the Subcommittee on
Dorgan, Members of the Subcommittee,
you for the opportunity today to address issues concerning the
administration and enforcement of restrictions on travel-related
transactions involving Cuba. As you know, the Treasury Department's Office
of Foreign Assets Control ("OFAC") is currently responsible for
administering and enforcing 24 economic sanctions programs, most recently
the President's September 23 Executive Order targeting persons who commit,
threaten to commit, or support terrorism. With respect to the embargo on
Cuba, the President, as recently as January 17, has reasserted his
commitment to the use of the embargo and travel restrictions to encourage
a transition to democracy in Cuba. (Tab 1)
I speak about travel during the course of this testimony, I refer
specifically to restrictions on "transactions related to
travel," rather than simply to "restrictions on travel."
OFAC's jurisdiction under the Trading With the Enemy Act ("TWEA")
is to prohibit or regulate commercial or financial transactions, not
travel per se. The licensing criteria set forth in the Cuban Assets
Control Regulations, 31 CFR Part 515 (the "Regulations"),
implemented under the authority of this statute, address transactions
incident to travel and other transactions that are directly incident to
those activities deemed consistent with U.S. foreign policy.
enforce against transactions engaged in by persons subject to U.S.
jurisdiction when those transactions are entered into without
authorization. In contrast,
travel to Cuba that is fully hosted by Cuban or third-country nationals,
where nothing of value is provided in return, is not covered by the
Regulations. OFAC's jurisdiction under TWEA to regulate these classes of
transactions has withstood judicial review and been confirmed by the
United States Supreme Court.
licensing regime applicable to transactions involving Cuba travel took its
present form toward the end of the last administration, with an emphasis
on people-to-people contact and family reunification. This is only the
most recent development in administration policy on the subject, however,
and the current status of Cuba travel is very much a legacy of both
political parties. I have appended a chronology demonstrating how often
the policy has shifted with respect to Cuba travel. (Tab 2)
1977, for example, President Carter lifted restrictions on travel to Cuba
in their entirety, such that all travel-related transactions involving
Cuba were authorized under a general license. General licenses in OFAC
parlance constitute blanket authorization for those transactions set forth
in the general license in OFAC's regulations, and are self-selecting and
self-executing. No further case-specific permission is required to engage
in transactions covered by that general license.
Then, in 1982, the pendulum swung in the other direction, and
President Reagan reimposed a prohibition on all travel-related
transactions. The pre-existing general license was limited to official
U.S. or foreign government travel, visits to close relatives, and travel
related to journalism, professional research of an academic nature and
certain professional meetings.
1982 to early 1994, the general license authorization remained unchanged.
Travel transactions for humanitarian reasons, public performances,
exhibitions, and similar activities were specifically licensed on a
case-by-case basis. In 1993, under President Clinton, specific licenses
were made available for travel transactions related to educational,
religious, and human rights activities and the export or import of
the summer of 1994, responding in part to Cuban policies that resulted in
thousands of Cuban rafters crossing the Florida Straits, President Clinton
tightened OFAC's licensing regime to require specific licenses for all but
diplomats and full-time journalists. U.S. persons seeking to visit close
relatives in Cuba instantly became by far the largest source of specific
license applications. The following year, the general license was
reinstated for professional research, professional meetings and the first
family visit in circumstances of "extreme humanitarian need"
during any 12-month period.
to the Pope's visit to Cuba in 1998, President Clinton announced a new
policy in 1999 to promote increased people-to-people contacts in support
of the Cuban people. The result of this policy shift is reflected in the
current twelve regulatory categories of activities for which
travel-related and other transactions are authorized, either by general or
specific license. General licenses continue to apply to diplomats,
full-time journalists, professional researchers, certain professional
meetings and the first family visit per 12-month period. The requirement
that the family visit take place under circumstances of
"extreme" humanitarian need, however, was eliminated.
categories were expanded, most requiring case-by-case authorization by
specific license, including educational exchanges, religious activities,
athletic competition and public performances and exhibitions. In addition,
consistent with an overall policy development applicable to most countries
subject to economic sanctions programs that liberalized the export of food
and medicine, travel and other transactions directly incident to the
marketing, sales negotiation, accompanied delivery or servicing of
agricultural exports to Cuba became eligible for authorization by specific
license, provided that the exports are of the kind licensed by the
Department of Commerce.
the years, Congress has been actively involved in the formulation of
policy with regard to Cuba generally, and Cuba travel in particular. In
1992, the Cuban Democracy Act (the "CDA") added civil penalty
authority and required the creation of an administrative hearing process
for civil penalty cases and the establishment of an OFAC satellite office
in Miami to assist in administering and enforcing the Cuba program.
The Cuban Liberty and Democratic Solidarity (Libertad) Act of 1996
(the "Libertad Act") required that the underlying prohibitions
as set forth in the Regulations are to remain in place until there is a
transition to a democratically-elected government in Cuba.
in 2000, Congress passed the Trade Sanctions Reform and Export Enhancement
Act (the "TSRA"), restricting the President's discretionary
authority to authorize certain travel-related transactions to, from, or
within Cuba. Under section 910 of the TSRA, that authority is restricted
to travel-related transactions related to activities". . . expressly
authorized in paragraphs (1) through (12) of section 515.560 of title 31,
Code of Federal Regulations, or in any section referred to in any of such
paragraphs (1) through (12) (as such sections were in effect on June 1,
2000)." Any activity falling outside of these twelve categories is
defined in this section of the TSRA as "tourism" and may not be
the basis for issuing a license.
910 of the TSRA also expressly provides for case-by-case review of license
applications for travel in support of agricultural exports -- an activity
referred to in paragraph (12) of section 515.560 of the Regulations -- but
in so doing restricted the President's discretion to authorize such trips
by general license. I have appended a synopsis of these twelve categories
of activities for which travel-related transactions may be authorized to
this testimony for ease of reference. (Tab 3) I have also appended our
brochure on Cuba entitled: "What You Need to Know About the U.S.
Embargo," which covers all facets of this economic sanctions program.
process: OFAC processes a large number of license applications relating to
the Cuba embargo, the majority of which concern travel. License
applications relating to subsequent family visits, free-lance journalism,
educational activities by accredited U.S. academic institutions, religious
activities, informational materials and agricultural and medical exports
are processed by OFAC's Miami office. During calendar year 2001, the Miami
office handled 19,045 license applications for travel, particularly family
visits, and at least as many attendant telephone calls.
of the office's primary responsibilities is to regulate certain activities
of 182 entities nationwide, which are currently licensed to:
provide travel and carrier services to authorized travelers; and
(2) remit funds to Cuban households on behalf of individuals who are
subject to U.S. jurisdiction in the amounts and frequency authorized under
the Regulations (the "Service Provider Program"). Almost
two-thirds of these licensed entities are headquartered in Miami. Integral
to this regulatory program is the licensing and compliance oversight of
the direct charter flights to Cuba currently authorized from Miami, Los
Angeles and New York to carry authorized travelers. I have appended a copy
of OFAC's Circular 2001, setting forth guidelines applicable to the
Service Provider Program. (Tab 5) The
Miami office also investigates alleged violations of the Regulations and
processes enforcement referrals from the U.S. Customs Service and the U.S.
remaining travel-related license
applications are processed at OFAC's main office in Washington, DC,
along with all non-travel license applications involving Cuba, relating to
everything from blocked estates to international corporate acquisitions.
The travel-related applications include those involving professional
research and attendance at professional meetings not covered by the
general license, educational exchanges not involving academic study
pursuant to a degree program, participation in a public performance,
clinic, workshop, athletic or other competition, or exhibition in Cuba,
support for the Cuban people as provided in the CDA, humanitarian
projects, activities of private foundations or research or educational
institutes, and exports of medicine or medical supplies and certain
telecommunications equipment or reexports of U.S.-origin agricultural
commodities from a third country to Cuba. During calendar year 2001,
OFAC's Washington, DC staff handled 1,283 license applications for travel
in these various categories, with support from Treasury's Office of the
endeavor to process license applications within two weeks absent the need
for interagency review, and most travel-related applications fall within
this category. There are many instances, however, where a given
application fails to meet the applicable licensing criteria.
Depending upon the circumstances, the licensing officer may contact
the applicant to request additional information or clarification or
prepare a letter of denial. Certain
applications may have been delayed by the anthrax threat, which caused the
main Treasury Department mailroom to shut down for several weeks. Mail continues to be delayed for up to two months because of
the decontamination process that has since been put into place.
Licensing Criteria: Recent events have unfortunately given rise to
misperceptions on the part of the U.S. public regarding travel to Cuba. While travel for purposes of tourism or most business
transactions remains strictly prohibited, travel guides to Cuba are
readily available in any bookstore or on the internet portraying Cuba as
just another Caribbean tourist destination. The Pope's visit to Cuba in
1998, President Clinton's 1999 people-to-people initiative, the recent
surge in popularity of Cuban music and culture and the Elian Gonzales case
have all served to focus the American public's interest and attention on
appears that a great deal of the current frustration regarding the denial
of license applications involves a disconnect on what constitutes an
"educational exchange" or "people-to-people contact."
These terms are often used in license applications but are not accompanied
by material sufficient to demonstrate eligibility according to the
applicable licensing criteria. We
will continue to streamline these licensing criteria and, at the same
time, promote greater transparency and understanding by the public.
exchanges not involving academic study pursuant to a degree program must
take place under the auspices of an organization that sponsors and
organizes such programs to promote people-to-people contact. We have
published explanatory guidelines on our Internet website. (Tab 6) These
guidelines provide, in part, that people-to-people contact normally
entails direct interaction between U.S. and Cuban individuals not
affiliated with the Cuban government, and normally does not involve
meetings with Cuban government officials. OFAC evaluates, among other
things, whether the U.S. program is structured to result in direct and
individual dialogue with the Cuban people and whether the proposed
activities with the Cuban people are educational in nature, such as
participation in joint activities that may include seminars, lectures and
workshops. OFAC also evaluates whether each traveler will be fully
participating in all of the proposed people-to-people activities.
exchange involving people-to-people contact does not include travel for
purposes of, for example: railroad hobbyists' desire to see aging
locomotives in Cuba; a U.S. city's desire to establish a sister city
relationship with government officials of a Cuban city or province, or a
group of architects getting together to take a walking tour of Havana. Such proposed itineraries are not made more acceptable by a
traveler's commitment to distribute a small amount of over-the-counter
medicines or visit Cuban clergy or dissidents during the trip, when such
contacts are minimal and clearly not the primary focus of the trip.
licenses for such exchanges issued at the advent of the people-to-people
initiative in 1999 are now coming up for renewal. As we review activities
undertaken pursuant to those licenses during the past two years, it
appears that not all of the activities that took place pursuant to those
licenses entirely conformed to the intent of the licenses as issued.
For example, some license holders allowed other groups to travel to
Cuba under the authority of their licensees when that particular use of
the license was not contemplated in the original submission to OFAC.
Accordingly, we are exercising a heightened degree of scrutiny in
our review of these requests for renewals, and are incorporating reporting
requirements into the renewed licenses to ensure better compliance.
there has also been some confusion with respect to our licensing criteria
with respect to applications to permit persons to travel to Cuba in
conjunction with the exportation of agricultural commodities authorized by
the Department of Commerce. Consistent with the TSRA, the Regulations
provide that travel and other transactions that are directly incident to
the "marketing, sales negotiation, accompanied delivery, or servicing
of exports that appear consistent with the export licensing policy of the
Department of Commerce" may be authorized by specific license.
licensing criterion does not include trade missions to discuss
transactions that are not currently authorized, such as direct U.S.
financing, with a view toward the eventual end of the embargo. It also
does not permit individuals with no apparent nexus to this criterion to
join the trip, simply out of personal interest or a familial relationship
to another traveler. While there is no limitation on numbers of
participants in any given group, this nexus must exist between each
traveler and the activity in which he or she seeks to engage. Large
numbers are sometimes an indication that no such nexus exists. We have
just issued explanatory guidelines on our website to provide additional
guidance to persons applying for these licenses. (Tab 7)
to 1992, OFAC lacked civil penalty authority to enforce the Cuban embargo.
Criminal prosecution of travel-related violations was extremely rare. In
my experience, U.S. Attorneys often do not accept travel violations for
criminal prosecution absent other illegal commercial or financial
transactions by the traveler involving Cuba or Cuban nationals. The lack
of criminal prosecutions is widely reported in the media and in almost any
travel publication that discusses Cuba.
the passage of the CDA in 1992, the Trading With the Enemy Act ("TWEA")
was amended to provide that civil fines of up to $50,000 (now adjusted for
inflation to $55,000) could be levied for violations of the Regulations.
The CDA also required that the Secretary of the Treasury impose
such penalties "only on the record after opportunity for an agency
hearing . . . with the right to pre-hearing discovery." In 1996, the
LIBERTAD Act increased the number of categories of violations for which
civil penalties may be sought to include all travel-related violations. In
February 1997, OFAC promulgated proposed regulations to govern the
hearings, and in March 1998 published final regulations. Judicial review
by Article III courts is available once the Administrative Law Judge's
civil penalty determination is made final.
administrative review process is currently in place, despite efforts over
the years to establish such a process. I am pleased to note, however, that
Secretary O'Neill has approved a proposal for Treasury Department funding
of two Administrative Law Judges with the necessary support staff.
majority of OFAC's enforcement actions with respect to the Cuba embargo
concern individuals who engage in unauthorized travel transactions related
to Cuba tourism. For many reasons, including those previously articulated,
increasingly larger numbers of Americans disregard the law and travel to
Cuba purely for tourism. Interest in Cuba on the part of otherwise
law-abiding Americans has also been exploited by foreign travel agencies
that falsely advertise trips to Cuba claiming that such travel is legal.
OFAC has endeavored to correct these agencies' misrepresentations
by contacting them directly and placing advisories for all to see on our
website. (Tab 8)
tourism, certain organizations and individuals view travel to Cuba as an
act of civil disobedience. Organized challenges to the embargo have taken
the form of protests involving unlicensed travel transactions and the
unlicensed export of goods. There are passionate constituencies on both
sides of this issue, those who believe that we do not do enough to stem
the flow of U.S. tourist travel to Cuba and those who believe that any
regulation of travel is an infringement of their constitutional rights.
has worked hard to develop procedures with the Customs Service to identify
unlicensed travelers returning to the United States from Cuba. We have
endeavored to enforce these restrictions in an evenhanded manner that is
consistent with our responsibilities under the law. Returning Cuba travelers are identified by Customs agents and
inspectors at ports of entry in the United States or at U.S. Customs
Preclearance Facilities in Canada or the Bahamas. Those travelers who do
not claim a general or specific license from OFAC to engage in Cuba
travel-related transactions are routinely referred to OFAC for
investigation and civil penalty action. This workload is an extremely
heavy drain on finite enforcement and legal resources.
an enforcement case is referred for civil penalty consideration, the
administrative record either contains evidence of transactions involving
Cuba or the prepenalty notice is premised upon a rebuttable presumption
that an individual traveling to Cuba necessarily engaged in transactions
involving Cuba. This presumption appears in OFAC's Regulations and may be
rebutted by documentation establishing that the traveler was fully hosted
by a Cuban or third-country national. If the presumption is not rebutted,
a prepenalty notice with statement of rights and procedures attached is
then issued alleging violations of the embargo. (Tab 9) In many instances,
individuals request an informal settlement before OFAC issues a prepenalty
penalty assessments for unauthorized travel range from $5,000 to $7,500,
but the majority of cases are settled in amounts ranging from roughly
$2,000 to $5,000, depending upon the circumstances. A number of prepenalty
notice recipients, however, request administrative hearings, often with
the assistance of public interest legal organizations. As previously
mentioned, these cases are awaiting the funding and selection of
Administrative Law Judges.
have appended a chart that depicts our Cuba travel enforcement case
openings and referrals for civil penalty review, as well as the number of
Cuba travel Prepenalty Notices issued, for the period of January 1996
through June 2001. (Tab 10) As shown, 4,535 travel cases were opened for
investigation; 1,690 cases were referred for civil penalty review; and
Prepenalty Notices were issued in 947 cases.
Again, many individuals request informal settlements with OFAC
without the issuance of prepenalty notices.
this time, OFAC devotes approximately 5% of its budget and 7 full-time
equivalent positions to the administration and enforcement of restrictions
involving travel to Cuba. In addition, Treasury's Office of the General
Counsel devotes significant resources in support of these efforts. OFAC
remains committed to carrying out the President's mandate that enforcement
of the Cuba embargo be enhanced under current law. OFAC will continue to
administer and enforce the restrictions on travel-related transactions
involving Cuba in a manner that is timely, fair, and consistent with that
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