Economic Sanctions and U.S. Agricultural Exports

CRS Report for Congress
Economic Sanctions and
U.S. Agricultural Exports
Updated March 20, 2000
Remy Jurenas
Specialist in Agricultural Policy
Resources, Science, and Industry Division

Congressional Research Service ˜ The Library of Congress

A^BSTRACT
This report identifies the countries currently subject to U.S. economic sanctions that restrict
or prohibit shipments of agricultural and food products. It presents data on the agricultural
products that these countries import, lays out estimates of the extent to which U.S.
agricultural exports were reduced in 1996 as a result of these sanctions, and briefly analyzes
the impact of these “lost export sales” on the U.S. agricultural sector and national economy.^t^h^th
The report summarizes legislative activity in the 105 Congress and in the 106 Congress
relating to sanctions on U.S. agricultural exports, the Clinton Administration’s July 1999
policy change exempting food and medicine from sanctions imposed on some countries, and
arguments made for and against exempting or treating food differently in carrying out U.S.
sanctions policy. This report will be updated to reflect major congressional action or
significant policy decisions announced by the Administration on this issue.

Economic Sanctions and U.S. Agricultural Exports
Summary
Various statutes and regulations authorize the President to restrict or prohibit
trade with targeted countries for national security or foreign policy reasons. The
exercise of these authorities has resulted in restrictions or prohibitions at times being
placed on the export of U.S. agricultural commodities and products. The U.S.
government currently restricts exports of agricultural products as part of across-the-
board economic sanctions imposed on Cuba and Iraq. Exceptions are made for
humanitarian reasons, allowing food to be sold or donated to these two countries.
The Clinton Administration moved last year to lift prohibitions on U.S.
commercial sales of most agricultural commodities and food products to four other
countries. The U.S. Department of Treasury on July 27, 1999, issued export licensing
regulations to implement the Administration’s policy decision to exempt sales of food
and medical products from future, and some current, sanctions. This will allow sales
that meet specified conditions and safeguards to be made to Iran, Libya, and Sudan.
Since this policy went into effect, Treasury has approved licenses allowing for U.S.
exports of corn to Iran and durum wheat to Libya. A separate September 17^t^h White
House announcement on easing sanctions against North Korea likely means that sales
of agricultural products will be allowed under a less restrictive licensing policy. A
USDA analysis estimates that U.S. economic sanctions on these countries “reduced
U.S. agricultural exports by roughly $500 million in 1996.” The likely impacts,
according to a CRS analysis presented in this report, suggest that these “lost export
sales” may have in 1996 reduced farm income by $150 million.
Those in favor of changing U.S. sanctions policy to exempt agricultural exports
argue that restricting exports only hurts U.S. farmers and business, undermines our
reputation as a “reliable supplier,” and does not change targeted countries’ behavior.
Those opposed to change argue that current law gives the President flexibility to
permit food to be shipped for humanitarian reasons and that U.S. food, if sold, could
be misused by foreign governments and/or not made available to those in need.
Because of concern about declining farm exports, Congress in recent years has
focused increased attention on exempting food from U.S. sanctions. In 1998, the

105^th Congress overrode nonproliferation sanctions to permit USDA financing of U.S.

wheat sales to Pakistan (P.L. 105-194). In 1999, the House and Senate approved bills
that differ in their approach to sanctions. H.R. 17 (adopted by the House June 15,
1999) lays out congressional procedures to approve or disapprove a future embargo
on agricultural products that is not part of an embargo on all products to a country.
Senate action proposed changes to current as well as future embargoes. It approved
an amendment to its FY2000 agriculture appropriations bill (S.1233) exempting
commercial sales of agricultural and medical products from all current U.S. unilateral
sanctions, and from future unilateral sanctions proposed by the President, unless
Congress first approves. This provision was dropped in conference because of
objections by those opposing any commercial sales to Cuba and because it represented
a significant change in U.S. sanctions policy. The Senate plans to consider H.R. 17
during the week of March 20^t^h. The Senate Foreign Relations Committee also
reportedly will include food exemption language similar to last year’s floor
amendment in a foreign trade and assistance bill to be considered on March 23.

Contents
Background .................................................... 1
Countries Subject to U.S. Sanctions.................................2
Food Exceptions to U.S. Sanctions..................................2
Sanctioned Countries’ Share of
World Agricultural Trade......................................4
Sanctions’ Impact on U.S. Agricultural Exports.........................5
Economic Impact of “Reduced” Agricultural Exports....................7
Legislative Actions in the 105^th Congress..............................7
Legislative Activity in the 106^th Congress..............................9
Floor Action...............................................9
Committee Activity.........................................11
Other Bills................................................12
Clinton Administration’s Position..................................15
April 1999 Announcement of Policy Change......................16
Regulations Issued to Implement Policy Change....................17
Sales under the New Policy...................................18
Debate on Agricultural and Food Exports
in U.S. Economic Sanctions Policy..............................19
List of Tables
Table 1. U.S. Agricultural Exports to Countries Under Exceptions to U.S. Sanctions
Regimes ................................................... 4
Table 2. Agricultural Imports of the Six Countries Affected by U.S. Economic
Sanctions, Total and Share of World.............................5
Table 3. 1998/99 Trade in Selected Agricultural Commodities: Imports by the Six
Countries Currently Subject to U.S. Economic Sanctions ¹ ............6

Economic Sanctions and
U.S. Agricultural Exports
Background
Presidents have used broad statutory authorities to impose embargoes, or
economic sanctions, on U.S. trade when actions by targeted countries have
endangered national security or have undermined foreign policy objectives, or are
needed because of short domestic supply. On occasion, Congress has passed specific
legislation to require the President to announce sanctions when foreign governments
take certain actions and to limit his discretion in conducting sanctions policy with
respect to a specific country.¹ This at times has resulted in prohibitions or restrictions
placed on U.S. agricultural exports.
Some embargoes have been selective in nature (e.g., restricting sales of
commodities and food products but not of other exports). The most often-mentioned
example is the 1980-81 grain embargo imposed on the Soviet Union following its
invasion of Afghanistan. In other cases, exports of farm commodities have been, or
are currently, prohibited or limited as part of an across-the-board embargo applicable
to all U.S. trade. In implementing these statutes, the Executive Branch has at times
drawn distinctions in the type of agricultural shipments prohibited or curtailed. For
example, commercial export sales might be prohibited, while shipments of food for
humanitarian reasons (i.e., food aid) are allowed under certain circumstances.

¹General authority to restrict U.S. trade is found in the Trading with the Enemy Act, the
International Economic Emergency Powers Act (IEPA), and the Export Administration Act
(EEA). Though the EEA, which authorizes export controls, expired in 1994, its authorities
continue pursuant to IEPA. Laws that further prescribe the President’s authority to restrict
trade include the International Security and Development Cooperation Act, the Cuban
Democracy Act, the Cuban Liberty and Democratic Solidarity Act, and the Arms Export
Control Act. For additional information on these laws and related authorities and their use,
see CRS Report 97-949, Economic Sanctions to Achieve U.S. Foreign Policy Goals:
Discussion and Guide to Current Law, by Dianne E. Rennack and Robert D. Shuey, May 14,
1999; CRS Report 98-116, Nuclear, Biological, Chemical, and Missile Proliferation
Sanctions: Selected Current Law, by Dianne E. Rennack, May 27, 1998; CRS Report

95-248, Cuba: U.S. Economic Sanctions, by Mark P. Sullivan and Dianne E. Rennack,

November 21, 1996; and CRS Report 98-486, Nuclear Sanctions: Section 102(b) of the
Arms Export Control Act and its Application to India and Pakistan, by Jeanne J. Grimmett,
August 2, 1999.

Countries Subject to U.S. Sanctions
The U. S. government prohibits or restricts commercial exports of agricultural
products as part of across-the-board economic sanctions currently imposed on two
countries for foreign policy or national security reasons: Cuba and Iraq. Sanctions
on Cuba are imposed on a unilateral basis. With respect to Iraq, the United States
participates in a multilateral sanctions regime authorized by United Nations (UN)
resolutions, which supercedes unilateral action taken in 1990 to prohibit U.S. trade
following Iraq’s invasion of Kuwait. At present, there is no selective U.S. trade
embargo that singles out agricultural exports, nor is there one imposed for reasons of
short domestic supply.
In a policy change formalized on July 26, 1999, the U.S. government now
licenses commercial sales of most agricultural commodities and food products to Iran,
Libya and Sudan (under the conditions and safeguards laid out in implementing
regulations - for details, see Clinton Administration’s Position below). In a
separate announcement on September 17, 1999, the Administration announced an
easing of sanctions against North Korea. Restrictions on the export by U.S. firms of
non-sensitive goods, including most consumer goods, will be lifted. Commercial sales
of agricultural products are expected to be allowed under export licensing regulations
(likely to be similar to those announced for the other three countries) to be issued in

2000.²

Food Exceptions to U.S. Sanctions
The Executive Branch has at times exercised discretionary authority that allows
exceptions for humanitarian food shipments. This has allowed U.S. agricultural
products to be exported (usually under license) to four of the six countries subject to
sanctions as of mid-1999. Licensed or permitted agricultural exports to these
countries totaled $107 million in calendar 1998 (table 1). In recent years, shipments
covered by exceptions have included: (1) commercial sales to Iraq under the UN-
sponsored “oil-for-food” program,³ (2) donations and sales to eligible non-

²White House, Office of the Press Secretary, “Fact Sheet: Easing Sanctions Against North
Korea,” September 17, 1999.
³U.S. firms are authorized to sell (under a specific license issued by the U.S. Department of
Treasury’s Office of Foreign Assets Control - OFAC) agricultural commodities and food
products to Iraq only for essential civilian needs. OFAC-licensed sales must conform with
UN Security Council Resolution 986 (April 14, 1995), which established the “oil-for-food”
program, and meet other UN requirements and procedures. Under the program, U.S.
agricultural exports (primarily wheat and dried beans) totaled $81.9 million in 1997, $96.2
million in 1998, and $9.3 million in early 1999. U.S. exporters are currently eligible to bid
on Iraqi-planned purchases of commodities and food (paid for out of the revenues generated
by permitted oil sales) under Phase VI authorized by Security Council Resolution 1242 (May

21, 1999), covering the May 25 to November 21, 1999, period. Iraq indicated in early 1999,

though, that it will no longer buy from U.S. and three other countries’ firms, preferring to do
business with other countries that support its demand for lifting UN sanctions (Associated
(continued...)

governmental entities and private businesses in Cuba,⁴ and (3) wheat and wheat flour
shipments to North Korea⁵ and Sudan.⁶ Under the UN program, Iraq in the 1997/98
marketing year was the seventh largest market for U.S. wheat. Shipments to North
Korea and Sudan were financed by the U.S. Department of Agriculture’s (USDA)

³ (...continued)
Press, “Iraq might ban U.S., British imports,” February 23, 1999). For additional
perspective, see CRS Report 98-680, Iraq: Humanitarian Needs, Impact of Sanctions, and
the “Oil for Food” Program, by Lois McHugh, August 13, 1998, and CRS Issue Brief
92117, Iraqi Compliance with Cease-Fire Agreements, by Kenneth Katzman, updated
regularly.
⁴Regulations administered by the U.S. Department of Commerce’s Bureau of Export
Administration (BXA) prohibit most exports of U.S. origin to Cuba. Three exceptions apply
to agricultural-related shipments. First, regulations allow U.S. individuals to ship gift parcels
of food, seeds, veterinary medicines and supplies, among other specified items, to individuals
in Cuba without a license. Eligible U.S. charitable organizations with an established record
in delivering humanitarian donations in Cuba may also export food without license. Exports
of “commingled food products donated for relief” (HTS# 980210) totaled $140,457 in 1997,
$62,834 in 1998, and none in 1999 to date (January-July). Second, BXA regulations require
an export license, issued on a case-by-case basis, for the shipment of donated food (among
five other categories) for humanitarian purposes to eligible beneficiaries in Cuba. Exports
apparently covered by such licenses totaled $12,681 in 1997 (corn seed and cardamom), none
in 1998, and $3,730 in 1999(agar-agar, derived from vegetable products). Third, the
President announced on January 5, 1999, that U.S. policy will now allow “the sale of food and
agricultural inputs to independent non-governmental entities, including religious groups and
Cuba’s emerging private sector.” The BXA’s final rule authorizes export licenses to be issued
for the sale of permitted products to eligible recipients in Cuba and the procedures to be
followed in transporting such exports (Federal Register, May 13, 1999, pp. 25807-25808).
For additional perspective, see CRS Issue Brief 94005, Cuba: Issues for Congress, by Mark
Sullivan, updated regularly.
⁵Regulations generally prohibit exports to North Korea, unless licensed by the BXA. Exports
of commercially-supplied goods (including food) to meet basic human needs may be
authorized on a case-by-case basis under BXA-issued validated licenses. During 1998, the
United States donated 500,000 metric tons (MT) of food aid, primarily wheat, to North Korea.
In 1999, the United States committed 600,000 MT (100,000 MT which is being shipped,
100,000 MT for a pilot agricultural project to help improve the country’s potato yield and
rebuild its damaged agricultural infrastructure, and 400,000 MT to cover expected needs in
the July 1999-June 2000 period) (USDA News Release No. 0215.99, May 17, 1999).
Though the White House announced on September 17, 1999, that U.S. trade sanctions will
be eased, the degree to which licensing procedures pertinent to agricultural exports are revised
will not become clear until final regulations are issued sometime in 2000. For background and
additional perspective, see CRS Report 97-551, North Korean Food Shortages: U.S. and
Allied Responses, by Larry A. Niksch, May 30, 1997, and CRS Issue Brief 91141, North
Korea’s Nuclear Weapons Program, by Larry A. Niksch, updated regularly.
⁶U.S. exports to Sudan were prohibited from November 1987 until late July 1999, unless
OFAC specifically issued a license. Regulations during this period allowed donated articles
(such as food) intended to relieve human suffering to be shipped without a license. Under a
food aid initiative, USDA planned to ship 91,930 metric tons of wheat, flour and bulgur
(estimated at $14 million) in the December 1998-July 1999 period. For additional
perspective, see CRS Issue Brief 98043, Sudan: Humanitarian Crisis, Peace Talks,
Terrorism, and U.S. Policy, by Ted Dagne, updated regularly.

section 416(b) overseas donations program and the U.S. Agency for International
Development’s P.L. 480 Title II program. Food donations to these two countries are
distributed through the UN’s World Food Program.
Reflecting the 1999-announced change in export licensing policy (see Clinton
Administration’s Position below), agricultural and food exports in calendar 1999
totaled $72 million (table 1). Under this policy, 551,000 MT of corn (valued at $47.6
million) were sold to Iran, the first since 1995.
Table 1. U.S. Agricultural Exports to Countries Under Exceptions to U.S. Sanctions
Regimes
C^ALENDARY^EAR199419951996199719981999
$ in thousands
Cuba 135 62 7 153 63 4
Iran 85,537 136,410 0 0 0 47,680
Iraq 460 9 2,720 81,944 96,161 9,252
Libya000000
North Korea04,220361,5884,0447,039
Sudan 38,142 10,474 15,869 11,041 6,495 8,399
Total 124,274 151,175 18,632 94,726 106,763 72,370
Note: Restrictions or prohibitions on U.S. exports to these countries were imposed on Cuba in 1962, on Iran in 1995,
on Iraq in 1990, on Libya in 1986, on North Korea in 1950, and on Sudan in 1997. Prohibitions on commercial U.S.
agricultural exports to Iran, Libya, and Sudan were lifted to reflect a U.S. policy change, effective late July 1999.
Source: USDA, Foreign Agricultural Service
Sanctioned Countries’ Share of
World Agricultural Trade
The six countries affected by U.S. economic sanctions account for a small share of
world agricultural trade. Table 2 shows that these countries imported almost $7.7 billion in
agricultural imports in 1998, or 1.9% of worldwide imports (excluding the United States) that
totaled $415 billion. Iran, Iraq and Libya accounted for 83% of the six-nation total,
purchasing almost $6.4 billion.
The top commodities (in quantity terms) imported by these countries are wheat and flour,
rice, corn and vegetable oils (table 3). These countries presently account for about 10% of
projected world imports of both rice and wheat.

Table 2. Agricultural Imports of the Six Countries Affected by U.S.
Economic Sanctions, Total and Share of World
C^{ALENDAR YEAR}199619971998
$ in millions
Cuba 707.1 719.5 655.9
Iran 2,998.3 3,254.5 3,550.7
Iraq 939.7 1,487.5 1,718.5
Libya 1,252.6 1,245.0 1,114.7
North Korea387.4455.2334.0
Sudan 282.2 327.6 308.0
Six-Country Total6,557.37,489.37,681.8
All Countries ¹440,355.8426,937.0414,977.9
percent
Six-Country Share1.491.751.85
of World
Agricultural¹
Imports
¹ Excluding United States.
Source: Derived from the UN’s Food and Agriculture Organization’s FAOSTAT database
Sanctions’ Impact on U.S. Agricultural Exports
USDA’s Foreign Agricultural Service (FAS) estimates that U.S. economic
sanctions on these six countries “reduced U.S. agricultural exports by roughly $500
million in 1996.”⁷ To place into context, this amount would have represented 0.8%
of U.S. agricultural exports in 1996, if added to recorded agricultural export sales
totaling $60.4 billion that year. FAS broke out these lost sales as $275 million in bulk
commodities (primarily corn and wheat), and $225 million in all other (processed and
consumer-ready) commodity and food products. FAS arrived at this estimate using
two assumptions: (1) U.S. exports would be as competitive in these markets as they
are in world agricultural trade, and (2) trade would be diverted to other destinations
if U.S. exports to these six countries were permitted.⁸ One analyst commented that

⁷“Economic Analysis of the Impact of U.S. Trade Sanctions on U.S. Agricultural Exports,”
Informational Memorandum for the Under Secretary from Lon Hatamiya, FAS Administrator,
May 18, 1998.
⁸As further explanation, if U.S. agricultural exporters could sell to these “closed” markets,
U.S. farm exports to the rest of the world in the immediate period would fall somewhat. This
would occur because other agricultural exporting countries — as they see their sales to these
six country markets decline because of the competition posed by new U.S. sales — would sell
elsewhere, a development which would displace U.S. sales.

the FAS “lost sales” estimate is a conservative one that does not fully take into
account other variables that would likely come into play if U.S. sanctions were lifted.⁹
Table 3. 1998/99 Trade in Selected Agricultural Commodities: Imports
by the Six Countries Currently Subject to U.S. Economic Sanctions ¹
C^OMMODITYQ^UANTITYI^{MPORTED BY}^{THESE SIX COUNTRIES}S^IX-C^OUNTRYS^{HARE OF}W^ORLDI^MPORTS²
1,000 metric tonspercent
Wheat & Flour8,950 9.7
Corn1,600 2.5
Barley1,000 6.8
Rice2,16010.0
Vegetable Oils1,512 5.2
Cotton 41 0.8
Tobacco Leaf 10 0.6
¹ 1998/99 marketing year for all commodities except rice (calendar 1999) and tobacco leaf
(calendar 1997).
² U.S. imports are excluded in deriving these shares.
Source: USDA, FAS commodity circulars (May 1999), and ERS’ Production, Supply, and
Distribution (PS&D) database; FAO’s FAOSTAT database for tobacco leaf imports
A survey conducted by the U.S. International Trade Commission (ITC) “found
the costs and effects of U.S. unilateral economic sanctions on the U.S. agricultural
sector to be minimal,” because the affected six countries are small, low-income
economies that import relatively small volumes of higher-value agricultural products.
Respondents indicated that current sanctions “have minimal impact on U.S. producers
of soybeans, alcoholic beverages, leaf tobacco, seeds, meat, dairy, fish, and forest
products” but “may affect trade in some products, in some markets, and during some
time periods.” In responses to the ITC survey, the U.S. Wheat Associates (a
nonprofit trade promotion association) estimated that sanctions have resulted in
annual losses of $320 million in sales of wheat products over the last 10 years.
Separately, the North American Export Grain Association (a trade association of
grain trading companies) estimated that sanctions have reduced U.S. corn and wheat¹⁰¹¹

exports by about $200 million annually.
⁹“USDA Puts a Price Tag on Sanctions” by Greg Doud, in World Perspectives, Inc., “Ag
Perspectives,” July 1, 1998, p. 7.
¹⁰USITC, Overview and Analysis of Current U.S. Unilateral Economic Sanctions,
Publication 3124, August 1998, p. 3-5.
¹¹The lost sales estimates presented by the U.S. Wheat Associates and the North American
Export Grain Association overlap in commodity coverage and differ in other respects. This
likely reflects each association’s use of different methodologies, assumptions, and time
periods. The derivation of their estimates also appears to follow an approach different than
that used by USDA’s Foreign Agricultural Service to develop its reduced agricultural exports
(continued...)

Economic Impact of “Reduced” Agricultural Exports
It is difficult to quantify the impact of sanctions on the U.S. economy and the
agricultural sector in particular, because of the complexity involved in weighing
numerous market factors and the policies of affected countries’ that may change their
agricultural output and redirect trade flows. One approach to calculating the impact
is to apply appropriate trade-related economic and employment multipliers developed
by USDA’s Economic Research Service (ERS) to FAS’ estimate of $500 million in
lost sales in 1996. Such an analysis would suggest that these lost sales in that year
may have reduced farm income by about $150 million, lowered overall U.S. economic
activity by an estimated $1.2 billion, and reduced U.S. job creation by about 7,600 —¹²¹³

2,600 less in the farm sector, 5,000 in all other sectors.

Legislative Actions in the 105^th Congress
Farm state members’ concerns that nonproliferation sanctions imposed on
Pakistan following its nuclear weapons test on May 30, 1998, would result in that
country’s loss of access to USDA export credit guarantees to finance wheat purchases
served to focus attention on the impact that U.S. sanctions policy has on U.S.
agricultural exports. Concern that U.S. exporters would lose out on bidding on
Pakistan’s wheat tender in mid-July 1998 prompted Congress to move quickly, with
Administration support, to pass the Agriculture Export Relief Act of 1998 (P.L. 105-

¹¹ (...continued)
estimate.
¹² The farm income loss estimate is based on ERS’ finding that 45% of every dollar of bulk
commodity exports and 26% of each dollar of all other agricultural exports returns to the farm
as income. The estimate of lower U.S. economic activity is based on ERS’ multiplier that $1
of bulk exports generates 85 cents of additional business activity, and that each dollar of all
other agricultural exports generates $1.35 elsewhere in the economy. Additional economic
activity is generated as agricultural commodities are transported, processed, and merchandised
to buyers, and includes activity associated with farm purchases of inputs and equipment
needed for agricultural production. The jobs estimate is based on ERS’ finding that each
billion dollars in agricultural exports generates about 14,200 jobs. The multipliers used by
CRS to develop these calculations are taken from “U.S. Agricultural Trade Boosts Overall
Economy,” by William Edmondson, in ERS, U.S. Agricultural Trade Update, January 1998.
¹³To place into context, the $150 million in reduced farm income would have represented
about one-quarter of 1% of U.S. farm income in calendar 1996, if added to farm income
totaling $53.4 billion (using ERS’ definition) or $66.9 billion (using the Department of
Commerce Bureau of Economic Analysis’ definition). The $1.2 billion in lower economic
activity would have represented a small fraction of 1% of gross domestic product (GDP), if
added to the almost $7.7 trillion in 1996 GDP. The 7,600 fewer jobs estimate would have
represented a very small fraction of 1% of U.S. total employment, if added to U.S. civilian
employment of 126.7 million in 1996.

194). Signed into law on July 14, 1998, this Act exempts USDA credits, guarantees
and financial assistance from these sanctions through September 30, 1999.¹⁴
Advocates favoring changes to U.S. sanctions laws seized on the above issue to
highlight the “unintended” impact that sanctions can have on U.S. agriculture.
Extensive debate followed in the Senate on other proposals to exempt food from
economic sanctions imposed on other countries and to change the scope of U.S.¹⁵
sanctions policy in general. During debate on S. 2159 (FY1999 agricultural
appropriations), the Senate on July 15, 1998, adopted by voice vote an amendment
offered by Senator Dodd (after a motion to table it failed, 38-60) to exempt the sale
of food, fertilizer, medicine and medical equipment from current and future unilateral
sanctions. Because of concern that such a policy change would loosen the U.S. trade
embargo with Cuba and other countries, Senator Torricelli offered an amendment
preventing Dodd’s amendment from applying to any country that supports
international terrorism or that systematically denies access to food and medicine for
political reasons or as a means of coercion or punishment. The Senate adopted by
voice vote this amendment, after rejecting a motion to table it on a 30-67 vote.
House-Senate conferees later dropped both amendments, largely over differences of
opinion over the Torricelli provisos. Most observers acknowledged that the Torricelli
text would have had the effect of not allowing food to be exempt from the sanctions
currently imposed on the six countries, because all are on the State Department’s list
of terrorist states.¹⁶ Another amendment, offered by Senator Lugar (the same text
as his bill S. 1413, the Sanctions Policy Reform Act), would have required that a cost-
benefit analysis be prepared before any future sanction is imposed and placed a 2-year
limit on any sanctions unless Congress acted to renew them. This was tabled on a 53-

46 vote after extensive floor debate.

The deteriorating outlook for commodity prices and farm income during the
summer of 1998 prompted other lawmakers to focus on sanctions policy. The House
passed H.R. 4647 (Selective Agricultural Embargoes Act) on October 5 (see
discussion of H.R. 17 in following section). Meanwhile, report language found in the
agriculture appropriations portion of the FY1999 Omnibus Appropriations Act (P.L.
105-277) stated that the $3.057 billion authorized for “market loss payments” was to
compensate grain, cotton and dairy farmers for the loss of income in 1998 caused by

¹⁴For more information, see CRS Report 98-770, U.S. Agricultural Exports and the Nuclear
Nonproliferation Sanctions on India and Pakistan, by Remy Jurenas, July 21, 1998.
¹⁵1998 was not the first year that Congress has weighed in on this issue. Bills to lift the food
and medical restrictions on sales to Cuba have been introduced for several years now. Press
accounts of the famine in North Korea and the impact of UN sanctions on the civilian
population of Iraq have in recent years also elevated the food/sanctions issue in the public’s
eye.
¹⁶Inside U.S. Trade, “House conferees to offer alternative to Dodd food, medicine
amendment,” September 4, 1998, pp. 5-6; “Farm appropriators strike meat, produce labeling
provisions,” October 2, 1998, pp. 5-6. Washington Times, “Senate keeps Cuba embargo
intact; amendment had humanitarian aim, sponsor Dodd says,” July 17, 1998, p. A15.

“unilateral trade sanctions,” along with “regional economic dislocation” and “the
failure of the government to pursue trade opportunities aggressively.”¹⁷
Legislative Activity in the 106^th Congress
The current Congress has increased the level of activity on the issue of sanctions
and their impact on the agricultural sector. To date, the House has passed one
sanctions measure (H.R. 17). The Senate also approved an amendment to its FY2000
agriculture appropriations bill (S. 1233/H.R. 1906) that would have made farther-
reaching changes to sanctions policy than the House bill. The Senate amendment
would have eased the trade embargo on Cuba. Because of strong opposition, this
language was dropped from the conference agreement on the FY2000 spending
measure.
Members also have introduced some 20 pertinent bills, five committees have held
hearings,¹⁸ a Senate committee reported out a bill that is similar in some respects to
the Senate-passed amendment to S. 1233, and a House committee defeated an
amendment to exempt agricultural and medical products from current sanctions.
Some of the legislative proposals offered go further and are broader in coverage than
the Administration’s policy change announced in late April 1999 (see Clinton
Administration’s Position below).
Floor Action
The House and Senate have passed measures that differ in how each proposes
to exempt agricultural exports from U.S. sanctions policy. The House on June 15,
1999, passed H.R. 17 (Selective Agricultural Embargoes Act of 1999) under
suspension of the rules.¹⁹ This measure lays out procedures for Congress to approve
or disapprove of an embargo on agricultural products that is not a part of a future
embargo on all products to a particular country. If Congress in a joint resolution

¹⁷Title XI-Emergency and Market Loss Assistance, in section 101(a) of H.Rept. 105-825 filed
for H.R. 4328, printed in the Congressional Record, October 19, 1998, p. H11302.
¹⁸The Senate Agriculture Committee held a hearing on S. 566 on May 11, 1999; the Senate
Foreign Relations Committee heard testimony also on May 11; the House Ways and Means
Committee held a hearing on H.R. 1244 on May 27; the House Agriculture Committee on
June 9; the House Small Business Committee’s Subcommittee on Tax, Finance, and Exports
held a hearing on June 24; and the Senate Foreign Relations Committee held two followup
hearings (to hear an Administration witness on July 1, and to receive testimony on July 21
from four senators who introduced bills on this issue). In hearings held on re-authorizing the
Export Administration Act, the Senate Banking Committee received testimony on the issue
of agriculture and sanctions on June 23 and 24.
¹⁹Introduced January 6, 1999, by Representative Ewing. The House Agriculture Committee
on February 10 ordered H.R. 17 to be reported without amendment on a voice vote. The
Committee filed its report (H. Rept. 106-154, Part 1) on May 20. This bill was also referred
to the House International Relations Committee, which ordered it to be reported by voice vote
on June 10 (H. Rept. 106-154, Part II, filed June 14). An identical bill (S. 315) was
introduced on January 27 by Senator Ashcroft.

disapproves of the President’s action, the embargo automatically ends 105 days after
an embargo is announced. If Congress approves the embargo within a 100-day
window after receiving the President’s report on why the embargo was imposed, the
embargo ends on: (1) the date determined by the President, or (2) one year after the
resolution is enacted, whichever is earlier.
H.R. 17 specifically addresses the type of sales restriction illustrated by President
Carter’s decision in 1980 to impose an embargo on only sales of grain and soybeans
to the Soviet Union. If enacted, these provisions would apply only to any future
decision by the President to selectively embargo agricultural and food products
exported to a targeted country. It would not alter the trade restrictions imposed on
agricultural exports under current economic sanctions. Senate leadership have
indicated that H.R. 17 will be considered on the floor during the week of March 20.
On August 4, 1999, the Senate adopted an amendment (offered by Senators
Ashcroft and Hagel) to its version of the FY2000 agriculture appropriations bill (S.

1233/H.R. 1906) proposing to exempt commercial sales of agricultural commodities,

food products, medicine, and medical products from current U.S. unilateral sanctions.
This amendment would have allowed the President to withdraw this exemption from
current sanctions (i.e., add sanctions back) current sanctions, or to include agricultural
commodities in future sanctions. Presidential decisions would only take effect if
Congress votes in advance (following specified procedures and a timetable) in favor
of such action. A motion to table the amendment (offered by Senators Helms and
Torricelli) was defeated on a 29-70 vote. There was not comparable provision in the
House--passed appropriations bill (H.R.1906). Strong opposition by some members
in the House to the Senate amendment (particularly because of its easing of the U.S.
trade embargo on Cuba) threatened conference agreement between the House and
Senate. Ultimately, the embargo provisions were dropped from the conference
agreement, following leadership intervention and heavy pressure to get additional
money out to the farm sector as quickly as possible. As part of the agreement to drop
the sanctions language, Senate sponsors got a commitment from their leadership that
they would be given an opportunity to bring a sanctions exemptions bill to the Senate
before the end of the session.
The Senate-passed amendment (in H.R. 1906) would have gone beyond the
Administration's policy change (see Clinton Administration’s Position below) by
allowing commercial sales of agricultural products also to Cuba and North Korea
(currently strictly limited by the Cuban Liberty and Democratic Solidarity Act -- P.L.²⁰

104-114 -- and restricted by other statutes, respectively). This amendment, though,

would not effectively apply to Iraq, which is presently subject to a multilateral
sanctions regime administered by the United Nations. The language expanded
coverage of the agricultural products covered by this exemption to include non-food
commodities (e.g., cotton and tobacco) and appeared to provide for a more
streamlined export licensing process for commercial sales of these products. Some
in the Administration signaled their opposition to the amendment, arguing that
requiring the President to secure congressional approval of sanctions (which could

²⁰See footnote 1.

include restricting exports of farm commodities) would limit the President's flexibility
in using sanctions as a tool to advance foreign policy and national security objectives.
Committee Activity
On May 26, 1999, the Senate Agriculture Committee reported a bill (S. 566) that
would exempt commercial sales of agricultural commodities, livestock, and value-
added products from current and future U.S. unilateral economic sanctions.²¹ In an
amendment offered by Senator Conrad during markup, the bill was revised to allow
the President to review each exemption to a current sanction on a country. The
President could include agricultural products in sanctions in only two instances: (1)
when war is declared, and (2) when included for national interest reasons and
Congress fails to enact a resolution of disapproval. If enacted, commercial sales of
agricultural products to countries subject to sanctions would be allowed, unless the
President determines that such sales should be included in a sanctions regime on a
specific country and Congress does not override that decision. The Committee
approved S. 566 on a 17-1 vote, and filed its report on the bill (S. Rept. 106-157) on
September 13.
During House Appropriations Committee markup of the FY2000 agriculture
appropriations bill (H.R. 1906) on May 19, 1999, an amendment offered by
Representative Nethercutt to exempt commercial sales of food, other agricultural
products, medicine and other medical products from current and future U.S. unilateral
economic sanctions was defeated on a 24-28 vote. An amendment to preclude Cuba
from benefitting from the proposed exemption, offered by Representative DeLay, was
considered but subsequently withdrawn.
The Senate may address the food exemption from sanctions issue in considering
the Export Administration Act of 1999 (S. 1712), possibly this spring. Title IV of this
bill as reported last October by the Senate Banking Committee would exempt
agricultural commodities, medicine, and medical supplies from the application of the
foreign policy export controls laid out in the bill, but not from controls imposed in
response to national security threats. The bill's language further requires the President
to terminate any export control on these products mandated by other laws, except for
a control that future law specifically reimposes. Title IV's proposed exemption,
though, would not apply to a country subject to an embargo imposed under the
Trading with the Enemy Act (specifically Cuba and North Korea).
The Senate Foreign Relations is expected to include sanctions provisions in a
major foreign aid and reauthorization bill scheduled for mark up on March 23.
Indications are that this language will closely parallel that adopted as an amendment
by the Senate last August to the FY2000 agriculture appropriations measure (see
Floor Action above).

²¹Section 3 of S. 566 (Agricultural Trade Freedom Act, introduced March 8, 1999, by Senator
Lugar) contains the pertinent provisions.

Other Bills
Farm groups view U.S. sanctions policy as undermining the widely-held farm
policy goal of promoting U.S. agricultural exports. Others see the sanctions issue as
a way to influence U.S. foreign policy towards specific countries. Reflecting these
positions, lawmakers have introduced some 20 bills to exempt food and medicine
from U.S. economic sanctions and to change the way that such sanctions can be
imposed. These bills, summarized below, are grouped according to their primary
objective: (1) exempt food exports from economic sanctions, (2) change broad U.S.
sanctions policy and its use, and (3) address country-specific sanctions.
Exempting Food from Sanctions. Five bills (H.R. 212, H.R. 817, H.R. 2743,
S. 327, and S. 425) would generally exempt exports of food and other agricultural²²
products from U.S. unilateral sanctions imposed against a foreign government. H.R.
212, H.R. 2743, and S. 327 would change policy with respect to current and also
future sanctions. H.R. 817 and S. 425 would apply only to future sanctions.
Provisions (among others) found in these bills:
^!give the President authority to add food back into any current
sanctions imposed on U.S. exports to a foreign country for national
security and/or foreign policy reasons;
^!allow the President to include food in any new sanction imposed if
Congress has declared war or the President has declared a national
emergency;
^!restrict exports when domestic shortages of an agricultural
commodity exist;
^!specify the date by which the food exemption is to become effective
(ranging from date of enactment up to 180 days after enactment
unless the President decides to include food in any announced
sanctions decision);
^!exempt the export of other products, such as agricultural inputs (i.e.,
fertilizer), medicines and medical equipment, from sanctions;
^!exclude or include (depending on the bill) exports facilitated by
USDA credit and food aid programs in the food exception to
sanctions;

²²H.R. 212 (Freedom to Market Act, introduced January 6, 1999, by Representative
Nethercutt), section 4 of H.R. 817 (United States Agricultural Trade Act of 1999, introduced
February 17 by Representative Ewing), title III of H.R. 2743 (Farm and Ranch Emergency
Assistance Act of 1999, introduced August 5 by Representative Emerson), S. 327 (Food and
Medicine Sanctions Relief Act of 1999, introduced January 28 by Senator Hagel), and S. 425
(Food and Medicine for the World Act of 1999, introduced February 11 by Senator Ashcroft).

^!require congressional approval of any new sanction affecting
agricultural exports; and
^!set timetables for the President and other federal departments to
submit reports to Congress on any sanctions imposed on a foreign
country and specify what these reports are to include (e.g.,
explanations of why each decision was made, an analysis of the
impact on the U.S. agricultural sector of including food in any
sanctions decision).
Two of these bills (H.R. 212 and S. 327) could permit U.S. agricultural and food
exports to resume largely without any restriction to any country still subject to
across-the-board U.S. economic sanctions (subject to the degree of discretion given
to the President and differing timetables and/or reporting requirements).
Separately, a provision in H.R. 1299 expresses the sense of Congress that federal
prohibitions or restrictions on the sale or provision of agricultural commodities to
foreign countries should be maintained only if essential to U.S. national security. It
requires the President to conduct a study each year to determine (1) whether or not²³
they are essential to such U.S. interests, and (2) their impact on U.S. agriculture.
Changing U.S. Sanctions Policy. Four bills are much broader in scope, but still
address matters of concern to the agricultural sector. H.R. 1244 and S. 757 seek to
reform the process by which future unilateral economic sanctions are imposed, but
differ in some details of the framework that is to apply in considering congressional-
and executive branch- initiated sanctions, respectively. In general terms, these
measures detail guidelines to be followed in formulating sanctions; allow the President
to adjust the timing and extent of executive branch sanctions; limit executive branch
sanctions to 2 years, unless extended by the President for national security and foreign
policy reasons; require the President, the Secretary of Agriculture, the Congressional
Budget Office, and the U.S. International Trade Commission to file reports assessing
the costs of a sanction relative to desired objectives). One provision authorizes
USDA to increase export assistance and promotion programs whenever farm
commodities are subject to sanctions.²⁴ S. 1161 similarly establishes procedures for
considering and enacting unilateral economic sanctions legislation and lays out a
framework for their use in support of U.S. national interests while minimizing the
sanctions’ adverse effects on the U.S. economy. Separately, S. 927 has implications
for the agricultural sector in the flexibility it gives to the Executive Branch in changing
the scope of current sanctions. It authorizes the President to delay, suspend, or

²³Section 7 of H.R. 1299 (Restore Agriculture Productivity Act of 1999, introduced March

25 by Representative Berry).

²⁴H.R. 1244 (Enhancement of Trade, Security, and Human Rights through Sanctions Reform
Act, introduced March 24, 1999, by Representative Crane), and S. 757 (Sanctions Reform
Act, introduced March 25 by Senator Lugar).

terminate any economic sanction on a foreign country if he determines and reports to
Congress that it does not serve U.S. national interests.²⁵
Country-Specific Proposals. In addition to the broad legislative initiatives, 10
bills would change how U.S. sanctions policy is applied to individual countries. Six
measures pertain to Cuba. H.R. 230, H.R. 1644, and S. 926 propose to exempt U.S.
food and other specified exports (e.g., medicine and medical equipment) from the
comprehensive U.S. trade embargo currently in force with respect to Cuba. H.R. 229,
H.R. 256, and H.R. 1181 are much broader in scope, proposing to completely lift the
trade embargo on Cuba or significantly modify its application.²⁶
Two measures address U.S. sanctions policy toward Iraq. H.Con.Res. 39
advises on U.S. policy with respect to the UN’s “oil-for-food” program with Iraq.
H.R. 3825 proposes to end current U.S. sanctions imposed on Iraq to allow the
export of food, other agricultural products (including fertilizer), medicine, and other
medical products for humanitarian reasons.²⁷
The Senate, in completing consideration on June 8, 1999, of the FY2000
Department of Defense appropriations bill (S. 1122), adopted by voice vote an
amendment that suspends the application of the non-military nonproliferation
sanctions imposed on India and Pakistan (including each country’s loss of access to
USDA credit guarantees) for 5 years.²⁸ Section 707 of H.R. 973, which the House
passed under suspension of the rules on June 15, would make permanent the change
made by the Agriculture Export Relief Act of 1998 (P.L. 105-194), which temporarily
exempted USDA export assistance from the nonproliferation sanctions mandated by
the Arms Control Act.²⁹ Section 1707 of H.R. 2415 is an identical provision.³⁰ These
House provisions would continue India’s and Pakistan’s eligibility (if program criteria

²⁵Respectively, the Economic Sanctions Reform Act of 1999, introduced May 27, and the
Sanctions Rationalization Act of 1999, introduced April 29, both by Senator Dodd.
²⁶H.R. 230 (Cuban Humanitarian Trade Act of 1999, introduced January 6, 1999, by
Representative Rangel); H.R. 229 (Free Trade With Cuba Act, introduced January 6 by
Representative Rangel); H.R. 256 (Cuba Reconciliation Act, introduced January 6 by
Representative Serrano); H.R. 1181 (introduced March 18 by Representative Paul); and H.R.
1644 / S. 926 (Cuban Food and Medicine Security Act of 1999, introduced April 29 by
Representative Serrano and Senator Dodd). For more information and background, see CRS
Issue Brief 94005, Cuba: Issues for Congress, by Mark P. Sullivan, updated regularly, and
CRS Report 98-118, Cuba: Initiatives to Ease Restrictions on U.S. Food and Medical
Exports, by Mark P. Sullivan and Dianne E. Rennack, February 11, 1998.
²⁷H.Con.Res. 39 was introduced March 2, 1999, by Representative Watkins. H.R. 3825
(Humanitarian Exports Leading to Peace Act of 2000) was introduced by Representative
Conyers on March 2, 2000.
²⁸Title X, as inserted into the text of H.R. 2561 and passed by the Senate on July 28, 1999.
Conference action is pending.
²⁹Security Assistance Act of 1999, introduced March 4, 1999, by Representative Gilman.
³⁰American Embassy Security Act of 1999, introduced July 1, 1999, by Representative
Christopher Smith. The Senate did not include this provision in passing its version of this
measure on August 3, 1999.

are met) to access USDA’s export programs (e.g., direct credits and credit
guarantees) to purchase U.S. agricultural commodities after September 30, 1999.
Clinton Administration’s Position
Statements made in the May-September 1998 period suggested that the Clinton
Administration was contemplating a possible shift in policy with respect to restricting
exports of agricultural and food products in its exercise of overall U.S. sanctions
policy. Low commodity prices and falling agricultural exports, combined with
mounting congressional pressure for a policy change, appear to largely explain the
Administration’s increased focus on this issue. To illustrate, inter-agency efforts to
formulate a U.S. government response on implementing the nonproliferation sanctions
imposed on India and Pakistan following their nuclear tests led the Administration to
conclude that the Arms Control Act required cutting off USDA financial backing of
substantial wheat exports to Pakistan, the third largest market for U.S. wheat. As
congressional pressure built for the Administration to exclude USDA export credit
guarantees from the sanctions, President Clinton on June 10, 1998, signaled that U.S.
policy is to try, “wherever possible, to minimize the humanitarian impact on the
people of those [two] countries” and stated that “we have long believed that food
should not be used as a weapon to influence other nations.” In radio remarks, the
President announced his support of legislation (subsequently enacted as P.L. 105-194
on July 14, 1998) “to ensure that American farmers can continue to export wheat to³¹
Pakistan and India under [USDA’s] export credit program.”
Until late April 1999 (when an exception to including food and medicine in
sanctions policy was announced — described below), the Administration appeared to
be handling decisions on liberalizing food and agricultural exports to the currently-
sanctioned countries on an ad hoc, case-by-case basis. First, the President announced
in early January 1999 that sales to Cuba would be allowed of U.S. food products to
non-governmental entities (i.e., religious groups and private restaurants) and of
agricultural inputs to private farmers and farmer cooperatives producing food for sale
in private markets.³² Regulations to implement this decision (among others with
respect to Cuba) were recently issued. Second, the Niki Trading Corporation (a U.S.
firm) in late 1998 submitted a request to the Administration to sell $500 million in
U.S. agricultural commodities (2 million MT of wheat, plus smaller amounts of corn,
sugar, rice, and soybean meal) to Iran. Though a preliminary, staff-level report to the
White House in mid-January 1999 reportedly recommended that this request be
rejected, the Department of Treasury will consider Niki’s application along with
possible others now that regulations to implement the Administration’s policy change
allowing commercial food sales to Iran have been issued (see below).³³

³¹Associated Press, “Clinton endorses Pakistan wheat bill amid GOP criticism,” June 13,

1998.

³²The White House, Office of the Press Secretary, “Statement by the President,” January 5,

1999.

³³Washington Post, “Iran requests $500 million in food items,” January 19, 1999, p. A13;
(continued...)

April 1999 Announcement of Policy Change³⁴
The Administration on April 28, 1999 “codified” presidential statements made
last year not to use food as a tool to conduct foreign policy with a White House
announcement that the United States “will exempt commercial sales of agricultural
commodities and products, as well as medicine and medical equipment from future
unilateral Executive Branch economic sanctions regimes, unless [the President]
determines that our national interest requires otherwise.” Its statement announced
that this policy will extend also to existing sanctions regimes, where the discretion to
do so exists, “by modifying licensing policies to permit case-by-case review of specific
proposals.” An inter-agency effort will develop “country-specific licensing criteria to
guide the case-by-case review process so that sanctioned governments do not gain
unjustified or unwarranted benefits.”
Undersecretary of State Stuart Eizenstat highlighted the criteria that will be
followed in granting a license under this change. These will include:
^!the requirement that all sales contracts be fully negotiated at the time
a license is applied for,
^!the requirement that all sales be made at prevailing market prices,
and
^!a restriction that all sales be made to non-governmental entities.
Extraordinary circumstances spelled out in the announcement that would prompt
the Administration to make an exception to this exemption include:
^!actual or potential armed conflict involving the United States or its
allies,
^!a situation where a regime is diverting imports of food, medicine, or
medical equipment to its military or its political supporters, or
^!a situation in which the import of such items would provide
unjustified economic benefit to a regime or its officials.
Officials stated this announcement was part of an Administration effort to reform
the process for imposing and maintaining unilateral economic sanctions. The change
exempting agriculture and medicine reflects the outcome of a debate that any

³³ (...continued)
Pro Farmer Headline News, “National Security Council reportedly okays exempting U.S. ag
trade sanctions on Iran,” March 9, 1999.
³⁴This section is based on the following sources: White House, Office of the Press Secretary,
“Humanitarian Exemptions from Sanctions,” April 28, 1999; U.S. Department of State,
Office of the Spokesman, Press Briefing on Economic Sanctions, April 28, 1999; and USDA,
“Remarks of Secretary Dan Glickman [on] Change in U.S. Economic Sanctions Policy” and
“Sanctions Reform Fact Sheet,” April 28, 1999.

sanctions imposed should be effective and that the cost of their imposition on U.S.
interests should be minimized.
Briefings at USDA and the Department of State confirmed that this policy
change will apply to the sanctions currently in place with respect to Iran, Libya, and
Sudan. This change, though, will not apply to sanctions now imposed on Cuba, Iraq,
and North Korea, which are authorized by statute and/or are governed by regulations
that provide for the export licensing (if specific criteria are met) of U.S. agricultural
commodities and food products.³⁵ Further, the new policy “will not affect current
statutory or other restrictions on U.S. government funding, financing or guarantees
in support of such sales.”
Regulations Issued to Implement Policy Change
The White House, the Department of Treasury, and the USDA on July 26, 1999,
announced the release of regulations to implement the Administration’s new policy
permitting the commercial sale of food and medical products to countries still subject
to broad economic sanctions. Officials stated that these regulations: (1) codify the
humanitarian-based principle that sanctions should not be used as a foreign policy tool
to deny importing countries the ability to buy these products, except in the most
compelling circumstances, and (2) will provide U.S. agriculture and business with the
opportunity to compete on a predictable basis in more markets.³⁶ Effective
immediately, Treasury’s Office of Foreign Assets Control (OFAC) will administer a
new export licensing policy with respect to the commercial export of these products
(subject to specified safeguards) to Iran, Libya, and Sudan. The main provisions that
are pertinent to agriculture:
^!specify that licenses will be issued for the sale of agricultural
commodities and products intended for ultimate consumption as food
by humans or animals (non-food commodities, such as cotton and
tobacco, are not included in, or covered by, this policy change),
^!allow sales only to approved buyers (e.g., private individuals acting
for their own account, non-governmental entities, and government

³⁵U.S. economic sanctions on North Korea were not affected by this policy change when
announced in late April. The Administration’s easing of sanctions against North Korea,
announced September 17, 1999, are expected to result in a revision of export licensing
regulations that are similar in content to the regulations issued for licensing commercial sales
of agricultural products to Iran, Libya, and Sudan. These regulations are not likely to be
issued until well into the year 2000.
³⁶White House, Office of the Press Secretary, “Implementing Humanitarian Exemptions from
Sanctions;” U.S. Department of Treasury, “Treasury Deputy Secretary Stuart E. Eizenstat
Statement on Sanctions” (LS-29); and USDA, “Statement by Secretary of Agriculture Dan
Glickman on New Regulations Providing Sanctions Relief for Agriculture” (Release No.

0304.99).

procurement bodies that are not affiliated with “coercive organs of
the state),³⁷
^!require that all covered sales be subject to specific OFAC licenses
under one of two procedures:
(1) an expedited process designed for sales of listed bulk agricultural
commodities (i.e., one license that is in effect over a specified time period
that authorizes an exporter to respond to requests for bids, enter into
binding contracts, and perform under these contracts, subject to certain
conditions), or
(2) a two-step procedure for all other food items (the first step requires
a seller to obtain a general export license to enter into contracts that make
performance contingent upon final OFAC approval, disclose all parties with
an interest in the sale, and lay out all terms of the sale; the second step
requires the prospective seller to apply to OFAC for a specific license
(granted after a case-by-case contract review) that authorizes performance
under the contracts),
^!lay out payment and financing terms that differ by the type of license
issued:
(1) under a general license, such terms include cash in advance, sales on
open account with certain limitations, or financing by third country banks
that are neither U.S. individuals nor entities of the governments of Iran,
Libya or Sudan. U.S. banks would be permitted to advise or confirm
letters of credit issued by third country banks.
(2) under a specific license, OFAC will consider applications from U.S.
banks to participate in financing sales on a case-by-case basis, where such
financing arrangements would not undermine overall compliance with U.S.
sanctions.³⁸
Sales under the New Policy
Secretary of Agriculture Dan Glickman in testimony before the House
Agriculture and Senate Foreign Relations Committees indicated that, as a result of
this change, U.S. exports of wheat and corn each could increase by as much as 1
million tons to the three affected countries. He mentioned this change also improved
the prospects for making sales of rice to countries that once were major markets.

³⁷OFAC has identified them to be: in Iran, the Government Trading Corporation (GTC) and
the State Livestock and Logistics Co. (SLAL), and in Libya, the National Supply Corporation
(NASCO).
³⁸OFAC’s regulations were published in the Federal Register on August 2, 1999 (pages
41784-41794), and are available on the Web at
[http://frwebgate.access.gpo.gov /cgi-bin/getdoc.cgi?dbname=1999_register&docid=99-19

628-filed].

Traders view Iran as having the best market potential for sales under the policy
change. Iran is the largest food importer of the three countries affected by this shift
in U.S. policy, importing close to $3 billion in agricultural commodities and food
products in each of 1996 and 1997. Top 1997 imports were wheat ($618 million),
sugar — primarily refined ($518 million), rice ($420 million), soybean oil ($211
million), and corn ($179 million). The country’s commodity import needs are
expected to increase substantially over the coming year, because of a serious drought
affecting the region. USDA in late 1999 projected that Iran will need to import 6
million metric tons (MT) of wheat, 1.2 million MT of corn, 1 million MT of barley,
and 900,000 MT of rice to cover production shortfalls. USDA Undersecretary
Schumacher stated in an interview that the United States could become “a major
supplier” to Iran at current market prices, as U.S. wheat, corn, soybeans and rice “are
very export competitive.” He added that the United States can compete with Europe
for sales of wheat to Iran, but said the USDA’s export credit guarantee program will
not be available (reflecting the Administration’s policy position) to facilitate U.S.³⁹
sales.
Reported Sales. Since the Administration’s policy change went into effect, U.S.
exporters have sold 551,000 metric tons (MT) of corn to Iran and a small quantity of
animal feed. During this period, wheat trade associations and lawmakers from wheat
producing states have urged the Administration to make USDA credit guarantees
available to facilitate the sale of U.S. wheat to Iran. They note that Iran in the fall of
1999 purchased large quantities of wheat (about 1 million MT from the European
Union since early August, and 1 million MT from Canada on August 24, 1999,
reportedly under a credit line provided by the Canadian Wheat Board). They also
argue that U. S. exporters will lose out on wheat sales unless the Administration
further revises its policy to allow the use of U.S. Government credit programs to
facilitate sales to previously-sanctioned countries. Press accounts report that the
Administration opposes making USDA credit guarantees available to Iran because of
its Government’s support of terrorism; Secretary Glickman though indicates that this
issue is still under review.
U.S. exporters in mid-February 2000 reported sales of 16,200 MT of durum
wheat to Libya, taking advantage of the policy change.
Debate on Agricultural and Food Exports
in U.S. Economic Sanctions Policy
Many farm organizations, agricultural commodity associations, and agribusiness
firms favor changing U.S. policy to exempt export sales of agricultural commodities,
food products, and agricultural inputs from the broad economic sanctions currently
imposed on targeted countries. They have joined with firms in the pharmaceutical and
manufacturing sectors to call for a comprehensive review of the economic impact of

³⁹FAO for data on Iran’s commodity imports data; Pro Farmer Headline News, “U.S. trade
sanctions for food and medicine lifted against Iran, Libya and Sudan,” July 26, 1999; USDA,
FAS, Grains: World Markets and Trade, September 13, 1999.

these sanctions and for limits on the executive branch’s use of sanctions to restrict
trade.⁴⁰
Opposition to exempting sales of agricultural commodities and food products
from current sanctions is, by contrast, somewhat more diffuse. Except for those that
publicly favor continuing the comprehensive trade embargo on Cuba (which prohibits
the sale of agricultural commodities and food products along with almost all other⁴¹
commercial trade involving Cuban government entities), advocates of the use of
sanctions as a “legitimate and effective” policy tool are scattered throughout the
foreign policy and defense community. Most have no financial stake in the debate,
and frequently draw little distinction between prohibiting sales of food and prohibiting
exports of all other products.
Those in favor of exempting U.S. agricultural commodities and food products
from economic sanctions imposed for foreign policy and national security reasons
argue that:
^!Sales lost because of these decisions have had a disproportionate
economic impact on the U.S. agricultural sector, which now depends⁴²
more heavily on exports to generate income than before. The
agricultural community frequently expresses the view that the
imposition of sanctions undermines the more market-oriented farm
policy objectives laid out in the 1996 Freedom to Farm Act that
assumed continued and increased access to foreign markets.
^!These prohibitions undermine the credibility and reputation of the
United States as a reliable supplier to foreign customers. Proponents
of a change in U.S. policy point out that agricultural exporting
competitors (Argentina, Australia, Canada, and the European Union)
benefit from increased sales to these lost markets, and claim that over
the long term, the countries targeted by U.S. sanctions tend to

⁴⁰The American Farm Bureau Federation, American Soybean Association, Cargill, ConAgra,
Farmland Industries, Fertilizer Institute, Grocery Manufacturers of America, Illinois Corn
Growers Association, National Cattlemen’s Beef Association, National Grange, and North
American Export Grain Association, among others in the agricultural and food sectors, are
members of USA*ENGAGE [http://www.usaengage.org]. This is a coalition of small and
large businesses, trade associations, and agriculture groups “working to oppose the use of new
unilateral economic sanctions by the U.S. Government and to establish a standard of
accountability for any future unilateral sanctions.”
⁴¹One organization advocating this view is the Cuban American National Foundation
[http://www.canfnet.org], which is opposed to legislative efforts to lift portions of the U.S.
embargo on Cuba (“CANF Addresses Corporation Lobbying Against U.S. Embargo,” press
release issued March 17, 1998).
⁴²In 1996, exports accounted for 21.4% of the value of agricultural production, compared to
15.9% in 1988. Some of the major commodities are even more dependent on export markets
to generate income. For example, in 1996, 53.5% of the wheat, 48.1% of the rice, and 42%
of the cotton produced was exported. USDA, ERS, Foreign Agricultural Trade of the United
States, January/ February/March 1997, p. 28.

diversify their sources of agricultural imports and/or seek to become
more self- sufficient. They also mention that there is a longer-term
impact (beyond the period during which sanctions are employed) on
U.S. export competitiveness in these markets.
^!Food should not be used as an instrument of U.S. foreign policy to
influence the behavior of “rogue” nations, because such a policy is
immoral. Some argue that withholding food results in malnutrition
and possible starvation among the poor in the affected nations but
generally does not affect the elites’ and leaderships’ standard of
living.
Those opposed to explicitly exempting food, or granting the President discretion
to exclude food, from U.S. economic sanctions policy argue that:
^!Comprehensive sanctions are an essential tool in U.S. efforts to bring
about a change in a country’s policies and practices, particularly
when its actions conflict with U.S. foreign policy and national
security objectives (i.e., fighting terrorism, limiting nuclear
proliferation, thwarting aggressive action against neighboring
countries that are U.S. allies, etc.). Accordingly, the President
should have maximum flexibility to determine the most effective use
of sanctions (i.e., neither requirements for specific inclusions nor
prohibitions against specific exemptions).
^!Exempting food exports from sanctions’ coverage can result in the
leadership of a targeted country using food imported or received
from the United States as a political tool to reward those supportive
of the policies that prompted the sanction or to coerce others to
accept those policies.
^!U.S. economic sanctions do not limit the ability of the President to
permit food to be sold or donated for humanitarian reasons. Current
statutory authorities have allowed the executive branch to approve
U.S. commodity sales to Iraq under the UN’s “oil-for-food”
program, the mailing of food parcels and the limited donation and
sale of food and other agricultural products to Cuba, and U.S. food
aid shipments to North Korea and Sudan.