Errata Sheet

U.S. International Trade Commission. U.S. Agricultural Sales to Cuba: Certain Economic Effects of U.S.

Restrictions, USITC Publication 3932. Washington, DC: USITC, 2007.

• Chapter 3, page 3-3, 2nd paragraph, 2nd sentence should read, “Current regulations allow for three

general license categories for travel to Cuba: (i) official government travel, covering U.S.

government officials, foreign government officials, and officials of international organizations of

which the United States is a member;...”
U.S. International Trade Commission

Address all communications to

Secretary to the Commission

United States International Trade Commission

Washington, DC 20436

COMMISSIONERS

Dean A. Pinkert

Deanna Tanner Okun

Robert A. Rogowsky

Director of Operations

Karen Laney-Cummings

Director, Office of Industries

Charlotte R. Lane

Daniel R. Pearson, Chairman

Shara L. Aranoff, Vice Chairman

Irving A. Williamson
U.S. International Trade Commission

Washington, DC 20436

Publication 3932 July 2007

www.usitc.gov

U.S. Agricultural Sales to Cuba:

Certain Economic Effects of U.S. Restrictions

Investigation No. 332--489
This report was prepared principally by Office of Industries

Co-Project Leaders

John Reeder

john.reeder@usitc.gov

and

Joanna Bonarriva

joanna.bonarriva@usitc.gov

Principal Authors

Roger Corey, Andrew Gately, Brad Gehrke, Fred Forstall, John Fry,

Vincent Honnold, and Joseph Kowalski

Primary Reviewers

David Ingersoll and Marinos Tsigas

Office of Economics

William Deese

Administrative Support

Phyllis Boone

Under the direction of

Jonathan R. Coleman, Chief

Agriculture and Fisheries Division
iii

CONTENTS

Page

Executive Summary ................................................... vii

Chapter 1 Introduction ............................................... 1-1

Background and purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-1

Product scope and coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-2

Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-2

Overview of Cuba’s agricultural sector and food trade . . . . . . . . . . . . . . . . . . . . . . . . . . 1-4

Overview of Cuba’s tourism sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-5

Chapter 2 Overview of Cuba’s Purchases of Agricultural,

Fish, and Forestry Products, 2000–06 ....................... 2-1

Cuban imports of agricultural, fish, and forestry products . . . . . . . . . . . . . . . . . . . . . . . . 2-1

Major products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-1

Major suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-4

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-5

EU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-7

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-7

Argentina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-7

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-8

Food procurement and distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-8

Domestic food production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-10

Imports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-12

Import procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-12

Alimport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-12

Other Cuban importing entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-14

Food sales outlets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-15

Chapter 3 U.S. Restrictions on Travel and Agricultural

Product Sales to Cuba: Regulatory Framework and

Major Effects .................................................... 3-1

Regulatory framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-1

Bureau of industry and security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-2

Office of foreign assets control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-3

Regulation of travel licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-3

Regulation of export payments and financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-5

Effects of travel license regulations on agricultural sales to Cuba . . . . . . . . . . . . . . . . . . 3-6

Effects of payment and financing terms on agricultural product sales to Cuba . . . . . . . . 3-8

Effects of other factors on U.S. agricultural sales to Cuba . . . . . . . . . . . . . . . . . . . . . . . . 3-12
iv

CONTENTS–Continued

Page

Chapter 3 U.S. Restrictions on Travel and Agricultural

Product Sales to Cuba: Regulatory Framework and

Major Effects—Continued

Effects of travel restrictions on U.S. travel to Cuba . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-13

Effects on U.S. travel of lifting U.S. travel restrictions to Cuba . . . . . . . . . . . . . . . . . . . . 3-15

Commission estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-15

Published studies and statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-16

Chapter 4 Estimate of U.S. Sales of Agricultural, Fish, and 

Forestry Products to Cuba with Restrictions Affecting

Agricultural Exports and Travel Removed 4-1

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-1

Agricultural, fish, and forest products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-3

Wheat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-6

Rice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-7

Corn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-9

Animal feed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-10

Soybeans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-12

Fats and oils . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-13

Dry beans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-15

Poultry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-17

Beef . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-19

Pork . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-20

Dairy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-22

High-value processed foods and beverages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-26

Fish products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-28

Forest products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-30

Other food products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-33

Appendixes..............................................................

A. Request letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

B. Federal Register notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1

C. Hearing witnesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1

D. Summary of views of interested parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1

E. Statistical tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1

F. Tourism modeling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1

G. Analytical framework and assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . G-1

H. Economic literature review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . H-1
v

CONTENTS–Continued

Page

Figures

1.1. Framework to analyze lifting financing and travel restrictions . . . . . . . . . . . . . . . . . . . . . . 1-3

2.1. Cuban imports of agricultural products, 2000–06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-2

2.2 Overview of Cuba’s food production, purchasing, and distribution system . . . . . . . . . . . . 2-9

3.1. Hypothetical comparison: U.S. export transaction with Dominican buyer . . . . . . . . . . . . . 3-9

3.2. U.S. export transaction with Cuba . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-10

F.1. U.S. travel restriction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4

F.2. Removal of restriction on U.S. travel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7

G-1. Illustrative effect of lifting financing restrictions on U.S. agricultural exports to Cuba . . . G-4

G-2. Illustrative effect of lifting travel restrictions on U.S. agricultural exports to Cuba . . . . . . G-6

Tables

ES.1. Estimated effects of removing U.S. financing restrictions on U.S. agricultural exports to

Cuba . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . viii

ES.2. Estimated effects of removing U.S. travel restrictions on U.S. agricultural exports

to Cuba . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix

ES.3. Estimated effects of removing all U.S. financing and travel restrictions on U.S.

agricultural exports to Cuba . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix

2.1. Cuban agricultural, fish, and forest imports from the world, by commodity, 2000–06 . . . 2-3

2.2. Cuban agricultural, fish, and forest imports, by major supplier, 2000–06 . . . . . . . . . . . . . 2-4

2.3. Cuban agricultural, fish, and forest imports from the United States, by commodity,

2000–06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-6

2.4. Annual value of food sold in Cuban convertible peso (CUC) market . . . . . . . . . . . . . . . . 2-16

3.1. Number of specific licenses issued for travel to Cuba, by type, 2004–06 . . . . . . . . . . . . . 3-4

3.2. Cuban tourist arrivals from the World and the United States, 2000–05 . . . . . . . . . . . . . . . 3-14

3.3 Short term estimates of additional tourists with lifting of the travel restrictions . . . . . . . . 3-15

4.1. Estimated effects of removing U.S. financing restrictions on U.S. agricultural exports

to Cuba . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-4

4.2 Estimated effects of removing U.S. travel restrictions on U.S. agricultural exports

to Cuba . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-5

4.3. Estimated effects of removing all U.S. financing and travel restrictions on U.S.

agricultural exports to Cuba . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-5

4.4. Wheat: Effect of removing financing and travel restrictions on Cuban imports . . . . . . . . 4-7

4.5. Rice: Effect of removing financing and travel restrictions on Cuban imports . . . . . . . . . . 4-9

4.6. Corn: Effect of removing financing and travel restrictions on Cuban imports . . . . . . . . . . 4-11

4.7. Animal feed: Effect of removing financing and travel restrictions on Cuban imports . . . . 4-12

4.8. Soybeans: Effect of removing financing and travel restrictions on Cuban imports . . . . . . 4-14

4.9 Fats and oils: Effect of removing financing and travel restrictions on Cuban imports . . . 4-15

4.10. Dry beans: Effect of removing financing and travel restrictions on Cuban imports . . . . . 4-17

4.11. Poultry: Effect of removing financing and travel restrictions on Cuban imports . . . . . . . . 4-19

4.12. Beef: Effect of removing financing and travel restrictions on Cuban imports . . . . . . . . . . 4-21

4.13. Pork: Effect of removing financing and travel restrictions on Cuban imports . . . . . . . . . . 4-23

4.14. Milk powders: Effect of removing financing and travel restrictions on Cuban imports . . 4-25
vi

CONTENTS–Continued

Page

Tables—Continued

4.15. Other dairy products: Effect of removing financing and travel restrictions on Cuban

imports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-26

4.16. Processed foods and beverages: Effect of removing financing and travel restrictions

on Cuban imports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-29

4.17. Fish products: Effect of removing financing and travel restrictions on Cuban imports . . . 4-31

4.18. Forest products: Effect of removing financing and travel restrictions on Cuban imports . 4-33

4.19. Other products: Effect of removing financing and travel restrictions on Cuban imports . . 4-36

E.1. Cuban imports of wheat and meslin and flour, 2000–06 . . . . . . . . . . . . . . . . . . . . . . . . . . . E-3

E.2. Cuban imports of corn, 2000–06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-3

E.3. Cuban imports of rice, 2000–06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-4

E.4. Cuban imports of animal feed, 2000–06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-5

E.5. Cuban imports of soybeans, 2000–06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-5

E.6. Cuban imports of fats and oils, 2000–06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-6

E.7. Cuban imports of dry beans, 2000–06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-7

E.8. Cuban imports of poultry, 2000–06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-8

E.9. Cuban imports of beef and beef products, 2000–06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-9

E.10. Cuban imports of pork and pork products, 2000–06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-10

E.11. Cuban imports of other dairy, 2000–06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-10

E.12. Cuban imports of milk powder, 2000–06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-11

E.13. Cuban imports of processed food products, 2000–06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-12

E.14. Cuban imports of fish and seafood, 2000–06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-12

E.15. Cuban imports of paper and wood products, 2000–06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-13

F.1. Elasticities of substitution for U.S. and non-U.S. travelers . . . . . . . . . . . . . . . . . . . . . . . . . F-8

F.2. Market shares by representative U.S. and non-U.S. travelers and the shares of foreign

tourist expenditures attributed to U.S. and non-U.S. tourists in each destination . . . . . . F-9

F.3. Cuban travel data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-9

F.4. Long-run results from removing travel ban under the Canadian-like demand shift . . . . . . F-11

F.5. Results with the short-run supply restriction from removing travel ban under the

Dominican-Republic-like demand shift . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12

F.6. Short-run results from removing travel ban under the ad valorem tariff approach . . . . . . . F-12

G.1. Assumptions concerning individual commodity sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . G-7

H-1. Estimated U.S. agricultural exports to Cuba in the absence of U.S. sanctions . . . . . . . . . . H-4
vii

Executive Summary

This report provides (1) an overview of Cuba’s purchases of U.S. agricultural, fish, and

forestry products since 2000; (2) an analysis of the effects that U.S. government restrictions

on export financing terms and travel to Cuba by U.S. citizens have on those Cuban

purchases; and (3) estimates of likely U.S. agricultural sales if export financing restrictions

and travel restrictions are lifted. The report was prepared in response to a request from the

Senate Committee on Finance.

To perform its analysis, the Commission relied upon Cuban production and consumption

data as reported to the United Nations; reported world exports to Cuba; official Cuban

statistics on production and trade; official data on U.S. exports to Cuba; interviews with the

principal U.S. exporters and shippers to Cuba; academic studies; testimony at the

Commission’s public hearing; written submissions; and staff travel to Cuba. 

To assess the effects on U.S. agricultural exports and on travel to Cuba, the Commission

used two economic models: one to estimate the effect of lifting restrictions on U.S. citizen

travel to Cuba, and another to estimate the effect that U.S. financing restrictions have had

on U.S. agricultural exports to Cuba and the stimulus that additional travel by U.S. citizens

to Cuba would have on the Cuban demand for U.S. agricultural exports. The Commission

assumed no change in current U.S. investment policy towards Cuba (i.e., U.S. investment

in Cuba remains prohibited) nor did it assume any policy changes within Cuba.

Major Findings

Estimated Effect on U.S. Sales of Agricultural Products to Cuba if

Restrictions on Financing were Lifted 

• Because of data limitations and the non-market aspects of Cuban purchasing decisions,

the overall effect of removing all statutory restrictions on U.S. exports to Cuba is difficult

to quantify. However, based on interviews with Cuban purchasing officials, sector

modeling results, and discussions with U.S. industry officials, the Commission estimates

that the U.S. share of Cuban agricultural, fish, and forest product imports would rise to

between one-half and two-thirds.

• Financing restrictions raise Cuba’s cost of purchasing U.S. products. Many of these costs

are difficult to measure precisely. Therefore, Commission estimates of financing

restriction effects are presented in the form of ranges. Staff interviews and analysis

indicate that such costs range between 2.5 to 10 percent of the purchase price depending

on the commodity sector.

• All agricultural commodity sectors would likely benefit from the lifting of the financing

restrictions on U.S. agricultural exports to Cuba (table ES.1). Among the sixteen

commodity groups examined, the largest gains in U.S. exports to Cuba were for other

food products, including fresh fruits and vegetables (a rise of $34 million to $65 million

annually), milk powder ($14 million to $41 million), processed foods ($18 million to $34

million), wheat ($17 million to $33 million), and dry beans ($9 million to $22 million).
viii

Table ES.1 Estimated effects of removing U.S. financing restrictions on U.S. agricultural exports to Cuba

Commodity

Cuban imports from

the United States

U.S. share of

Cuban imports

Cuban imports from

the United States

U.S. share of

Cuban imports

With restrictions With restrictions Without restrictions Without restrictions

$ million Percent $ million Percent

Wheat 51 38 68 - 84 51 - 65

Rice 40 24 54 - 83 33 - 53

Corn 43 71 46 - 48 78 - 85

Animal feed 42 76 43 - 45 79 - 85

Soybeans 32 99 30 - 31 99 - 100

Fats and oils 22 57 24 - 27 63 - 74

Dry beans 20 25 29 - 42 37 - 56

Poultry 45 65 51 - 56 77 - 85

Beef 0.1 0.2 6 - 10 13 - 25

Pork 14 42 20 - 24 60 - 74

Milk powder 13 10 27 - 54 22 - 45

Other dairy 0.1 0.3 5 - 10 27 - 53

Processed foods 1 2 19 - 35 29 - 55

Fish products 0 0 8 - 15 30 - 56

Forest products 10 17 16 - 27 28 - 49

Other food products 5 3 39 - 70 29 - 53

Source: Global Trade Atlas and Commission estimates.

Note: Summing the individual partial equilibrium results for each commodity to obtain the total effect of removing

restrictions is not supported by economic theory. The individual partial equilibrium results assume that prices in other

markets remain constant and do not consider cross-commodity substitution.

Estimated Effect on U.S. Sales of Agricultural Products to Cuba if

Travel Restrictions were Lifted 

• If restrictions on travel of U.S. citizens to Cuba were lifted, among the sixteen commodity

groups examined, measurable gains in U.S. exports to Cuba were for processed foods (a

rise of $3 million to $8 million), poultry ($1 million to $3 million), beef and pork (each

gaining $1 million to $2 million), and fish ($1 million to $4 million) (table ES.2). These

are sectors where a large share of imports are distributed to the tourism sector.

• U.S. agricultural exports of most bulk products, including wheat, rice, corn, animal feed,

soybeans, dry beans, forest products, and milk powder will experience virtually no gains

owing to increased visits to Cuba by U.S. tourists, since only a negligible fraction of these

Cuban imports are consumed in the tourist sector.

Estimated Effect on U.S. Sales of Agricultural Products to Cuba if

Both Financing and Travel Restrictions were Lifted 

• Eliminating financing restrictions on U.S. agricultural exports would likely have a larger

impact on U.S. agricultural sales than lifting the travel restrictions on U.S. citizens (table

ES.3). This is because most imported food from the United States consists of bulk

commodities sold to Cubans, rather than foods that are sold to tourists.
ix

Table ES.2 Estimated effects of removing U.S. travel restrictions on U.S. agricultural exports to Cuba

Commodity

Cuban imports from

the United States

U.S. share of

Cuban imports

Cuban imports from

the United States

U.S. share of

Cuban imports

With restrictions With restrictions Without restrictions Without restrictions

$ million Percent $ million Percent

Wheat 51 38 52 - 53 38

Rice 40 24 40 24

Corn 43 71 43 - 44 71

Animal feed 42 76 43 76

Soybeans 32 99 32 - 33 99 - 100

Fats and oils 22 57 23 - 24 57

Dry beans 20 25 20 25

Poultry 45 65 46-48 65

Beef 0.1 0.2 1- 3 3 - 7

Pork 14 42 15-16 42

Milk powder 13 10 13 10

Other dairy 0.1 0.3 0.3 - 1 2 - 4

Processed foods 1 2 4 - 9 5 - 11

Fish products 0 0 1 - 4 5 - 11

Forest products 10 17 10 17

Other food products 5 3 6 - 8 4 - 5

Source: Global Trade Atlas and Commission estimates.

Note: Summing the individual partial equilibrium results for each commodity to obtain the total effect of removing

restrictions is not supported by economic theory. The individual partial equilibrium results assume that prices in

other markets remain constant and do not consider cross-commodity substitution.

Table ES.3 Estimated effects of removing all U.S. financing and travel restrictions on U.S. agricultural exports to

Cuba

Commodity

Cuban imports from

the United States

U.S. share of

Cuban imports

Cuban imports from

the United States

U.S. share of

Cuban imports

With restrictions With restrictions Without restrictions Without restrictions

$ million Percent $ million Percent

Wheat 51 38 68 - 85 51 - 65

Rice 40 24 54 - 84 33 - 52

Corn 43 71 47 - 49 78 - 85

Animal feed 42 76 44 - 46 79 - 85

Soybeans 32 99 31 - 32 99 - 100

Fats and oils 22 57 25 - 28 63 - 73

Dry beans 20 25 29 - 42 37 - 55

Poultry 45 65 54 - 58 76 - 84

Beef 0.1 0.2 9 - 13 19 - 29

Pork 14 42 22 - 25 58 - 70

Milk powder 13 10 28 - 55 22 - 44

Other dairy 0.1 0.3 6 - 11 29 - 52

Processed foods 1 2 27 - 42 33 - 53

Fish products 0 0 12 - 18 34 - 54

Forest products 10 17 16 - 27 28 - 48

Other food products 5 3 42 - 73 30 - 52

Source: Global Trade Atlas and Commission estimates.

Note: Summing the individual partial equilibrium results for each commodity to obtain the total effect of removing

restrictions is not supported by economic theory. The individual partial equilibrium results assume that prices in other

markets remain constant and do not consider cross-commodity substitution.
x

• If restrictions on financing of U.S. agricultural exports and on travel of U.S. citizens to

Cuba were both lifted, the largest gains in U.S. exports to Cuba among the sixteen

commodity groups examined were for other food products (including fresh fruits and

vegetables) (a rise of $37 million to $68 million annually), milk powder ($15 million to

$42 million), processed foods ($26 million to $41 million), wheat ($17 million to

$34 million), and dry beans ($9 million to $22 million).

Recent Trends in U.S.-Cuba Agricultural Trade

• In 2000, U.S. agricultural exports to Cuba were negligible. Following implementation of

the Trade Sanctions Reform and Export Enhancement Act (TSRA) of 2000, U.S. exports

grew rapidly so that by 2004 the United States was the largest supplier of agricultural

products to Cuba. In that year, Cuba imported $392 million in agricultural goods from the

United States, equivalent to 42 percent of its total agricultural imports. The increase in

U.S. exports to Cuba coincided with weather-related production declines in Cuba which

necessitated increased imports. The majority of Cuban imports from the United States are

consumed by Cuban citizens, with a small share going to the tourist market.

• The value of Cuban agricultural imports from the United States dropped by 10 percent

in 2005 and a further 4 percent in 2006. A change in U.S. Department of Treasury, Office

of Financial Asset Control (OFAC) financial transaction rules in March 2005 which

require the seller to receive payment from the Cuban buyer before vessels carrying goods

leave the U.S. ports, may partially account for this decline. Other factors also may have

been important, such as OFAC’s changes to U.S. regulations on Cuban remittances and

favorable credit terms offered by U.S. competitors in the Cuban market, and an overall

decline in imports in 2006.

• All Cuban imports of agricultural products from the United States are controlled by a

state-trading entity, Alimport. Several factors, both economic and non-economic, are

considered by Alimport in its food purchasing decisions. Therefore, even though the

United States is, for many products, the most competitive supplier for Cuba in terms of

price, quality, and delivery terms, Alimport considers non-commercial factors such as

diversifying import suppliers, strengthening strategic geo-political relationships, and

influencing the political debate over sanctions in the United States. Purchases are also

allegedly geared to particular U.S. States or Congressional districts in an effort to

heighten local interests in pressing the Administration to normalize trade with Cuba. 

Effects of Changes in U.S. Export Financing Regulations on U.S.

Agricultural Sales to Cuba

• Opinions on the effect of business travel and export financing regulations on U.S.

exporters are mixed. Larger exporters (e.g., multinational commodity trading companies)

that account for the vast majority of agricultural exports characterize the extra financial

costs and the burden of obtaining travel licenses to conduct business in Cuba as small. In

contrast, exporters with small sales volumes and new entrants characterize the process as

non-transparent, time-consuming, expensive, and in some cases, a reason not to trade with

Cuba altogether. While several U.S. industry officials indicated that their applications for

travel licenses were initially denied, or took more time to process than expected, none

indicated that they were ultimately unable to obtain travel licenses.
xi

• U.S. regulations, especially financing regulations imposed after March 2005, which

require the seller to receive payment from the Cuban buyer before vessels carrying goods

leave the U.S. ports, reportedly increased the cost of U.S.-Cuba trade for both U.S.

exporters and Alimport. This has made U.S. products less competitive relative to imports

from other sources.

• Many U.S. exporters view OFAC’s decision requiring that payments be made through

letters of credit drawn on third-country banks as an impediment to sales to Cuba.

Furthermore, the OFAC rule change disrupted U.S. exports to Cuba during late 2004 and

early 2005 that were already under contract and/or in transit. 

• OFAC appears to have restricted business travel to and from Cuba that is necessary for

U.S. exporters to effectuate sales. Particularly important are Cuban officials traveling to

the United States to inspect U.S. processing facilities, U.S. port facilities, fresh produce,

live animals, and other products subject to sanitary and phytosanitary standards. For many

of these products, restricting business travel effectively bars U.S. sales to Cuba. 

• OFAC restrictions on maritime shipping of U.S. products to Cuba significantly increased

freight charges for cargo to Cuba above freight charges to other Caribbean destinations.

Effects of Travel Restrictions on U.S. Agricultural Sales to Cuba

• U.S. restrictions on travel to Cuba limited the number of Americans traveling to Cuba to

fewer than 200,000 in 2005 and reduced the amount of U.S. dollar remittances to Cuba

from Cuban-Americans. A large proportion of these remittance dollars received by Cuban

citizens are spent on U.S. agricultural products. 

• Many Americans express interest in travel to Cuba, according to the American Society

of Travel Agents, and U.S. travel to Cuba would increase markedly in the absence of

sanctions. Cuba is increasingly able to meet U.S. tourist demand, owing to the addition

of hotel capacity and recent improvements in tourism services and facilities.

• The Commission estimated that without the travel sanctions, travel by Americans to Cuba

would increase from 171,000 to between about 554,000 and 1.1 million in the short term.

Since these American visitors could, to some extent, displace current foreign tourists in

Cuba, the net effect in the short term is a potential annual increase in additional tourist

visits to Cuba of between 226,000 and 538,000. In 2006, the total number of visitors to

Cuba was 2.2 million.

• Additional tourist arrivals would increase U.S. sales of agricultural goods to Cuba

because of the increased tourist demand for food and because of higher Cuban economic

growth boosting domestic demand for high quality U.S. food products.

 1

 Central Intelligence Agency, World Factbook 2007.

 2

 Ibid.

 3

 Sullivan, “Cuba: U.S. Restrictions on Travel and Legislative Initiatives in the 107th Congress,” 1.

 4 Trade Sanctions Reform and Export Enhancement Act of 2000, Public Law 106-387, October 18, 2000

(at 22 USC §§ 7201-7209).

 5

 Radelat, “Lawmakers propose Cuba-related bills, but few - if any - are expected to pass,” 2. Another

example is the Indiana Farm Bureau, which signed a commitment in October 2003 to work for the repeal of

U.S. trade and travel restrictions against Cuba in return for Cuban pledges to purchase $15 million in

agricultural products such as pork, soybeans, corn, poultry, eggs, and cattle. “Indiana farmers pledge to

oppose Cuba embargo.” 

 6

 For example, U.S. Representatives Jerry Moran (KS), Jo Ann Emerson (MO), Stephanie Herseth (SD)

and Mike Ross (AR) introduced the Agricultural Export Facilitation Act of 2007 in February of this year, and

Senators Mike Enzi (R-WY), Byron Dorgan (D-ND) and others introduced the Freedom to Travel to Cuba

Act (S. 721) on March 1, 2007. Senators Max Baucus (D-MT) and Mike Crapo (R-ID) and U.S.

Representatives Charles Rangel (D-NY) and Jo Ann Emerson introduced the Promoting American

Agricultural and Medical Exports to Cuba Act of 2007 in June 2007.

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CHAPTER 1

Introduction

Background and Purpose

Cuba is the largest Caribbean nation, with 11.4 million inhabitants and a land mass of over

110,000 square kilometers.1

 Since 1959, when Fidel Castro assumed power, Cuba has been

a communist state characterized by a one party political system and a centrally planned

economy. Per capita GDP was $3,900 in 2006,2

 and the economy is heavily dependent on

the tourism sector. The U.S. economic embargo against Cuba was originally put into place

in October 1960, but at the time it was limited in scope and did not include food and

medicine. In February 1962, the Kennedy administration tightened the embargo, and by July

1963, travel by U.S. citizens to Cuba was prohibited, and financial and commercial

transactions with Cuba were made illegal.3

 Although the embargo regulations have been

loosened and tightened by successive Presidential administrations, the basic framework of

the trade and travel restrictions has remained in place for more than 40 years. U.S. sales of

food to Cuba are currently permitted under the Trade Sanctions Reform and Export

Enhancement Act of 2000 (TSRA),4

 provided that Cuban purchases are paid with cash and

not credit.

In recent years, farmer groups in the United States, such as the American Farm Bureau

Federation and United States Rice Federation, have supported easing or repealing trade and

travel restrictions.5

 Various members of Congress have introduced legislation to remove

these barriers.6

 The Bush Administration, however, advocates maintaining both the economic

embargo and travel restrictions.

This report provides an overview of Cuba’s purchases of agricultural, fish, and forestry

products since 2000 (chapter 2); an analysis of the effects that U.S. government restrictions

on export financing terms and travel to Cuba by U.S. citizens have on those Cuban purchases

(chapter 3); and estimates of likely U.S. agricultural sales if export financing
 7

 In this report, the term “financing restrictions” are broadly defined to include all statutory, regulatory

and other U.S. legal restrictions that prevent U.S.-Cuban trade from being conducted on the same basis as

other U.S. trading partners. Such statutory and regulatory restrictions include: the export payment and

financing restrictions imposed under the Trade Sanctions Reform and Export Enhancement Act; the

restrictions on travel visas for Cuban officials wishing to visit the United States in order to purchase and

inspect U.S. agricultural goods; the rules governing maritime shipping between Cuba and the United States;

the ban on normal commercial credit for such U.S. exports; the ban on direct financial wire transfers of U.S.

dollars from the Cuban National Bank to a U.S. bank for payment of U.S. exports; and limits on support

services (marketing, technical assistance, and product promotion) in Cuba related to the sale of U.S.

agricultural exports.

 8

 On March 16, 2007, the U.S. Senate Committee on Finance (Committee) requested that the U.S.

International Trade Commission (Commission) prepare a report under section 332(g) of the Tariff Act of

1930 (19 U.S.C. 1332(g)). The Committee originally requested that the Commission submit its report no later

than June 29, 2007, but subsequently changed that date to July 12, 2007. Copies of the request letters are in

Appendix A, and the Commission’s notice of investigation, published in the Federal Register of April 5,

2007 (72 FR 16817), is in Appendix B.

 9

 The USDA maintains the complete list of U.S. products eligible for export to Cuba at

www.fas.usda.gov/itp/cuba/ScheduleBEligibleCommodities06-28-06.pdf

 10 Cuban import data are reported in GTA only through 2004. Export data reported by the rest of the

world to Cuba is, therefore, used as a proxy for Cuban imports.

1-2

restrictions7 and travel restrictions were lifted (chapter 4). The report was prepared in

response to a request from the Senate Committee on Finance.8

Product Scope and Coverage

The Commission’s analysis covers Cuban purchases of agricultural, fish, and forestry

products, including those from the United States. U.S. agricultural trade with Cuba is

currently limited to a list of eligible products, as provided for in TSRA.9

 These include all

or parts of the following chapters or subheadings of the Harmonized Tariff Schedule (HTS):

1- 24 (with limited exceptions, e.g., human hair), 3301-3302.10 (essential oils), 3501-3507

(casein, albumin, gelatin, peptones, dextrines, glues, rennet), 4001 (rubber), 41 (hides and

leather), 43 (furskins), 4401-4421 (wood and wood products), 4701-4706 (wood pulp),

4801-4805 (paper products), 5001-5002 (silk), 5101-5102 (wool), 5202 and 5205 (cotton

and cotton yarn), and 5301-5305 (other vegetable fibers).

Approach

The Committee requested that the Commission provide three distinct types of information

and analysis: an overview of Cuban purchases of agricultural, fish, and forest products;

analysis concerning how restrictions on export financing and travel have impacted U.S. sales

of these products; and an estimate of likely U.S.-Cuba trade in the event that these

restrictions are lifted.

For the first component, the Commission collected information on Cuba’s imports of

agricultural, fish, and forest products from 2000 to the present. The Commission used Global

Trade Atlas (GTA) data on exports from major supplying countries to Cuba.10 Data were

collected for broad commodity groups (e.g., wheat, beef, and poultry) at the 6-digit HTS

level. Information on how imported products are allocated among the major consuming

segments (i.e., consumption by the local population versus tourists) was derived from

published reports and academic papers on the Cuban food market system, as well as from

interviews with U.S. and Cuban industry officials and academics.

For the second component, the Commission gathered information on the regulations
 11 A list of hearing witnesses is appendix C and summaries of views of interested parties is appendix D.

1-3

themselves from the major Federal agencies that govern U.S.-Cuba trade and travel, namely

the Department of Commerce, Bureau of Industry and Security (BIS), which regulates

merchandise exports and re-exports to Cuba, and the Department of Treasury, Office of

Foreign Assets Control (OFAC), which regulates imports from Cuba and financial

transactions involving Cuban assets, including regulations that affect travel to Cuba. Next,

the Commission developed information on the effects of these regulations from published

sources, staff interviews with interested parties, testimony at the Commission’s hearing, and

written submissions by interested parties.11 In all, Commission staff conducted interviews

with over 40 representatives of key agricultural, shipping, travel and tourism industries,

academics at the Universities in Texas and Florida, and officials at the U.S. Departments of

Agriculture, Commerce, Transportation, and Treasury. Commission staff also conducted 

field work in Havana, Cuba, interviewing Cuban officials from several government agencies

and state-trading enterprises.

The final component of the study concerns the estimation of what U.S.-Cuba trade would

look like absent the U.S.-imposed export financing and travel restrictions. Here, the

analytical approach can be understood from a simple pie diagram (figure 1.1). Current Cuban

imports of a commodity, say wheat, from all country sources are represented by a pie, with

the initial U.S. share of imports represented by the slice labeled “A”). 

The Senate Finance Committee requested the Commission to evaluate three scenarios—(1)

lifting all financing restrictions, (2) lifting travel restrictions, and (3) lifting both financing

and travel restrictions jointly. In the first scenario, with financing restrictions removed,

certain transaction costs associated with U.S. sales would decline, thereby making U.S.

Source: Commission staff.
 12 Central Intelligence Agency, World Factbook 2007.

 13 Korves, Ross, “Agricultural Trade with Cuba in the Post-Castro Era,” and CubaNews, September 2006,

8.

1-4

exports more competitive in the Cuban market. This is represented in figure 1.1 by the share

in the inner pie growing from A to A+B as U.S. exports displace other import suppliers of

Cuba. In the second scenario, with restrictions on travel to Cuba lifted, there are two effects

that increase the overall size of the pie (but not the share because the financing restrictions

are assumed to remain in place). First, the pie grows owing to the macroeconomic impact of

additional tourists on the Cuban economy. With more U.S. tourist expenditures, Cuba’s GDP

grows, thereby generating additional purchasing power by the local Cuban population to buy

more imported food for itself. Second, the pie grows owing to the greater number of tourists

that purchase and consume food while visiting Cuba. These changes are depicted in figure

1.1 by the pie size increasing, and with U.S. sales to Cuba represented by the area A+C. In

the third scenario, with financing and travel restriction lifted, both the U.S. share and overall

size of the import pie grow. U.S. imports to Cuba would be represented by the areas

A+B+C+D.

Using this theoretical framework, the next task was to develop empirical estimates of the pie

size and U.S. share in the three scenarios. This entailed compiling data on Cuban imports,

broken out by commodity and country of origin, the market segments (i.e., for consumption

by Cuban citizens versus tourists) into which imported products are sold, and food

expenditure patterns by tourists. Also required were certain commodity demand and supply

elasticities, and multipliers for macroeconomic variables. Finally, evaluating the scenarios

required data on a price wedge, reflecting the additional transaction costs of U.S.-Cuba trade

associated with the financing restrictions, and the number of additional tourists expected to

visit Cuba if the travel restrictions were lifted. These data were compiled from GTA,

economic literature, staff interviews, and hearing testimony provided by leading experts on

the Cuban economy. Estimates of the number of U.S. tourists likely to visit Cuba were

derived by the Commission using a comparative static equilibrium model. All of the above

information was utilized to derive empirical estimates of U.S. sales of agriculture products

to Cuba absent current restrictions. Owing to uncertainty on certain key assumptions of this

framework (e.g., the price wedge and the number of additional tourist visits), sensitivity

analysis was conducted to determine the robustness of the results to changes in several of

those assumptions.

Overview of Cuba’s Agricultural Sector and Food Trade

In 2006, the Cuban agricultural sector contributed only 5 percent of Cuba’s GDP, but

employed approximately 20 percent of the population.12 Government policy plays a large

role in determining which crops are locally grown and how the agricultural sector is

structured. Traditionally, sugar and tobacco grown for export markets dominated agricultural

production. Since the collapse of the Soviet Union, the Cuban government has focused on

greater self-sufficiency in food production. Sugar production declined from 8 million tons

to 1.3 million tons between 1989 and 2006, during which time the Cuban government has

reoriented its agriculture sector toward the production of other products.13 Cuba’s

agricultural economy is still largely centered around export cash crops such as sugar,

tobacco, coffee, and citrus, but food staples such as potatoes, rice, corn, beans, sweet 
 14 Central Intelligence Agency, World Factbook 2007. Some of the vegetable crops include onions,

pumpkins and squash, and tomatoes. 

 15 U.S. Department of Agriculture, Foreign Agricultural Service, “Market Development Reports: Cuba’s

Dollar Food Market and U.S. Exports, 2003,” 9.

 16 Jones, Commission Hearing Transcript, 79-80, academic representative, e-mail message to

Commission staff, April 5, 2007, and Alimport officials, interview with Commission staff, Havana, June 12,

2007.

 17 Data from Global Trade Atlas (GTA). Export data to GTA are FAS values, which do not include

freight, insurance, and other transaction costs.

 18 U.S.-Cuba Trade and Economic Council, “Economic Eye on Cuba,” February 13, 2007.

 19 Alimport officials, interview with Commission staff, Havana, June 12, 2007.

 20 Alimport’s import projections are CIF values which include freight, insurance and other transaction

costs.

 21 Peters, Philip, International Tourism: The New Engine of the Cuban Economy, 3-4.

1-5

potatoes, malanga (tropical yam) and a wide variety of vegetables are now grown for local

consumption.14

Cuba is heavily dependent on food imports to feed its population and supply the food

demands of tourists. Empresa Cubana Comercializadora de Alimentos, or Alimport for

short, an agency within the Ministry of Foreign Trade, imports most intermediate food

products and bulk goods, and acts as a central trading desk for all agricultural imports from

the United States.15 Alimport has wide discretion to choose the foreign companies and

countries from which to make food purchases. Purchasing food at the lowest cost is

reportedly not the only purchasing criterion,16 as the Cuban government is interested in

maintaining multiple supply relationships around the world as a hedge against regulatory or

political risks.

Cuban agricultural imports were valued at $1 billion in 2006, representing 18 percent of total

imports into Cuba in that year. The U.S. market share was 33 percent, or $337 million.17 The

majority of purchases from the United States were bulk commodities such as wheat ($51

million), corn ($43 million), rice ($40 million), soybeans ($32 million), and beans, peas, and

lentils ($20 million). The remainder was primarily poultry meat ($44 million), soybean meal

($27 million), soybean oil ($21 million), pork ($13 million), and powdered milk ($13

million).18 Alimport reported that Cuba imported $1.6 billion in food from all sources in

2006,19 and expects imports to reach $1.7 billion in 2007.20

Overview of Cuba’s Tourism Sector

Cuba has numerous features attractive to tourists. It is the largest island in the Caribbean,

with 3,570 miles of coastline, including over 300 beaches, and possesses natural resources

attractive to niche tourists, such as excellent reefs for scuba diving, forests for bird watching,

and lakes for fishing. Cuba also contains the most extensive colonial architecture in the

Americas, and because of its relative isolation since the early 1960s, Cuba maintains and

operates vintage relics such as American automobiles from the 1950s and railroad

locomotives built before 1920.21

Over time the number of tourists visiting Cuba has grown substantially. Though Cuba was

a popular tourist destination prior to 1959, its current tourism industry did not develop until

after the dissolution of the Soviet Union in the early 1990s. With the loss of economic

support from its communist ally, Cuba began to develop its tourism sector in an effort to
 22 Ibid., 3.

 23 USITC calculations based on data from United Nations World Tourism Organization, Yearbook of

Tourism Statistics.

 24 Valdes, Rosa Tania, “Price Not Politics Slows Cuba Tourism,” and “2007 Tourism Arrivals Take a

Plunge,” 13.

 25 Valdes, Rosa Tania, “Price Not Politics Slows Cuba Tourism.”

 26 The Commission estimated the number of U.S. travelers to Cuba. See chapter 3 for full discussion.

 27 Commission staff estimate, based on UN World Tourism Organization data and Spandoni, Effectiveness

of Economic Sanctions in the Context of Globalization and Transnational Linkages. See chapter 3 and

table 3.1 for full discussion.

 28 Industry official, interview by Commission staff, Washington, DC, April 4, 2007. Venezuelans may

visit Cuba for medical treatment, as well.

 29 Airline Industry Information, “Virgin Atlantic Launches Service to Havana,” June 28, 2005. 

 30 Chung-Wee, Roger, Caribbean Aviation, “International Flights to the Caribbean.”

1-6

increase foreign exchange earnings, principally as a means to import food. During the 1990s,

tourist arrivals grew more than 370 percent from approximately 340,000 to over 1.6 million

annually.22 Tourist arrivals grew a further 31 percent during 2000–05, reaching 2.3 million

in 2005. Cuba now attracts a significant share of tourists traveling to the Caribbean. In 2005,

Cuba received the third-most visitors of any Caribbean destination, trailing only the

Dominican Republic (4.0 million) and Puerto Rico (3.7 million).23 However, tourist arrivals

declined in 2006 to 2.2 million, a 4 percent decline from 2005.24 This drop is partly attributed

to an 8 percent revaluation of the convertible Cuban peso in April 2005 that made Cuba

relatively more expensive vis-à-vis competitor tourist markets, particularly the Dominican

Republic and Mexico.25

Cuba receives tourists from all over the world, although the majority are Canadians and

Europeans. In 2005, visitors from Canada represented the largest share of visitors to Cuba,

accounting for 26 percent, followed by visitors from the United Kingdom (9 percent), Spain

and Venezuela (8 percent each), and Italy (7 percent). The United States, with an estimated

7 percent share, was likely the sixth leading provider of tourists to Cuba in 2005.26 An

estimated 171,000 American citizens visited Cuba in 2005 and were mainly Cuban

Americans visiting family.27

Between 2000 and 2005, average annual visitor growth rates from Venezuela (57 percent),

the United Kingdom (14 percent), and Canada (12 percent) exceeded the average 5 percent

growth rate overall. This growth in visitor arrivals from Venezuela is likely attributable to

an informal arrangement between the Cuban and Venezuelan governments, whereby Cuba

offers discounted tourism services to Venezuelan citizens as reciprocity for Venezuelan

energy subsidies.28 Increased arrivals from the United Kingdom are, in part, attributable to

the establishment of direct air service from London to Havana by Virgin Atlantic in July

2005,29 which doubled air capacity between the two countries. Similarly, growth in Canadian

arrivals is attributable to increased airlinks. For instance, beginning in 2003, Air Canada

joined carriers Cubana and SkyService in offering service from numerous destinations in

Canada to several Cuban cities.30
1-7

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[title IX], October 18, 2000, 22 U.S.C. § § 7201 et seq.

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1-8

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 1

 Trade data (FAS value, foreign port of export) were compiled from the Global Trade Atlas online

database. Because of the unavailability of Cuban import data after 2004, data for other countries’ exports to

Cuba are used as a proxy for Cuban imports. Data are not available for Vietnam, and therefore Cuban

imports of rice from the world presented in this report are significantly understated.

 2

 Agricultural, fish, and forest products refer to USDA-eligible items under TSRA. These are found at

www.fas.usda.gov/itp/cuba/ScheduleBEligibleCommodities06-28-06. For purposes of this report, the term

“agricultural products” is used interchangeably with the term “agricultural, fish, and forestry products.”

 3

 According to estimates, the losses caused by the drought in 2004 totaled $835 million, representing

2.5 percent of Cuba’s gross domestic product. Grogg, “Cuba: Food Aid for Victims of Worst Drought Since

1901” and Marx, “In Cuba, Drought Hits Crisis Level.” The 2003-05 drought was the worst to affect Cuba

in a century; Cuban 2004-06 production of most staple crops and poultry meat/ cattle slaughter fell by 10 and

40 percent, respectively. U.S. Department of State official, U.S. Interests Section, Havana, e-mail message to

Commission staff, May 31, 2007.

 4

 International Federation of Red Cross, “Cuba: Hurricane Charley Appeal No. 20/04 Final Report,”

January 18, 2006.

 5

 Rainfall replenished Cuba’s reservoirs to 80 percent of capacity by December 2006. U.S. Department of

State official, U.S. Interests Section, Havana, e-mail message to Commission staff, May 31, 2007.

 6

 U.S. Department of Agriculture, Economic Research Service, “Cuba’s Agriculture: Collapse &

Economic Reform” and Messina, Brown, Ross, and Alvarez, “Cuban Non-Sugarcane Agricultural Trade

Patterns: Historical Perspectives and Future Prospects.”

2-1

CHAPTER 2

Overview of Cuba’s Purchases of

Agricultural, Fish, and Forestry Products,

2000–06

Cuban Imports of Agricultural, Fish, and Forestry

Products1

Cuban imports of agricultural, fish, and forestry products rose from $550 million in 2000 to

over $1 billion in 2006, an increase of 89 percent (figure 2.1).2

 Most of this growth occurred

during 2002–05, with the largest year-on-year increase between 2003 and 2004, when

imports rose about $181 million. The higher level of imports in 2004 coincided with

agricultural production setbacks in Cuba owing to a severe drought in 2003–05 that inflicted

extensive damage on Cuba’s agricultural production and three hurricanes (Charley in August

2004, Ivan in September 2004, and Dennis in July 2005).3

 These natural disasters led to

additional import purchases to meet domestic food consumption.4

 Imports peaked in 2005,

as the Cuban government replenished food inventories, and then fell slightly in 2006.5

Major Products

Agricultural imports are concentrated in products that are either staples in the Cuban diet,

such as rice and beans, or not produced efficiently in Cuba’s tropical climate,6

 such as
 7

 Mattson and Koo, “An Overview of Cuban Agriculture and Prospects for Future Trade with the United

States.”

 8

 Detailed commodity-level Cuban import data by import supplier is contained in appendix E.

 9

 U.S. Department of Agriculture, Foreign Agricultural Service, “International Trade Report: Cuban

Market, Good for U.S. Grain”, August 5, 2005.

 10 Industry officials, interview by Commission staff, April 2007.

 11 FAO, FAOSTAT Agricultural Consumption Data.

2-2

Source: Global Trade Atlas.

0

200

400

600

800

1,000

1,200

2000 2001 2002 2003 2004 2005 2006

$ million

Figure 2.1 Cuban imports of agricultural products, 2000–06

coarse grains, wheat, and animal products.7 During 2000–06, over 50 percent of the total

value of Cuba’s agricultural imports consisted of cereals, meats, and dairy products

(primarily milk powder) (table 2.1).8

Cuba imports most of its domestic consumption of grain (wheat, wheat flour, rice, and

corn).9

 Wheat cannot be grown commercially in Cuba, and domestic production of rice and

corn account for about 42 percent and 43 percent of domestic consumption, respectively.

Between 2000 and 2006, Cuban grain imports grew about 6 percent annually, reaching

almost $247 million in 2006. During this period, grain accounted for more than one-quarter

of all Cuban agricultural imports. Combined Cuban imports of wheat and wheat flour ranged

annually between $130 million and $150 million annually.

Cuban imports of meat (mainly poultry, pork, and beef) have grown since 2000, because it

is less expensive to purchase meat from efficient overseas suppliers than to produce livestock

domestically with imported feedgrains.10 Between 2000 and 2006, Cuban meat imports rose

more than 180 percent in value terms, and accounted for about 15 percent of all Cuban

agricultural imports in 2006 (table 2.1). Imports of beef and pork increased steadily over the

time period, while poultry imports doubled between 2003 and 2004 in response to drought

conditions and the hurricane damage to domestic poultry flocks. Poultry comprises the bulk

of Cuban meat imports. Lower-priced poultry meat provides a more cost effective source of

animal protein for the domestic market than either beef or pork. Over the period, Cuban per

capita consumption of poultry increased, beef fell, and pork was stable.11
 12 Cuba has experienced declining domestic production and exports of sugar since the dissolution of the

Soviet Union. Plagued by the lack of agricultural inputs, the lack of spare parts, and periods of drought and

hurricanes, the Cuban government began restructuring the domestic sugar industry in 2002, resulting in a

contraction of the industry. Amuchastegui, “Cuba downsizes ailing sugar industry.”

2-3

Table 2.1 Cuban agricultural, fish, and forestry imports from the world, by commodity, 2000–06

Commodity 2000 2001 2002 2003 2004 2005 2006

U.S. dollars (millions)

Grains 180 190 210 193 238 246 247

Wheat 94 89 73 72 71 94 78

Flour 39 57 61 74 39 46 57

Corn 8 13 30 36 61 64 60

Rice 39 30 47 11 67 41 51

Other grains (a

) (a) (a) (a) (a) (a) 2

Animal feed 33 28 29 31 52 50 56

Soybeans 3 7 25 35 40 40 32

Fats and oils 33 31 39 68 56 84 39

Dry beans 35 39 52 55 64 63 79

Meats 56 72 75 79 155 141 159

Poultry 33 41 48 52 103 86 69

Beef 4 5 6 8 25 19 42

Pork 13 18 14 11 16 26 34

Other meats 6 9 7 7 11 10 15

Eggs (a

) (a) 1 1 1(a) (a)

Dairy products 88 95 79 102 134 176 147

Sugar, cane or beet (a

) 12 13 32 11 31 69

Processed food 36 38 43 65 64 59 67

Fish and seafood 29 31 17 14 23 27 26

Paper and wood 22 33 35 44 50 50 60

Other 32 28 33 38 46 75 57

Total 550 603 650 756 937 1,043 1,039

Source: Global Trade Atlas.

Note: Data are unavailable for Vietnam, however, Vietnam is believed to be the leading source of Cuba’s rice imports.

a

Less than $1 million.

In 2006, Cuban imports of dairy products were $147 million, or 14 percent of all Cuban

agricultural imports that year. Dairy products have been among the fastest-growing

agricultural imports, increasing 11 percent annually over the past 6 years. The bulk of these

are milk powders (nonfat dry milk and whole milk powder), which are reconstituted into

fluid milk and given primarily to children as part of food rations provided by the Cuban

government. A significant share of Cuba’s dairy consumption is imported. New Zealand and

the EU supply most Cuban dairy imports.

Cuban imports of other agricultural products (table 2.1) rose as well during 2000–06.

Although Cuba was once the world’s largest sugar-exporting country, it became a net

importer of sugar.12 Cuban imports of sugar increased from 44,000 metric tons (mt) in 2000
 13 U.S. Department of Agriculture, Foreign Agricultural Service, Production, Supply and Distribution

Online (PS&D).

 14 U.S. Department of Agriculture, Foreign Agricultural Service, “World Sugar Situation,” December

2005. 

 15 Ross and Fernandez Mayo, “International Economic Associations in Cuba’s Agricultural Sector.”

2-4

to over 250,000 mt in 2006.13 At the same time, Cuba continued to fulfill long standing

agreements with several countries, including China, for annual sugar export contracts.14

Thus, Cuba must import sugar to ensure that both domestic and export demands are satisfied.

Another notable trend is that Cuban imports of soybeans increased from about 10,000 mt in

2000 to over 130,000 mt 2006, as Cuba’s first soybean processing plant commenced

operations in October 2000.15 The plant is a joint venture with Canadian Sherritt

International and processes soybeans into soybean meal and soybean oil (a cooking oil).

Major Suppliers

In 2006, the United States was the leading supplier of Cuban imports of agricultural, fish,

and forestry products, with a share of 32 percent. The other major suppliers were the EU

(16 percent), Brazil (14 percent), Argentina (7 percent), and Canada (6 percent). These five

countries together accounted for over $793 million, or 76 percent, of total Cuban imports of

agricultural goods in 2006 (table 2.2).

Table 2.2 Cuban agricultural, fish, and forestry imports, by major supplier, 2000–06

Reporting country 2000 2001 2002 2003 2004 2005 2006

U.S. dollars (millions)

United States (a

) 4 140 254 392 352 337

EU 273 238 209 239 164 171 170

Brazil 22 58 41 27 62 110 149

Argentina 41 36 13 12 68 72 71

Canada 74 84 62 41 63 79 66

China 70 59 87 47 32 57 52

New Zealand 6 44 30 39 54 40 43

Chile 28 22 28 30 42 36 41

Uruguay 0 0 (a

) (a) 8 31 36

Mexico 28 31 16 17 18 38 24

All other 7 25 25 51 33 58 49

Total 550 603 650 756 937 1,045 1,039

Source: Global Trade Atlas.

Note: Data are unavailable for Vietnam, however, Vietnam is believed to be the leading source of Cuba’s rice imports.

a

Less than $1 million.

The suppliers of Cuban agricultural imports have changed significantly over the past 5 years.

In 2000, with virtually no trade between the United States and Cuba, the EU accounted for

50 percent of all imports with the remaining share allocated fairly evenly among seven

countries (Canada, China, Chile, Brazil, Mexico, New Zealand, and Argentina). Then, in

2001, the United States entered the market and, by 2004, had captured a 42 percent import

share, mostly at the expense of the EU, Argentina, Canada, and Mexico. In 2006, the United
 16 Between 1990 and 1999, cumulative U.S. agricultural exports to Cuba amounted to less than $20,000.

USITC, Interactive Tariff and Trade Database (Dataweb).

 17 Messina, U.S.-Cuban Agricultural Trade: Present Realities and Future Prospects.

 18 CubaNews, “USTEC: Food exports to Cuba fell 11% to $350m in 2005.”

 19 Cuba imported 500,000 metric tons of rice from Vietnam in 2005–06 with preferential financing.

CubaNews, “Cuba to Triple Rice Production by 2015,” and Echevarría, “U.S. Rice Producers Expect Cuba

Market to Keep Growing.” China has provided considerable official credit to Cuba. Economic Intelligence

Unit, Cuba Country Profile 2007, 43-44. 

 20 U.S. Department of Agriculture, Foreign Agricultural Service, International Trade Report: Cuban

Market, Good for U.S. Grain.

 21 Marc Frank, “Cuba slashes imports amid ongoing cash crunch,” Reuters, October 2002, quoted by

Spandoni, “Effectiveness of Economic Sanctions in the Context of Globalization and Transnational

Linkages: The Case of Cuba,” 182.

 22 Cuban rail cars can hold only 30 tons each (as compared to the 80 ton maximum in the United States)

becasue of weight limits of Cuban rail lines. Thus, direct maritime delivery is particularly important to

Cubans. Cuban industry official, interview with Commission staff, June 14, 2007.

 23 United States Poultry and Egg Council, written submission to the Commission, May 8, 2007 and Cuban

industry official, interview with Commission staff, June 14, 2007.

2-5

States accounted for a one-third share, the EU and Brazil, combined for another one-third,

and the other countries comprised the remaining one-third.

United States

The 1992 Cuban Democracy Act all but prohibited commercial sales of agricultural products

between the United States and Cuba.16 The loosening of restrictions under TSRA and Cuba’s

need to import food in the wake of Hurricane Michelle in November 2001 provided the

impetus for trade to resume.17 In 2002, the first shipments of U.S. rice arrived in Cuba (table

2.3). The flow of products steadily increased from $26,000 in 2000 to a peak of $392 million

in 2004. Sales fell 10 percent in 2005 to $352 million, and fell a further 2 percent in 2006

to $337 million. According to the Cuban government, this decline resulted from changes in

U.S. regulations on export payments and financing in March 2005.18 Other commentators

have attributed the decline to other factors, such as the availability of favorable financing

terms from competitive suppliers and an overall decline in imports in 2006.19 The effects of

the March 2005 regulatory changes are described in chapter 3.

In general, agricultural products imported from the United States have lower costs of

delivery and warehousing than competitive products from third-country exporters because

of the proximity of the U.S. ports to Cuba, the marketing efficiency of the U.S. exporters,

the smaller volume of individual shipments, and the transportation and handling capacity of

U.S. ports.20 In 2002, an unnamed Cuban official estimated that the proximity of U.S. Gulf

ports saves freight, warehousing, and interest costs, and gives U.S. exporters the equivalent

of up to a 20 percent price advantage over third-country suppliers to Cuba.21 The lack of

domestic storage capacity for agricultural products and poor internal rail22 and truck delivery

heightens the advantages U.S. exporters have in being able to make timely deliveries of

smaller shipments on a “just-in-time” basis. U.S. suppliers are reported to service the three

major Cuban ports in a matter of one day or less, as compared to 25 days for sailing from

Brazil.23
 24 Sullivan, “Cuba: U.S. Restriction on Travel and Remittances,” 5.

2-6

Table 2.3 Cuban agricultural, fish, and forestry imports from the United States, by commodity, 2000–06

Commodity 2000 2001 2002 2003 2004 2005 2006

U.S. dollars (millions)

Grains (a

) 2 52 83 180 145 136

Wheat 0 0 23 37 58 51 51

Flour 0 0 0 (a

) (a)03

Corn 0 2 23 36 58 55 43

Rice (a

) 0 6 11 64 39 40

Other grains 0 0 0 0 0 0 0

Animal feed 0 0 19 26 36 24 42

Soybeans 0 0 21 34 28 33 32

Fats and oils 0 0 22 52 24 28 22

Dry beans 0 0 (a

) 1 8 12 20

Meats 0 2 23 37 63 66 59

Poultry 0 2 23 37 61 58 45

Beef 0 0 (a

) 0(a) 0(a)

Pork 0 0 (a

) 0 2 8 14

Other meats 0 0 0 (a

) 0 0(a)

Eggs 0 0 (a

) (a) (a) (a) 0

Dairy products 0 0 (a

) (a) 27 30 13

Sugar, Cane or Beet 0 0 0 0 0 0 0

Processed food 0 0 (a

) 12 10 2 1

Fish and seafood 0 0 0 (a

) (a) (a) (a)

Paper and wood 0 0 (a

) 5 10 6 10

Other 0 0 (a

) 3 552

Total (a

) 4 140 254 392 351 337

Source: Global Trade Atlas.

Note: Data are unavailable for Vietnam, however, Vietnam is believed to be the leading source of Cuba’s rice imports.

a

Less than $1 million.

In 2006, the United States accounted for a substantial percentage of Cuban imports of wheat

(66 percent), corn (71 percent), rice (77 percent), poultry (65 percent), pork (42 percent),

soybeans (100 percent), and animal feed (76 percent). The drop in imports from the United

States in 2005 was concentrated in a few products, mainly rice and animal feed. Cuban

imports from the United States of several commodities increased between 2004 and 2005,

including soybeans, fats and oils, pork, dairy products, and dry beans.

The Cuban government’s access to foreign exchange limits Cuban imports, especially those

from the United States, since no U.S. commercial credit can be provided. This underscores

the importance of Cuban-American family travel and remittances and dollar receipts from

tourism to the Cuban economy. Changes in U.S. government regulations from March 2003

to June 2004 eased family travel restrictions to Cuba and increased the amount that each

traveler could carry from $300 to $3,000.24 This action had the potential to substantially
 25 Data on exchange rates taken from www.oanda.com.

 26 Mattson and Koo, “An Overview of Cuban Agriculture and Prospects for Future Trade with the United

States.”

 27 Overall poultry exports decreased between 2001 and 2006, likely an outcome of EU enlargement in

2004, which led to an increase in intra-EU poultry trade. Farm Foundation, The Future of Animal Agriculture

in North America.

 28 Mercosur is a South American trading bloc consisting of Argentina, Brazil, Paraguay, Uruguay and

Venezuela, as well as associate members Bolivia and Chile. Hearn, “Castro rallies trade bloc.”

 29 Resende, “How Cuba fits into Brazil’s plans.”

2-7

increase the Cuban government’s access to foreign exchange and its ability to purchase food

and agricultural products from the United States during this period.

EU

The EU was the second largest supplier of agricultural products to Cuba in 2006 but has seen

its share of the Cuban import market decline from 50 percent to less than 20 percent between

2000 and 2006. EU sales of wheat and poultry to Cuba fell in 2004 when the Cuban

government shifted to other suppliers such as the United States, Brazil, Argentina, and

Canada. The significant appreciation of the Euro against the Cuban peso and U.S. dollar

during 2003–06 made U.S. and third-country agricultural products relatively less

expensive.25

Lower EU wheat sales to Cuba coincided with increased Cuban wheat imports from the

United States and Canada. This shift away from the EU toward imports from the North

American suppliers may suggest a Cuban preference for higher quality wheat and away from

wheat flour.26 The building of several Cuban wheat mills also contributed to higher wheat,

and lower wheat flour imports. EU poultry sales to Cuba fell from $14.5 million to

$2.7 million during 2000–06 and were offset by increased imports from Brazil and the

United States.27 The EU still retains a large percentage of the Cuban import market for milk

powder and wheat flour.

Brazil

Cuban agricultural imports from Brazil increased more than six-fold during 2000–06. In

2006, Cuban imports of Brazilian sugar were over $50 million, up from zero in 2000.

Brazilian meat exports to Cuba also increased six-fold from $6 million in 2000 to almost $40

million in 2006. Pork accounted for 61 percent, and beef and poultry for 29 percent of the

total value of Brazilian meat exports to Cuba in 2006. Brazil also sold significant quantities

of powdered milk and soybean oil to Cuba. 

An important factor in the increase in Cuban food imports from Brazil was reportedly the

Cuban government seeking political support for admission to Mercosur. Cuba acceded to

Mercosur in July 2006.28 Brazil imported the vast majority of Cuba’s exports to Mercosur

countries in 2004,29 and continues to purchase large quantities of Cuban goods. 

Argentina

Cuban imports from Argentina increased 73 percent by value between 2000 and 2006. This

increase was primarily led by gains in corn, powdered milk, and dry beans. Dairy and corn

each accounted for 25 percent of total shipments in 2006. Dry beans increased significantly,

from $288,000 in 2000 to $13 million in 2006. Like Brazil, Argentina is member of
 30 Real annual country exchange rate per U.S. dollar. U.S. Department of Agriculture, Economic Research

Service, Agricultural Exchange Rate Data Set.

 31 Data on exchange rates taken from www.oanda.com.

 32 “Canadian food suppliers getting stiffed; U.S. rivals like status quo,” CubaNews, 11.

 33 Agriculture and Agri-Food Canada. “Agri-Food Past, Present & Future Report Cuba, July 2005.”

 34 Industry officials, interviews by Commission staff, April 2007. Commission staff fieldwork, Havana,

Cuba, June 11-15, 2007.

2-8

Mercosur, and it is possible that Cuba’s shift in food suppliers away from the EU to

Mercosur members was designed to support Cuba’s accession to the trading bloc. The

Argentine peso declined about 50 percent relative to the U.S. dollar from 2001 to 2006,30 and

increased Argentine price competitiveness.

Canada

Canada fell from the second to the fifth leading supplier to the Cuban market during

2000–06. In 2006, Canada exported $66 million and its market share decreased to 6 percent.

The appreciation of the Canadian dollar against the U.S. dollar since 2004 reduced Canadian

price competitiveness in much the same way as the Euro’s rise.31 The unwillingness of the

Canadian agricultural sector to extend additional credit to the Cuban government and

delayed Cuban payments32 may have played a role as well.

Increased competition resulting from the re-entry of the United States into the Cuban market

resulted in declining Canadian export sales of corn, wheat, pork, and poultry.33 Canadian

wheat sales to Cuba have been affected not only by U.S. wheat, but by Cuban imports of

Argentine wheat starting in 2004. 

Cuban imports of Canadian poultry also declined during this period from $12 million in

2000 to $1 million in 2006. This decline coincided with a large increase of imports from the

United States and Brazil, with sales of poultry from these countries reaching almost

$65 million in 2006. Canadian pork exports to Cuba remained fairly constant during

2000–06, averaging $10 million per year, but Canada’s share of pork imports declined from

69 to 32 percent over the same period. 

Food Procurement and Distribution

Cuba’s food procurement and distribution system is highly complex. It consists of many

parts, including domestic agricultural production and imports, several entities involved in

food procurement, and various types of food sales outlets, serving both Cubans and tourists

(figure 2.2). The system is further complicated by two major factors: central planning and

dual currencies.

Large sections of the system are centrally planned. For example, imports are tightly

controlled by the Cuban government, particularly imports from the United States, and most

Cubans receive their food through government-controlled ration stores. Within the system,

however, there are large pockets where free enterprise is allowed to operate. For example,

imports from non-U.S. suppliers are sold directly to hotels, and farmers with excess

production sell their products in private farmers’ markets.34
2-9

Figure 2.2 Overview of Cuba’s food production, purchasing, and distribution system

Source of supply Food procurement Food sales outlets 

Domestic agricultural 

production

Old peso market:

Government ration stores

School/Hospitals/Institutions

Farmers markets

Bakeries

Peso restaurants

Convertible peso 

market:

Convertible peso stores

Hotels

Restaurants

Imports from the 

United States

Imports from the 

Rest of the World

Alimport

ITH

State-owned or mixed 

enterprise companies (e.g., 

Cimex, TRD, Cubalse)

Domestic food 

processing

Source: Commission fieldwork.
 35 The Cuban government eliminated the circulation of U.S. dollars, which had been in use since the early

1990s, and all other foreign currencies on November 4, 2005. To enforce the elimination of dollars, a 10

percent fee was added to all conversion of U.S. dollars to CUCs, a fee not charged for the conversion of other

foreign currencies into CUCs. Prior to March 2005, the Cuban Central Bank reported the value of US$1 as

equal to CUC1. In March 2005, the CUC was revalued 7.4 percent.

 36 Bodegas are stores which sell a broad variety of foods, while placitas are small shops that sell only

fruits and vegetables. Alverez,“Overview of Cuba’s Food Rationing System,” 4.

 37 Ross and Fernandez Mayo, Cuba’s ‘New’ Peso Food Chain: Linkages and Implications for U.S.

Exporters.

 38 Imports supply the majority of Cuban consumption of wheat, rice, dry beans, corn, vegetable oil, and

poultry meat. See chapter 4 for commodity analysis.

 39 Economist Intelligence Unit, Cuba Country Profile 2007, 34.

 40 CubaNews, “RHC: Cigar, Honey Industries Back on Track” and CubaNews, “Citrus Crop Recovers

from Last Year’s Disasters.”

 41 U.S. Department of Agriculture, Foreign Agricultural Service, “Caribbean Basin Market Development

Reports, Cuba’s Dollar Food Market and U.S. Exports,” and USDA official, U.S. Interests Section, Havana,

e-mail message to Commission staff, May 31, 2007.

2-10

The retail food distribution system operates under a dual currency—the old peso (CUP) and

the new convertible peso (CUC), a hard currency backed by foreign exchange, such as U.S.

dollars or Euros.35 Consumer outlets using CUPs include farmers’ markets, schools,

hospitals, and government ration stores (bodegas and placitas),36 as well as many

commercial establishments, such as shops selling non-luxury items and restaurants primarily

serving Cubans. The CUC, which was introduced in 1993, is used in establishments that

accept foreign exchange, such as hotels, tourist restaurants, and retail outlets selling luxury

items. In CUC retail outlets, food and other items are subject to significant mark-ups (as high

as 300 percent) as a means by which the Cuban government can acquire foreign exchange.37

Domestic Food Production

Cuba is a net food importer, with slightly over one-half to two-thirds of its consumption of

staple food products being imported.38 Much of Cuba’s agricultural production system is

centrally-planned and inefficient, making domestic food production costly. According to

Cuban national income statistics, total agricultural output shrank by nearly one-half during

the economic crisis period of 1990–94. This decline coincided with the collapse of the Soviet

Union and the removal of subsidies to the Cuban agricultural economy in the form of

petroleum, fertilizer and other farm chemicals, and farm machinery. Since then, the Cuban

government has promoted food self-sufficiency through the use of more organic forms of

production. However, current agricultural output is only about 55 percent of the level in

1990.39

The structure of agricultural production in Cuba is diverse, including small producers selling

to farmers’ markets, large state farms, and state-controlled agricultural cooperatives

(UBPCs). Traditionally, Cuban agriculture has been centered on sugar for export, but with

the loss of the Soviet subsidies and market, agricultural exports have diversified into

products such as cigars, rum, and citrus products.40 Production for domestic consumption is

focused on rice, potatoes, beans, fresh fruit and vegetables, and, to a lesser extent, livestock.

In the non-sugar cane sector, output currently remains below the level of production in

1989.41 Cuban cattle herds and fluid milk production have not rebounded to the 1989 levels,

despite heavy government spending on imported higher quality live cattle and genetics 
 42 Cuban beef production fell from 76,000 metric tons in 2000 to 60,000 metric tons in 2005 and fresh

whole milk production fell from 614,000 metric tons to 334,000 metric tons in the same period, according to

data from FAO.

 43 U.S. Department of State official, U.S. Interests Section, Havana, e-mail message to Commission staff,

May 31, 2007.

 44 Commission staff field visit, Havana, Cuba, June 12-14, 2007.

 45 Cuban pork production rose from 76,000 metric tons in 2001 to 97,000 metric tons in 2005, according

to data from FAO; however, this is still below the 116,000 metric tons produced in 1996.

 46 Cuban egg production rose from 76,000 metric tons in 2001 to 91,000 metric tons in 2005, according to

data from FAO.

 47 U.S. Department of Agriculture, Foreign Agricultural Service, “Caribbean Basin Market Development

Reports, Cuba’s Dollar Food Market and U.S. Exports, 2003,” 7.

 48 Industry officials, interview by Commission staff, June 21, 2007.

 49 U.S. Department of Agriculture, Foreign Agricultural Service, “Caribbean Basin Market Development

Reports, Cuba’s Dollar Food Market and U.S. Exports, 2003,” 6.

 50 Ibid., 7.

 51 Domestic Cuban food quality and food distribution were considered erratic and of poor quality in 2006,

as was acknowledged in debate in the Cuban National Assembly in December 2006. Economist Intelligence

Unit, Cuba Country Profile 2007, 36.

2-11

improvements.42 In addition, the 2004 hurricane and the 2005 drought damaged livestock and

crops throughout Cuba.43

Counter to the general downward trend, certain commodity sectors have grown in recent

years. For example, fruit and vegetable production in 2006 was higher than before 1994, and

small farmers grow an abundance of plantain and tropical root crops (potatoes, sweet

potatoes, and malanga), as evidenced by their supplies at the free farmers’ markets.44 Cuban

pork production rose between 2000 and 2005, as private, small-scale hog farms expanded

(and state and UBPC hog farming diminished).45 Cuban egg production also rose by

20 percent during 2000–05.46

All food processing operates under the Ministry of Food Industries, either as wholly staterun entities or as foreign joint ventures that produce for the domestic tourist trade or export

markets. The leading joint ventures in food production are Sherritt International and AGRO

King of Canada, Nestle of Switzerland, Labatt Breweries of Canada, and Grupo BM of

Israel.47 Foreign joint ventures in beer, soft drink and mineral water bottling, rum, tobacco

(cigars), citrus (oranges and grapefruit), and greenhouse vegetables have boosted production

of these products in recent years.48

The major components of domestic food processing industries are the dairy industry (mainly

milk processing); meat products (mainly poultry and pork); grain milling; oilseed processing;

confections and sugar; bread and baked goods; fruit and vegetable products (including

orange juice); alcoholic beverages (mostly rum and beer); and bottled water and other soft

drinks.49 The food sectors that had the highest growth since 1994 include beer; soft drinks

and mineral water; alcoholic beverages (rum) for export; powdered milk (imported product

being reconstituted into fluid milk); pasta; wheat flour; and cheese and ice cream (using

reconstituted imported dry milk).50

Cuban food processors face considerable difficulties, many of which concern the timely

delivery of food inputs, and poor food transportation and storage infrastructure.51 For

example, Cuban port operations for unloading a bulk agricultural vessel can take two to three
 52 Cuban ports do not generally have sufficient forklifts and cranes necessary to rapidly unload cargo and

move it to port storage. The only significant container port is in Havana, and during 2004–06 it was

frequently overwhelmed with non-food storage containers until the Cuban Army provided emergency

assistance to reduce the backload. Industry officials, interview by Commission staff, May 4, 2007 and June

21 and 25, 2007.

 53 Reed, Commission Hearing Transcript, 129. 

 54 Industry officials, interview by Commission staff, May 4, 2007.

 55 Johnson, Commission Hearing Transcript, 145-146. Industry officials, interview by Commission staff, 

May 4, 2007.

 56 Bonilla, Commission Hearing Transcript, 109.

 57 U.S. Department of Agriculture, Foreign Agricultural Service, “Caribbean Basin Market Development

Reports, Cuba’s Dollar Food Market and U.S. Exports,” 14.

 58 However, there are reports that small amounts of branded U.S. food products such as Coca-Cola and

California wines are transhipped through third countries to Cuba. Academic representative, interview by

Commission staff, May 15, 2007; and Weissert, “U.S. Brands get to Cuba.”

 59 Ministry of Foreign Trade Official, interview by Commission staff, Havana, Cuba, June 12, 2007.

2-12

times the time to unload the same vessel in other Caribbean ports.52 Internal distribution of

agricultural products can also be difficult.53 Coupled with poor grain storage and inadequate

railroad rolling stock, grain spoilage and losses in 2006 were severe, according to U.S.

industry sources.54 Joint venture hotels often experience problems with delivery of fresh

produce as trucking and refrigeration are often lacking.55 However, a U.S. port official stated

that Cuban bulk handling and cold storage facilities in 2007 have adequate capacity to

receive and maintain the quality of U.S. food exports (like frozen chicken and dry beans).56

Imports

Cuban imports of food products, including bulk commodities, intermediate (semi-processed)

products, and consumer-ready products, account for the majority of domestic food

consumption. Typically, imports are sold to different market segments depending on the type

of commodity. Imports of bulk commodities (e.g., grains, oilseeds, and dry beans) have

accounted for close to one-half of all Cuba’s agricultural imports since 2001 (table 2.1); most

of these bulk commodities are imported for the ration stores and government institutions, as

well as for food processing companies and feed mills. Some intermediate products, such as

soybean meal and soybean oil, are also sold to food processing and feed mills. A large

percentage of intermediate and consumer-ready products (e.g., meat, dairy products, cooking

oil, and snack foods) are sold directly to consumers through the convertible peso stores,

government-owned restaurants, and tourist hotels and restaurants.57 Imported food is sold in

both currency market outlets. However, the majority of U.S. imports are bulk and, after

domestic food processing, are sold through the old peso markets; the majority of non-U.S.

food imports, on the other hand, are sold in the convertible peso markets.

Import Procurement

Alimport

Alimport (Empresa Cubana Comercializadora de Alimentos under the Ministry of Foreign

Trade) is the sole Cuban agency authorized by the government to import food from the

United States.58 Alimport purchased $1.6 billion of Cuba’s total food imports in 2006,59 and

primarily supplies ration stores, school lunch programs, hospitals, and other government

institutions. Alimport also imports food ingredients for the food processing sector (e.g.,

wheat flour), convertible peso stores (tiendas de recupación de divisas), and other
 60 Jones, Commission Hearing Transcript, 80.

 61 Demurrage charges are fees paid as compensation for the delay of a ship or freight car or other cargo

beyond its scheduled time of departure. 

 62 Industry representative, e-mail to Commission staff, April 5, 2007.

 63 Cuba imported 500,000 metric tons of rice from Vietnam in 2005-6 with preferential financing,

CubaNews, “Cuba to Triple Rice Production by 2015,” and Echevarría, “U.S. Rice Producers Expect Cuba

Market to Keep Growing.” China has provided considerable official credit to Cuba. Economic Intelligence

Unit, Cuba Country Profile 2007, 43-44.

 64 CubaNews, “Despite the Risks, Canadian Companies Find Cuba Fertile Ground for Trade Deals.”

 65 Industry officials, interview by Commission staff, April 2007.

 66 Industry official, e-mail to Commission staff, April 5, 2007.

 67 U.S.-Cuba Trade and Economic Council, “Economic Eye on Cuba: 2006 U.S. Export Statistics for

Cuba.”

 68 Kavulich, Commission Hearing Transcript, 17 and San Martin, “Feud Erupts Over Cuba Trade.” 

 69 Industry official, e-mail message to Commission staff, April 5, 2007; industry officials, interviews with

Commission staff, April-May, 2007; and media representative, interview with Commission staff, Havana,

Cuba, June 14, 2007.

 70 Spandoni, 2005, 182.

2-13

government-owned companies.60 Alimport imports most of the bulk and intermediate

agricultural products entering Cuba.

The Alimport logistics group charters Cuban and foreign flag vessels and monitors

transportation of the products to Cuba. According to U.S. industry sources, Alimport buys

U.S. agricultural products on both a free-on-board (f.o.b.) and a delivered (c.i.f) basis

because Alimport sometimes charters the vessel or other times has the U.S. exporter charter

delivery to Cuba. In either case, Alimport pays for shipping and any demurrage charges.61

Several factors reportedly go into Alimport’s buying decisions.62 Purchase price,

transportation cost, quality, and delivery considerations are all important economic factors

that make the United States an attractive supplier. Another economic factor is the availability

of bartering and credit financing from non-U.S. suppliers. For example, China and Vietnam

have provided official credit for the purchase of rice,63 and Canada has provided credit

guarantees for $300 million of exports (mostly non-agricultural) to Cuba since 1990.64 The

French export credit agency, COFACE, has provided long- and short-term credit for Cuba’s

purchase of French wheat and other products.65 However, U.S. exporters are prohibited by

federal laws from extending export credits to Cuba.

Non-economic factors also enter into Alimport’s buying decisions. For instance, Alimport

maintains multiple supply relationships to hedge against the risk that laws or regulations in

a given supplying country could change, thereby making a supplier, such as the United

States, unavailable.66 The Cuban government also has cultivated import relationships because

of political motivations.67 For example, Cuba maintains close political ties to China and

Venezuela and benefits from special financial arrangements with these countries. In addition,

Alimport reportedly initiated a policy in 2003 that limited or ceased purchases from U.S.

companies that did not actively lobby the U.S. government for changes to laws and

regulations regarding trade with Cuba.68 Purchases are also allegedly geared to particular

U.S. States or Congressional districts in an effort to heighten local interests in pressing the

Administration to normalize trade with Cuba.69

Even in the period of expanding U.S. exports to Cuba prior to the 2005 changes to U.S.

regulations, the Cuban government had indicated that the U.S. share of Cuban agricultural

imports would likely rise to only 60 percent.70 The subsequent rules change highlighted the

vulnerability of Cuban food imports to a U.S. trade action, and likely reduced the share of
 71 Jones, U.S.- Cuba Trade Association, written statement to the Commission, May 1, 2007. Industry

official, e-mail message to Commission staff, April 5, 2007.

 72 Ross and Fernandez Mayo, “Cuba’s Dollar Food Market and U.S. Exports.”

 73 Alimport also negotiates with its non-U.S. trading partners on behalf of other Cuban state-trading

enterprises. Jones, Commission Hearing Transcript, 114. CIMEX and CUBALSE Officials, interviews by

Commission staff, Havana, Cuba, June 12, 2007.

 74 ITH Officials, interview by Commission staff, Havana, Cuba, June 13, 2007.

 75 Academic representative, interview by Commission staff, May 15, 2007. CIMEX and CUBALSE

Officials, interview by Commission staff, Havana, Cuba, June 12, 2007.

 76 Ross and Fernandez Mayo, “Cuba’s ‘New’ Peso Food Chain: Linkages and Implications for U.S.

Exporters.”

 77 U.S. Department of State official, U.S. Interests Section, Havana, e-mail message to Commission staff,

May 31, 2007.

 78 Academic representative, interview by Commission staff, May 15, 2007.

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its total food imports that Cuba would purchase from the United States. U.S.-Cuban trade

experts reported to the Commission that, absent U.S. legal restrictions on trade, the U.S.

share of Cuban food imports may rise to 50 percent, but likely no higher because of Cuban

food security concerns.71

Other Cuban Importing Entities

While U.S. agricultural exporters are required to sell exclusively to Alimport, Cuba’s other

trading partners sell directly to many other state-trading enterprises and companies within

Cuba. Food imports have traditionally been controlled by a small number of government

ministries. After 1992, however, the decentralization in Cuban foreign trade permitted state

and private enterprises, as well as joint ventures and other companies, to import food.72 There

are five leading channels through which non-U.S. agricultural products can be purchased by

Cubans.73

• ITH (Commercializador ITH, S.A.) is the principal supplier to the tourist hotels and

restaurants (operating under the Ministry of Tourism).74

• Six major chains (government-owned corporations) operate the convertible peso stores,

including CIMEX, S.A. (Tiendas Panamericanas); Cubanacán, S.A. (Tiendas Universo);

Caracól S.A. (Tiendas Caracol); CUBALSE S.A. (Tiendas Meridiano); GAE S.A.

(Tiendas TRD Caribe); and Tiendas Habaguanex S.A. No foreign investment in

convertible peso stores is permitted, and the chains do not compete for business (i.e., by

not setting up stores in close proximity to one another).75

• Government-owned corporations that own and operate hotels in Cuba. Cubanacán (with

28 hotels, 50 restaurants, and many cafeterias) is the largest such corporation, accounting

for more than one-third of tourist receipts. Others include Grupo Hotelero, Gran Caribe,

Horizonte Hoteles, Habaguanex, and Grupo de Turismo Gaviota.76

• Roughly 30 percent of Cuban hotels are foreign joint ventures. These ventures are

permitted to import food for their facilities, generally through ITH or ABATUR (Ministry

of Tourism).77 Import purchases are often influenced by the needs of chefs designing

menus for the hotel restaurants.78 The major joint venture hotel groups are Grupo Sol

Melia (Spanish), Accor and Club Med (France), LTI and RIU (Germany), Leisure

Canada, Inc. (Canada), and SuperClubs (Jamaica).
 79 U.S. Department of Agriculture, Foreign Agricultural Service, “Caribbean Basin Market Development

Reports, Cuba’s Dollar Food Market and U.S. Exports, 2003.”

 80 Academic representative, interview by Commission staff, May 15, 2007.

 81 In April 2007, Economy Minister Jose Luis Rodriguez said that 57 percent of the population has access

to hard currency either through jobs in tourism or remittances from relatives living abroad. The U.S.

Commission for Assistance to a Free Cuba estimated in 2004 that remittances from the United States totaled

$1 billion a year. Weissert.

 82 Archer, “Caribbean Basin Market Development Reports: How Cubans Survive 2003,” and Alimport,

interview with Commission staff, June 13, 2007.

 83 Cuba Transition Project, “Food Security and Nutrition in Cuba.”

 84 Messina, Commission Hearing Transcript, 195.

 85 Bonilla, Jones and Messina, Commission Hearing Transcript, 125-128, 195.

 86 Testimony before the USITC, Commission Hearing Transcript.

 87 Agromercados are open air markets with products from private farmers and surpluses of cooperative

farms that have fulfilled their production quotas. State markets are usually located next to the agromercados

and are authorized to sell more processed goods, such as tomato sauce, peanut bars, and guava paste.

Topados sell products of larger agricultural cooperatives, and regularly fix prices approximately 25–30

percent lower than the rates at the agromercados. The Worker’s Youth Army (EJT) produces food for the

military and sells its surplus in these markets. Products sold in EJT markets are often the cheapest option.

Organopónicos are organic gardens with raised container beds. Cuba Transition Project, “Food Security and

Nutrition in Cuba.”

 88 Archer, “Caribbean Basin Market Development Reports How Cubans Survive 2003.”

2-15

• There are about thirty companies licensed to import meat directly from all foreign

countries except from the United States.79 It is likely that these companies are permitted

by the Cuban government to directly import a wide variety of other food items destined

primarily for the tourist trade.80

Food Sales Outlets

As previously noted, food for final consumption in Cuba can broadly be separated into

outlets that accept the CUP, serving mostly Cubans, and those accepting only CUCs, serving

mostly tourists and Cubans with access to CUCs.81 CUCs are the basis of exchange in the

CUC stores and hotels and restaurants that cater to the tourist industry. In addition to formal

restaurants and hotels, other tourism outlets that accept CUCs are in-home family restaurants

(paladares) and bed and breakfast homes (casas particulares).

The basis of the CUP market is the government ration store. The ration (libreta) provides

every Cuban with a basket of staple food items at heavily subsidized prices. Such items

include rice, beans or peas, potatoes, plantains, sugar, cooking oil, coffee, and, when

available, soy/meat blend, chicken, and beef.82 In addition, children under the age of seven

are provided with milk, and children aged 7-14 receive soy yogurt.83 The government also

provides subsidized food through school lunch feeding programs, work programs,

institutions, and hospitals (“social meals”), that supplement food made available through the

ration stores.84 The ration stores provide at most two-thirds of nutritional food requirements

for a typical Cuban, since frequently no meat or produce is available.85 However,

malnutrition is not prevalent in Cuba and life expectancy is reportedly close to the U.S.

rate.86

Other markets where Cubans can purchase food using CUPs include agricultural markets

(agromercados), state markets, topados, EJT (Working Youth Army) markets, urban

gardens, organopónicos,

87 fish shops, and supermarket-type stores (imágenes).88 Cubans with

access to foreign currency can exchange it for convertible pesos at the government exchange
 89 CADECA (Caja de Cambio, S.A.) is the foreign exchange bureaus that sell convertible pesos. Ross and

Fernandez Mayo, 2003, 5.

 90 Cuban state workers receive part of their wages in CUCs and part in CUPs, As of December 2006, one

CUC equaled 24 CUPs (unofficial rate), Economic Intelligence Unit, Cuba Country Profile 2007, 3.

 91 Ross and Fernandez Mayo, “Cuba’s ‘New’ Peso Food Chain: Linkages and Implications for U.S.

Exporters.”

 92 Total composed of direct imports of $40 - 60 million for convertible peso stores, $40 - 60 million for

the tourist industry, and an estimated $75 million to $90 million from the Ministry of Food Industries.

2-16

bureaus (CADECAs)89 and purchase food at convertible peso stores.90 Black market outlets

accept both currencies.

Both domestically produced and imported food flows into all of these food sales outlets.

Most of the imported food from the United States is bulk commodities and sold to Cubans

through CUP outlets. Most food imported from non-U.S. suppliers, such as Canada and

Europe, typically is sold in convertible peso market outlets.91

In 2003, the U.S. Department of Agricluture’s Foreign Agricultural Service estimated the

distribution of food imports sold through CUC outlets within Cuba (table 2.4). Total sales

in these outlets were estimated to range between $400 million and $500 million. However,

the share of these sales sourced from imports is difficult to measure. Imports sold directly

to CUC stores and the tourist industry together account for $80 million to $120 million. At

least half of the Ministry of Food Industries products (i.e., $75 million to $90 million) likely

were derived from imported inputs (e.g., wheat to produce wheat flour). On this basis, it is

plausible that $155 million to $210 million (39 to 42 percent) of the total CUC food sales

were derived from imports.92

Table 2.4 Annual value of food sold in Cuban convertible peso (CUC) market

Source of food sold Market channel

Wholesale

value of food Share of total 

$ million Percent

Direct import Convertible peso stores 40-60 10-12

Direct import Tourist industry 40-60 10-12

Ministry of Food Industries

(imported and domestic inputs)

Convertible peso stores and tourism 150-180 36-38

Ministry of Agriculture (mostly

domestic)

Convertible peso stores and tourism 160-180 36-40

Mixed enterprises (mostly

domestic)

Tourist hotels and restaurants 5-10 1-2

Free agricultural markets

(domestic)

CADECAS

(convertible peso for old peso exchange)

5-10 1-2

Total 400-500 100

Source: U.S. Department of Agriculture, Foreign Agricultural Service, “Caribbean Basin Market Development Reports:

Cuba’s Dollar Food Market and U.S. Exports, 2003.” GAIN Report Number C13010, September 24, 2003, 24.

The remaining $245 million to $290 million (58 to 61 percent) of total CUC sales were

therefore domestically produced, sold through the Ministry of Agriculture, foreign joint

ventures (mixed enterprises), free agricultural markets, and Ministry of Food Industries.
2-17

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Service. July 2005. http://atn-riae.agr.ca/latin/4055_e.htm (accessed May 5, 2007).

Alverez, Jose. “Overview of Cuba’s Food Rationing System.” University of Florida. IFAS Extension.

FE482.

Amuchastegui, Domingo. “Cuba downsizes ailing sugar industry; authorities to close 71 out of 156

mills.” CubaNews, July 2002.

Archer, Susan.“Caribbean Basin Market Development Reports: How Cubans Survive 2003.” U.S.

Department of Agriculture, Foreign Agricultural Service, U.S. Interest Section in Havana. GAIN

Report No. C13006. July 11, 2003.

CubaNews.“Canadian food suppliers getting stiffed; U.S. rivals like status quo.” February 2003.

——. “Citrus Crop Recovers from Last Year’s Disasters.” September 2006.

——. “Cuba to Triple Rice Production by 2015.” December 2006.

——. “Despite the Risks, Canadian Companies Find Cuba Fertile Ground for Trade Deals.”

September 2005.

——. “RHC: Cigar, Honey Industries Back on Track.” February 2005.

——. “USCTEC: Food exports to Cuba fell 11% to $350m in 2005.” April 2006.

Cuba Transition Project. “Food Security and Nutrition in Cuba..” Institute for Cuban and CubanAmerican Studies, University of Miami.

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Echevarría, Vito. “U.S. Rice Producers Expect Cuba Market to Keep Growing.” CubaNews, January

2007.

Economist Intelligence Unit, Cuba Country Profile 2007.

Edwards, Bruce. “Officials seeking more Cuba Trade.” Rutland Herald, August 9, 2005.

http://www.rutlandherald.com/apps/pbcs.dll/article?AID (accessed May 31, 2007).

Food and Agricultural Organization of the United Nations. FAOSTAT Agricultural Consumption Data.

http://faostat.fao.org/site/346/default.aspx (accessed May 4, 2007).

Farm Foundation. “The Future of Animal Agriculture in North America.”

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Grogg, Patricia. “Cuba: Food Aid for Victims of Worst Drought Since 1901.” Inter Press Service News

Agency, June 20, 2007. http://www.ipsnews.net (accessed May 16, 2007).
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Hearn, Kelly. “Castro rallies trade bloc.” The Washington Times, July 22, 2006.

http://www.washingtontimes.com/functions/print.php?StoryID (accessed May 16, 2007).

International Federation of Red Cross. “Cuba: Hurricane Charley Appeal No. 20/04 Final Report.”

January 18, 2006. http://www.reliefweb.int/rw/RWB.NSF/db900SID/RMOI6L82SE? (accessed

May 2, 2007). 

Johnson Roger. North Dakota Commissioner of Agriculture. Testimony before the U.S.

International Trade Commission in connection with Inv. No. 332-489, U.S. Agricultural Sales to

Cuba: Certain Economic Effects of U.S. Restrictions, May 1, 2007. Hearing transcript.

Jones, Kirby. U.S.-Cuba Trade Association. Testimony before the U.S. International Trade Commission

in connection with Inv. No. 332-489, U.S. Agricultural Sales to Cuba: Certain Economic Effects

of U.S. Restrictions, May 1, 2007. Hearing transcript.

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Washington, D.C., 2003. 
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——. “Cuba’s ‘New’ Peso Food Chain: Linkages and Implications for U.S. Exporters,” Cuba In

Transition. Volume 15. Association for the Study of the Cuban Economy: Washington, DC,

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Linkages: The Case of Cuba.” PhD diss., University of Florida, 2005.

Sullivan, Mark P. “Cuba: U.S. Restriction on Travel and Remittances.” CRS Report for Congress.

Congressional Research Service, Washington, DC. February 27, 2007.

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——. “Cuba’s Agriculture: Collapse & Economic Reform.” October 1998.

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——. “Market Development Reports: Cuba’s Dollar Food Market and U.S. Exports, 2003,” GAIN report

No. C13010, September 24, 2003.

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May 3, 2007).

——. “World Sugar Situation.” December 2005.

http://www.fas.usda.gov/htp/sugar/2006/World%20Sugar%20 (accessed May 9, 2007).

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——. Interactive Tariff and trade Dataweb (Dataweb). http://www.usitc.gov (accessed various dates).

Weissert, Will. “U.S. Brands Get to Cuba.” Associated Press, May 12, 2007. 

 1

 President John F. Kennedy, Proclamation, “Embargo on All Trade With Cuba, Proclamation 3447” and

Foreign Assistance Act of 1961, Public Law 87-195, September 4, 1961.

 2

 31 CFR Part 515.

 3 Trading with the Enemy Act, October 6, 1917.

 4 Cuban Democracy Act of 1992, Public Law 102-484, October 23, 1992 and Cuban Liberty and

Democratic Solidarity Act of 1996, Public Law 104-114, March 12, 1996.

 5

 U.S. Department of Commerce, Bureau of Export Administration, “Exports to Cuba, Final Rule,”

Federal Register, Vol. 64, No. 92, 25807.

 6 Trade Sanctions Reform and Export Enhancement Act of 2000, Public Law 106-387, October 18, 2000

(at 22 USC §§ 7201–7209).

3-1

CHAPTER 3

U.S. Restrictions on Travel and Agricultural

Product Sales to Cuba: Regulatory

Framework and Major Effects

Regulatory Framework

A number of laws and regulations provide the legal framework under which trade with and

travel to Cuba are conducted. Trade with Cuba was prohibited by Proclamation 3447 issued

by President Kennedy on February 3, 1962, under the authority of the Foreign Assistance

Act of 1961.1

 Cuban Assets Control Regulations (CACR)2 were issued by the U.S.

Government on July 8, 1963, under the authority of the Trading with the Enemy Act.3

 The

Cuban Democracy Act of 1992 (CDA) and the Cuban Liberty and Democratic Solidarity Act

of 1996 (LIBERTAD, also know as Helms-Burton) placed additional restrictions on trade

with Cuba.4

 The CDA, however, included provisions that allowed for licensed exports in

support of the Cuban people, including food donations (but not commercial sales), medicines

and medical devices, low-level Federal Communications Commission-approved

telecommunications equipment, and items for news bureaus and groups that promote

democracy.

In 1999 there was a minor relaxation of rules when the Bureau of Export Administration

(BXA, precursor of the Bureau of Industry and Security) published regulations legalizing

sales of agricultural commodities to independent, non-governmental entities in Cuba.5

 The

Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA) offered additional

opportunities to expand agricultural exports to Cuba.6

Trade with and travel to Cuba are primarily regulated by two U.S. agencies. The Bureau of

Industry and Security (BIS), in the Department of Commerce, regulates merchandise exports

and re-exports to Cuba. The Office of Foreign Assets Control (OFAC), in the Department

of Treasury, regulates imports from Cuba and financial transactions involving Cuban assets,

including regulations that affect travel to Cuba.
 7

 Standard export licensing procedures are set forth in Executive Order 12981, which provides up to 39

days for initial interagency review. U.S. Department of Commerce, Bureau of Industry and Security,

"Exports and Reexports to Cuba."

 8

 EAR99 is the designation for dual-use goods that are covered by the EAR (Export Administration

Regulations) but are not specifically listed on the Commerce Control List (CCL). EAR99 items can be

shipped without a license to most destinations under most circumstances. In fact, the majority of commercial

exports from the United States fall into this category. However, if EAR99 items are to be exported to an

embargoed country (in this case, Cuba), to an end-user of concern, or in support of a prohibited end-use, a

license may be required. U.S. Department of Commerce, International Trade Administration, "What is an

Export License and Do All U.S. Exports Require One?"

 9

 Notifications and supporting documents can be submitted using Form BIS -748P (the BIS multi-purpose

application form) or electronically using the Simplified Network Application Process (or SNAP-R) at

http://www.bis.doc.gov/SNAP/index.htm. United States Department of Commerce, Bureau of Industry and

Security, “Exports and Reexports to Cuba, Iran, and Sudan Under the Trade Sanctions Reform and Export

Enhancement Act.”

 10 The Department of Defense has authorized BIS to review notifications on its behalf. BIS officials,

interview with Commission staff, April 24, 2007; and U.S. Department of Commerce, Bureau of Industry

and Security, "Exports and Reexports to Cuba."

 11 A denial order states that the denied person may not participate in any way in any transaction involving

any commodity, software, or technology exported from the United States that is subject to the Export

Administration Regulations (EAR). 

3-2

Bureau of Industry and Security

BIS is the primary gatekeeper for the export of agricultural commodities to Cuba. Prior to

the TSRA, applications to sell agricultural commodities to Cuba were reviewed by BIS on

a case-by-case basis. Owing to the narrow conditions defined by existing laws and

regulations, licenses were routinely denied and agricultural exports were very limited.7

 To

implement the TSRA, BIS created License Exception Agricultural Commodities (known as

the AGR process). Under this process, BIS authorizes exports to Cuba of those TSRAeligible products that are EAR99 (i.e., those not listed on the Commerce Control List),

subject to certain criteria and restrictions.8

 Exporters of TSRA-eligible items are not required

to use the AGR process and may seek a standard export license. However, applications for

standard export licenses can take more than three times as long to process and be approved

than applications under the AGR process. 

To ship agricultural products under the AGR process, exporters must submit notification of

sales to BIS and obtain confirmation that no agency objects to the transaction taking place.9

Within two business days of entering the notification into its database, BIS electronically

refers the notification to the Departments of State and Defense, as well as other agencies as

appropriate.10 If no agency raises an objection within 9 business days, the authorization is

approved. Within 12 business days of being registered in the database, BIS notifies the

exporter if objections are raised. Agencies may object if: (1) the goods are not agricultural

commodities, (2) the goods are not EAR99, (3) the export would violate the terms of a denial

order,11 (4) the recipient may promote international terrorism, or (5) the transaction raises

nonproliferation concerns.

Exports to Cuba must also be made on the basis of a written contract between a U.S. seller

and a Cuban buyer, and must take place within 12 months of signing the contract. BIS

licenses are also required for supplies (such as fuel, petroleum and related items, food for

crew members, and medicine for crew members) used in vessels carrying authorized

agricultural exports to Cuba. License applications for such supplies are processed under

standard procedures, but are valid for 24 months once issued.
 12 Sullivan, “Cuba: U.S. Restrictions on Travel and Remittances,” 2.

 13 31 CFR Part 515 and U.S. Department of the Treasury, Office of Foreign Assets Control, “Cuba, What

You Need To Know About the U.S. Embargo,” 1.

 14 U.S. Department of the Treasury, Office of Foreign Assets Control, “Comprehensive Guidelines for

License Applications to Engage in Travel-Related Transactions Involving Cuba,” 4.

 15 Cuban-Americans visiting family members are limited to only $50 per day. For other travelers, the limit

is $167 per day based on the U.S. Department of State’s per diem allowance providing estimated daily costs

for food and lodging in Havana. The rate is adjusted periodically.

 16 For additional details, see U.S. Department of the Treasury, Office Of Foreign Assets Control,

“Comprehensive Guidelines for License Applications to Engage in Travel-related Transactions Involving

Cuba.”

3-3

Office of Foreign Assets Control

Regulation of Travel Licenses

Travel to Cuba for U.S. citizens and residents is restricted, although not prohibited.12 Such

restrictions were introduced initially under CACR and are administered by OFAC.13

Regulations prohibit U.S. residents from purchasing tourism services, such as lodging, meals

and transportation, while visiting Cuba.14 Under certain circumstances, however, OFAC is

authorized to grant general or specific licenses to U.S. travelers permitting them to purchase

finite amounts of Cuban tourism services.15

General licenses are issued to travelers to Cuba for official government or professional

purposes without direct authorization from OFAC. Current regulations allow for three

general license categories for travel to Cuba: (i) official government travel, covering U.S.

federal and state government officials, foreign government officials, and officials of

international organizations of which the United States is a member; (ii) journalism travel,

covering journalists regularly employed in that capacity by news reporting organizations,

including technical support personnel; and (iii) full-time professional research travel,

covering professionals conducting research in their professional area, or attendance at certain

professional meetings or conferences. Rather than directly contacting OFAC, a general

license applicant may simply sign an affidavit of their purpose of visit to Cuba before an

OFAC-licensed travel service provider. Travelers under these licenses must be able to

document that their travel qualifies under that category and must keep records that may be

demanded by OFAC or other law enforcement officials for a period of five years after the

travel takes place.16

Specific licenses are issued on a case-by-case basis, and require direct authorization from

OFAC. Travel under specific licenses is limited to persons visiting immediate family

members (i.e., grandparents, parents, children, grandchildren, siblings, spouses, or the same

immediate family members of a spouse, or spouses of those family members); freelance

journalists; students in structured higher education programs; members of religious

organizations undertaking religious activities in Cuba; amateur or semi-professional athletes

participating in competitions; advocates of human rights and democracy; humanitarian aid

workers; individuals exchanging informational materials; and business-persons seeking to

facilitate exports authorized by the Department of Commerce. Data on the number of specific

licenses granted during 2004–06 are presented in table 3.1.
 17 U.S. Department of the Treasury, Office of Foreign Assets Control, “Comprehensive Guidelines for

License Applications to Engage in Travel-related Transactions Involving Cuba,” 65; and OFAC officials,

interview with Commission staff, May 2, 2007.

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Table 3.1 Number of specific licenses issued for travel to Cuba, by type, 2004–06

Cuba travel category 2004 2005 2006 

Family visitsa 19,766 25,304 40,308

Journalistic activities (Freelance) 17 13 4

Research/meeting 167 107 87

Academic activities 84 96 90

Religious activities 208 256 331

Humanitarian projects 34 36 19

Public performance 20 23 12

Support for the Cuban people 30 86 78

Research institutes 11 10 8

Informational material 35 28 34

Licensed exports 269 258 184

Agriculture 201 196 137

Agriculture and medicalb 29 21 16

Medical 18 19 16

Donations 21 22 15

Source: U.S. Department of the Treasury, Office of Foreign Assets Control.

a

Each traveler receives a separate license. For the other categories, multiple travelers may travel on one license. b

Travelers using this type of licences are permitted to engage in activities pursuant to the export of either

agriculture or medical goods.

Although the number of specific licenses issued gives insight into overall trends in U.S.

travel to Cuba, it does not provide data on the actual number of travelers. License recipients

are eligible to travel to Cuba, but may, in fact, not actually travel. Furthermore, multiple U.S.

residents may travel to Cuba on all the types of specific licenses except those granted for

family visits.

The three-year available time series precludes extensive analysis of trends in the number of

specific licenses granted. However, the 59 percent increase in the number of family visits

licensed in 2006 can be attributed to licensing provisions, instituted in 2004, permitting

Cuban-Americans to visit family in Cuba only once in a three-year period. Therefore,

Cuban-Americans who had traveled to Cuba in 2003 under the previous licensing regime

that allowed one annual visit were not eligible to travel again to Cuba until 2006.

U.S. agricultural exporters wishing to visit Cuba for business purposes, such as making

contacts with Cuban buyers or signing transactions, do not qualify for a general license.

Instead, they must obtain a specific license from OFAC. The regulations provide that travel

must be directly incident to the marketing, sales negotiation, accompanied delivery, or

servicing of eligible exports. Applications of individuals whose qualifications have no

apparent connection to these licensing criteria are denied.17 Licenses are typically issued to

cover an unlimited number of trips in a 12-month period. However, licenses must be

amended if any criteria of the original application change.
 18 Sullivan, “Cuba: U.S. Restrictions on Travel and Remittances,” 4.

 19 Federal Register, March 24, 2003 (68 F.R. 14141-14148).

 20 Federal Register, June 16, 2004 (69 F.R. 33768-33775).

 21 This restriction was implemented by an adjustment to guidelines issued by U.S. Department of the

Treasury, Office of Foreign Assets Control. U.S. Department of the Treasury, Office of Foreign Assets

Control, Comprehensive Guidelines, 40.

 22 U.S. House of Representatives, Committee on Agriculture, Review of U.S. Agricultural Trade With

Cuba, Hearing transcript, 8.

 23 Industry officials, interview with Commission staff, April and May, 2007.

 24 Ibid.

 25 OFAC does not review all financial transactions involving agricultural exports to Cuba to assure that

they are within compliance, but relies on U.S. financial institutions to assure that transactions are in

compliance with the regulations. On March 16, 2005, the Director of OFAC, Robert Wagner, testified before

3-5

The criteria for travel license eligibility has changed over time. Current license categories

were established under the TSRA. Since then, the trend has been toward greater

restrictiveness. For example, in 2001, President Bush directed OFAC to prevent “excessive

travel,”18 and in 2003, people-to-people educational travel unrelated to coursework was

prohibited.19 In 2004, OFAC reversed a brief relaxation of family travel that had permitted

Cuban-Americans to visit a relative within three degrees of relationship (e.g., greatgrandparents or second cousins).20 Furthermore, family visits were limited to one trip in a

three-year period. In addition, the 2004 measures prohibited “fully-hosted travel,” which had

allowed access for visitors whose expenses were fully funded by Cuban nationals and also

eliminated educational exchanges sponsored by secondary schools. Finally, in 2005, another

restriction limited religious organizations from sending more than 25 members to Cuba once

per year.21

Regulation of Export Payments and Financing

In addition to regulating travel to Cuba, OFAC is the primary agency regulating all financial

transactions with Cuba. Prior to the TSRA, the CACR provided a general license for

financial transactions and other activities related to shipping in connection with exports to

Cuba authorized by BIS.22 This meant that an exporter receiving a BIS license to export to

Cuba was not required to seek additional authorization from OFAC to undertake financial

transactions and other regulated activities such as shipping. After the TSRA was

implemented, a general license for financial transactions continued to be required in order

to export agricultural products to Cuba authorized under AGR. However, the TSRA added

additional conditions, most notably that payments by Cubans for agricultural products must

be in the form of cash in advance, or financed through a third-country bank.

Prior to late 2004, exporters believed that transactions conducted in the form of “cashagainst-documents” fulfilled the “cash-in-advance” condition.23 Cash-against-documents

transactions do not specifically link the physical shipment of the goods from the port at

which they are loaded to the completion of the financial transaction. Shipments would leave

the departure port while the financial transaction was in process. Exporters maintained

ownership of the product because the documents that transferred ownership were not

exchanged. Upon receipt of payment, the seller would authorize the transfer of the

documents necessary to transfer ownership of the product to the Cuban buyer. The available

information suggests that virtually all transactions prior to late 2004 took place under these

arrangements.24

In late 2004, completion of some financial transactions involving exports of BIS-authorized

agricultural products were blocked because U.S. financial institutions questioned whether

cash-against-document transactions were, in fact, permitted under the cash in advance rule.25
the U.S. House of Representatives Committee on Agriculture that OFAC believes that an article describing

trade with Cuba and associated financial transactions triggered the inquiries by financial institutions. U.S.

House of Representatives, Committee on Agriculture, Review of U.S. Agricultural Trade With Cuba, Hearing

transcript, 8. Some U.S. exporters believe that the holds were prompted by OFAC. Industry representative,

interview with Commission staff, April 3, 2007. OFAC documentation states that U.S. financial institutions

initiated the holds to request guidance on whether sellers were required to receive payment before the goods

were shipped from the United States or before the goods were delivered to Alimport. If payment were not

received before goods were shipped, U.S. exports could have been, in effect, extending credit to Alimport.

OFAC officials, interview with Commission staff, May 2, 2007; U.S. Department of Commerce, Bureau of

Export Administration, "Exports to Cuba, Final Rule," and OFAC officials, interview with Commission staff,

May 2, 2007.

 26 OFAC officials, interview with Commission staff, May 2, 2007; and U.S. Department of Commerce,

Bureau of Export Administration, "Exports to Cuba, Final Rule." Federal Register, Vol. 70, No. 37, 9225.

 27 U.S. Department of Commerce, Bureau of Export Administration. "Exports to Cuba, Final Rule."

Federal Register, Vol. 70, No. 37, 9225.

 28 Radelat, “In Wake of Tough New OFAC Regulations, Food Exporters Turn to Letters of Credit.”

 29 Ibid.

 30 It has been reported that 5 of 173 companies that attended an Alimport negotiating conference in early

2004 accounted for 80 percent of the sales at that conference. Luxner, 1; Kavulich, Commission Hearing

Transcript, 20; and industry officials interviewed by Commission staff, April 2007.

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While researching the issue, OFAC allowed trade to continue. However, after completion

of its research, OFAC officials announced a clarification of the term “cash-in-advance” in

a February 2005 Federal Register notice.26 Under this clarification, payment of cash in

advance was defined to mean that the seller must receive payment before the vessels carrying

the goods leave the port at which they were loaded. Moreover, transactions similar to cashagainst-documents transactions would not be permitted after March 24, 2005.27 After this

clarification, Alimport chose not to pay in cash. Instead it arranged payments in the form of

letters of credit through third-country banks, a process that had always been permitted under

OFAC regulations.28 Reportedly, Alimport refused to pay cash in advance because by doing

so, the exported products would become Cuban property while still in the U.S. port, and thus

would be vulnerable to confiscation by Cuban exiles in the United States with legal claims

against the Cuban government.29

Effects of Travel License Regulations on Agricultural

Sales to Cuba

The effect of OFAC travel regulations as they pertain to sales-related visits is most likely

small for large exporters (e.g., multinational commodity trading companies) that account for

the vast majority of agricultural exports to Cuba. Such exporters indicated in interviews for

this report that they have few, if any, problems in initially receiving or renewing travel

licenses.30 Furthermore, these large exporters noted that neither the current licensing

processes nor current travel restrictions hinder their ability to compete for sales to Cuba.

Nonetheless, these exporters view the ability to travel to Cuba as critical to completing sales

contracts because Cuban purchasing officials are routinely denied visas to travel to the

United States.
 31 Industry officials, interview with Commission staff, April and May, 2007.

 32 Ibid.

 33 Johnson, Commission Hearing Transcript, 209.

 34 OFAC officials, interview with Commission staff, May 2, 2007.

 35 Ibid.

 36 Industry officials, interview with Commission staff, April/May, 2007.

 37 Johnson, Commission Hearing Transcript, 170-171.

 38 Jones, Commission Hearing Transcript, 78.

 39 OFAC officials, interview with Commission staff, May 2, 2007; and Bonilla, Commission Hearing

Transcript, 49.

3-7

While large multinational commodity trading companies appear to be able to successfully

navigate OFAC travel regulations, other exporters painted a different picture. For example,

exporters with small sales volumes or those attempting to sell agricultural products to Cuba

for the first time reported that they found the travel licensing process to be cumbersome,

non-transparent, and time consuming. Some industry officials indicated that documentation

from all previous travel to Cuba had to be presented in order to have a license renewed,

something not previously required.31 Others indicated that their applications were initially

rejected, but after some minor adjustments that did not seem substantiative, the applications

were approved.32 Testifying before the Commission, North Dakota Commissioner of

Agriculture, Roger Johnson, characterized the process as “terribly, terribly time consuming,

inefficient, and frustrating.”33

Data from OFAC indicate the the number of travel licenses issued for U.S. agricultural sales

to Cuba fell from 201 to 137 during 2004-06 (table 3.1). OFAC officials told the

Commission that license applications for travel to Cuba were most often denied because

applications were incomplete.34 They said that applications are typically deemed incomplete

because the justification for travel of one or more persons identified on the application (or

on an amendment to a previous application or license) does not meet the criteria for being

directly incident to the marketing, sales negotiation, accompanied delivery, or servicing of

agricultural exports.35 Further, they reported that applications are also often denied because

of missing or incomplete certification that (i) the proposed transactions constitute a full-time

schedule for all of the participants and (ii) that the travel cannot be completed in a shorter

period of time. While several industry officials indicated that their applications for travel

licenses were initially denied or took more time to process than expected, none indicated that

they were ultimately unable to obtain travel licenses.36

Many industry officials who were interviewed stated that relaxing restrictions on visits to the

United States by Cuban official would facilitate trade. They indicated that Cuban purchasing

officials are either denied visas altogether, or are issued visas that are so restrictive (e.g., in

the number of days the visa is valid) as to render the proposed travel unworkable. For

example, testimony at the Commission’s public hearing revealed that sales of seed and table

potatoes from North Dakota have been precluded by the inability of Cuban phytosanitary

experts to obtain permission to travel in the United States.37 Another witness testified that

many industry officials declined to testify at the Commission hearing out of fear that their

applications to renew travel licenses would be subject to additional scrutiny or rejected by

OFAC.38

Another area of concern reported by industry representatives is related to travel by U.S. port

officials. OFAC reportedly limits travel licenses for U.S. port officials to one 7-day visit per

12-month period.39 When issued, travel licenses for U.S. port officials exclude certain related

port representatives, such as port commissioners, port consultants, or port tenants and
 40 Bonilla, Commission Hearing Transcript, 50.

 41 OFAC officials, interview with Commission staff, May 2, 2007.

 42 Ibid.

 43 Grains and cereals are primarily shipped in bulk. 

3-8

shippers, from traveling on the port authority’s license.40 OFAC officials indicated that

without a letter from a licensed exporter indicating that port officials are conducting business

directly incident to the marketing, sales negotiation, delivery, or servicing of eligible exports,

the port’s application does not meet the criteria as outlined.41 However, OFAC officials

suggested that, if accompanied by a letter designating the port authority as agents of an

exporter, port officials’ applications might be considered differently.42

Effects of Payment and Financing Terms on Agricultural

Product Sales to Cuba

Based on interviews and testimony provided to the Commission for this investigation, there

is a consensus among exporters and industry officials that eliminating cash-againstdocuments transactions as an eligible method of payment has had a substantial negative

effect on the sale of agricultural products to Cuba. There is also consensus that CACR

requirements that transactions be processed through third-country financial institutions also

contributes to increased costs of agricultural product sales to Cuba. These difficulties can be

illustrated through a hypothetical scenario that compares the differences in structure between

a dollar-denominated cash-against-documents transaction for a bulk shipment of wheat43

exported from the United States to the Dominican Republic, and a dollar-denominated letterof-credit transaction for a bulk shipment of wheat to Cuba.

In the case of the Dominican Republic, the Dominican buyer and U.S. seller agree on a

shipping date and port (figure 3.1). The buyer arranges for the appropriate-sized vessel to

be at the selected U.S. port and loaded within an agreed time frame. The seller arranges for

transportation of the product to the appropriate U.S. port facility. Assuming that the vessel

and the product both arrive within the contracted time frame, the ship is loaded and leaves

port to travel to the Dominican Republic. To complete the transaction, the Dominican buyer

instructs its bank to transmit the appropriate funds to the seller’s bank, paying appropriate

transfer fees and exchange fees if the buyer’s accounts are not denominated in U.S. dollars.

When the seller’s bank confirms that the funds have been received into the buyer’s account,

shipping and certification documents are exchanged, and ownership of the product is

transferred to the buyer, regardless of the location of the vessel.

In a similar transaction involving wheat exports to Cuba (figure 3.2), Alimport and the U.S.

seller agree on a shipping date and a port. However, the selection of shipping date and port

would not necessarily be based on economic criteria; rather, a port would be chosen where

an existing shipping company has been appropriately licensed to handle shipments to Cuba.

Alimport would arrange for the appropriate sized vessel to be at the selected U.S. port within

an agreed time frame. The seller would arrange for transport of the product to the selected

U.S. port facility.
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Figure 3.1 Hypothetical comparison: U.S. export transaction with Dominican buyer

The Dominican buyer and the U.S. exporter agree on a shipping 

date and the port of departure

The Dominican buyer contracts for shipping services 

from the U.S. port to the Dominican port and 

arranges for transmission of funds to exporter’s 

bank account 

The U.S. exporter contracts for shipment of 

product from the exporter’s facilities to the 

agreed port facility and arranges for the export 

documentation necessary to transfer ownership

Wheat is 

transported from 

the growing 

region... 

to the 

agreed 

on port 

facility 

The Dominican buyer arranges for 

transfer of funds to the U.S. exporter’s 

bank converting foreign exchange to U.S. 

dollars if necessary 

When the ship arrives, wheat is 

loaded and the ship leaves the 

U.S. port 

The U.S. exporter’s bank 

deposits funds into 

the U.S. exporter’s account 

and then authorizes... 

the export documents to be 

transferred, which 

transfers ownership of the 

product to the Dominican 

buyer
3-10

Figure 3.2 U.S. export transaction with Cuba

Alimport and U.S. exporter agree on shipping 

date and port of departure 

Alimport contracts for shipping services 

from U.S. port to Cuban port and arranges 

for a letter of credit issued by a European 

bank 

The U.S. exporter contracts for shipment of 

product from the exporter’s facilities to the 

agreed port facility and arranges for export 

documentation necessary to transfer 

ownership 

Letter of 

Credit 

Wheat is 

transported from

the growing 

region... 

... to 

the 

agreed 

port 

facility 

The Cuban 

Central Bank 

approves and 

transfers funds

A European Bank 

converts Cuban 

foreign exchange to 

Euros and issues 

the letter of credit 

(in Euros) 

 Dollars are 

 transmitted to the 

 exporter’s U.S. 

 bank 

Euros are converted 

 to dollars 

When the 

exporter’s bank 

confirms that the 

dollars have been 

received... 

... wheat on the ship leaves 

the U.S. port for the Cuban 

port 
 44 In this case, a letter of credit authorizes the U.S. seller to draw funds from an account held by a foreign

bank. In the case of U.S.-Cuba trade, this most often involves a European bank dealing primarily in Euros.

 45 U.S. industry representative, interview by Commission staff, June 16, 2007.

 46 Roger Johnson, North Dakota Agricultural Commissioner, post-hearing written submission to the

Commission, May 7, 2007.

 47 “Because the CACR involves a foreign affairs function, the provisions of the Executive Order 12866

and the Administrative Procedure Act (5 U.S.C. 553) (the “APA”) requiring notice of proposed rulemaking,

opportunity for public participation, and delay in effective date are inapplicable. Because no notice of

proposed rulemaking is required for this rule, the Regulatory Flexibility Act (5 U.S.C. 601-612) does not

apply.” Department of Treasury, Office of Foreign Assets Control, Federal Register Vol. 70, No. 37, 9225.

 48 Martin, Commission Hearing Transcript, 72.

 49 Industry officials, interviews with Commission staff, April 17, 2007; Alimport official, interview with

Commission staff, Havana, Cuba, June 12, 2007.

3-11

During this time, Alimport must also arrange for a Euro-denominated letter of credit with a

foreign bank.44 Alimport must first obtain approval from the Cuban Central Bank to transfer

sufficient funds to cover the letter of credit to an account in the foreign bank. If Alimport has

an insufficient supply of Euros to complete the transaction, it must pay exchange fees to

convert U.S. dollars to Euros, as well as a fee for the letter of credit ranging from 1/8 to 1/4

of one percent of the value of the letter of credit (up to $2,500 per $1 million of value).45 The

letter of credit is irrevocable: the foreign bank releases the funds to the U.S. exporter upon

presentation of an invoice indicating that the product is loaded and ready for shipment. The

Euros are then exchanged into dollars for transfer to the account of the U.S. exporter in a

U.S. bank. The product is physically exported once the U.S. exporter’s bank confirms receipt

of the released funds. If the letter of credit is not available by the agreed time frame for

loading and shipping, Alimport is responsible for demurrage charges ranging from $10,000

to $15,000 per day depending on the size of the vessel. Meanwhile, the U.S. exporter could

incur additional storage charges because the product remained in U.S. port storage facilities

longer than anticipated.

The CACR requirement that all financial transactions flow through third-country banks can

also increase transaction costs, especially for small- and medium-sized exporters who do not

have established commercial relationships with the appropriate foreign banks. Delayed

delivery of letters of credit appears to have an even larger effect on small- and medium-sized

exporters whose shipments are less than a full vessel load. Because each discrete shipment

on a vessel is required to have a confirmed letter of credit in place before the vessel leaves

port, the delay of any single letter of credit delays all shipments on the same vessel. Delays

can range from one to ten days, in some cases increasing total shipping costs by $20,000 to

$40,000.46

As the above illustrations demonstrate, payment and financing terms for agricultural sales

to Cuba can significantly increase transaction costs, which reduce the competitiveness of

U.S. agricultural product sales to Cuba. Furthermore, as stated in OFAC’s February 2005

clarification notice, CACR requirements can be altered without a notice of proposed

rulemaking, without the opportunity for public participation, and without any delay in the

effective date.47 This contributes to uncertainty for Alimport purchase managers and can

result in U.S. suppliers being viewed as unreliable. The clarification of the definition of cash

in advance in 2005 also cut across preexisting contracts and caused U.S. exporters to violate

the terms of those contracts.48 Breaches of contracts reportedly added to the climate of

commercial uncertainty faced by Alimport purchase managers and further eroded the

perceived reliability of U.S. exporters.49 Alimport may have responsed to this uncertainty
 50 Industry officials, interviews with Commission staff, April 2007.

 51 National Association of Wheat Growers and U.S. Wheat Associates, written submission to the

Commission, May 8, 2007.

 52 Ibid.

 53 Kavulich Commission, Hearing Transcript, 27. Industry officials, interviews with Commission staff,

April and May 2007.

 54 Reportedly, Cuba defaulted on repayment of French wheat in late 1999 or 2000. The British

government reportedly terminated its export guarantee program it had extended to Cuba after high rates of

default by the Cuban government in 2002. William Messina, Commission Hearing Transcript, 97.

 55 Commodity check-off programs collect funds for the establishment and operation of promotion

programs regarding an agricultural commodity that includes a combination of promotion, research, industry

information, or consumer information activities. These programs are funded by mandatory assessments on

producers or processors, and are designed to maintain or expand markets and uses for the commodity.

Becker, “Federal Farm Promotion (“Check-Off”) Programs.” The Market Access Program (MAP), formerly

the Market Promotion Program, uses funds from the USDA’s Commodity Credit Corporation (CCC) to help

U.S. producers, exporters, private companies, and other trade organizations finance promotional activities for

U.S. agricultural products. The MAP encourages the development, maintenance, and expansion of

commercial export markets for agricultural commodities. Activities financed include consumer promotions,

market research, technical assistance, and trade servicing. USDA, “Market Access Program.”

 56 Industry officials, interviews with Commission staff, April and May, 2007.

 57 Johnson, Commission Hearing Transcript, 180.

 58 Foreign Agricultural Service officials are posted to many U.S. embassies overseas. These officials are

an important source of market intelligence for U.S. firms exporting to those countries.

3-12

and the perception of unreliability by diversifying its import suppliers, despite certain

competitive factors favoring U.S. suppliers, such as price, product quality, and proximity.50

In effect, CACR regulations do not permit the extension of credit to the Cuban government

by U.S. financial institutions or firms. Opinions on the effect of the prohibition on the

extension of normal commercial credit terms by U.S. firms on agriculture sales to Cuba are

mixed. Many industry officials advocate normalizing commercial relations with Cuba,

including the extension of normal commercial credit to agricultural export sales. For

example, the U.S. wheat industry noted that the ability to extend normal commercial credit

terms on U.S. sales to Cuba would benefit U.S. wheat sales.51 The wheat industry also stated

that the largest single factor affecting potential U.S. wheat exports to Cuba was the

administrative burden on Alimport related to the clarification of payment in advance.52 By

contrast, some exporters and industry officials stated that lifting the ban on U.S. firms

extending commercial credit terms for U.S. agricultural sales to Cuba could have a negative

effect.53 With the current ban in place, exporters are not put in the position of having to deny

credit to Alimport during sales contract negotiations.54

Effects of Other Factors on U.S. Agricultural Sales to Cuba

Many agricultural industry associations rely on federal farm promotion programs, so-called

check-off funds, and U.S. Department of Agriculture (USDA) Market Access Program funds

for international market research and promotion activities.55 Several industry officials

indicated that their ability to support their industry’s efforts to expand agricultural sales to

Cuba is limited because they are prohibited from using funds from these sources to support

activities eligible under CACR, such as marketing activities, sales negotiations, and servicing

exports to Cuba.56 As noted by North Dakota’s Commissioner of Agriculture, having each

State support its own agricultural sales delegations to Cuba causes overlapping and duplicate

expenditures.57 He stated that support of these efforts by USDA’s Foreign Agricultural

Service would be much more efficient.58
 59 Cuba does not recognize dual citizenship, and according to Cuban law, any citizen who left Cuba after

1970 is considered to be solely a Cuban citizen. Robyn, Dorothy, et al., The Impact on the U.S. Economy of

Lifting Restrictions on Travel to Cuba, 264.

 60 According to the 2005 American Community Survey of the U.S. Census Bureau, there are 1.46 million

Cuban-Americans. The second largest community of Cubans living outside of Cuba resides in Venezuela,

and in the late 1990s numbered only approximately 50,000. Ackerman, Holly. “Different Diasporas: Cubans

in Venezuela, 1959-98.”

 61 Cuban Ministry of Tourism official, interview by Commission staff, Havana, Cuba, June 13, 2007.

 62 Cuban Ministry of External Relations official, interview by Commission staff, Havana, Cuba, June 13,

2007.

 63 Robyn, Dorothy, et al., The Impact on the U.S. Economy of Lifting Restrictions on Travel to Cuba, 264.

 64 Freedom to Travel Campaign, interview by Commission staff, Washington, DC, April 4, 2007.

 65 Robyn, Dorothy, et al., The Impact on the U.S. Economy of Lifting Restrictions on Travel to Cuba, 264.

 66 Robyn, Dorothy, et al., The Impact on the U.S. Economy of Lifting Restrictions on Travel to Cuba,

2002.

3-13

Effects of Travel Restrictions on U.S. Travel to Cuba

Growth in Cuba’s tourism sector will likely increase Cuban demand for food imports. An

increasingly vibrant tourism industry in Cuba will not only require more and better quality

food for foreign visitors, but will likely continue to increase demand for food by Cuban

citizens that work in tourism and related services. The resulting overall growth in Cuban

GDP would provide additional hard currency to the Cuban government permitting increased

imports, including those from the United States. To assess the extent to which lifting U.S.

tourist travel restrictions would affect U.S. travel to Cuba, the Commission examined current

and likely future travel by U.S. citizens to Cuba absent restrictions.

Precise numbers of total U.S. citizens traveling to Cuba are not available from either Cuban

or U.S. sources. The Cuban government requires Cuban emigres returning to Cuba to do so

using a Cuban passport, and thus these visitors are recorded as returning Cuban citizens,

rather than visitors from their current country of residence.59 Consequently, CubanAmericans, who represent the majority of ethnic Cubans living outside Cuba, are not

reported as visitors from the United States.60 Using the Cuban government’s methodology,

whereby only “non-Cuban born” U.S. residents are counted, arrivals to Cuba from the United

States were 37,233 in 2005. In 2006, Cuba reported 34,000 non-Cuban-born visitors from

the United States.61 These numbers represented about half of the number in 2000, likely

owing to the tightening of OFAC licensing restrictions on travel to Cuba in both 2004 and

2005.62

U.S. government data on travel licenses for Cuban-Americans to visit family in Cuba are

only available from 2004 to 2006 (see table 3.1), and the short time series precludes analysis

of trends. Moreover, such data cannot provide an accurate account of the actual number of

licensed persons that chose to travel to Cuba because multiple individuals may travel on

certain types of licenses. Furthermore, even with such data, estimating the precise number

is complicated by the high level of illegal travel by U.S. residents to Cuba who travel to

Cuba each year without OFAC licenses.63 Estimates of such unauthorized visitors exceed

120,000 per year.64 Such travelers transit through third countries en route to Cuba from the

United States.65

Although no complete data exist on Cuban-American visits and total U.S. visitors to Cuba,

several estimates have been made. In 2002, Robyn et al. estimated that 120,000 CubanAmericans traveled to Cuba in 2000.66 Sanders and Long estimated that about
 67 Sanders, Ed, and Patrick Long, “Economic Benefits to the United States from Lifting the Ban on Travel

to Cuba.”

 68 Robyn et al. And Sanders and Long’s estimates of travel by Cuban-Americans to Cuba in 2000 and

2001 of 120,000 and 124,000, respectively, are substantially higher than the number of OFAC licenses

granted for Cuban-Americans to visit family during 2004-06 (19,766; 25,304; and 40,308). The decline is

indicative of the tightening of travel restrictions for Cuban-Americans in 2004.

 69 Spadoni, Paolo, Effectiveness of Economic Sanctions in the Context of Globalization and Transnational

Linkages: The Case of Cuba, 153.

 70 Such “other Caribbean arrivals” represented between 6 and 9 percent of total non-resident visitor

arrivals to Cuba from 2000 through 2005.

3-14

176,000 American citizens visited Cuba in 2001.67 About 124,000 of these were CubanAmericans visiting family, 30,000 were other categories of legal visitors and 22,000 were

illegal visitors.68 Spadoni provided a time series of such estimates from 1990 to 2003 and

estimated 123,400 “non-Cuban born” Cuban-Americans visited Cuba in 2000, a number

similar to that of Robyn et al.69

Commission estimates of U.S. travel to Cuba from 2000 through 2005 are provided in

table 3.2. Visitors from the United States were estimated at 171,000 in 2005, accounting for

about 7 percent of all tourists, a share similar to Spain, Venezuela, and Italy. This estimate

is based on data reported by the Cuban Government to the United Nations World Tourism

Organization (UNWTO), applying a method used by Spadoni. The UNWTO reports a

significant share of annual non-resident visitor arrivals to Cuba as “other Caribbean

arrivals.”70 Many of these arrivals represent visits to Cuba of Cubans living abroad. In fact,

Spadoni estimates that approximately 90 percent of such “other Caribbean arrivals” represent

Cuban born Cuban-Americans traveling to Cuba. Commission estimates track Spadoni’s

methodology, and also add visits by “non-Cuban born” U.S. residents as described above.

Table 3.2 Cuban tourist arrivals from the World and the United States, 2000–05 

Country 2000 2001 2002 2003 2004 2005

1,000 visitors

World 1,774 1,775 1,686 1,906 2049 2,319

United States 200 204 219 236 163 171

Source: Commission estimate based on data from United Nations World Tourism Organization, Yearbook of

Tourism Statistics, and Spadoni, Effectiveness of Economic Sanctions in the Context of Globalization and

Transnational Linkages.

Note: Figures include total visitors, including both overnight visitors and day visitors that may arrive on cruise ships.

Effects on U.S. Travel of Lifting U.S. Travel Restrictions

to Cuba

Commission Estimates

The Commission estimates that the number of overnight U.S. visitors to Cuba would increase

from 171,000 in 2005 (the base year) to between 554,000 and 1.127 million visitors per year

in the short run if restrictions on travel were abolished (table 3.3). Tourist expenditures by

all tourists in Cuba would increase by between 13 and 33 percent. The increased number of

visits by U.S. residents raises the price of tourism services in Cuba, and fewer non-U.S.
 71 Although tourism in the Dominican Republic is more developed than in Cuba, the Dominican Republic

has a range of Caribbean tourism services and offers somewhat similar vacation opportunities as Cuba.

3-15

foreigners would visit Cuba. In light of this potential displacement, the Commission’s

estimate of the net additional tourists that would visit Cuba in the first year of unrestricted

travel ranges from 226,000 to 538,000 and is consistent with other empirical travel studies.

Table 3.3 Short term estimates of additional tourists with lifting of the travel restrictions

Tourists Base

Additional U.S. tourist and

displaced ROW tourist Final

1,000 tourists

Dominican-Republic-like demand shift:a

U.S. tourists 171 956 1,127

Non-U.S.-origin tourists 2,090 -418 1,672

Total 2,261 538 2,799

Ad valorem approach:a

U.S. tourists 171 383 554

Non-U.S.-origin tourists 2,090 -158 1,932

Total 2,261 226 2,487

Source: Cuban Oficina Nacional de Estadistica, Anuario Estadistico de Cuba, 2005, chap. 13 and Commission

estimates.

Note: Totals may not add due to rounding. Tourist figures include overnight visitors only and exclude day visitors.

a

See appendix F for details of method.

These estimates were generated by a comparative static model that is similar to partial

equilibrium trade models used in other Commission studies (see appendix F for a more

detailed explanation). Market equilibrium is determined by the point where the sum of the

U.S. demand and the non-U.S. demand for tourism services intersects the Cuban supply of

tourism services. When the travel ban is eliminated, the demand by U.S. residents shifts

outward, which generates the aforementioned changes. A demand shift based on U.S.

citizens traveling to Cuba in proportions similar to Canadians led to a high, or long-run,

estimate. Short-run demand shifts are based on similar numbers of U.S. citizens traveling to

Cuba as currently travel to the Dominican Republic71 or the removal of an ad valorem

tariff that represents the travel restriction. The short-run estimates also incorporate capacity
 72 Hotel capacity is the largest constraint on the potential increase in net foreign visitor arrivals to Cuba in

the absence of U.S. sanctions. In 2005, hotel occupancy was approximately 64 percent, a level typical in the

Caribbean where there is significant seasonal variation in tourist demand. However, even during Cuba’s high

tourist season, from December to April, additional capacity currently exists. In 2006, monthly arrivals in

March were highest, totaling 260,446. If the same number of travelers were received in the other “high

season” months, total arrivals would have risen by 114,491. In fact, if arrivals in each month of 2006 were

equal to March levels, Cuba would have received an additional 904,785 arrivals in that year.

 73 The re-opening of air transportation between the United States and Cuba is likely to be a complex

process. Although an air transportation agreement between the United States and Cuba, signed in 1953 and

amended in 1957, is still in effect, this agreement limits the number of cities serviced and would likely have

to be renegotiated. Air Transport Association, interview by Commission staff, Washington, DC, April 11,

2007. According to a U.S. Department of Transportation official, negotiation of a new air transportation

agreement would likely take several months, with air travel limited to extra-bilateral charters during that

time. U.S. Department of Transportation official, phone interview by Commission staff, April 20, 2007. A

second barrier to the resumption of air transport between the United States and Cuba is Cuba’s

noncompliance with International Civil Aviation Organization (ICAO) safety standards. The U.S. Federal

Aviation Administration (FAA) does not allow aircraft from nations that do not meet ICAO standards to fly

to the United States. If Cuban airlines were prohibited from servicing the United States, Cuba would be

unlikely to provide U.S. airlines unlimited access to its own airports. U.S. Department of Transportation

official, phone interview by Commission staff, April 20, 2007.

 74 Estimates include both long and short-run projections. All estimates are stated in terms of expected

gross U.S. overnight visitor arrivals.

 75 Reuters, “Cuba Not Ready, But Expecting U.S. Tourists.” The Cuban Ministry of Tourism indicated in

June 2007 that within two to three years after lifting the travel ban that about one million American tourists

could visit Cuba annually, and that these additional tourists would not displace any of the 2.2 million foreign

tourists visiting Cuba in 2006. Ministry officials indicated a Cuban hotel room occupancy rate of 60-61

percent in 2006, with considerable unused hotels. The Cuban government expects most American tourists to

visit Cuba during May to August when most Canadian and European tourists do not travel there. American

tourists are likely to stay on average four to five days, in contrast to the 12-14 day visit of most Europeans.

Cuban Ministry of Tourism official, interview with Commission staff, Havana, Cuba, June 13, 2007. 

 76 Jones, Commission Hearing Transcript.

 77 Kavulich, Commission Hearing Transcript, 17, 21-22.

 78 U.S. International Trade Commission, The Economic Impact of U.S. Sanctions With Respect to Cuba, 4-

21.

3-16

constraints based on the availability of hotel space and the limited air transportation

agreements between the United States and Cuba.72 73

Published Studies and Statements

Forecasts of the number of additional U.S. residents that would travel to Cuba in the absence

of sanctions vary; estimates range from 100,000 to over 3 million.74 Cuba’s deputy minister

of tourism, Oscar Gonzalez, estimated that 1 million Americans would visit Cuba in the first

year of unrestricted travel.75 The U.S.-Cuba Trade Association has made a comparable

estimate.76 However, the U.S.-Cuba Trade and Economic Council has a far lower estimate,

asserting that Cuban tourism infrastructure is incapable of accommodating large numbers of

additional visitors.77

Empirical studies also provide a wide range of estimates. In 2001, the Commission,

assuming the continuation of restrictive business and social policies, which had resulted in

the underdevelopment of Cuba’s tourism infrastructure, estimated that between 100,000 to

350,000 additional U.S. visitors would visit Cuba in the first year of unrestricted travel.78

Sanders and Long, in a scenario assuming unrestricted travel to Cuba by U.S. residents on

U.S. airlines and a continued prohibition of U.S. investment in Cuba, estimated 950,000 U.S.
 79 Sanders and Long provide estimates of anticipated travel under three different scenarios, the estimate

above is from one of these three scenarios. Sanders, Ed, and Patrick Long, Economic Benefits to the United

States from Lifting the Ban on Travel to Cuba.

 80 Robyn, Dorothy, et al., “The Impact on the U.S. Economy of Lifting Restrictions on Travel to Cuba,”

267.

 81 Paul Ruden, Senior Vice President, American Society of Travel Agents, written submission to the

Commission. 

 82 Sanders, Ed, and Patrick Long. Economic Benefits to the United States from Lifting the Ban on Travel

to Cuba.

 83 Ibid.

 84 Sanders, Ed, and Patrick Long, Economic Benefits to the United States from Lifting the Ban on Travel

to Cuba.

 85 Robyn, Dorothy, et al, “The Impact on the U.S. Economy of Lifting Restrictions on Travel to Cuba,”

272.

 86 Paul Ruden, Senior Vice President, American Society of Travel Agents, written submission to the

Commission. 

3-17

visitors would arrive in Cuba during the first year and 2.7 million by the fifth year.79 Robyn

et al., modeling arrivals by Cuban-Americans and Americans of non-Cuban descent

separately, estimated 3.2 million U.S. visitor arrivals after several years of market

adjustment.80 Finally, the American Society of Travel Agents (ASTA), adopting the

methodology of Robyn et al., forecasted 1.3 million overnight visits by Americans during

the third year of unrestricted travel.81

Because U.S. tourists would likely displace tourists in Cuba from other foreign countries,

at least in the short-run, the tourist number of most interest to the Commission’s current

analysis is the net number of additional tourists that would visit Cuba absent the travel

restrictions. Sanders and Long estimated the net increase in foreign resident arrivals to Cuba

in the first year of unrestricted travel would be between 300,000 and 475,000 visitors.82 The

lower estimate assumes that there would be no direct air travel between the United States and

Cuba, while the latter assumes that direct air travel would be possible.83

Several of the above studies also estimated the number of U.S. cruise and ferry passengers

that would visit Cuba in the absence of sanctions. Such estimates range from 50,000 to

481,000. Sanders and Long estimated day visitors arriving by cruise ship and ferry would

total 50,000 in the first year of unrestricted travel and 450,000 by the fifth year.84 Robyn et

al. forecasted 397,000 U.S. cruise passengers would visit Cuba per year after several years

of market adjustment.85 Finally, the ASTA forecasted that 481,000 U.S. cruise visitors would

visit Cuba by the third year of unrestricted travel.86
3-18

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Lourdes Gil. Revisiting the Cuban Diaspora: The 'Idea of a Nation' Displaced. Albany: SUNY

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Congressional Research Service, Washington, DC. April 17, 2007.

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connection with Inv. No. 332-489, U.S. Agricultural Sales to Cuba: Certain Economic Effects of

U.S. Restrictions, May 1, 2007. Hearing transcript.

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6001 et seq.

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§§ 6021 et seq.

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Johnson Roger. North Dakota Commissioner of Agriculture. Testimony before the U.S. International

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Certain Economic Effects of U.S. Restrictions, May 1, 2007. Hearing transcript.

Jones, Kirby. U.S.-Cuba Trade Association. Testimony before the U.S. International Trade Commission

in connection with Inv. No. 332-489, U.S. Agricultural Sales to Cuba: Certain Economic Effects

of U.S. Restrictions, May 1, 2007. Hearing transcript.

Kavulich, John. U.S. Cuba Trade and Economic Council. Testimony before the U.S. International Trade

Commission in connection with Inv. No. 332-489, U.S. Agricultural Sales to Cuba: Certain

Economic Effects of U.S. Restrictions, May 1, 2007. Hearing transcript.

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Exporters.” CubaNews, May 2004.

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Economic Effects of U.S. Restrictions, May 1, 2007. Hearing transcript.
3-19

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Radelat, Ana. “In Wake of Tough New OFAC Regulations, Food Exporters Turn to Letters of Credit.”

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Restrictions on Travel to Cuba.” Paper presented at the Twelfth Annual Meeting of the

Association for the Study of the Cuban Economy, Coral Gables, Florida, August 1-3, 2002.

http://lanic.utexas.edu/project/asce/pdfs/volume12/robyn.pdf (accessed April 14, 2007).

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to Cuba.” The Cuba Policy Foundation. Washington, DC. June 2002.

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April 13, 2007).

Spadoni, Paolo. “Effectiveness of Economic Sanctions in the Context of Globalization and Transnational

Linkages: The Case of Cuba.” PhD diss., University of Florida, 2005.

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[title IX], October 18, 2000, 22 U.S.C. § § 7201 et seq.

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U.S. Department of Agriculture. “Market Access Program.”

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Enhancement Act.” http://www.bis.doc.gov/Licensing/TSRAnExpEnhanceActFactSheet

(accessed May 29, 2007).

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——. Federal Register 64, No. 92. May 1999.

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All U.S. Exports Require One?” http://www.export.gov/regulation/exp_001498.asp (accessed

May 29, 2007).
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U.S. Department of Treasury. Office of Foreign Assets Control. “31 CRF Part 515, Cuban Assets Control

Regulations,” Federal Register 70, No. 37 (February 2005), 9225.

——. “Comprehensive Guidelines for License Applications to Engage in Travel-Related Transactions

Involving Cuba,” September 30, 2004.

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——. “Cuba, What You Need To Know About the U.S. Embargo.”

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USITC Publication 3398. Washington, DC: USITC, February 2001.
 1

 A discussion of the model and its assumptions is found in appendix G and review of the relevant

economic literature is found in appendix H.

4-1

CHAPTER 4

Estimate of U.S. Sales of Agricultural, Fish,

and Forestry Products to Cuba with

Restrictions Affecting Agricultural

Exports and Travel Removed

Introduction

Commission estimates of the effects of lifting financing and travel restrictions on U.S. sales

of agricultural, fish, and forest products to Cuba are presented for 16 individual commodity

sectors. As requested by the Committee, three scenarios are presented—lifting financing

restrictions (scenario 1), lifting travel restrictions (scenario 2), and jointly lifting financing

and travel restrictions (scenario 3). The results were derived from a partial equilibrium model

of U.S.-Cuba trade developed for this study,1

 as well as extensive discussions with industry

officials, including individuals who regularly conduct trade with Cuba. In addition to a

quantitative assessment, background on Cuba’s domestic industry, U.S. exports and

competitiveness, and the importance of Cuba to the United States as an export market is

provided for each sector.

There are many unknowns and real-world features of Cuba’s food purchasing decisions that

are not easily captured in any analytical framework. The Commission employed a

comparative-static approach in which the results show what U.S.-Cuba trade might have

looked like in 2006 if the financing or travel restrictions had not been in place. The results

should be treated as being strongly indicative of the direction and likely magnitude of effects

of lifting financing and travel restrictions, but should not be interpreted as forecasts of future

trade absent the restrictions.

The quantitative assessments of likely effects of removing financing and travel restrictions

are influenced by a set of key assumptions. First, Cuba’s political and economic structure

remains in place. Second, there is no expansion in Cuba’s tourist infrastructure, including

the number of hotel rooms available. Given these assumptions, the results should be

interpreted as short-term, lower-bound effects for each of the scenarios. In the long term, the

benefits to U.S. agricultural exporters of lifting the financing and travel restrictions likely

would be significantly larger than the ones presented in this report.

Third, the framework the Commission used to estimate likely impacts is based on standard

trade theory which makes certain assumptions about the behavior of decisionmakers (e.g.,

profit maximization by producers, welfare maximization by consumers). Outcomes in this

framework are determined by economic factors alone. For example, it captures how Cuban

agricultural imports are impacted by changes in purchase prices and direct tourists’ food
4-2

expenditures, all of which are important factors in Alimport’s decision-making process. But

there are other important economic factors influencing Cuba’s food purchasing decisions that

the framework does not capture, such as export credits offered by U.S. competitors and

foreign exchange constraints that might limit the amount of expenditures on food imports.

The framework also does not capture the effect that a lower price of one commodity might

allow additional purchases of other products (including the same commodity but of higher

quality). Non-economic factors, such as political considerations, affecting decisionmaking

are not captured in this framework. Finally, the estimates for scenarios 2 and 3 do not capture

the possible indirect effect of relaxed travel restrictions on the total level of family

remittances, some of which would likely be spent on additional food purchases.

Fourth, certain key factors affecting the results cannot be known with certainty, so the

estimated effects are provided in the form of ranges. Staff interviews and analysis suggest

that the cost of financing restrictions ranges between 2.5 and 10.0 percent of the purchase

price depending on the commodity sector. There is also uncertainty about how many

additional tourists would visit Cuba if travel restrictions were lifted. So, in scenario 2 results

are again provided as ranges, assuming additional tourists of 250,000 to 750,000. Results in

scenario 3 range on the basis of combined lower and upper bound assumptions from

scenarios 1 and 2.

As noted in chapter 3, the Commission initially estimated the number of net additional

tourists traveling to Cuba if the U.S. travel restrictions were removed at 226,000 to 538,000.

This analysis shows that increased numbers of U.S. tourists would displace tourists from

third-countries and thereby limit the net increase in total tourist visits. Subsequent

information, primarily as a result of Commission staff travel to Cuba, indicates that fewer

third-country tourists may be displaced than initially presumed because Americans travel

throughout the year and particularly during the summer when fewer Canadians and

Europeans visit Cuba, which would lessen the competition for hotel space. Thus, for the

economic analysis and sensitivity analysis presented in chapter 4, the Commission used a

wider range, 250,000 to 750,000, for the number of net additional tourist visits. This range

takes into account the uncertainty in how tourists may respond to elimination of the

restrictions and encompasses the magnitude of the most likely response by tourists. It is

important to note that the model results are not particularly sensitive to the number of

tourists’ visits to Cuba because Cuba's domestic market is much larger than its tourist market

and its own citizens, not tourists, consume most U.S. agricultural exports. Thus, as noted,

lifting the restrictions on U.S. tourist visits to Cuba has a limited impact on U.S. exports to

Cuba.

Some general observations can be made about the results that apply to most of the individual

sectors. First, removing all financing restrictions (scenario 1) leads to an increase in the

quantity of Cuban imports from the world, but to a decline in the total value of those imports.

In this case, import values should be thought of as the total cost to Alimport of acquiring

agricultural products from overseas. When the financing restrictions are lifted, the unit cost

of purchasing imports declines. In addition, because Cuba’s demand for agricultural imports

is inelastic with respect to price, the cost savings are greater than the additional expenditures

of acquiring increased quantities. Thus lifting the financing restrictions results in an overall

reduction in the amount spent on imports, but does not imply lower returns or prices to U.S.

exporters. Furthermore, the U.S. share of Cuba’s total imports of agricultural products would

increase. Second, lifting the travel ban has a modest impact on Cuba’s agricultural imports

of most commodities, especially those imported heavily from the United States. This is

because, as mentioned in chapter 2, the United States supplies a large proportion of Cuba’s
 2

 Summing the individual partial equilibrium results for each commodity to obtain the total effect of

removing restrictions on all agriculture, fish, and forest products is not supported by economic theory. The

individual partial equilibrium results assume that prices in other markets remain constant and do not consider

cross-commodity substitution. For example, if the price of pork is lowered, consumers may increase their

purchases of pork and reduce purchases of other products, for example, fish. If the prices of pork, fish, and

other commodities are simultaneously reduced, the substitution of pork for fish will not occur to the same

extent. Also, lower prices for a group of commodities will, in effect, increase the consumer's budget, which

could be used to purchase any commodity.

 3

 This includes lifting restrictions on the travel of Cubans to the United States. This change is a key factor

in the estimated increases in U.S. exports for certain products, such as potatoes, fruits, vegetables, and beef.

These restrictions limit the ability of Cuban buyers to inspect U.S. facilities which is a significant barrier to

sales in these sectors. Information obtained by the Commission from USDA Animal and Plant Health

Inspection Service officials indicates that Cuban SPS regimes are generally consistent with international

norms and would not likely pose significant barriers to most U.S. exports. 

4-3

bulk commodities (e.g., unmilled wheat and rice, animal feed, soybeans) and these products

are mostly destined for consumption by the local population, not tourists. Third, the results

for scenario 3 (joint removal of trade and travel restrictions) are not the sum of results from

scenario 1 and 2. This is because in scenario 3 there is a drop in the unit cost of Cuban

purchases at the same time that demand is increasing from additional tourists.

Agricultural, Fish, and Forest Products

In 2006, the United States exported about $337 million of agricultural products to Cuba, and

accounted for about one-third of Cuban agricultural imports from all countries. Because of

data limitations and the non-market aspects of Cuban purchasing decisions, the overall effect

of removing restrictions on U.S. exports to Cuba is difficult to estimate. However, based on

interviews with Cuban purchasing officials, sector modeling results, and discussions with

U.S. industry officials, the Commission estimates that the U.S. share of Cuban agricultural,

fish, and forest product imports would rise to between one-half and two-thirds.2

If financing restrictions on U.S. exports to Cuba were lifted (scenario 1), the total value of

Cuban agricultural imports from the United States would increase significantly in fifteen of

the sixteen commodity groups examined, the exception being soybeans (table 4.1).3

 The

largest increase in value of U.S. exports to Cuba will likely occur for other food products,

including fresh potatoes, fruits, and vegetables (a rise of $34 million to $65 million annually

above the 2006 U.S. export level), followed by milk powder ($14 million to $41 million);

rice ($14 million to $43 million); processed foods ($18 million to $34 million); wheat

($17 million to $33 million); dry beans ($ 9 million to $22 million); and poultry, beef, and

pork (each category increasing by about $6 million to $12 million). In percentage terms, the

greatest gains will occur for U.S. products exported to Cuba in very low volumes in 2006,

particularly fish products (with virtually no exports to Cuba in 2006); processed food (more

than an 18-fold increase); other food products including fresh potatoes (more than a 7-fold

increase); beef (more than a 60-fold increase); and dairy products (more than a 3-fold

increase). No significant change in U.S. soybean exports to Cuba is expected because the

United States currently supplies nearly one hundred percent of Cuban imports.
4-4

Table 4.1 Estimated effects of removing U.S. financing restrictions on U.S. agricultural exports to Cuba

Commodity

Cuban imports from

the United States

U.S. share of

Cuban imports

Cuban imports from

the United States

U.S. share of

Cuban imports

With restrictions With restrictions Without restrictions Without restrictions

$ million Percent $ million Percent

Wheat 51 38 68 - 84 51 - 65

Rice 40 24 54 - 83 33 - 53

Corn 43 71 46 - 48 78 - 85

Animal feed 42 76 43 - 45 79 - 85

Soybeans 32 99 30 - 31 99 - 100

Fats and oils 22 57 24 - 27 63 - 74

Dry beans 20 25 29 - 42 37 - 56

Poultry 45 65 51 - 56 77 - 85

Beef 0.1 0.2 6 - 10 13 - 25

Pork 14 42 20 - 24 60 - 74

Milk powder 13 10 27 - 54 22 - 45

Other dairy 0.1 0.3 5 - 10 27 - 53

Processed foods 1 2 19 - 35 29 - 55

Fish products 0 0 8 - 15 30 - 56

Forest products 10 17 16 - 27 28 - 49

Other food products 5 3 39 - 70 29 - 53

Source: Global Trade Atlas and Commission estimates.

Note: Summing the individual partial equilibrium results for each commodity to obtain the total effect of removing

restrictions is not supported by economic theory. The individual partial equilibrium results assume that prices in other

markets remain constant and do not consider cross-commodity substitution.

With regard to lifting U.S. restrictions on travel by U.S. citizens to Cuba (scenario 2), the

gains to U.S. exports to Cuba are concentrated in processed foods (a gain of $3 million to

$8 million above the level of 2006 U.S. exports); fish products ($1 million to $4 million);

other food products ($1 million to $3 million); and poultry, beef, and pork (each about

$1 million to $3 million) (table 4.2). These food imports are sold mainly to restaurants and

tourist hotels in Cuba. U.S. agricultural exports of most bulk products, including wheat, rice,

corn, animal feed, soybeans, dry beans, forest products, and milk powder will experience

virtually no gains owing to increased visits to Cuba by U.S. tourists, since only a negligible

fraction of these Cuban imports are consumed in the tourist sector.

If U.S. restrictions on both financing and travel were lifted (scenario 3), Cuban agricultural

imports from the United States would increase significantly in fifteen of the sixteen

commodity groups examined, the exception being soybeans which are supplied almost

exclusively by U.S. sources (table 4.3). The largest increase in value of U.S. exports to Cuba

will likely occur for other food products, including fresh potatoes, fruits, and vegetables (a

rise of $37 million to $68 million annually); processed foods ($26 million to $41 million);

wheat ($17 million to $34 million); milk powder ($15 million to $42 million); rice ($14

million to $44 million); dry beans ($9 million to $22 million); and poultry, beef, and pork

(each category increasing by about $9 million to $13 million). In percentage terms, the

greatest gains will occur for U.S. fish products exports (with virtually no exports to Cuba in

2006); processed food exports (more than a 26-fold increase); other food products including

fresh potatoes (more than a 7-fold increase); beef (more than a 90-fold increase); and dairy

products (more than a 3-fold increase).
4-5

Table 4.2 Estimated effects of removing U.S. travel restrictions on U.S. agricultural exports to Cuba

Commodity

Cuban imports from

the United States

U.S. share of

Cuban imports

Cuban imports from

the United States

U.S. share of

Cuban imports

With restrictions With restrictions Without restrictions Without restrictions

$ million Percent $ million Percent

Wheat 51 38 52 - 53 38

Rice 40 24 40 24

Corn 43 71 43 - 44 71

Animal feed 42 76 43 76

Soybeans 32 99 32 - 33 99 - 100

Fats and oils 22 57 23 - 24 57

Dry beans 20 25 20 25

Poultry 45 65 46-48 65

Beef 0.1 0.2 1- 3 3 - 7

Pork 14 42 15-16 42

Milk powder 13 10 13 10

Other dairy 0.1 0.3 0.3 - 1 2 - 4

Processed foods 1 2 4 - 9 5 - 11

Fish products 0 0 1 - 4 5 - 11

Forest products 10 17 10 17

Other food products 5 3 6 - 8 4 - 5

Source: Global Trade Atlas and Commission estimates.

Note: Summing the individual partial equilibrium results for each commodity to obtain the total effect of removing

restrictions is not supported by economic theory. The individual partial equilibrium results assume that prices in

other markets remain constant and do not consider cross-commodity substitution.

Table 4.3 Estimated effects of removing all U.S. financing and travel restrictions on U.S. agricultural exports to

Cuba

Commodity

Cuban imports from

the United States

U.S. share of

Cuban imports

Cuban imports from

the United States

U.S. share of

Cuban imports

With restrictions With restrictions Without restrictions Without restrictions

$ million Percent $ million Percent

Wheat 51 38 68 - 85 51 - 65

Rice 40 24 54 - 84 33 - 52

Corn 43 71 47 - 49 78 - 85

Animal feed 42 76 44 - 46 79 - 85

Soybeans 32 99 31 - 32 99 - 100

Fats and oils 22 57 25 - 28 63 - 73

Dry beans 20 25 29 - 42 37 - 55

Poultry 45 65 54 - 58 76 - 84

Beef 0.1 0.2 9 - 13 19 - 29

Pork 14 42 22 - 25 58 - 70

Milk powder 13 10 28 - 55 22 - 44

Other dairy 0.1 0.3 6 - 11 29 - 52

Processed foods 1 2 27 - 42 33 - 53

Fish products 0 0 12 - 18 34 - 54

Forest products 10 17 16 - 27 28 - 48

Other food products 5 3 42 - 73 30 - 52

Source: Global Trade Atlas and Commission estimates.

Note: Summing the individual partial equilibrium results for each commodity to obtain the total effect of removing

restrictions is not supported by economic theory. The individual partial equilibrium results assume that prices in other

markets remain constant and do not consider cross-commodity substitution.
 4

 Mattson and Koo, An Overview of Cuban Agriculture and Prospects for Future Trade with the United

States, 15.

 5

 U.S. Wheat Associates and National Association of Wheat Growers, written statement to the

Commission, May 8, 2007.

 6

 Cuban government officials, interview by Commission staff, Havana, Cuba, June 13, 2007.

 7

 U.S. Department of Agriculture, Office of the Chief Economist, World Agricultural Supply and Demand

Estimates, March 9, 2007, 11and 19.

 8

 U.S. Department of Agriculture, Economic Research Service, U.S. Agricultural Trade Update,

February 15, 2007, 3.

 9

 U.S. wheat shipped from Gulf ports has a freight advantage of about $10 to $20 per metric ton over EU

and Canadian wheat. The price in crop year 2006/07 for U.S. wheat (No. 2, Hard Red Winter, ordinary

protein, f.o.b. Gulf ports) was about $204 per metric ton, according to data of the U.S. Department of

Agriculture; this implies a 5-percent advantage over EU and Canadian wheat (assuming that the f.o.b. EU

wheat price is roughly equivalent to the U.S. export price).

4-6

Wheat

Cuba does not grow wheat commercially and all domestic consumption is imported. Current

per capita wheat consumption is about 100 kilograms per capita, down from 130 kilograms

per capita in the late 1980s.4

 Wheat imports in the form of wheat flour have diminished over

the past decade because Cuba is able to mill the majority of imported wheat into flour. Cuba

has developed a large and relatively modern wheat milling industry, with state-of-the-art

European milling equipment. Through a foreign joint venture, Cuba has doubled its milling

capacity for bread wheat flour and added four new durum wheat mills (for pasta) in

2003–06.5

 The emergence of the Cuban milling industry favors U.S. wheat over thirdcountry wheat flour, for use in peso-market bakeries that sell French-bread loaves of

200–400 grams that are considered a staple in the Cuban diet.6

The United States is the world’s leading exporter of wheat.7 In 2006, U.S. wheat exports

amounted to $4.2 billion (53 percent of domestic production) with Japan, Nigeria, Mexico,

and the Philippines being the top export markets.8

 U.S. competitiveness in world wheat

markets is based on several factors, including low-cost production, highly efficient

transportation and handling, and government export assistance programs. Cuba was the

sixteenth largest market for U.S. wheat in 2006 with exports of $54 million (with

$51.4 million of unmilled wheat and $2.6 million of flour). This accounted for 40 percent

of Cuba’s total wheat and flour imports of $136 million (table 4.4). Major U.S. competitors

for the Cuban wheat and flour market in 2006 were the EU (42 percent) and Canada

(13 percent) (tables E.1 and E.2).

Lifting the financing restrictions (scenario 1) would lower the cost to Cuba of purchasing

wheat from the United States. This is estimated to increase U.S. wheat sales by $16.1 million

to $32.3 million above the $51.4 million import level in 2006 (table 4.4). Increased imports

from the United States would displace third country suppliers, particularly the EU and

Canada, and the U.S. share of Cuban wheat imports is estimated to increase from 38 percent

to between 51 percent and 65 percent. U.S. wheat has a lower freight cost than Canadian

wheat shipped via the St. Lawrence seaway, and European wheat shipped from

Mediterranean ports.9

 Removing travel restrictions (scenario 2) to Cuba would increase total

U.S. wheat exports by between $400,000 and $1.1 million above the 2006 level. The impact

is small because most imported wheat is consumed by the local population, not by tourists.

Eliminating both financing and travel restrictions (scenario 3) is estimated to increase U.S.

wheat exports by between $16.7 million and $33.3 million.
 10 U.S. Department of Agriculture, Foreign Agricultural Service, PS&D.

 11 CubaNews, “Cuba to triple rice production by 2015,” and Bill J. Reed, United States Rice Federation,

statement to the Commission, May 1, 2007.

 12 CubaNews, “Cuba to triple rice production by 2015,” 13.

 13 United States Rice Federation, post-hearing statement to the Commission, May 8, 2007.

 14 U.S. Department of Agriculture, Foreign Agricultural Service, Caribbean Basin Market Development

Reports How Cubans Survive 2003, 4.

4-7

Table 4.4 Wheat: Effect of removing financing and travel restrictions on Cuban imports 

Scenario With restriction Without restriction Changea

Lifting financing restrictions (scenario 1):

Cuban imports for Cubans ($ million) 134.3 127.0 - 131.9 -7.3 - -2.4

Cuban imports for Tourists ($ million) 1.4 1.3 -0.1 - 0

Total Cuban imports ($ million) 135.6 128.3 - 133.2 -2.4 - -7.3

Total Cuban imports (1,000 MT) 671.0 676.0 - 686.1 5.0 - 15.1

U.S. share of Cuban imports (%) 37.9 50.7 - 65.3 12.8 - 27.4

Cuban imports from the United States ($ million) 51.4 67.5 - 83.7 16.1 - 32.3

Lifting travel restrictions (scenario 2):

Cuban imports for Cubans ($ million) 134.3 134.9 - 136.2 0.6 - 1.9

Cuban imports for Tourists ($ million) 1.4 1.7 - 2.4 0.3 - 1.0

Total Cuban imports ($ million) 135.6 136.6 - 138.5 1.0 - 2.9

Total Cuban imports (1,000 MT) 671.0 675.8 - 685.5 4.8 - 14.5

U.S. share of Cuban imports (%) 37.9 37.9 n/a

Cuban imports from the United States ($ million) 51.4 51.8 - 52.5 0.4 - 1.1

Lifting financing and travel restrictions (scenario 3):

Cuban imports for Cubans ($ million) 134.3 128.8 - 132.5 -5.5 - -1.7

Cuban imports for Tourists ($ million) 1.4 2.2 - 2.4 0.9 - 1.1

Total Cuban imports ($ million) 135.6 131.0 - 134.9 -4.6 - -0.7

Total Cuban imports (1,000 MT) 671.0 684.8 - 700.6 13.8 - 29.6

U.S. share of Cuban imports (%) 37.9 50.5 - 64.7 12.6 - 26.8

Cuban imports from the United States ($ million) 51.4 68.2 - 84.8 16.7 - 33.3

Source: Commission estimates.

Note: Estimates of the effects of lifting financing restrictions are based on a price wedge (additional cost) of 2.5 -

7.5 percent. Estimates of the effects of lifting travel restrictions are based on tourist increases of 250,000 - 750,000.

a

The changes in the value of imports reflect the total changes in the cost to Alimport. The removal of restrictions

entails reductions in the costs of importing. When these cost reductions are greater than the increase in the value of

additional imports the change is negative. This does not imply a decline in the returns or prices received by U.S.

exporters.

Rice

Cuban rice production averaged 400,000 mt annually during crop years 2000/01 to 2005/06,

accounting for about 40 percent of its domestic consumption.10 The sector was devastated

by recent hurricanes and by a severe drought in 2006 that reduced production to 200,000

mt.11 In Cuba, rice production occurs on nine large state farms, and on many smaller

producer cooperatives and small farms.12 In 2002, Cuba’s rice milling industry consisted of

27 rice mills and 5 parboiled rice plants, with a capacity of about 400,000 mt.13 Because

these mills are in poor condition, Cuba prefers to import milled rice for immediate

consumption rather than paddy (unmilled) rice that requires domestic milling. The Cuban

population is a significant consumer of rice, which is rationed at about 3 kilograms per

month, and subsidized at a price of Cuban Pesos (CUP) 0.55 per kilogram in 2003.14
 15 Mattson and Koo, An Overview of Cuban Agriculture and Prospects for Future Trade with the United

States, 15.

 16 U.S. Department of Agriculture, Economic Research Service, Rice Situation and Outlook Yearbook, 59

and U.S. Department of Agriculture, Economic Research Service, Rice Outlook, 11.

 17 U.S. Department of Agriculture, Economic Research Service, Rice Outlook, 9.

 18 Ibid., 13.

 19 According to official data of U.S. Department of Commerce.

 20 Global Trade Atlas database.

 21 CubaNews, “Cuba to triple rice production by 2015.”

 22 During Commission staff visits to a ration store and a peso free agricultural market in Havana, only

Vietnamese and Chinese rice were being sold. Commission field visit, Havana, Cuba, June 12-14, 2007.

 23 U.S. rice shipped from Houston has a significant ocean freight advantage over Brazilian, Thai or

Vietnamese rice since it is shipped over shorter distances and in smaller vessels capable of docking in many

Cuban ports. CubaNews. “U.S. rice producers see huge potential for sales to Cuba.”

 24 CubaNews, “U.S. rice producers see huge potential for sales to Cuba.”

 25 CubaNews, “Cuba to triple rice production by 2015,” 13 and EIU, Cuba Country Profile 2007, 43-44.

 26 For the Commission’s econometric model for rice, the estimated value of the 500,000 metric tons of

Vietnamese rice ($115 million) was added to the $51.2 million reported to the Global Trade Atlas (GTA) by

all other leading rice exporters to Cuba in 2006. Vietnam does not report its exports to the GTA. The fob

price of the Vietnamese rice was estimated at $230 per metric ton. Source: Cuba News, December 2006, 13;

and USDA, ERS, Rice Outlook, June 12, 2007, table 6.

4-8

During 2000–06, per capita consumption of milled rice averaged about 57 kilograms, four

times the level in the United States.15

The United States is the world’s fourth leading exporter of rice.16 During crop years 2000/01

to 2005/06, U.S. rice exports—both paddy and fully milled rice—amounted to slightly over

$1 billion annually, with Mexico, Japan, Iraq, and Haiti the four leading U.S. markets. In

2006, about 52 percent of U.S. rice production was exported.17 Cuba was the eighth largest

U.S. market for rice in 2006, when exports were $39.5 million, or 24 percent of Cuba’s total

imports of rice (table 4.5).18 In 2006, about 80 percent of U.S. rice exports to Cuba were

milled rice with the remainder mostly paddy rice.19 In that year, Cuba also imported rice

from Thailand (15 percent) and Brazil (most of the remainder).20 These official import data

for rice do not include the 500,000 mt of rice imported from Vietnam through preferential

financing.21 It is also likely that concessional Chinese rice exports are not reported in the

trade data.22

The U.S. rice industry is located mainly in Arkansas and the Gulf States, has substantial

available stocks and unutilized milling capacity, and enjoys low shipping cost to the nearby

Cuban market. U.S. rice is of superior quality and can be shipped promptly (about 24-hour

sailing time from New Orleans ports) in smaller ocean vessels.23 These factors make U.S.

exporters highly competitive with third-country suppliers (such as Thailand, China, Vietnam,

and Brazil) in the Cuban market. However, these countries are able to offer lower prices than

the United States. Reportedly, in 2003 poor quality rice imported from Vietnam was sold at

one U.S. cent per pound in Cuba (versus 15 cents or more per pound for U.S. rice).24

Vietnamese and Chinese rice exports are also provided under long-term credit and

government-to-government purchasing arrangements.25

Lifting the financing restrictions (scenario 1) would have a significant positive effect on U.S.

rice exports to Cuba—U.S. exports would increase by between $14 million and $43 million,

and the U.S. share of Cuban rice imports would increase to between 33 percent and

53 percent (table 4.5).26 Removal of travel restrictions to Cuba (scenario 2) would increase

total U.S. rice exports by between $300,000 and $900,000 above the 2006 level of U.S.

exports to Cuba. The effect is small reflecting the fact that most rice imports are consumed
 27 Cuban egg production rose 36 percent from 67,000 metric tons in 2001 to 91,000 metric tons in 2005,

and Cuban pork production rose 28 percent from 76,000 metric tons to 97,000 metric tons, respectively.

United Nations, Food and Agriculture Organization, FAOStat.

 28 United Nations, Food and Agriculture Organization, FAOStat.

 29 U.S. Department of State official, U.S. Interests Section, Havana, e-mail message to Commission staff,

May 31, 2007.

4-9

Table 4.5 Rice: Effect of removing financing and travel restrictions on Cuban imports 

Scenario With restriction Without restriction Changea

Lifting financing restrictions (scenario 1):

Cuban imports for Cubans ($ million) 163.0 154.1 - 160.1 -8.8 - -2.9

Cuban imports for Tourists ($ million) 3.3 31. - 3.3 -0.2 - -0.1

Total Cuban imports ($ million)a 166.3 157.3 - 163.4 -9.0 - -2.9

Total Cuban imports (1,000 MT)a 698.0 703.2 - 713.7 5.2 - 15.7

U.S. share of Cuban imports (%) 23.8 32.8 - 52.7 9.0 - 28.9

Cuban imports from the United States ($ million) 39.5 53.6 - 82.9 14.1 - 43.4

Lifting travel restrictions (scenario 2):

Cuban imports for Cubans ($ million) 163.0 163.7 - 165.1 0.7 - 2.1

Cuban imports for Tourists ($ million) 3.3 3.8 - 4.8 0.5 - 1.5

Total Cuban imports ($ million)b 166.3 167.5 - 169.9 1.2 - 3.6

Total Cuban imports (1,000 MT)b 698.0 703.1 - 713.2 5.1 - 15.2

U.S. share of Cuban imports (%) 23.8 23.8 0.0

Cuban imports from the United States ($ million) 39.5 39.8 - 40.4 0.3 - 0.9

Lifting financing and travel restrictions (scenario 3):

Cuban imports for Cubans ($ million) 163.0 156.1 - 160.8 -6.9 - -2.2

Cuban imports for Tourists ($ million) 3.3 4.6 - 4.9 1.2 - 1.6

Total Cuban imports ($ million)b 166.3 160.6 - 165.7 -5.7 - -0.6

Total Cuban imports (1,000 MT)b 698.0 713.2 - 728.9 15.2 - 30.9

U.S. share of Cuban imports (%) 23.8 32.7 - 52.1 8.9 - 28.3

Cuban imports from the United States ($ million) 39.5 54.2 - 83.7 14.6 - 44.2

Source: Commission estimates.

Note: Estimates of the effects of lifting financing restrictions are based on a price wedge (additional cost) of 2.5 -

7.5 percent. Estimates of the effects of lifting travel restrictions are based on tourist increases of 250,000 - 750,000.

a

The changes in the value of imports reflect the total changes in the cost to Alimport. The removal of restrictions

entails reductions in the costs of importing. When these cost reductions are greater than the increase in the value of

additional imports the change is negative. This does not imply a decline in the returns or prices received by U.S.

exporters. b

Import value and volume include 500,000 mt of Vietnamese rice valued at $115 million which is not reported in

Global Trade Atlas data.

by Cubans as opposed to tourists. Eliminating both the trade and travel restrictions (scenario

3) would likely increase U.S. rice exports by $15 million to $44 million above the 2006

level.

Corn

Recent growth in Cuba’s livestock industry (particularly eggs and pork) has spurred the

demand for feedgrains, especially corn.27 Between crop years 2001/02 and 2005/06, Cuba’s

corn consumption grew 12 percent annually from 590,000 metric tons (mt) to 877,000 mt.

Domestic production only rose 5 percent annually from 300,000 mt to 362,000 mt;28 growth

was slowed by drought and other adverse weather conditions.29 The share of domestic

consumption supplied by imports has increased reaching 57 percent in 2006.
 30 U.S. Department of Agriculture, Economic Research Service, U.S. Agricultural Trade Update, 2-3.

 31 Global Trade Atlas database.

 32 CubaNews, “USCTEC: Food exports to Cuba fell 11 percent to $350 million in 2005.”

 33 Mostly soybean meal under HS 23 and HS 1208.

 34 Ross, “Cuba: U.S. Agribusiness Export Prospects under Three Scenarios,” 375.

 35 U.S. Department of Agriculture, Foreign Agricultural Service, Production, Supply and Distribution

Online.

 36 U.S. Census Bureau, Annual Survey of Manufactures.

 37 Richard Ostlie, American Soybean Association, written statement to the Commission, April 27, 2007, 2.

4-10

The United States is the world’s leading producer and exporter of corn, with annual U.S.

production averaging about $25 billion (at the farm level) during 2000/01 to 2006/07. U.S.

exports of corn amounted to $7 billion in 2006, with Japan, Mexico, and Korea being the

major destination markets.30 U.S. international competitiveness is based on low production

cost and a highly efficient marketing and distribution system. In 2006, Cuba imported

$60 million of corn from all countries of which the United States supplied 71 percent, or

$43 million (table 4.6), making Cuba the 23rd largest foreign market for U.S. corn. Argentina

supplied nearly all of the remaining 29 percent of Cuban imports in 2006.31 In early 2006,

the U.S. Grains Council signed a commercial agreement with Cuba to supply 700,000 mt of

U.S. corn, and 140,000 mt of distillers dried grain with solubles, a corn by-product used in

animal feed.32

The overall effects of removing financing and travel restrictions on U.S. corn exports to

Cuba are small. Removing financing restrictions (scenario 1) is likely to increase the value

of Cuban purchases of U.S. corn by between $3.4 million and $5.3 million above the

$43 million of U.S. exports to Cuba in 2006 (table 4.6). Removal of travel restrictions to

Cuba (scenario 2) would increase total U.S. corn exports by $300,000 to $1.0 million above

the 2006 level of U.S. exports to Cuba. Elimination of both the trade and travel restrictions

(scenario 3) is likely to increase U.S. corn exports by $4.0 million to $6.2 million above the

2006 level of U.S. exports. The total increase in U.S. exports is limited by the fact that the

United States already accounts for a significant share of Cuban imports.

Animal Feed33

The Cuban feed industry has been characterized by aging, inefficient feed mills and

declining production. Cuba produces its own soybean meal by processing (crushing)

imported soybeans. In crop year 2001/02, Cuba opened its first soybean processing plant,

with a processing capacity of 160,000 mt of soybeans annually.34 Cuban soybean meal

production increased from 13,000 mt in 2000/01 to 74,000 mt 2005/06 (down from 124,000

mt in 2004/05). With the recent expansion of Cuba’s poultry and hog industries, soybean

meal consumption grew by 58 percent over this time period. In 2006, Cuba’s domestic

soybean meal consumption was 260,000 mt of which 71 percent was supplied from

imports.35

Most U.S. animal feed exports to Cuba consist of soybean meal. Total U.S. shipments of

soybean meal amounted to $11 billion in 2005,36 while exports were $1.7 billion in 2006,

with Mexico, Canada, the Philippines, and Japan being the four leading markets. The

international competitiveness of the U.S. soybean meal industry is based on many factors,

including abundant availability of soybeans and advanced processing technology that

provides high-quality products at a low cost.37 However, Argentina and Brazil have

overtaken the United States as the world’s leading soybean meal exporters owing to their

rapidly rising production of soybeans and their expanding domestic crushing industries.
 38 Global Trade Atlas database.

 39 For example in 2005/06, Argentine soybean meal (fob Buenos Aires), priced at $158 per metric ton,

undersold U.S. soybean meal by 18 percent (U.S. soybean meal, fob Decatur at, $192 per ton). U.S.

Department of Agriculture, Foreign Agricultural Service, Oilseeds: World Markets and Trade, table 30.

4-11

Table 4.6 Corn: Effect of removing financing and travel restrictions on Cuban imports

Scenario With restriction Without restriction Changea

Lifting financing restrictions (scenario 1):

Cuban imports for Cubans ($ million) 59.2 56.0 - 58.1 -3.2 - -1.0

Cuban imports for Tourists ($ million) 0.6 0.6 0

Total Cuban imports ($ million) 59.8 56.6 - 58.7 -3.2 - -1.1

Total Cuban imports (1,000 MT) 507.0 510.8 - 518.4 3.8 - 11.4

U.S. share of Cuban imports (%) 71.3 78.4 - 84.8 7.1 - 13.5

Cuban imports from the United States ($ million) 42.6 46.1 - 48.0 3.4 - 5.3

Lifting travel restrictions (scenario 2):

Cuban imports for Cubans ($ million) 59.2 59.5 - 60.0 0.3 - 0.8

Cuban imports for Tourists ($ million) 0.6 0.8 - 1.1 0.2 - 0.5

Total Cuban imports ($ million) 59.8 60.2 - 61.1 0.5 - 1.4

Total Cuban imports (1,000 MT) 507.0 510.8 - 518.5 3.8 - 11.5

U.S. share of Cuban imports (%) 71.3 71.3 0.0

Cuban imports from the United States ($ million) 42.6 42.9 - 43.6 0.3 - 1.0

Lifting financing and travel restrictions (scenario 3):

Cuban imports for Cubans ($ million) 59.2 56.8 - 58.4 -2.4 - -0.8

Cuban imports for Tourists ($ million) 0.6 1.0 - 1.1 0.4 - 0.5

Total Cuban imports ($ million) 59.8 57.8 - 59.6 -2.0 - -0.2

Total Cuban imports (1,000 MT) 507.0 518.0 - 529.9 11.0 - 22.9

U.S. share of Cuban imports (%) 71.3 78.3 - 84.5 7.0 - 13.2

Cuban imports from the United States ($ million) 42.6 46.6 - 48.9 4.0 - 6.2

Source: Commission estimates.

Note: Estimates of the effects of lifting financing restrictions are based on a price wedge (additional cost) of 2.5 -

7.5 percent. Estimates of the effects of lifting travel restrictions are based on tourist increases of 250,000 - 750,000.

a

The changes in the value of imports reflect the total changes in the cost to Alimport. The removal of restrictions

entails reductions in the costs of importing. When these cost reductions are greater than the increase in the value of

additional imports the change is negative. This does not imply a decline in the returns or prices received by U.S.

exporters.

In 2006, Cuba imported $56 million of soybean meal of which the United States supplied

$42 million (76 percent) (table 4.7), making Cuba the 11th largest foreign market for U.S.

soybean meal. Cuba’s other import suppliers were Mexico and Argentina, which together

accounted for 20 percent.38 Argentina was the world’s leading soybean meal exporter in

2006/07, and Argentine soybean meal generally undersells U.S. soybean meal in world

markets.39 However, shipping meal to Cuba from U.S. Gulf ports is less expensive and more

timely than from Argentina.

The effects of removing the financing and travel restrictions on U.S. soybean meal sales to

Cuba are modest. This is because the United States already enjoys a large share of Cuban

imports and because additional tourists would be expected to buy imported rather than

domestically produced meat products. Lifting financing restrictions (scenario 1) is likely to

increase the value of Cuban purchases of U.S. soybean meal by between $1 million and

$2.7 million above the $42 million of U.S. exports to Cuba in 2006 (table 4.7). Removal of

travel restrictions to Cuba (scenario 2) would increase total U.S. soybean meal exports by

between $300,000 and $1.0 million above the 2006 level of U.S. exports to Cuba. 
 40 Ross, “Cuba: U.S. Agribusiness Export Prospects under Three Scenarios,” 375.

 41 U.S. Department of Agriculture, Foreign Agricultural Service, Production, Supply and Distribution

Online. 

4-12

Table 4.7 Animal feed: Effect of removing financing and travel restrictions on Cuban imports 

Scenario With restriction Without restriction Changea

Lifting financing restrictions (scenario 1):

Cuban imports for Cubans ($ million) 55.4 52.4 - 54.4 -3.0 - -1.0

Cuban imports for Tourists ($ million) 0.6 0.5 0.0

Total Cuban imports ($ million) 56.0 52.9 - 55.0 -3.0 - -1.0

Total Cuban imports (1,000 MT) 291.5 293.7 - 298.1 2.2 - 6.6

U.S. share of Cuban imports (%) 75.6 78.8 - 85.1 3.2 - 9.5

Cuban imports from the United States ($ million) 42.3 43.3 - 45.0 1.0 - 2.7

Lifting travel restrictions (scenario 2):

Cuban imports for Cubans ($ million) 55.4 55.7 - 56.2 0.3 - 0.8

Cuban imports for Tourists ($ million) 0.6 0.7 - 1.1 0.2 - 0.5

Total Cuban imports ($ million) 56.0 56.4 - 57.3 0.4 - 1.3

Total Cuban imports (1,000 MT) 291.5 293.8 - 298.3 2.3 - 6.8

U.S. share of Cuban imports (%) 75.6 75.6 0.0

Cuban imports from the United States ($ million) 42.3 42.6 - 43.3 0.3 - 1.0

Lifting financing and travel restrictions (scenario 3):

Cuban imports for Cubans ($ million) 55.4 53.1 - 54.7 -2.3 - -0.7

Cuban imports for Tourists ($ million) 0.6 1.0 - 1.1 0.4 - 0.5

Total Cuban imports ($ million) 56.0 54.1 - 55.8 -1.8 - -0.2

Total Cuban imports (1,000 MT) 291.5 298.0 - 304.9 6.5 - 13.3

U.S. share of Cuban imports (%) 75.6 78.8 - 84.9 3.2 - 9.3

Cuban imports from the United States ($ million) 42.3 43.9 - 45.9 1.6 - 3.6

Source: Commission estimates.

Note: Estimates of the effects of lifting financing restrictions are based on a price wedge (additional cost) of 2.5 -

7.5 percent. Estimates of the effects of lifting travel restrictions are based on tourist increases of 250,000 - 750,000.

a

The changes in the value of imports reflect the total changes in the cost to Alimport. The removal of restrictions

entails reductions in the costs of importing. When these cost reductions are greater than the increase in the value of

additional imports the change is negative. This does not imply a decline in the returns or prices received by U.S.

exporters.

Elimination of both the trade and travel restrictions (scenario 3) is likely to increase U.S.

soybean meal exports by between $1.6 million and $3.6 million above the 2006 level of U.S.

exports. These estimates do not account for the possible impact on demand for animal feed

resulting from increased imports of meat products. An increase in imports of pork and

poultry could reduce Cuban production of these products, thereby reducing demand for

animal feed.

Soybeans

Cuba does not grow soybeans, but processes imported soybeans into soybean oil and

soybean meal. Cuba has one soybean processing plant that opened in 2001–02, with a

processing capacity of 160,000 mt annually.40 Cuban soybean consumption (crush) rose from

18,000 mt to 96,000 mt during 2000/01 to 2005/06.41
 42 U.S. Department of Agriculture, Office of the Chief Economist, World Agricultural Supply and

Demand Estimates, 15.

 43 Compiled from official statistics of the U.S. Department of Commerce.

 44 U.S. Department of Agriculture, Foreign Agricultural Service, Oilseeds and Products, table 7.

 45 Global Trade Atlas database.

 46 For example in 2005/06, the price of Brazilian soybeans (fob Rio Grande) of $228 per metric ton was

priced 4 percent below the U.S. soybean export price of $236 per ton (f.o.b. vessel, Gulf ports); U.S.

Department of Agriculture, Foreign Agricultural Service, Oilseeds, table 29 and U.S. Department of

Agriculture, Economic Research Service, Statistical Indicators.

 47 Products in this category are classified under HTS subheadings 1501 to 1506. Animal fats consist

mainly of beef fat (tallow) and pork fat (lard). Vegetable oils consist mainly of soybean oil, sunflower oil,

and cottonseed oil.

 48 U.S. Department of Agriculture, Foreign Agricultural Service, Caribbean Basin Market Development

Reports, 4.

 49 Ibid., Production, Supply and Distribution Online.

 50 Ross, “Cuba: U.S. Agribusiness Export Prospects under Three Scenarios,” 375.

4-13

U.S. production of soybeans averaged about $18 billion annually during crop year 2000/01

to 2005/06,42 of which about $6.5 billion were exported, with China, Mexico, Japan, the EU,

and Taiwan being the leading markets.43 The United States is the world’s leading soybean

exporter (40 percent of world exports in 2005/06), followed by Brazil (also 40 percent) and

Argentina (11 percent).44 In 2006, Cuba imported $32 million of soybeans, of which the

United States supplied all but about $100,000 (table 4.8).45 In 2006, Cuba was the 18th

largest foreign market for U.S. soybeans. U.S. soybean exporters compete mainly with

Argentina and Brazil. Brazilian soybeans are slightly less expensive than U.S. soybeans in

world markets,46 but shipping from U.S. Gulf ports to Cuba is less expensive and more

timely (about 24-hour sailing time from New Orleans ports) than from Brazilian or Argentine

ports to Caribbean ports.

Lifting the financing restrictions on U.S. sales to Cuba (scenario 1) likely will reduce slightly

the value of Cuban purchases of U.S. soybeans by $500,000 to $1.6 million below the

$32 million of U.S. exports to Cuba in 2006 (table 4.8). Removal of travel restrictions to

Cuba (scenario 2) would increase total U.S. soybean exports by between $300,000 and

$1.0 million above the 2006 level of U.S. exports to Cuba. Because the United States

supplied virtually all Cuban imports of soybeans in 2006, elimination of both the financing

and travel restrictions (scenario 3) is not likely to change U.S.-Cuba trade significantly,

increasing by $200,000 or decreasing by $700,000 from the 2006 import level. U.S.

soybeans would likely continue to supply nearly all Cuban imports. Because the United

States already supplies virtually all Cuban soybean imports, removal of the restrictions will

have essentially no impact on U.S. exports. In the short term, the GDP growth resulting from

increased tourism will not increase soybean demand significantly owing to limits on Cuban

processing capacity.

Fats and Oils47

Fats and oils consumption in Cuba is heavily subsidized and provided as a basic foodstuff

on the ration card at a quantity of 0.5 pounds per person per month.48 Cuban vegetable oil

production rose from 3,000 mt to 18,000 mt during crop year 2000/01 to 2005/06.49 Soybean

oil, the leading vegetable oil, is produced in Cuba from imported soybeans in a single

processing plant with a capacity of 160,000 mt of soybeans annually.50 Cuba refines or

repackages imported fats and oils for consumer use as either cooking oils or frying fat

(shortening) products.
 51 U.S. Census Bureau, Annual Survey of Manufactures.

 52 Compiled from official statistics of the U.S. Department of Commerce.

 53 U.S. Department of Agriculture, Foreign Agricultural Service, Oilseeds and Products, table 9.

 54 Global Trade Atlas database.

 55 For example in 2005/06, Argentine soybean oil (fob Buenos Aires), priced at $467 per metric ton,

undersold U.S. soybean oil by 9 percent ( U.S. crude soybean oil, fob Decatur at, $516 per ton). U.S.

Department of Agriculture, Foreign Agricultural Service, Oilseeds, table 31.

4-14

Table 4.8 Soybeans: Effect of removing financing and travel restrictions on Cuban imports

Scenario With restriction Without restriction Changea

Lifting financing restrictions (scenario 1):

Cuban imports for Cubans ($ million) 31.6 29.8 - 31.0 -1.7 - -0.6

Cuban imports for Tourists ($ million) 0.3 0.3 0.0

Total Cuban imports ($ million) 31.9 30.1 - 31.3 -1.7 - -0.6

Total Cuban imports (1,000 MT) 130.7 131.6 - 133.6 1.0 - 2.9

U.S. share of Cuban imports (%) 99.6 99.9 0.3

Cuban imports from the United States ($ million) 31.7 30.1 - 31.3 -1.6 - -0.5

Lifting travel restrictions (scenario 2):

Cuban imports for Cubans ($ million) 31.6 31.7 - 32.0 0.2 - 0.5

Cuban imports for Tourists ($ million) 0.3 0.5 - 0.8 0.2 - 0.5

Total Cuban imports ($ million) 31.9 32.2 - 32.8 0.3 - 1.0

Total Cuban imports (1,000 MT) 130.7 132.0 - 134.6 1.3 - 3.9

U.S. share of Cuban imports (%) 99.6 99.6 0.0

Cuban imports from the United States ($ million) 31.7 32.1 - 32.7 0.3 - 1.0

Lifting financing and travel restrictions (scenario 3):

Cuban imports for Cubans ($ million) 31.6 30.3 - 31.1 -1.3 - -0.4

Cuban imports for Tourists ($ million) 0.3 0.8 - 0.9 0.5

Total Cuban imports ($ million) 31.9 31.0 - 32.0 -0.8 - 0.1

Total Cuban imports (1,000 MT) 130.7 134.6 - 137.5 3.9 - 6.9

U.S. share of Cuban imports (%) 99.6 99.9 0.3

Cuban imports from the United States ($ million) 31.7 31.0 - 32.0 -0.7 - 0.2

Source: Commission estimates.

Note: Estimates of the effects of lifting financing restrictions are based on a price wedge (additional cost) of 2.5 -

7.5 percent. Estimates of the effects of lifting travel restrictions are based on tourist increases of 250,000 - 750,000.

a

The changes in the value of imports reflect the total changes in the cost to Alimport. The removal of restrictions

entails reductions in the costs of importing. When these cost reductions are greater than the increase in the value of

additional imports the change is negative. This does not imply a decline in the returns or prices received by U.S.

exporters.

U.S. shipments of all fats and oils products averaged about $9 billion annually during

2001–05,51 with soybean oil the leading product with shipments of about $5 billion. During

crop years 2001/02 to 2005/06, U.S. exports of soybean oil amounted to $367 million

annually with Canada, Mexico, China, and Korea the four leading markets.52 In 2006, U.S.

exports of soybean oil amounted to $360 million, placing the United States third among the

world’s leading soybean oil exporting countries, behind Argentina (57 percent) and Brazil

(25 percent).53 In 2006, Cuba’s fats and oils imports were $39 million, with the United States

supplying $22 million (57 percent), $21 million of which was soybean oil. That year Cuba

was the fifth leading market for U.S. soybean oil. U.S. soybean oils exporters compete

mainly with Argentina and Brazil in the Cuban market.54 Cuba also imports small amounts

of vegetable oils from Mexico, Canada, and the EU. Argentine soybean oil is generally lower

priced than U.S. soybean oil in world markets,55 but shipping from U.S. Gulf ports to Cuba

is less expensive and more timely.
 56 Dry beans, also termed “pulses” or “legumes,” include all dry edible beans, peas, and lentils (soybeans

excluded), classified under HS0713.

 57 Johnson, Commission Hearing Transcript, 7.

 58 U.S. Department of Agriculture, Foreign Agricultural Service, Caribbean Basin Market Development

Reports, 4.

4-15

Removing the financing restrictions (scenario 1) would likely increase the value of Cuban

purchases of U.S. fats and oils by between $1.8 million and $4.9 million above the

$22 million of U.S. exports to Cuba in 2006 (table 4.9). Removal of travel restrictions to

Cuba (scenario 2) would increase total U.S. fats and oils exports by between $400,000 and

$1.2 million above the 2006 level of U.S. exports to Cuba. Elimination of both the trade and

travel restrictions (scenario 3) is likely to increase U.S. fats and oils exports by between

$2.8 million and $6.0 million above the 2006 level of U.S. exports. Under this scenario, U.S.

soybean oil exports may supply between 63 and 73 percent of Cuban soybean oil imports.

Table 4.9 Fats and oils: Effect of removing financing and travel restrictions on Cuban imports 

Scenario With restriction Without restriction Changea

Lifting financing restrictions (scenario 1):

Cuban imports for Cubans ($ million) 38.6 36.5 - 37.9 -2.1 - -0.7

Cuban imports for Tourists ($ million) 0.4 0.4 0.0

Total Cuban imports ($ million) 39.0 36.9 - 38.3 -2.1 - -0.7

U.S. share of Cuban imports (%) 57.3 62.9 - 73.9 5.6 - 16.6

Cuban imports from the United States ($ million) 22.3 24.1 - 27.2 1.8 - 4.9

Lifting travel restrictions (scenario 2):

Cuban imports for Cubans ($ million) 38.6 38.8 - 39.1 0.2 - 0.6

Cuban imports for Tourists ($ million) 0.4 0.9 - 1.9 0.5 - 1.5

Total Cuban imports ($ million) 39.0 39.7 - 41.0 0.7 - 2.1

U.S. share of Cuban imports (%) 57.3 57.3 0.0

Cuban imports from the United States ($ million) 22.3 22.7 - 23.5 0.4 - 1.2

Lifting financing and travel restrictions (scenario 3):

Cuban imports for Cubans ($ million) 38.6 37.0 - 38.1 -1.6 - -0.5

Cuban imports for Tourists ($ million) 0.4 1.8 - 2.0 1.4 - 1.6

Total Cuban imports ($ million) 39.0 38.8 - 40.1 -0.2 - 1.1

U.S. share of Cuban imports (%) 57.3 62.6 - 73.1 5.4 - 15.8

Cuban imports from the United States ($ million) 22.3 25.1 - 28.3 2.8 - 6.0

Source: Commission estimates.

Note: Estimates of the effects of lifting financing restrictions are based on a price wedge (additional cost) of 2.5 -

7.5 percent. Estimates of the effects of lifting travel restrictions are based on tourist increases of 250,000 - 750,000.

a

The changes in the value of imports reflect the total changes in the cost to Alimport. The removal of restrictions

entails reductions in the costs of importing. When these cost reductions are greater than the increase in the value of

additional imports the change is negative. This does not imply a decline in the returns or prices received by U.S.

exporters.

Dry Beans56

Cuba is a large consumer of dry beans as they are an important source of non-meat protein

in the Cuban diet.57 Dry bean consumption in Cuba is heavily subsidized and provided as a

basic foodstuff on the ration card at a quantity of 20 ounces per person per month.58 In

addition, Cuba processes peas and beans into a bean protein paste used in school nutrition

programs, along with bread and soy protein products. Cuban production consists of a variety
 59 Cuban dry bean production rose from 106,000 metric tons in 2000 to 132,000 tons in 2004, but then

dropped to 106,000 tons in 2005 and 80,000 tons in 2006. United Nations, Food and Agriculture

Organization, FAOStat. 

 60 U.S. Department of Agriculture, Economic Research Service, Vegetables and Melons Situation and

Outlook Yearbook, 146, 153-155.

 61 According to data of the U.S. Department of Commerce.

 62 United Nations, Food and Agriculture Organization, FAOStat. 

 63 U.S. exports of dry peas and lentils to all markets rose from 767 million to 1,275 million pounds, and

exports of dry edible beans from 5.6 million hundred-weight (cwt) to 7.2 million cwt, during 2004–05. U.S.

Department of Agriculture, Economic Research Service, Vegetables and Melons, 151, 157.

 64 Department of Commerce.

 65 Johnson, Commission Hearing Transcript, 123.

 66 Ibid.

 67 Ibid.

 68 U.S. rate costs are $26 per metric ton higher than for Canadian growers. Eric Bartsch, North Dakota

Dry Pea and Lentil Council and CubaNews, “N. Dakota delegation scores pea sale to Alimport.”

 69 U.S. Department of Agriculture, Foreign Agricultural Service. Canada Grain and Feed Annual Report

2006, 8-9.

4-16

of dry edible beans, peas, and lentils and accounts for about half of its dry bean

consumption.59 Cuban imports make up the balance and averaged 192,000 mt annually

during 2001–05.

U.S. dry bean production amounted to $649 million in 2005.60 U.S. exports of dry beans,

which include navy, pinto, black, and kidney beans; lentils; and chick and dried peas,

amounted to $403 million in 2006, with the EU, Mexico, Canada, and India being the four

leading U.S. markets.61 Cuba was the fifth leading U.S. market for dry beans in 2006 with

purchases of $20 million (table 4.10). The United States is the world’s fifth leading exporter

of dry beans (including peas and lentils), behind Burma, Canada, China, and Australia.62 U.S.

exports of dry beans have risen over the past several years and become more price

competitive in world markets with other competitive global suppliers, such as Canada.63

In 2006, Cuba imported $79 million of dry beans of which the United States supplied

$20 million (25 percent) (table 4.10). During 2004–06, the U.S. share of Cuban dry bean

imports rose from 13 to 25 percent. In 2006, green peas and pinto beans each accounted for

about 40 percent of U.S. dry bean exports to Cuba, with lentils (11 percent) and yellow peas

the remainder.64 U.S. dry bean exporters compete mainly with Canada and China in the

Cuban market. For many years, Chinese dry black and pinto beans were priced lower than

U.S. beans in the Cuban market,65 possibly because of government assistance to Chinese

producers.66

Currently, U.S. beans shipped to Cuba have a significant ocean freight advantage over

Chinese beans, and have become more price competitive in Cuba since early 2006.67 Ocean

freight costs of U.S. products from New Orleans to Cuba are lower than ocean rates for the

Canadian product from Thunder Bay to Cuba, but internal U.S. rail costs to transport Upper

Midwestern beans and peas to the U.S. Gulf ports are higher than those faced by Canadian

growers to Thunder Bay.68 Nevertheless, U.S. peas and lentils have become more price

competitive with Canadian products in recent years in third country markets, partly aided by

the revalued Canadian dollar relative to the U.S. dollar.69

Lifting the financing regulations (scenario 1) likely would increase the value of Cuban

purchases of U.S. dry beans by between $9 million and $21.9 million above the $20 million

of U.S. exports to Cuba in 2006 (table 4.10). Removal of travel restrictions to Cuba (scenario
 70 This section covers fresh, chilled, and frozen meat and the edible offal of poultry classified under the

heading 0207; and prepared and preserved poultry products classified under the subheadings 160231,

160232, and 160239.

 71 The latest available data for Cuban consumption and production of poultry is 2005. United Nations,

Food & Agriculture Organization, FAOStat.

4-17

Table 4.10 Dry beans: Effect of removing financing and travel restrictions on Cuban imports

Scenario With restriction Without restriction Changea

Lifting financing restrictions (scenario 1):

Cuban imports for Cubans ($ million) 78.3 74.1 - 76.9 -4.2 - -1.4

Cuban imports for Tourists ($ million) 0.8 0.7 - 0.8 0.0

Total Cuban imports ($ million) 79.1 74.8 - 77.7 -4.3 - -1.4

Total Cuban imports (1,000 MT) 245.0 246.8 - 250.5 1.8 - 5.5

U.S. share of Cuban imports (%) 25.2 37.3 - 55.8 12.1 - 30.7

Cuban imports from the United States ($ million) 19.9 28.9 - 41.8 9.0 - 21.9

Lifting travel restrictions (scenario 2):

Cuban imports for Cubans ($ million) 78.3 78.7 - 79.4 0.4 - 1.1

Cuban imports for Tourists ($ million) 0.8 1.0 - 1.3 0.2 - 0.5

Total Cuban imports ($ million) 79.1 79.6 - 80.7 0.5 - 1.6

Total Cuban imports (1,000 MT) 245.0 246.7 - 250.0 1.7 - 5.0

U.S. share of Cuban imports (%) 25.2 25.2 0.0

Cuban imports from the United States ($ million) 19.9 20.0 - 20.3 0.1 - 0.4

Lifting financing and travel restrictions (scenario 3):

Cuban imports for Cubans ($ million) 78.3 75.1 - 77.3 -3.2 - -1.0

Cuban imports for Tourists ($ million) 0.8 1.2 - 1.3 0.4 - 0.5

Total Cuban imports ($ million) 79.1 76.3 - 78.6 -2.8 - -0.5

Total Cuban imports (1,000 MT) 245.0 249.7 - 255.6 4.7 - 10.6

U.S. share of Cuban imports (%) 25.2 37.1 - 55.2 11.9 - 30.1

Cuban imports from the United States ($ million) 19.9 29.2 - 42.2 9.3 - 22.2

Source: Commission estimates.

Note: Estimates of the effects of lifting financing restrictions are based on a price wedge (additional cost) of 2.5 -

7.5 percent. Estimates of the effects of lifting travel restrictions are based on tourist increases of 250,000 - 750,000.

a

The changes in the value of imports reflect the total changes in the cost to Alimport. The removal of restrictions

entails reductions in the costs of importing. When these cost reductions are greater than the increase in the value of

additional imports the change is negative. This does not imply a decline in the returns or prices received by U.S.

exporters.

2) is likely to have a small impact on U.S. sales of dry beans to Cuba, as few dry beans are

sold to the Cuban tourist sector, and would increase total U.S. dry bean exports by between

$100,000 and $400,000 above the 2006 level. Elimination of both the trade and travel

restrictions (scenario 3) is likely to increase U.S. dry bean exports by between $9.3 million

and $22.2 million above the 2006 level of U.S. exports. Under this scenario, U.S. dry bean

exporters may supply between 37 and 55 percent of Cuban dry bean imports.

Poultry70

Between 2000 and 2005, Cuba became increasingly more dependent on poultry imports to

meet its domestic consumption needs.71 In 2001–02, Cuban production fell by one half in the

aftermath of Hurricane Michelle in November 2001. Between 2002 and 2005, the share

poultry of imports in Cuba’s domestic consumption averaged 85 percent and the Cuban 
 72 Walters, “Expanding trade with Cuba creates opportunities for U.S. farmers, says UF expert.”

 73 U.S. consumers prefer “white” chicken meat (breasts) and the U.S. exports “dark” meat (leg quarters

and wings) to regions where it is preferred.

 74 United States Poultry and Egg Export Council and the National Chicken Council, written statement to

the Commission, May 11, 2007.

 75 There are also significant indirect costs associated with the amount of time needed to apply for and

receive a license from OFAC to travel to Cuba for business purposes. United States Poultry & Egg Export

Council and the National Chicken Council, written statement to the Commission, May 11, 2007. Industry

officials, interview with Commission staff, April 2007.

 76 United States Poultry and Egg Export Council and the National Chicken Council, written statement to

the Commission, May 11, 2007.

 77 Cuban government officials, interviews by Commission staff, Havana, Cuba, June 12-13, 2007.

4-18

government has indicated that it is more efficient for them to import poultry than to produce

it domestically.72

The United States is the second largest global poultry exporter, after Brazil, with exports

valued at $2.5 billion in 2006, accounting for 26 percent of global poultry exports. In 2006,

the largest export markets for U.S. poultry were Russia (19 percent), Mexico (17 percent),

Canada (13 percent) and China (13 percent). Since 2002, Cuba has become an increasingly

important market for U.S. poultry, accounting for 1.8 percent of exports in 2006. Abundant

supplies of relatively low cost feed ingredients, as well as regional preferences for different

poultry cuts help to make the United States one of the most competitive global poultry

producers.73

The U.S. poultry and egg industry stated that the current U.S. restrictions on financing as

well as travel to Cuba have negatively impacted the industry.74 The added cost of financial

restrictions and the use of letters of credit drawn on a foreign bank have directly affected the

price competitiveness of U.S. sales of poultry to Cuba and halted the sale of U.S. eggs.

Poultry industry officials also noted that U.S. regulations have dampened the attractiveness

of Cuba as a destination for U.S. shippers and there is only one carrier that currently

operates breakbulk vessels (the primary mode of transporting chilled and frozen poultry by

sea) to Cuba.75

In 2006, Cuban poultry imports were valued at $68.6 million of which the United States

accounted for $44.7 million, or 65 percent (table 4.11). Brazil is the major competitor in the

Cuban market, accounting for $20.1 million (29 percent). The United States enjoys a natural

competitive advantage over Brazil in shipping costs and transit time to the Cuban market;

one day or less from ports along the Gulf of Mexico versus over 25 days from Brazil.76 The

U.S. poultry exports to Cuba have been mainly frozen chicken leg quarters, drums, and

wings, and ground turkey which are imported both in containers and bulk freighter

shipments. Frozen U.S. chicken and ground turkey are sold in convertible peso stores as well

as provided in the ration stores.77

The removal of the current financial restrictions on U.S. agricultural exports to Cuba

(scenario 1) is likely to increase Cuban purchases of U.S. poultry in the range of $6.7 million

to $10.8 million (table 4.11). The elimination of transaction costs associated with the current

financial restrictions will enable the United States to be more price competitive with Brazil.

The vast majority of poultry imported by Cuba is destined for domestic consumption, and

the removal of current travel restrictions (scenario 2) would increase U.S. sales of poultry

by $1.1 million to $3.2 million. Elimination of both financial and travel restrictions (scenario

3) is likely to increase Cuban imports of U.S. poultry by $9.6 million to $13.7 million.
 78 Beef as referred to in this section covers fresh, chilled, and frozen beef classified under headings 0201

and 0202; fresh and frozen edible bovine offal (variety meats) classified under subheadings 020610, 020621,

020622, and 020629; salted, dried, cured, or smoked beef products classified under subheading 021020; and

prepared and preserved beef products classified under subheading 160250.

 79 United Nations, Food and Agriculture Organization, 2006 Meat Market Assessment and Meat Statistics.

 80 Ibid., FAOStat.

 81 Ibid.

4-19

Table 4.11 Poultry: Effect of removing financing and travel restrictions on Cuban imports

Scenario With restriction Without restriction Changea

Lifting financing restrictions (scenario 1):

Cuban imports for Cubans ($ million) 58.3 55.6 - 57.1 -2.7 - -1.3

Cuban imports for Tourists ($ million) 10.3 9.8 - 10.1 -0.5 - -0.2

Total Cuban imports ($ million) 68.6 65.4 - 67.1 -3.2 - -1.5

Total Cuban imports (1,000 MT) 116.7 120.2 - 123.7 3.5 - 7.0

U.S. share of Cuban imports (%) 65.2 76.6 - 84.8 11.4 - 19.6

Cuban imports from the United States ($ million) 44.7 51.4 - 55.5 6.7 - 10.8

Lifting travel restrictions (scenario 2):

Cuban imports for Cubans ($ million) 58.3 58.6 - 59.2 0.3 - 0.8

Cuban imports for Tourists ($ million) 10.3 11.6 - 14.3 1.4 - 4.1

Total Cuban imports ($ million) 68.6 70.2 - 73.5 1.6 - 4.9

Total Cuban imports (1,000 MT) 116.7 119.5 - 125.0 2.8 - 8.3

U.S. share of Cuban imports (%) 65.2 65.2 0.0

Cuban imports from the United States ($ million) 44.7 45.8 - 47.9 1.1 - 3.2

Lifting financing and travel restrictions (scenario 3):

Cuban imports for Cubans ($ million) 58.3 56.4 - 57.3 -1.9 - -1.0

Cuban imports for Tourists ($ million) 10.3 13.5 - 14.3 3.2 - 4.1

Total Cuban imports ($ million) 68.6 69.8 - 71.7 1.2 - 3.1

Total Cuban imports (1,000 MT) 116.7 128.3 - 132.0 11.6 - 15.3

U.S. share of Cuban imports (%) 65.2 75.8 - 83.6 10.6 - 18.4

Cuban imports from the United States ($ million) 44.7 54.4 - 58.4 9.6 - 13.7

Source: Commission estimates.

Note: Estimates of the effects of lifting financing restrictions are based on a price wedge (additional cost) of

5 - 10 percent. Estimates of the effects of lifting travel restrictions are based on tourist increases of 250,000 -

750,000.

a

The changes in the value of imports reflect the total changes in the cost to Alimport. The removal of restrictions

entails reductions in the costs of importing. When these cost reductions are greater than the increase in the value of

additional imports the change is negative. This does not imply a decline in the returns or prices received by U.S.

exporters.

Beef78

Cuba is neither a large beef producing nor a large beef consuming country. Between 2000

and 2005, per capita consumption averaged 6.6 kg, well below the 13.5 kg average for

Central American and Caribbean nations.79 Total consumption averaged 67,740 mt during

2000–05, but fell from 78,880 mt in 2000 to 58,450 mt in 2005.80 Decreased consumption

corresponded to production that fell from 75,770 mt in 2000 to 55,250 mt in 2004, although

it recovered slightly in 2005 to 59,900 mt.81 Domestic beef production supplies between

85 and 95 percent of domestic consumption.
 82 Before bovine spongiform encephalopathy (BSE) was discovered in December 2003, in a Canadian cow

imported into the United States, the United States was the largest global exporter by value of beef and beef

products covered under this section.

 83 Global Trade Atlas.

 84 Ibid.

 85 Alimport officials, interview with Commission staff, Havana, Cuba, June 12, 2007.

 86 U.S. Department of Agriculture, Foreign Agricultural Service, GAIN Report No. C13010, September

24, 2003, 8.

 87 This section covers fresh, chilled, and frozen pork products classified under heading 0203; fresh and

frozen edible pork offal (variety meats) classified under subheadings 020630, 020641, and 020649; pork fat

classified under subheading 020900; salted, dried, cured, or smoked pork products classified under

subheadings 021011, 021012, and 021019; and prepared and preserved pork products classified under

subheadings 160241, 160242, and 160249. Hereafter, references to pork will refer to this entire list of pork

and pork products unless otherwise specified.

4-20

The United States is currently the third largest global exporter of beef, by value, after

Australia and Brazil.82 In 2006, total U.S. beef exports were valued at nearly $1.8 billion,

accounting for 10.7 percent of global beef export value.83 A substantial proportion of U.S.

beef trade is with Canada and Mexico; other important markets include Taiwan, Egypt,

Japan, the Bahamas, and Hong Kong. Major competing exporters include Australia, Brazil,

Argentina, New Zealand, Canada, and Uruguay. Cuba accounts for a negligible share of

U.S. beef exports. The United States is competitive on the world market for high-quality,

grain-fed beef owing to high productivity coupled with abundant supplies of relatively low

cost feed ingredients (i.e., pasture for cows; feed grains and protein supplements), economies

of size in processing, and a highly efficient marketing and distribution system.

In 2006, Cuba imported $42.3 million of beef, 95 percent of which was supplied by Brazil,

Uruguay, and Chile. Brazil supplies processed beef to the Cuban market while Uruguay

supplies frozen boneless beef.84 The United States supplied less than $100,000 of beef to

Cuba in 2006 representing less than 1 percent of the total value of Cuban beef imports. The

principal factor impeding U.S. beef exports to Cuba has been the inability of Cuban sanitary

officials to visit U.S. slaughtering and processing facilities and to interact with USDA meat

inspectors, particularly with respect to concerns over BSE.85 Moreover, Brazil and Uruguay

are very price competitive exporters of beef products to Cuba, including beef liver. Uruguay

has a joint venture meat processing facility (jerked beef and other meats) specifically

producing for export to Cuba.86

Lifting the financing restrictions is likely to increase U.S. beef exports to Cuba by between

$5.4 million and $10 million (table 4.12). If travel restrictions were removed, it is likely that

U.S. tourists would demand U.S. grain-fed beef rather than Brazilian or Uruguayan grass-fed

beef. Therefore, assuming a shift in Cuba’s purchase patterns to supply the type of beef U.S.

tourists are likely to demand, the U.S. beef exporters could capture a significant portion

(perhaps 80 percent or more) of imports resulting from increased U.S. tourism, likely an

additional $1.1 million to $3.2 million. The removal of both sets of restrictions (scenario 3)

would likely increase U.S. exports of beef to Cuba by $8.8 million to $12.9 million over

their 2006 level.

Pork87

Pork is the preferred meat in Cuba. During 2000–06, per capita pork production in Cuba was

among the highest in the Central American-Caribbean region, averaging almost 10 kilograms
 88 United Nations, Food and Agriculture Organization, 2006 Meat Market Assessment and Meat Statistics.

 89 Cuban pork consumption increased sporadically from 98,000 mt to 124,000 during 2001–03 and from

118,000 mt to 123,000 mt during 2004–06. Cuban pork production ranged between a low of 90,000 mt in

2002 and a high of 98,000 mt in 2004, with the exception of 2001 when production dropped to 76,000 mt.

United Nations, Food and Agriculture Organization, 2006 Meat Market Assessment and Meat Statistics.

 90 Commission staff field visit, Havana, Cuba, June 12-14, 2007.

 91 Global Trade Atlas.

4-21

Table 4.12 Beef: Effect of removing financing and travel restrictions on Cuban imports

Scenario With restriction Without restriction Change

Lifting financing restrictions (scenario 1):

Cuban imports for Cubans ($ million) 38.1 36.3 - 37.3 -1.8 - -0.8

Cuban imports for Tourists ($ million) 4.2 4.0 - 4.1 -0.2 - -0.1

Total Cuban imports ($ million) 42.3 40.4 - 41.4 -1.9 - -0.9

Total Cuban imports (1,000 MT) 18.3 18.8 - 19.4 0.5 - 1.1

U.S. share of Cuban imports (%) 0.2 13.2 - 25.0 13.0 - 24.8

Cuban imports from the United States ($ million) 0.1 5.5 - 10.1 5.4 - 10.0

Lifting travel restrictions (scenario 2):

Cuban imports for Cubans ($ million) 38.1 38.3 - 38.6 0.2 - 0.5

Cuban imports for Tourists ($ million) 4.2 5.6 - 8.3 1.4 - 4.1

Total Cuban imports ($ million) 42.3 43.8 - 46.9 1.5 - 4.6

Total Cuban imports (1,000 MT) 18.3 18.9 - 20.3 0.7 - 2.0

U.S. share of Cuban imports (%) 0.2 2.6 - 7.1 2.4 - 6.9

Cuban imports from the United States ($ million) 0.1 1.2 - 3.3 1.1 - 3.2

Lifting financing and travel restrictions (scenario 3):

Cuban imports for Cubans ($ million) 38.1 36.8 - 37.4 -1.3 - -0.6

Cuban imports for Tourists ($ million) 4.2 7.7 - 8.4 3.5 - 4.2

Total Cuban imports ($ million) 42.3 44.5 - 45.9 2.2 - 3.5

Total Cuban imports (1,000 MT) 18.3 20.8 - 21.4 2.6 - 3.1

U.S. share of Cuban imports (%) 0.2 19.4 - 29.2 19.2 - 29.1

Cuban imports from the United States ($ million) 0.1 8.9 - 13.0 8.8 - 12.9

Source: Commission estimates.

Note: Estimates of the effects of lifting financing restrictions are based on a price wedge (additional cost) of

5 - 10 percent. Estimates of the effects of lifting travel restrictions are based on tourist increases of 250,000 -

750,000.

a

The changes in the value of imports reflect the total changes in the cost to Alimport. The removal of restrictions

entails reductions in the costs of importing. When these cost reductions are greater than the increase in the value of

additional imports the change is negative. This does not imply a decline in the returns or prices received by U.S.

exporters.

annually.88 Cuban pork consumption averaged 115,000 mt annually during the same period,

compared with domestic production of 92,000 mt.89 On average, imports accounted for about

20 percent of domestic pork consumption between 2000 and 2006. Pork is sold fresh at peso

agricultural markets as well as in fresh and frozen forms in convertible peso markets.90

The United States is the second largest global exporter of pork; the EU is the largest. In

2006, total U.S. pork exports were valued at nearly $2.7 billion, accounting for 24 percent

of global pork exports.91 Other major competing exporters include Canada, Brazil, China,

Chile, and Mexico. The largest markets for U.S. pork are Japan, Mexico, Canada, South

Korea, and Russia. Cuba is a very small market for the United States, accounting for one-half

of one percent of total shipments. A highly productive breeding herd and abundant supplies

of relatively low cost feed ingredients (corn and soybean meal) help make the United States

one of the most competitive pork producers in the world. Economies of scale in processing
 92 Industry representative, interview with Commission staff, April 27, 2007.

 93 U.S. pork exporters find that the bid process is inconsistent and not based on market demand. U.S. pork

exporters also believe that the inability to negotiate directly with Cimex, Cubalse, ITH, and the foreign

companies that manage Cuban resort hotels puts them at a severe disadvantage relative to their competitors

in accessing distribution channels that supply the Cuban tourism industry. Industry representative, interview

with Commission staff, April 27, 2007.

 94 For example, having to ship pork through Florida ports adds approximately 2 cents per pound to U.S.

exporters internal shipping costs. Market development is hindered by the disparate cost for shipping smaller,

sample-sized shipments, which limits the ability to develop demand for U.S. product relative to competitors.

Industry representative, interview with Commission staff, April 27, 2007.

 95 Based on unit values, most imported pork is lower-value product that is likely to be distributed to local

processors or directly to local consumers. The unit value of some pork product imports suggests that some

processed products are distributed to the tourist trade. 

 96 Trade data for this section are based on HTS headings 0401-0406 (milk, cream, milk powder, yogurt,

sour cream, buttermilk, curds, whey and whey protein concentrates, butter, dairy spreads, milk fats, and

cheeses), 1702 (lactose), 2105 (ice cream), 3501 (milk protein concentrates and other caseins, and caseinates

and other casein derivatives), subheading 1901.10 (infant formula) and subheading 3502.20 (milk albumin).

 97 CubaNews, “When it comes to sheer size, Camagüey leads the way.”

4-22

and an efficient marketing and distribution system also contribute to the competitiveness of

U.S. pork in world markets.

Staff interviews with U.S. pork industry officials indicated that U.S. regulations on exports

to Cuba cause inefficiencies that increase the cost of exporting pork to Cuba compared with

other export destinations.92 Officials noted that a more significant impediment to increased

pork exports is the Cuban requirement that all sales with U.S. companies be negotiated

through Alimport.93 Industry officials also stated that U.S. regulations limit the willingness

and ability of various shipping companies and port facilities to handle exports to Cuba.

Consequently, pork exporters cannot use the most logistically and economically efficient

ports to ship pork to Cuba.94 The U.S. pork industry estimated that U.S. restrictions related

to financing and travel result in approximately a 5 percent cost disadvantage relative to

competitors in the Cuban market.

In 2006, Cuba imported $33.6 million of pork, with the United States accounting for

$14.1 million or 42 percent (table 4.13).95 The major competitors in the Cuban market are

Canada and Chile, both of which have highly competitive pork producing and processing

industries. However, Canadian pork exports to Cuba have fallen from $14 million annually

in 2001 to approximately $11 million in 2006, possibly because of the recent appreciation

of the Canadian dollar. Chilean pork exports to Cuba have steadily increased from $1 million

in 2001 to more than 6 million in 2006.

The removal of financing restrictions (scenario 1) is likely to increase the value of Cuban

purchases of U.S. pork by between $5.5 million and $9.5 million (table 4.13). The lifting of

travel restrictions (scenario 2) is likely to have a smaller impact on U.S. exports of pork, an

increase of $600,000 to $1.9 million, as most of those are destined for the Cuban population.

Elimination of both financial and travel restrictions is likely to increase U.S. pork exports

by between $7.3 million and $11.2 million.

Dairy96

The dairy industry, like many agricultural sectors in Cuba, has fallen on hard times. In the

mid-1980s, milk production topped out at approximately 250 million gallons.97 By 2005,
 98 National Milk Producers Federation, written submission to the Commission, May 10, 2007. Data

converted from pounds to gallons at 1 gallon = 8.62 lbs.

 99 International Centre for Sustainable Cities. Enhancing Sustainable Dairy Production Capacity in Cuba:

Final report to CIDA, 4.

 100 U.S. Department of Agriculture, National Agricultural Statistical Service, Milk Production, Disposition

and Income: 2006 Summary, 2. USDA data is converted from pounds at a conversion rate of 1 gallon of milk

= 8.62 pounds.

 101 CubaNews, “When it comes to sheer size, Camagüey leads the way.”

 102 U.S. Dairy Export Council, 2005 Annual Report, 18.

4-23

Table 4.13 Pork: Effect of removing financing and travel restrictions on Cuban imports

Scenario With restriction Without restriction Changea

Lifting financing restrictions (scenario 1):

Cuban imports for Cubans ($ million) 26.9 25.7 - 26.3 -1.2 - -0.6

Cuban imports for Tourists ($ million) 6.7 6.4 - 6.6 -0.3 - -0.1

Total Cuban imports ($ million) 33.6 32.1 - 32.9 -1.5 - -0.7

Total Cuban imports (1,000 MT) 17.1 17.6 - 18.1 0.5 - 1.0

U.S. share of Cuban imports (%) 42.1 59.7 - 73.9 17.6 - 31.8

Cuban imports from the United States ($ million) 14.2 19.6 - 23.7 5.5 - 9.5

Lifting travel restrictions (scenario 2):

Cuban imports for Cubans ($ million) 26.9 27.0 - 27.3 0.1 - 0.4

Cuban imports for Tourists ($ million) 6.7 8.1 - 10.8 1.4 - 4.1

Total Cuban imports ($ million) 33.6 35.1 - 38.1 1.5 - 4.4

Total Cuban imports (1,000 MT) 17.1 17.8 - 19.3 0.8 - 2.3

U.S. share of Cuban imports (%) 42.1 42.1 0.0

Cuban imports from the United States ($ million) 14.2 14.8 - 16.0 0.6 - 1.9

Lifting financing and travel restrictions (scenario 3):

Cuban imports for Cubans ($ million) 26.9 26.0 - 26.4 -0.9 - -0.5

Cuban imports for Tourists ($ million) 6.7 10.1 - 10.9 3.3 - 4.1

Total Cuban imports ($ million) 33.6 36.1 - 37.3 2.4 - 3.7

Total Cuban imports (1,000 MT) 17.1 19.9 - 20.4 2.9 - 3.3

U.S. share of Cuban imports (%) 42.1 57.7 - 70.4 15.5 - 28.3

Cuban imports from the United States ($ million) 14.2 21.5 - 25.4 7.3 - 11.2

Source: Commission estimates.

Note: Estimates of the effects of lifting financing restrictions are based on a price wedge (additional cost) of

5 - 10 percent. Estimates of the effects of lifting travel restrictions are based on tourist increases of 250,000 -

750,000.

a

The changes in the value of imports reflect the total changes in the cost to Alimport. The removal of restrictions

entails reductions in the costs of importing. When these cost reductions are greater than the increase in the value of

additional imports the change is negative. This does not imply a decline in the returns or prices received by U.S.

exporters.

milk production had fallen to 113 million gallons produced by 380,000 dairy cows.98 When

Soviet support ended in the early 1990s, the Cuban government was unable to import cattle

feed in large quantities, and grazing became a primary source of feed. Degraded grazing

lands have became a serious problem, so that Cuba’s milk production in 2006 was

0.8-1.8 gallons per cow per day,99 compared to approximately 6.3 gallons per milking cow

in the United States.100 Some dairy processing facilities, such as the yogurt plant in Nuevitas

(Camagüey province), are producing products from soybeans, owing to an inadequate supply

of milk.101

The U.S. dairy industry remains a significant global exporter, particularly in non-fat dry milk

(NDM), whey proteins, and lactose.102 In 2006, the United States exported $1.7 billion in

dairy exports, up more than 16 percent from 2005. Other significant dairy-exporting
 103 The United States exports little whole milk powder. In 2006, 98 percent of U.S. exports of milk powder

was NDM.

 104 There were zero purchases in 2001; butter, buttermilk and cheese purchases totaled $57,462 in 2002;

and purchases of ice cream, lactose, whey, cream and milk fats totaled $256,125 in 2003. Data from Global

Trade Atlas.

 105 Jones, Commission Hearing Transcript, 126; Messina, Commission Hearing Transcript, 130; and

National Milk Producers Federation, written submission to the Commission, May 10, 2007.

 106 Letter from United States Engage to Reps. Bill Delahunt, Jo Ann Emerson Jeff Flake, and Jerry Moran,

June 20, 2005.

4-24

countries include the EU, New Zealand, and Australia in all export categories, and Argentina

and Ukraine for cheese and milk powders. The United States is the fourth largest exporter

of milk powder,103 behind New Zealand, the EU, and Australia. The top five export markets

for the United States in 2006, by quantity, were Mexico, Indonesia, Philippines, Malaysia,

and Vietnam. Cuba’s share of U.S. milk powder exports was only 2 percent of total milk

powder exports in 2006, declining from a 6 percent share in 2004 and a 5 percent share in

2005. Since 2004, nearly all Cuban imports of U.S. dairy products have been shipments of

NDM, with very limited purchases of lactose, cheese, concentrated milk, whey, and other

milk products. From 2001–03, Cuba purchased almost no U.S. dairy products.104 U.S.

competitiveness in dairy products is based on the recent depreciation in the dollar relative

to other currencies and highly efficient transportation and handling services. With its close

proximity to Cuba, the United States has a natural advantage over global competitors for

dairy sales.

Cuban imports of milk powder (NDM and whole milk powder) from the world totaled

$128.0 million in 2006, while those of U.S. NDM were $12.6 million, for a 10 percent

market share for the United States. Other suppliers of milk powders to the Cuban market

include New Zealand (34 percent share), Uruguay (17 percent), Argentina (14 percent share),

EU (13 percent), and Brazil (9 percent). The share of Cuba’s consumption supplied by

imports is difficult to calculate. Much of Cuba’s milk production is consumed as fluid rather

than processed into cheese, ice cream, and other dairy products. A significant share of

Cuba’s consumption of processed products is satisfied by imports, and nearly all dairy goods

consumed in the tourist market (except perhaps fluid milk) are imported. Under the current

system of food rationing in Cuba, the government tries to provide every child under seven

years of age one liter of milk per day. But reportedly such rations are not always available.105

U.S. dairy exporters find that current U.S. regulations hamper U.S. sales of dairy products

to Cuba. After the imposition of more restrictive regulations by OFAC in 2005, Dairy

America, an association of nine U.S. dairy cooperatives, experienced lower sales of NDM

to Cuba. The new regulations reportedly added an additional $3,000 in costs to each

shipment of 1,000 mt, which, in Dairy America’s view, may cause Alimport to seek other

suppliers.106

Removing the current financial restrictions on U.S. agricultural exports to Cuba (scenario 1)

is likely to increase Cuban purchases of U.S. milk powders, including NDM and whole milk

powder, at the expense of global competitors (table 4.14). Increases in Cuban imports of milk

powders from the United States under scenario 1 would range from $14.7 million to $41.8

million. Removing travel restrictions is also likely to increase Cuban purchases of U.S. milk

powders by approximately $200,000 to $700,000 (scenario 2). Most of the Cuban demand

for milk powders is among the local population (especially young children), rather than in

the tourist sector, and the impact of additional tourists on imports of milk powders is 
4-25

Table 4.14 Milk powders: Effect of removing financing and travel restrictions on Cuban imports

Scenario With restriction Without restriction Changea

Lifting financing restrictions (scenario 1):

Cuban imports for Cubans ($ million) 125.5 118.7 - 123.2 -6.8 - -2.2

Cuban imports for Tourists ($ million) 2.6 2.4 - 2.5 -0.1 - 0.0

Total Cuban imports ($ million) 128.0 121.1 - 125.8 -6.9 - -2.3

Total Cuban imports (1,000 MT) 57.9 58.3 - 59.2 0.4 - 1.3

U.S. share of Cuban imports (%) 9.8 21.7 - 44.9 11.9 - 35.1

Cuban imports from the United States ($ million) 12.6 27.3 - 54.3 14.7 - 41.8

Lifting travel restrictions (scenario 2):

Cuban imports for Cubans ($ million) 125.5 126.1 - 127.3 0.6 - 1.8

Cuban imports for Tourists ($ million) 2.6 2.9 - 3.6 0.3 - 1.0

Total Cuban imports ($ million) 128.0 129.0 - 130.8 0.9 - 2.8

Total Cuban imports (1,000 MT) 57.9 58.3 - 59.2 0.4 - 1.3

U.S. share of Cuban imports (%) 9.8 9.9 - 10.1 0.1 - 0.3

Cuban imports from the United States ($ million) 12.6 12.8 - 13.2 0.2 - 0.7

Lifting financing and travel restrictions (scenario 3):

Cuban imports for Cubans ($ million) 125.5 120.3 - 123.8 -5.1 - -1.6

Cuban imports for Tourists ($ million) 2.6 3.4 - 3.6 0.8 - 1.1

Total Cuban imports ($ million) 128.0 123.7 - 127.4 -4.3 - -0.6

Total Cuban imports (1,000 MT) 57.9 59.1 - 60.5 1.2 - 2.6

U.S. share of Cuban imports (%) 9.8 21.8 - 44.4 12.0 - 34.6

Cuban imports from the United States ($ million) 12.6 27.8 - 54.9 15.3 - 42.4

Source: Commission estimates.

Note: Estimates of the effects of lifting financing restrictions are based on a price wedge (additional cost) of 2.5 -

7.5 percent. Estimates of the effects of lifting travel restrictions are based on tourist increases of 250,000 - 750,000.

a

The changes in the value of imports reflect the total changes in the cost to Alimport. The removal of restrictions

entails reductions in the costs of importing. When these cost reductions are greater than the increase in the value of

additional imports the change is negative. This does not imply a decline in the returns or prices received by U.S.

exporters.

relatively limited. Removing both sets of restrictions (scenario 3) would likely cause a

significant increase in Cuban purchases of U.S. milk powders, ranging from $15.3 million

to $42.4 million.

Removing the current financial restrictions on U.S. agricultural exports to Cuba (scenario 1)

is also likely to increase Cuban purchases of other dairy products (excluding milk powders)

from the United States at the expense of global competitors (table 4.15). Increases in Cuban

imports of other dairy products from the United States under scenario 1 would range from

$5.1 million to $9.7 million. Removing travel restrictions is also likely to increase Cuban

purchases of other dairy products from the United States by approximately $200,000 to

$700,000 (scenario 2). Removing both sets of restrictions (scenario 3) would likely cause a

significant increase in Cuban purchases of other dairy products from the United States,

ranging from $5.9 million to $10.4 million.
 107 For purposes of this section, the term ‘processed foods’ refers to those that are found in chapters 19-22

of the HTS, including grain-based products such as cookies, crackers, bakery products, breakfast cereals,

pasta and flour-based preparations; processed fruits, vegetables, and nuts; soups, sauces, and condiments;

miscellaneous food preparations; and alcoholic and non-alcoholic beverages.

 108 Ross and Fernandez Mayo, “Cuba’s ‘New’ Peso Food Chain: Linkages and Implications for U.S.

Exporters.”

 109 CubaNews, “Cuba plans further downsizing of sugar industry.”

4-26

Table 4.15 Other dairy products: Effect of removing financing and travel restrictions on Cuban imports

Scenario With restriction Without restriction Changea

Lifting financing restrictions (scenario 1):

Cuban imports for Cubans ($ million) 14.5 13.9 - 14.2 -0.7 - -0.3

Cuban imports for Tourists ($ million) 4.8 4.6 - 4.7 -0.2 - -0.1

Total Cuban imports ($ million) 19.4 18.5 - 19.0 -0.9 - -0.4

Total Cuban imports (1,000 MT) 8.5 8.7 - 9.0 0.3 - 0.5

U.S. share of Cuban imports (%) 0.3 27.4 - 53.0 27.1 - 52.7

Cuban imports from the United States ($ million) 0.1 5.2 - 9.8 5.1 - 9.7

Lifting travel restrictions (scenario 2):

Cuban imports for Cubans ($ million) 14.5 14.6 - 14.7 0.1 - 0.2

Cuban imports for Tourists ($ million) 4.8 5.3 - 6.4 0.5 - 1.5

Total Cuban imports ($ million) 19.4 19.9 - 21.1 0.6 - 1.7

Total Cuban imports (1,000 MT) 8.5 8.7 - 9.2 0.3 - 0.8

U.S. share of Cuban imports (%) 0.3 1.5 - 3.8 1.3 - 3.6

Cuban imports from the United States ($ million) 0.1 0.3 - 0.8 0.3 - 0.8

Lifting financing and travel restrictions (scenario 3):

Cuban imports for Cubans ($ million) 14.5 14.0 - 14.3 -0.5 - -0.2

Cuban imports for Tourists ($ million) 4.8 6.0 - 6.3 1.1 - 1.5

Total Cuban imports ($ million) 19.4 20.0 - 20.6 0.7 - 1.3

Total Cuban imports (1,000 MT) 8.5 9.5 - 9.7 1.0 - 1.3

U.S. share of Cuban imports (%) 0.3 29.0 - 52.3 28.8 - 52.0

Cuban imports from the United States ($ million) 0.1 6.0 - 10.5 5.9 - 10.4

Source: Commission estimates.

Note: Estimates of the effects of lifting financing restrictions are based on a price wedge (additional cost) of

5 - 10 percent. Estimates of the effects of lifting travel restrictions are based on tourist increases of 250,000 -

750,000.

a

The changes in the value of imports reflect the total changes in the cost to Alimport. The removal of restrictions

entails reductions in the costs of importing. When these cost reductions are greater than the increase in the value of

additional imports the change is negative. This does not imply a decline in the returns or prices received by U.S.

exporters.

High-value Processed Foods and Beverages107

Domestic production of processed foods in Cuba consists of a wide variety of foods and

beverages, including milk and meat products, confections, grain-based products, fruit and

vegetable products, alcoholic beverages, water, tropical and citrus juice, soft drinks, and

beer.108 In recent years, the Cuban government has begun to close down inefficient sugar

mills and replace them with food processing plants such as those for pastas, chocolate,

candy, and soybean and corn processing.109 Foreign joint ventures, particularly Canadian,

Israeli, Spanish, and Swiss, are also important drivers of certain food and beverage

processing in Cuba. Despite this presence, the poor state of Cuba’s transportation

infrastructure and, in some cases, quality issues currently constrain domestic processors. The

tourism sector demands high quality products that are familiar to foreign tourists. In 1999,
 110 Ross and Fernandez Mayo, “Cuba’s dollar food market and U.S. Exports,” 380.

 111 U.S. Department of Agriculture, Foreign Agricultural Service, Cuba: HRI Food Service Sector Report

2002, 11.

 112 CubaNews, “Reality Check: Not all companies want to sell to Cuba.”

 113 U.S. International Trade Commission, Processed Foods and Beverages: A Description of Tariff and

Non-tariff Barriers for Major Products and Their Impact on Trade, 9-1-9-3.

 114 No imports of processed foods from the United States were recorded in 2001.

 115 These imports were entered under HTS 2106.90, under which various food preparations are classified,

including dairy mixtures, alcoholic preparations, butter substitutes, syrups, gelatins, artificial sweeteners, and

coffee whiteners.

 116 U.S. Department of Agriculture, Foreign Agricultural Service, Cuba: HRI Food Service Sector Report

2002, 1.

 117 Cuban imports of processed foods from the United States generally remained in the $1-2 million range,

with the exception of 2003 and 2004 when $11.6 million and $10.0 million were imported, respectively. The

jump in those years can be attributed to imports in one category, food preparations of cereals or dairy,

entered under HTS 1901.90, under which various items are classified, including malt extracts, prepared

puddings, dry mixtures, cajeta not made from cow’s milk, and margarine cheese. These imports were valued

at $9.0 million and $6.6 million in 2003 and 2004, respectively, while no exports in this category were

shipped in any other year. 

4-27

the latest data available, only 20 percent of Cuba’s domestic production of processed foods

was sold in dollar stores and tourist outlets.110 It has also been estimated that Cuba’s

domestic food production accounts for only five to 10 percent of the tourism industry’s food

needs.111 As a result, Cuba depends on imported processed foods and food preparations for

its growing tourist industry.112

The United States is a leading producer and exporter of processed products. Although U.S.

exports of processed foods and beverages typically represent a small portion of total U.S.

production, exports have become an increasingly important component of sales. Most

international trade in processed foods is among developed nations with high per-capita

incomes such as Japan, the EU, and Canada. However, export growth is mainly in

developing markets with rising middle class incomes and a growing awareness and taste for

U.S. products.113 Many exports of certain processed foods, particularly sauces, mayonnaise,

condiments, and many beverages, generally consist of branded products aimed at the high

end of the retail market. In 2006, Cuba imported $1.1 million in processed food from the

United States, an increase of 21 percent over such imports in 2002.114

In 2006, Cuba imported $66 million in processed food from the world, an increase of

77 percent over such imports in 2001, and showed steady growth during 2001–06 in virtually

all categories. These imports were of a wide variety of bulk food preparations as well as

specialty items, such as prepared baby food, bakery items, and olives. The bulk of Cuban

imported processed foods during 2001–06 was for miscellaneous food preparations,115 wine,

tomato paste, cookies, pasta, sauces and condiments, jams, breads, beer and nonalcoholic

beverages, and was mainly supplied by the EU throughout the period. Many EU products

are presumably for use in the hotel and restaurant industry in which European firms,

primarily Spanish, have investments. Brazil, Guatemala, and Chile were also important

suppliers to the Cuban market. The governments of many of these countries offer trade

promotion programs, such as financing programs, export subsidies, or barter arrangements,

to encourage trade with Cuba.116 In contrast, the U.S. share of total Cuban imports of

processed foods and beverages was very small, or 1.7 percent in 2006. U.S. exports of

processed food products to Cuba fluctuated widely during this period,117 and consisted
 118 These imports were entered under HTS 2106.90, under which various food preparations are classified,

including dairy mixtures, alcoholic preparations, butter substitutes, syrups, gelatins, artificial sweeteners, and

coffee whiteners.

 119 CubaNews, “From strawberry daquiri mix to soymilk, Florida firm sees huge potential in Cuba.”

 120 Ibid., “U.S. foodservice sector slow to export products to Cuba.”

 121 Specific examples are pastry flour for making donuts and the equipment to form the donuts and

concentrated juice mix and the dispenser to reconstitute it. CubaNews, “U.S. foodservice sector slow to

export products to Cuba,” and Commission staff interview with industry representatives, March 28, 2007.

 122 CubaNews, “U.S. foodservice sector slow to export products to Cuba.”

 123 U.S. Department of Agriculture, Foreign Agricultural Service, Cuba: HRI Food Service Sector Report

2002, 4.

 124 Ross and Fernandez Mayo, “Cuba’s dollar food market and U.S. Exports,” 374.

 125 This section covers fish and fish products classified in chapter 3 and headings 1604 and

1605.

 126 United Nations, Food and Agriculture Organization, FISHSTAT.

4-28

mainly of food preparations of cereals or dairy, tomato paste, protein concentrates, sauces

and condiments, other food preparations,118 and pasta.

The impact of U.S. restrictions on U.S. processed food companies has been mixed. One U.S.

producer of alcoholic drink mixes reported success in exporting and growing its business to

Cuba since 2002.119 However, other food processing companies cited the complicated nature

of U.S. law surrounding U.S. exports as a disincentive to doing business there.120 Some other

processed food companies’ food exports have been hampered by restrictions on selling

related food service dispensers and other equipment necessary for use with their products.121

Others reported not being aware of the possibility of exporting their products to Cuba.122 For

some branded companies, the reluctance to export to Cuba stems from fear of alienating their

customer base with strong views on Castro and his regime.

The removal of financing restrictions on U.S. agricultural exports to Cuba (scenario 1) is

likely to increase Cuban purchases of U.S. processed food and beverages at the expense of

global competitors. Increases in Cuban imports of processed foods from the United States

under scenario 1 would range from $17.9 million to $33.8 million (table 4.16). This increase

is likely because lower transportation costs, shorter shipping times, and the ability to fulfill

quick turnaround orders would give U.S. processed food exporters a significant advantage

over those from other countries.123 Moreover, the high quality of U.S. food preparations is

well known by buyers in the Cuban hotel and restaurant industry and Cuban citizens have

historically favored U.S. branded food items.124

With the removal of travel restrictions to Cuba (scenario 2), U.S. processed food exports are

likely to increase by $2.5 million to $7.6 million. This estimates that U.S. exports would

garner 50 percent of Cuba’s additional imports of high-valued processed foods. The removal

of both sets of restrictions (scenario 3) would significantly increase U.S. exports of highvalue processed foods to Cuba, by $25.9 million to $40.7 million.

Fish Products125

Cuba, despite being an island with a significant coastline, is a small producer of fish

products, with annual production of about 9,000 mt, or well below one percent of the world’s

total.126 Cuba has limited commercial fish-farm aquaculture, but does have an
 127 Cuban government officials, interview by Commission staff, Havana, Cuba, June 13, 2007.

 128 Adams, “An Overview of the Cuban Commercial Fishing Industry and Implications to the Florida

Seafood Industry of Renewed Trade,” and Adams, “Recent Changes in Management Structure ans Strategies

of the Cuban Fishing Industry.”

 129 Global Trade Atlas.

 130 Global Trade Atlas and United Nations, Food and Agriculture Organization, FISHSTAT. See also,

DTCNews, “Cuban Fishing Industry Reports Millions in Revenue,” which reports high levels of lobster

production and that “(Cuban spiny) lobsters are highly demanded in the European and Japanese markets.”

 131 United Nations, Food and Agriculture Organization, FISHSTAT.

 132 Ibid.

4-29

Table 4.16 Processed foods and beverages: Effect of removing financing and travel restrictions on Cuban imports

Scenario With restriction Without restriction Changea

Lifting financing restrictions (scenario 1):

Cuban imports for Cubans ($ million) 49.5 48.1 - 48.9 -1.4 - -0.6

Cuban imports for Tourists ($ million) 16.5 16.0 - 16.3 -0.2 - -0.5

Total Cuban imports ($ million) 66.0 64.1 - 65.2 -1.8 - -0.8

U.S. share of Cuban imports (%) 1.7 29.1 - 54.5 27.4 - 52.8

Cuban imports from the United States ($ million) 1.1 19.0 - 35.0 17.9 - 33.8

Lifting travel restrictions (scenario 2):

Cuban imports for Cubans ($ million) 49.5 49.7 - 50.2 0.2 - 0.7

Cuban imports for Tourists ($ million) 16.5 21.6 - 31.7 5.1 - 15.2

Total Cuban imports ($ million) 66.0 71.3 - 81.9 5.3 - 15.9

U.S. share of Cuban imports (%) 1.7 5.1 - 10.7 3.4 - 9.0

Cuban imports from the United States ($ million) 1.1 3.7 - 8.7 2.5 - 7.6

Lifting financing and travel restrictions (scenario 3):

Cuban imports for Cubans ($ million) 49.5 48.8 - 49.1 -0.7 - -0.4

Cuban imports for Tourists ($ million) 16.5 29.7 - 32.3 13.2 - 15.8

Total Cuban imports ($ million) 66.0 78.5 - 81.5 12.5 - 15.5

U.S. share of Cuban imports (%) 1.7 33.1 - 53.3 31.4 - 51.6

Cuban imports from the United States ($ million) 1.1 27.0 - 41.8 25.9 - 40.7

Source: Commission estimates.

Note: Estimates of the effects of lifting financing restrictions are based on a price wedge (additional cost) of

5 - 10 percent. Estimates of the effects of lifting travel restrictions are based on tourist increases of 250,000 -

750,000.

a

The changes in the value of imports reflect the total changes in the cost to Alimport. The removal of restrictions

entails reductions in the costs of importing. When these cost reductions are greater than the increase in the value of

additional imports the change is negative. This does not imply a decline in the returns or prices received by U.S.

exporters.

abundant catch of wild shrimp and spiny lobster.127 It has a limited processing infrastructure

(e.g., for canning) and much fish harvested for local consumption is dried or otherwise cured

for preservation, or consumed fresh locally.128 It is a somewhat larger importer of fish

products, with estimated 2006 imports of $25.8 million, also less than 1 percent of the

world’s total.129 Cuba exports most of its domestic harvest, consisting largely of shrimp and

other high-value crustaceans, mainly to the EU and Japan.130 Imports supplied over

95 percent of apparent consumption of fish products in Cuba in 2004.131

The United States is the 6th largest producer of fish (aquaculture plus commercial catches),

supplying 5.5 million mt (4 percent) of the world’s production of 140.5 million mt in 2004,

the latest available year.132 It is also the 4th largest exporter, accounting for $3.6 billion

(5 percent) of global exports of $71.5 billion in 2004. The EU is the largest market for U.S.

exports, with 26 percent by value of total U.S. exports in 2006, followed by Japan
 133 Cuban government officials, interview by Commission staff, Havana, Cuba, June 12, 2007.

 134 United Nations, Food and Agriculture Organization, FAOSTAT.

 135 Before cessation of Soviet subsidies and trade preferences, Cuban accounted for about half of all

Caribbean of imports of wood products. Consumption collapsed in 1992 (with lumber and wood panels

dropping 79 percent and almost 100 percent, respectively) and remains less than 40 percent of consumption

prior to the collapse. Ross, “Factors Affecting the Potential Market in Cuba for Selected U.S. Forest

Products,” 104 and United Nations, Food and Agriculture Organization, FAOSTAT.

 136 Cuba has 94 relatively small sawmills with a total capacity of 230,000 cubic meters, roughly the same

as one good size mill in the United States. Spelter and Alderman, Profile 2005: Softwood Sawmills in the

United States and Canada, 1; “Institutional Strengthening of the Cuban Forest Service Project,” CFAN, and

Ross, “Factors Affecting the Potential Market in Cuba for Selected U.S. Forest Products,” 107.

 137 In 2001, lumber production totaled 190,000 cubic meters. Production declined 23 percent in 2002 but

recovered to 220,000 cubic meters in 2005, close to the Cuban industry’s reported capacity. United Nations,

Food and Agriculture Organization, FAOSTAT, and Luxner, "Florida Firm is First to Ship U.S. Lumber to

Cuba Since 1958," 3.

4-30

(23 percent), Canada (18 percent), Korea (11 percent), and China (10 percent). Cuba is not

currently an important market for U.S. exports, with less than one-tenth of one percent of the

total. Important international competitive advantages held by the U.S. industry include a vast

supply of fish resources along three coasts, and a reputation for high quality.

Cuban imports from the world in 2006 reached $25.8 million, of which the United States

accounted for a negligible amount ($3,000), mainly frozen shrimp and frozen fish fillets.

Chile has been Cuba’s main source of imports in recent years, supplying the Cuban market

with fish fillets (e.g., salmon and Jack mackerel) and other products, nearly all of which go

to the tourist sector.133 Spain and Argentina are smaller but still important suppliers of

Cuba’s seafood imports.

With the financing-related restrictions removed (scenario 1), U.S. exports of fish products

to Cuba would likely rise by $7.7 million to $14.6 million (table 4.17). With the removal of

travel restrictions to Cuba (scenario 2), U.S. fish products exports are likely to increase by

$1.3 million to $3.8 million. Much of any increase in fish products exports to Cuba would

likely be for the tourist trade, and could include high-value items such as shellfish (for

example, shrimp and American lobster), canned fish and shellfish, and fresh fish fillets

(exports of which are currently limited owing to the risk of shipment delays for highly

perishable food products). This estimates that U.S. exports would garner 50 percent of

Cuba’s additional imports of fish products. The removal of both sets of restrictions

(scenario 3) would significantly increase U.S. exports of fish products to Cuba, by

$11.7 million to $18.1 million.

Forest Products 

Like many developing countries, Cuban consumption of paper is very low, while its

production is even smaller, such that imports account for about two-thirds of Cuban

consumption.134 Cuban wood products consumption is also very low.135 Cuban lumber

production is constrained by inadequate raw materials and obsolete infrastructure136 and is

mostly consumed in the production of shipping pallets.137 There was no production of

plywood or other wood panels in Cuba during the period.
 138 In 2006, the United States was the fifth largest exporter of wood products behind Canada, the EU,

China, and Russia. Global Trade Atlas.

 139 Industry official, e-mail to Commission staff, April 12, 2007. Industry official, interview with

Commission staff, June 21, 2007.

 140 Ibid.

 141 Industry officials, e-mails to Commission staff, April 12, 2007 and May 3, 2007. 

 142 Industry official, e-mail to Commission staff, April 12, 2007. 

 143 Ibid., May 3, 2007. 

4-31

Table 4.17 Fish products: Effect of removing financing and travel restrictions on Cuban imports

Scenario With restriction Without restriction Changea

Lifting financing restrictions (scenario 1):

Cuban imports for Cubans ($ million) 20.7 20.9 - 21.0 0.2 - 0.4

Cuban imports for Tourists ($ million) 5.2 5.2 - 5.3 0.1

Total Cuban imports ($ million) 25.8 26.1 - 26.3 0.3 - 0.4

U.S. share of Cuban imports (%) 0 29.6 - 55.8 29.6 - 55.7

Cuban imports from the United States ($ million) 0 7.7 - 14.6 7.7 - 14.6

Lifting travel restrictions (scenario 2):

Cuban imports for Cubans ($ million) 20.7 20.8 - 20.9 0.1 - 0.3

Cuban imports for Tourists ($ million) 5.2 7.7 - 12.8 2.5 - 7.6

Total Cuban imports ($ million) 25.8 28.4 - 33.7 2.6 - 7.9

U.S. share of Cuban imports (%) 0 4.5 - 11.3 4.5 - 11.3

Cuban imports from the United States ($ million) 0 1.3 - 3.8 1.3 - 3.8

Lifting financing and travel restrictions (scenario 3):

Cuban imports for Cubans ($ million) 20.7 21.0 - 21.3 0.3 - 0.6

Cuban imports for Tourists ($ million) 5.2 12.1 - 13.2 6.9 - 8.1

Total Cuban imports ($ million) 25.8 33.4 - 34.2 7.5 - 8.4

U.S. share of Cuban imports (%) 0 34.3 - 54.1 34.3 - 54.1

Cuban imports from the United States ($ million) 0 11.7 - 18.1 11.7 - 18.1

Source: Commission estimates.

Note: Estimates of the effects of lifting financing restrictions are based on a price wedge (additional cost) of

5 - 10 percent. Estimates of the effects of lifting travel restrictions are based on tourist increases of 250,000 -

750,000.

a

The changes in the value of imports reflect the total changes in the cost to Alimport. The removal of restrictions

entails reductions in the costs of importing. When these cost reductions are greater than the increase in the value of

additional imports the change is negative. This does not imply a decline in the returns or prices received by U.S.

exporters.

With abundant forest resources and a large forest products industry, the United States ranks

among the top global exporters of both wood and paper products. Major markets include

Canada, Japan, Mexico, and China, which collectively accounted for over 60 percent of U.S.

wood products exports in 2006. In contrast, Cuba accounted for one tenth of one percent of

U.S. wood products exports and ranked 47th among all markets in 2006.138 Benefitting from

low ocean freight rates and efficient service through Gulf Coast ports, U.S. mills

(particularly those in the Southeast) are competitive in Cuba and other Caribbean markets.139

According to U.S. industry officials, travel restrictions and the costs and delays of obtaining

a letter of credit are impediments to expanded wood products trade.140 Travel (usually

multiple trips) is necessary to sell treated wood products in Cuba, as producers often need

to see specific end-use applications.141 However, the size of the market and expected returns

do not justify the administrative burden necessary to seek permission to travel.142 For wood

products, another restrictive aspect of export restrictions is that certain complementary

products (e.g., roofing) are not on the list of eligible export items.143 The 2005 OFAC rule
 144 Ibid. 

 145 U.S. industry official, interview with Commission staff, June 21, 2007.

 146 Global Trade Atlas.

 147 Shipments in this sector came principally from producers in Alabama. Cuban consumption of utility

poles is being driven by replacement of aging or hurricane-damaged poles and the upgrade of Cuba's

electricity grid. Luxner, “Ron Sparks: Cuba is Key Market for Alabama Farmers,” 8, and industry official,

telephone interview with Commission staff, May 3, 2007. Cuban government officials, interview with

Commission staff, Havana, Cuba, June 13, 2007.

 148 Industry officials, interview with Commission staff, June 21, 2007.

 149 Ibid.

4-32

change reportedly eliminated small- to medium-sized wood products firms from the Cuban

market as only larger firms were able to offset the additional costs.144 Delays of U.S. exports

at the U.S. port occur because of the need to obtain a letter of credit, costing at least one U.S.

wood products exporter $40,000 to $50,000 per export shipment for a delay of 10-15 days.145

In 2006, Cuban imports of forest products totaled $57.5 million, of which $33.6 million

consisted of printing and writing paper, newsprint, and packaging papers, and $23.9 million

of wood products.146 In 2006, Cuba imported $9.7 million in forest products from the United

States, accounting for 17 percent of Cuba’s total forest product imports. Major competitors

in the Cuban market were Canada (24 percent), the EU (22 percent), Brazil (14 percent), and

China (8 percent). Among forest products, the United States supplied approximately

95 percent of Cuban imports of treated or untreated utility poles, which are not readily

available from other countries.147 Utility poles that Cuba had imported from Canada tended

to degrade rapidly in the Caribbean climate unlike U.S. utility poles made of Southern

Pine.148 Reportedly, the extension of U.S. commercial credit for U.S. utility pole exports

would allow a doubling of these exports.149

Based on the Commission’s most likely estimates of direct and indirect costs of regulations

and competitor response, the removal of financial restrictions (scenario 1) is likely to

increase Cuban purchases of U.S. forest products at the expense of other suppliers. The

increase in Cuban imports of U.S. forest products would range from $6 million to

$17 million (table 4.18). The value of Cuba’s total forest products imports would decrease

slightly owing to price decreases resulting from unrestricted access by U.S. producers.

Because Cuban demand for forest products is relatively price inelastic, increased demand is

not expected to offset the impact of lower prices in the Cuban market. The impact of the

removal of travel restrictions (scenario 2) would be much smaller because increased tourist

travel is not expected to increase Cuban consumption of forest products very much in the

near term. U.S. forest products exports to Cuba would increase by $100,000 to $300,000.

Elimination of all restrictions (scenario 3) is likely to increase U.S. forest products from

$6.2 million to $17.3 million.
 150 This sector includes all other food and agricultural products not elsewhere covered within HS chapters

01, 04, 05, 06, 07 (except dry beans and peas (HS 0713), 08, 09, 12 (except soybeans), 13-14, 17-18, 24, 33,

35, 40-41, and 51-53. Three-quarters of Cuban imports in this category, valued at $57 million in 2006,

consisted of coffee, fresh potatoes, sugar, chocolate and cocoa, and spices. 

 151 BM Group of Israel has a 50 percent stake in one citrus processing plant, and provides financing for

the domestic Cuban crop. CubaNews, “Citrus Crop Recovers from Last Year’s Distasters.”

 152 U.S. Department of Agriculture, Foreign Agricultural Service, Caribbean Basin Hurricane Dennis’

Impact on Cuba Agriculture 2005, 4-5. 

4-33

Table 4.18 Forest products: Effect of removing financing and travel restrictions on Cuban imports

Scenario With restriction Without restriction Changea

Lifting financing restrictions (scenario 1):

Cuban imports for Cubans ($ million) 56.9 53.8 - 55.9 -3.1 - -1.0

Cuban imports for Tourists ($ million) 0.6 0.5 - 0.6 0.0

Total Cuban imports ($ million) 57.5 54.4 - 56.4 -3.1 - -1.0

U.S. share of Cuban imports (%) 17.0 27.9 - 49.2 10.9 - 32.3

Cuban imports from the United States ($ million) 9.7 15.7 - 26.8 6.0 - 17.0

Lifting travel restrictions (scenario 2):

Cuban imports for Cubans ($ million) 56.9 57.2 - 57.7 0.3 - 0.8

Cuban imports for Tourists ($ million) 0.6 0.9 - 1.6 0.3 - 1.0

Total Cuban imports ($ million) 57.5 58.1 - 59.3 0.6 - 1.8

U.S. share of Cuban imports (%) 17.0 17.0 0.0

Cuban imports from the United States ($ million) 9.7 9.8 - 10.1 0.1 - 0.3

Lifting financing and travel restrictions (scenario 3):

Cuban imports for Cubans ($ million) 56.9 54.6 - 56.1 -2.3 - -0.7

Cuban imports for Tourists ($ million) 0.6 1.5 - 1.7 0.9 - 1.1

Total Cuban imports ($ million) 57.5 56.0 - 57.8 -1.4 - 0.3

U.S. share of Cuban imports (%) 17.0 27.6 - 48.3 10.7 - 31.3

Cuban imports from the United States ($ million) 9.7 16.0 - 27.0 6.2 - 17.3

Source: Commission estimates.

Note: Estimates of the effects of lifting financing restrictions are based on a price wedge (additional cost) of 2.5 -

7.5 percent. Estimates of the effects of lifting travel restrictions are based on tourist increases of 250,000 - 750,000.

a

The changes in the value of imports reflect the total changes in the cost to Alimport. The removal of restrictions

entails reductions in the costs of importing. When these cost reductions are greater than the increase in the value of

additional imports the change is negative. This does not imply a decline in the returns or prices received by U.S.

exporters.

Other Food Products150

This sector contains is a diverse group of agricultural and food products not elsewhere

included in the other commodity sectors. The majority of Cuban imports of these products

are tropical products that the United States does not generally export: coffee and tea; cocoa

beans and cocoa products; spices; and sugar. However, this sector does include products of

importance to U.S. exporters, particularly fresh fruits and vegetables (potatoes, apples, and

fresh vegetables), cotton, seeds for planting, live animals, and animal genetics.

Cuban fruit and vegetable production has grown significantly over time. In particular, the

Cuban citrus industry has been bolstered by the presence of an Israeli foreign joint venture

that markets Cuban exports to Europe.151 Cuba is the second leading grapefruit juice

producer in the world (following the United States) and an important exporter of fresh

Valencia oranges.152 In 2005, citrus exports of $100 million were Cuba’s second leading
 153 About 90 percent as juice and the remainder as fresh fruit. CubaNews, “Citrus Crop Recovers from

Last Year’s Distasters.”

 154 Ross and Fernandez Mayo, “Cuba’s dollar food market and U.S. Exports,” 14. In 2007 there were

about 200,000 Cubans with urban gardens. Clausen, “Worms, Cows, and Sugarcane Cuba Heals its Soil,” 49.

 155 United Nations, Food and Agriculture Organization, FAOStat.

 156 Industry representative, interview with Commission staff, May 4, 2007.

 157 Ross and Fernandez Mayo, “Cuba’s dollar food market and U.S. Exports,” 23.

 158 Joseph Lallande, Maine Potato Growers, Inc., written submission to the Commission, May 7, 2007.

 159 United Nations, Food and Agriculture Organization, FAOStat.

 160 Maine Potato Growers, Inc., written submission to the Commission, May 4, 2007.

4-34

agricultural export behind tobacco.153 In crop year 2005/06, Cuba grew 156,000 tons of

grapefruit and 342,000 tons of Valencia oranges: about 80 percent was processed into citrus

juice in five plants in Cuba; 5 percent exported fresh and/or sold to the tourism/convertible

peso market; and the remaining 15 percent sold fresh to Cubans. Cuba has a large organic

gardening and small farmer fresh vegetable and fruit sector, some products of which are sold

in hard currency tourist hotels and restaurants through a marketing entity operated by the

Ministry of Agriculture.154 Cuban production of tropical yams, plantain, and sweet and white

potatoes is abundant.155

Joint venture hotels and restaurants can experience problems with delivery of Cuban fresh

produce as trucking and refrigeration are often lacking within Cuba.156 Fresh fruits and

vegetables are an important item in Cuban tourist restaurants: about 9 percent of a leading

Cuban restaurant chain’s purchases of imported food consisted of fresh fruits and vegetable

imports.157

In 2006, Cuba imported $57 million of these other products; three-quarters of the total

consisted of coffee, fresh potatoes, sugar, chocolate and cocoa, and spices. In 2006, the

United States exported $2 million (4 percent) of these products. Cuban imports of fresh fruits

and vegetables amounted to $16 million in 2006, $1.3 million supplied by the United States.

The leading Cuban imports of fruit and vegetables from all countries were potatoes

(64 percent) and apples (7); the United States supplied chiefly apples, almonds, and table

grapes.

Cuba has imported 30,000 to 36,000 mt of seed potatoes annually for planting.158 The EU

exported about two-thirds of Cuba seed potato imports, with the remainder coming from

Canada.159 In addition to the seed potato needs, Cuba imports small amounts of fresh table

potatoes when its domestic potato crop is low, according to the Maine Potato Growers. Cuba

has imported seed potatoes to upgrade and improve its domestic potato production which has

been declining over the past six years. In the case of fresh table potatoes, Cuban

phytosanitary officials have been unable to inspect Maine potato fields and cultural practices,

which has prohibited the fulfillment of a $6–$9 million fresh potato contract with

Alimport.160

The United States is both an importer and exporter of fresh fruits and vegetables as well as

one of the world’s leading producers. The United States tends to import winter vegetables,

and tropical fruit (such as bananas), and export temperate products like apples, pears, and

edible nuts (almonds). U.S. exports of fresh fruits and vegetables amounted to $9 billion in

2006, with Canada, the EU, Japan, Mexico, China, and Korea being the largest markets.

Cuba was an insignificant market for U.S. fresh fruits and vegetables with purchases of

$1 million in 2006. In 2003, in the Eastern Caribbean market (not including Cuba), the

United States supplied 38 percent of Eastern Caribbean imports of fresh vegetables of
 161 These fresh produce exports go to feed the 2 million tourists visiting the Eastern Caribbean, and to

supply cruise ships docking at these countries. U.S. Department of Agriculture, Foreign Agricultural Service,

Caribbean Basin HRI Food Service Sector: Eastern Caribbean Region Report 2007, 13.

 162 Joseph Lallande, Maine Potato Growers, Inc., statement to the Commission, May 7, 2007; Will

Weissert, “North Dakota pushes potatoes in Cuba.”

 163 For scenarios 1 and 3, it is assumed that Cuban officials would not be denied visas for travel to the

United States to meet with U.S. phytosanitary officials, which has been a significant barrier to trade for this

category of products. In addition, port delays owing to OFAC regulations, which are currently an important

impediment to exports of perishable produce, are assumed to be removed in scenarios 1 and 3.

4-35

$44 million, and 58 percent of the region’s imports of fresh fruits and nuts of $25 million,

according to USDA.161

There were no U.S. exports to Cuba of potatoes, tomatoes, lettuce, peppers or onions during

2001–06. U.S. exports to Cuba included apples and table grapes, which can be refrigerated

for months without spoilage. U.S. exporters of more perishable fresh vegetables will not

assume the risk posed by port delays owing to OFAC regulations. The States of Maine,

Idaho, and North Dakota have been unable to export fresh potatoes to Cuba because of the

travel restriction on Cuban phytosanitary officials traveling to those States.162

Removing the financing restrictions (scenario 1)163 is likely to increase the value of Cuban

purchases of other U.S. products by $34.3 million to $65 million above the $5 million of

U.S. exports to Cuba in 2006 (table 4.19). Removal of travel restrictions to Cuba (scenario

2) would increase U.S. fresh produce exports by $1 million to $3.1 million above their 2006

level. Elimination of both the trade and travel restrictions (scenario 3) is likely to increase

U.S. fresh produce exports by $37.6 million to $67.8 million.
4-36

Table 4.19 Other products: Effect of removing financing and travel restrictions on Cuban imports

Scenario With restriction Without restriction Changea

Lifting financing restrictions (scenario 1):

Cuban imports for Cubans ($ million) 134.8 125.0 - 130.0 -9.8 - -4.8

Cuban imports for Tourists ($ million) 7.1 6.6 - 6.8 -0.5 - -0.3

Total Cuban imports ($ million) 141.9 131.5 - 136.8 -10.4 - -5.1

U.S. share of Cuban imports (%) 3.4 28.6 - 53.1 25.2 - 49.7

Cuban imports from the United States ($ million) 4.9 39.2 - 69.9 34.3 - 65.0

Lifting travel restrictions (scenario 2):

Cuban imports for Cubans ($ million) 134.8 135.4 - 136.7 0.6 - 1.9

Cuban imports for Tourists ($ million) 7.1 9.1 - 13.2 2.0 - 6.1

Total Cuban imports ($ million) 141.9 144.6 - 149.9 2.7 - 8.0

U.S. share of Cuban imports (%) 3.4 4.1 - 5.3 0.7 - 1.9

Cuban imports from the United States ($ million) 4.9 5.9 - 8.0 1.0 - 3.1

Lifting financing and travel restrictions (scenario 3):

Cuban imports for Cubans ($ million) 134.8 126.7 - 130.6 -8.1 - -4.2

Cuban imports for Tourists ($ million) 7.1 12.0 - 13.3 4.9 - 6.2

Total Cuban imports ($ million) 141.9 138.7 - 143.8 -3.2 - 2.0

U.S. share of Cuban imports (%) 3.4 29.5 - 52.4 26.1 - 49.0

Cuban imports from the United States ($ million) 4.9 42.4 - 72.7 37.6 - 67.8

Source: Commission estimates.

Note: Estimates of the effects of lifting financing restrictions are based on a price wedge (additional cost) of

5 - 10 percent. Estimates of the effects of lifting travel restrictions are based on tourist increases of 250,000 -

750,000.

a

The changes in the value of imports reflect the total changes in the cost to Alimport. The removal of restrictions

entails reductions in the costs of importing. When these cost reductions are greater than the increase in the value of

additional imports the change is negative. This does not imply a decline in the returns or prices received by U.S.

exporters.
4-37

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APPENDIX A

Request Letters

A-3
A-4
APPENDIX B

Federal Register Notices

B-3

Federal Register / Vol. 72, No. 65 / Thursday, April 5, 2007 / Notices 16817

INTERNATIONAL TRADE COMMISSION 

[Investigation No. 332-489]

U.S. Agricultural Sales to Cuba: Certain

Economic Effects of U.S. Restrictions

AGENCY: United States International Trade

Commission.

ACTION: Institution of investigation and

scheduling of public hearing.

SUMMARY: Following receipt of a request

on March 16, 2007, from the Committee on

Finance of the United States Senate

(Committee), the Commission instituted

investigation No. 332-489, U.S. Agricultural

Sales to Cuba: Certain Economic Effects of

U.S. Restrictions, under section 332(g) of

the Tariff Act of 1930 (19 U.S.C. 1332(g)).

DATES:

March 30, 2007: Date of institution.

April 24, 2007: Deadline for filing

requests to appear at the public hearing.

April 26, 2007: Deadline for filing

prehearing briefs and statements.

May 1, 2007, 9:30 a.m.: Public hearing.

May 8, 2007: Deadline for written

statements, including any post-hearing

briefs.

June 29, 2007: Transmittal of report to

the Committee on Finance.

ADDRESSES: All Commission offices,

including the Commission’s hearing rooms,

are located in the United States

International Trade Commission Building,

500 E Street, SW., Washington, DC. All

written submissions, including requests to

appear at the hearing, statements, and

briefs, should be addressed to the

Secretary, United States International Trade

Commission, 500 E Street, SW.,

Washington, DC 20436. The public record

for this investigation may be viewed on the

Commission’s electronic docket (EDIS) at

http://edis.usitc.gov.

FOR FURTHER INFORMATION

CONTACT:

Industry-specific information may be

obtained from John Reeder, Project Leaders

(202-205-3319; john.reeder@usitc.gov), or

Joanna Bonarriva, Project Leaders (202-

205-3312; joanna.bonarriva@usitc.gov),

Office of Industries, United States

International Trade Commission,

Washington, DC 20436. For information on

the legal aspects of this investigation,

contact William Gearhart of the Office of the

General Counsel (202-205-3091;

william.gearhart@usitc.gov). The media

should contact Margaret O’Laughlin, Public

Affairs Office (202-205-1819; 

margaret.olaughlin@usitc.gov). Hearing

impaired individuals are advised that

information on this matter can be

obtained by contacting the TDD terminal

on (202-205-1810). General information

concerning the Commission may also be

obtained by accessing its Internet server

(http://www.usitc.gov). Persons with

mobility impairments who will need

special assistance in gaining access to

the Commission should contact the Office

of the Secretary at 202-205-2000.

SUPPLEMENTARY INFORMATION: As

requested by the Committee, the

Commission will conduct an investigation

and provide a report that contains, to the

extent possible, the following information::

 ! An overview of Cuba’s purchases of

agricultural, fish and forestry products

from, to the extend possible, 2000 to the

present, including identification of major

supplying countries, products, and market

segments;

 ! An analysis of the effects that U.S.

restrictions, including those relating to

export financing terms and travel to Cuba

by U.S. citizens, may have had or

currently have on Cuban purchases of

U.S. agricultural, fish, and forestry

products; and,

 ! A qualitative and, to the extent

possible, quantitative estimate of U.S.

sales of agricultural, fish and forestry

products to Cuba, in the event that: (i)

Statutory, regulatory, or other restrictions

affecting agricultural exports are

removed, (ii) statutory, regulatory, or

other restrictions on travel to Cuba by

U.S. citizens are lifted, and, (iii) statutory,

regulatory, or other restrictions affecting

agricultural exports are removed and

statutory, regulatory or other restrictions

on travel to Cuba by U.S. citizens are

lifted.

 As requested, the Commission will

transmit its report to the Committee by

June 29, 2007. 

 Public Hearing: A public hearing in

connection with the investigation is

scheduled to be held at the U.S.

International Trade Commission Building,

500 E Street, SW., Washington, DC

beginning at 9:30 a.m. on May 1, 2007.

All persons shall have the right to appear,

by counsel or in person, to present

information and to be heard. Requests to

appear at the public hearing should be

filed with the Secretary, United States

International Trade Commission, 500 E

Street, SW., Washington, DC 20436, no

later than 5:15 p.m., April 24, 2007. Any

prehearing briefs (original and 14 copies)

should be filed not later than 5:15 p.m., 

April 26, 2007. The deadlines for filing

post-hearing briefs or statements is

5:15 p.m., May 9, 2007. In the

event that, as of the close of

business on April 24, 2007, no

witnesses are scheduled to appear

at the hearing, the hearing will be

canceled. Any persons interested

in attending the hearing as an

observer or non-participant may

call the Secretary (202–205–2000)

after April 24, 2007, to determine

whether the hearing will be held.

 Written Statements: In lieu of or

in addition to participating in the

hearing, interested persons are

invited to submit written statements

concerning the investigation. All

submissions should be addressed

to Secretary, United States

International Trade Commission,

500 E Street, SW., Washington,

DC 20436, and should be received

no later than the close of business

on May 8, 2007. All written

submissions must conform with the

provisions of section 201.8 of the

Commission’s Rules of Practice

and Procedure (19 CFR 201.8).

Section 201.8 of the rules requires

that a signed original (or a copy

designated as an original) and

fourteen (14) copies of each

document be filed. In the event that

confidential treatment of the

document is requested, at least

four (4) additional copies must be

filed, in which the confidential

information must be deleted (see

the following paragraph for further

information regarding confidential

business information). The

Commission's rules do not

authorize filing submissions with

the Secretary by facsimile or

electronic means, except as

permitted by section 201.8 of the

Commission’s Rules (19 CFR

201.8) (see Handbook for

Electronic Filing Procedures, 

http://www.usitc.gov/secretary/fed_

reg_notices/rules/documents/hand

book_on_electronic_filing.pdf. 

 Any submissions that contain

confidential business information

must also conform with the

requirements of section 201.6 of

the Commission's Rules of Practice

and Procedure (19 CFR 201.6).

Section 201.6 of the rules requires

that the cover of the document and

the individual pages be clearly

marked as to whether they are the

“confidential” or “non-confidential''

version, and that the confidential

business information 
B-4

16818 Federal Register / Vol. 71, No. 167 / Tuesday, August 29, 2006 / Notices

be clearly identified by means of

brackets. All written submissions,

except for confidential business

information, will be made available in

the Office of the Secretary to the

Commission for inspection by

interested parties. The Committee has

asked that the report that the

Commission transmits not contain any

confidential business information. Any

confidential business information

received by the Commission in this

investigation and used in preparing the

report will not be published in a manner

that would reveal the operations of the

firm supplying the information.

 By order of the Commission.

 Issued: April 2, 2007.

Marilyn R. Abbott, 

Secretary to the Commission.

[FR Doc. E7–6409 Filed 4–4–07;

8:45 am]

BILLING CODE 7020-02-P
B-5

35722 Federal Register / Vol. 72, No. 125 / Friday, June 29, 2007 / Notices

INTERNATIONAL TRADE COMMISSION 

[Investigation No. 332-489]

U.S. Agricultural Sales to Cuba: Certain

Economic Effects of U.S. Restrictions

AGENCY: United States International Trade

Commission.

ACTION: Extension of date for transmitting

report.

SUMMARY: Following receipt of a letter on

June 18, 2007, from the Committee on

Finance of the United States Senate

(Committee), the Commission has extended

to July 12, 2007, the date for transmitting its

report to the Committee in investigation

No. 332-489, U.S. Agricultural Sales to

Cuba: Certain Economic Effects of U.S.

Restrictions.

DATES: June 18, 2007: Receipt of letter

from the Committee. July 12, 2007: New

date for transmitting the Commission’s

report to the Committee.

 Background: The Committee’s letter

dated June 18, 2007 and received on

June 18, 2007, notes that Commission staff

recently received visas to travel to Cuba and

notes that the Commission will need

additional time to incorporate any new

information obtained during the travel into its

report. To facilitate the incorporation of new

information, the Committee has extended

the transmittal date for the report to July 12,

2007.

 The Commission published notice of

institution of the investigation in the Federal

Register on April 15, 2007 (72 FR 16817).

The notice is also available on the

Commission Web site at http://www.usitc.

gov. All other information about the

investigation, including a description of the

subject matter to be addressed, contact

information, and Commission addresses,

remains the same as in the original notice.

The public record for this investigation may

be viewed on the Commission’s electronic

docket (EDIS) at http://www.usitc.gov/

secretary/edis.htm.

Issued: June 25, 2007.

By order of the Commission.

Marilyn R. Abbott, 

Secretary to the Commission.

[FR Doc. E7–12657 Filed 6–28–07;

8:45 am]

BILLING CODE 7020-02-P

APPENDIX C

Hearing Witnesses

C-3

As of April 30, 2007 @ 3:00 p.m.

 TENTATIVE CALENDAR OF PUBLIC HEARING

Those listed below are scheduled to appear as witnesses at the United States International Trade

Commission’s hearing:

Subject: U.S. Agricultural Sales to Cuba: Certain Economic Effects of U.S.

Restrictions

Inv. No.: 332-489

Date and Time: May 1, 2007 - 9:30 a.m.

Sessions will be held in connection with this investigation in the Main Hearing Room (room 101),

500 E Street, S.W., Washington, D.C.

STATE GOVERNMENT WITNESSES:

The Honorable Roger Johnson, North Dakota Agriculture Commissioner

TIME

ORGANIZATION AND WITNESS: ALLOCATION:

U.S.-Cuba Trade and Economic Council, Inc. 10 minutes

New York, NY

John S. Kavulich, Senior Policy Advisor

Port Authority of Corpus Christi 10 minutes

Corpus Christi, TX

Ruben Bonilla, Jr., Chairman, The Port Commission

University of Florida 10 minutes

Institute of Food and Agricultural Sciences (“IFAS”)

Gainesville, FL

William A. Messina, Jr., Professor

-1-
C-4

TIME

ORGANIZATION AND WITNESS: ALLOCATION:

American Society of Travel Agents 10 minutes

Alexandra, VA

Paul Ruden, Senior Vice President of Legal

and Industry Affairs

Melissa Teates, Director of Research

North American Export Grain Association 10 minutes

Washington, D.C.

Gary C. Martin, President and CEO

U.S.-Cuba Trade Association 10 minutes

Washington, D.C.

Kirby Jones, President

USA Rice Federation 10 minutes

Arlington, VA

Bill J. Reed, Vice President, Public Affairs,

Riceland Foods, Inc.

-END-
APPENDIX D

Summary of Views of Interested Parties

 1

 Roger Johnson, commissioner, North Dakota Department of Agriculture, written submission and hearing

transcript, 6-13.

 2

 Agriculture is the largest sector in the North Dakota economy, generating $4.7 billion in cash receipts in

2006, $3.9 billion in exports, and leading the Nation in production of 14 commodity categories. 

 3

 John S. Kavulich, senior policy advisor, U.S.-Cuba Trade and Economic Council, hearing transcript, 13-

22.

 4

 The Council provides the United States business community with information and analysis on matters

and issues of interest regarding commercial, economic, and political relations between the United States and

Cuba.

D-3

Roger Johnson, North Dakota Agriculture Commissioner

North Dakota Department of Agriculture1

In his testimony, Commissioner Roger Johnson stated that North Dakota has exported

$32 million in agricultural products to Cuba since 2002, including dry edible beans, green

and yellow peas, lentils, wheat, semolina flour, and pasta.2

 To facilitate Cuban trade, in

November 2005 the Commissioner signed a memorandum with Alimport resulting in $11

million in sales and an expected additional $9 million by the end of 2007.

The Commissioner indicated North Dakota agriculture will not be fully competitive in the

Cuban market, despite natural logistical competitive advantages, without normalized trade

relations. Commissioner Johnson cited licensing, documentation, and “cash only” sales as

issues that have affected North Dakota producers negatively. All shipments destined for

Cuba without all embargo-required documents are stopped in Florida, often the result of

government delays. Further, if a product misses the weekly ship to Cuba from Florida, the

product must wait until the following week, jeopardizing product quality. According to the

Commissioner, the “cash in advance” requirement has created a number of inefficiencies,

characterized by sales of small volumes, the absence of long-term contracts, unnecessarily

high transportation costs due to the lack of back hauling, and exchange rate losses.

The Commissioner suggested that establishing normalized trade relations with Cuba would

benefit North Dakota and U.S. agriculture by a conservative estimate of a 30 percent increase

in U.S. trade. In addition to streamlined documentation requirements and elimination of

“cash in advance” sales, the Commissioner indicates that he supports direct banking

transfers, a lifting of travel restrictions, the extension of trade beyond food and medicine, a

biotech research exchange, and holding Cuba to the same sanitary and phytosanitary

standards as the rest of the world trading community. According to the Commissioner, these

changes in policy would lead to expansion of higher-value, higher-quality exports to Cuba

and the ability to compete with foreign countries for the Cuban market.

John S. Kavulich, Senior Policy Advisor

U.S.-Cuba Trade and Economic Council3

Mr. Kavulich of the U.S.-Cuba Trade and Economic Council referenced several issues with

respect to the Cuban government that impair U.S. exports.4

 He said that the Ministry of

Foreign Trade initiated a policy in 2003 in which Alimport decreased or suspended

purchases from U.S. companies, depending on how actively members of Congress, state

officials, and organizations were perceived to be lobbying the U.S. government for changes
 5

 Ruben Bonilla, Jr., chairman of the Port Commission, Port Authority of Corpus Christi, Texas, written

submission and hearing transcript, 46-54.

 6

 The Port of Corpus Christi is the sixth-largest port in the United States by tonnage.

 7

 These contract cover or tentatively cover wheat, beans, dairy products, pork, rice, processed foods,

lumber and fresh fruit

D-4

in laws and regulations. According to Mr. Kavulich, the Cuban government also repeatedly

defaults on payment for foreign imports. He also stated that Cuban government price

controls purposefully limit the purchasing ability of consumers.

Mr. Kavulich said that policy changes needed to improve trade between the two countries

would require Cuban reform, and not reform in the United States. Mr. Kavulich testified that

limited investment in tourism infrastructure under the Cuban government has left Havana

and the country incapable of handling the influx of tourists. Given minimum-standard hotel

accommodations and the fact that most cruise ship tourists are being accommodated onboard

their vessels, he testified that a significant increase in demand for high value, high-quality

U.S. products is unlikely. The “cash only” sales provision in U.S. law is warranted, in his

opinion, due to concerns of U.S. firms that a Cuban default would likely erode support for

improved trade normalization. Further, according to Mr. Kavulich, regulations limiting

exports to agricultural food products and health care products have not been substantially

limiting. 

Mr. Kavulich said that the Commission’s analysis in this investigation should include three

scenarios regarding the Cuban Government regime. The first scenario should be based on

the existing Cuban commercial, economic, and political institutions. The second should

involve a Cuban government transitioning towards freer institutions. The third scenario

should be a completely transitioned Cuban Government. Mr. Kavulich stated that the regime

under which Cuban consumers are subject has direct and important impacts on the effect of

the lifting of sanctions.

Ruben Bonilla, Jr., Chairman of the Port Commission

Port Authority of Corpus Christi, Texas5

In his statement, Mr. Bonilla, Jr. said that the Port Authority of Corpus Christi has exported

100,000 metric tons of food products to Cuba since June 2003 as part of an agreement with

Alimport to expand trade relations between the two entities for these and other commodities.6

The Port Authority is actively pursuing similar export contracts for additional agricultural

commodities and is involved in the signing of contracts between multiple States and

Alimport.7

He cited concerns regarding U.S. restrictions on travel and direct banking, and the limitations

on exportable products. He said Alimport pledged a doubling of exports through Corpus

Christi, but that U.S. restrictions have prevented that from happening. He also said that

current travel regulations prevent U.S. ports from effectively conducting business with Cuba

most of the year, and that regulations on direct financial transfers to U.S. exporters can

prevent shipment loading prior to receiving the cash transfer. He also indicated that if a cash
 8

 William A. Messina, Jr., agricultural economist, University of Florida Institute for Food and Agricultural

Sciences, Texas, written submission and hearing transcript, 54-64.

 9

 University of Florida faculty have conducted 15 years of collaborative work with faculty at the

University of Havana on U.S.- Cuban trade relations. This collaboration has permitted unprecedented access

to writings and expertise of Cuban economists and scientists, Cuban data, and first hand observation of farms

and markets as Cuban agriculture has been transformed. 

D-5

transfer is delayed and the vessel is at port, the costs to the importer can be $15,000 per day

per vessel. 

Mr. Bonilla reported that the president of Alimport stated that a lifting of restrictions on U.S.

food and agricultural exports to Cuba could equate to $5 billion in sales over the next five

years. As such, Mr. Bonilla recommended five reforms to U.S. restrictions: (1) general

business travel license provisions, (2) unrestricted travel for port authorities, (3) direct

financial transfers to U.S. banks by Alimport, (4) the reduction of restrictions on rail cars and

energy, and (5) the extension of visas to Alimport officials. He also indicted that U.S. travel

restrictions for port officials should at a minimum mirror those restrictions in place for U.S.

export shippers, and the license should be valid for 12 months with authorization to travel

as frequently as necessary to conduct business.

William A. Messina, Jr., Agricultural Economist

University of Florida Institute of Food and Agricultural

Sciences8

Mr. Messina cited Cuban credit risk and the U.S. “cash only” sales provision, travel

restrictions, and general distrust as potential factors limiting trade. He said the Cuban market

is widely recognized as a very risky market in which to conduct credit sales and other

financial transactions. According to Mr. Messina, some large firms may be willing to take

on this credit risk, which is currently minimized through the “cash only” sales provision, to

increase exports. Conversely, he could also envision a situation where exports would

decrease without “cash only” sales as firms would be unwilling to assume such a high risk.

Mr. Messina suggested that the lifting of U.S. travel restrictions could increase tourism and

family visitations and remittances. An influx of tourists could increase demand for new

hotels and restaurants, driving demand for high-quality, high-value U.S. agricultural

products. Mr. Messina added that the lifting of travel restrictions will increase the frequency

of family visits and remittances. Much of the remittance would likely be used for food

consumption, increasing demand for U.S. agricultural products. In addition, Mr. Messina

testified that simple distrust between the United States and Cuba is a powerful disincentive

to engage in commercial trading. He noted that he and his University of Florida colleagues

found that open U.S.-Cuba trade and commercial relations could create an additional

$1 billion in U.S. agricultural exports and $700 million in agricultural inputs.9
 10 Bill J. Reed, vice president of public affairs, USA Rice Federation, written submission and hearing

transcript, 83-89.

 11 The USA Rice Federation is a national organization of rice producers, millers, merchants, exporters,

and related industries that promote the U.S. rice industry. 

 12 Gary C. Martin, president and CEO, North American Export Grain Association, written submission and

hearing transcript, 67-74.

 13 The North American Export Grain Association (NAEGA) promotes and sustains the development of

commercial grain and oilseed exports and represents a majority of U.S. exports of grains, oilseeds, and

related products. With regard to Cuba, NAEGA is primarily interested in maintaining contract integrity and

providing for optimal terms of trade under U.S. regulations.

D-6

Bill J. Reed, Vice President, Public Affairs

USA Rice Federation10

Mr. Reed testified that the U.S. rice industry is export dependent, shipping approximately

one-half of its production of 6.4 million metric tons abroad annually.11 He indicated that

since the United States lifted its ban on agricultural exports to Cuba in 2000, U.S. rice

exports to Cuba have totaled 630,000 tons. Prior to the embargo in 1962, Cuba was the

largest export market for U.S. rice and is predicted to reach that status again if U.S.-Cuban

trade relations are normalized, according to Mr. Reed. 

In his testimony, Mr. Reed indicated that without normalized trade relations, the U.S. rice

industry will not reach its potential in competing with other countries in the Cuban market

despite competitive advantages and higher quality. Mr. Reed referenced the “cash only” sales

provision and the restriction on direct wire transfers as key hindrances to U.S. agricultural

exports to Cuba. These restrictions have prevented the United States from being a “reliable”

supplier to the Cuban market.

Mr. Reed suggested that all economic sanctions and restrictions regarding Cuba should be

removed. He testified that the TSRA legislation passed in 2000 to improve trade has been

“impeded by unnecessary and unjustified regulatory action” by the current Administration

with the purpose of restricting trade and travel with Cuba. He estimated that the United

States would supply nearly all Cuban rice imports, currently averaging 550,000-600,000 tons

annually, and make Cuba the second-largest rice export market if the U.S. government were

to remove all restrictions.

Gary C. Martin, President and CEO

North American Export Grain Association12

Mr. Martin cited licensing procedures for agricultural exports and the“cash only” payment

provision as NAEGA’s primary concerns under the Trade Sanctions Reform and Export

Enhancement Act of 2000.13 Mr. Martin indicated that the U.S. government approval process

for licenses is inconsistent and appears to take longer for agricultural exports to Cuba.

Concerning “cash only” payment provision, Mr. Martin testified that U.S. government

actions have created a climate of commercial uncertainty. In 2005, the Department of

Treasury froze Cuban payments to U.S. exporters to review the terms of those payments. Mr.

Martin noted the freeze included contracts from prior to the change in interpretation of the

“cash only” provision, damaging certain U.S. interests. Mr. Martin added that the
 14 James Summer, president, USA Poultry and Egg Export Council, written submission.

 15 The USA Poultry and Egg Export Council (USAPEEC) is a nonprofit organization dedicated to

increasing exports of U.S. poultry and egg food products. The Council accounts for more than 90 percent of

U.S. poultry and egg exports and includes most domestic production and processing companies.

D-7

Department of Treasury’s 2005 definition of “financing” under the “cash only” provision is

unreasonable.

Mr. Martin recommended that the U.S. government improve licensing procedures and clarify

“payment of cash in advance” in order to better participate in market opportunities available

to U.S. industries in Cuba. He suggested that the Commerce Department provide greater

consistency in the length of the approval process for licenses and improve the overall time

it takes for approvals to occur. Mr. Martin also noted clarification is needed for definition

of “payment of cash in advance” in addition to approval for direct financial transfers from

Cuban to U.S. banks. He also expressed the need for expanded and more predictable

business travel for industry representatives to Cuba.

James Summer, President

USA Poultry and Egg Export Council14

In his submission, Mr. Summer stated that U.S. poultry is one of the largest U.S. export

commodities to Cuba.15 However, exports of U.S. poultry have had small or negative growth

and eggs are no longer exported to Cuba in recent years due to U.S. restrictions and

regulations on trade. 

Mr. Summer identified restrictions on sales, transactional financing, and travel as having a

significant detrimental effect on U.S. poultry and egg exports to Cuba. He stated that special

licenses, needed for doing business in Cuba, require going through a cumbersome, timeconsuming, and opaque application system that can take months to gain approval. The

industry perceives the approval process as discouraging and designed to deny approval

whenever possible. The prohibition on direct financial transactions leads to unnecessary

transactional costs that could accrue to as much as $7,300 for a standard shipment of

chicken. He also indicated that travel restrictions have limited the number of tourists visiting

Cuba and resulted in limited demand for high value products in the Cuban services industry.

Additionally, the travel restrictions have limited the ability of Cuban health officials and

technicians to visit the United States to participate in meaningful dialogue with U.S.

counterparts to minimize misunderstandings that can cause unnecessary delays and

disruptions in trade. Mr. Summer noted that the lack of both air and ocean transportation,

the prohibition on currency exchange, and other requirements for doing business that would

normally be taken for granted are either limited or extremely costly in Cuba.

Mr. Summer strongly recommended that restrictions on engaging in trade with Cuba,

including restrictions on business and tourist travel, and financial transactions, be removed.

The removal of these restrictions, according to Mr. Summer, would allow the U.S. poultry

and egg industry to take advantage of its proximity to Cuba and competitively compete with

foreign countries in the Cuban market.
 16 Richard Ostlie, president, American Soybean Association, written submission.

 17 The American Soybean Association is primarily focused on policy development and implementation

and represents 27,000 soybean producers in the United States. 

 18 Joseph Lallande, president and CEO, Maine Potato Growers, Inc., written submission.

 19 Maine Potato Growers, Inc. (MPG) is an agricultural marketing and supply cooperative serving the

needs of northern Maine potato growers with 400 active member growers and 125 full-time associates.

D-8

Richard Ostlie, President

American Soybean Association16

Mr. Ostlie of the American Soybean Association indicated that the Cuban market for

soybeans, soybean meal and soybean oil imports totaled $91 million of U.S. product in 2006,

up from $40 million in 2002.17 He listed four hindrances to soy exports into Cuba:

(1) payment of cash in advance, (2) third party banking, (3) licensing rules, and (4) the lack

of government assistance. The requirement of “cash in advance,” according to Mr. Ostlie,

caused delays and complications to U.S. export shipments, forcing Cuba to look elsewhere

for alternative suppliers. The prohibition on direct financial transfers causes unnecessary

delays and added costs, he said. There is no guarantee that licenses–which are necessary for

selling goods to Cuba–would be granted, and the time and resources needed to apply have

been burdensome, especially on small businesses and farmers. He also mentioned that U.S.

agricultural cooperators and affiliates are unable to use government assistance for their

exports to Cuba. Programs such as the USDA Market Access Program, Foreign Market

Development and industry checkoff funds, used regularly for market development abroad,

are not available for marketing to the Cuban market. 

Mr. Ostlie recommended the lifting of restrictions on “cash in advance,” third party banking,

licensing rules, and government payments. He noted these restrictions impede the economic

growth of both Cuba and U.S. soybean producers, and cited a U.S. Soybean Export Council

report that found lifting all U.S. restrictions on Cuba could result in approximately $1 billion

in U.S. sales of agricultural and food products to Cuba annually.

Joseph G. Lallande, President and CEO

Maine Potato Growers18

Mr. Lallande of the Maine Potato Growers (MPG) wrote that Cuba offers a large and

untapped potential export market for seed potatoes and tablestock potatoes.19 He indicated

that Alimport signed a letter of intent to purchase both seed and table potatoes from MPG,

but the parties have been unable to successfully complete the transaction due to U.S.

restrictions. 

Mr. Lallande cited concerns regarding travel restrictions for both U.S. businesses and Cuban

government officials, the revised “payment in cash” provision, and the prohibition on direct

financial transfers. Mr. Lallande said that the cumbersome travel restrictions make business

travel, which is essential for doing business, extremely difficult. These travel restrictions

prevent Cuban plant health inspectors from visiting U.S. sites to determine if U.S.

agricultural practices pose any threat to the Cuban potato industry. Additionally, Mr.

Lallande noted that the “cash only” sales provision and restriction on direct transfer of funds
 20 Kirby Jones, president, U.S.-Cuba Trade Association, written submission and hearing transcript, 74-82.

 21 The USCTA is comprised of 55 member companies and organizations which support full commercial

relations between Cuba and the United States. Mr. Jones, president of USCTA, has been involved in U.S.-

Cuba relations for 33 years and many of the agricultural sales contract negotiations with Cuba over the past

five years. 

D-9

from Cuban to U.S. banks places the United States at a competitive disadvantage with other

foreign suppliers of the Cuban market.

Mr. Lallande stated that he hoped the U.S. government would begin more liberal commercial

relations with Cuba. He said further that the lifting of travel restrictions, the “cash only”

sales provision, and the direct financial transfers restriction would help MPG to sell its

products to Alimport. He projected the potential export opportunity for his organization in

Cuba at between $6.6 million and $9.0 million.

Kirby Jones, President

U.S.-Cuba Trade Association20

In his submission, Mr. Jones of the U.S.-Cuba Trade Association (USCTA) said that the

current Administration has taken action to stifle agricultural exports to Cuba despite

Congress’ attempt to open agricultural trade in the Trade Sanctions Reform and Export

Enhancement Act of 2000.21 He described these actions as including: (1) redefining

“payment in advance,” (2) freezing Cuban payments for U.S. products for investigations

without any given reason, (3) threatening to investigate U.S. operations of foreign banks

unless the banks terminate Cuban operations, (4) prohibiting U.S. firms from using the

Netherlands-Caribbean Bank, a bank used by many U.S. firms exporting to Cuba,

(5) permitting only one Cuban visit to each U.S. port annually, and (6) intimidating U.S.

firms by not granting permission to travel to Cuba. Mr. Jones added that these and other

actions taken by the Administration have led Cuban government officials to conclude that

they are not willing to take the risk of further increasing purchases from the United States.

Mr. Jones disagreed with claims made that Alimport purchases products based on political

reasons. He said that Alimport’s purchasing decisions are based primarily on price and other

normal business criteria.

Mr. Jones said that Congress should enact HR 1026, which would allow direct banking for

agricultural sales, allow a general license for travel, and redefine payment in advance to

mean payment before goods change title. He also said that Congress should ensure that the

Administration seek congressional approval for any action which would impact

Congressional legislation. Mr. Jones added that Congress should remove all restrictions on

U.S. citizens traveling to Cuba by passing HR 654 and S 721. According to Mr. Jones,

Alimport officials have said that if the current restrictions were removed Cuba would

purchase $850 million of U.S. agricultural products annually, giving U.S. exporters a

50 percent share of total Cuban agricultural product imports.
 22 Ron Sparks, commissioner, Alabama Department of Agriculture and Industries, written submission.

 23 Larry Sitzman, executive director, Nebraska Pork Producers, written submission.

 24 Ignacio E. Sanchez, General Cigar Company, Inc., written submission.

 25 General Cigar is a 100-year old company that distributes its product primarily throughout the United

States from tobacco grown in Dominican Republic and Honduras and manufactured in Dominican Republic. 

D-10

Ron Sparks, Alabama Agricultural Commissioner

State of Alabama Department of Agriculture and

Industries22

Commissioner Sparks wrote that Alabama agricultural exports to Cuba totaled $140 million

in 2006 and had a $400 million economic impact on the State. He said that Alabama

agriculture, the State’s largest industry, is a major exporter of poultry, utility poles, lumber,

grains, and soybeans to Cuba. In his testimony, he expressed concern with restrictions on

U.S. businesses that hinder the United States from effectively competing in the Cuban

marketplace. He also expressed concern that Alabama agriculture will not be able to export

products competitively into the Cuban market under current conditions. The Commissioner

stated that both houses of the Alabama legislature overwhelmingly passed a resolution

urging Alabama’s congressional delegation as well as other U.S. government leaders to end

the embargo and remove all travel restrictions against Cuba.

Larry Sitzman, Executive Director

Nebraska Pork Producers23

Mr. Sitzman said that the Nebraska pork industry has benefitted from exports to Cuba over

the past two years. Nebraska exported pork, along with wheat, dry edible beans, poultry,

soybeans, corn, and beef to Cuba, totaling $60 million. Mr. Sitzman expressed concern that

the restriction on direct financing has disadvantaged Nebraska pork producers and processors

in the Cuban market. He said that the requirement to handle financial transactions through

a foreign, third-country bank adds additional fees to the final cost of pork. This, in turn,

lowers the competitiveness of U.S. pork compared to other foreign pork suppliers in the

Cuban market and decreases the profitability of U.S. pork processors and producers. He said

that the restriction on direct financing should be altered in order to level the playing field for

Nebraska pork producers with foreign counterparts.

Ignacio E. Sanchez, DLA Piper U.S. LLP Partner

General Cigar Company, Inc.24

Mr. Sanchez, a representative for General Cigar Company, Inc., said that the company’s

Cuban operations, including assets and intellectual property, were confiscated by the Cuban

government under the Castro regime.25 He indicated that the Cuban state-owned companies,

Cubatabaco and Corporacion Habanos, possess in Cuba and other foreign countries title to

trademark registrations for long-established Cuban cigar brands, including ones owned by

General Cigar in the United States.

He said that General Cigar is concerned with the unfair trade scenario that would result if
 26 Shawna Morris, director of government relations and trade, U.S. Dairy Export Council and the National

Milk Producers Federation, written submission.

 27 The USDEC and NMPF combined represent the interests of dairy farmers, dairy cooperative marketing

associations, propriety processors, and export traders. 

D-11

any trade liberalization with Cuba, achieved in advance of fully normalized trade relations,

permits the importation of Cuban products. Specifically, General Cigar is concerned that a

joint venture between a Spanish company, Altadis S.A., and Corporacion Habanos, will

create a monopoly in the U.S. market for distribution of Cuban cigars and result in the illegal

use and derivation of profits from the confiscated trademarks, factories, and other production

assets confiscated by the Cuban government and belonging to General Cigar in the United

States. 

Mr. Sanchez recommended that the Commission undertake a review of U.S. trade laws to

determine the Commission’s relevance to and potential effectiveness in addressing these

anti-competitive conditions. Further, he suggested that Congress should grant the

Commission the appropriate powers needed to address the future challenges that may arise

from a change in U.S.-Cuba relations to prevent irreparable injury to the U.S. cigar market.

Shawna Morris, Director of Government Affairs and Trade

U.S. Dairy Export Council and National Milk Producers

Federation26

Ms. Morris said that the Cuban market is beneficial to the U.S. dairy industry (accounting

for $30 million of U.S. exports in 2005), but U.S. restrictions have caused a substantial

decrease in 2006 exports. She said the National Milk Producers Federation (NMPF) and

U.S. Dairy Export Council (USDEC) was concerned about the reinterpretation of the

permissible payment terms by the Department of Treasury in 2005.27 According to Ms.

Morris, this reinterpretation has increased both the time and costs involved in exporting

agricultural products to Cuba and has had a significant effect on the attractiveness of U.S.

dairy exports to Cuban buyers.

Ms. Morris said that NMPF and USDEC are hopeful for completely normalized trade

relations with Cuba. She said that it was the belief of both MMPF and USDEC that the

reinterpretation of the payment provision by the Department of Treasury violates the intent

of Congress in facilitating agricultural export opportunities in Cuba. As such, she

recommended that the interpretation in place prior to late 2004 be restored.
 28 Royce Schaneman, executive director, Nebraska Wheat Board, written submission.

 29 John Thaemert and Leonard Schock, National Association of Wheat Growers and U.S. Wheat

Associates, written submission.

D-12

Royce Schaneman, Executive Director

Nebraska Wheat Board28

Mr. Schaneman said that Nebraska wheat producers have benefitted from the recent trade

relationship with Cuba, and that Nebraska wheat producers have secured 175,000 metric tons

of hard red winter wheat sales to Cuba.

He stated that suppliers have expressed frustration regarding the restrictions on direct

financial transfers and the “cash only” provisions that have limited the ability of the wheat

industry to export. Prohibiting direct financial transfers to U.S. banks increases the total cost

of delivered commodities to Cuba, and this can result in either reduced profits for the U.S.

industry or lost sales contracts to foreign competitors. In addition, Mr. Schaneman said that

the requirement to perform all transactions on a “cash only” basis has caused contract

completion delays and opportunities for processing errors which negatively impact the

profitability of exporting companies.

Mr. Schaneman said changes to these U.S. financial provisions are necessary to provide a

level playing field for U.S. wheat exporters by granting U.S. exporters the same access to

the Cuban market as their foreign competitors.

John Thaemert, President of the National Association of

Wheat Growers

Leonard Schock, Chairman of U.S. Wheat Associates29

Mr. Thaemert and Mr. Schock wrote that U.S. wheat growers export approximately

50 percent of their annual wheat crop to all countries. They said that Cuba is the largest

import market for wheat and wheat products in the Caribbean, and provides a significant

export potential for U.S. wheat growers. They said that U.S. wheat exports are the third

largest agricultural export to Cuba by value for the 2001 to 2006 period and the largest in

marketing year 2006.

They expressed concern over the prohibition on direct financial transfers, travel restrictions,

and lack of access to USDA commercial loan programs in Cuba. They stated that the

prohibition on direct financial transfers has increased the cost of buying U.S. wheat and

added an excessive and unnecessary administrative burden on Alimport. Travel restrictions,

according to Mr. Thaemert and Mr. Schock, have made doing business in Cuba very

difficult, while most of the U.S. wheat industry’s competition is easily able to travel to Cuba,

as needed to conduct business. They also mentioned that access to the USDA commercial

loan programs would help in exporting to Cuba, but would be insufficient due to the

administrative burdens that exist for the previous reasons.
 30 Paul Ruden, Senior Vice President of Legal and Industry Affairs, written submission and hearing

transcript, 64-67.

 31 The American Society of Travel Agents (ASTA) is a worldwide professional travel trade organization

with 26,000 members in 170 countries. The ASTA promotes and represents the views and interests of travel

agents and its core principle is that travel restrictions should not be used as an instrument of government

policy. 

D-13

Mr. Thaemert and Mr. Schock repeated the position of the U.S. wheat industry, calling for

normalized trade relations with Cuba and the lifting of travel restrictions to and from Cuba.

Specifically, they recommended overturning the February 2005 regulation changes regarding

the transfer of funds between Alimport and U.S. exporters, which have had a substantial

effect on the ability of U.S. wheat producers to export. They cited a U.S. Wheat Associates

estimate that the current restrictions on trade and travel have cost the U.S. wheat industry at

a minimum $40 million annually in lost sales to the Cuban market.

Paul Ruden, Senior Vice President of Legal and Industry

Affairs

American Society of Travel Agents30

Mr. Ruden said that his testimony was for the limited purpose of expressing the results of

an American Society of Travel Agents (ASTA) estimation of the impact of lifting the current

U.S. travel restrictions to Cuba.31 Mr. Ruden indicated that the ASTA estimates an increase

of 1.8 million visits by U.S. citizens to Cuba by 2010 if the United States lifted its travel

restrictions in 2008. Specifically, there would be an increase of 835,000 recreational visits

by air, 481,000 cruise ship visitors, and 482,000 family visitors. He said that this estimate

assumed a three-year build-up as flights are added and U.S. citizens become familiarized

with Cuban travel options. Mr. Ruden also said that estimates are based on the travel patterns

of Canadians to Cuba and the Dominican Republic and Americans to the Dominican

Republic, along with the expected growth rates in tourism for Cuba and the Dominican

Republic.

APPENDIX E

Statistical Tables 

E-3

Table E.1 Cuban imports of wheat and meslin and flour, 2000–06

Reporting country 2000 2001 2002 2003 2004 2005 2006

US Dollars (1,000)

EU 116,433 129,740 104,681 106,537 37,938 42,163 57,363

United States 0 0 22,789 36,736 58,038 52,019 54,059

Canada 16,250 14,909 3,350 16 1,948 28,068 17,259

Argentina 4 0 (a

) (a) 9,720 12,155 6,834

Mexico 119 575 672 2,892 3,095 7,313 73

Brazil 3 11 4 0 0 0 13

China 0 0 0 9 0 8

Other 25 1,391 2,214 51 31 12 3

Reporting total 132,834 146,627 133,709 146,233 110,779 141,731 135,612

Quantity (1,000 metric tons)

EU 910 859 596 582 140 180 264

United States 0 0 176 245 353 328 301

Canada 128 109 17 (a

) 11 174 99

Argentina (a

) 0 0 0 61 99 38

Mexico (a

) (a) (a) 13 10 29 (a)

Brazil (a

) (a) (a) 0 00 0

China 0 0 0 0 0 0 0

Other (a

) 13 23 (a) (a) (a) (a)

Reporting total 1,038 983 814 840 575 809 703

Source: Compiled from Global Trade Atlas. Accessed May 15, 2007.

Note: Due to rounding, numbers may not add to total.

Table E.2 Cuban imports of corn, 2000–06

Reporting country 2000 2001 2002 2003 2004 2005 2006

US Dollars (1,000)

United States 0 2,327 22,739 35,571 57,501 54,914 42,624

Argentina 0 9,495 27 7 3,148 9,182 17,069

Mexico 43 26 21 18 (a

) 92 98

Brazil 0 1,339 0 0 0 0 0

Canada 5,409 0 1,805 0 0 0 0

China 2,500 0 4,999 0 0 0 0

EU 0 0 6 0 0 0 0

Reporting total 7,951 13,187 29,598 35,596 610,649 64,188 59,790

Quantity (1,000 metric tons)

United States 0 25 225 330 484 509 381

Argentina 0 111 (a

) (a) 26 103 126

Mexico (a

) (a) (a) (a) 0(a) (a)

Brazil 0 16 0 0 0 0 0

Canada 39 0 2 0 0 0 0

China 26 0 50 0 0 0 0

EU 0 0 (a

) 0 00 0

Reporting total 65 152 277 330 510 612 507

Source: Compiled from Global Trade Atlas. Accessed May 15, 2007.

Note: Due to rounding, numbers may not add to total.

a

Less than 500.
E-4

Table E.3 Cuban imports of rice, 2000–06

Reporting country 2000 2001 2002 2003 2004 2005 2006

US Dollars (1,000)

United States 26 0 6,266 10,778 64,048 39,204 39,542

Thailand 23 0 0 0 2,832 0 7,495

Brazil 0 0 0 0 0 0 3,632

EU 60 36 289 45 104 1,435 577

Mexico (a

) 12 19 23 7 55 4

Canada 0 12 (a

) 1 1(a) (a)

China 38,809 29,649 39,975 0 0 0 0

Argentina 9 0 39 0 16 (a

) 0

Belize 0 111 0 0 0 0 0

Russia 0 3 0 0 0 (a

) 0

St. Vincent & the Grenadines 0 6 0 0 0 0 0

Guyana 0 0 0 0 0 97 0

Turkey 0 0 0 0 0 (a

) 0

Uruguay 0 0 0 0 0 228 0

Reporting total 38,926 29,827 46,589 10,847 67,007 41,019 51,250b

Quantity (1,000 metric tons)

United States (a

) 0 55 88 177 154 158

Thailand (a

) 0 0 0 14 0 26

Brazil 0 0 0 0 0 0 13

EU (a

) (a)1(a) (a)4 1

Mexico 0 (a

) (a) (a) (a) (a) 0

Canada 0 (a

)0(a) (a) (a) 0

China 226 196 217 0 0 0 0

Argentina (a

) 0(a) 0(a)0 0

Belize 0 (a

) 0 0 00 0

Russia 0 (a

) 0 0 00 0

St. Vincent & the Grenadines 0 (a

) 0 0 00 0

Guyana 0 0 0 0 0 (a

) 0

Turkey 0 0 0 0 0 0 0

Uruguay 0 0 0 0 0 1 0

Reporting total 226 196 273 88 191 159 199b

Source: Compiled from Global Trade Atlas. Accessed May 15, 2007.

Note: Due to rounding, numbers may not add to total.

a

Less than 500.

b

The reported total does not include rice from Vietnam. In 2005/06, there were a reported 500,000 metric tons of

rice imported from Vietnam which the Commission estimates had a value of about $115 million. The fob price of the

Vietnamese rice was estimated at $230 per metric ton, based on $15 per ton above the lowest priced Thai export

rice during 2005/06. Source: Cuba News, December 2006, 13; and USDA, ERS, Rice Outlook, June 12, 2007, table

6.
E-5

Table E.4 Cuban imports of animal feed, 2000–06

Reporting country 2000 2001 2002 2003 2004 2005 2006

US dollars (1,000)

United States 0 0 19,281 25,884 36,094 23,857 42,308

Mexico 2,819 5,234 2,227 2,411 1,287 7,725 7,115

Argentina 28,248 19,243 2,387 0 13,284 0 4,230

Canada 309 54 274 30 333 732 1,090

Ecuador 0 0 0 0 381 158 479

Guatemala 0 0 0 0 0 45 386

EU 744 1,171 1,209 890 426 136 342

China 1,296 2,186 2,450 1,688 0 0 23

Costa Rica (a

) 6 13 0 0 0 0

Brazil 64 42 0 0 0 17,375 0

Jamaica 0 0 1,425 557 549 0 0

Reporting total 33,480 27,938 29,267 31,459 52,353 50,029 55,972

Source: Compiled from Global Trade Atlas. Accessed May 15, 2007.

Note: Due to rounding, numbers may not add to total.

a

Less than 500.

Table E.5 Cuban imports of soybeans, 2000–06

Reporting country 2000 2001 2002 2003 2004 2005 2006

US dollars (1,000)

United States 0 0 20,922 34,475 27,933 32,723 31,742

Brazil 2,788 6,006 800 46 0 7,756 105

Canada 659 575 2,789 0 0 0 24

Mexico (a

) (a) (a) 000 1

Argentina 0 0 0 0 12,502 0 0

Reporting total 3,448 6,581 24,511 34,521 40,435 40,479 31,871

Quantity (1,000 metric tons)

United States 0 0 110 134 85 121 130

Brazil 8 29 2 (a

) 0 31 (a)

Canada 2 2 15 0 0 0 (a

)

Mexico 0 0 (a

) 000 0

Argentina 0 0 0 0 44 0 0

Reporting total 10 31 127 134 129 151 131

Source: Compiled from Global Trade Atlas. Accessed May 15, 2007.

Note: Due to rounding, numbers may not add to total.

a

Less than 500.
E-6

Table E.6 Cuban imports of fats and oils, 2000–06

Reporting country 2000 2001 2002 2003 2004 2005 2006

US dollars (1,000)

United States 0 0 22,022 51,519 23,765 27,732 22,312

Brazil 8,614 17,760 4,186 3,167 12,295 21,168 8,119

Mexico 5,494 1,760 2,685 716 2,692 6,683 3,210

Canada 649 2,398 1,165 528 606 856 1,887

EU 7,962 3,866 5,147 5,205 1,677 1,694 1,572

Argentina 10,151 4,380 3,468 6,148 13,640 24,766 1,094

Malaysia 0 132 152 139 700 543 279

Guatemala 0 0 205 378 260 150 217

Ecuador 0 0 0 0 69 266 141

China 0 55 0 12 33 108 17

All other 67 443 1 100 38 72 116

Reporting total 32,937 30,794 39,029 67,924 55,791 84,037 38,964

Source: Compiled from Global Trade Atlas. Accessed May 15, 2007.

Note: Due to rounding, numbers may not add to total.
E-7

Table E.7 Cuban imports of dry beans, 2000–06

Reporting country 2000 2001 2002 2003 2004 2005 2006

US dollars (1,000)

China 26,495 24,271 33,890 41,456 23,759 42,505 35,933

United States 0 0 58 1,184 8,395 11,669 19,910

Argentina 288 80 160 143 4,240 611 13,124

Canada 7,827 14,313 17,297 6,510 27,553 6,868 9,603

Mexico 271 71 39 (a

) 171 1,137 347

Brazil 0 0 0 0 0 0 148

EU 378 586 643 5,425 208 65 37

Belize 0 6 0 0 0 0 0

Russia 0 0 0 0 0 (a

) 0

Singapore 0 0 0 (a

)0 0 0

Turkey 0 0 0 0 0 (a

) 0

Reporting total 35,259 39,327 52,087 54,718 64,327 62,854 79,103

Quantity (1,000 metric tons)

China 68 80 106 129 75 129 92

United States 0 0 1 3 30 52 68

Argentina 1 (a

) (a) (a) 10 1 28

Canada 47 71 79 22 107 24 56

Mexico (a

) (a) (a) 0(a)2(a)

Brazil 0 0 0 0 0 0 (a

)

EU (a

) 1 1 21 (a) (a) (a)

Belize 0 (a

) 000 0 0

Russia 0 0 0 0 0 0 0

Singapore 0 0 0 0 0 0 0

Turkey 0 0 0 0 0 0 0

Reporting total 118 151 186 175 222 207 245

Source: Compiled from Global Trade Atlas. Accessed May 15, 2007.

Note: Due to rounding, numbers may not add to total.

a

Less than 500.
E-8

Table E.8 Cuban imports of poultry, 2000–06

Reporting country 2000 2001 2002 2003 2004 2005 2006

US dollars (1,000)

United States 0 1,959 23,097 37,003 61,209 58,276 44,730

Brazil 5,872 16,121 15,171 7,305 32,086 23,635 20,123

EU 14,528 10,084 5,330 6,234 8,246 3,310 2,704

Canada 12,387 12,509 4,820 1,905 767 551 881

Argentina 0 (a

) 0 0 749 91 108

China 0 0 0 0 0 0 31

Chile 0 6 18 2 1 6 29

Mexico 106 12 (a

) (a) 37 0 0

Trinidad & Tobago 0 1 0 0 0 0 0

Reporting total 32,893 40,692 48,435 52,450 103,095 85,869 68,605

Quantity (1,000 metric tons)

United States 0 3 53 70 67 76 79

Brazil 9 25 26 12 43 32 32

EU 25 16 10 13 19 7 4

Canada 20 18 8 4 1 1 1

Argentina 0 0 0 0 1 (a

) (a)

China 0 (a

) (a) (a)0(a) (a)

Chile 0 0 0 0 0 0 (a

)

Mexico (a

) (a) 0 0(a)0 0

Trinidad & Tobago 0 (a

) 000 0 0

Reporting total 54 63 97 99 130 116 117

Source: Compiled from Global Trade Atlas. Accessed May 15, 2007.

Note: Due to rounding, numbers may not add to total.

a

Less than 500.
E-9

Table E.9 Cuban imports of beef and beef products, 2000–06

Reporting country 2000 2001 2002 2003 2004 2005 2006

US dollars (1,000)

Brazil 0 153 1,044 1,167 1,230 1,984 22,615

Uruguay 0 0 0 0 6,930 8,217 13,073

Chile 0 12 1,242 4,435 5,898 5,370 4,696

Canada 1,656 4,334 2,122 960 60 979 1,851

United States 0 0 162 0 209 0 71

EU 2,000 29 2 16 8,621 403 6

Russia 0 44 0 0 0 (a

) 1

Argentina 6 (a

) 0 1 1,209 2,180 (a)

Australia 0 0 0 938 255 0 0

China 105 0 0 (a

) 00 0

Mexico 53 (a

) (a) (a) 836 35 0

New Zealand 0 0 0 128 0 0 0

Panama 0 0 1,242 304 100 0 0

Trinidad & Tobago 0 1 0 0 0 0 0

Reporting total 4,020 4,573 5,815 7,946 25,348 19,168 42,313

Quantity (1,000 metric tons)

Brazil 0 a 1 1 1 1 10

Uruguay 0 0 0 0 3 4 5

Chile 0 a 1 2 3 3 2

Canada 2 3 2 1 (a

)2 1

United States 0 0 (a

) 0(a)0(a)

EU 2 a 0 (a

) 6(a) 0

Russia 0 a 0 0 0 0 0

Argentina (a

) 0 0 0(a)1 0

Australia 0 0 0 1 (a

)0 0

China (a

) 0 0 0 00 0

Mexico (a

) 0 0 0(a) (a) 0

New Zealand 0 0 0 (a

) 00 0

Panama 0 0 (a

) (a) (a)0 0

Trinidad & Tobago 0 a 0 0 0 0 0

Reporting total 4 3 4 5 14 11 18

Source: Compiled from Global Trade Atlas. Accessed May 15, 2007.

Note: Due to rounding, numbers may not add to total.

a

Less than 500.
E-10

Table E.10 Cuban imports of pork and pork products, 2000–06

Reporting country 2000 2001 2002 2003 2004 2005 2006

US dollars (1,000)

United States 0 0 91 0 1,639 7,630 14,163

Canada 9,018 14,092 9,693 7,819 9,696 9,736 10,719

Chile 0 1,184 1,746 1,598 1,756 3,193 6,240

China 279 0 0 (a

) (a) 0 1,473

EU 3,645 2,456 1,848 1,729 1,758 1,456 986

Mexico 161 134 147 102 222 137 33

Argentina 0 0 0 (a

) (a) (a) 0

Brazil 0 2 19 56 720 3,962 0

Dominican Republic 0 1 0 0 0 0 0

Russia 0 0 0 23 0 (a

) 0

Reporting total 13,102 17,869 13,544 11,328 15,792 26,115 33,617

Quantity (1,000 metric tons)

United States 0 0 (a

) 0 248

Canada 6 8 8 5 5 5 5

Chile 0 1 1 1 1 2 3

China (a

)0 0 0 001

EU 3 2 1 (a

) (a) (a) (a)

Mexico (a

) (a) (a) (a) (a) (a) (a)

Argentina 0 0 0 0 (a

)00

Brazil 0 (a

) (a) (a) (a)20

Dominican Republic 0 0 0 0 0 0 0

Russia 0 0 0 (a

) 000

Reporting total 9 11 11 7 10 13 17

Source: Compiled from Global Trade Atlas. Accessed May 15, 2007.

Note: Due to rounding, numbers may not add to total.

a

Less than 500.

Table E.11 Cuban imports of other dairy, 2000–06

Reporting country 2000 2001 2002 2003 2004 2005 2006

US dollars (1,000)

EU 10,603 6,308 7,315 9,164 11,245 12,396 11,000

Argentina 0 0 a a 1,374 3,175 3,152

Uruguay 0 0 0 162 539 311 1,189

Canada 1,564 2,119 1,678 206 811 772 1,188

Brazil 0 0 140 358 380 571 1,125

Mexico 823 955 715 683 808 673 752

New Zealand 0 1,046 831 339 726 243 221

Chile 40 61 100 561 622 314 200

All Others 921 2,664 189 261 693 208 381

Reporting total 13,973 13,153 10,969 11,734 17,197 18,662 19,208

Source: Compiled from Global Trade Atlas. Accessed May 15, 2007.

Note: Due to rounding, numbers may not add to total.

a

Less than 500.
E-11

Table E.12 Cuban imports of milk power, 2000–06

Reporting country 2000 2001 2002 2003 2004 2005 2006

US dollars (1,000)

New Zealand 6,343 43,246 29,282 38,465 53,059 39,477 43,057

Uruguay 0 0 0 133 0 22,429 21,791

Argentina 882 0 0 78 673 10,064 18,400

EU 59,981 18,672 18,671 34,165 22,451 33,779 16,660

United States 0 0 0 0 26,653 29,691 12,561

Brazil 0 0 0 0 0 7,860 10,858

Canada 6,661 10,234 3,370 6,128 4,713 7,218 2,267

Australia 0 7,851 8,653 1,028 0 1,757 1,505

Chile 21 2,161 7,627 10,109 9,505 2,605 950

Switzerland 0 0 0 0 0 2,317 484

All Others 46 11 11 9 14 a a

Reporting total 73,934 82,176 67,614 90,116 117,069 157,196 128,534

Quantity (1,000 metric tons)

New Zealand 3 21 22 24 26 18 19

Uruguay 0 0 0 a 0 10 10

Argentina a 0 0 a a 5 8

EU 35 9 13 21 10 16 7

United States 0 0 0 0 13 13 6

Brazil 0 0 0 0 0 4 5

Canada 4 5 2 3 2 3 1

Australia 0 4 5 1 0 1 1

Chile a 1 4 7 5 1 a

Switzerland 0 0 0 0 0 a a

Reporting total 43 39 46 56 57 71 58

Source: Compiled from Global Trade Atlas. Accessed May 15, 2007.

Note: Due to rounding, numbers may not add to total.

a

Less than 500.
E-12

Table E.13 Cuban imports of processed food products, 2000–06

Reporting country 2000 2001 2002 2003 2004 2005 2006

US dollars (1,000)

EU 21,324 22,295 26,015 31,787 31,659 31,622 33,614

United States 0 0 933 11,629 10,047 2,317 1,126

Mexico 6,738 5,018 4,792 4,777 3,128 4,343 4,004

Chile 2,476 3,453 3,874 4,536 5,649 4,510 6,561

Guatemala 0 0 1,717 4,019 2,627 2,335 3,466

Canada 2,148 1,974 1,861 2,428 2,486 2,480 2,303

Brazil 2,444 2,037 1,010 1,574 2,446 3,508 4,124

Colombia 163 219 491 1,339 1,227 1,928 1,774

Argentina 176 275 1,122 983 1,814 1,573 1,950

Costa Rica 124 85 86 388 409 147 238

Venezuela 239 246 130 320 496 981 624

Ecuador 0 33 64 138 155 73 98

Peru 8 21 20 116 83 18 (a

)

China 28 39 47 104 1,112 1,897 5,531

All other 358 1,016 492 529 894 26,860 1,252

Reporting total 36,227 37,711 42,652 64,668 64,233 58,831 66,665

Source: Compiled from Global Trade Atlas. Accessed May 15, 2007.

Note: Due to rounding, numbers may not add to total.

a

Less than 500.

Table E.14 Cuban imports of fish and seafood, 2000–06

Reporting country 2000 2001 2002 2003 2004 2005 2006

US dollars (1,000)

Chile 23,182 13,477 10,878 6,676 15,576 15,277 14,373

EU 3,366 10,343 3,145 2,775 2,683 4,130 4,300

China 0 0 0 85 651 1,888 3,642

Ecuador 0 1,726 451 845 901 1,096 967

Thailand 116 0 96 259 383 359 619

Peru 432 435 60 82 252 316 443

Argentina 1,047 1,731 1,169 851 1,448 1,377 420

Canada 395 525 224 17 238 210 344

Taiwan 0 0 0 40 0 54 336

Panama 0 0 0 0 0 0 232

Mexico 369 1,863 133 211 126 10 121

Russia 42 37 17 23 5 5 16

United States 0 0 0 38 196 74 3

All other 256 1,023 518 1,886 805 2,123 (a

)

Reporting total 29,205 31,160 16,691 13,788 23,265 26,918 25,815

Source: Compiled from Global Trade Atlas. Accessed May 15, 2007.

Note: Due to rounding, numbers may not add to total.

a

Less than 500.
E-13

Table E.15 Cuban imports of paper and wood products, 2000–06

Reporting country 2000 2001 2002 2003 2004 2005 2006

US dollars (1,000)

Canada 5,293 2,952 7,704 9,604 8,456 8,554 13,690

EU 8,757 11,571 12,360 11,483 12,098 12,916 12,649

United States 0 0 15 5,242 9,816 6,425 9,742

Brazil 745 2,178 3,783 4,471 4,465 6,836 8,159

China 0 2,111 5,477 2,969 6,202 2,150 4,769

Argentina 21 49 1,399 2,727 3,302 5,178 3,800

Mexico 5,916 9,849 918 661 613 1,546 1,678

Russia 192 5 13 949 1,523 1,048 1,061

Ecuador 0 2,552 1,324 1,720 1,308 1,786 981

Nicaragua 0 0 0 0 98 197 348

Chile 0 14 43 70 95 193 171

Honduras 0 0 0 939 160 437 155

Guatemala 0 0 6 712 724 356 145

Peru 0 0 51 104 62 16 72

Colombia 528 462 607 176 12 115 39

All Other 968 1,507 1,461 1,908 1,126 2,636 2,583

Reporting total 22,420 33,252 35,161 43,734 50,058 50,389 57,463

Source: Compiled from Global Trade Atlas. Accessed May 15, 2007.

Note: Due to rounding, numbers may not add to total.

APPENDIX F

Tourism Modeling

 1

 The initial price, p0, is a composite price for all tourism services.

 2

 Robyn, Dorothy, et al, “The Impact on the U.S. Economy of Lifting Restrictions on Travel to Cuba.”

F-3

Introduction

Several different approaches are taken to estimate the effects of removing the restrictions on

U.S. travel to Cuba. The first approach, which is considered to be a long-run estimate, is

based on U.S. demand for tourism services in Cuba being proportionally similar to Canadian

demand for tourism in Cuba; it results in a total of approximately 4 million tourists from the

world, 2.8 million of which are U.S. citizens, visiting Cuba each year. A second approach

considers Cuba’s short-run capacity limits and the U.S. demand shift is based on the number

of U.S. visits to the Dominican Republic. Here the total number of visits to Cuba is slightly

over 2.8 million, of which 1.1 million are U.S. citizens, per year. A third approach estimates

the travel restriction as an equivalent ad valorem tariff. Removing the equivalent tariff

eventuates in a smaller response, with less than 2.5 million total visits (554,000 U.S.

citizens) by tourists to Cuba. The wide range of estimates in the different approaches results

from the lack of a close correspondence between the legally defined restrictions and the

economic concepts to model the removal of restrictions. The responses of U.S. tourists and

Cuban suppliers to removal of the restrictions are also unknown. The lower range of these

estimates is deemed more likely, at least in the short run. In the long run, the number of

tourists could approach the higher estimate.

This appendix presents the model that was used to estimate the effects on Cuban tourism of

eliminating the U.S. restriction on travel to Cuba. Only overnight stays are examined; cruise

travel is not addressed. This model is similar to partial equilibrium trade models that are

frequently used in studies estimating the effects of trade liberalization. In those studies,

known tariffs in the affected industries are removed to estimate the effects of trade

liberalization. The U.S. restrictions on travel to Cuba, which is a type of non-tariff barrier,

cannot be modeled with an equivalent tariff that is known with certainty. Issues related to

the uncertain nature of the travel restriction are discussed below. These types of models also

depend upon elasticities that give information about the demand and supply relationships.

Ideally these are estimated empirically, but only limited information about the elasticities is

available in this case. This analysis focuses on the interrelated effects in the Cuban and

associated tourist markets that would likely occur given particular representations of the U.S.

travel restriction and model elasticities.

The U.S. Travel Restriction

The travel restriction prohibits U.S. citizens from spending money in Cuba on hotels and

other tourism services unless they obtain a license from OFAC. Expenditures abroad by U.S.

citizens are classified as U.S. imports of services. Thus, the travel restriction acts to limit

imports of tourism services from Cuba, and such trade restrictions are often represented by

a gap between the demand price and the supply price, such as the distance E0A in figure F.1,

where E0 represents the initial equilibrium and q0 represents the number of U.S. residents

who go to Cuba while the restriction is in place.1

 Because the distance E0A is unknown, we

take two approaches to estimate the response if the travel restriction were lifted. The first

approach, which is similar to that of Robyn and others,2

 focuses on estimating the distance

E0B. It is assumed that U.S. citizens in the absence of restrictions will travel to Cuba in a
 3

 Robyn et al. argue that this is plausible because Canada and the United States are similar from

socioeconomic and demographic viewpoints and have roughly similar percentages of their populations

visiting the Caribbean region. Robyn, Dorothy, et al, “The Impact on the U.S. Economy of Lifting

Restrictions on Travel to Cuba,” 7.

F-4

proportion similar to Canadians.3 Cuba is the fifth largest tourist destination for Canadians,

and this approach generates a long-run estimate. Almost 518,000 Canadians traveled to Cuba

in 2005; if the same proportion of U.S. citizens were to go to Cuba, almost 4.8 million U.S.

citizens would go to Cuba annually. Thus point B is established, and removing the restriction

shifts the demand curve to D in figure F.1. Although this approach moves out the demand

curve to match proportionally the number of Canadians visiting Cuba at current prices,

supply is upward sloping; thus price rises, and the resulting number of tourists is less than

if price had remained the same. The effect on the numbers of tourists is the same as if the

price wedge E0A were removed.

P

Q

D w ithout

restriction

D ’ w ith

restriction

S

E0

E1

p0(1+ave)

p0

A

B

q0

Figure F.1 U.S. travel restriction
 4

 A similar response would be obtained by selecting another destination with similar numbers of visits by

U.S. citizens. For example, approximately the same number of U.S. tourists visited Jamaica as the

Dominican Republic in 2005.

 5

 Tourism travel to Cuba is not licensed, and the restriction applies to travel through third countries. Such

travelers may face civil penalties and criminal prosecution when they return to the United States. See

http://travel.state.gov/travel/cis_pa_tw/cis/cis_1097.html.

 6

 Other popular third-country sites include Canada, Cayman Islands, Jamaica, Nassau, and the Dominican

Republic. Although fares vary somewhat, fares through Cancun are competitive with these other sites. 

F-5

Canadians have a history of visiting Cuba and may have developed an affinity for certain

Cuban vacation sites that increases their propensity to return. Because these relationships

have developed over a long period, U.S. citizens may not immediately respond in a similar

fashion. Although tourism in the Dominican Republic is more developed than in Cuba, the

Dominican Republic has a range of Caribbean tourism services and offers somewhat similar

vacation opportunities as Cuba. For example, the Dominican Republic, which is also Spanish

speaking, offers several all-inclusive beach-centered tourism options similar to Cuba. To

represent a short-run demand shift, it is assumed that an equal number of U.S. citizens would

travel to Cuba as currently travel to the Dominican Republic. In 2005, 1.4 million U.S.

citizens visited the Dominican Republic. Because U.S. citizens may have become partial

toward particular aspects of the Dominican tourism experience, this may be considered as

a fairly large short-run response.4

 This approach is similar to the previous one in that an

estimate of point B in figure F.1 has been made.

The final approach focuses on estimating the ad valorem equivalent tariff (E0A in figure F.1,

where D’ is effective demand with the restriction); the effects of removing the restriction are

then calculated by removing the estimated equivalent tariff. Some U.S. travelers circumvent

the restriction by going through a third country. An ad valorem equivalent tax is estimated

as the extra cost that such a traveler has to pay. Under these circumstances, the full price of

a trip for a U.S. citizen (pf

) includes regular air (or boat) fare (pA); the additional fare for

traveling through a third country (pAxl); an ad valorem risk premium (r) related to the

possible negative consequences associated with circumventing the travel restriction;5

 and

spending in Cuba on lodging, food, and other items (pc).

The extra cost of making the trip with the restriction in place includes the additional

expenses for traveling through a third country (pAxl) and the risk premium (r pc). The unit

price (p0 in figure F.1) of a trip without the travel restriction does not include these extra

costs and is simply pA + pc= p0. The ad valorem equivalent tariff (ave in figure F.1) is thus

estimated as the extra costs over the unit price without the restriction (pAxl +r pc)/p0. 

The Commission estimates these expenditures as follows. Regular U.S. airfare to Cuba is

estimated at $600 based on round trip airfare between St. Louis (which is near the population

center of the United States) and the Dominican Republic. Under the restrictions the traveler

first goes to Cancun (also about $600 round trip) and pays an additional $450 for round trip

airfare between Cancun and Cuba.6

 We assume the risk premium is half of the in-country

price of tourism services. If a tourist spends $1000 per visit in-country, the unit price without

the restriction would be $600+$1000 = $1,600. The extra costs under the restriction are

$450+0.5×($1000) = $950. The ad valorem equivalent tariff is thus estimated as

(100×($950/$1600)) = 59 percent.

p p p rp f A Axl c = + ++ ( ) 1
 7

 Various parts of the Cuban government and multinational firms provide tourism services and hold equity

positions in hotels in Cuba. Private Cuban residents supply only a very small part of these services through

room and board arrangements (casas particulares) and local eateries (paladares). Because tourism is a global

market, monopolistic concerns are not considered here.

 8

 ARA Consulting Group, Systems Caribbean, and KPMG Peat Marwick. “A Study to Assess the

Economic Impact of Tourism on Selected CDB Borrowing Member Countries,” 42.

 9

 For example, Rosensweig finds an income elasticity of international tourism of 1.5. Rosensweig,

“Elasticities of Substitution in Caribbean Tourism,” 89-100.

 10 To some degree, a tourist may substitute any destination with any other somewhat similar destination,

but Rosensweig finds greater substitution within Caribbean destinations than between Caribbean and

European or North American destinations. Rosensweig, “Elasticities of Substitution in Caribbean Tourism,”

89-100.

F-6

Model

Despite little U.S. travel, tourism in Cuba is well developed, with over two million foreign

visitors per year in recent years. International visitors account for all of the more developed

types of tourism in Cuba, as Cuban nationals cannot afford most accommodations for

international visitors and are also prohibited from doing so. The demand for tourism services

in Cuba is represented as the horizontal or quantity sum of the demand by U.S. residents and

the demand by non-U.S. visitors. International visitors, as well as Cuban suppliers of tourism

services,7

 respond to price signals; thus the equilibrium number of tourists in the Cuban

market is represented by setting the supply of tourism services in Cuba, as a function of

price, equal to the sum of the U.S. and non-U.S. demands. In figure F.2, D1

 represents nonU.S. demand, and effective U.S. demand is the difference between total market demand D0

and D1. Initial equilibrium is at the point (q0,p0); q1 is the number of non-U.S. visitors, and

q0

-q1 are the U.S. visitors. When the restriction on U.S. travel is removed, total market

demand shifts out to D*, and the resulting equilibrium is (p*,q*). Because p*>p0

, fewer nonU.S. visitors demand tourism services in Cuba; examination of the non-U.S. demand curve

D1

 at price p* shows that the resulting number of non-U.S. visitors is q2, and the number of

U.S. visitors is q*-q2

. Implicitly a price wedge has been removed for U.S. residents as their

quantity expands. While the market price increases for non-U.S. tourists, the implicit price

for U.S. tourists decreases. Thus, U.S. residents will substitute away from similar markets

for tourism services into Cuba, but non-U.S. residents will find the relatively lower prices

in alternative markets more attractive and substitute towards those markets.

Demand

Demand for international tourism depends upon the preferences and income of the tourist

and relative prices in the destination countries. U.S. tourists because of their high income are

believed to spend more than tourists from many other countries. Europeans are also believed

to stay longer and spend more than many other tourists.8

 As incomes rise, consumers tend

to spend a greater portion of income on tourism.9

 In this model, income is assumed to remain

constant and is not discussed further.

It is assumed that both the representative U.S. and non-U.S. tourists have a category of

demand that can be called Caribbean tourism services.10 It is assumed that these consumers
 11 This is the “Armington assumption.” The technical details can be seen in Armington, “A Theory of

Demand for Products Distinguished by Place of Origin,” 159-178, and Francois and Hall, “Partial

Equilibrium Modeling,” 135-139.

 12 Included are Anguilla, Antigua and Barbuda, Aruba, Barbados, Bonaire, Cancun, Cayman Islands,

Curacao, Dominica, Dominican Republic, Grenada, Jamaica, Montserrat, St. Lucia, St. Maarten, St. Vincent

and the Grenadines, and Trinidad and Tobago.

 13 Durbarry, “Long-Term Structural Tourism Demand Modeling: An Application to France.”

 14 These studies were summarized in Dixon, et al, “Tourism and the Environment in the Caribbean: An

Economic Framework,” 45-46. Papers in this series are not formal publications of the World Bank, but are

circulated to encourage thought and discussion.

F-7

have similar but not identical preferences11 for tourism services in (1) Cuba, (2) South

Florida, (3) Puerto Rico and the U.S. Virgin Islands, and (4) other Caribbean destinations.12

Generally, the demand for tourism is thought to be elastic because of the discretionary nature

of tourism compared to food, for example, and empirical studies in Europe have found ownprice demand elasticities in the range of -1.8.13 However, studies in the Caribbean have found

the demand for tourism to be inelastic, allegedly because of the different characteristics of

each island. Crouch and Shaw found the price elasticity of tourism spending to be -0.39;

Hiemstra and Ismail found the demand elasticity of hotel rooms to be -0.44.14 This study uses

P

Q

S

q*

p*

p0

q0 q1 q2

D*

D0

D1

Figure F.2 Removal of restriction on U.S. travel

0
 15 An aggregate demand elasticity of -0.7 was tried but did not greatly affect the results, and runs with that

elasticity are not reported.

 16 Rosensweig reported intra-Caribbean elasticities in the range of 2 to 3. Rosensweig, J.A., “Elasticities

of Substitution in Caribbean Tourism,” Journal of Development Economics 29 (1988): 89-100.

 17 Simple demand functions that are linear in logs were used, which, unlike demand functions using the

CES functional form, permit different elasticities of substitution for different destinations.

F-8

an aggregate demand elasticity for Caribbean tourism services of -1.2.15 Similar aggregate

demand elasticities for the category of Caribbean tourism were used for U.S. and non-U.S.

consumers.

The degree that one tourist destination can be substituted for another is measured by the

elasticities of substitution, which theoretically ranges between 0, indicating no substitution,

and infinity, indicating perfect substitution. There is little empirical work on substitution

elasticities for this region.16 The elasticities of substitution used for this study are shown in

table F.1; they indicate a relatively small degree of substitution between these markets.17 U.S.

tourists are believed to be less likely to substitute between Cuba and markets such as South

Florida, Puerto Rico, and the U.S. Virgin Islands that do not require visas. Non-U.S. tourists

are believed to substitute more between Cuba and other Caribbean destinations than

destinations associated with the United States.

Table F.1 Elasticities of substitution for U.S. and non-U.S. travelers

South Florida Puerto Rico & U.S. Virgin Other Caribbean

For the U.S. tourist

Cuba 2 2 4

South Florida 4 2

Puerto Rico & U.S. Virgin Islands 3

For the non-U.S. tourist

Cuba 2 2 3

South Florida 3 2

Puerto Rico & U.S. Virgin Islands 3

Source: Commission estimate.

Representative U.S. and non-U.S. consumers or travelers currently purchase tourism services

from all Caribbean market segments. The representative U.S. traveler currently purchases

most of these services in South Florida and other Caribbean destinations and very little from

Cuba (first column of table F.2), and the representative non-U.S. traveler purchases most

Caribbean tourism services from other Caribbean destinations and relatively little from South

Florida (second column of table F.2). Theory requires that these should be shares of

expenditures of each representative traveler in the different market segments. Comprehensive

data on expenditures are unavailable, and these estimates are based on the numbers of

tourists in the different market segments. This approach implicitly assumes that expenditures

are the same in different destinations. The relative importance of U.S. and non-U.S. travelers,

again based on the number of tourists, are also shown for each destination in the last two

columns of table F.2.
 18 The extensive requirements and approvals necessary for infrastructure development raise Cuba’s capital

costs somewhat in comparison to competing suppliers, but its labor costs are thought to be less. Cuba has a

well-educated population and over 20 hospitality schools to train tourism professionals. Cerviño and Cubillo,

“Hotel and Tourism Development in Cuba: Opportunities, Management Challenges, and Future Trends,”

223-246.

 19 Hiemstra and Ismail, “Incidence of the Impacts of Room Taxes on the Lodging Industry,” 22-26.

F-9

Table F.2 Market shares by representative U.S. and non-U.S. travelers and the shares of foreign tourist expenditures

attributed to U.S. and non-U.S. tourists in each destination 

Representative U.S.

traveler’s share of

purchases in each market

Representative Non-U.S.

traveler’s share of

purchases in each market

U.S. market

share

Non-U.S.

market share

Percent

Cuba 3.4 13.7 7.5 92.5

Other Caribbean destinations 36.7 58.5 47.5 52.5

Puerto Rico & Virgin Islands 12.9 16.2 83.5 16.5

South Florida 47.0 11.6 90.8 9.2

Source: Staff calculations based on data in Caribbean Tourism Organization, Statistical Report 2002-2003 and

“Latest Statistics 2005,” (September 2006) and “Tourist Arrivals by Main Market - 2005"; Rochell Broder-Singer,

“Tourism Statistics South Florida,” (June 2004); Office of Travel and Tourism Industries, U.S. Dept. of Commerce,

“U.S. Citizen Air Traffic to Overseas Regions,” 2005.

Supply

Cuba offers a number of beaches both on the main island and on keys and the number of

hotel rooms has been increasing, as shown in table F.3. It is believed that within the present

framework (no major policy changes in Cuba) supply will likely continue to increase in the

intermediate run. Cuba’s cost of supplying tourism services is believed to be similar to that

of other islands in the Caribbean.18 Hiemstra and Ismail estimated a supply elasticity for

hotel rooms in the Caribbean of 2.86.19 An elasticity of supply of 3 was used for each

country. 

Table F.3 Cuban travel data

International arrivals of

overnight tourists (1,000)

Number of rooms in hotels

& other establishments

Mean annual occupancy

rate (percent)

2000 1,741 38,072 74.2

2001 1,736 40,158 64.7

2002 1,656 41,323 59.7

2003 1,847 43,696 61.8

2004 2,017 45,270 63.5

2005 2,261 45,644 63.6

Source: Cuban Oficina Nacional de Estadistica, Anuario Estadisco de Cuba, 2005, chap. 13.

In the short run the lack of hotel rooms and other tourist amenities hinder Cuba’s ability to

respond to large increases in the number of tourists. To represent this situation, a short-run

upper bound was calculated by assuming that the trend rate of increases in the number of

rooms between 2000 and 2005 would continue for the next three years and that the mean

annual occupancy rate would increase from a mean of 65 percent to 80 percent, which is a

practical upper limit given the seasonal peaks during the winter months but allow for the fact
 20 Cerviño and Cubillo point out that related infrastructure, such as airports, and tourist attractions must be

developed at the same time as hotels and that these related investments may be less developed than hotels in

Cuba. Cerviño and Cubillo, “Hotel and Tourism Development in Cuba: Opportunities, Management

Challenges, and Future Trends,” 223-246.

 21 Formulas 5.43 and 5.44 in Francois and Hall, 138 were used.

F-10

that some Americans typically travel during the summer.20 This approach results in a shortrun capacity limit of 2.8 million tourists per year. When the capacity constraint is reached,

the supply curve becomes vertical; thus price can still rise, but quantity cannot increase

beyond this point. Sustained high prices signal investors that profits can be made by

investing in tourism infrastructure, so the lack of hotel rooms is not expected to constrain the

number of overnight tourists in the long run.

Market Equilibrium

Equilibrium in each market occurs where supply equals the sum of the demands of the

representative U.S. and non-U.S. consumers. The following group of equations constitute

the model where the left-hand side is supply, the first term on the right-hand side is demand

by U.S. residents and the second term is demand by non-U.S. residents.

where

- the p’s are prices;

- the k’s, the K’s, and J’s are constants related to initial conditions;

- the c’s, F’s, V’s, and O’s are subscripts representing, respectively, Cuba, South

Florida, Puerto-Rico and the U.S. Virgin Islands, and the rest of the Caribbean; c-US

indicates the special implicit price for U.S. tourists in the Cuban market;

- b shifts U.S. demand in the Cuban market in the quantity shock version; otherwise

it equals 1; t is the ad valorem equivalent tariff that is removed in the price wedge

version; otherwise it equals 0;

- the ε’s are supply elasticities;

- the φ’s and η’s are own-price elasticities, respectively, for non-U.S. and U.S.

demand; and

- the χ’s and ψ’s are cross price elasticities, respectively, for non-U.S. and U.S.

demand.

The own-price and cross-price demand elasticities are calculated from the aggregate demand

elasticities, the substitution elasticities, and the market shares using the approach of Francois

and Hall.21 The simulations based on this model are reported below.

k p Kb p

t p p p Jpp p p

kp Kp p p p Jp p p p

kp Kp p p p Jp p p p

k p

Cc C

c US

F V O Cc F V O

F F F c US F V O F c F V O

V V V c US F V O V c F V O

O O

c cF cV cO cF cV cO

F FC F FV FO FC F FV FO

V VC VF V VO VC VF V VO

O

ε

η

ψ ψ ψ φχ χ χ

ε ψ ηψ ψ χ φ χ χ

ε ψ ψ ηψ χ χ φ χ

ε

= +

⎛

⎝

⎜ ⎞

⎠

⎟ +

= +

= +

−

−

−

1

= + Kp p p p Jp p p p O c US F V O O c F V O −

ψ ψψη χχχφ OC OF OV O OC OF OV O
 22 The capacity constraint, as previously discussed, is based on limits to hotel occupancy. Other short-run

constraints likely apply specifically to U.S. travel. For example, a new air transport agreement between Cuba

and the United States would have to be negotiated, and Cuba is not currently in compliance with FAA safety

regulations and would not be permitted to fly into the United States. Although these barriers could be

overcome in the long run, they would be additional constraints that limit the number of U.S. travelers to

Cuba in the short run. 

F-11

Results

In this model, the initial equilibrium in the Cuban market has 2.261 million total tourists of

which 171,000 are U.S. citizens, and the market clearing price for purchases in Cuba is

$1000 per tourist. These figures are based on Cuban government and World Tourist

Organization data and adjusted for the numbers of Cuban Americans traveling to Cuba as

reported in Chapter 3.

First, the demand for tourism services in Cuba by U.S. citizens is shifted out in similar

proportion to that of Canadian demand. The results are large, and the total of over 4 million

tourists must be viewed as a long-run response because it exceeds Cuba’s current capacity

to absorb tourists (table F.4).

Table F.4 Long-run results from removing travel ban under the Canadian-like demand shift 

Market Price Quantity Value

Percent change

Cuba 21.8 80.6 102.3

South Florida -2.8 -8.5 -11.3

Puerto Rico & U.S. Virgin Islands -2.0 -6.1 -8.1

Other Caribbean destinations -4.6 -13.8 -18.4

Number of tourists in Cuba U.S. origin (1,000) Non-U.S. origin (1,000) Total (1,000)

Resulting total by source 2,799 1,283 4,083

Net change by source 2,628 -807 1,822

Source: Staff estimation.

Note: Totals may not add due to rounding.

In this scenario, large numbers of U.S. citizens shift purchases of tourism services toward

the Cuban market, which negatively affects the other markets. However, non-U.S. tourists

shift into those other markets, which mitigates the negative effects somewhat. The effect is

largest in the other Caribbean destination which is thought to be most substitutable with the

Cuban market. 

Next, the short-run response is examined in which demand shifts out as if the same number

of U.S. citizens visit Cuba as currently visit the Dominican Republic and limits on Cuba’s

ability to furnish tourism services is taken into account. Applying the estimated capacity

constraint of 2.8 million tourists per year increases the price of tourism services in the Cuban

market (table F.5). Shifting out the U.S. demand crowds some non-U.S. visitors out of the

market, but changes in the numbers of tourists by source are smaller than in the long-run

scenario.22 Effects in the other markets are also less than in the long-run scenario. 
F-12

Table F.5 Results with the short-run supply restriction from removing travel ban under the Dominican-Republic-like

demand shift

Market Price Quantity Value

Percent change

Cuba 9.4 23.8 33.3

South Florida -1.0 -3.1 -4.1

Puerto Rico & U.S. Virgin Islands -0.7 -2.2 -2.9

Other Caribbean destinations -1.6 -4.9 -6.5

Number of tourists in Cuba U.S. origin (1,000) Non-U.S. origin (1,000) Total (1,000)

Resulting total by source 1,127 1,672 2,799

Net change by source 956 -418 538

Source: Staff estimation.

Finally, the approach of removing an ad valorem equivalent tariff of 59.4 percent was taken.

The effects under this scenario are much smaller (table F.6) than under the other approaches.

The estimated equilibrium total number of tourists is less than the short-run quantity

constraint. Effects in the other markets are also modest. 

Table F.6 Short-run results from removing travel ban under the ad valorem tariff approach 

Market Price Quantity Value

Percent Change

Cuba 3.2 10.0 13.2

South Florida -0.4 -1.2 -1.6

Puerto Rico & U.S. Virgin Islands -0.3 -0.9 -1.2

Other Caribbean destinations -0.7 -2.0 -2.7

Number of tourists in Cuba U.S. origin (1,000) Non-U.S. origin (1,000) Total (1,000)

Resulting total by source 554 1,932 2,487

Net change by source 383 -158 226

Source: Staff estimation.

Note: Totals may not add due to rounding.
F-13

Bibliography

ARA Consulting Group, Systems Caribbean, and KPMG Peat Marwick. “A Study to Assess the

Economic Impact of Tourism on Selected CDB Borrowing Member Countries.” Prepared for the

Caribbean Development Bank (May 1996): 42.

Armington, Paul. “A Theory of Demand for Products Distinguished by Place of Origin. IMF Staff Papers

16 (1969): 159-178. 

Cerviño, Julio and Jose Cubillo, “Hotel and Tourism Development in Cuba: Opportunities, Management

Challenges, and Future Trends,” Cornell Hotel and Restaurant Administration Quarterly 46,

no. 2 (May 2005): 223-246.

Dixon, John, Kirk Hamilton, Stefano Pagiola, and Lisa Segnestam. “Tourism and the Environment in the

Caribbean: An Economic Framework.” Environmental Economics Series no. 80, World Bank

(March 2001): 45-46. 

Durbarry, Ramesh, “Long-Term Structural Tourism Demand Modeling: An Application to France,”

Nottingham University working paper, 2002. http://www.nottingham.ac.uk/ttri/pdf/2002_1.pdf

(accessed June 15, 2007)

Francois, Joseph and Keith Hall. “Partial Equilibrium Modeling,” in Applied Methods for Trade Policy

Analysis, eds. Joseph Francois and Kenneth Reinert, 135-139. 1997. 

Hiemstra, S. and J. Ismail. “Incidence of the Impacts of Room Taxes on the Lodging Industry.” Journal

of Travel Research, (Spring 1993): 22-26.

Rosensweig, J.A., “Elasticities of Substitution in Caribbean Tourism.” Journal of Development

Economics 29 (1988): 89-100.

APPENDIX G

Analytical Framework and Assumptions 

 1

 Although lower prices of U.S. imports may cause Cubans to import more from any import source

including from the U.S., U.S. imports are shown to be respresnted by A+B+C+D for simplicity of

presentation.

 2

 For ease of presentation, the U.S. supply schedule is not drawn. It can be traced as the horizontal

distance between S0

ROW+US and S0ROW.

G-3

Analytical Framework and Assumptions in Estimating U.S.

Sales of Agricultural Products to Cuba with Financing

and Travel Restrictions Removed

Analytical Framework

Scenario 1: Lifting Financing Restrictions on U.S. Agricultural Exports to

Cuba

The analytical framework used to assess the effects of financing restrictions on U.S. exports

of agricultural products to Cuba can be illustrated in two ways—from a simple pie chart and

from a supply-demand diagram—as shown in figure G.1. In the pie chart, initial Cuban

imports of an agricultural product from all country sources are represented by the entire pie

(areas A+B+C), with the U.S. share of imports represented by the pie slice, A, and the restof-the-world share represented by the slices B and C (figure G.1, panel a). Lifting financing

restrictions makes U.S. exporters more competitive vis-à-vis the rest-of-the-world in the

Cuban market. The U.S. slice of the pie grows from A to A+B as U.S. exporters displace

other Cuban import suppliers (although they keep the slice C). Also, lifting the financing

restrictions causes the entire pie to grow slightly (so the U.S. share grows to include D)

because the lower U.S. price generates additional purchases by Cuban importers. The U.S.

share of imports is represented initially by A/(A+B+C), and after the restrictions are lifted

by (A+B+D)/(A+B+C+D).1

Alternatively, the framework can be illustrated with Cuban import supply and demand

curves (figure G.1, panel b). Initially, the total supply of imports is given by S0

ROW+US which

is the horizontal sum of the supply schedules of the rest-of-the-world (S0

ROW) and the United

States.2

 Note that the supply curves are drawn relatively flat, capturing the assumption that

both U.S. and rest-of-the-world supplies are highly elastic with respect to price. This is

because Cuba, a small buyer of agricultural products compared with the overall world

market, is not expected to significantly alter the world price as a result of changing its level

of purchases. Cuba’s demand is represented by DCuba. With financing restrictions in place,

an initial equilibrium is QT

0

, of which the rest-of-the-world supplies QROW

0

 (represented by

the areas B+C) and the United States supplies, QUS

0

 (area A). The initial equilibrium price

is P0

.

It is assumed that the payment and financial restrictions placed on U.S. exports to Cuba

cause the U.S. supply curve to be higher than it would otherwise be. Lifting those restrictions

shifts the U.S. supply curve down because a price gap applied to U.S. commodities is

removed. The result is that the overall supply schedule faced by Cuban importers moves

from S0

ROW+US to S1ROW+US. A new equilibrium is reached at price, P1

, and imports, QT

1

, made

up of supplies from the rest-of-the-world, QROW

1

, and from the United States, QUS

1

. Total
G-4

Price

Quantity

S1

ROW + US

DCuba

Panel b

P0

QT Q 0

ROW Q 0ROW

1 QT1

QUS

0

QUS

1

CB AD

P1

SROW 

S0

ROW + US

A

B

C D

Figure G.1 Illustrative effect of lifting financing restrictions on U.S. agricultural

exports to Cuba 

Panel a

D
G-5

Cuban imports are made up of A+B+C+D, with area B representing U.S. imports formerly

supplied by the rest-of-the-world, and area D representing the additional Cuban demand

associated with a lower price supplied by the United States.

Scenario 2: Restrictions on Travel are Lifted

In the second scenario, restrictions on travel by U.S. citizens to Cuba are lifted. This has two

effects on the size of the pie (but not the slice because the financing restrictions are assumed

to remain in place). First, the pie grows reflecting the macroeconomic impacts on the Cuban

economy. With increased U.S. tourist expenditures, Cuba’s GDP grows, thereby creating

additional purchasing power with which Cubans can buy more imported food. Second, the

pie grows because of greater numbers of tourists consuming food in Cuba, a large portion

of which is imported food. In figure G.2, panel a, the growth in import demand is represented

by the increase in the pie by the areas C and D, and Cuban imports from the United States

change from A/(A+B) with the travel restrictions in place, to (A+C)/(A+B+C+D) without

the restrictions.

The supply-demand representation of lifting the travel restrictions is shown in figure G.2,

panel b. The initial equilibrium Cuban import level is QT

0

, of which the United States

supplies QUS

0

 and the rest-of-the-world supplies QROW

0

. The equilibrium price is P0. Lifting

travel restrictions, as noted above, increases the demand for imports by Cuba, represented

in figure G.2b as an upward shift in the demand curve from D0

Cuba to D1Cuba. A new

equilibrium is reached at a greater import level, QT

1

, and higher price, P1. Note the increase

in imports is sourced from both the United States and rest-of-the-world, QUS

1

 and QROW

1

,

respectively.

Framework Assumptions

The analytical framework described above provides the basis on which the quantitative

effects of lifting restrictions are estimated. The scenarios depicted in figures G.1 and G.2

were captured in a spreadsheet model using a set of base trade data, elasticities and

multipliers, assumptions about the market segments (i.e., for consumption by locals and

tourists) into which imported products are sold, and food expenditure patterns by tourists.

Sources and assumptions made in selecting these model inputs are provided below.

Commodity Sectors

Base data and assumptions concerning the commodity sectors are shown in table G.1. Each

column of this table is discussed below.
G-6

Price

Quantity

D0

Cuba

Panel b

P0

QT Q 0

ROW

0

QROW

1

QT Q 1

US

0

QUS

1

P1

SROW 

S0

ROW + US

D1

Cuba

A D

Figure G.2 Illustrative effect of lifting travel restrictions on U.S. agricultural

exports to Cuba 

Panel a

B C
 3

 Tourism Global Inc., The Caribbean Accommodation Sector as a Consumer of Locally Produced Goods

and Services and Contributor to Government Revenues.

G-7

Table G.1 Assumptions concerning individual commodity sectors

Commodity

Share of

tourist food

expenditure

Share of

imports for

tourist sector

Imports

from

World

Imports

from

U.S. Price wedge 

Import

elasticity of

demand

U.S. & ROW

elasticity of

supply

Percent Percent $ mil. $ mil. Percent

Wheat 2 1 135.6 51.4 2.5 - 7.5 -0.3 5.0

Rice 3 2 166.3 39.5 2.5 - 7.5 -0.3 5.0

Corn 1 1 59.8 42.6 2.5 - 7.5 -0.3 5.0

Animal feed 1 1 56.0 42.3 2.5 - 7.5 -0.3 5.0

Soybeans 1 1 31.9 31.7 2.5 - 7.5 -0.3 5.0

Fats & oils 3 1 39.0 22.3 2.5 - 7.5 -0.3 5.0

Dry beans 1 1 79.1 19.9 2.5 - 7.5 -0.3 5.0

Beef 8 10 42.3 0.1 5.0 - 10.0 -0.6 5.0

Pork 8 20 33.6 14.2 5.0 - 10.0 -0.6 5.0

Poultry 8 15 68.6 44.7 5.0 - 10.0 -0.6 5.0

Milk powders 2 2 128.0 12.6 2.5 - 7.5 -0.3 5.0

Other dairy 3 25 19.4 0.1 5.0 - 10.0 -0.6 5.0

Processed foods 30 25 66.0 1.1 5.0 - 10.0 -0.8 5.0

Fish 15 20 25.8 0.0 5.0 - 10.0 -1.3 5.0

Forest 2 1 57.5 9.7 2.5 - 7.5 -0.3 5.0

Other products 12 5 141.9 4.9 5.0 - 10.0 -0.3 5.0

Sources: Global Trade Atlas and Commission estimates.

Share of Tourist Food Expenditure

In scenario 2 (lifting the travel restrictions), an estimate of the additional tourist expenditure

on food (in millions of dollars) is derived from estimates of the additional number of tourists,

the number of days stayed, and the expenditure on food per tourist per day. How this

additional expenditure impacts the demand for individual commodities requires an

assumption about how tourists allocate their food expenditures among different products

(e.g., for every dollar of tourist food expenditure, how many cents go to wheat, rice, beef,

and pork). In the Commission’s analysis, these assumptions were based on an extensive

survey of Caribbean tourist spending patterns that provided estimates of food expenditures

by product.3

 Because Cuba’s tourism industry is well established, such Caribbean-wide

patterns likely reflect spending patterns among tourists in Cuba itself. In cases where the

commodity grouping in the cited study did not exactly match those in our analysis,

information from industry and other sources was gathered by Commission staff and used to

make appropriate adjustments.

Share of Imports for Tourist Sector

In analyzing scenario 2, the framework splits Cuban imports among the two major market

segments—the local population and tourists. This is because demand by Cubans is expected

to respond to GDP growth, while demand by tourists is expected to reflect the number of

tourists. Further, some imported products are more likely sold to Cubans (e.g., rice), while

others are more likely for tourists (e.g., meat, fish, processed food, deciduous fruit). The
 4

 Tourism Global Inc., The Caribbean Accommodation Sector as a Consumer of Locally Produced Goods

and Services and Contributor to Government Revenues.

 5

 U.S. Department of Agriculture. Foreign Agricultural Service, “Cuba HRI Food Service Sector.”

 6

 Alimport officials, interview by Commission staff, Havana, Cuba, June 12, 2007; ITH officials,

interview by Commission staff, Havana, Cuba, June 13, 2007.

 7

 The share of imports for tourists covers products consumed in hotels and restaurants. It does not cover

sales in convertible peso stores.

 8

 Global Trade Atlas.

 9

 Industry official, interview by Commission staff, April 2007.

 10 Ibid., March 28, 2007, April 12, 2007, and April 17, 2007.

 11 CubaNews, “Despite the Obstacles, Cuba’s Alimport is Spending More than Ever on U.S. Food.”

G-8

Cuban/tourist shares used in our estimates were based the Tourism Global, Inc., study,4

analysis by the U.S. Department of Agriculture,5 and discussions with Cuban officials.6 In

general, the tourist sector is assumed to account for a small share of bulk commodity imports

(1-2 percent), and a higher share (10–25 percent) for higher-valued products.7

Imports from the World and the United States

Statistics on Cuban trade with the world and United States were obtained from the Global

Trade Atlas.8

 Cuban import data were based on the export data of supplying countries, owing

to the fact that exporter data included 2005 and 2006, whereas Cuban import data only are

reported through 2004.

Price Wedge

To estimate the effect of Cuban Assets Control Regulations (CACR) on the sale of U.S.

agricultural products to Cuba, it was necessary to first estimate the size of the cost wedge

created by these regulations. The price wedge is the added cost per unit of U.S. exports of

each commodity created by the restrictions that are the subject of this study. Without these

restrictions, the price paid by Alimport would be lower; the difference in price is the price

wedge. 

The price wedge created by the regulations consists of two types of costs—direct costs and

indirect costs. Direct costs are measurable and attributable to a specific product shipment,

such as costs associated with procuring letters of credit, currency exchange, transportation,

demurrage, and spoilage. Indirect costs are not measurable and not directly attributable to

a specific shipment, such as costs associated with additional time needed to process

transactions, administrative costs incurred in order to comply with the regulations, increased

travel costs, and travel restrictions on some U.S. and most Cuban officials. Commission staff

obtained information on these costs from interviews with industry officials.

Letters of credit

The costs associated with obtaining a letter of credit can range from less than 1 percent up

to nearly 4 percent of the value of the shipment.9

 One industry source indicated that letter

of credit fees ranged from 0.125 percent to 0.25 percent of the value of the letter of credit.

Additional sources estimated the cost of obtaining a letter of credit at $8,000 to $10,000 per

fully loaded bulk vessel.10 During 2001–06, bulk shipments to Cuba averaged about

9,000 mt, valued at $2.5 million.11 Based on these values, the cost of obtaining a letter of

credit for bulk shipments ranged from 0.3 percent to 0.4 percent of the value of the
 12 Representatives of the U.S. poultry industry stated that the cost of a letter of credit was $7,300 for a

shipment of chicken parts valued at $1.9 million or 0.38 percent. United States Poultry and Egg Export

Council, written statement to the Commission, May 8, 2007.

 13 CubaNews, “In Wake of Tough New OFAC Regulations Food Exporters Turn to Letters of Credit.”

 14 United States Poultry and Egg Export Council, written statement to the Commission, May 8, 2007.

 15 Bonilla, Commission Hearing Transcript.

 16 Roger Johnson, North Dakota Commissioner of Agriculture, post-hearing written statement to the

Commission, May 7, 2007.

 17 Ibid.

 18 Luxner, “Pedro Alvarez: Cuba Hungry for American Food Imports.”

 19 Industry sources have also told staff that Cuban importers were incurring large demurrage costs even

before the U.S. rules were changed, and that demurrage costs are as much related to inefficiencies in the

Cuban system as they are U.S. regulations. The information collected suggests that demurrage costs could be

decreased, though not completely eliminated, if U.S. regulations were changed.

 20 Roger Johnson, North Dakota Commissioner of Agriculture, post-hearing written statement to the

Commission, May 7, 2007; United States Poultry and Egg Export Council, written statement to the

Commission, May 8, 2007; and industry officials, interview with Commission staff, April 27, 2007.

 21 United States Poultry and Egg Export Council, written statement to the Commission, May 8, 2007.

 22 Commission staff interview with Cuban officials, Havana, June 12-14, 2007.

G-9

shipment.12 Additional information suggests that obtaining a letter of credit for smaller,

container-based shipments is proportionally greater. For example, in March 2005, the

charges on a 160 metric ton shipment of whey powder valued at about $80,000 were stated

to be between $2,000 and $3,000, representing 2.5 to 3.8 percent of the shipments value.13

Other industry sources indicated that letter of credit fees could be as little as $250.14

Demurrage costs

Demurrage costs depend on whether the vessel is bulk or container. Demurrage for a bulk

vessel in a U.S. port typically costs $15,000 per day, and a bulk vessel can spend as many

as 10 days at anchor owing to delays related to clearing letters of credit through third-country

banks and other license requirements.15 Container ship demurrage charges have been

estimated at $20,000 to $30,000 per container ship per day (each vessel holding about 160

to 240 containers or about $125 per container per day).16 Container shipments typically

consist of shipments based on several independent transactions with Alimport. Therefore,

delays in the paperwork for any one transaction can delay all of the shipments, and in some

cases vessels are forced to leave with only a partial load.17 In April 2004, Cuban government

officials indicated that Alimport had paid approximately $18 million in extra charges

because of shipping delays and currency exchange.18 This represents 4.5 percent of the

approximately $400 million in U.S. agricultural exports to Cuba during 2001–03.19

High transport charges, foreign exchange transactions, and phytosanitary barriers

Testimony before the Commission suggests that U.S. exporters of high-valued products

(HVP) in non-bulk shipments face high transportation charges to Cuba because these

shipments must frequently be shipped in half-empty vessels, or because the exporter must

transport the merchandise to a more distant port where shipping services to Cuba exist.20

Because of the restrictions, there is currently only one carrier operating container vessels that

deliver HVPs to Cuba.21 In 2007, this carrier shipped only once per week to Cuba, causing

delays of merchandise at the U.S. port.22 There are many other container lines originating

from U.S. Gulf ports or U.S. ports along the Eastern Seaboard that could offer efficient

delivery of U.S. agricultural products sold to Cuba.
 23 Commission staff interview with Cuban officials, Havana, June 13, 2007.

 24 Ibid., June 12, 2007.

 25 U.S. industry officials, interview with Commission staff, June 21, 2007.

 26 Commission staff interview with Cuban officials, Havana, June 12-14, 2007.

 27 Alimport officials, interview by Commission staff, Havana, Cuba, June 12, 2007.

 28 CubaNews, “Alimport contracts for $118 million in U.S. food purchases,” June 2007.

 29 Johnson, Commission Hearing Transcript, 171.

 30 Commission staff interview with Cuban officials, Havana, June 12-14 2007.

 31 Maine Potato Growers, Inc., written submission to the Commission, May 4, 2007.

 32 Alimport officials, interview by Commission staff, Havana, Cuba, June 12, 2007.

 33 Industry officials, interview with Commission staff, May 2007.

G-10

Current U.S. restrictions prohibit foreign vessels that dock in Cuba from using U.S. ports for

a six month period, and therefore many foreign flag shippers are precluded from competing

to transport U.S. merchandise to Cuba. The Cuban-flag vessels of the Melfi Marine

Container Company cannot enter U.S. ports to pick up U.S. merchandise.23 As a result,

maritime charges for U.S. containers exported to Cuba are much higher than for U.S.

containers moving to other close Caribbean ports, such as to Haiti (which is about 60 miles

from Cuba).24 In addition, the cost of moving bulk cargo from U.S. ports to Havana in 2007

was double that to the Dominican Republic. Industry officials attributed this to U.S.

restrictions and the lack of unloading capability at Cuban ports, which can only handle

vessels of less than 25,000 mt, and because it takes much longer to unload the bulk cargo

inthe Cuban port.25

Regardless of whether demurrage is incurred or not, U.S. financing regulations increase

processing time and the probability that shipping delays will occur. Therefore, the inherent

risk of a 3-5 day delay in shipping perishable products that are refrigerated but not frozen

(such as fresh fruits and vegetables), to Cuba is too great since such a delay could cause

significant and unacceptable product loss. With only a once weekly container ship to Cuba,

U.S. products can be delayed 10-13 days if a ship is missed.26 As a result, very little produce

(other than some U.S. apples) are reported to be exported to Cuba. According to Cuban

officials, the cost of requiring payments in funds other than U.S. dollars and the involvement

of third-country banks is significant.27 It is reported that such costs amounted to $30 million

in 2006.28

Travel restrictions placed on Cuban officials limit the ability of U.S. exporters to make

product sales. For example, the inability of Cuban phytosanitary officials to travel in the

United States precluded the sale of North Dakota seed potatoes to Cuban buyers.29 In

addition, no U.S. beef has been purchased because of Cuban sanitary and phytosanitary

officials’ inability to visit the United States.30 In the case of fresh table potatoes, Cuban

phytosanitary officials have been unable to inspect Maine potato fields and cultural practices,

which has prohibited the fulfillment of a $6–$9 million fresh potato contract with Alimport.31

U.S. beef exports to Cuba have been negligible largely because Cuban inspectors have not

been granted visas to travel to the United States.32 Similarly, although Cuba has indicated

interest in purchasing U.S. live dairy cattle, the inability of Cuban officials to inspect the

animals has stymied most sales.33

Demand and Supply Elasticities

The price elasticities of export supply to Cuba for both U.S. and non-U.S. suppliers are

assumed to be highly elastic (the U.S. supply curve in a supply-demand graph of the Cuban

import market is close to horizontal) and in all cases an elasticity of +5 was used. This is
 34 Tomek and Robinson, Agricultural Product Prices.

 35 There are several sources of useful estimates of food demand (price and income) elasticities (some for

Cuba, some for Caribbean or Latin American countries that can be used as proxies for Cuba), including

databases maintained by USDA such as Datasets: International Food Consumption Patterns (excluding

Cuba but including most other Caribbean countries) and SWOPSIM (Static World Policy Simulation

Modeling Framework); Wu, “Growth, Expansion of Markets and Income Elasticities in World Trade;” Hong,

“Import Elasticities Revisited;” and Pacheco-Lopez and Thirlwall, “Trade Liberalization, the Income

Elasticity of Demand for Imports, and Growth in Latin America.” In addition, the Food and Agricultural

Policy Research Institute maintains the FAPRI Searchable Elasticity Database (including Cuba).

 36 Commission estimates of net additional tourists are 226,000 to 538,000. For its estimate of U.S.

agriculture exports absent restrictions, the Commission used the wider range of 250,000 to 750,000 which

takes into account the uncertainty of how tourists may respond to the elimination of restrictions and

encompasses the magnitude of the most likely response by tourists.

 37 Ministry of Tourism officials, interview by Commission staff, Havana, Cuba, June 13, 2007; Peters,

“International Tourism: The New Engine of the Cuban Economy;” Robyn, Dorothy, et al., “The Impact on

the U.S. Economy of Lifting Restrictions on Travel to Cuba;” Rosson, “Estimated Agricultural Economic

Impacts of Expanded U.S. Tourism to Cuba.”

G-11

because Cuba is a very small market compared with U.S. and global exports for all the

commodities covered. The Cuban import demand elasticities were based on the assumption

that import demand for food and agricultural products is inelastic with respect to price.34 For

bulk commodities, an elasticity of -0.3 was assumed on the basis of a review of several

published sources of food demand elasticities covering a broad range of commodities and

estimated for countries with similar economic characteristics to Cuba.35 Elasticities for

higher-valued products ranged from -0.6 to -1.3, again on assumptions drawn from the

economic literature.

Assumptions on Tourism

The number of net additional tourists (i.e., additional U.S. travelers to Cuba less non-U.S.

tourists that would be displaced by U.S. tourists) in the short-term is assumed to range from

250,000 to 750,000 (see the tabulation below). This estimate is based on previous studies,

and the Commission’s own empirical estimates.36 For a full discussion of this issue, see

chapter 3. Data are required for expenditures on food per tourist per day, as well as the

average length (in days) of a typical tourist’s visit to Cuba. A number of published sources

provide a ranges of estimates. Approximate mid-points for these ranges are daily tourist food

expenditures of $50 per day and 4.5 days per visit.37

Assumptions concerning tourism sector

No. of net additional tourists 250,000 - 750,000

No. days per visit 4.5

Expenditure on food/tourist/day ($) 50

Tourist expenditure-GDP multiplier 1.45

Import-GDP multiplier 0.38

Share of imports accounted for by food (%) 15

Lifting the travel restrictions affects U.S. exports of agricultural products in two ways: (1) an

increase in tourism directly increases Cuban demand for food imports to supply those added

tourists, and (2) an increase in tourist spending expands the Cuban economy, which increases

Cuban demand for food imports by its own citizens as well as foreign tourists. The first is

measured by a GDP/tourist expenditure multiplier (the increase in GDP caused by an
 38 Studies with estimates (or ranges of estimates for these multipliers include Perry, et al, “Cuban

Tourism, Economic Growth, and the Welfare of the Cuban Worker;” Wu, “Growth, Expansion of Markets

and Income Elasticities in World Trade;” Hong, “Import Elasticities Revisited;” and Pacheco-Lopez and

Thirlwall, “Trade Liberalization, the Income Elasticity of Demand for Imports, and Growth in Latin

America.” In addition, researchers at Michigan State maintain a model to predict the effects of tourism for

the U.S. Park Service; their research provides a range for a generic tourism multiplier (1.3 to 1.6). Stynes and

Propst, “Money Generation Model version 2.” Many tourism multipliers are estimated from input-output

matrixes.

G-12

increase in tourism spending), and the second by an import/GDP multiplier (the increase in

import demand caused by an increase in GDP). Combined, the two enable an estimate of the

overall impact on Cuban demand for food imports caused by an increase in tourism. The

multipliers selected were 1.45 for the tourist expenditure-GDP multiplier and 0.38 for the

GDP-import multiplier. The sources for these parameters included a number of published

academic studies of tourism and import demand in Caribbean economies.38 In its May 2007

report for Cuba, the Economist Intelligence Unit reported trade statistics for 2005. These

data indicated that about 15 percent of all Cuban imports were accounted for by food (other

major non-food imports were machinery and equipment, fuel, and chemicals).
G-13

Bibliography

Bonilla, Ruben. Port of Corpus Christi. Testimony before the U.S. International Trade Commission in

connection with Inv. No. 332-489. U.S. Agricultural Sales to Cuba: Certain Economic Effects of

U.S. Restrictions. May 1, 2007. Hearing transcript.

Cuba News. “Despite the Obstacles, Cuba’s Alimport is Spending More than Ever on U.S. Food.”

January 2007.

Cuba News. “In Wake of Tough New OFAC Regulations Food Exporters Turn to Letters of Credit.”

March 2005.

Food and Agricultural Policy Research Institute. FAPRI Searchable Elasticity Database.

http://www.fapri.org/tools/elasticity.aspx (accessed May 9, 2007).

Hong, Pingfan. “Import Elasticities Revisited.” UN Economic and Social Affairs Discussion Paper

No. 10, 1999. 

Johnson, Roger. North Dakota Commissioner of Agriculture. Testimony before the U.S. International

Trade Commission in connection with Inv. No. 332-489, U.S. Agricultural Sales to Cuba:

Certain Economic Effects of U.S. Restrictions, May 1, 2007. Hearing transcript.

Luxner, Larry. “Pedro Alvarez: Cuba Hungry for American Food Imports,” CubaNews, April 2004.

Pacheco-Lopez, Penelope, and A.P. Thirlwall. “Trade Liberalization, the Income Elasticity of Demand

for Imports, and Growth in Latin America.” Department of Economics, Keynes College,

University of Kent, 2003. 

Perry, Joseph M., et al. “Cuban Tourism, Economic Growth, and the Welfare of the Cuban Worker,”

1997. http://lanic.utexas.edu/la/cb/cuba/asce/cuba7/Perry.pdf (accessed June 15, 2007).

Peters, Philip. “International Tourism: The New Engine of the Cuban Economy.” Lexington Institute,

2003. 

Robyn, Dorothy, James D. Reitzes, and Bryan Church. “The Impact on the U.S. Economy of Lifting

Restrictions on Travel to Cuba.” Paper presented at the Twelfth Annual Meeting of the

Association for the Study of the Cuban Economy, Coral Gables, Florida, August 1-3, 2002.

http://lanic.utexas.edu/project/asce/pdfs/volume12/robyn.pdf (accessed April 14, 2007).

Roningen, Vernon O., John Sullivan, and Praveen Dixit. “Documentation of the Static World Policy

Simulation (SWOPSIM) Modeling Framework.” U.S. Department of Agriculture, Economic

Research Service, 1991. Staff Report AGES 9151. 

Rosson, Parr. “Estimated Agricultural Economic Impacts of Expanded U.S. Tourism to Cuba.”

Department of Agricultural Economics, Texas A & M University, 2003.

Stynes, Daniel and Dennis Propst. “Money Generation Model version 2.” Michigan State University,

2006. http://web4.canr.msu.edu/mgm2 (accessed June 15, 2007).
G-14

Tomek, William G., and Kenneth L. Robinson. Agricultural Product Prices. Cornell University Press,

1985.

Tourism Global Inc., The Caribbean Accommodation Sector as a Consumer of Locally Produced Goods

and Services and Contributor to Government Revenues, March 2007.

http://www.caribbeanhotels.org/chahotelspendstudy0307.pdf (accessed May 9, 2007).

U.S. Department of Agriculture. Datasets: International Food Consumption Patterns.

http://www.ers.usda.gov/Data/InternationalFoodDemand/Index.asp? (accessed May 9, 2007). 

U.S. Department of Agriculture. Foreign Agricultural Service. Cuba: HRI Food Service Sector Report

2002. GAIN Report No.CU2003, July 15, 2002.

Wu, Yi. “Growth, Expansion of Markets and Income Elasticities in World Trade.” Department of

Economics, Georgetown University, 2000.
APPENDIX H

Economic Literature Review 

 1

 U.S. International Trade Commission, The Economic Impact of U.S. Sanctions with Respect to Cuba.

 2

 Ibid., 4-21.

H-3

Literature Review

No one, to our knowledge, has examined the particular modifications of the financial

restrictions on agricultural exports to Cuba addressed in this report. Other studies have

explored the benefits to U.S. consumers of adding Cuba as a travel option and the gains to

U.S. producers from opening the Cuban market to U.S. agricultural exports. These studies

indicate that liberalization of restrictions also benefits Cuban exporters of travel services and

Cuban consumers of agricultural imports. However, uncertainty over the responses of both

private consumers and producers and the Cuban and U.S. governments has resulted in a wide

range estimated effects.

This literature review focuses on the relatively small set of studies that have examined the

effects of U.S. restrictions on agricultural exports and travel to Cuba. Generally, only studies

that make quantitative estimates of the effects were selected for review. These studies are

organized into three subsections: multipurpose and general studies, agricultural exports, and

travel and tourism.

Multipurpose and General Studies

This section looks at the previous Commission study, which examined the effects on a

number of sectors of removing the restrictions on U.S. trade with Cuba. These estimates of

increased exports to Cuba are relatively small. A critique of the Commission study by a

professor from the University of West Virginia follows, and a Ph.D. dissertation asserting

that globablization has dampened the effectiveness of the U.S. sanctions on trade with Cuba

is very briefly discussed.

The Commission evaluated the effects of removing U.S. sanctions on U.S.-Cuban bilateral

trade in 2001.1

 The Commission used econometric procedures and analysts’ judgments

predicated on studies and testimony by industry groups to formulate its estimates of

increased exports for the 2001 study (commodity estimates are reproduced in table H.1). The

Commission also estimated that from 100,000 to 350,000 more U.S. residents might travel

to Cuba if the travel ban were lifted.2

 Although some estimates at the time were higher, they

were believed to be improbable because of the lack of hotel space. 

A key component of the econometric procedures was a gravity model that assumes trade

between two countries is a function of their GDPs and the economic distance between them.

Here, economic distance is measured by physical distance, a country’s score on the Heritage

Foundation’s economic freedom index, the count of the number of foreign born citizens from

each country in the United States, and indicator variables for current and former communist

countries and for NAFTA membership. The gravity equation was first estimated for a sample

of countries including Cuba but not the United States. Next, potential shares of U.S. exports

in Cuba’s imports were estimated using actual U.S. trade data with third-country trading

partners. These estimates were combined with the parameter estimates and particular values

of variables for Cuba from the initial regression to generate potential U.S.-Cuba trade. 
 3

 Trumbull, “Imperfect Methodology but the Right Results? The USITC Report on the Economic Impact

of U.S. Sanctions with Respect to Cuba,” 105-109.

 4

 Spandoni, “Effectiveness of Economic Sanctions in the Context of Globalization and Transnational

Linkages: The Case of Cuba,” 125.

H-4

Table H.1 Estimated U.S. agricultural exports to Cuba in the absence of U.S. sanctions

Sector

Cuban imports from

the world, 1996-98

average

Estimate of U.S.

share of Cuban

imports

Estimate of U.S.

exports to Cuba

Estimate of Cuban

share of total U.S.

exports

Million dollars Percent Million dollars Percent

Selected agricultural products:

Meat 95 65-80 62-76 1

Dairy 82 5-15 4-12 1-3

Wheat 86 40-60 34-52 1

Rice 99 40-60 40-59 4-6

Feedgrains 10 90-100 9-10 (a

)

Animal feed 53 80-90 42-48 1

Fats and oils 37 80-90 29-33 1

Dried beans 64 20-40 13-26 4-8

Cotton 12 50-70 6-8 (a

)

Winter vegetables (b

) (b) (c) (a)

Tropical fruit (b

) (b) (c) (a)

Seafood 21 5-10 1-2 (a

)

Totald 559 43-58 241-327 1

Source: Reproduction of table ES-1, USITC, 2001, xxv. Estimated U.S. share of Cuban trade and estimated

U.S.–Cuban trade data are derived from Commission staff estimates and the Commission gravity model.

a

Less than half of 1 percent.

b

Not available.

c

Less than $500,000.

d

Represents over 90 percent of total Cuban imports of agricultural products.

The model implicitly assumes that Cuba will not grow significantly, so it is unable to afford

to increase its imports significantly. 

Trumbull critiqued this Commission gravity model.3

 He believes that the distance measure

based on the distance between the largest city of each country does not adequately capture

geographic characteristics. He suspects that U.S. trading partners are heterogenous in ways

not accounted for by the model and that key variables are omitted from the model, which

could bias the results. He argues that Cuban GDP would likely grow as the sanctions are

lifted and that trade and Cuban GDP are thus endogenous. He also states that inferring the

U.S. share of Cuban imports based on data from third countries is suspect because Cuba is

unique. He argues that more sensitivity analysis should have been done, but that the results

are believable despite the problems.

Spandoni argues that globalization has reduced the effectiveness of U.S. sanctions against

Cuba. Non-U.S. transnational companies have invested in many sectors of the Cuban

economy, and Cuba trades in a variety of goods with a number of foreign companies. For

example, the Spanish firm Sol Melia manages and has equity interests in a number of Cuban

hotels.4

 Despite the sanctions, Cubans have also benefitted from remittances from the Cuban
 5

 Parr and Adcock, “Economic Impacts of U.S. Agricultural Exports to Cuba.”

 6

 Ibid., 3-6. The Center for North American Studies estimated exports for sectors not included in the 2001

ITC study.

 7

 Specifically they use the IMPLAN model which captures disaggregated inter-industry flows plus final

demand; IMPLAN then generates the total effects for each U.S. state.

 8

 Mattson and Koo, “An Overview of Cuban Agriculture and Prospects for Future Trade with the United

States.”

H-5

diaspora, the majority of whom reside in the United States. Spandoni relies on a variety of

case studies, Cuban government data, interviews, and secondary sources to examine U.S.

financial flows in the Cuban economy and the effectiveness of sanctions, but he does not

forecast what would happen if the sanctions were lifted.

Agricultural Exports

Two studies related to U.S. agricultural exports are reviewed in this subsection. Academics

associated with Texas A&M prepared the first study that takes different projections of the

increase in agricultural exports to Cuba and apportions the benefits to U.S. states. Their

results vary based on the initial projections. Academics associated with North Dakota State

University wrote the second study which shows that U.S. agricultural exports to Cuba are

expected to increase as Cuban GDP rises.

Rosson and Adcock investigate the impact of increased agricultural exports to Cuba on the

U.S. economy under three different alternatives.5

 These three alternatives assume,

respectively, that the United States exports $37.5 million, $411 million, and $1.24 billion of

agricultural products annually to Cuba. The second alternative is based on the 2001 USITC

study, although it assumes that additional commodities are exported.6

 The third alternative

assumes a total absence of sanctions, high GDP growth in Cuba, and large U.S. market

shares of imports. Compared to current conditions, in which Cuba’s total agricultural imports

amounted to $1.04 billion in 2006, the third alternative is extremely optimistic. 

Rosson and Adcock take the estimates of increased exports and apportion them to U.S. states

based on each state’s share of total domestic production of the particular commodity. They

then use a detailed input-output model to estimate the related production that would be

needed to meet the increases in demand for U.S. exports.7

 The method used in this study is

fairly standard and is generally acceptable, but it has some limitations. If Cuban demand for

U.S. exports increases, U.S. exporters will meet this demand in part by diverting shipments

from other foreign destinations and possibly from the United States, as well. Thus, the net

increase in final demand for U.S. products will be less than the increase in exports to Cuba.

Also input-output analysis assumes that prices and technology are fixed. As export demand

increases, prices for domestic goods may change, and substitution may occur among

different inputs in the production process. For example, increased exports could raise the

domestic price of the exported commodity. Thus, it is likely that this input-output study

overestimates the economy-wide benefits from increased exports to Cuba. 

Mattson and Koo examine Cuban agricultural production and estimate the Cuba-U.S.

bilateral agricultural trade that would occur if restrictions were completely eliminated.8

 They

observe that U.S. exports of wheat, corn, poultry, and rice to the Caribbean region excluding

Cuba account for, respectively, 99 percent, 99 percent, 92 percent and 33 percent of total

exports to the region. They then calculate potential U.S. exports to Cuba based on those

market shares. While this approach may provide a theoretical upper bound for U.S. exports,
 9

 They estimate separate single equation models for each commodity and include a constant, Cuban

production of the commodity, and a time trend. These are not demand equations as no price variables are

included; the specification may omit key variables as substitution among different commodities may be

possible. Annual time series data from 1985 to 2000 is used, which is a very short series for statistical

estimation. They do not report any tests for stationary or autocorrelation, and whether the time trend may be

successful at removing any autocorrelation.

 10 A good summary of this literature appears in Angus Deaton, The Analysis of Household Surveys: A

Microenometric Approach to Development Policy, chapter 4.

 11 Commission Hearing Transcript, 125-130.

 12 Sanders and Long, “Economic Benefits to the United States from Lifting the Ban on Travel to Cuba,” 5.

H-6

attaining such high U.S. market shares appears improbable in the current policy setting in

which Cuba has made its intention known not to become overly reliant on any one country.

Mattson and Koo also estimate relationships between Cuban imports of wheat, rice, corn,

soybeans, and poultry and Cuban real per capita GDP.9

 They find a significant positive

relationship between per capita GDP and imports of wheat, corn, and poultry; the

relationship was insignificant for the other commodities. They use these relationships to

calculate how much Cuban food imports would increase as its GDP increases by different

amounts. Many economists have studied the relationship between income and food

consumption with fairly consistent results: poor people in developing countries often spend

very high proportions of their income on food, but the share of total expenditures devoted

to food purchases decreases as income increases.10 Despite Cuba’s issuance of ration cards

for basic food needs and its good health indicators, indications are that it will increase food

purchases as its GDP improves,11 and imports will continue to be a major source of food.

Although Mattson and Koo’s work is not without some problems, it stresses an important

relationship between income and consumption. As Cuba’s GDP improves, food imports are

likely to increase as well, but at declining rate.

Travel and Tourism

This subsection looks at two studies of the economic benefits of removing the restrictions

on U.S. travel to Cuba. The first study (Sanders and Long), which was prepared for the

Cuban Policy Foundation, estimates an intermediate to large response according to the time

allowed for Cuban infrastructure to adjust. The second study, which was prepared for the

Center for International Policy, looks at the long run and estimates a very large response.

Neither of these studies considers the effect that increased numbers of U.S. tourists might

have on other tourists visiting Cuba. It is likely that large increases in the numbers of U.S.

tourists would raise prices in the Cuban market and push non-U.S. tourists toward other

markets; thus, the net increase in the total number of tourists visiting Cuba would be less

than the increased number of tourists from the United States. The net change in the number

of tourists is also the appropriate number to use in calculations of the effects on U.S. exports

to Cuba from increased travel.

Sanders and Long estimate the effect of removing the travel ban under three scenarios that

(1) keep other restrictions in place, (2) allow U.S. companies to carry passengers to Cuba but

restrict U.S. investment in Cuba, and (3) entirely eliminate the trade embargo.12 They note

that, although tourism has expanded significantly in Cuba, its numbers of arrivals per square

kilometer and per kilometer of coastline remain low compared with other Caribbean

destinations. Their method could be characterized as a thought experiment for each scenario

informed by data and opinions of some travel industry experts. They assume that half the

U.S. travelers to Cuba will be diverted from other international destinations and that the
 13 Sanders and Long, “Economic Benefits to the United States from Lifting the Ban on Travel to Cuba,”

11.

 14 These tourists will convert dollars to Cuban pesos to purchase goods and services in Cuba. Similarly

expenditures by foreigners in the United States are counted as U.S. exports.

 15 Robyn, et al, “The Impact on the U.S. Economy of Lifting Restrictions on Travel to Cuba.”

H-7

other half will be induced to travel internationally instead of staying home. Although lifting

the ban will likely spur some new additional travel, it is arbitrary to assume that this number

is one-half. Their estimates of net increases of overnight visitors in the first year are,

respectively for the three scenarios, 300,000; 475,000; and 500,000 and similar figures for

the fifth year are 840,000; 1,330,000; and 1,400,000.13 Given the many uncertainties, such

as the degree to which Cuba opens up its market for investment, their method for estimating

the number of tourists is generally valid. 

Next, Sanders and Long project the increases in national income and jobs that would result

from the increased travel to Cuba. The Commission does not find that this analysis is

supported by evidence. Expenditures by U.S. citizens in Cuba are counted as imports of

tourism services,14 and imports enter the national accounting identity with a negative sign.

Although it is likely that both Cuba and the United States would gain from full trade

liberalization, it is unlikely that increases in imports of tourism services alone will lead to

net increases in national income and jobs. To the extent that tour operators and others in the

U.S. travel industry gain from liberalization of the travel sector, these gains would be

transfers from other parts of the economy.

Robyn et al. examine the impact of removing the travel ban to Cuba.15 They look at the long

run and do not consider Cuba’s supply of hotel rooms and related tourism services as a

constraint. They make a separate estimate for Cuban Americans visiting their families in

Cuba by assuming that these visits will occur at the same frequency as visits by Dominican

Americans to the Dominican Republic. They base their estimate of tourist visits by assuming

that U.S. citizens will visit Cuba in similar proportion to Canadians. This approach leads to

estimates of an additional 289,000 annual personal trips by Cuban Americans and an

additional 2.72 million annual trips by tourists; their total estimate (current plus additional)

is that 3.2 million U.S. citizens will visit Cuba annually. They apportion the increase into

diversions from other destinations and new demand based on two methods. First, they

assume that all additional trips by Cuban Americans are new demand and that 20 percent of

the tourist trips are new demand. Their second approach, which classifies 1.09 million annual

trips as new demand, assumes that U.S. travel to Cuba will be proportional to Canadian

travel to Cuba. By not considering any constraints on the Cuban side, Robyn and others’

results represent an upper bound on the tourism response.

Robyn et al. forecast the increase in demand for U.S. carriers as a result of removing the

travel restriction and the additional economic output and employment that this would

generate. This part of their work is subject to the same concern as Sanders and Long’s work.

Increased tourism expenditures in Cuba represent an increase in imports, and nothing has

occurred on the income side to suggest that aggregate employment will increase. The

consumer’s budget constraint has not shifted out, so the likely increases in the travel sector

are transfers from other segments of the economy and not net additions.
H-8

Bibliography

Deaton, Angus. “The Analysis of Household Surveys: A Microenometric Approach to Development

Policy.” Washington, DC: The World Bank.

Mattson, Jeremy W. and Won W. Koo. “An Overview of Cuban Agriculture and Prospects for Future

Trade with the United States.” Center for Agricultural Policy and Trade Statistics. North Dakota

State University. August 2003.

Parr, Rosson and Flynn Adcock. “Economic Impacts of U.S. Agricultural Exports to Cuba.” Center for

North American Studies. Texas A&M. October 2001.

Robyn, Dorothy, James D. Reitzes, and Bryan Church. “The Impact on the U.S. Economy of Lifting

Restrictions on Travel to Cuba.” Paper presented at the Twelfth Annual Meeting of the

Association for the Study of the Cuban Economy. Coral Gables. Florida. August 1-3, 2002.

http://lanic.utexas.edu/project/asce/pdfs/volume12/robyn.pdf (accessed April 14, 2007).

Sanders, Ed and Patrick Long. “Economic Benefits to the United States from Lifting the Ban on Travel to

Cuba.” Washington, DC: The Cuban Policy Foundation. June 2002.

Spandoni, Paolo. “Effectiveness of Economic Sanctions in the Context of Globalization and

Transnational Linkages: The Case of Cuba.” Ph.D. Diss. University of Florida. 2005.

Trumbull, William N. “Imperfect Methodology but the Right Results? The USITC Report on the

Economic Impact of U.S. Sanctions with Respect to Cuba.” Papers and Proceeding of the

Eleventh Meeting of the Association for the Study of the Cuban Economy 22. (August 2001): 105-

109.

U.S. International Trade Commission. The Economic Impact of U.S. Sanctions with Respect to Cuba.

USITC Publication 3398. Washington, DC: USITC. February 2001.