An assessment is made of the dominant processes governing the circulation in a 30 km by 40 km area off the coast of Cape Hatteras, North Carolina, where surface current velocity vectors have been obtained using shore-based high-frequency radars in the High Resolution Remote Sensing experiment in 1993. Although the currents in this region are constantly under the influence of winds and tides, frequent intrusion of energetic flows into the area, apparently mostly of Gulf Stream origin, is shown to have a strong influence on the current variability. Analysis of vorticity and divergence shows that the flow intruding into the area is strongly rotational with positive vorticity. This rotational motion is not in geostrophic balance with the surface pressure gradient, and an inertial oscillation is often excited as a result, with vorticity and divergence oscillating 90¿ out of phase. On average the geostrophic imbalance generates a net surface flow divergence, which, in turn, induces negative vorticity that more than offsets the positive vorticity advected into the region. However, vertical viscous transfer of positive vorticity from subsurface to surface is shown to be required to complete the surface vorticity balance; the same energetic cyclonic shear flows that intrude into the area are suggested as the source of the subsurface vorticity as these flows of Gulf Stream origin are known to be subducted under buoyant shelf water. ¿ 2000 American Geophysical Union