International Trade Law News

Published by Jacobson Burton Kelley PLLC

A coalition of export, agriculture and business organizations and companies has sent a letter to Representatives Delahunt (D-MA), Emerson (R-MO), Flake (R-AZ) and Moran (R-KS) supporting their efforts to reverse the Office of Foreign Assets Control's (OFAC) February 2005 regulation clarifying the term "payment of cash in advance" as it applies to sales of agricultural products to Cuba.

The letter states that sales of U.S. agricultural products to Cuba have "declined significantly" since OFAC announced that U.S. exporters must be paid in cash before shipment rather than before title of goods changed hands as had been the case since December 2001. The letter notes that this "change in policy has hindered the payment process by requiring an additional letter of credit for the Cuban buyer" making "the payment process much more difficult."

The letter cites the following examples of how the new regulations have caused a decrease in sales of U.S. agricultural products to Cuba:

--U.S. Department of Agriculture data show that sales of agricultural products to Cuba for the first four months of 2005 are 26% below the levels of the same period in 2004.

--The USA Rice Federation reports that sales of rice to Cuba in 2005 have dropped 52% by volume over the same period in 2004. Rice exporters have said that Cuba is now purchasing rice from China and Viet Nam.

--Last month, Pedro Alvarez, Chairman of Alimport, the main Cuban buyer, stated that due to the change in payment requirements, Alimport was forced to purchase $300 million of wheat, corn, soybeans, rice, poultry, pork and other agricultural products from other countries.

--The U.S. Apple Association reports that exports to Cuba from the U.S. are projected to fall at least 30% as this summer's apple crop is harvested and sold.

--Dairy America has experienced slower and more costly shipments to Cuba of nonfat dry milk with the new regulations adding an additional $3,000 per each shipment of 1,000 MT which may cause Cuba to look elsewhere.

--The Port of Corpus Christi in Texas reports that the OFAC regulations have curtailed its ability to conduct and grow its business with Cuba.

--The Virginia Department of Agriculture predicts that companies in Virginia which sold $20 million to Cuba in 2004 will face a reduction due to the OFAC regulations of 50% in sales to Cuba which will particularly impact small to medium sized firms.