Travelocity fined $183,000 for booking trips to Cuba

MH
Posted on Tue, Aug. 14, 2007
Travelocity fined $183,000 for booking trips to Cuba
BY DOUGLAS HANKS
Travelocity was fined nearly $183,000 for booking roughly 1,400 Cuba trips between 1998 and 2004, apparently the first time Washington has cracked down on a major online travel provider for violating the 1963 embargo on the communist nation.

Travelocity blamed the 1,458 violations on technical issues that were corrected years ago. ''In no way did the company intend to sell trips to Cuba,'' the spokeswoman, Ashley Johnson, wrote in an e-mail Tuesday. ``The trips to Cuba . . . were unintentionally booked online because of a technical issue several years ago and it's just now being settled.''

Johnson said the trips were booked in the United States. But Travelocity's penalty comes amid conflicts over foreign arms of U.S. firms selling trips into the popular Caribbean vacation spot. And it touches on the complications of isolating a country commercially amid an increasingly global and digital economy.

Treasury's Office of Foreign Assets Control also fined American Express Travel for allowing its Mexican subsidiary to book two groups on Cuba trips in December 2002 and October 2003. But while American Express paid $16,625 for its two incidents, Travelocity was fined $182,750 for 1,458 violations, OFAC disclosed Saturday.

The Travelocity fine is the second-highest imposed by the OFAC during this fiscal year, ending Sept. 30. The highest fine -- $220,000 -- was levied on LogicaCMG of Lexington, Mass. Its predecessor, CMG Telecommunications, exported computers, electronic components and technical support knowing the goods were destined for Cuba in 2001.

FAMILIAR TERRITORY

The penalties do not seem to open up a new front in the Bush administration's energetic enforcement of laws designed to hurt Cuba's economy. Experts on the embargo said federal law is fairly clear that foreign subsidiaries of U.S. firms can't do business in Cuba, and that OFAC clarified the matter with travel companies five years ago.

At the time, an unknown Internet travel company had requested permission for its foreign website to book Cuba trips for people not subject to U.S. jurisdiction -- namely the 2 million people who vacation in Cuba each year.

The company, whose name OFAC did not disclose, noted travel providers had always been free to include information on Cuba flights, hotel rates and air fares on digital booking systems used by travel agents. Why should the online version be any different?

But in a 2002 letter, OFAC's director at the time, Richard Newcomb, said the Internet had transformed those booking systems into commercial ventures where financial transactions take place. As a result, the subsidiary was banned from selling Cuba trips. Clif Burns, an export lawyer specializing in Cuba, said the matter seemed settled with the letter. An OFAC official who did not want to be identified said Travelocity was the first large online travel provider to face an OFAC fine.

COMPLEX ISSUE

Still, the issue has gotten complicated amid the globalization trend.

Burns said European Union regulations bar companies operating in member countries from denying commerce to Cuba -- a rule that would apply to U.S. subsidiaries. He said EU regulators have not enforced the 1996 rule, so most U.S. companies adhere to Washington's protocol toward Havana.

And Kayak.com, a popular travel website operated out of Norwalk, Conn., does advertise Cuba vacations. Though Expedia, Travelocity and other large travel sites set their own prices, Kayak merely receives ''referral fees'' from travel providers who get business through the site, spokeswoman Kellie Pelletier said. Because of that, she said, it is free to post the Cuba offerings.

Founded in 1996, Travelocity is the sixth-largest U.S. travel agency; it ranks second in Internet sales. In 2006, the company booked $10.1 billion in travel worldwide.

Jorge Piñon, a senior research associate at the University of Miami's Institute for Cuban and Cuban-American Studies, said the issue of online Cuban commerce can get complicated when dealing with U.S. websites.

''There's a lot of other things you can do with Cuba vis-à-vis the Internet,'' he said. ``I could be buying Cuban cigars in Spain [but] using an Internet service provider which is owned by a U.S. corporation.''

El Nuevo Herald staff writer Wilfredo Cancio Isla contributed to this report.