The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) today clarified that under the Cuban Assets Control Regulations the terminology "payment of cash in advance" with regard to Commerce-licensed shipments to Cuba means payment of cash prior to shipment of U.S. farm products.
A statement from American Farm Bureau Federation President Bob Stallman says, "These regulations are unwarranted and will have the basic effect of disrupting the shipment of U.S. farm products, and, initially, it will likely cut off all purchases of U.S. farm products to Cuba."
The Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA) provides that agricultural products, medicines and medical supplies may be exported to Cuba as long as they are paid for through a letter of credit from a third country financial institution that may be confirmed or advised by a U.S. financial institution or by payment of cash in advance. Cash in advance of shipment is a widely held interpretation of the terminology, notably by other agencies in the U.S. Government.
Agricultural organizations have been working for months, asking that the OFAC policy be fixed so that the excessive demurrage costs can be avoided, trade restored, and the reputation of the United States as a reliable exporter be preserved.
"It is our hope that an Administration which has adopted such an aggressive trade agenda will not allow one agency within the government to thwart that agenda with onerous payment rules for sales to Cuba." Daren Coppock, CEO of the National Association of Wheat Growers (NAWG) says, "What concerns us is this whole ordeal makes us an unreliable, higher-cost provider. We can't afford to be in that situation."
The final rule on the payment policy was submitted to the Federal Register today (Feb. 22) and becomes effective immediately. The language in the final rule provides a 30-day window for exporters to continue to engage in transactions under financing terms resembling cash against documents, but requires payment for such transactions to be completed within the 30-day period. The exporter will still need a Commerce Department license. The purpose of this 30-day window is to provide a transition period.
The Treasury Department says it engaged in discussions within the Administration and received input from Congress and industry officials before issuing this guidance.
Senators have voiced concern over the rule change. The Agricultural Export Facilitation Act of 2005, introduced recently by Sens. Larry Craig, R-Idaho, Max Baucus, D-Mont., Richard Lugar, R-Ind., Pat Roberts, R-Kan., and others would clarify Congress’ original intent of what cash payment in advance was under the Trade Sanctions and Reform Act of 2000.