U.S. Cuban Trade Sanctions

1. U.S. Cuban Trade Sanctions Omarana Ejaz María Gutiérrez

2. Overview • The establishment of the embargo in October 1960 was a direct response to the revolutionary regime’s expropriation of US properties and its shift towards communism. Diplomatic ties were formally severed in January 1961. The official objective of the US response at this time was to signify condemnation of the confiscation of US capital, through diplomatic isolation and economic sanctions. • As Cuba became more allied with the Soviet Union, a secondary objective, of increasing the cost to the USSR of continuing the alliance, also gained prominence • In 1962, following the Bay of Pigs affair, and Castro’s declared commitment to Marxist-Leninist ideals, the US government extended sanctions by banning all Cuban imports and the re-export of US products to Cuba from other countries, and announced an end to aid for countries that provide assistance to Cuba.

3. Overview • In the time of heightened Cold War tensions - 1962 is also the date of the Cuban Missile Crisis, during which Kennedy and Khrushchev narrowly averted a major nuclear conflict - the Kennedy administration prohibited travel to Cuba and made financial and commercial transactions with Cuba illegal for US citizens. The 1960s can therefore be characterized as a period of increased bilateral tension, and a corresponding tightening of economic sanctions against Cuba. • During the 1970s this approach was softened as extraterritorial dimensions of the embargo were dropped and some attempts were made to find accommodation between Cuba and the US. Success was limited by US opposition to Cuban intervention in a number of international revolutionary movements, including those in Angola, Syria, Puerto Rico and Ethiopia. During this decade, sanctions signified US objections to Cuba’s activities and policies in the international arena.

4. Overview • The 1980s marked a resurgence of the hard line approach in US relations with Cuba. The 1980 Mariel Boatlift, bringing about 125,000 Cuban refugees to the US, focused attention on migration as a major issue of concern between the two countries and a bilateral agreement was reached in 1984 seeking to relieve the problem. Despite this promising co-operation, newly inaugurated president Reagan re-established the ban on travel and relations between the countries remained tense as Cuba continued to support revolutionaries throughout the region. • The 1990s marked a major change in the external situation with the collapse of the Soviet Union. • Since this time, Cuba has been muted in the international scene. • the country no longer maintains a significant armed force, and is not internationally important in either economic or political terms.

5. Overview • Following collapse of the Soviet Union and termination of all economic assistance to Cuba, the response of the US was to strengthen sanctions under the 1992 Cuban Democracy Act (CDA) • The bill forbids foreign subsidiaries of US companies from dealing with Cuba, prohibits any ship that has docked in Cuban harbors from entering US ports, and calls for a termination of aid to any country that provides assistance to Cuba. • Canada and the United Kingdom expressed strong opposition to the extraterritorial nature of the proposed measure and block US subsidiaries located in their countries from complying with CDA provisions. • June 20, 1994 Canadian Foreign Ministry announces that it will resume development assistance to Cuba after a 16-year ban. • February 24, 1996 A Cuban MiG-29 fighter downs two civilian planes belonging to a Cuban-American exile group, "Brothers to the Rescue," that Cuba claims was violating its airspace. President Clinton condemns the action, suspends charter travel from the US, and reaches an agreement with Congress on the Cuban Liberty and Democratic Solidarity Act, referred to as the Helms-Burton Act.

6. Overview • March 12, 1996 Canadian Trade Minister announces that Canada will seek consultations with the US under the North American Free Trade Agreement (NAFTA) regarding the legality of the Helms-Burton bill. Mexico joins in the request. • July 16, 1996 President Clinton asserts that US companies have the right under the Helms-Burton Act to sue foreign companies that are using Cuban assets formerly owned by Americans. • August 19, 1996 The US State Department informs a number of Mexican executives that they will be banned from the US the Helms-Burton Act. 34 members of the OAS pass a resolution declaring that the Helms-Burton Act "does not conform to international law." • October 1, 1996 The Mexican Congress overwhelmingly approves a Helms-Burton "antidote" law that imposes fines of up to $301,000 on Mexican companies that comply with the US legislation. • October 28, 1996 The European Union (EU) approves anti-boycott legislation that forbids compliance with the Helms-Burton Act. • November 19, 1996 The World Trade Organization (WTO) agrees to establish a dispute settlement panel to review the EU's complaint about the Helms-Burton law.

7. Overview • November 28, 1996 The Canadian Parliament passes into law anti-Helms-Burton legislation penalizing companies for obeying the US law, allowing the attorney general to issue blocking orders of US court judgments, and allowing Canadians to recoup penalties. • February 20, 1997 WTO Director General names a three-member panel to rule on the Helms-Burton dispute. Within hours, the Clinton administration announces that the US will not "show up" for such proceedings, arguing that Helms-Burton is based on foreign policy rather than commercial concerns and therefore should not be judged in the WTO. • 8 July 1999 European Communities lodge WTO complaint against the US for a Appropriations Act that bars US courts from recognizing trademarks that are used in connection with businesses or assets confiscated in Cuba. In 2002, the WTO rules for the EC, concluding that the US grants access to its courts in trademark cases in a discriminatory manner by excluding Cuban nationals and foreign successors-in-interest. The US and EC eventually reach an agreement that the EC would not request WTO authorization to retaliate, but reserves the right to do so. • 28 October 2000 Congress passes the Trade Sanctions Reform and Export Enhancement Act, which provides for the granting of one-year export licenses for shipping food and medicine to Cuba.

8. Legislation • Cuban Assets Control Regulations (1963) • Under the Trading with the Enemy Act of 1917 • The Cuban Democracy Act (1992) • Cuba Liberty and Democratic Solidarity Act ["Helms-Burton Act“] (1996) • Trade Sanctions Reform and Export Enhancement Act of 2000.

9. Cuban Assets Control Regulations • The Cuban Assets Control Regulations, 31 CFR Part 515 were issued by the U.S. Government on July 8th 1963 under the Trading With the Enemy Act to respond to the hostile actions by the Cuban government. • This act regulates all transactions involving property and services in which Cuba or a Cuban national has an interest, including travel, remittances, and other financial transactions with Cuba. • Affect U.S citizens and permanent residents wherever they are located, all people and organizations physically in the United States, and all branches and subsidiaries of U.S. organizations throughout the world. • The Regulations are administered by the U.S. Treasury Department's Office of Foreign Assets Control. • The basic goal of the sanctions is to isolate the Cuban government economically and deprive it of U.S. dollars. • Criminal penalties for violating the sanctions range up to: • 10 years in prison, • $1,000,000 in corporate fines, and $250,000 in individual fines. • Civil penalties up to $55,000 per violation may also be imposed. • Any one dealing with Cuba must maintain records and be able to furnish that information regarding those dealings to the U.S. Treasury Department

10. The Cuban Democracy Act • The intent of this act was to support democracy in Cuba by further restricting U.S. trade with the Cuban government and encouraging other countries to limit their trade. • However, the law permits • U.S. exports of medicine and medical supplies to Cuba, with certain exceptions, but specific licenses were required for these items and the U.S. government had to be able to verify that the items were being used for the purpose intended and benefit Cuban people. • The law also restricted trade with Cuba by foreign subsidiaries of U.S. firms and prohibited any vessel unlicensed by Treasury from • 1. Loading or unloading freight in a U.S. port within 180 days after leaving a Cuban port where it engaged in trade of goods or services • 2. Entering a U.S. port while carrying goods or passengers to or from Cuba or goods in which Cuba or a Cuban national had an interest.

11. Cuba Liberty and Democratic Solidarity Act (the "Helms-Burton Act“) • States that the President should apply sanctions against all foreign countries providing assistance to Cuba • Requires all United States directors of international financial institutions to oppose the admission of Cuba as a member of their institution • Authorizes the President to provide published information, humanitarian assistance, and support for democratic and human rights groups in Cuba in support of democracy-building efforts • Stipulates that the United States will withhold assistance to the independent states of the former Soviet Union equal to the amount of assistance and credit that the country is providing for intelligence facilities in Cuba • Allows the President to take steps to terminate the economic embargo of Cuba once a transition Cuban government is in power • Title III gives U.S. nationals the authority to sue a person or entity who traffics property confiscated by the Cuban government, and allows the President to suspend this authority for up to six months • Under Title IV, the US must deny entry to the executives and major shareholders, as well as their immediate families, of firms found to be "trafficking" in expropriated property. • Reaffirms ban on products that originate in Cuba, are made in Cuba, or are transported through Cuba

12. Trade Sanctions Reform and Export Enhancement Act of 2000 • This Legislature changed the U.S.-Cuba trade relationship by enacting certain exceptions from U.S. sanctions legislation for agricultural and medical exports; allowing U.S. food and agricultural sales to Cuba. However, the legislation includes licensing and financial provisions that exporters must follow. • The ban on U.S. imports from Cuba was not changed by this legislation. • Strict laws remain in place on using U.S. dollars in Cuba, financing transactions, traveling to Cuba, and limiting U.S. Government assistance. • The principal agencies involved and control these regulations are USDA, U.S. Department of State, U.S. Department of the Treasury’s Office of Foreign Assets Control, and the U.S. Department of Commerce’s Bureau of Export Administration. • It provides for the granting of one-year export licenses for shipping food and medicine to Cuba. No export assistance is to be made available, and all transactions must be conducted in advance with cash or through third country financing. The law also creates a specific license to permit travel for those conducting business related to the newly permitted food and medicine sales. • The legislation was introduced in Congress after lobbying by farm groups and agribusiness firms affected by declining agricultural exports and lower commodity prices in the late 1990s

13. Major Problems • No exporting of products, technology, or services could be conducted from the U.S. to Cuba, neither directly or through a third country like Canada or Mexico. • Absolutely no importing of Cuban goods or services to the U.S. • No transactions could be conducted involving property in Cuba or when a Cuban national has an interest. (a regulation for those who were subject to U.S. jurisdiction) • Prohibit buying from or selling to Cuban nationals whether they are physically located on the island of Cuba or doing business elsewhere on behalf of Cuba. Individuals or organizations who act on behalf of Cuba anywhere in the world are considered by the U.S. Treasury Department to be “Specially Designated Nationals” of Cuba. • There is a total freeze on Cuban assets, both governmental and private, and on financial dealings with Cuba; all property of Cuba, of Cuban nationals, and of Specially Designated Nationals of Cuba in the possession or control of persons subject to U.S. jurisdiction is “blocked.” Any property in which Cuba has an interest which comes into the United States or into the possession or control of persons subject to U.S. jurisdiction is automatically blocked by operation of law.

14. Major Problems • Economic damages: food shortages & transportation dificulties • attacks the economic resources of Cuba's people: effects on food, clean water, medicine, and other economic needs • Travel restrictions embedded in the embargo have also been shown to limit the amount of medical information that flows into Cuba from the United States. • As long as the embargo continues, non-U.S. foreign businesses in Cuba do not have to compete with U.S. businesses and thus will have a head start when and if the embargo is ended. • U.S. processed food product exports for Cuba’s growing tourism industry lags far behind exports of these products from competing countries. Major competitors include Argentina, Brazil, the EU, New Zealand, Canada and China. • The lack of foreign currency due to the unwillingness to liberalize the economy, diversify the export base, and the need to pay off substantial debts owed to its Japanese, European, and Latin American trading partners. • Violation of International Law (United Nations since 1990) • Hurts the people of Cuba and allows Fidel and Raul Castro to use American sanctions as an easy excuse for a poorly performing economy. All of these problems have caused diplomatic, political, economical, and developmental hardships for Cuba.

15. Major Problems “From here on out, say a growing chorus of experts, America will pay a price for maintaining its 45-year trade ban with the Communist nation — a strategic and economic price that will have negative repercussions for the United States in the decades to come. What has changed the equation? Oil. To be more specific, recent, sizable discoveries of it in the North Cuba Basin — deep-water fields that have already drawn the interest of companies from China, India, Norway, Spain, Canada, Venezuela and Brazil.”

17. Issue • The main issue of the Cuban embargo is the problem posed by “The extraterritoriality nature of the Helms-Burton Act, that violates international law, obstructs trade and impedes the course of a positive, fair and competitive global trade” • Provokes retaliation from other nations: slows trade and impede cooperation among nations

18. Issue • The enactment of “Helms-Burton Act”. expanded the U.S. economic embargo against Cuba through measures aimed at penalizing third countries, firms and individuals trading with Cuba.. • The law, poses serious questions regarding whether or not Helms-Burton violates basic principles of international law. A fundamental principle of international law is territorial sovereignty, each nation is sovereign and so has the right to exercise jurisdiction and control over matters within its territory. • There are two other important concepts related to territorial jurisdiction: • 1) territorial integrity which gives a state the right to demand that other states refrain from committing acts which violate the independence or territorial supremacy of that state; and • 2) nonintervention which requires that a state not interfere with the internal or external affairs of another state. A state may thus make laws that pertain to persons and activities within its territory and with which no other state may interfere. • Extending a state's authority beyond its territory (extraterritorial jurisdiction) may be permitted if such acts are not punishable by the laws of the state where committed or if such acts endanger the security of the state, its money, official seals or marks.

19. Issue • Helms-Burton would appear to violate the United Nations' Declaration on Principles of International Law concerning friendly relations and co-operation among states. The Declaration, prohibits a state from using or encouraging the use of economic, political or any other type of measures to coerce another state in order to obtain from it the subordination of the exercise of its sovereign rights and to secure from it advantages of any kind. • Helms-Burton may also violate the General Agreement on Trade in Services and the North American Free Trade Agreement investment and services rules (Chapter 11) and the rules on temporary entry for business persons (Chapter 16). • On July 11, 1996, the U.S. announced that it would deny visas to seven top executives and directors of Sherritt International Corp., a Canadian mining company accused of "trafficking" in confiscated U.S. property in Cuba. • On August 20, 1996, the U.S. State Department also warned several top executives of a Mexican telephone company (Grupo Domos) that they were in danger of losing their U.S. visas because of the company's investments in Cuba.

20. Issue • The question Helms-Burton raises is just how far is may a country go when it (the U.S.) tries to change the political climate in another country (Cuba)? • The other question Helms-Burton raises is why is it proper for the United States to engage in a boycott when the U.S. has for years condemned the Arab League for its boycott of Israel (see Section 999 of the Internal Revenue Code and 15 C.F.R. Part 769)?

21. Policy Proposal • Strengthening ties with Cuba can lead to a strong ally in the Caribbean. Strategically or economically. • A strong Cuban ally could provide the U.S. with badly needed, improved diplomatic relations with countries who have greater confidence in Cuba. (and not just Communist or dictator-ruled countries) • Both countries' citizens could benefit from the tourism to this island. • Open door policies can lead to improved communication even with the worst regimes. • Lifting the embargo could help families and citizens of Cuba gain the inner strength to take on the Cuba dictatorship.(This would circumvent decades of ongoing resentment from a people who may feel abandoned by a large and powerful nation who could leverage their freedom with minimal effort)

22. Policy Proposal • Strengthening the confidence of the citizens of Cuba by providing overt support and resources could give the people the courage to stand up against the regime and ultimately change the government internally. (This would consume significantly less resources than a war with Cuba to liberate its people) • The simple act of lifting the embargo could create a natural process that allows for a peaceful or more preferable movement of change. • Lifting the Cuban embargo shows the world that the U.S. does not want to dictate to any people or government how it should be run, and signals a more amicable willingness to allow other nations to take care of their own affairs. (Not everyone in the world wants a democracy or economy like the U.S. but they do want liberty and freedom and justice for every citizen in a way that supports their cultural values). • Changing the Cuban Embargo law could bring Billions of dollars to both countries, and create thousands of new jobs in both countries.

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