International Trade Law News

Published by Jacobson Burton Kelley PLLC

There are reports that the Office of Foreign Assets Control (OFAC) is considering issuing an interpretive ruling or other guidance related to the requirement in the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA) and the Cuban Assets Control Regulations that goods exported to Cuba must be paid for with cash in advance. Some speculate that OFAC will hold that the phrase "payment of cash in advance" means that the payment must be made before the shipment leaves the United States. Many U.S. exporters say that such a clarification is not necessary to serve the legislative intent and would be contrary to common business practices for cash transactions. Since TSRA was enacted, the general understanding of the agricultural trade community has been that payment in advance means payment before releasing the goods to the Cuban buyer.

Several members of Congress have already written a letter to Treasury Secretary Snow protesting any changes in the manner in which payments from Cuba are handled. The letter, signed by Representative Jo Ann Emerson (R-MO), one of the original sponsors of TSRA, and several other members of Congress, stated that "though there is not a need for tightening requirements on these U.S. sales to Cuba, it is certain that requiring payment prior to shipments, a prepayment, will end all U.S. agriculture sales to Cuba. . . . Even if Cuba would be willing to continue to buy U.S. goods, a change from the current practice would increase costs, create tremendous logistical problems, negatively impact the price for agricultural products and generally make U.S. exports less competitive."

Meanwhile, there are press reports indicating that some U.S. companies that recently sold food and agricultural products to Cuba have not had the funds associated with the sale credited to their bank accounts in the United States. Apparently, the Cuban authorities authorized the payment and the U.S. banks received the funds from Cuba, but the U.S. banks have not credited the accounts of exporters per instructions from the U.S. Government.