Order Code IB10061
CRS Issue Brief for Congress
Received through the CRS Web
Exempting Food and Agriculture Products
from U.S. Economic Sanctions:
Status and Implementation
Updated April 18, 2006
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
1999-2001 Changes in U.S. Policy Allowing Agricultural Sales to Sanctioned Countries
Debate on Agricultural and Food Exports in U.S. Economic Sanctions Policy
Provisions Enacted in 2000 to Exempt Food and Medical Products from U.S. Economic
Overview of TSRA
Extension of Food and Medical Exemption to Cuba
Codification of Food/Medical Exemption
Export Licensing Requirement
Payment and Financing Terms of Exempted Sales
Prohibition on U.S. Government Assistance for Export Sales
Definition of Products Covered by Exemption
Congressional Role in Future Sanctions on Exempted Products
Sales to Cuba under TSRA’s Policy
Sales Activity to Date
Cuba-Specific Bills and Provisions
Bill Dealing with Other Sanctioned Countries
Proposed Changes to Overall Food Sanctions’ Exemption Policy
Amendments to TSRA in Anti-Terrorism Legislation
Provisions in Appropriations Bills
Debate over Cash in Advance Payment Definition
FOR MORE INFORMATION, PLEASE SEE THE FOLLOWING CRS PRODUCT:
CRS Report RL32730, Cuba: Issues for the 109th Congress, by Mark P. Sullivan.
Exempting Food and Agriculture Products from U.S. Economic
Sanctions: Status and Implementation
Congressional opponents of TSRA’s
prohibitions on the private U.S. financing of
agricultural sales, public financing of eligible
exports, and tourist travel to Cuba introduced
bills in the 107th and 108th Congresses to
repeal these provisions. Though several
amendments to repeal or relax certain TSRA
provisions with respect to Cuba were adopted
during committee markups or passed during
floor debate, all were dropped in subsequent
conference action. The Bush Administration’s
policy is to allow sales under TSRA, but not
to change any aspect of the embargo until
political and economic reforms occur in Cuba.
Reflecting this stance, Administration officials
have continually signaled to conferees they
would advise the President to veto any bill
that included any change in TSRA’s prohibitions against Cuba.
Falling agricultural exports and declining
commodity prices in the late 1990s led farm
groups and agribusiness firms to urge Congress to pass legislation exempting food from
U.S. economic sanctions against certain countries. In completing action on the FY2001
agriculture appropriations bill, Congress
codified the lifting of unilateral sanctions on
commercial sales of food, agricultural commodities, medicine, and medical products to
Iran, Libya, North Korea, and Sudan, and
extended this policy to apply to Cuba (Title IX
of H.R. 5426, as enacted by P.L. 106-387;
Trade Sanctions Reform and Export Enhancement Act of 2000, or TSRA). Other provisions place financing and licensing conditions
on sales to these countries. Those that apply
to Cuba, though, are permanent and more
restrictive. TSRA also gives Congress the
authority in the future to veto a President’s
proposal to impose a sanction on the sale of
agricultural or medical products.
In the 109th Congress, H.R. 719/S. 328,
H.R. 1339/S. 634, S.Amdt. 281 and S.Amdt.
282 to S. 600, and identical House and Senate
provisions in H.R. 3058 seek to respond to an
OFAC rule which took effect in March 2005
defining “payment of cash in advance” as
payment that must be received by the U.S.
exporter prior to agricultural products being
shipped from the U.S. port rather than before
title and control is transferred to the Cuban
buyer. Fearing lost sales, opposition to this
rule by farm groups and some Members has
led to ongoing debate on this issue. Responding to congressional pressure, OFAC on July
29, 2005, slightly revised this rule to allow for
goods to be shipped from a U.S. port once a
third-country bank receives payment for the
U.S. exporter from the Cuban purchaser. In
legislative action to date, conferees dropped
the provision in H.R. 3058 prohibiting implementation of OFAC’s initial rule, in light of a
presidential veto threat.
Codifying the food and medical sales
exemption for Cuba generated the most controversy. Exemption proponents argued that
prohibiting sales to Cuba harmed the U.S.
agricultural sector, and that opening up limited trade would be one way to pursue a
“constructive engagement” policy. Opponents
countered that an exemption would undercut
U.S. policy to pressure the Castro government
to make political and economic reforms.
Though top Cuban officials initially stated that
no purchases would be made with TSRA’s
conditions in place, food stock losses caused
by a hurricane and a shift in Cuban strategy
have led to almost $1.2 billion in cash purchases by Cuba of U.S. food and farm commodities from December 2001 to February
2006. Agricultural sales to Iran, Libya, and
Sudan under TSRA have totaled $307 million.
Congressional Research Service
The Library of Congress
MOST RECENT DEVELOPMENTS
In filing their conference report on November 18, 2005, conferees on the FY2006
Transportation-Treasury appropriations bill (H.R. 3058) dropped identical House and Senate
provisions prohibiting the use of funds “to administer, implement, or enforce” a rule
governing how sales of agricultural products to Cuba are to be paid. This language was
dropped to avoid a threatened Presidential veto, despite reported widespread support among
members in both chambers. This legislative initiative reflected an effort by congressional
opponents to overturn a regulation issued by the Department of Treasury’s Office of Foreign
Assets Control (OFAC) tightening the timing of when payments must be received by U.S.
firms before U.S. agricultural exports can be shipped to Cuba. (For background, see “109th
Congress - Debate over Cash in Advance Payment Definition”).
During a trade fair held in Havana in early November 2005, Cuba reportedly signed
$260 million in contracts to buy food and agricultural commodities from U.S. firms.
BACKGROUND AND ANALYSIS
1999-2001 Changes in U.S. Policy Allowing
Agricultural Sales to Sanctioned Countries
The Clinton Administration on April 28, 1999, announced it would lift prohibitions on
U.S. commercial sales of most agricultural commodities and food products to three countries
— Iran, Libya, and Sudan. Moreover, it indicated that it would not include these products
in announcing future sanctions on other countries. The Administration’s decision reflected
its view that food should not be used as a foreign policy tool and officials’ acknowledgment
that U.S. sanctions policy had hurt the U.S. farm economy. On July 27, 1999, the U.S.
Department of Treasury issued country-specific export licensing regulations to exempt
commercial sales of food and medical products by U.S. companies that meet specified
conditions and safeguards to Iran, Libya, and Sudan. Licenses are issued by the Treasury’s
Office of Foreign Assets Control (OFAC). Regulations issued June 19, 2000, to implement
a White House decision announced in September 1999 now permit sales of agricultural
products to North Korea without an export license. Licensed agricultural sales to Cuba under
a policy announced in May 1999 were restricted only to private and non-governmental
entities (but were broadened under a statutory change that went into effect in July 2001).
Since the Clinton Administration’s policy went into effect, Treasury has approved
licenses that have resulted in U.S. sales of corn to Iran, durum wheat to Libya, and hard red
winter wheat to Sudan. Also, President Clinton, in issuing executive orders in 1999 to
impose U.S. economic sanctions on Serbia and the Taliban in Afghanistan, specifically
exempted commercial sales of food and medical products from prohibitions imposed on all
U.S. exports to these destinations.
The Trade Sanctions Reform and Export Enhancement Act of 2000 (Title IX of H.R.
5426, as enacted by P.L. 106-387 on October 28, 2000; referred to below as TSRA) codified
the lifting of U.S. sanctions on commercial sales of food, agricultural commodities, and
medical products to Iran, Libya, North Korea, and Sudan, and extended this policy to apply
to Cuba. Such sales are subject to export licensing procedures laid out in regulations. In a
significant policy move, this act also gives Congress veto power over a President’s proposal
to impose a unilateral agricultural or medical sanction in the future.
Debate on Agricultural and Food Exports in
U.S. Economic Sanctions Policy
Farm organizations, agricultural commodity associations, and agribusiness firms have
favored changing U.S. policy to exempt export sales of agricultural commodities, food
products, and agricultural inputs from the broad economic sanctions currently imposed on
targeted countries. They argued that prohibitions only hurt U.S. farmers and business,
undermine this country’s reputation as a “reliable supplier,” and do not change targeted
countries’ behavior. In recent years, these groups joined with firms in the pharmaceutical
and manufacturing sectors to call for a comprehensive review of the economic impact of
these sanctions and for limits on the executive branch’s use of sanctions to restrict trade.
Opposition to exempting sales of agricultural commodities and food products from U.S.
sanctions policy has been somewhat more diffuse. Opponents argued that current law gives
the President sufficient flexibility to permit food to be shipped for humanitarian reasons, and
that U.S. foodstuffs, if sold, could be misused by foreign governments or not made available
to those in need. Some objected to the loosening of trade restrictions with certain countries,
such as Cuba. Coming largely from the foreign policy and defense community, they viewed
sanctions as a “legitimate and effective” policy tool, and drew little distinction between
prohibiting sales of food and prohibiting exports of all other products.
Provisions Enacted in 2000 to Exempt Food and
Medical Products from U.S. Economic Sanctions
Overview of TSRA. The most significant policy change made by the Trade Sanctions
Reform and Export Enhancement Act of 2000 exempts commercial sales of agricultural and
medical products to Cuba from the longstanding U.S. trade embargo on that country. At the
same time, TSRA made permanent a prohibition on Cuba’s access to U.S. private and other
public financing to purchase exempted products. Though press coverage suggested that the
debate was solely over a Cuba-specific measure, this act codified an exemption for sales of
agricultural and medical products in the conduct of U.S. sanctions policy with respect to five
countries and the terms under which this exemption operates. It further codified Clinton
Administration policy (based on existing law) that prohibited making available U.S.
government credits, credit guarantees, and other financial assistance to facilitate agricultural
and medical product sales to certain sanctioned countries. Also, TSRA made changes to the
food and medical products exemption-from-sanctions policy exercised administratively by
the Executive Branch since mid-1999. This act (1) broadens the exemption to allow sales
of non-food agricultural commodities and fertilizers, and (2) streamlines the process U.S.
exporters follow to obtain licenses to sell exempted products to sanctioned countries.
Other TSRA provisions require the President to secure future congressional approval
before he can impose for foreign policy or national security reasons a restriction or
prohibition on the sale of agricultural and medical products, and limit the duration of any
such approved sanction to not more than two years unless Congress approves an extension.
Status of Implementation. TSRA provisions with respect to countries subject to
U.S. unilateral sanctions at the time took effect on February 25, 2001. However, interagency
differences between the Department of Commerce’s Bureau of Industry and Security (BIS)
— then known as the Bureau of Export Administration (BXA) — and Treasury’s OFAC
over how to interpret these provisions were not resolved until considered by the White
House’s National Security Council. Both agencies issued their interim rules to reflect
TSRA’s statutory changes on July 12, 2001; these took effect on July 26, 2001. From
August 2001 through February 2006, U.S. exporters sold almost $1.5 billion in agricultural
products to Cuba, Iran, Libya, and Sudan under TSRA provisions.1 The $60 million in
agricultural exports to North Korea, and also most shipments to Sudan, most likely were food
donations and not commercial sales.
Extension of Food and Medical Exemption to Cuba. TSRA allows licensed
commercial sales of agricultural and medical products to Cuba. This policy change reflects
the law’s requirement that the President “terminate any unilateral agricultural sanction or
unilateral medical sanction” 120 days after enactment. This provision effectively supersedes
statutory provisions in the Cuban Liberty and Democratic Solidarity Act of 1996 (P.L.
104-114). That law codified the-then regulatory prohibitions on all U.S. export/import and
other transactions under the U.S. embargo imposed on Cuba in the early 1960s. Under this
embargo, commercial sales of U.S.-origin agricultural products (and medical products at
times) to Cuba generally were prohibited. Separately, the Cuban Democracy Act of 1992
allows some commercial sales of U.S. medical products to Cuba, but under tight conditions.
Though the Clinton Administration announced sanctions policy changes in 1999 and
in 2000 to allow sales of agricultural and medical products to Iran, Libya, Sudan, and North
Korea, it did not have legal authority to do the same with respect to Cuba. This explains why
most of the congressional debate leading up to TSRA’s passage revolved around whether this
same exemption should be statutorily extended to apply also to Cuba. As House debate and
a compromise unfolded in early summer 2000, those opposed to this opening in trade with
Cuba succeeded in adding a number of Cuba-specific provisions.
Under TSRA, agricultural and medical sales to Cuba are now subject to various
conditions and restrictions that are similar to those already in effect on similar product sales
to the other sanctioned countries. U.S. exporters must follow an export licensing process
before any product can be shipped. Further, a permanent prohibition is in place against the
use of any U.S. government export program or financing provided by U.S. private banks or
state and local governments to facilitate licensed sales.
Cuba-Related Regulations Issued. BIS’s interim rules continue pre-2001 policy
that requires medical product exports to Cuba be licensed, establish an expedited process for
handling agricultural product sales to Cuba, and waive the restriction on the direct shipment
of eligible products now permitted to be sold to Cuba.
Codification of Food/Medical Exemption. TSRA enacts as U.S. policy the
principle that commercial sales of food, other agricultural products, medicine, and other
This total amount excludes commercial agricultural sales made to Libya after broad U.S. economic
sanctions were lifted in April 2004.
medical products shall not be used as a tool to conduct foreign policy or to address national
security objectives (see “Definition of Products Covered by Exemption”). This law
stipulates that this principle apply to all countries now subject to U.S. unilateral sanctions;
and require that a President in the future justify to Congress why sales of these products to
a sanctioned country or foreign entity should be limited, and obtain congressional approval
before taking such action. Limits on agricultural sales are defined to be “any prohibition,
restriction, or condition on carrying out ... any commercial export sale of agricultural
commodities” or on using any U.S. Department of Agriculture (USDA) program authorized
under four specified statutes or any U.S. government export financing (“including credits or
credit guarantees”) to facilitate such sales. For medical product sales, such limits are defined
to be “any prohibition, restriction, or condition on exports of, or the provision of assistance
consisting of, medicine or a medical device.”
In immediate and practical terms, TSRA: (1) codified earlier Clinton Administration
decisions to allow agricultural and medical product sales to four countries (Iran, Libya, North
Korea, and Sudan) and (2) amended the laws and related regulations authorizing the U.S.
embargo on Cuba to allow commercial sales of agricultural and medical products.
Exceptions to Exemption. TSRA provides four exceptions to this general principle.
These are when the United States acts against a foreign country or entity to impose a sanction
that includes these products pursuant to (1) its involvement in a multilateral sanctions regime
or a mandatory decision of the United Nations Security Council; (2) a declaration of war, or
specific statutory authorization for the use, or the imminent or actual involvement in
hostilities, of U.S. armed forces; and (3) its export control to prevent potential military use
under the Arms Export Control Act, the Export Administration Act, or other authority.
President Bush tapped this exception authority in issuing Executive Order 13224 (September
23, 2001) to prohibit transactions with designated terrorists and their supporters. Section 4
states the determination that TSRA shall not affect the imposition or continuation of any
unilateral agricultural or medical sanction on any individual or entity “determined to be
subject to this order because imminent involvement of [U.S.] Armed Forces ... in hostilities
is clearly indicated by the circumstances.”
Export Licensing Requirement. Under TSRA’s exemption, exports of agricultural
and medical products to governments and other entities in sanctioned countries are allowed
only under an approved export license. Section 906(a)(1) requires that this export licensing
requirement apply to sales to those countries that the Secretary of State (exercising authority
under three cited statutes) has determined “have repeatedly provided support for acts of
international terrorism.” In practice, this means that sales of eligible products to
governments of countries currently so designated (Cuba, Iran, and Sudan), or to any other
entity in each of these countries, must be licensed before any shipment can be made. Though
the Secretary of State has determined that the governments of North Korea and Syria also are
sponsors of international terrorism, Section 906(a)(2) explicitly states that the license
requirement does not apply to sales to these two countries. The Secretary has discretion to
drop this licensing requirement for Iran, Libya, and Sudan if the determination is made that
its government no longer supports international terrorism.2 No such discretion is permitted
for Cuba, meaning this licensing requirement is made permanent for eligible sales to Cuba.
Relevant provisions in the act seek to streamline and simplify the type of license an
exporter must obtain to sell permitted products to sanctioned countries. These address
concerns expressed by U.S. agricultural exporters that the Treasury regulations governing the
licensing of agricultural sales to Iran, Libya, and Sudan had been cumbersome and time
consuming. Differences between the pre-2001 licensing rules and the relevant enacted
provisions that modify the earlier rules are described below.
Previous Licensing Rules. For countries covered by the Clinton Administration’s
1999 food and medical exemption policy (Iran, Libya and Sudan), the Department of
Treasury’s OFAC issued two types of export licenses — general and specific. The type
required, and the relevant conditions and procedures that apply to each, depended on the
nature of the product the exporter wanted to sell, the end user of the proposed sale, the details
of the terms of a sales contract, the date of contract performance, and on how the sale would
be paid for (see “Payment and Financing Terms of Exempted Sales” for important related
conditions). A general license authorizes certain transactions without the need for an
exporter to file an application providing all the details of each individual transaction. A
specific license is issued on a case-by-case basis to an individual or company allowing an
activity or transaction to take place.
OFAC’s food exemption regulations set up two different procedures for obtaining
licenses, depending on the product to be sold. The conditions that an exporter must meet
varied according to which procedure is followed. An expedited licensing process applied to
prospective sales of specified bulk agricultural commodities. A “specific license” authorized
an exporter to enter into “executory contracts” (i.e., respond to requests for bids, enter into
binding contracts, and perform against contract terms), and covered transactions over a
specified time period. Certain conditions had to be met to obtain this license. For sales of
all other food products, medicines and medical equipment, OFAC used a two-step licensing
procedure to review each contract on a case-by-case basis. First, an exporter had to obtain
a “general license” to enter into an executory contract that made performance contingent
upon prior approval by OFAC, disclose all parties with an interest in the sale, and lay out all
terms of the sale. Second, the exporter had to apply for a “specific license” permitting
performance of the executory contract before the sale can be completed. OFAC issued these
regulations under the authority of the Export Administration Act of 1979 (as extended) that
requires a “validated license” to export any good to a country determined to be a sponsor of
For Cuba, Commerce’s BIS through July 2001 administered different licensing rules
applicable to shipments of eligible food and agricultural commodities, farm inputs, and
medical products. Though various statutes and regulations prohibited most exports of U.S.
origin to Cuba, these exceptions allowed for the donation and sale of food and agricultural
In practice, the State Department under these statutes has rarely changed, or reversed, a “sponsor
of international terrorism” determination made with respect to a foreign government. With the
easing of most U.S. sanctions on Libya announced in April 2004, U.S. exporters of agricultural
products do not need to secure licenses to sell to this country, even though it remains designated as
a sponsor of state terrorism.
products to individuals, eligible non-governmental entities, and private businesses. TSRA
as enacted effectively supersedes these provisions to now allow for the commercial sale of
agricultural and medical products to Cuba under prescribed terms (see below).
TSRA’s Changes to Licensing Rules. Section 906(a) of TSRA allows sales of
exempted agricultural and medical products to sanctioned countries on terms that are less
restrictive than under previous policy (see above). The law stipulates that such exports “shall
only be made pursuant to one-year licenses ... for contracts entered into during the one-year
period of the license and shipped within the 12-month period beginning on the date of the
signing of the contract” and that “such one-year licenses shall be no more restrictive than
license exceptions administered by the Department of Commerce or general licenses
administered by the Department of Treasury.” The wording appears to require BIS and
OFAC to consider license applications on a streamlined and less conditioned basis rather
than on the present case-by-case and highly regulated basis. In other words, the apparent aim
was to move away from a complex and time consuming process that may require an exporter
to walk through a multiple step process to seek approval for the several transactions involved
in completing one sale. The new law removes executive branch discretion in determining
the time period that applies to transactions covered by an export license, by placing a defined
time parameter on the period during which an approved license covers eligible product
transactions. One related provision is intended to ensure that other licensing conditions and
procedures cover multiple types of transactions (e.g., an exporter submits one application
providing the information required for all of the sales transactions covered by a license).
Another requires that regulations must ensure procedures that will deny licenses for exports
to any entity, or “end user,” within an affected country that promotes international terrorism.
Debate over Proposed Licensing Regulations. BXA and OFAC had in early
2001 drafted licensing rules to implement the new law’s exemption. These, reportedly,
differed in some key respects. BXA proposed for the countries under its jurisdiction (Cuba,
North Korea, and Syria) an “arrangement” to allow companies during a one-year period to
export eligible products without the need to secure an individual license for each shipment.
BXA reportedly would have granted a “license exception” if a company agrees to monitor
sales of eligible products using a prescribed set of parameters. Under this exception, sales
would still be subject to a government audit. OFAC proposed for all affected countries
(Cuba, Iran, Libya, North Korea, Sudan, and Syria) a case-by-case licensing system that
includes end use verification. Its proposal was similar to rules already in effect for Iran,
Libya, and Sudan. This two-step licensing process would involve first approving a license
to allow an exporter to enter into negotiations to make sales, and then issuing another license
to cover actual shipments. The reported differences in these draft regulations reflected
conflicting views on how to interpret TSRA’s provisions as well as language that some
observers suggested was unclear and contradictory. As these differences became known
during February 2001, Members of Congress and interest groups weighed in with their views.
Regulations Published. BIS’s rule allows for the sale of eligible agricultural
products to Cuba without an export license (subject, though, to a review of a written
contract) if other federal agencies do not object within 11 days. In other words, BIS will
administer a licensing exception with respect to only those products that are covered by the
regulation’s definitions of agricultural and medical products. OFAC’s rule requires an
exporter to obtain a one-year export license for sales of agricultural and medical sales to Iran
and Sudan. If a reviewing agency objects within 11 days, the license application is denied;
if a “concern” is raised, OFAC has 30 more days to review the license request. Under the
Bush Administration’s Libyan sanctions policy change announced April 23, 2004, most U.S.
exports to Libya no longer require an export license.
Some agricultural exporters have since expressed concern that the requirement to have
OFAC check each time that the end user (e.g., buyer) in Iran and Sudan is not involved in
promoting international terrorism slows down the licensing process. They have urged that
OFAC change its rules to reflect the more flexible licensing system implemented under
Clinton’s 1999 executive order.
Payment and Financing Terms of Exempted Sales. U.S. policy seeks to ensure
that sanctioned countries do not receive any financial benefit from permitted, or licensed,
transactions. It also prohibits such countries from accessing bank accounts and other assets
that their governments, or organizations or firms in these countries, hold in the United States.
The new law does not change current policy, meaning that U.S. banks cannot offer trade
financing to facilitate export sales of exempted products to such countries. With respect to
Cuba, TSRA codifies two of the three types of financial transactions that OFAC regulations
permit to facilitate licensed food and medical product sales to Iran and Sudan. Other
provisions prohibit U.S. government support of such sales to all sanctioned countries (see
“Prohibition on U.S. Government Assistance for Export Sales”).
Current Prohibition and Restrictions. OFAC regulations specifically prohibit
U.S. banks from extending financing to countries subject to U.S. unilateral economic
sanctions. This policy is reflected in the current payment and financing rules that apply to
licensed sales of agricultural and medical products to Iran and Sudan laid out initially by
Clinton Administration policy, and to Cuba under embargo regulations. With respect to the
first two countries, OFAC regulations allow only for payment of cash in advance to be made
to the U.S. seller for a sanctioned country’s purchase of exempted products. The two
permitted trade financing, or credit, terms are (1) sales on open account3 with certain
limitations, and (2) financing by third country banks that are neither an overseas office of a
U.S. bank nor entities of the governments of these three countries.4 U.S. banks are permitted
to advise or confirm letters of credit5 issued by third country banks, but are prohibited from
providing any trade financing. An exporter must obtain a general license from OFAC for
each of these payment or credit terms. OFAC also will consider an application from U.S.
Sales on open account refers to a transaction in which goods are released to a buyer prior to
payment, or a promise of payment. Because the exporter bears all the risk of non-payment by the
buyer, this type of transaction requires a high level of established trust between both parties. An
exporter, however, may view sales on these terms as providing entry to a potential market that
outweighs such risk. Such terms allow a buyer to delay payment until the imported products have
An example of third country financing would be a French bank providing trade finance for a U.S.
exporter’s sale of wheat to Iran. This bank must not be an affiliate of a U.S. bank nor of any Iranian
state financial institution.
A letter of credit (L/C) is used when the importer/buyer’s ability to pay is uncertain, or when the
exporter/seller needs it to obtain financing. A L/C gives the buyer the financial backing of an issuing
bank, which makes payment within a specified time period to the seller via the seller’s bank upon
presentation of certain documents (e.g., those that reflect the carrying out of a sales contract’s terms).
banks for a specific license to participate in financing sales on a case-by-case basis, where
such financing arrangements would not undermine overall compliance with U.S. sanctions.
Prohibition on U.S. Financing of Agricultural Sales to Cuba. Section 908(b)
of TSRA prohibits the financing of agricultural sales “to Cuba or any person in Cuba” by
U.S. banks, any state or local government, the federal government, or any other U.S. private
person or entity. This prohibition effectively codifies a provision in the Cuban embargo
regulations (31 CFR 515.533(f)) that does not allow trade financing for the commercial sale
of food or agricultural commodities to non-governmental entities in Cuba that BIS is
authorized to license under a 1999 policy change. TSRA language stipulates that licensed
sales can occur only if paid in “cash in advance,” or if financed by a third country bank. In
codifying this financing prohibition, the Executive Branch no longer has discretion to revise
the financing rules should it determine the nature of the U.S.-Cuban relationship is changing.
In practical terms, this financing policy treats Cuba no different than other sanctioned
countries under pre-2001 regulations with respect to licensed sales. (See also “109th
Congress - Debate over Cash in Advance Payment Definition”).
Prohibition on U.S. Private Financing of Licensed Exports to Other
Countries. Though the issue of prohibiting any U.S. private financing of agricultural
exports to Cuba received much attention during the legislative debate, none of TSRA’s
provisions require any change in OFAC regulations that prohibit U.S. private financing of
agricultural and medical product sales to Iran and Sudan.6 With respect to these two
countries, OFAC will continue to implement its current policy prohibiting U.S. private
financing of licensed sales. Though some thought that TSRA would allow these countries
to take advantage of U.S. private financing despite the statutory prohibition imposed on
Cuba, no provision in the act explicitly addressed this issue in a way that would require a
change to be made to existing regulations. Members supportive of the financing exemption
argued that since Congress did not place in the law any restrictions on commercial financing
for these countries, new administrative regulations should not include restrictions that run
counter to the congressional intent to eliminate sanctions on those tools (e.g., credit) that can
facilitate eligible commercial sales. OFAC’s reported view was that since the thrust of U.S.
policy is to restrict currency flows to sanctioned countries, it would be burdensome to set up
a mechanism to allow for the financing of agricultural and medical product sales, and thus
better not to permit it.
Prohibition on U.S. Government Assistance for Export Sales. Section 908(a)
of TSRA prohibits making available any U.S. government assistance (including foreign aid,
credit or guarantees, and export assistance) “for exports to Cuba or for commercial exports
to Iran, Libya, North Korea, or Sudan.” Wording grants the President authority to waive this
prohibition for humanitarian reasons, or if he determines it is in the national interest to do
so with respect to Iran, Libya, North Korea, and Sudan. This waiver authority does not
extend to Cuba. Statutory wording further differentiates among the 5 above-cited countries
by applying this prohibition on all exports (and not just commercial exports) to Cuba.
Clarifying language also stipulates that this U.S. government assistance prohibition does not
“alter, modify, or otherwise affect” certain provisions of the Cuban Liberty and Democratic
Under the Bush Administration’s Libyan sanctions policy change announced April 23, 2004, TSRA
requirements no longer apply with respect to how sales of agricultural and medical products are to
be paid for.
Solidarity Act of 1996 that authorize the President “to furnish assistance and provide other
support for individuals and independent nongovernmental organizations to support
democracy-building efforts for Cuba” and that require the President to “take all necessary
steps to ensure that no funds or other assistance is provided to the Cuban Government.”
In the regulations issued, the Bush Administration chose not to exercise Presidential
waiver authority on this issue. Although some Members of Congress in 1999 and 2000
urged that credit guarantees be made available to facilitate agricultural sales to Iran, U.S.
policy (reaffirmed by TSRA) is not to extend any government assistance in support of
permitted commercial sales to a sanctioned country listed as a sponsor of international
terrorism. This position is primarily based on the statutory prohibition found in Section
620A of the Foreign Assistance Act of 1961 (22 U.S.C. 2371), which TSRA reaffirms.
Definition of Products Covered by Exemption. Compared to OFAC’s 1999
policy, TSRA broadens the types of agricultural products covered by the enacted exemption
(Sections 775 and 902(1)). Such products are defined to include “any agricultural
commodity, food, feed, fiber, or livestock,” and any derived product. Livestock is defined
to include “cattle, sheep, goats, swine, poultry (including egg-producing poultry), equine
animals used for food or in the production of food, fish used for food, ... other animals
designated” by the Secretary of Agriculture, and insects. Conferees on October 5, 2000,
accepted an amendment that added “fertilizer” and “organic fertilizer” to the definition of an
agricultural commodity. Exports of these inputs are allowed, unless subject to export control
under other specified statutes. Section 902(4) and (5) defines medicine and medical devices
referring to terms used in statutes administered by the Food and Drug Administration.
Treasury regulations followed to implement the Clinton Administration’s 1999 policy
governing sales to Iran, Libya, and Sudan listed the bulk agricultural commodities and some
food products eligible to be licensed. OFAC’s list encompassed most of the products
covered by the 2000-enacted definition, but did not allow for sales of non-food commodities
like cotton (a fiber), tobacco, and wood products. Treasury’s stated rationale for excluding
these non-food commodities was that they could be used for military purposes. OFAC’s
regulations did not detail the other food products nor specify any medical product that could
be sold, and thus required an exporter to apply for a license to ascertain whether a product
could be sold. Concern about the use of fertilizer and agri-chemicals for military purposes
was reflected also in OFAC regulations, which did not allow sales of these items (including
insecticides and pesticides) as agricultural products to sanctioned countries.
Definitions in TSRA Regulations. Both BIS and OFAC agreed upon common
definitions for agricultural and medical products in implementing their respective new export
licensing exceptions and requirements. Based on the statutory language, the rules spell out
that agricultural commodities include food commodities, feed, fish, shellfish and fish
products; beer, wine, and spirits; soft drinks; livestock; fiber, including cotton, wool, and
other fibers; tobacco and tobacco products; wood and wood products, including lumber and
utility poles; seeds for food; reproductive materials such as fertilized eggs, embryos and
semen; vitamins and minerals; food additives and supplements; and bottled drinking water.
This definition also includes fertilizers and organic fertilizers, but excludes furniture made
from wood; clothing manufactured from plant or animal materials; agricultural equipment
(whether hand tools or motorized equipment); pesticides, insecticides, or herbicides; and
cosmetics (unless derived entirely from plant materials). Both agencies require sales of three
products to meet stringent export control rules: fertilizer, western red cedar, and live horses.
Congressional Role in Future Sanctions on Exempted Products. TSRA,
in effect, gives Congress veto power over a President’s proposal to impose a unilateral
agricultural or medical sanction in the future. Section 903(a) requires a President to first
secure congressional approval before he can restrict or prohibit the sale of agricultural and
medical products on a targeted country for foreign policy or national security reasons. It
requires the President report to Congress not later than 60 days before he plans to impose a
sanction, describing the proposed sanction and the activities by the foreign country or entity
that justify the sanction. Section 904 specifies that the requirement for the President to report
to Congress on a proposed sanction does not apply when the United States is at war or
involved militarily against a target country, when the sanctioned product is controlled under
specified export control laws or could be used to facilitate the development or production of
a chemical, biological, or nuclear weapon, or when it is imposed as part of a multilateral
sanctions regime or a mandatory decision of the United Nations Security Council. Section
905 provides that any unilateral agricultural or medical sanction approved by Congress
(described above) automatically ends not later than two years after it goes into effect. The
President may request that Congress extend the sanction for another two years.
Sales to Cuba under TSRA’s Policy
Though sales to Iran, Libya, and Sudan under the Clinton Administration’s 1999
exemption policy were small relative to their total agricultural imports, U.S. farmers,
commodity groups, and agribusiness eyed Cuba as a promising market. Calling for a
broadening of U.S. policy to also exempt food from sanctions in Cuba, they argued that U.S.
agriculture had lost out to foreign competitors in making sales to a sizable, nearby market.
Cuban agricultural imports averaged about $800 million annually in the 2000-2002
period, according to the Food and Agriculture Organization. Leading commodities imported
in 2002 were rice, chicken meat and products, wheat and flour, whole dry milk, lentils and
corn. Food and agricultural imports in recent years have represented 17% of total Cuban
merchandise imports, and have declined as a share of total imports since the early 1990s.
Top suppliers in 2002 (as Cuba took advantage of the U.S. embargo exemption under TSRA)
based on preliminary data were Canada, the United States, France, China, and Brazil. In
addition, Cuba’s tourism industry reportedly imports an additional $100 to $250 million in
food products to cover the needs of visiting tourists.
U.S. agricultural interests argued that exempting agricultural exports from the U.S.
embargo on Cuba would result in an opening that yields substantial sales. Various studies
projected annual sales could range from $100 million to over $1 billion, depending on the
time frame looked at and the extent of liberalization that occurred in U.S.-Cuban trade.
These interests also held that such a policy change will give U.S. exporters (particularly of
rice and wheat) a competitive edge if Cuba takes advantage of its proximity to buy from its
nearest supplier in order to save the cost of transporting commodities and food from its
current suppliers (France, Canada, Argentina) located much farther away. Cuba reportedly
could save up to $100 million in transportation costs if officials decided to buy primarily
from U.S. agricultural exporters.
Expectations in 2000 of large immediate U.S. sales to the island were viewed as
unrealistic, according to other analysts. Analysts pointed to Cuba’s limited financial
resources, its reliance on barter and credit transactions to finance agricultural imports, its
denial of access to U.S. government programs and to all U.S. public and private financing,
and the possible application of other restrictive rules under current embargo regulations that
could hamper such sales. They also suggested that it was uncertain that Cuba would
purchase from the United States, pointing out there may be pressure to maintain trade ties
with some of its “socialist partners” supplying such key commodities as rice, as well as
resistance to relying on just one single supplier. Some also observed that the Cuban
government may not be prepared for or interested in taking advantage of this possible U.S.
trade opening. Top Cuban officials, including Castro himself, initially rejected the enacted
measure. They strongly criticized its financing, travel, and other prohibitions as
“unworkable” and “insulting,” viewing it as a tightening rather than an easing of the
embargo, and stated that Cuba will not buy any U.S. product with such conditions in place.
Sales Activity to Date. Notwithstanding this position, the Cuban government on
November 13, 2001, signaled interest in buying U.S. agricultural commodities to quickly
rebuild food reserves damaged or lost due to the devastation caused by Hurricane Michelle.
This move followed an earlier U.S. government offer of humanitarian assistance, to which
Cuba responded on November 8 with a request that the United States temporarily suspend
TSRA’s licensing requirements to purchase foodstuffs and allow Cuban vessels to transport
them from U.S. ports. The State Department agreed only to speed up the licensing process,
and noted some problems might arise if Cuban ships were used.
Negotiations between several U.S. agribusiness firms and Alimport, Cuba’s food import
agency, in late November and early December 2001 led to the signing of contracts to sell
U.S. wheat, corn, soybeans, soymeal, soyoil, poultry, and rice and other food products valued
at $35 million. The first shipment of corn and poultry arrived in Havana on December 13,
2001. U.S. farm groups, agribusiness firms, and anti-embargo groups hailed these sales
under the new sanctions policy, and hoped they would lead to additional sales and represent
a symbolic beginning of a changing relationship, respectively. Though top Cuban officials
initially stated these cash purchases were a one time event, this stance changed in the
following months. Additional export sales occurred in spring 2002, and have since
continued on a regular basis. Altogether, from December 2001 through February 2006, U.S.
exporters have shipped to Cuba $1.175 billion in agricultural and food products. See “109th
Congress - Debate over Cash in Advance Payment Definition” for details in the latest policy
developments and congressional debate on U.S. sales policy.
Members introduced several bills and amendments in 2001 and 2002 to revise U.S.
policy on how food products are handled in sanctions regimes. Most sought to repeal the
export financing and travel prohibitions imposed on Cuba by TSRA; conferees dropped one
such provision included in the Senate’s 2002 farm bill. The Bush Administration continued
to reiterate that any bills with provisions that relax the Cuban trade embargo would be
vetoed. Two bills revisited the broader issue of the parameters and process to be followed
to exempt agricultural sales in U.S. sanctions policy. Bush Administration’s efforts to amend
TSRA in light of the September 11th terrorist attacks were reflected in compromise language
included in anti-terrorism legislation.
Cuba-Specific Bills and Provisions. Proposals varied in approach and in scope.
H.R. 173 and Section 335 of S. 1731 (the Senate Agriculture Committee’s farm bill) simply
would have repealed the prohibition on private U.S. financing of agricultural sales to Cuba.
Seven measures (Section 2(h) of H.R. 174; H.R. 797/S. 402; Section 3(f) of H.R. 798/S. 400;
Titles I and II of H.R. 2138/S. 1017; Section 1(f) of H.R. 2662; S. 171; and S. 239) were
broader in their coverage, proposing to drop 3 provisions in TSRA. These are (1) the
requirement that eligible exports to Cuba be licensed in advance, (2) the prohibitions on U.S.
government assistance/financing of food and medical product sales and on private financing
of agricultural sales to Cuba, and (3) the prohibition on tourist travel to Cuba. Some bills
would have repealed specific provisions; S. 239 broadly stated that irrespective of TSRA,
“the prohibition or restriction on trade or financial transactions with Cuba shall not apply”
to the export of agricultural and medical products, or to travel related to the sale or delivery
of these products, to Cuba. Additional language found only in H.R. 797/ S. 402; H.R. 798/S.
400; and S. 239 effectively would have repealed the current restriction that ships entering
Cuba cannot enter a U.S. port for six months. This would allow such vessels to transport
U.S. agricultural and medical shipments to Cuba. Some bills would have retained
restrictions or prohibitions on agricultural/medical product exports to Cuba to meet broader
export control and national security objectives. In most of these bills, the referenced
provisions were part of broader legislative efforts to modify or terminate some or all aspects
of the U.S. embargo on Cuba. Among other recommendations offered to change U.S. policy
toward Cuba, the bipartisan House Cuba Working Group on May 15, 2002, proposed (1)
allowing the private financing of U.S. agricultural and medical exports, and (2) repealing the
statutory ban on any ship that visits Cuba from calling on an American port for 180 days.
Debate on Farm Bill Provision. The Bush Administration “strongly opposed” the
Senate-passed farm bill provision (Section 355 of S. 1731) that would have repealed the
prohibition on private U.S. financing of U.S. sales of agricultural commodities to Cuba. The
Administration based its stance on its view that Cuba continues to deny basic civil rights to
its citizens and rejects global efforts to combat terrorism. Reflecting this perspective,
Senator Smith during floor debate offered an amendment to require the President to certify
to Congress that Cuba’s government is not involved in supporting acts of international
terrorism before the Cuba-specific prohibition is repealed. A second-degree amendment
offered by Senator Torricelli to also require Presidential certification that all convicted felons
living in Cuba have been returned to the United States before the prohibition is removed fell
when the Senate on December 18, 2001 tabled the Smith amendment (61-33). The Senate
provision was a contentious issue in the subsequent farm bill conference held to resolve
differences with the House measure, which did not contain a comparable provision. With
reports surfacing that the House leadership would make the final decision on this matter,
Representative Dooley (one conferee from the House Agriculture Committee) on April 17,
2002, offered a motion to instruct House conferees to accept the Senate position. Following
debate on the motion on April 18, the House on a roll call vote of 273-143 agreed to this
motion to instruct (non-binding on conferees) on April 23. In final action, Senate conferees
receded to the House position, leaving the private financing prohibition in place.
Amendment to FY2003 Treasury Appropriations Bill. Representative Jerry
Moran on July 23, 2002, proposed an indirect approach to relax the prohibitions and
stipulations on private commercial agricultural and medical product sales to Cuba. His
amendment (Section 646 to H.R. 5120, FY2003 Treasury Appropriations), accepted by voice
vote, would have effectively cut off funding for one year to Treasury’s OFAC for
administering only those tasks involving the private financing prohibition and current
shipping restrictions, among other Cuban embargo regulations that apply to agricultural and
medical product sales. It would not apply to TSRA’s licensing requirements that cover
agricultural sales to Cuba, because they are administered by Commerce’s BIS which is not
funded by the Treasury appropriations bill. Final action on this measure did not occur before
Congress adjourned. In the 108th Congress, House and Senate leadership dropped the OFAC
provision in H.J.Res. 2, the omnibus spending bill that also funded Treasury operations in
FY2003, in sending this measure to the floor for action in January 2003.
Administration’s Position. President Bush on May 20, 2002, in a major Cuba
policy speech reiterated his opposition to any repeal of the prohibition on private financing
of agricultural sales, stating it “would just be a foreign aid program in disguise, which would
benefit the current regime.” Bush stated he would veto legislation that relaxes the embargo
in any way until the Cuban government introduced a series of specified reforms. Secretary
of State Powell and Treasury Secretary O’Neill followed up in a July 11, 2002, letter to
House appropriators to state they would recommend a presidential veto of any bill that eased
restrictions on trade and travel to Cuba.
Bill Dealing with Other Sanctioned Countries. One measure seeking to amend
TSRA was broader in the range of countries to be covered. S. 171 would have repealed the
TSRA’s prohibition on U.S. government assistance and financing of sales not just with
respect to Cuba, but also with respect to Iran, Libya, North Korea, and Sudan.
Proposed Changes to Overall Food Sanctions’ Exemption Policy. Three
measures addressed broad U.S. policy on the issue of exempting agricultural exports from
export control or sanctions regimes. Title IV of S. 149, as introduced, proposed to exempt
agricultural commodities, medicine, and medical supplies from export controls imposed for
foreign policy reasons. Language specified that this exemption would not apply to any such
items subject to national security export controls imposed under Title II of this bill or listed
on the U.S. Munitions List, nor to their export to a country against which an embargo is in
effect under the Trading With the Enemy Act (Cuba and North Korea). During Senate
Banking Committee markup on March 22, 2001, all of Title IV was deleted. Concerned the
Executive Branch might exercise the bill’s broad authorities in ways that undercut TSRA’s
intent to exempt food and medical products from unilateral sanctions, Senator Roberts
succeeded in including language in a manager’s amendment that addressed this issue.
Section 603 (as adopted by the Senate in early September 2001) stated that S. 149 does not
authorize export controls on food for national security purposes. It also stated that such
controls cannot be used to restrict food exports for foreign policy reasons, unless Congress
in advance approves such action following TSRA’s provisions, and explicitly stated that
nothing in S. 149 authorized the exercise of authority to restrict agricultural and medical
product exports contrary to any TSRA provision.
Amendments to TSRA in Anti-Terrorism Legislation. The package of antiterrorism measures (P.L. 107-56; H.R. 3162) signed into law on October 26, 2001 amended
some TSRA provisions. The compromise struck between the Bush Administration and key
Senators modified one circumstance under which TSRA’s food/medical exemption would
not apply, codified that agricultural and medical product sales to the Taliban-controlled area
of Afghanistan are subject to TSRA’s export licensing requirements that apply to Cuba and
to governments of other countries determined to be sponsors of international terrorism, and
expressly allows eligible export sales to be made also to any other entity in Syria or North
Korea without the need for an exporter to secure a license. Other provisions stated that no
TSRA provision limits the application of criminal or civil penalties on those who unlawfully
engage in the export of agricultural and medical products to designated foreign organizations,
groups, persons, or entities, nor affects the statutory prohibitions against providing material
support or resources to designated foreign terrorist organizations.
Members introduced seven measures, and offered amendments to spending bills, to
relax TSRA’s Cuba-applicable provisions in the 2003-2004 period. Conferees dropped two
provisions in FY2005 spending bills that would have relaxed TSRA restrictions.
Cuba-Specific Bills. H.R. 187 proposed to repeal TSRA’s prohibition on the use of
private financing for agricultural and medical product exports to Cuba. H.R. 188 and S. 403
were broader in scope, repealing the private financing prohibition, ban on travel, and
licensing requirement provisions, among numerous provisions intended to end the U.S. trade
embargo on Cuba. H.R. 1698 and H.R. 3422 would have repealed or superseded all TSRA
provisions that apply to Cuba, respectively. H.R. 4457/S. 2449 proposed to terminate
TSRA’s restrictions with respect to Cuba (among other features of the U.S. embargo on
Cuba) unless Congress passes a resolution to renew them.
Opponents of liberalizing trade with Cuba introduced H.R. 3670 to penalize U.S.
exporters and others who sell products or services to Cuba if such trade is explicitly
conditioned on their lobbying Congress to remove trade and travel restrictions on Cuba. The
bill’s intent is to address a U.S. farm organization reportedly agreeing in a memorandum of
understanding7 to press Congress to engage with Cuba and to seek repeal of these restrictions
in return for Cuban purchases of $15 million worth of agricultural products from Indianabased businesses. Other members indicated their intent to introduce related bills, or offer
amendments, to amend TSRA to (1) allow farm machinery sales to Cuba on a cash-only
basis, and (2) repeal U.S. travel restrictions (viewed by U.S. agricultural groups among
others as a way for Cuba to generate dollar earnings to purchase U.S. food products). For
additional information on legislative efforts to amend TSRA’s restrictions on travel to Cuba,
see CRS Report RL31139, Cuba: U.S. Restrictions on Travel and Remittances, by Mark P.
Provisions in Appropriations Bills. Conferees on the FY2004 agriculture
appropriations measure (H.R. 2673), part of the FY2004 omnibus spending package, in midNovember 2003 dropped a Senate amendment (Section 760 of S. 1427) that would have
facilitated the process of securing permission to travel to Cuba under TSRA to promote and
sell U.S. agricultural and medical products there. The amendment was added by voice vote
on July 17, 2003, during Senate Appropriations Committee markup of this spending bill;
Cuba Trader, “House Members Seek to Punish Trade-for-Lobby Deals Between Cuba and U.S.
Entities,” December 8, 2003.
Senator Dorgan’s intent was to address such situations as OFAC’s decision in June 2003 to
deny the license application of a firm seeking to organize a food and agribusiness exhibition
in Havana in January 2004. The White House opposed this provision, arguing that it would
weaken current sanctions imposed against the Cuban government. Its position, laid out in
its “Statement of Administration Policy” on S. 1427, is that “travel to Cuba should be further
policed to ensure that those traveling [there] are doing so for legal purposes and not simply
using legal categories to disguise travel for other purposes.”
An identical provision was included in the FY2005 agriculture appropriations bill
(Section 776 of S. 2803). Introduced by Senator Dorgan during markup, this amendment
was adopted by the Senate Appropriations Agriculture Subcommittee by voice vote on
September 8. Language would require the Treasury’s OFAC to give “general licenses” for
U.S. exporters and others seeking to travel there on eligible business. Current policy requires
them to apply for a “specific license” for each prospective trip. Amendment supporters
argued that the Bush Administration has used the rules to delay or to refuse to issue travel
licenses to those seeking to make farm sales in Cuba. Seeking to head off a possible similar
initiative in the House in June when its agriculture appropriations was considered, the
Administration stated the bill would be vetoed if this provision was included.
Administration officials argue the current licensing process “helps to ensure that travel to
Cuba serves appropriate purposes and that sales to Cuba are done within the boundaries of
the law.” Just before conferees completed work in November 2004, the Director of the
White House Office of Management and Budget signaled that including in the omnibus
appropriations measure (H.R. 4818) any provision to weaken existing sanctions against Cuba
(such as restrictions on commercial exports of agricultural and medical goods) would result
in a presidential veto. In final action, appropriators dropped this provision from the bill.
An amendment to the FY2005 transportation/treasury spending bill (Section 649 of H.R.
5025), adopted by the House during floor debate on September 22, 2004, would have
prohibited the use of appropriated funds to implement any U.S.-imposed sanction on private
commercial sales of agricultural commodities to Cuba. Representative Waters, its sponsor,
stated that TSRA’s financing restrictions on these sales “make trade ... unnecessarily
expensive, bureaucratic and complicated” and argued that with their removal, small
businesses would be in a better position to increase U.S. market share. An opponent
acknowledged that since U.S. agricultural sales are now legal, exporters have indicated they
like to be paid under the current policy in place. Allowing financing for such sales would
simply “reward the dictatorship,” he argued. Conferees also dropped this provision from the
same FY2005 omnibus spending package considered during the November 2004 lame duck
Debate over Cash in Advance Payment Definition. Concerned that some
reported late payments from Cuba constituted a form of financing and possibly violated
TSRA’s financing prohibition, Treasury’s OFAC on November 12, 2004, instructed U.S.
banks to stop all transfers of Cuban payments to U.S. exporters while it investigated recent
sales transactions. OFAC subsequently released some payments on a case-by-case basis,
which allowed banks to forward funds to exporters. The Bush Administration also indicated
plans to announce new rules on the payment issue by late December 2004. In letters to the
Secretary of Treasury and Secretary of State in late November and early December 2004,
some Members of Congress questioned or expressed opposition to the Administration’s
plans. They noted that the change being considered to require a seller to receive payment
before a shipment leaves a U.S. port would be much more restrictive than current practice
and would “impede” agricultural sales to Cuba. One Senator argued that a more restrictive
rule would constitute a new sanction that in itself would require congressional approval
under TSRA provisions in order to take effect. Separately, a coalition of agricultural groups
and businesses in a December 8, 2004, letter to President Bush stated that U.S. exporters
have “followed explicitly both the letter and spirit of the law” in selling food products to
Cuba. They argued the proposed restrictive guideline would “run counter to the norms of
international trade,” which simply require payment to be received prior to the shipment’s
release to the buyer (e.g., payment before transfer of title to the buyer, even if the ship is
docked in Havana).
To signal continued opposition to the Administration’s intent to change the timing of
payment for U.S. agricultural product sales to Cuba and to amend certain TSRA provisions,
some Members of the House and Senate introduced identical measures (H.R. 719/S. 328) in
early February 2005. Section 5 would clarify that “payment of cash in advance” means
payment by the purchaser (e.g., the Cuban government) and the seller’s receipt of such
payment, before the product’s title and control is transferred and released, respectively, to
the purchaser. H.R. 1339/S. 634 would only redefine this term, using language identical to
Section 5 in H.R. 719/S. 328. With Treasury’s publication on February 25, 2005, of the rule
to require payment before shipment from a U.S. port (with an effective date of March 25),
some Members responded they would explore all available options to change this policy or
to block Senate consideration of significant Treasury nominees. One legislative initiative to
accomplish this (in S.Amdt. 281 and S.Amdt. 282) is pending in Senate consideration of S.
600 (Foreign Affairs Authorization Act for FY2006 and FY2007). Also added as an
amendment to the FY2006 Transportation-Treasury appropriations bill (Section 945 of H.R.
3058 as passed by the House, and Section 721 as passed by the Senate) was a prohibition on
using funds to implement OFAC’s rule. With the White House threatening to veto the bill
if included, conferees dropped this provision in the final enacted measure. This occurred
after almost 40 House members urged conferees to retain it. Five of the 23 Senate conferees
signed the conference report, noting their opposition to dropping the Cuba trade language.
Farm groups and agribusiness firms in a letter to four House members on June 27, 2005,
called for restoring the option to allow receipt of payment before title is transferred. They
presented data on the decline in U.S. agricultural sales this year compared to 2004 because
of the OFAC rule, and detailed the loss of sales of rice and other commodities to such other
countries as Vietnam and China.
OFAC’s announcement on July 29, 2005, allowing for the shipment of goods once the
seller’s agent (if located in a third country) receives payment from the Cuban buyer could
make it slightly easier for some U.S. sellers to make sales, according to some analysts.
Others question whether this clarification will make any difference. Opponents of the rule
have signaled their intent to continue to work with Congress to overturn it. This slight shift
in policy prompted Senator Baucus to lift his hold on six Treasury nominees, who were then
confirmed by the Senate later that day. Though exports in the first four months after OFAC’s
rule change (April to July 2005) were below 2004 levels, exports since August 2005 have
been higher each month compared to year-earlier levels. This may be attributable to OFAC’s
rule modification in late July 2005 and a reported willingness by Alimport to work with U.S.
exporters under these new payment procedures.