Exempting Food and Agriculture Products from U.S. Economic Sanctions: Status and Implementation

Publication Date: June 2006

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Trade

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Abstract:

In approving the FY2001 agriculture appropriations act, 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. 106387; 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.

Codifying the food and medical sales exemption for Cuba generated much debate. 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 no purchases would be made with TSRA's conditions in place, food stock losses due to a hurricane and a shift in Cuban strategy led to almost $1.25 billion in cash purchases by Cuba of U.S. food and farm commodities from December 2001 to April 2006. Agricultural sales to Iran, Libya, and Sudan under TSRA have totaled $313 million.

Congressional opponents of TSRA's prohibitions on private U.S. financing of agricultural sales, public financing of eligible exports, and tourist travel to Cuba have introduced bills since 2000 to repeal these provisions. Though several amendments to repeal or relax TSRA provisions relative to Cuba were adopted by committees or passed during floor debate, all were dropped in 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, Administration officials continually signal to conferees they will advise the President to veto any bill that would change TSRA's prohibitions against Cuba.

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 amendments to appropriations bills seek to change a rule issued in early 2005 which defined "payment of cash in advance" to mean that payment must be received by the U.S. exporter prior to when agricultural products are shipped from a U.S. port, rather than before title and control is transferred to the Cuban buyer. Fearing lost sales, farm groups and some congressional opposition to this rule has led to ongoing debate on this issue. Responding to congressional pressure, the Bush Administration in July 2005, revised this rule slightly 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 recent floor action, the House on June 14, 2006, adopted an amendment to the FY2007 Transportation-Treasury spending bill (section 950 of H.R. 5576) to prohibit implementation of this rule. Conferees dropped identical language in FY2006's Treasury's bill (H.R. 3058) in response to a presidential veto threat. This report replaces CRS Issue Brief IB10061.