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

Publication Date: April 2006

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Trade

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Abstract:

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.

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 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.

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.