United States General Accounting Office

GAO Report to the Honorable

Dan Burton, Chairman, Committee on

Government Reform and Oversight

House of Representatives

December 1998 CUBAN EMBARGO

Selected Issues

Relating to Travel,

Exports, and

Telecommunications

GAO/NSIAD-99-10

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-281123 

December 1, 1998

The Honorable Dan Burton

Chairman, Committee on Government

 Reform and Oversight

House of Representatives

Dear Mr. Chairman:

In 1962, the United States imposed an economic embargo against Cuba

that has been modified over the years by legislation and presidential

actions. At your request, we reviewed the implementation and monitoring

of certain embargo provisions affecting travel, telecommunications, and

trade. Specifically, we examined (1) whether the decision of the

Department of the Treasury’s Office of Foreign Assets Control (OFAC) to

allow authorized U.S. travelers to fly indirectly to Cuba by taking

chartered aircraft that touched down and changed flight numbers in third

countries and then flew on to Cuba was consistent with U.S. law;

(2) whether a telecommunications agreement between International

Telephone and Telegraph (ITT) and STET International (an Italian

telecommunications company) was consistent with U.S. law; (3) how U.S.

products can be available in Cuba; and (4) how U.S. agencies license and

monitor U.S. travelers and companies, including licensed air carrier

providers, and exports that are affected by the embargo’s restrictions. You

also asked that we determine whether the executive branch’s changes to

the embargo in 1998 were consistent with U.S. law. As requested, we are

also providing information on the telecommunications provisions of the

Cuban Democracy Act of 1992 (CDA), Cuba’s imports, and U.S. restrictions

on imports containing Cuban components in appendixes I-III.

Background To implement the embargo, the Treasury Department, in 1963, issued the

Cuban Assets Control Regulations (CACR),1

 under the authority of the

Trading With the Enemy Act of 1917, as amended,2

 which confers broad

authority on the President to impose embargoes on foreign countries. The

CACRs prohibit U.S. persons from engaging in any financial transactions

1

31 C.F.R. pt. 515.

2

50 U.S.C. app. § 5(b).

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with Cuban entities, including those related to travel and exports.3 In

recent years, Congress has added other embargo measures—enacting the

CDA of 1992 4 and the Cuban Liberty and Democratic Solidarity (LIBERTAD)

Act of 1996 (also known as the Helms-Burton Act).5

 The CDA restricts

U.S.-owned or -controlled firms in third countries from exporting to Cuba

and authorizes humanitarian and telecommunications exports. The

Helms-Burton Act codified the embargo in effect on March 1, 1996, and

added other provisions related to the rights of U.S. citizens whose

property has been confiscated by the Cuban government.

In March 1998, the President announced (1) the restoration of direct

charter flights between the United States and Cuba for authorized U.S.

travelers, (2) a plan to streamline and expedite licensing procedures for

medical exports, and (3) the reinstitution of family remittances up to $300

per quarter from persons in the United States to their families in Cuba.

Subsequently, OFAC added the requirement that “fully hosted”6

 travelers

must, when requested, supply proof that costs associated with their travel

to Cuba were paid for by a non-U.S. entity.

Results in Brief The President’s broad authority under section 5(b) of the Trading With the

Enemy Act allows the executive branch a great deal of discretion in

making changes to embargo restrictions. Both flight procedures used by

the Department of the Treasury and the Department of Commerce—those

for indirect flights between February 1996 and May 1998 and those for

direct flights adopted in 1998 for passengers and cargo—were consistent

with existing U.S. laws. In addition, the executive branch’s 1998 change

that further monitors fully hosted travel is also consistent with existing

U.S. law.

We also believe that the agreement between ITT and STET International

regarding ITT’s confiscated property in Cuba is consistent with the

applicable statutory language of the Helms-Burton Act. ITT has agreed to

3

For this report, the term “U.S. persons” refers to “persons subject to U.S. jurisdiction.” Under the

CACRs, this term includes (1) U.S. citizens or residents, (2) any person actually within the United

States, and (3) corporations organized in the United States or any U.S. state or territory. 31 C.F.R.

§515.329.

4

22 U.S.C. §§ 6001 and following.

5

Id. §§ 6021 and following.

6

Fully hosted travelers refer to U.S. persons who make no currency transfers to Cuba before, during, or

after their travel to Cuba. All their travel expenses in Cuba are paid for by other individuals or entities,

including payments to Cuban air carriers. See 63 Fed. Reg. 27350 (May 18, 1998). Fully hosted travelers

continue to be prohibited from taking direct flights between the United States and Cuba.

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let STET use ITT’s confiscated property in Cuba over the 10-year period of

the agreement, and STET provided substantial compensation to ITT.

Some U.S. goods such as humanitarian items like food, clothing, and

medicines, can legally be exported to Cuba. In most instances, U.S. goods

can also be legally exported to Cuba by non-U.S. firms in third countries if

the U.S. supplier has no knowledge that the buyer intends to sell them to

Cuba. However, no reliable data are available on the amount of such trade.

Exports may also reach Cuba illegally if businesses deliberately

circumvent the embargo restrictions. According to U.S. officials, few

countries cooperate with U.S. enforcement of the embargo.

The executive branch’s 1998 changes that expedite procedures for medical

exports to Cuba and permit licensed medical and pharmaceutical sales

representatives to travel to Cuba are consistent with the 1992 CDA, which

specifically authorizes medical exports, and OFAC’s licensing authority

under the CACRs.

OFAC is primarily responsible for implementing the Cuba embargo, the

Commerce Department’s Bureau of Export Administration (BXA) licenses

exports, and the Customs Service enforces the embargo at U.S. borders.

Customs seizes contraband—both goods and currency—and refers

potential civil violations to OFAC and potential criminal violations to the

Justice Department. Justice officials told us they have not prosecuted

many Cuba embargo cases partly due to the difficulty of proving specific

intent to violate the law. They also indicated that the lack of significant

monetary impact of Cuban embargo cases and jury appeal where

humanitarian issues may be present are factors to be considered in these

cases. Justice has prosecuted 10 cases related to export and travel

violations in the last 6 years.

In 1998, the executive branch, citing humanitarian reasons, changed family

remittance procedures to allow U.S. persons to send general family

remittances of up to $300 per quarter to relatives in Cuba. Because these

changes will likely result in increased transfers of currency to Cuba, they

do not appear to further the general purpose of the embargo—that is, to

limit the flow of hard currency from the United States to Cuba. However,

the President’s broad authority over the conduct of foreign affairs as well

as that under section 5(b) of the Trading With the Enemy Act allows the

executive branch a great deal of discretion in making changes to embargo

restrictions. In addition, the CACRs provide specific authority to the

Treasury Secretary to modify the restrictions in the CACR “by means of

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regulations, rulings, instructions, licenses, or otherwise.” Consequently,

based on our review of all the applicable statutory language, we believe

OFAC had the authority to make the family remittance changes under its

general licensing authority.

Over the course of its implementation, the Cuba embargo has both been

strengthened by the law and regulations, including the Helms-Burton Act,

and loosened to allow humanitarian assistance. Although we were not able

to quantify illegal trade to Cuba, these laws and regulations have afforded

a measure of control over the movement of people and goods from the

United States to Cuba.

Indirect and Direct

Flights to Cuba Are

Consistent With U.S.

Law

We believe that OFAC’s decision to permit U.S.-licensed air carrier service

providers to charter foreign aircraft that landed in a third country,

changed flight numbers, and then flew on to Cuba independent of the U.S.

carrier service provider was consistent with its legal authority. We also

believe that the executive branch’s decisions to restore direct U.S. flights

to Cuba of both persons and cargo and to further monitor fully hosted

travel to Cuba were consistent with the existing law.

Travel Restrictions in the

CACR

No U.S. statute currently establishes overall restrictions on travel to Cuba.

The restrictions on travel are regulatory and are set forth in the CACRs.

These restrictions do not prohibit travel to Cuba itself but do preclude

most U.S. persons from spending money on travel to Cuba. The primary

purpose of the travel restrictions is to stop the flow of hard currency from

the United States to Cuba.

The CACRs allow limited categories of U.S. persons to spend money on

travel to Cuba without seeking OFAC approval. These include (1) official

government travelers; (2) journalists; and (3) once per year, persons

traveling to visit close relatives in Cuba under circumstances of extreme

humanitarian need. In addition, U.S. persons whose expenses are fully

paid by a non-U.S. person, including a Cuban or the Cuban government,

may also travel to Cuba without OFAC approval. Additional categories of

U.S. persons may travel to Cuba if they obtain a specific license from OFAC

to do so.7

7

Examples include (1) people traveling more than once a year to visit close relatives in Cuba under

circumstances of extreme humanitarian need, (2) recognized human rights organizations that are

investigating human rights violations, and (3) companies negotiating the performance of

telecommunications agreements for service between the United States and Cuba.

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Authorized travelers to Cuba may spend no more than $100 per day in

Cuba for items directly related to travel. Travelers may also bring back to

the United States a maximum of $100 worth of Cuban merchandise

purchased for personal use, but only once every 6 consecutive months.

These travelers may also pay for all transportation-related transactions

involving travel to and from Cuba, but no more than $500 may be paid to

Cuba in any 12-month period for fees imposed by Cuba.

Indirect Flights to Cuba

During 1996-98

Prior to February 1996, the United States permitted authorized carrier

service providers to arrange direct flights between the United States and

Cuba. Following the shootdown of two “Brothers to the Rescue”8

 aircraft

on February 26, 1996, the President suspended all direct flights between

the United States and Cuba. OFAC then notified authorized carrier service

providers that they could arrange indirect flights provided that U.S.

responsibility for such flights ended in the third country. Authorized

travelers could travel to Cuba by changing flights in the third country and

flying on to Cuba. Under this procedure, responsibility for the second leg

of the flight had to be assumed by a non-U.S. tour sponsor using non-U.S.

aircraft and flight crews. Moreover, at that time, the requirement to change

flights meant a change of aircraft.

According to OFAC, several problems arose regarding air carrier service to

third countries. First, OFAC became aware that most air service between

the third-country destinations and Cuba was provided by a Cuban airline.

Since authorized travelers had to pay the airline for tickets, additional U.S.

currency was provided to Cuba. Second, authorized travelers’ need to

carry currency to meet expenses in third countries significantly

complicated Customs’ outbound search in the United States for excess

currency going to Cuba. Third, since all travelers to Cuba—both legal and

illegal—were going through third countries, Customs had to deal with

assertions by some travelers that their final destination was the third

country and not Cuba. Thus, Customs could not act with certainty about

how much U.S. currency each passenger could legitimately take. And

finally, travelers’ need to change aircraft in the third country often resulted

in substantial delays or overnight stays for passengers awaiting connecting

flights, thereby necessitating the possession of additional funds.

To address these problems, OFAC informed all carrier service providers by

letter dated July 9, 1996, that they could permit authorized travelers to

remain on board the non-U.S. aircraft for a continuing flight to Cuba from

8

A Miami Cuban group.

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B-281123 

a third country, provided that the flight number was changed and the U.S.

service provider’s responsibility for the second leg of the flight ended in

the third country.

We find OFAC’s July 9 change in procedure to be consistent with its

authority under section 5(b) of the Trading With the Enemy Act, which

conferred broad authority on the President and, by delegation to OFAC, to

implement comprehensive embargoes against foreign countries. This

change is consistent with section 102(h) of the Helms-Burton Act.

Section 102(h) states that “the economic embargo of Cuba, as in effect on

March 1, 1996, including all restrictions under part 515 of title 31, Code of

Federal Regulations, shall be in effect upon the enactment of this Act, and

shall remain in effect, subject to section 204 of this Act.” Under 31 C.F.R. §

515.201, financial transactions with Cuba, which include travel expenses,

are generally prohibited except as specifically authorized by the Secretary

of the Treasury by regulations, licenses or otherwise. Section 204 requires

a presidential determination that a transition government in Cuba is in

power before the economic sanctions can be either suspended or

terminated.

The conference report accompanying the act explains that section 102(h)

was not intended to prohibit executive branch agencies from amending

existing regulations to tighten economic sanctions on Cuba or to

otherwise implement Helms-Burton. According to OFAC, two of the

principal purposes of the July 9 procedure were to afford greater U.S.

control over flights and passengers, and to reduce currency transfers to

Cuba resulting from authorized travelers flying from third countries to

Cuba on a Cuban airline.

Direct Flights to Cuba Are

Consistent With U.S. Law

In May 1998, the executive branch released its regulations for the

resumption of direct passenger charter flights between Miami, Florida, and

Havana, Cuba, effective June 15, 1998. Under the revised procedures,

U.S.-licensed carrier service providers can arrange direct flights to Cuba,

using either U.S. or non-U.S. aircraft and flight crews. The executive

branch also restored direct humanitarian cargo flights between the United

States and Cuba and imposed additional monitoring procedures on fully

hosted travel to Cuba. Regarding the latter, it established a presumption

that U.S. persons who travel to Cuba without authorization have engaged

in prohibited travel-related transactions. Fully hosted travelers can rebut

this presumption by giving federal enforcement agencies, upon request,

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relevant supporting documentation showing that they have not engaged in

prohibited transactions.

According to OFAC, restoration of direct flights between the United States

and Cuba is likely to give U.S. enforcement agencies—primarily Customs

and OFAC—greater control over U.S. persons and humanitarian cargo than

they had on flights routed through third countries. Enhanced control also

appears to reduce, to some extent, the potential for illegal transfers of

currency into Cuba.

We concur with OFAC’s position regarding the executive branch’s authority

to restore direct flights. We also believe that it is within OFAC’s authority to

strengthen the monitoring procedures on fully hosted travel to Cuba.

Among other things, this restriction is intended to make it more difficult

for travelers to spend money in Cuba.9

 Since all these changes will assist

Customs and OFAC in enforcing the embargo by providing greater control

over travel to Cuba, they are consistent with the embargo as codified by

Helms-Burton.

Agreement on Use of

Confiscated Property

Is Consistent With

U.S. Law

A number of provisions in the 1996 Helms-Burton Act relate to U.S.

property confiscated by the Cuban government. Title III of the

Helms-Burton Act establishes a private right of action for U.S. persons or

entities against others who knowingly and intentionally have trafficked in

property confiscated by the Cuban government on or after January 1, 1959.

Under title III, the term “traffics” includes a broad range of activities

undertaken without the authorization of the U.S. national who holds a

claim to the property. Title IV of the act authorizes the Secretary of State

to deny a visa to, and the Attorney General to exclude from the United

States, an alien that the Secretary determines has confiscated or trafficked

in property owned by a U.S. national. For title IV sanctions to apply, the

trafficking had to occur on or after March 12, 1996.10

After enactment of Helms-Burton, the State Department began an

investigation of STET International, an Italian firm, which benefits from

the use of ITT property confiscated in Cuba. Before State concluded its

investigation on July 15, 1997, ITT and STET entered into an agreement

9

See 63 Fed. Reg. 27350-51 (May 18, 1998). OFAC officials, however, have indicated that enforcement

cases may be difficult to prove under this new restriction.

10The President may suspend the provisions of title III for successive 6-month periods and President

Clinton has done so since enactment of Helms-Burton. Unlike title III, however, the provisions of

title IV cannot be suspended.

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under which ITT (1) allowed STET to use its confiscated property and

(2) waived its right to bring any action against STET for such use, for a

10-year period. ITT also agreed to cooperate with STET in contacts with

State to help ensure that no STET personnel would be excluded from the

United States under title IV. In exchange, STET agreed to make a

substantial one-time payment to ITT. In July 1997, State terminated its

investigation. Subsequently, STET paid ITT the agreed-upon amount. State

said that the agreement constituted a major step forward in the

enforcement of Helms-Burton, reinforced the principle of respect for the

property rights of U.S. citizens, and would serve as a disincentive to other

foreign firms currently operating in or considering investment in

confiscated U.S. property in Cuba without authorization of the U.S.

claimant.

In reviewing the agreement, State determined that as long as it is

implemented in accordance with its terms, for the 10-year period covered,

STET’s use of ITT’s confiscated property will not constitute “trafficking.”

The term traffics does not apply when U.S. nationals authorize other

parties to make use of confiscated property for which they have claims.

According to State, claimants may waive the title III private right of action.

State also pointed out that the amount STET agreed to pay ITT was not

insubstantial and, as such, suggests that the agreement was not a

subterfuge for avoiding the intent of titles III and IV.

We have reviewed the agreement and State’s analysis and find the

agreement consistent with the language and intention of titles III and IV of

Helms-Burton. The agreement would appear to preclude STET from being

considered a trafficker in ITT’s confiscated property, at least for the 10-year

period covered by the agreement.

Embargo Restrictions

on U.S. Exports to

Cuba

The embargo against Cuba prohibits the export of U.S. goods and

technology to Cuba, with limited exceptions. The exceptions include gift

parcels, food and agricultural items, medicines and medical equipment,

items donated by recognized charities, and certain non-humanitarian

goods. Commerce’s BXA licenses some items while some items qualify for

exceptions to BXA licensing requirements.11

11OFAC has the authority to license exports from foreign subsidiaries of U.S. firms and U.S. firms

abroad. However, as mentioned above, the CDA specifically precludes U.S.-owned or -controlled

foreign firms in third countries from exporting to Cuba.

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Licensed Exports BXA licenses exports that are made in the United States or that are made by

foreign firms and contain certain percentages of U.S. components. Limited

categories of goods can be exported to Cuba only after the exporter has

sought a license. The CDA specifically authorizes exports of medicines,

medical supplies, instruments and equipment, and pharmaceuticals, and

BXA licenses these exports.12 BXA also reviews and licenses exports on a

case-by-case basis of (1) certain telecommunications commodities;

(2) nonstrategic, foreign-made products that contain insubstantial

proportions of U.S.-origin materials, parts, or components; (3) certain

commodities and software used by human rights organizations or

individuals and nongovernmental organizations that promote independent

activity intended to strengthen civil society in Cuba; and (4) certain

commodities and software to U.S. news bureaus in Cuba.

Unlicensed Exports The two major categories of goods that can be exported to Cuba without a

BXA license are gift parcels and humanitarian donations. Gift parcels may

include only food, vitamins, seeds, medicines, medical supplies and

devices, hospital supplies and equipment, equipment for the handicapped,

clothing, personal hygiene items, veterinary medicines and supplies,

fishing equipment and supplies, soap-making equipment, and receive-only

radio equipment and necessary batteries for reception of commercial

and/or civil AM/FM and short-wave, publicly available frequency bands.13

Except for gift parcels of food, which are unrestricted, only one gift parcel

valued at no more than $200 may be sent from the same donor to the same

recipient in any 1 calendar month.

Humanitarian donations to meet basic human needs may also be exported

to Cuba without a license.14 However, donors must be U.S. charitable

organizations with an established record of involvement in donor

programs. They must also have experience in maintaining and verifying a

system of distribution in Cuba to ensure delivery to the intended

beneficiaries.

12The CDA authorizes medical exports to Cuba unless (1) restricted by pertinent provisions of the

Export Administration or the International Emergency Economic Powers Acts; (2) there is a

reasonable likelihood they will be used for torture or other human rights abuses or will be reexported;

(3) they could be used in the production of any biotechnological product; or (4) the U.S. Government

is unable to verify, by on-site inspection or other means, that the item will be used for the purpose for

which it is intended and only for use and benefit of the Cuban people. (22 U.S.C. § 6004(c) and (d);

subsection (a) also states that its provisions, including those authorizing medical exports to Cuba,

apply notwithstanding any other provision of law.)

13BXA authorizes exports of gift parcels by an individual donor for the use of the donee or the donee’s

immediate family.

14Some donations of medicines and medical items must be specifically licensed.

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The majority of U.S. humanitarian exports to Cuba are donated medicines

licensed by BXA. Actual U.S. humanitarian exports to Cuba in 1997 totaled

$9.3 million, of which $7.4 million was donated medicinal and

pharmaceutical products, as reported by Commerce’s Bureau of the

Census. Table 1 shows official data for U.S. exports to Cuba for 1993-97.

(See app. II for data on Cuban imports.)

Table 1: U.S. Exports to Cuba, 1993-97

U.S. dollars in millions

Commodity 1993 1994 1995 1996 1997

Medicinal & pharmaceutical,

donated $1.0 $3.4 $3.6 $4.4 $7.4

Articles donated for relief 0.1 0.6 1.2 0.8 1.3

Wearing apparel, donated 1.0 0.1 0.1 0.1 0.4

Telecommunication apparatus 0 0 0.1 0.1 0

Commingled food exports 0.1 0.1 0 0 0.1

Other 0.3 0.2 0.8 0 0

Totala $2.6 $4.4 $5.8 $5.5 $9.3

aTotal may not add due to rounding.

Source: Department of Commerce, Bureau of the Census.

Legal and Illegal Exports

Through Third Countries

In addition to the goods excepted from the ban on exports, other U.S.

goods can reach Cuba by being lawfully sold to buyers in third countries

who then reexport them to Cuba without the knowledge of the U.S.

exporter. Complicating the picture somewhat is the presence in Cuba of

goods bearing U.S. trademarks. These goods can be produced in third

countries under licensing arrangements with the U.S. owner of the

trademark and subsequently exported to Cuba. This may or may not be a

violation of U.S. law, depending on whether the U.S. owner of the

trademark knows that the licensee plans to market the trademarked goods

in Cuba.

Exports may also reach Cuba illegally if businesses deliberately

circumvent the embargo restrictions. It is difficult for U.S. agencies to

detect illegal exports once they have left the United States because few

countries cooperate with U.S. enforcement of the embargo. Most countries

trade freely with Cuba, and some have enacted legislation to ensure that

their firms do not cooperate with the U.S. embargo. For example, under

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Canadian law, judgments under Helms-Burton are not to be recognized or

enforced in Canada.

New Guidelines Intended

to Streamline Medical

Exports Are Consistent

With U.S. Law

On May 14, 1998, BXA issued guidelines describing expedited procedures

for licensing medical exports to Cuba. The guidelines indicated that BXA

will work with exporters on the monitoring of and on-site verification

requirements for medical sales or donations to Cuba.15 The guidelines also

provided a number of clarifications about how to fill out the required

license application forms. As part of the May 1998 changes, OFAC also

added sales representatives from pharmaceutical and medical companies

to the categories of U.S. persons that could travel to Cuba under a specific

license. This travel must be in connection with permitted sales of health

care products to Cuba.

We believe that BXA’s expediting and streamlining procedures for medical

exports to Cuba properly implement the provision in the CDA specifically

authorizing medical exports to Cuba. We also believe that OFAC’s licensing

authority under the CACRs covers its addition of sales representatives to

the categories of persons that can travel to and spend money in Cuba. This

furthers the specific provision in the CDA authorizing medical exports to

Cuba.

Roles in

Implementation and

Monitoring

Although the State Department plays a pivotal role in policy matters, OFAC

is primarily responsible for implementing the embargo and BXA licenses

exports. Under their licensing authority, they define and limit the

frequency and extent of financial transactions related to travel and

exporting. However, both agencies must rely to a great extent on Customs,

which has the primary role of enforcing the embargo at U.S. borders.

OFAC licenses transactions for travel—whether direct or indirect— by U.S.

persons and by U.S. service providers who provide transportation services

to authorized travelers. OFAC’s small enforcement division works closely

with Customs, especially in the application of the regulations to specific

situations. It monitors the air carrier providers’ operations, including their

financial transactions with Cuba and their business travel to Cuba.

According to OFAC, its Miami office, established at the direction of

Congress in 1995 to strengthen enforcement, is better able to coordinate

with U.S. Customs in Florida on potential criminal cases and is working

15According to BXA, entities that could help comply with end-use monitoring include, but are not

limited to, representatives of the license applicant, religious or charitable groups, third country

diplomats, and international nongovernmental organizations.

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closely with Customs on several current cases. It also provides a local

presence for licensing travelers and educating the public about the

embargo’s requirements.

OFAC Monitors Air Carrier

Service Providers

Under the CACRs, OFAC licenses travel and air carrier service providers to

arrange travel and/or provide travel services to authorized passengers

visiting Cuba. In authorizing service providers, OFAC licenses companies

that meet OFAC’s compliance requirements, which focus on service

reliability, financial integrity, and the ability to provide OFAC with

documentary evidence of compliance. OFAC requires the service providers

to submit annual reports on the number of passengers transported and the

total amount of money transferred to Cuba.

At the time of our review, OFAC had not reviewed the carriers’ contracts

with Cuban entities or used the information submitted by the service

providers for analysis or follow up. OFAC officials stated that, during the

time period covered by this report, existing resources were being devoted

to other enforcement matters, such as monitoring the operational

requirements for all service providers and issuing humanitarian licenses

for travel. OFAC officials also noted that the availability of further resources

would result in enhanced oversight of the regulated community.

We reviewed OFAC files pertaining to licensing, reporting, and other routine

matters for the three carrier service providers actively flying authorized

passengers to third countries in 1997. We found that some data related to

currency transfers to Cuba seemed inconsistent with the number of

passengers transported to Cuba. For example, one carrier’s report of

currency transfers to Cuba during 1997 included a significant amount for

passengers actually transported in 1996, but the carrier reported the

number of passengers transported in 1997 only. Thus, we were not able to

compare the amounts of currency transferred to Cuba per passenger by

the three air carriers, although we noted certain apparent differences in

total amounts transferred.

We questioned OFAC about the difficulty in assessing the currency transfers

to Cuba reported by the three air carrier service providers. OFAC pointed

out that it requires only the total currency transfer to Cuba during the year

and does not request information about liabilities incurred. OFAC

subsequently conducted an on-site check during April 1998 and verified

that Cuba charges each carrier service provider the same amount per

ticket sold. OFAC told us that the differences could be explained partly by

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other fees, such as visa fees, and partly by differences among the service

providers in the timing of their payments.

OFAC officials told us that they found other accounting problems with two

of the service providers during their review. OFAC suspended indefinitely

the two air carriers’ authorizations to provide services to Cuba, effective

September 28, 1998, with the provision that each may engage in travel

transactions through October 14, 1998, in order not to strand authorized

passengers who departed the United States prior to September 30 aboard

flights originated by either air carrier.

BXA’s Role in Monitoring

Authorized Exporters

Because of the difficulty in monitoring all goods exported, both OFAC and

BXA rely on exporters’ voluntary adherence to export regulations. In

addition, humanitarian organizations are permitted to self-certify their

eligibility to export to nongovernmental organizations in Cuba without

seeking BXA approval. According to BXA officials, BXA does require

enhanced record-keeping measures, but it only occasionally monitors

these organizations.

For goods that are licensed, BXA specifies a ceiling on the amount of

exports that the licensee may export, but exporters have used only a small

proportion of the total authorized amount. For example, actual 1997

exports to Cuba amounted to $9.3 million, according to Customs, but the

total value of potential exports that BXA licensed in 1997 was about

$341 million. Tables 2 and 3 indicate the authorized and actual amounts of

exports for humanitarian donations and for medicine and medical

equipment for 1993-97.

Table 2: U.S. Authorized and Actual

Humanitarian Donations to Cuba,

1993-97

U.S. dollars in millions

Data 1993 1994 1995 1996 1997 Total

Authorized exports $559.8 $517.5 $526.3 $538.6 $340.7 $2,482.9

Actual exports $2.6 $4.4 $5.8 $5.5 $9.3 $27.6

Source: Department of Commerce, Bureau of Export Administration and Bureau of the Census.

Page 13 GAO/NSIAD-99-10 Cuban Embargo
B-281123 

Table 3: U.S. Authorized and Actual

Medicine and Medical Equipment

Exports to Cuba, 1993-97

U.S. dollars in millions

Data 1993 1994 1995 1996 1997 Totala

Authorized exports $12.2 $39.2 $113.8 $21.0 $88.7 $274.8

Actual exports $1.0 $3.4 $3.6 $4.4 $7.4 $19.8

aTotal may not add due to rounding.

Source: Department of Commerce, Bureau of Export Administration and Bureau of the Census.

Customs Monitors

Travelers and Exports

Although BXA and OFAC rely on Customs to enforce their regulations at U.S.

borders, Customs officials told us that demands on its resources prevent it

from examining all departing passengers and cargo destined for Cuba,

given its multiple enforcement priorities. The Customs Service office in

Miami, Florida, monitors departing passengers and shipments at random

and, during fiscal year 1996, Customs made 20 seizures of currency

totaling $256,158 that was being transported in violation of the CACRs.

During fiscal year 1997, Customs made 14 seizures totaling $109,376.

Customs refers criminal violations to the Justice Department or civil

violations to OFAC if warranted. Customs officials said they refer few cases

to the Justice Department because violations tend to be insignificant in

value and thus do not meet the criteria for prosecution. According to the

U.S. Attorney’s Office in Miami, the minimum for prosecuting a currency

violation is generally $10,000.

The U.S. Attorneys’ offices have brought few prosecutions for violations of

restrictions on travel and exports to Cuba over the 36 years of the

embargo’s history. Officials of the U.S. Attorney’s Office in Miami told us

that this situation is partly due to the difficulty in accumulating the

required proof that persons suspected of a violation had both knowledge

of the embargo and the specific intent to violate it. They also told us that

the lack of significant monetary impact of Cuban embargo cases and jury

appeal where humanitarian issues may be present are factors to be

considered in these cases. Nevertheless, they said that their office has

begun to put more emphasis on violations of the embargo. One recent

export case involving the illegal export of up to $400 million in goods

resulted in several convictions and the imposition of significant fines. The

discovery of this violation came from informants, rather than any

monitoring done by OFAC, BXA, or Customs. Table 4 summarizes the roles of

key agencies that implement the embargo against Cuba.

Page 14 GAO/NSIAD-99-10 Cuban Embargo
B-281123 

Table 4: Roles of Key Agencies in Implementing the Cuban Embargo

Agency Activity Exceptions Restrictions Enforcement

State Coordinates U.S. foreign

policy for Cuba

Not applicable Not applicable Not applicable

Treasury/OFAC and

Customs

OFAC licenses

individuals’ travel to Cuba

U.S. government officials,

journalists, and persons

visiting close relatives in

Cuba once per year for

humanitarian reasons,

and fully hosted travelers

License is valid for a

specified time period;

U.S. currency is limited to

$100/day, on departure

all passengers make

declaration to Customs as

to amount of currency

they are taking.

Customs enforces at U.S.

borders and checks

about 20 percent of

departing flights going to

Cuba from the Miami,

Florida, airport.

Treasury/OFAC Licenses (1) travel service

providers and (2) carrier

service providers

None Must meet OFAC criteria

and maintain adequate

records to ensure OFAC

that all regulations and

directives are being

followed.

Ad hoc compliance

reviews in Aug./Sept.

1997 and Apr. 1998;

Customs and OFAC

coordinate enforcement

actions.

Treasury/OFAC Authorizes family

remittances

Amounts under $300 per

quarter permitted

$300 per quarter to a

close relative

Customs enforces at U.S.

borders. Remitttance

forwarders are required to

maintain records and

report summary data to

OFAC.

Treasury/OFAC Takes action on civil

violations

Determined on a

case-by-case basis

Not applicable OFAC takes penalty

action, including

assessing and collecting

fines, as appropriate.

Commerce/BXA;

Customs

BXA licenses

consolidators of gift

parcelsa

None Consolidator may export

up to the total dollar

amount authorized by the

BXA license.

Individual may send one

per month to same

recipient, $200 maximum,

except for food, which is

not restricted.

Consolidators are

responsible to ensure that

parcels contain allowable

items, that the value does

not exceed $200, and that

individuals send only one

parcel per month.

Commerce does not

regularly monitor. One

BXA audit since 1996

found only minor

problems. 

Customs generally

examines exports on a

random basis and

collects export

documents to provide

Census with export data.

(continued)

Page 15 GAO/NSIAD-99-10 Cuban Embargo
B-281123 

Agency Activity Exceptions Restrictions Enforcement

Commerce/BXA;

Customs

BXA licenses medicine,

medical equipment

No specific license

needed when sent in a

gift parcela

Exporter may send no

more than the total dollar

amount authorized by the

BXA license, which is

valid for 2 years.

BXA does not track

amount of authorized

exports actually shipped;

Customs generally

examines U.S. exports on

a random basis, and

collects export

documents to provide

Census with data.

Commerce/BXA;

Customs

BXA licenses

food/agriculture

No specific license

needed when sent in a

gift parcela

Exporter may send no

more than the total dollar

amount authorized by the

BXA license, which is

valid for 2 years.

BXA does not track

amount of authorized

exports actually shipped;

Customs generally

examines U.S. exports on

a random basis, and

collects export

documents to provide

Census with data.

Commerce/BXA;

Customs

BXA licenses

non-humanitarianb exports

None Exporter may send no

more than the total dollar

amount authorized by the

BXA license, which is

valid for 2 years.

BXA does not track

amount of authorized

exports actually shipped;

Customs generally

examines U.S. exports on

a random basis, and

collects export

documents to provide

Census with data.

Commerce/BXA;

Customs

BXA authorizes exports of

donations by recognized

charities

No specific license

needed

Organization self-certifies

that it meets all BXA

criteria, including

ensuring that goods

reach intended

beneficiaries.

BXA occasionally reviews

export documents filed by

Customs and may audit

the organizations at any

time; Customs generally

examines U.S. exports on

a random basis, and

collects export

documents to provide

Census with data.

Justice/U.S. Attorneys’

Offices

Prosecutes criminal

violations referred by

Customs

Decisions to prosecute

are determined on a

case-by-case basis.

Not applicable Not applicable

aPermitted items are limited to food, which has no limits on the value, vitamins, seeds, medicines,

medical supplies and devices, hospital supplies and equipment, equipment for the handicapped,

clothing, personal hygiene items, veterinary medicines and supplies, fishing equipment and

supplies, soap-making equipment, and receive-only radio equipment and necessary batteries for

reception of commercial and/or civil AM/FM and short-wave, publicly available frequency bands.

It should also be noted that shippers of these parcels are licensed by BXA.

bIncludes telecommunications, weather, air traffic control, scientific, news bureau, and

pro-democracy items, and medicines and medical equipment sales.

Page 16 GAO/NSIAD-99-10 Cuban Embargo
B-281123 

President’s 1998

Changes to Family

Remittance

Regulations

The changes in the general family remittance procedures will likely result

in increased transfers of currency to Cuba. Although these changes may

have been made for humanitarian reasons, they do not appear to further

the general purpose of the embargo—that is, to limit the flow of hard

currency from the United States to Cuba. However, the President’s broad

authority over the conduct of foreign affairs as well as that under

section 5(b) of the Trading With the Enemy Act allows the executive

branch a great deal of discretion in making changes to embargo

restrictions.

History of Family

Remittances

Between October 1991 and August 30, 1994, the CACRs permitted U.S.

persons aged 18 years or older to make general family remittances16 to

close family members in Cuba in amounts not exceeding $300 in any

consecutive 3-month period.17 On August 20, 1994, however, the President

announced steps to limit the ability of the Cuban government to

accumulate foreign exchange, and on August 30, 1994, new family

remittances regulations were issued.18 Under these regulations, U.S.

persons could send money to close relatives in Cuba only if they first

obtained a specific license from OFAC and the remittances were being

made under circumstances of extreme humanitarian need.

Notwithstanding this limited authority, according to OFAC, its general

operating policy was not to grant licenses for these remittances.

Effect of 1998 Changes The 1998 changes to the family remittance regulations substantially

reinstated the regulations that were used between October 1991 and

August 30, 1994. They allow a U.S. person at least 18 years of age to make

remittances of up to $300 in any consecutive 3-month period to a close

relative in Cuba. By eliminating the requirements that a specific license be

obtained and that remittances be made only under circumstances of

extreme humanitarian need, the changes will likely result in increased

transfers of currency to Cuba.

16See 63 Fed. Reg. 27348 (May 18, 1998). The executive branch stated that there had been no change in

the authorization permitting emigration remittances of up to $1,000 on a one time basis to close

relatives in Cuba. Sections 515.563(b) and 564(c) of the CACRs authorize U.S. persons to make

remittances of $500 to close family members for purposes of enabling them to emigrate from Cuba to

the United States, and an additional $500 for travel-related emigration costs. U.S. persons who are not

close family members can only make remittances to Cubans of $500 for travel-related emigration costs.

1756 Fed. Reg. 49847 (Oct. 2, 1991).

1859 Fed. Reg. 4884 (Aug. 30, 1994).

Page 17 GAO/NSIAD-99-10 Cuban Embargo
B-281123 

According to OFAC, each of the economic sanctions programs it

implements and administers, including the Cuba embargo, has been

structured to impose broad restrictions, leaving reasonable administrative

flexibility through licensing authority to ensure that the programs serve

the foreign policy objectives for which they were imposed. Furthermore,

OFAC considers the executive branch’s changes to the remittance

procedures a proper exercise of the President’s constitutional authority to

conduct the foreign affairs of the United States.

As we discussed earlier, section 102(h) of Helms-Burton codified the

economic embargo of Cuba as it was in effect on March 1, 1996, including

all restrictions under 31 C.F.R. part 515. OFAC believes that the restrictions

referred to in section 102(h) include the exercise of licensing authority.

Specifically, OFAC refers to 31 C.F.R. § 515.201, which prohibits

remittances to Cuba “except as specifically authorized by the Secretary of

the Treasury . . . by means of regulations, rulings, instructions, licenses, or

otherwise.” This encompasses the authority to amend the CACRs to modify

license requirements. Thus, OFAC believes that its licensing authority

allowed it to change the family remittance regulations as a reasonable

means of adjusting the terms of the embargo.

It is clear that the President’s broad foreign affairs authority,19 as well as

that under section 5(b) of the Trading With the Enemy Act, allows the

executive branch a great deal of discretion in making changes to embargo

restrictions.20 We believe that OFAC has the authority to make the family

remittance changes under its general licensing authority, which was

included in the codification of the embargo under section 102(h).

Moreover, section 112 of Helms-Burton specifically addresses the

reinstitution of general licenses for family remittances. This section

expressed the sense of Congress that prior to such reinstitution, the

President should insist that the Cuban government take steps to foster

economic freedoms for small businesses in Cuba, among other conditions.

Congress further suggested that if a general license was reinstituted, the

administration should continue to require specific licenses for amounts

over $500. In our view, section 112 clearly indicates that, even after section

102(h) of Helms-Burton codified the embargo in effect on March 1, 1996,

the administration retained the authority to reinstitute a general license for

family remittances.

19United States v. Curtiss-Wright Export Corp., 299 U.S. 304 (1936).

20See generally, Udall v. Tallman, 380 U.S. 1, 16 (1965); Chevron U.S.A., Inc., v. Natural Resources

Defense Council, 467 U.S. 837 (1984).

Page 18 GAO/NSIAD-99-10 Cuban Embargo
B-281123 

In their comments on this report, both OFAC and the Department of State

noted that the administration carefully considered the sense of Congress,

but determined that it was important to institute the changes promptly

after the Pope’s visit to Cuba in January 1998. This was deemed necessary

to expand the flow of humanitarian assistance to Cuba. The comments

specifically stated the view that the issue of family remittances was a

matter “subject to Presidential discretion in weighing the humanitarian

purpose of allowing U.S. residents and citizens to support family members

in Cuba against the resulting flow of hard currency to Cuba.” Nevertheless,

because these changes will likely result in increased transfers of currency

to Cuba, they do not appear to further the general purpose of the embargo

to limit such transfers.

Conclusions The U.S. embargo of Cuba has been in place for over 36 years. Under the

embargo, the U.S. government has formulated regulations that balance

policy objectives of the embargo with humanitarian needs of

Cuban-Americans with family ties to Cuba. The embargo has been

adjusted a number of times. Some changes tightened the embargo to

further restrict transfers of hard currency to Cuba, one of the embargo’s

principal purposes, and others have loosened it in furtherance of

humanitarian considerations.

The executive branch has broad authority under U.S. law to make changes

in the embargo as circumstances dictate. Overall, the changes discussed in

this report are consistent with this broad authority. The changes in the

regulations that permit general family remittances to Cuba may serve a

humanitarian purpose, but they do not appear to further the U.S. objective

of limiting currency transfers to Cuba.

In some respects, the embargo has not been easy to enforce. It is difficult

for U.S. enforcement agencies to monitor people and goods once they

leave U.S. borders, and most foreign countries do not cooperate with U.S.

embargo restrictions. Furthermore, there have been relatively few

prosecutions of travel and export cases because of difficulties of proof,

lack of jury appeal in cases where humanitarian issues may be present,

and the relatively small amounts of goods or currency that are involved.

Agency Comments

and Our Evaluation

The Treasury Department’s OFAC and the State Department provided

written comments on a draft of this report. The Treasury’s Office of

Customs, the Commerce Department’s BXA, and the Department of Justice

Page 19 GAO/NSIAD-99-10 Cuban Embargo
B-281123 

also provided technical comments that have been incorporated where

appropriate. OFAC and State did not agree that the President’s decision to

reinstitute the authorization for family remittances was inconsistent with

the fundamental purpose of the embargo. OFAC and State stated that the

issue of family remittances is a matter of presidential discretion in

weighing the humanitarian purpose of allowing U.S. residents and citizens

to support family members in Cuba against the resulting flow of hard

currency to Cuba. OFAC and State also noted that Helms-Burton does not

prohibit OFAC from making reasonable adjustments to the family

remittance licensing regime. (See app. IV for their comments.)

As discussed in our report, we recognize that OFAC has the authority to

make reasonable adjustments to the family remittance procedures. We did

not intend to imply otherwise, and we have revised the report to remove

any confusion. Our intent was to make Congress aware that the 1998

changes to the family remittance procedures would permit larger transfers

of U.S. currency to Cuba.

Scope and

Methodology

In order to assess the consistency of executive branch policy with U.S.

laws and regulations, we met with U.S. officials at the Departments of

State, Commerce’s Bureau of Export Administration, Justice, and the

Department of the Treasury’s Office of Foreign Assets Control. We also

reviewed the relevant laws, regulations, court decisions, directives by the

President, and legislative histories of the CDA of 1992 and the LIBERTAD Act

of 1996 (Helms-Burton). In order to describe how U.S. goods can be

available in Cuba, we consulted specialists, including the U.S. Customs

Service and the U.S. Attorney’s Office. For a more detailed description of

our objectives, scope, and methodology, see appendix V.

We conducted our review between July 1997 and August 1998 in

accordance with generally accepted government auditing standards.

As agreed with your office, unless you publicly announce its contents

earlier, we plan no further distribution of this report until 30 days from its

issuance date. At that time, we will provide copies of the report to

interested congressional committees; the Departments of the Treasury,

State, Commerce, and Justice; and the Director, Office of Management and

Budget. We will also make copies available to others on request and

include it on our database of reports at our Internet site.

Page 20 GAO/NSIAD-99-10 Cuban Embargo
B-281123 

Please contact me at (202) 512-4128 if you have any questions concerning

this report. Major contributors to this report are listed in appendix VI.

Sincerely yours,

Benjamin F. Nelson, Director

International Relations and Trade Issue

Page 21 GAO/NSIAD-99-10 Cuban Embargo
Contents

Letter 1

Appendix I 

Provisions Governing

Telecommunications

Services

24

Appendix II 

Major Exports to

Cuba

26

Appendix III 

Restrictions on

Imports Containing

Cuban Components

28

Appendix IV 

Comments From the

Departments of State

and the Treasury

29

Appendix V 

Scope and

Methodology

32

Appendix VI 

Major Contributors to

This Report

34

Tables Table 1: U.S. Exports to Cuba, 1993-97 10

Table 2: U.S. Authorized and Actual Humanitarian Donations to

Cuba, 1993-97

13

Page 22 GAO/NSIAD-99-10 Cuban Embargo
Contents

Table 3: U.S. Authorized and Actual Medicine and Medical

Equipment Exports to Cuba, 1993-97

14

Table 4: Roles of Key Agencies in Implementing the Cuban

Embargo

15

Table II.1: Cuba’s Imports from Major Trading Partners and the

United States, 1992-97

26

Table II.2: Medicine Exports to Cuba By Major Trading Partners

and the United States, 1995-96

27

Abbreviations

AT&T AT&T Corporation

BXA Bureau of Export Administration

CACR Cuban Assets Control Regulations

CDA Cuban Democracy Act

FCC Federal Communication Commission

ITT International Telephone and Telegraph

LIBERTAD Cuban Liberty and Democratic Solidarity

MCI MCI Communications

OFAC Office of Foreign Assets Control

Page 23 GAO/NSIAD-99-10 Cuban Embargo
Appendix I 

Provisions Governing Telecommunications

Services

The Cuban Democracy Act (CDA) authorizes telecommunications services

and facilities between the United States and Cuba.1

 It allows

telecommunications facilities in such quantity and quality as are necessary

to provide efficient and adequate telecommunications services between

the two countries. The Helms-Burton Act (Helms-Burton) limited the CDA

telecommunications provision by prohibiting any U.S. person from

investing either directly or indirectly in the domestic telecommunications

network within Cuba. Helms-Burton also required the President to submit

to Congress a semiannual report detailing payments made to Cuba by U.S.

persons providing telecommunications services to Cuba.

In July 1993, the State Department set forth the executive branch’s general

policy guidelines for implementing the telecommunications provision of

the CDA. Under these guidelines, the Department of the Treasury’s Office of

Foreign Assets Control (OFAC) is responsible for licensing travel by U.S.

companies to Cuba to discuss possible contractual arrangements and

payment terms. Commerce is responsible for licensing the export of U.S.

telecommunications commodities to Cuba for approved

telecommunications projects to the extent that the exports are necessary

to deliver a signal to an international gateway to Cuba. The Federal

Communications Commission (FCC) is responsible for licensing circuits

and is to consult with the appropriate agencies regarding proposals

involving new modes of communication. And State, in consultation with

Treasury and Commerce, was to review U.S./Cuba telecommunication

policy within 12 to 18 months.2

The FCC informed us that it authorizes and has approved only

gateway-to-gateway services between the United States and Cuba. It has

allowed AT&T to upgrade its old undersea cable, but only to facilitate

gateway-to-gateway services.

Undersea Cable Project

Dropped

In 1996, AT&T Corporation (AT&T) and MCI Communications (MCI)

considered entering into an arrangement to replace AT&T’s undersea

telephone cable between Florida and Cuba with a fiber-optic cable. This

proposal was being considered because the existing cable, installed in

1989, had been repaired at least once and was outdated. However,

according to AT&T and MCI officials, the project was dropped for a number

1

22 U.S.C. § 6004(e).

2

The review was to determine whether additional circuits should be authorized to keep the service

efficient and adequate and to assess whether to allow improvements in domestic infrastructure to

improve U.S. access to the Cuban market. This review, however, was never completed.

Page 24 GAO/NSIAD-99-10 Cuban Embargo
Appendix I 

Provisions Governing Telecommunications

Services

of reasons, including congressional concerns about a counterintelligence

security risk posed by Cuba’s possible access to fiber-optic technology.

As a general matter, upgrade of the undersea cable would appear to be

possible under the CDA, as amended by Helms-Burton, and the executive

branch guidelines. These guidelines, in essence, direct the FCC to approve

proposals utilizing modes of communications already in place between the

United States and Cuba and cite the undersea cable as an example. The

guidelines also contemplate the possibility that the FCC will approve

proposals involving new modes of communications, such as fiber-optic

cable, so long as they are approved by the appropriate agencies.

Page 25 GAO/NSIAD-99-10 Cuban Embargo
Appendix II 

Major Exports to Cuba

From 1992 to 1996, the International Monetary Fund reported that exports

to Cuba increased from about $1.5 billion to $3.0 billion. The top six

exporters to Cuba were Spain, Russia, Mexico, France, Canada, and China.

In contrast, U.S. exports remained low throughout this period. (See 

table II.1.) The major products exported to Cuba were fuels, food, and

machinery and equipment.

Table II.1: Cuba’s Imports From Major

Trading Partners and the United

States, 1992-97a

U.S. dollars in millions

Country 1992 1993 1994 1995 1996 1997

Spain $219 $209 $320 $457 $513 $522

Russia b 113 272 261 508 312

Mexico 129 69 191 391 350 b

Canada 103 113 63 194 187 266

China 220 195 162 161 111 172

France 99 138 148 163 217 233

United States 1 3 5 6 6 10

Totalc $1,517 $1,561 $1,873 $2,645 $3,010 $2,637

aCuba’s imports are International Monetary Fund estimates based on reporting countries’ exports.

bData not available.

cTotal does not add because data reported are for selected exporters.

Source: International Monetary Fund Direction of Trade Statistics.

Given the recent congressional interest in the export of medicine to Cuba,

we have included data reported to the United Nations by Cuba’s major

trading partners on their export of medicines and pharmaceuticals. We

also include U.S. Census data of U.S. exports of medicine and

pharmaceuticals to Cuba. The United States ranked third in 1995 (the most

recent year for which the United Nations has comprehensive commodity

trade data), after China ($31.4 million) and Spain (6.4 million). (See 

table II.2.)

Page 26 GAO/NSIAD-99-10 Cuban Embargo
Appendix II 

Major Exports to Cuba

Table II.2: Medicine Exports to Cuba by

Major Trading Partners and the United

States, 1995-96

U.S. dollars in millions

Country 1995 1996

China $31.4 $18.1

Spain 6.4 a

United States 3.6 4.4

Netherlands 1.0 3.5

Italy 1.1 2.0

Mexico 0.7 2.0

France 1.3 1.6

Canada 0.2 1.2

Argentina 0.2 0.4

aData not available.

Source: United Nations and U.S. Department of Commerce trade data.

Page 27 GAO/NSIAD-99-10 Cuban Embargo
Appendix III 

Restrictions on Imports Containing Cuban

Components

The CACRs ban imports from Cuba if the commodities (1) are of Cuban

origin; (2) are or have been transported from or through Cuba; or (3) are

made or derived in whole or in part from any article that is grown,

produced, or manufactured in Cuba. With minor exceptions, the import

ban applies to all items that contain anything that is made in Cuba and

extends to all Cuban agricultural products, including raw and refined

sugar. Furthermore, the ban does not allow de minimis exceptions for

goods that contain even negligible amounts of Cuban origin materials.

Over the course of the embargo, Congress has enacted legislation

specifically dealing with sugar imports from Cuba. In 1963, Congress

amended the Foreign Assistance Act of 19611

 to preclude Cuba from

receiving any quota authorizing the import of Cuban sugar into the United

States until the President determines that Cuba has taken appropriate

steps either (1) to return to U.S. citizens and entities the properties taken

by Cuba on or after January 1, 1959, or (2) to provide equitable

compensation for their confiscation. The President can waive this

requirement pursuant to a national interest determination.

Helms-Burton stated that protection of essential U.S. security interests

required assurances that sugar products that enter the United States or are

withdrawn from warehouses for consumption in the United States are not

Cuban products. Furthermore, any country that desires to be allocated a

U.S. import quota for either refined or raw sugar and is a net importer of

sugar must certify to the President, through the State Department, that its

sugar exports to the United States do not contain any sugar produced in

Cuba. According to State Department officials, written verification was

required before October 1, 1997, to ensure that shipments under the fiscal

year 1998 quota would not be unnecessarily delayed. State monitors the

certifications and told us that all countries complied with this requirement.

1

22 U.S.C. § 2370(a)(2).

Page 28 GAO/NSIAD-99-10 Cuban Embargo
Appendix IV 

Comments From the Departments of State

and the Treasury

Page 29 GAO/NSIAD-99-10 Cuban Embargo
Appendix IV 

Comments From the Departments of State

and the Treasury

Page 30 GAO/NSIAD-99-10 Cuban Embargo
Appendix IV 

Comments From the Departments of State

and the Treasury

Page 31 GAO/NSIAD-99-10 Cuban Embargo
Appendix V 

Scope and Methodology

To determine whether the Department of the Treasury’s July 1996 travel

procedures used for indirect flights by lawful U.S. travelers were

consistent with the law, we researched and reviewed the laws that deal

with the embargo against Cuba, including their legislative histories,

applicable federal court decisions, the CACRs and official OFAC circulars.

For information on Treasury’s travel procedures, we consulted OFAC

officials, including OFAC attorneys. We met with the three carrier service

providers in Miami to discuss their perspectives on Treasury regulation

and to gain an understanding of their business operations, including costs

associated with direct flights in 1995 and indirect flights in 1997. We

visited OFAC’s Miami, Florida, office to review files and to observe the

travel procedures in action. We met with Customs officials both in

Washington, D.C., and Miami to learn more about their enforcement of

travel regulations and how they assess whether to refer cases to Justice or

OFAC. We also consulted Justice Department attorneys and the U.S.

Attorney’s Office in Miami to collect data on cases related to travel

violations of the embargo.

To provide information about the availability of U.S. products in Cuba, we

researched the legal requirements of the embargo’s export restrictions and

discussed with OFAC and Commerce Department attorneys their

interpretations of the restrictions and how they work with Justice on

developing evidence for legal cases. To gain an understanding of the

regulation and transport of humanitarian gift packages to Cuba via third

countries, we met with a gift consolidator in Miami who is authorized to

accept parcels from around the country and to arrange for their transport

to Cuba. We witnessed the inspection of individual packages, reviewed

documentation of its inventory for shipment, and collected some financial

data from the firm’s owner. We met with Customs officials to discuss

Custom’s enforcement efforts. We discussed with the Department of

Justice and the U.S. Attorney’s Office in Miami, Florida, those cases

involving potential violations of export restrictions, and we also reviewed

and categorized Cuban embargo-related cases that were identified by the

Justice Department.

To address questions about telecommunications, we reviewed the law and

regulations pertaining to the embargo’s telecommunications requirements

and discussed them with State and FCC attorneys. We consulted two

attorneys representing U.S. telecommunications firms about their firms’

consideration of a proposal for upgrading the undersea cable between

Florida and Cuba. In addition, we reviewed State Department documents

related to the agreement between a U.S. telecommunications firm and an

Page 32 GAO/NSIAD-99-10 Cuban Embargo
Appendix V 

Scope and Methodology

Italian firm using the U.S. firm’s property, which had been confiscated by

the Cuban government. We reviewed the relevant law and met with State

Department attorneys to discuss the matter.

For information on the May 1998 regulations, we relied on official

correspondence from Treasury explaining the administration’s position on

the May 1998 changes and Federal Register explanations of the changes.

We also consulted Commerce, State, and Treasury attorneys.

For information on Cuba’s imports, we researched the law and regulations

and reviewed databases available from the Department of Commerce,

Bureau of Export Administration, and Bureau of the Census; the United

Nations; and the International Monetary Fund. We also consulted the State

Department on the question of U.S. imports from other countries of

products potentially containing Cuban sugar.

Page 33 GAO/NSIAD-99-10 Cuban Embargo
Appendix VI 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington,

D.C.

Virginia C. Hughes, Assistant Director

Judith K. Knepper, Evaluator-in-Charge

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