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Home > Top Story Archive > March 19, 2009

Top Story

The following story is from the March 19 issue of International Trade Reporter
Current Reports:

Trade Policy

Senators Blast Treasury Implementation
Of Cuba Farm Provisions in Omnibus Bill

Senate Finance Committee Chairman Max Baucus (D-Mont.) led a group of senators expressing concern in a letter sent late March 16 to Treasury Secretary Timothy Geithner that Treasury's Office of Foreign Assets Control (OFAC) will continue to severely limit sales of U.S. agricultural products to Cuba despite congressional intent.

OFAC March 11 issued a notice (http://www.treasury.gov/offices/enforcement/ofac/programs/cuba/cuba.pdf) affecting the treatment of cash-based transactions involving U.S. agricultural exports that the senators said conflicts with congressional intent in the recently passed Omnibus Appropriations Act of 2009.

Sens. Bob Menendez (D-N.J.) and Bill Nelson (D-Fla.) had been concerned about policy language in the omnibus that they said was a threat to long-standing restrictions on travel to Cuba. Prior to the votes on the bill, Menendez and Nelson said on the Senate floor that they were satisfied with assurances they received from Geithner that implementation of the language in the omnibus will not encourage a “radical break” with Cuba restrictions. Menendez, citing communications from Geithner, said the omnibus will permit only a “narrow class” of business to engage in food and medical sales in Cuba ( 26 ITR 356, 3/12/09).

Baucus Dismayed

“I'm dismayed that the spirit and intent of the law has been disregarded by Treasury, but I fully expect that Secretary Geithner will revisit this issue to get U.S.-Cuba relations back on track and get our Cuba policy right for America's farmers and ranchers,” Baucus said in a news release. “In these difficult economic times we have an opportunity in Cuba as a growing and loyal trading partner with the U.S. I've worked to build ties and open Cuba to U.S. products, including world-class Montana wheat and peas, and I will continue to press Treasury on this until the issue gets resolved.”

Other signatories on the letter were Sens. Richard Lugar (R-Idaho), Jeff Bingaman (D-N.M.), Mike Enzi (R-Wyo.), Tom Harkin (D-Iowa), Pat Roberts (R-Kan.), Blanche Lincoln (D-Ark.), Mike Crapo (R-Idaho), Jon Tester (D-Mont.), Kit Bond (R-Mo.), Patty Murray (D-Wash.), Mark Pryor (D-Ark.), Mary Landrieu (D-La.), Maria Cantwell (D-Wash.), and Tim Johnson (D-S.D.).

In late 2007, Baucus held a hearing on the “Promoting American Agricultural and Medical Exports to Cuba Act of 2007,” which would make it easier for U.S. farmers and ranchers to sell their products to Cuba. Baucus will work to move a similar bill this year, the press release said.

Cuba has been under U.S. economic embargo since the early 1960s. However, under the 2000 Trade Sanctions Reform and Export Enhancement Act (TSRA), agricultural exports to Cuba were authorized by payment of cash in advance or third-country bank letters of credit. Such cash-based sales were working well until February 2005 when OFAC issued a rule that defined “payment of cash in advance” as payment prior to shipment of goods, the letter said.

The senators said that the change in definition has brought all cash-based sales to a halt, making the cash in advance provision useless and undermining Congress's intent to facilitate agriculture sales to Cuba.

Geithner had indicated that OFAC will continue to use this definition. “This is contrary to the intention of the provisions included in the Omnibus legislation to halt this use,” the letter said.

‘Legally Inaccurate.'

OFAC's March 11 notice mistakenly suggests that the “ordinary commercial meaning” of “cash in advance” requires payment prior to shipment of goods. “Such an interpretation is legally inaccurate,” the senators said, citing the conclusion of the Congressional Research Service's American Law Division which found that:

“[I]t would appear difficult to find legal support for OFAC's interpretation that ‘payment of cash in advance' requires payment be received prior to shipment. As a review of four traditional methods of payment indicates, it appears customary within the international trade and finance community to place the emphasis on the legal transfer of control, rather than on the date of shipment… OFAC's interpretation appears to limit the available payment options to those that are considered risky, undesirable, and underutilized….”

The International Trade Commission found that removing U.S. export restrictions would increase the annual U.S. share of Cuba's agriculture imports to as much as nearly 70 percent. This represents an annual boost of over $300 million in U.S. agriculture sales, according to the press release.

In other action related to Cuba, House Ways and Means Committee Chairman Charles Rangel (D-N.Y.) March 16 introduced a bill to lift the embargo on Cuba (H.R. 1530).

By Rossella Brevetti

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