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Banning Transactions in U.S. Dollars
long-standing effort to weaken the rule of Cuban President Fidel Castro. In particular, the U.S. has enforced travel
restrictions and an ongoing trade embargo on Cuba since the Cuban Revolution in 1959, when Castro took over
the Batista regime and began retaliating against U.S. interference in the local governance of Cuba by nationalizing
billions of dollars worth of U.S. investments.
In response to the tightened enforcement of U.S. sanctions under the administration of President George W. Bush,
Cuba recently imposed new foreign exchange controls on the U.S. dollar, making the dollar illegal tender and
banning all commercial transactions in U.S. currency.
U.S. Bans Travel to Cuba
In order to prevent the Cuban government from profiting off of tourism, the U.S. prohibits most U.S. citizens from
traveling to Cuba, unless they qualify for one of a limited number of licenses. U.S. citizens who attempt to subvert
the travel ban by flying to Cuba via Canada, Mexico or the Bahamas typically have three choices if they are caught
upon return to the U.S., including:
1. Pay a fine levied by the U.S. Treasury Department of up to $7,500
2. Negotiate a settlement for a lower fine
3. Request a hearing before an administrative-law judge
In fact, the ban has never been so strongly enforced as now, under the administration of President George W. Bush.
Recently, the Treasury Department started sending judicial notices to people accused of illegal travel to Cuba,
requiring them to appear before a judge.
Tightening the U.S. Embargo on Cuba
The first economic sanctions against Cuba occurred in late 1959, when the U.S. stopped purchasing Cuban sugar
to protest Castro's hostile acts toward U.S.-owned sugar companies in Cuba. Since then, the U.S. has taken
several measures to tighten the trade embargo against Cuba, pursuant to the Trading With the Enemy Act (TWEA)
and the Cuban Democracy Act (CDA).
Passed in 1917 to prevent U.S. citizens from engaging in business with the German Empire, TWEA has
subsequently been applied to forbid U.S. citizens from doing business with foreign nations in times of war
(including most regimes with which the U.S. does not have diplomatic relations). Accordingly, TWEA has been
applied to Cuba under Castro, and Iraq under Saddam Hussein. The Treasury Department has accused U.S.
travelers of violating TWEA by spending money for vacation packages to Cuba and by purchasing and importing
Cuban cigars, rum and clothing. In 1992, the U.S. government enacted the CDA to further tighten the embargo on
Cuba, aimed at prohibiting all U.S. firms from doing business in Cuba.
The Helms-Burton Act
Continuing U.S. sanctions against Cuba, the U.S. government passed the Helms-Burton Act (HBA) on March 12,
1996, in order to prohibit foreign companies from engaging in trade with Cuba. Passed less than one month after
Cuban fighter jets shot down two private planes belonging to a Cuban refugee group, the HBA contains provisions
for punishing non-U.S. companies that engage in trade with Cuba.
Specifically, the HBA allows U.S. citizens to bring lawsuits against foreign companies in U.S. District Courts, for
using U.S. property in Cuba that was seized without compensation by the Cuban government subsequent to the
Cuban revolution. In addition, the law seeks to prevent the executives of these companies and their families from
entering the U.S., by empowering the U.S. government to deny entry to foreign nationals who violate HBA provisions.
As such, the law has been criticized for violating international law and the sovereignty of nations to govern
companies in their territories.
Cuba's Foreign Exchange Controls
In response to tighter U.S. sanctions, Castro's government recently made the U.S. dollar illegal tender in Cuba.
Effective November 8, 2004, the new law bans Cuban shops and other businesses from accepting dollars and
requires tourists and Cubans exchanging in U.S. dollars to pay a 10% commission for "convertible pesos." Further,
travelers' checks and credit cards drawn on U.S. banks are no longer acceptable under the new law.
"Convertible pesos" is a local currency that cannot be converted on the world market (i.e., only accepted in Cuban
shops). When originally introduced in 1994, convertible pesos could be used interchangeably with U.S. dollars.
Under the new law, however, individuals exchanging currency in U.S. dollars must pay a 10% tax.
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