources to investigate residency documentation in Haiti or Mexico. To a certain extent, MLB must rely on the U.S. government to do this for them. If a player submits false residency documents, he is subject to being ineligible to sign with a club for a year. But if a player is caught submitting false documents to the federal government, the act would be considered a felony, which carries numerous immigration implications and complications. Perhaps out of concern that permanent residency documents were, or could be, falsified, MLB stiffened requirements for Cuban prospects. Specifically, it began requiring Cuban players to spend at least a year in a third country to establish permanent residency and to obtain a specific license from OFAC before being granted a work visa.
Under the Regulations, Cuban nationals who have taken up permanent residence outside of Cuba can apply to OFAC to become an “unblocked national” authorized to do business with companies subject to U.S. jurisdiction. Many MLB clubs, however, viewed the requirement as unduly burdensome, because it can take up to a year to obtain a specific license, which means a year of not playing baseball with a MLB franchise. Time became a factor.
Of course, the Cuban-national could become “unblocked” immediately by coming to the United States. But that would subject the player to baseball’s amateur draft, and the player’s rights would be controlled by one major league team. Again, time becomes a factor. But if the players establish residence outside the U.S., Puerto Rico, or Canada, they can become free agents and get more lucrative contract offers. Needless to say, OFAC’s specific license—and unblocking process—was a significant obstacle to MLB franchises and Cuban nationals, alike.
But that obstacle has now given away in favor of a declaration from that Cuban national that he has taken up permanent residency outside of Cuba. Already, Yoan Moncada, considered to be one of the top Cuban prospects, has benefited from this recent change. Without a doubt, the change in MLB policy will speed up the negotiation process for other Cuban prospects waiting to play ball.