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96–050PDF 2015

AGRICULTURAL TRADE WITH CUBA

HEARING

BEFORE THE

SUBCOMMITTEE ON TERRORISM, 

NONPROLIFERATION, AND TRADE

OF THE

COMMITTEE ON FOREIGN AFFAIRS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED FOURTEENTH CONGRESS

FIRST SESSION

SEPTEMBER 9, 2015

Serial No. 114–100

Printed for the use of the Committee on Foreign Affairs

(

Available via the World Wide Web: http://www.foreignaffairs.house.gov/ or

http://www.gpo.gov/fdsys/

(II)

COMMITTEE ON FOREIGN AFFAIRS 

EDWARD R. ROYCE, California, Chairman 

CHRISTOPHER H. SMITH, New Jersey 

ILEANA ROS-LEHTINEN, Florida 

DANA ROHRABACHER, California 

STEVE CHABOT, Ohio 

JOE WILSON, South Carolina 

MICHAEL T. MCCAUL, Texas 

TED POE, Texas 

MATT SALMON, Arizona 

DARRELL E. ISSA, California 

TOM MARINO, Pennsylvania 

JEFF DUNCAN, South Carolina 

MO BROOKS, Alabama 

PAUL COOK, California 

RANDY K. WEBER SR., Texas 

SCOTT PERRY, Pennsylvania 

RON DESANTIS, Florida 

MARK MEADOWS, North Carolina 

TED S. YOHO, Florida 

CURT CLAWSON, Florida 

SCOTT DESJARLAIS, Tennessee 

REID J. RIBBLE, Wisconsin 

DAVID A. TROTT, Michigan 

LEE M. ZELDIN, New York 

DANIEL DONOVAN, New York 

ELIOT L. ENGEL, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

ALBIO SIRES, New Jersey 

GERALD E. CONNOLLY, Virginia 

THEODORE E. DEUTCH, Florida 

BRIAN HIGGINS, New York 

KAREN BASS, California 

WILLIAM KEATING, Massachusetts 

DAVID CICILLINE, Rhode Island 

ALAN GRAYSON, Florida 

AMI BERA, California 

ALAN S. LOWENTHAL, California 

GRACE MENG, New York 

LOIS FRANKEL, Florida 

TULSI GABBARD, Hawaii 

JOAQUIN CASTRO, Texas 

ROBIN L. KELLY, Illinois 

BRENDAN F. BOYLE, Pennsylvania

AMY PORTER, Chief of Staff THOMAS SHEEHY, Staff Director

JASON STEINBAUM, Democratic Staff Director 

SUBCOMMITTEE ON TERRORISM, NONPROLIFERATION, AND TRADE

TED POE, Texas, Chairman 

JOE WILSON, South Carolina 

DARRELL E. ISSA, California 

PAUL COOK, California 

SCOTT PERRY, Pennsylvania 

REID J. RIBBLE, Wisconsin 

LEE M. ZELDIN, New York 

WILLIAM KEATING, Massachusetts 

BRAD SHERMAN, California 

BRIAN HIGGINS, New York 

JOAQUIN CASTRO, Texas 

ROBIN L. KELLY, Illinois 

(III)

C O N T E N T S 

Page

WITNESSES 

Mr. John Smith, Acting Director, Office of Foreign Assets Control, U.S. Department of the Treasury .................................................................................... 5

Mr. Phil Karsting, Administrator, Foreign Agricultural Service, U.S. Department of Agriculture .............................................................................................. 15

Mr. Matt Borman, Deputy Assistant Secretary, Bureau of Industry and Security, U.S. Department of Commerce ................................................................... 21

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Mr. John Smith: Prepared statement .................................................................... 8

Mr. Phil Karsting: Prepared statement ................................................................. 17

Mr. Matt Borman: Prepared statement ................................................................. 23

APPENDIX 

Hearing notice .......................................................................................................... 42

Hearing minutes ...................................................................................................... 43

Written responses from Mr. John Smith to questions submitted for the record 

by the Honorable Ileana Ros-Lehtinen, a Representative in Congress from 

the State of Florida .............................................................................................. 44

(1)

AGRICULTURAL TRADE WITH CUBA 

WEDNESDAY, SEPTEMBER 9, 2015

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON TERRORISM, NONPROLIFERATION, AND TRADE,

COMMITTEE ON FOREIGN AFFAIRS,

Washington, DC. 

The subcommittee met, pursuant to notice, at 2:05 p.m., in room 

2200, Rayburn House Office Building, Hon. Ted Poe (chairman of 

the subcommittee) presiding. 

Mr. POE. This subcommittee will come to order. Without objection, all members may have 5 days to submit statements, questions, and extraneous materials for the record, subject to the limitations in the rules. 

In 1962, President John Kennedy first imposed the trade embargo on Cuba after Communist dictator Fidel Castro took over. Fifty 

years later, Cuba is still Communist, and the Castros are still in 

control. They continue to imprison political dissidents. They do not 

respect the human rights of their own people. And among other 

things, there are at least 6,000 claims of Americans who had their 

properties stolen by the Castro brothers and are not resolved, totaling about $8 billion. 

This past December, the President announced that he would 

move to normalize relations with Cuba. Last month, the U.S. Embassy in Havana reopened for the first time in 54 years. News 

agencies are now reporting that the President plans to unilaterally 

lift travel restrictions to Cuba. 

This hearing on agricultural trade with Cuba comes at a time 

when a lot of change in our policy toward Cuba. And I will reiterate, the hearing is about trade with Cuba. 

In 2000, Congress carved out of JFK’s trade embargo agricultural 

commodities so our farmers could export to Cuba. Exports rose, hitting about $685 million in 2008, making up 42 percent of the 

Cuban market. Since then, exports have dropped, U.S. wheat and 

rice farmers went from providing over 40 percent of Cuba’s supply 

to now not supplying any. The U.S. has not exported rice since 

2009 and wheat since 2011. Cuba gets its wheat and rice from Vietnam, Venezuela, and Brazil. Sometimes it is difficult to understand 

why. 

Some of this very well may be because the Communist Cuban 

Government is manipulating the market. Maybe the Castro brothers don’t want to buy American rice even though it is cheaper and 

it is certainly better than rice from other places in the world. We 

2

know the Cuban Government already discriminates against our 

farmers. 

Unlike with other foreign competitors, the Cuban Government 

forces American farmers to sell their goods to a state-owned company called Alimport. This requirement by the Cuban Government 

raises the cost of doing business for U.S. farmers, makes them less 

competitive against their foreign counterparts. There are other hurdles that give our farmers a competitive disadvantage. 

Unlike foreign competitors, U.S. exporters cannot offer terms of 

credit to Cuban buyers. That means Cuba has to make all payments upfront in cash. If the U.S. Government allowed our exporters to offer terms of credit to Cuba, maybe our exporters would understand that the U.S. Government will not—let me say that again. 

If the U.S. Government allowed our exporters to offer terms of 

credit, our exporters understand that the U.S. Government will not 

bail them out if Cuba does not pay its debt. If our farmers want 

take that risk, then maybe we should let them take that risk. 

It is already U.S. policy that agricultural goods are not subject 

to the embargo, but that restriction we have left in place makes it 

hard for our farmers to trade at all. 

This half in and half out trading environment doesn’t make 

much sense to me. It is clear that the U.S. could be a strong contender in the Cuban market. Before the embargo, Cuba was typically the largest commercial market for U.S. long grain rice exports. Cuba often took more than half the U.S. annual long grain 

sales and almost one-third of our total rice exports. 

In my home State of Texas, I have represented many rice farmers. They grow long grain rice as they do in, I believe, Arkansas 

as well. When I got to Congress, I thought rice came in a box. So 

there is long grain rice; there is short grain rice. The markets for 

long grain rice were Iran, Iraq, and Cuba. Bummer. So they are 

looking for markets. Many rice farmers have literally gone out of 

business, and they are doing something else with their land. 

U.S. exporters have an advantage over foreign competitors because of the distance between the United States and Cuba. It is 

about 100 miles. That means lower shipping costs and transit 

times, which are especially important when shipping perishable 

goods. Ports like Mobile, Alabama; Miami; New Orleans; and Houston will have an opportunity to being a major export. The Port of 

Houston is a natural gateway for trade with Cuba, because it has 

a lot of products that Cuba needs. Exporting to Cuba would also 

require no infrastructure because American exporters have a 

strong foothold in the Caribbean and the Latin American markets. 

The rice market has a lot of potential because U.S. exporters can 

provide high quality rice year round, other than suppliers like Vietnam. 

It is clear our current policy when it comes to agricultural export 

to Cuba is not working. Cuba imports about 70 percent of its food. 

By law, our farmers have the freedom to export to Cuba, but in 

practice, the government seems to get in the way. 

I look forward to hearing from our witnesses about how we can 

effectively implement already existing U.S. policy that allows agricultural exports to Cuba. 

3

I will now yield to the ranking member from Massachusetts, Mr. 

Keating. 

Mr. KEATING. Mr. Chairman, thank you for having this hearing. 

I also would like to thank our witnesses for being here today to discuss agricultural trade with Cuba, and it is fitting that we have 

representatives from the Department of Treasury, Agriculture, and 

Commerce with us this afternoon to give us their particular perspectives and on the benefits and opportunities that lay ahead of 

us. 

This is obviously a time when the United States is reassessing 

its policy with Cuba. The administration has re-established diplomatic relationships with Cuba, removed Cuba’s designation as a 

state-sponsored terrorism, and issued new regulations easing restrictions on travel, remittances, trade, and financial services. 

The President has also stated he looks forward to engaging Congress in a debate about lifting the trade embargo. This is a debate 

to be met with optimism, restraint, and passion by supporters and 

opponents alike. 

I understand the desire for a different relationship with Cuba 

and the excitement surrounding new commercial opportunities in 

the Cuban market. Currently, Cuba imports about 80 percent of its 

food; next to the European Union, China and Brazil are the countries that are the two highest suppliers. There is no denying that 

there are substantial opportunities for the United States businesses, particularly in the agricultural industry. However, I remain 

cautious with regard to how well-intended policies may impact 

those hurt most by the regime’s policies, the Cuban people. Conditions on the island have not changed appreciably. The Cuban Government continues to jail political dissidents without just cause, engages in other human rights abuses, and fails to respect the rule 

of law. Fundamentally, we can agree that the Cuban Government 

does not afford Cuban people the political and economic freedom 

that they deserve. 

My main concern with opening up agricultural trade is the same 

concern I have with respect to the possibility of increased trade 

with Cuba generally. Who benefits? While I look at our renewed relations with the island as an opportunity for new commercial endeavors, it is foremost an opportunity for the Cuban Government 

to demonstrate its commitment to reforms at home. And so I look 

forward to hearing from our witnesses concerning existing agricultural trade with Cuba, why U.S. agricultural exports to Cuba have 

decreased, and how the administration’s recent policy and regulatory changes might impact agricultural trade with Cuba in the 

future. 

Thank you, Mr. Chairman. I yield back. 

Mr. POE. I thank the gentleman from Massachusetts. 

The Chair is going to recognize other members that are present, 

even not on this subcommittee, but are here because of this hearing. The Chair will recognize each for 1 minute. 

First will be the gentlelady from Florida, Ms. Ileana RosLehtinen, the chair of the Middle East Subcommittee. 

Ms. ROS-LEHTINEN. Thank you so much, Mr. Chairman. 

From an economic perspective, the very concept of trade and investment in Cuba is grounded in the misconception about how 

4

business takes place on the island. In Cuba, every single foreign 

trade transaction has been with the Castro regime or individuals 

acting on behalf of the regime. 

Since passage of the 2000 Trade Sanctions Reform and Export 

Enhancement Act, nearly $5 billion in U.S. agricultural and medical products have been sold to Cuba. It is an inconvenient truth, 

however, that all of those sales, all of them, by more than 250 privately owned U.S. companies were made to only 1 Cuban buyer, 

the Cuban regime. 

According to our U.S. Department of Agriculture, itself, ‘‘The key 

difference in exporting to Cuba compared to other countries in the 

region is that all U.S. agricultural products must be channeled 

through one Cuban Government agency, Alimport.’’ Exporting to 

Cuba is not about trading with small- or mid-sized farmers or businesses or manufacturers around the island, as some Americans 

would have you believe. 

Little imported food or medicine ever makes it into the stores 

where Cubans shop, nor is it available on rationed cars. It is gobbled up by high-ranking officials inside the regime. And one last 

point, Mr. Chairman, the Castro regime has proven time and time 

again that it will not pay its bills. It has not paid its creditors, and 

it has not paid U.S. certified claim holders. And so we have put in 

place this cash-in-advance provision to protect U.S. agricultural industry and to ensure that U.S. businesses are paid. And I have a 

series of questions when I am allowed to ask our witnesses. 

Thank you so much for the opportunity, Mr. Chairman. 

Mr. POE. I thank the gentlelady. 

The Chair will recognize Mr. Emmer from Minnesota for opening 

statement. 

Mr. EMMER. Thank you, Chairman Poe and Ranking Member 

Keating. Thank you for holding this hearing, and I appreciate your 

leadership on this issue and allowing me to join my former committee to discuss an issue that I care about deeply. 

My State of Minnesota was one of the first to send a delegation 

to Cuba after Congress made exceptions to the embargo for agricultural commodities in medical supplies in 2000. Cuba, who imports, 

as you heard, nearly 80 percent of its food is a natural market for 

American agricultural products. On a recent trip to Cuba, I met 

with several Cuban citizens and private business owners who want 

to increase trade with the U.S. because they are convinced this will 

create more opportunity for the Cuban people as a whole. 

While your topic today involves a discussion of regulatory barriers to agricultural trade and the actions of government, this discussion and today’s hearing is really about people, Americans and 

Cubans alike, who see renewed opportunities in expanding trade. 

I thank the witnesses for their time and expertise, and I look forward to their testimony. 

Thank you, again, Mr. Chairman. I yield back. 

Mr. POE. The gentleman yields back. 

The Chair recognizes the gentleman from Arkansas, Mr. 

Crawford. 

Mr. CRAWFORD. Thank you, Chairman Poe and Ranking Member 

Keating for allowing me to join this subcommittee as a guest today. 

5

Chairman Poe and I work closely together to identify opportunities for engagement with Cuba particularly as is applies to ag trade 

and specifically rice, as he mentioned. A little more than a year 

ago, we authored a letter to Treasury and OFAC requesting an easing of cash in advance for trade restrictions on exports to Cuba. I 

would like to thank Mr. Smith and your team for doing exactly 

what we asked in taking steps toward making U.S. ag more competitive in a country that is so close to our shores and imports 

about 80 percent of its food supply. While we have made progress 

on the executive level, I believe there is a lot more we can do, we 

can be doing here in Congress to further expand trade opportunities and permit travel. 

As a member from the district where ag is the number one industry, I am focused on removing barriers to ag trades, so this 

hearing is very relevant to those efforts. And, again, I thank the 

chairman and ranking member. 

Mr. POE. The gentleman yields back his time. 

Without objection, all the witnesses’ prepared statements will be 

made part of the record. And I would ask that each witness please 

keep your presentation to no more than 5 minutes. There is a light 

in front of you that will indicate that you can talk, you can slow 

down, and you can quit. 

I will introduce each witness and then give them time for their 

opening statements. John Smith is Acting Director of the Office of 

Foreign Assistance Control at the Treasury Department, which is 

responsible for administering economic and trade sanctions. Prior 

to joining OFAC, Mr. Smith served as an expert to the United Nations and was a trial lawyer with the Department of Justice. 

Mr. Karsting is an Administrator of the Foreign Agricultural 

Service, U.S. Department of Agriculture. Previously served more 

than 22 years on Capitol Hill working on appropriations, agriculture, and development issues. 

Mr. Matt Borman is Deputy Assistant Secretary of the Bureau 

of Industry and Security at the Department of Commerce. Mr. 

Borman joined the Commerce Department in 1992 and has spent 

his career largely focusing on export implementation and enforcement. 

Mr. Smith, we will start with you, and you have 5 minutes. 

STATEMENT OF MR. JOHN SMITH, ACTING DIRECTOR, OFFICE 

OF FOREIGN ASSETS CONTROL, U.S. DEPARTMENT OF THE 

TREASURY 

Mr. SMITH. Thank you, sir. Good afternoon Chairman Poe, Ranking Member Keating, and distinguished members. 

Thank you for the invitation to appear before you today to discuss potential opportunities to expand agricultural trade with 

Cuba. I will be addressing key regulatory amendments made by 

Treasury’s Office of Foreign Assets Control, or OFAC, in January 

to implement changes to U.S. policy toward Cuba announced by the 

President in December as well as the restrictions that remain in 

place. 

The regulatory changes are intended to create opportunities for 

increased agricultural exports to Cuba among other benefits to U.S. 

business. These changes ease Cuba sanctions within the continuing 

6

constraints of the embargo while advancing the administration’s 

policy to further engage and empower the Cuban people. 

The January rule changes benefit American exporters in at least 

five key respects. First, OFAC expanded the financing provisions of 

the regulations to allow America’s agricultural exporters to be more 

competitive in selling their wares to Cuba. Second, OFAC broadened the ability of U.S. financial institutions to provide services 

and effectuate payments for exporters and others authorized to engage in trade with Cuba. Third, OFAC authorized trade delegations 

and exporters satisfying the conditions of our regulations to travel 

to Cuba and engage in associated authorized transactions without 

the need to apply to OFAC for a specific license. 

Fourth, OFAC expanded certain humanitarian projects in Cuba, 

including those related to agricultural and rural development that 

promote independent activity. 

And, finally, OFAC eased restrictions to better provide efficient 

and adequate telecommunication services between the United 

States and Cuba and to increase access to telecommunications in 

Internet-based services for the Cuban people. 

I will talk about a few of these in more detail. As an initial matter, OFAC, as has been mentioned, modified the regulatory interpretation of the term, ‘‘cash in advance,’’ which describes the financing requirement for agricultural trade between the United 

States and Cuba. 

In addition, to improve the speed, efficiency, and oversight of authorized payments between the United States and Cuba, OFAC authorized U.S. banks to establish correspondent accounts at financial institutions in Cuba. This change was intended to ease the flow 

of authorized payments and eliminate the need for third-country 

payment structures, which should benefit U.S. exporters to Cuba. 

Another of our changes is related to travel. OFAC’s Cuba sanctions program is our only sanctions program that restricts travel to 

a country. The January regulatory amendments eased the travel 

restrictions by authorizing certain additional travel within the 12 

existing categories of travel in our regulations without the need to 

apply for a specific license from OFAC. 

Travel to Cuba for tourist activities, though, remains prohibited. 

The additional and expanded general licenses for travel were intended to make it easier for Americans to interact with the Cuban 

people and for trade delegations and authorized exporters to travel 

to Cuba to promote their products. Even with these changes that 

I have described, most transactions between the United States and 

Cuba, including most imports, exports, and other activities, remain 

prohibited. 

As OFAC implements these regulatory changes, we will continue 

to enforce the Cuban sanctions program and take actions against 

violators as appropriate. The President’s December announcement 

laid out a new course for our relations with Cuba, driven by a hope 

for a more positive future for the Cuban people. Our regulatory 

amendments to our Cuban assets control regulations in concert 

with the regulatory amendments that were issued by the Commerce Department mark significant changes to our Cuban sanctions that implement the new policy announced by the President. 

These changes are intended to benefit the Cuban people and help 

7

them to freely determine their own future as well as to support 

U.S. business and American exporters to Cuba. 

Thank you, and I would be happy to answer any questions. 

[The prepared statement of Mr. Smith follows:]

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Mr. POE. Thank you. 

Mr. Karsting. 

STATEMENT OF MR. PHIL KARSTING, ADMINISTRATOR, FOREIGN AGRICULTURAL SERVICE, U.S. DEPARTMENT OF AGRICULTURE 

Mr. KARSTING. Chairman Poe, Ranking Member Keating, and 

members of the subcommittee and special guests, I am pleased to 

come before you today to discuss agricultural trade with Cuba. As 

President Obama announced last December, the administration is 

charting a new course with Cuba in its drive to further engage and 

empower the Cuban people. The measures being taken also expand 

opportunities for America’s farmers and ranchers. 

In January, the Treasury Department published regulatory 

changes, including the revised interpretation of the term ‘‘cash in 

advance’’ and authorization for U.S. banks to establish correspondent banking accounts at Cuban banks. These changes had 

been sought by members of the U.S. agricultural community. Also, 

after more than half a century of isolation, the United States reopened its Embassy in Havana on July 20. 

USDA and many of its stakeholders are excited about this new 

chapter in U.S.-Cuba relations. Fifteen years ago Congress lifted 

the band on agricultural exports to Cuba that had been in place for 

decades. Despite that opening, U.S. Government agencies, including USDA, remain statutorily prohibited from providing export assistance and any credit or guarantees for exports to Cuba. As Secretary Vilsack has said, he cannot currently use a single dollar of 

trade promotion funding for our trade with Cuba. These restrictions apply to the Foreign Agricultural Service’s successful market 

development programs, like the Market Access Program and the 

Foreign Market Development Program. 

Though the policy changes announced and implemented by the 

President are significant, we still have legislative hurdles to cross 

and USDA stands ready to provide technical assistance to you and 

other Members as Congress considers further changes. 

If remaining statutory limitations were removed, we could be 

poised to become a major trading partner with Cuba. Cuba depends 

heavily on imports to feed its 11 million citizens. 

According to the World Food Programme, Cuba imports between 

70 to 80 percent of its food, which means the potential for our producers is significant. The United States has potentially huge structural advantages in exporting to Cuba, chief among them is location. We are less than 100 miles away, meaning lower shipping 

costs and transit times, especially compared to our current top 

competitors, Brazil and Europe. 

In Fiscal Year 2008, U.S. agricultural exports to Cuba reached 

$658 million. However, by the end of last fiscal year, they had fallen by more than half, to $300 million. Yet, at the same time, global 

agricultural exports to Cuba have doubled over the past decade to 

more than $2 billion. Last year, the largest U.S. agricultural exports to Cuba were poultry, soybean meal, soybeans, and corn. I am 

confident the U.S farmers, ranchers, and exporters are poised to 

capture the markets in Cuba, but I don’t want to minimize the obstacles. 

16

In addition to those I mentioned a moment ago, we bear in mind 

two overarching factors: First, Cuba is a country of limited foreign 

exchange; and second, U.S. companies are behind our foreign competitors in market development. 

Another impediment to trade is Cuba’s tightly controlled import 

policy requiring that all U.S. agricultural imports be channeled 

through one state corporation. 

The recent changes in U.S. policy toward Cuba are just one example of opportunities for USDA and Congress to support America’s farmers and ranchers as they build on a record of agricultural 

exports. In Fiscal Year 2014, global exports of U.S. food and agricultural products reached a record $152.5 billion and supported 

more than 1 million American jobs. The potential for U.S. agricultural exports around the globe is considerable. It is also critically 

important that we have trade agreements that support and create 

U.S. jobs by helping American agriculture to compete even more 

successfully. For example, USDA trade negotiators are currently 

working with USTR to advocate on behalf of U.S. agriculture in 

two major negotiations, the Trans-Pacific Partnership and the 

Transatlantic Trade and Investment Partnership. Once these 

agreements are in place, U.S. agricultural producers will enjoy improved access to markets representing two-thirds of the global 

economy. 

In conclusion, there is significant potential in extending U.S. agricultural exports to Cuba. Reestablishment of diplomatic relations 

and reopening our Embassy is simply the first step of a longer normalization process between the United States and Cuba. 

Agriculture has long served as a bridge to foster cooperation, understanding, and the exchange of ideas among people. And I have 

no doubt that American agriculture will play an important role as 

we expand our relationship with the Cuban people. 

[The prepared statement of Mr. Karsting follows:]

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Mr. POE. Thank you. 

Mr. Borman. 

STATEMENT OF MR. MATT BORMAN, DEPUTY ASSISTANT SECRETARY, BUREAU OF INDUSTRY AND SECURITY, U.S. DEPARTMENT OF COMMERCE 

Mr. BORMAN. Good afternoon, Mr. Chairman, Ranking Member 

Keating, members and guests of the subcommittee. Thank you for 

the opportunity to appear before the subcommittee today to address 

the role of Department of Commerce with regard to regulating agricultural trade with Cuba. 

As you know, on December 17, 2014, the President announced 

the most significant shift in Cuban policy in more than 50 years. 

As you noted, these changes are intended to create more opportunities for the American and Cuban people by increasing commerce, 

authorized travel, and the free flow of information. To implement 

aspects of the President’s new approach, the Bureau of Industry 

and Security of the Department of Commerce has amended the Export Administration Regulations twice—first, on January 16, and 

then again on July 22. The January 16 amendments created a new 

license exception, which is our equivalent of the Department of 

Treasury’s general license, called Support for the Cuban People, 

which was focused on allowing U.S. exporters to send certain items 

to Cuba for private sector economic activity and civic society without an individual license. 

We also expanded the scope of our license exception for gift parcels and humanitarian donations and revised our license exception 

for consumer communication devices, all to facilitate the movement 

of those goods to Cuba. The July 22 amendment to the regulations 

implemented the Secretary of State’s decision to remove Cuba from 

the State Sponsors of Terrorism list. 

Specifically to exports of agricultural products, the measures that 

were announced by the President and implemented in both of our 

regulations did not change the Export Administration Regulations 

with regard to BIS authorization of exports of agricultural commodities. The Trade Sanctions Reform and Export Enhancement Act of 

2000, TSRA, governs how we regulate the export of agricultural 

commodities to Cuba. To implement TSRA, we created a license exception, agricultural commodities, AGR, which is really an expedited individualized licensing process. This allows agricultural commodities to go to Cuba under an expedited process. Exporters have 

to provide prior notice. We review those prior notices with the Department of State and typically give an answer to the exporter 

within 12 business days. 

Consistent with TSRA, this expedited review process includes 

screening the ultimate consignor, the customer in Cuba, to ensure 

that the recipient does not promote international terrorism and 

that the transaction does not raise proliferation concerns. If the 

transaction meets the terms and conditions of the license exception 

AGR, exporters may proceed with the transaction once we confirm 

that neither reviewing agency has raised an objection. 

In addition, exports of agricultural commodities must be made 

pursuant to a written contract and must take place within 1 year 

of the signing of a contract unless the export is a commercial samVerDate 0ct 09 2002 11:38 Nov 04, 2015 Jkt 000000 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 F:\WORK\_TNT\090915\96050 SHIRL
22

ple or a donation; in that case, the contract requirement doesn’t 

apply. 

During calendar year 2014, BIS processed 56 agricultural export 

notifications valued at about $2.4 billion, and we had an average 

processing time of 10 days. Multiple shipments may be made pursuant to a single notification, and you should keep in mind that the 

dollar value, the $2.4 billion, reflects the proposed export, not a 

value of actual exports. 

As you heard from Mr. Karsting, the dollar value of actual exports last year was just a little bit under $300 million. But in any 

event, in 2014, exporters made 600 shipments of agricultural products to Cuba. In Cuba, only state-run companies are authorized to 

engage in foreign trade transactions and often a whole category of 

commodities imported from the United States is channeled through 

specific companies depending on the sector. And, of course, folks 

have already mentioned Alimport in the agricultural arena. 

That really summarizes how we at Commerce regulate the export 

of agricultural commodities to Cuba, and with my fellow panelists, 

I will be happy to answer questions. Thank you. 

[The prepared statement of Mr. Borman follows:]

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Mr. POE. The Chair recognize itself for questions. 

How come we are exporting less rice to Cuba than we were in 

2009? What is the reason? 

Mr. KARSTING. I think it is hard to get inside the mind of 

Alimport to find out what kind of buying decisions they are making. That is one of the reasons I think it is important for us to 

ramp up our interaction there. 

From 1941 to 1961, we had an agricultural attache in Havana. 

And all across the globe, we have people in 100 different offices in 

87 different countries where that is their job to understand what 

is going on regarding buying decisions within a country. Alimport 

is obviously opaque, but we would like to know a little bit more 

about that too because we would like to sell more rice. 

Mr. POE. My concern is the exporting of rice. What is good for 

the United States? What is good for American businesses with this 

question? As I mentioned in my opening statement, we grow that 

long grain rice. There are no markets for the long grain rice. Cuba 

is a primary market. And my rice farmers—and we ship it right 

out of a Port of Houston, which is an export port right out of Cuba. 

Because of the financing or lack of financing involved in it, why not 

let the exporter assume the risk as opposed to the government 

being involved in prohibiting credit? I will hear from all three of 

you on that. 

Mr. SMITH. I mean, I can start. 

Mr. POE. Sure. Mr. Smith. 

Mr. SMITH. To the extent that we hear from exporters, and I am 

sure you all hear from exporters as well, we can speculate on why 

trade may have gone up or down, but probably the primary thing 

that we hear from exporters at least on the Treasury side is the 

lack of availability of financing or credit that they can get. They 

tell us that their competitors in other countries can get either private financing or government financing, and we are restricted by 

statute from allowing that. 

Mr. POE. So if we change the statute, we would have to change 

the statute to allow the exporter to assume the risk of whether 

Cuba pays or not? We have already heard that they don’t pay their 

bills, but could we—why not let the exporter assume that risk? 

Mr. SMITH. I think that is a decision for Congress to make——

Mr. POE. Okay. 

Mr. SMITH [continuing]. Within the statute. 

Mr. POE. Anybody else want to weigh in on that? 

Mr. BORMAN. In the statute, yes. 

Mr. POE. How does the state-run government company put U.S. 

exporters at a disadvantage, Alimport? How does that put us at a 

disadvantage? 

Mr. KARSTING. Clearly, they have been making purchasing decisions since 2009 where both a variety of the exports as well as dollar value have gone down. So they are making purchasing decisions 

to go with other suppliers. A lot of the other suppliers have been 

in the country for some time developing relationships, helping to 

create demand, presumably, and that is what I think a lot of our 

stakeholders in the agricultural community are looking for as we 

look to this new relationship, that same sort of advantage. 

Mr. POE. Mr. Borman, any comment? 

28

Mr. BORMAN. I don’t really have anything to add to that. 

Mr. POE. I have a constituent, Ms. Rogers, who claims that she is owed more than $40 million from the Cuban Government; her 

grandfather brought John Deere and Caterpillar to Cuba. She is 

one of maybe 6,000 claimants against the Cuban Government for 

their actions 50 years ago. What is the status of those claims as 

a whole, the claims against the Cuban Government for confiscation 

of property and assets belonging to others? 

Mr. Keating—I mean, Mr. Smith. 

Mr. SMITH. Obviously, I think the State Department has primary 

jurisdiction. I think they have ongoing discussions or planned discussions that are outside of the Treasury Department expertise. 

Mr. POE. Do either Mr. Karsting or Bowman know any status of 

any of those claims? 

Mr. KARSTING. No. 

Mr. POE. There is a political issue. It has become a political 

issue, has it not, in the overall discussion of whether or not we 

should open up to Cuba or Cuba open up to the United States? Is 

that a fair statement, Mr. Smith? 

Mr. SMITH. I mean, it is certainly an issue for the administration 

and for Congress to weigh. We still have, in our Treasury regulations, the provisions from the statute that do not allow any financing or other credit to be provided involving transactions for confiscated property. So we still have that restriction in our regulations that is in the statute. I think when you are talking about any 

further discussions involving those claims, I think that is very 

much a matter for the diplomatic side of our Government along 

with Congress to consider. 

Mr. POE. I will yield to the ranking member, Mr. Keating, for 

questions. 

Mr. KEATING. Thank you. I think at least a couple of you mentioned in your testimony that the intent to benefit the Cuban people or its the hope that some of these changes would benefit the 

Cuban people. What can we do to ensure more that this will actually benefit the Cuban people, not just the regime? It is not in 

these regulations or enforcing some of these new changes. 

Mr. SMITH. I think for the Treasury Department—and I think 

Commerce has had a similar philosophy when we looked at the regulatory changes that we made, we looked to see how they could impact and help the Cuban people, and how we could restrict the government from benefiting. Where we may allow increased remittances for example, we excluded the Government of Cuba or Cuban 

Communist Party officials. So we tried to focus it on what might 

be individuals and moving it away from the government. When we 

talked about increasing travel from U.S. persons, it is our philosophy that Americans are the best Ambassadors for America to actually get the message to the Cuban people about how a democracy 

works. And so when you go down each one of our changes, each one 

of the categories, we try to focus on how we could help the Cuban 

people. And I think that is what we continue to look at. 

Mr. KEATING. How is that working, or is it working? Do you have 

any——

Mr. KARSTING. I would say just on the point of having Americans 

that are Ambassadors for change, American farmers, American agVerDate 0ct 09 2002 11:38 Nov 04, 2015 Jkt 000000 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 F:\WORK\_TNT\090915\96050 SHIRL
29

riculture have been doing that for a long time in our farmer-tofarmer exchange program. And that cohort of people that are primarily my stakeholders are very anxious to get on with that task, 

and I think farmers talking to farmers is a great way to reinforce 

those changes. 

Mr. BORMAN. Sir, we have seen a significant number of exports 

made under the license exceptions; for example, the donations, 

which I think we are fairly confident would actually go to the intended recipients, in part because the people who make the donations would learn if their intended recipients didn’t receive them. 

And we continue to try to educate U.S. exporters who would like 

to make these exports to the private sector, to specific groups in 

Cuba, on how to make sure that they identify who those foreign 

parties, different parties are, to make sure that they are going to 

the authorized end users. 

Mr. KEATING. Well, realizing that you are not advocating in your 

official capacities for any particular change in the future, can you 

at least share with us some thoughts you might have heard from 

others, if they are not even your own personal feelings about what 

changes, further changes, we can make to try and enhance our 

ability to help the Cuban people directly? And I realize you are not 

speaking for your own opinion or for the Department. 

Mr. KARSTING. I think a lot of our stakeholders have made clear 

that the ability to have a little bit more flexibility with regard to 

our Market Promotion Program (MAP), Market Access Program, 

Emerging Markets Program, those things that help us focus on 

trade missions, reverse trade missions, those sorts of things—I 

think they would say would be really valuable to us. 

Mr. KEATING. Trade promotion area too. 

One of the new regulations provides that certain goods produced 

by independent Cuban entrepreneurs are eligible to be imported 

into the U.S. Can you define that term, ‘‘independent Cuban entrepreneurs,’’ for me and give me an idea what you anticipate would 

be imported with this new change in turn? 

Mr. SMITH. The State Department has put out a list of what 

would constitute independent Cuban entrepreneurs. I think the 

way they did it is they took categories that they thought would not 

be appropriate that traditionally were not small business or entrepreneurs that were really state controlled. They put that on the 

list, and they said other things could be allowed. But this is a State 

Department function and we authorize what the State Department 

puts on its list. So that is a State Department expertise. 

Mr. KEATING. And, lastly, you mentioned how tourism changes 

can help some of the agricultural business. Could you just comment 

on how that can happen, some personal observations or some 

thoughts as how that would translate? 

Mr. KARSTING. I think any number of countries, there are lots of 

different markets within one country. You know, we think of bulk 

commodities, wheat, rice, corn, soy, going to one group. But there 

is also significant hotel-restaurant trade in different countries, and 

the potential for tourism and restaurant trade in Cuba is significant. I think there were 2.8 million last year, up to 3 million this 

coming year. That is a little different market, one that will seek 

different products. 

30

Mr. KEATING. Mr. Chairman, I yield back. 

Mr. POE. I thank the gentleman. 

The Chair recognizes the gentleman from South Carolina, Mr. 

Wilson. 

Mr. WILSON. Thank you, Mr. Chairman, and thank you very 

much for having this hearing. 

I appreciate, Chairman, Judge Ted Poe for his leadership. 

And this is so important about agricultural trade with Cuba. 

President Obama has thrown the Cuban Communist dictatorship a 

lifeline by restoring diplomatic relations. I don’t believe this is in 

the interest of the people of Cuba. 

In fact, this dictatorship had as a patron the Soviet Union. Then 

it had as a patron Hugo Chavez. And both of those experiences 

have proven Margaret Thatcher correct, that socialism will exist 

until you run out of spending other people’s money. 

The businesses in Cuba are dominated by the Castro regime, a 

military mafia, stolen from the Cuban people. So as the oppressive 

regime that the benefits from trade go to is a mafia, not to the people of Cuba. I learned first hand of the appropriation in that—of 

stolen property from extraordinary constituents. A neighbor of 

mine was a businessperson in Cuba, a plumbing business. He was 

just a wonderful person, a dear family man with wonderful, four 

young daughters, and he knew that because he was an anti-Communist that he was going to be picked up. And so he went to the 

local department store back in 1959, and he got luggage, went back 

home. Before he got home, the secret police were there. And they 

said, what are you doing? And he said: Well, we are going to be 

visiting a sick aunt in New York. And so the children were told to 

pack whatever you can; we are not coming back. They didn’t come 

back. But one of American success and dream, and in South Carolina, they then developed one of the largest plumbing businesses in 

our State. It is just horrific to think of rewarding people who have 

stolen property. 

Mr. Smith, Cuba is one of the last remaining Communist dictatorships that is of Marxist Leninist theory of state ownership of the 

means of production in business. 

But with the Communist allies now liberated, thank God, state 

ownership is shifted to the Cuban military. What percentage of 

business industry is owned by and operated by the Cuban military, 

and what percentage may be operated by the elite of the Communist Party? 

Mr. SMITH. Sir, I don’t have that statistic. I rely on the State Department for that. I know that—well, when we talk about what is 

owned by the Cuban Government, we are talking about an overwhelming majority. I have heard 75, 85 percent figures. But when 

you say the military itself, I don’t have that statistic, versus government ownership. 

Mr. WILSON. Actually, the numbers you gave are what I have 

heard, too, that at least 70 percent of all business would be with 

the Cuban military. But in between, you have, as has been in the 

post-Communist experience in other countries, a mafia developing. 

Mr. Borman, it is hard to believe because of experience, that the 

increased trade will help the Cuban people. The evidence is clear, 

the Castro regime had 30 years of subsidized trade with the Soviet 

31

Union and billions of dollars in European investment, yet none of 

the profits made its way to the Cuban people. What makes us 

think that adding the U.S. to the equation would be different except to prop up a corrupt dictatorship? 

Mr. BORMAN. So the changes to our regulations we have made 

allow the export of items to the private sector in Cuba, and there 

are now about 200 categories of employment, private sector employment, that are legal in Cuba. So if someone wants to makes 

that export, it has to go to one of the private sector activities. 

These are not, with the exception of telecom, going to the Cuban 

Government. The telecom is to facilitate communications among 

the Cubans and the rest of the world. 

Mr. WILSON. You say, private sector. Who would be the private 

sector? 

Mr. BORMAN. So there are agricultural co-ops. For example, there 

are people who run small restaurants, auto repair shops, those 

kinds of things. And those kinds of activities are legal in Cuba now 

in the private sector. So one of the percentages I have heard is 

roughly 85 percent of the Cuban economy is currently government 

controlled and about 15 percent is in this space, several hundred 

thousand people. 

Mr. WILSON. I would certainly look into that. Because I can—I 

had the opportunity, and I was really grateful, to be in Shanghai, 

and I saw these different businesses who were operating, and then 

somebody whispered to me, and they had beautiful logos, and it 

was impressive, I found out they were all state-owned. None were 

independently operated. 

I yield back. 

Mr. POE. I thank the gentleman. 

The Chair recognizes the gentleman from Texas, Mr. Castro. 

Mr. CASTRO. Thank you, chairman. And thank you all for your 

testimony, for being here with us today. Let me ask you, for whoever is appropriate to answer this, if there was trade between the 

two countries in agricultural, which specific States or regions of the 

country would benefit most from that? 

Mr. KARSTING. I think we see a lot of opportunity in certain commodity sectors, rice, poultry, wheat, corn, and soy, so any State 

that produces those. Certainly, the States involved in processing 

and shipping those, our Port of Houston, Port of New Orleans, I 

imagine all of our ports. But at USDA, when I look at agricultural 

exports overall, I am sort of agnostic about where they come from, 

because we know that it helps all farmers, all producers, everywhere if we grow markets overseas. So, I think there are probably 

some localized improvements, but it is good for everybody if we sell 

more. 

Mr. CASTRO. And let’s imagine that you said today that we were 

going to have normalized trading relationship with Cuba. How long 

would it actually take to start that up, practically speaking? 

Mr. BORMAN. Well, of course, that would be assuming that all the 

legislative barriers are taken away. 

Mr. CASTRO. Right. 

Mr. BORMAN. Then it is hard to say how long that would take 

because the Cuban economy, as you have heard, is still seemingly 

dominated by the government. To overcome many years of where 

32

they have been, that would take quite a bit of time for them to develop markets and for U.S. companies to figure out what the markets were. 

Mr. CASTRO. Right. I imagine the United States Congress was 

okay with it; what would be the time lag after that in your estimation? 

Mr. KARSTING. I would say for the programs that I manage within the Foreign Agricultural Service, to treat Cuba like other countries with regard to Market Access Program, foreign market development, Emerging Market Programs, would not take very long at 

all to change the notice that goes out to our cooperators, the private sector groups we work with, to say: Okay, now you can do 

things in Cuba. We would still look at them with the same level 

of scrutiny that we look at all the things that come to us and say: 

We want to make sure they have got good plans, that they are 

spending resources wisely. But as a matter of turning the switch, 

it wouldn’t take that long. 

Mr. CASTRO. Okay. I apologize, I came in a little late, and I know 

some of this ground may have been covered but what is the annual 

loss in terms of trade for not being able to trade with Cuba? 

Mr. KARSTING. It is kind of hard to quantify what we are losing. We went from a high of $658 million in 2009, we are now at about 

$300 million a year in agricultural trade. Meanwhile, their imports 

to other countries have grown to about $2 billion. So our market 

share has declined, and their market has grown in terms of an export destination. 

Mr. BORMAN. Another way to look at it is, last year, we author- ized about $2.4 billion in ag exports to Cuba, but only a small percentage, roughly $300 million, was actually made. So, clearly, the 

folks who came in seeking authorization saw a potential sale there, 

but the actual sales were far less than that. 

Mr. CASTRO. Okay. Thank you. 

I yield back, chairman. 

Mr. POE. Thank you. 

The Chair yields to the gentleman from Pennsylvania, Mr. Perry. 

Mr. PERRY. Good to see you all. 

Thank you, Mr. Chairman. 

To tell you the truth, I am a bit disappointed there is not somebody here from State, and so my questions are kind of probably 

more involved than that. But in that interest, how much do any of 

you folks get involved with State’s policy, with State’s policy regarding the economy of the state of Cuba. How do we know as individuals and people who support exporters, regardless of where they 

are from in the United States, how do we track how those goods 

and services go to the Cuban people as opposed to enhancing the 

government? Is there any way to know that, and do you get involved in that? Anybody. 

Mr. BORMAN. We at Commerce do. You have got two ways that 

goods subject to our jurisdiction go to Cuba. Either under an individual license, which means the exporter has to come in with an 

application to say who they are, who they want to sell to, and what 

the item is. And there is an interagency process that reviews that 

and determines, is that consistent with our policy. So, certainly, we 

would vet the end user, and in that scenario, you would have very 

33

few circumstances where approvals would go if the item was to go 

to a government end user. There are some exceptions, like medical——

Mr. PERRY. But there is essentially one buyer, right? 

Mr. BORMAN. Well, but then, from there, it depends what the 

product is. It might go to a government end user, like a hospital, 

because the government controls all the hospitals. But it could go 

to a retail store, which is eventually sold to any Cuban person off 

the street. 

Then on the license exception side, the way we have created this 

is we have told people, you can make certain exports without individual licenses, which means we in the government don’t review 

the end user, but you have to determine yourself that it is essentially in the private sector. And that is where we are continuing 

to try to educate U.S. companies and the U.S. exporters on who is 

in the private sector. 

And then, on the back end, once items are in Cuba, I think it 

is very likely that if they don’t go to the intended recipient, the 

U.S. exporter will let us know. If somebody sells something to a relative, say, who is running an auto repair shop, and they send them 

a tool kit and the tool kit doesn’t make it, I am confident that the 

intended recipient will let their relative know that. So that is kind 

of the way we would look at that. 

Mr. PERRY. I mean, does it get down to that level? I mean, how 

do you know? If you are talking about a tool kit, let’s say you send 

a tap and die set—I don’t know if they have the provisions to make 

that stuff like that in Cuba. I don’t know what their capacity is. 

But let’s just say you send that, and the recipient never gets it. I 

mean, are you going to find a $200 or $300 tool set in the scope 

of the kind of numbers you are talking, arguably be diminished by 

half? 

Mr. BORMAN. You are also talking about an issue that is a general export control issue, not just Cuba. For example, one of the 

data points I have heard is that last year, there was about $2.6 billion of remittances that went from U.S. to Cuba, and over 50 percent of that probably went to small businesses. So, again, those 

typically are going to be from friends or relatives in the United 

States who have friends and relatives in Cuba running those businesses. So I think they would tell them, I am sending you X, you 

know, an auto repair kit or something, and when the intended recipient didn’t receive it, they would let the sender know, and then 

they would likely contact us. So there are ways to try to monitor 

that. 

Mr. PERRY. And then what is the penalty? What happens then? 

Mr. BORMAN. One other thing. We also are continuing monitoring 

open source and classified information to see if there is anything 

significant that would come up in terms of unauthorized diversion 

of items. Penalties, they can be criminal penalties with jail time, 

they can be criminal fines, and also administrative fines and denial 

of export privileges. So they can be fairly significant. 

Mr. PERRY. To the exporter? 

Mr. BORMAN. Well, it can be to the exporter or to the foreign 

party, who would then go on a public denied persons list, which 

34

would then mean nobody could send anything to them without authorization. 

Mr. PERRY. And how often does that occur? 

Mr. BORMAN. Well, it occurs a lot. We have a denied persons list 

which has dozens and dozens of foreign parties on it, and then we 

have other restricted lists that tell the public, you can’t send to 

them without government approval. 

Mr. PERRY. So from a strategic standpoint, how does our export, 

how does our trade policy, how does that comport with our aversion 

to the Communist Government in Cuba? How do we get to where 

we want to be to not have a Communist Government in Cuba 

through our export policy? 

Mr. BORMAN. Well, I am not sure that it can get to that stage. 

Mr. PERRY. Well, how does it enhance it, or how does it——

Mr. BORMAN. Well, certainly, the policy would be not to allow 

things that would go to the Communist Party or the Cuban Government or the military. Certainly, that is the policy that continues 

to be in place. 

So, for example, the other thing to keep in mind is the items that 

are eligible for these license exceptions or general authorizations, 

they are very low-level items. They are not items controlled by the 

multilateral nonproliferation regimes. Those would still all need a 

license. So if somebody came in for a license for one of those items, 

like a big machine tool—5 axis machine tool—and they said we 

want it to go to the Cuban Ministry of Industry to produce aircraft, 

that would be denied. So that is the way we deal with that as well. 

Mr. PERRY. Are there any provisions for marking or information 

that goes along with the goods or services? 

Mr. BORMAN. Well, there are requirements that the documentation that goes with it lays out what—who they can or can’t go to. 

Mr. PERRY. Okay. 

Mr. BORMAN. But for these low-level items, it is not clear to me 

that people would want to try to put tracking or other devices on 

them. 

Mr. POE. The gentleman’s time is expired. 

Mr. PERRY. Thank you, Mr. Chairman. 

Mr. POE. The Chair recognizes the gentlelady from Florida, Ms. 

Ileana Ros-Lehtinen. 

Ms. ROS-LEHTINEN. Thank you, so much, Mr. Chairman. 

I have questions for Mr. Smith and Mr. Borman, and I would appreciate if you could give me written responses as soon as possible. 

Mr. Smith, the January 2015 OFAC rule permits persons to import into the United States goods from Cuba, including tobacco and 

alcohol, and permits U.S. persons to use credit and debit cards 

from U.S. financial institutions to pay for these transactions. Congress has prohibited U.S. financial institutions and persons to extend financing with respect to any transaction involving property 

confiscated by the Cuban regime. So if a credit card is used by a 

person to purchase alcohol or tobacco, such a transaction would involve the extension of a short-term loan or credit by a U.S. financial institution to consummate a transaction involving confiscated 

property. So I would ask you, how doesn’t this new OFAC regulation not contravene U.S. law? And I would like that answer in writing. 

35

And, secondly, a recent news story stated:

‘‘A $3-million yacht left Key West this week with two barbeque 

grills, 250 channels of satellite TV and a just-in-case plan for 

rescuing stranded Cuban rafters encountered in the Florida 

Straits. After 4 hours smooth sailing, the Still Water tied up 

at Havana’s Hemingway Marina. The well-heeled passengers 

breakfasted on smoked salmon and pastries, then boarded an 

air-conditioned Cuban Government bus for a day of touring the 

city.’’

Surely, you are aware that tourism travel to Cuba is illegal, so 

how do these elite luxury yacht trips not constitute illegal tourist 

activities, or is your Department just looking the other way? 

Mr. Borman, two questions for you, sir. The January 2015 BIS 

rule correctly cited the 1992 Cuban Democracy Act that is granting 

the Department of Commerce authorities to permit certain exports 

that promote telecommunication connections with Cuba. Yet the 

same rule remains conspicuously silent as to where BIS purportedly derived its statutory authority to create the Support for Cuban 

People license exemption for nontelecommunication items. So the 

Libertad Act explicitly ratified all these restrictions, codified a comprehensive trade embargo against Cuba. Thus, how do your regulations, these new BIS regulations, not contravene U.S. law? What 

gives you the power to do that? 

And, lastly, Mr. Borman, in the past, you have acknowledged 

that exports under the Support for the Cuban People license exemption would have to go through a Castro-owned intermediary, 

these bogus companies, as the regime controls all foreign trade on 

the island, as we have discussed. Funneling exports through the 

Castro regime is inarguably in contravention of the foreign policy 

objectives of the U.S. as codified by statute. 

So, again, I would ask you, Mr. Borman, how does this BIS regulation not contravene U.S. law? 

And, Mr. Chairman, if I may, my answer to your question about 

the decrease in sales, the reality is that the Castro regime knows 

and understands the U.S. very well. And it is purposefully, I believe, dropping the amount of sales right now of U.S. agricultural 

products so that the ag industry falls with this ruse and advocates 

for loosening of sanctions. And more concessions to the Castro regime will not help the Cuban people, but will only fill the coffers 

of the monopolies that have been created by the regime. 

And if I could just point to this—our local affiliate of NBC put 

out this tweet that is being followed live on Miami television, a sad 

scene that gets replayed every day. This is right off my congressional district, right off Key West. These are Cuban migrants trying to come to the United States. They did not get the memo about 

the paradise that is there in Cuba when all of these sanctions will 

be lifted, and there is a record number in recent history of Cuban 

rafters coming into the United States. 

So maybe you have a statement that you could give me to tell 

these folks how things are going to get so much better for them 

once we lift all these restrictions. 

And I was wondering if you knew that since the December 17 

Obama announcement, there have been a record number of arrests 

36

of dissident and opposition leaders in Cuba who are calling for freedom and human rights, and they did not get the memo of how everything but these ag products is going to improve their plight and 

their families’ plight. 

Thank you, Mr. Chairman. And I would appreciate if the gentlemen can give me those responses rapidly. Thank you. 

Mr. POE. I thank the gentlelady. 

Ms. ROS-LEHTINEN. Sorry for my voice. 

Mr. POE. The four questions, that will be submitted in writing 

to you. I know you are trying to write them down. They will be submitted to you in writing, and return the answers not only to the 

gentlelady in Florida, but to the Chair as well. 

Mr. POE. Thank the gentlelady. I hope you get to feeling better. 

The Chair recognizes the gentleman from Minnesota, Mr. 

Emmer. 

Mr. EMMER. Thank you, Mr. Chair. 

And thank you, again, the witnesses for being here today. 

I come from a State, Minnesota, that one of the two major drivers of our private economy is agricultural, and it is always about 

markets, not just in the United States but beyond our borders. And 

when it comes to Cuba, when the exception was made more than 

a decade ago, Minnesota was one of the first to send a delegation 

to Cuba and open up the relationship. It is important to our State 

when we are talking about export markets and growing trade opportunities. 

And I think it was Mr. Karsting who testified that lifting the embargo would help farmers in general; it would help all farmers. And 

I guess I want to go from there. 

What sectors, if you will—and whoever has the expertise or all 

of you—what sectors in our agricultural industry in this country 

are hurt most by the U.S. trade embargo? 

Mr. KARSTING. I think we have seen losses in wheat and rice, 

and you can go down the laundry list of bulk commodities and look 

at who has gone up and who has gone down over time, and that 

would be sort of a rough way to look at it. I think wheat and rice 

are two of the principal ones. Poultry exports remain pretty strong. 

But in general, what we have seen from 2005 compared to today, 

is that Cuba used to buy a much greater variety of goods, and now 

that variety of goods has been diminished. There has also been a 

fundamental shift in U.S. agricultural exports in the last decade or 

two. We sell a lot more processed and intermediate products these 

days than we did a decade or two ago. So, there is probably potential opportunity in each one of those categories. It is hard for me 

to say exactly which one is going to shine. Ask me in 10 years, and 

maybe we will have some good numbers on that. 

Mr. EMMER. Is there anything that maybe, again, I don’t know 

which one of you this is most appropriate for, but we talk about—

you have testified as to what the administration has done. There 

might be an argument if they are within their authority or not. 

But is there more that can still be done, you believe, without congressional action to open up the Cuban marketplace? 

Mr. KARSTING. I think the authority within my agency, you 

know, where we would go now does require action by Congress. 

Our principal export promotion programs that I mentioned before, 

37

we can’t use those. We can’t spend a single dollar on any sort of 

export promotion. 

So, you know, we would love to be an environment where we 

have a little more on-the-ground market intelligence in the country. 

When I say intelligence, I mean our ag attaches, those sorts of 

things, at some point. We currently run all of our Caribbean operations out of an office in Miami. So we will take it one step at a 

time. 

Mr. EMMER. Mr. Smith you were talking about some of the 

things that have been done through this administration’s actions, 

including broadening the ability of financial institutions to do 

more. And I think the gentlelady from Florida was referring to 

debit cards, et cetera. You had referred to U.S. banks, financial institutions, that can now have correspondent relationships in Cuba. 

How many of those exist at this moment? Has that started already? 

Mr. SMITH. To my knowledge, there is only one financial institution that has opened a correspondent account in Cuba. I think 

Cuba is one of our toughest sanctions programs. The variety of requirements that we have under our sanctions and the penalties 

that we impose for violations—most people are aware of the major 

penalties that we instituted when we find that a financial institution has run afoul of our sanctions—lead banks to be very, very 

cautious. 

And so I think if you ask me what my expectation would be is 

that until there is a greater interest for the banks, until there is 

more trade or interest from big American companies, you will have 

banks that are very cautious about getting in until the profit is 

greater for them. 

Mr. EMMER. But taking that one step farther, it is not just that, 

but isn’t it true that with the embargo still in place, they don’t—

there isn’t going to be a rush of banks, financial institutions entering into Cuba? 

Mr. SMITH. I think that is right. As I said at the beginning, even 

with these changes, most imports, most exports, and most other 

transactions remain prohibited between the United States and 

Cuba. Given that landscape, there is not that great of an incentive 

for financial institutions to rush in across the board. 

Mr. EMMER. Lastly, could you expand on your testimony earlier 

that you said the administration through its actions have expanded 

certain humanitarian projects in Cuba. 

Mr. SMITH. Sure. 

Mr. EMMER. Could you expand on that? 

Mr. SMITH. Sure. We issued a general license that is a regulatory 

authorization that allows U.S. persons to do certain activities within what we define as the humanitarian field. Within the humanitarian field, we define what we mean by that. So it may be certain 

medical or educational or other types of projects, including certain 

micro-financing type activities. And we also authorize in that area 

more remittances and an unlimited category where we might have 

restrictions in other categories. So we have been working in that 

area. We also allow travel for that purpose as well. 

Mr. EMMER. And I think, lastly, with what little time I might 

have left, Mr. Karsting, you were talking about the farmer-to-farmVerDate 0ct 09 2002 11:38 Nov 04, 2015 Jkt 000000 PO 00000 Frm 00041 Fmt 6633 Sfmt 6633 F:\WORK\_TNT\090915\96050 SHIRL
38

er programs. Can you—for people that are here, can you tell us, 

how do those work? 

Mr. KARSTING. We do a number of sort of educational exchange 

programs, and farmer to farmer can be one of them. Often, when 

we send trade missions overseas, U.S. producers will go and accompany their sales executives and that turns into a de facto farmerto-farmer exchange. 

We also have two other programs that we administer: There is 

the Norman E. Borlaug Exchange Program and the Cochran Exchange Program. The Borlaug relates more to graduate-level Ph.D. 

Research exchanges. The Cochran Program deals with a lot of very 

practical on-the-ground sort of this is the way you manage cold 

supply chain, you know, any number of sorts of things. 

So we do exchange programs around the globe, but obviously not 

with Cuba unless there is a change in the law. 

Mr. EMMER. Okay. Thank you. 

I yield back. 

Mr. POE. Thank the gentleman. 

The Chair recognizes the gentleman from Arkansas, Mr. 

Crawford. 

Mr. CRAWFORD. Thank you, Mr. Chairman. 

This is a question perhaps best directed to the State Department, 

but since they are not part of this panel, I will direct it to any and 

all of you who can answer it. Are there any barriers in place that 

you know of that restrict Cuban ag customers and officials from 

coming to the United States for the purpose of developing business 

relationships or conducting quality control activities like safety and 

quality inspections? 

Mr. KARSTING. We are not bringing in Cuban agricultural 

projects, so there would be no reason for them to——

Mr. CRAWFORD. I guess, maybe I should clarify what I am asking 

here. Can they come here to develop relationships as it applies to 

U.S. businesses accessing Cuba? 

Mr. KARSTING. That is a question I would leave to State. 

Mr. SMITH. I think that is more of a State Department visa issue. 

Mr. CRAWFORD. All right. Thank you. 

Mr. Karsting, some supporters of trade with Cuba have said that 

we need to keep the restrictions on FAS’ market development programs to ensure that taxpayer money doesn’t get into the hands of 

the Castro regime. Do you think that is a valid criticism, or are 

there enough safeguards in place that would prevent misappropriation? 

Mr. KARSTING. Our use of these market development programs, 

just by way of background, is one of our signature public/private 

partnerships. So we cooperate with about 86 different groups out 

there, private sector groups that promote agricultural exports overseas. So our agreement is with them, and they submit to us their 

strategies for building markets overseas. 

So I don’t view that money as going directly into the coffers of 

any of their target countries. It is going into the hands and the control of U.S. producers and exporter groups for them to figure out, 

with our concurrence, what is the best strategy for growing and developing a market overseas. So, I think there are a couple layers 

of protection in there that give me comfort on that. 

39

I want to back up a little bit to your earlier question. You talked 

about people coming over here. This is probably a good point to 

talk about. An important part of USDA in many, many countries 

around the globe is not just for our FAS folks to have a presence 

there to figure out how we can grow opportunity for American agriculture, but also for our Animal and Plant Health Inspection Service team to be on the ground, to make sure that we protect American agriculture on the plant and animal health side of things. 

So as we look down the road to a relationship with Cuba, it involves both of those elements. 

Mr. CRAWFORD. Okay. Thank you. 

And let me ask you, Mr. Karsting, would you say that Alimport 

is a concern in terms of quality of access in promoting U.S. products directly to consumers? 

Mr. KARSTING. Ask that again. 

Mr. CRAWFORD. Would you say that Alimport is a concern in 

terms of quality of access and promoting U.S. products directly to 

consumers? 

Mr. KARSTING. Well, certainly a lot of our competitors don’t go 

through Alimport, and it is a pretty opaque process. But you aren’t 

able to change things unless you are there and able to build relationships hopefully with end-use customers. 

Mr. CRAWFORD. What recommendations would you—or anybody 

on the panel can answer this if they want to—have in terms of policy shift that we could implement here that would enable producers 

to market directly into the Cuban market? 

Mr. KARSTING. Like I mentioned before, the Secretary said we 

can’t spend a single dollar of our MAP, EMP, or other marketing 

sorts of programs, in Cuba, and that is something that Congress 

is going to have to grapple with. We can’t unilaterally take any action on that. 

Mr. SMITH. And I think from a Treasury—oh, I am sorry. 

Mr. BORMAN. We in Commerce are also statutorily prohibited 

from doing our normal range of trade promotion and market analysis activities in Cuba. 

Mr. SMITH. And on the Treasury side, what we hear most from 

exporters are the cash in advance rules, meaning that they can’t 

get private financing either. They have to go through this——

Mr. CRAWFORD. Okay. So that is what we can’t do. So I guess 

what I am asking is recommendations from you for what we could 

do. And if I am hearing you right, you think we could take some 

action to lift that? 

Mr. SMITH. That restriction is in the statute; it is in the Trade 

Sanctions Reform and Export Enhancement Act that doesn’t allow 

private financing or government financing. So that is——

Mr. CRAWFORD. Which would be an essential piece to this anyway, so you would recommend that that would be a starting point? 

Mr. SMITH. If Congress wanted to look at that, that is the place 

to go. 

Mr. CRAWFORD. Okay. 

Mr. BORMAN. And TSRA also has the restrictions on export assistance, which is what we were talking about in our——

Mr. CRAWFORD. Okay. Thank you. 

I yield back. 

40

Mr. POE. Thank the gentlemen. Thank all out of our witnesses 

for being here. 

I thank our Members of Congress, especially the ones not on the 

committee for being here today as well. 

And the subcommittee is adjourned. 

[Whereupon, at 3:14 p.m., the subcommittee was adjourned.] 

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