New rule may weaken U.S.-Cuba trade
New rule may weaken U.S.-Cuba trade
WASHINGTON - Some agricultural producers have raised concerns about a new regulation that requires U.S. shippers to be paid for food and other goods destined for Cuba before shipments leave U.S. ports.
The U.S. Treasury Department changed its regulations Feb. 22 and now authorizes all exports to Cuba only if payment is received by the seller before the shipment of goods leave the U.S. port.
This is especially difficult for perishable commodities because it means all the paperwork must be completed for goods shipped in containers before the ship leaves, said Kirby Jones, president of the U.S.-Cuba Trade Association, which was just recently formed to lobby the Bush administration and Congress in hopes of easing the regulation.
Before the new regulation, the bill of lading and payment were exchanged between a buyer's and seller's banks. Under the new system, which went into effect March 24, the buyer's bank will need to transfer funds before the bill of lading is issued by the shipping company, creating a potentially significant delay between payment and delivery of the bill of lading.
"The regulation puts U.S. producers at a significant disadvantage, and Congress never intended the law to be interpreted in this way," said Robert Clifton Burns, a trade expert with the law firm of Powell Goldstein LLP.
As a result of the Trade Sanctions & Export Enhancement Act of 2000, which eased the 40-year sanctions against Cuba, agricultural trade has begun to flourish. Congress penned the law to allow agricultural products, medicines and medical supplies 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. By 2004, Cuba purchased nearly $400 million in U.S. agricultural goods.
Now Cuban buyers may look to other trading partners, such as Brazil, where a standard "cash against documents' transaction is still available, said Mr. Burns.
The Office of Foreign Assets Control, the agency that regulates economic sanctions, is also forcing shippers to renegotiate all contracts for agricultural goods destined to Cuba to conform with the payment changes.
"This action has already disrupted and directly hurt the smooth trade which in three years produced over $1.2 billion in sales by American firms, Mr. Jones said in a statement.
Senate Agriculture Committee Chairman Saxby Chambliss called the rule change "the wrong decision at the wrong time.
"We should not be making it harder to export agriculture products when the United States is experiencing a massive trade deficit, he added. "This will hurt all agriculture exports. I will work with my colleagues in the Senate to explore all available options to correct this action in the coming weeks.
The Treasury Department said the rule was changed when some U.S. financial institutions began requesting clarification on whether payments of cash in advance permits the shipment of goods to Cuba prior to receipt of the payment by U.S. exporters. The government decided that "payments made to U.S. exporters before shipment effectively met the goals of the TSRA and the U.S. Cuba sanctions program.
The U.S. Treasury Department changed its regulations Feb. 22 and now authorizes all exports to Cuba only if payment is received by the seller before the shipment of goods leave the U.S. port.
This is especially difficult for perishable commodities because it means all the paperwork must be completed for goods shipped in containers before the ship leaves, said Kirby Jones, president of the U.S.-Cuba Trade Association, which was just recently formed to lobby the Bush administration and Congress in hopes of easing the regulation.
Before the new regulation, the bill of lading and payment were exchanged between a buyer's and seller's banks. Under the new system, which went into effect March 24, the buyer's bank will need to transfer funds before the bill of lading is issued by the shipping company, creating a potentially significant delay between payment and delivery of the bill of lading.
"The regulation puts U.S. producers at a significant disadvantage, and Congress never intended the law to be interpreted in this way," said Robert Clifton Burns, a trade expert with the law firm of Powell Goldstein LLP.
As a result of the Trade Sanctions & Export Enhancement Act of 2000, which eased the 40-year sanctions against Cuba, agricultural trade has begun to flourish. Congress penned the law to allow agricultural products, medicines and medical supplies 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. By 2004, Cuba purchased nearly $400 million in U.S. agricultural goods.
Now Cuban buyers may look to other trading partners, such as Brazil, where a standard "cash against documents' transaction is still available, said Mr. Burns.
The Office of Foreign Assets Control, the agency that regulates economic sanctions, is also forcing shippers to renegotiate all contracts for agricultural goods destined to Cuba to conform with the payment changes.
"This action has already disrupted and directly hurt the smooth trade which in three years produced over $1.2 billion in sales by American firms, Mr. Jones said in a statement.
Senate Agriculture Committee Chairman Saxby Chambliss called the rule change "the wrong decision at the wrong time.
"We should not be making it harder to export agriculture products when the United States is experiencing a massive trade deficit, he added. "This will hurt all agriculture exports. I will work with my colleagues in the Senate to explore all available options to correct this action in the coming weeks.
The Treasury Department said the rule was changed when some U.S. financial institutions began requesting clarification on whether payments of cash in advance permits the shipment of goods to Cuba prior to receipt of the payment by U.S. exporters. The government decided that "payments made to U.S. exporters before shipment effectively met the goals of the TSRA and the U.S. Cuba sanctions program.
