Luxner News Inc, Stock Photos of Latin America & the Caribbean
 

Article Search

New OFAC rulings worry food exporters as U.S. sales to Alimport pass $1 billion
CubaNews / December 2004

The Bush administration is on the verge of issuing “clarifications” that might restrict the ability of U.S. companies to sell food to Cuba under the 2000 Trade Sanctions Reform and Export Enhancement Act (TSRA). Coincidentally, or perhaps not, the new rules could be announced this week — just as 300 U.S. food executives prepare to visit Havana for a Dec. 15-17 round of negotiations with Alim-port, Cuba’s state food purchasing agency. Both TSRA and the Treasury Department’s Office of Foreign Assets Control (OFAC) re-quire “payment in advance” for sales of U.S. farm commodities, though in practice, Alimport generally directs a third-country bank such as BNP Paribas to credit the U.S. bank account of an exporter once a ship has been loaded and begun its 72-hour voyage to Cuba. Since late 2001, OFAC has let U.S. exporters comply with the “cash in advance” provision by shipping the goods, and then transferring title and control of the goods to the buyer only after payment has been received. But now, say industry sources, OFAC will de-mand payment for food before vessels carrying the goods even leave U.S. shores — a requirement that could doom future food sales to Cuba. Treasury spokeswoman Molly Millerwise said OFAC began reviewing the 2000 law after some U.S. financial institutions handling Cuban purchases asked Treasury to clarify its policy. “OFAC at this point is working directly with exporters to issue specific licenses to unblock their payments,” she told Reuters. “At the same time, Treasury will be issuing guidance shortly on the payment policy itself.” John Kavulich, head of the U.S.-Cuba Trade & Economic Council, told CubaNews that “in the past, supporters of TSRA have found that when they stir up a storm quickly, the Bush administration tends to mitigate whatever it was hoping to do. So far, that’s been a successful strategy.” “Clearly, financial institutions reacted to a perceived threat from the Treasury Depart-ment,” Kavulich said. “They reacted to overt policy statements to the effect that although TSRA transactions are permitted, no one should engage in them.” The payment issue is so sensitive that the spokesman for the Cuban Interests Section in Washington declined comment, pending further analysis. So did Bank of America, which along with other U.S. financial institutions has been prevented by OFAC in the past few weeks from processing Cuban payments for U.S. farm goods on the grounds that those sales may be violating the “cash in advance” requirement. DORGAN LASHES OUT AT OFAC’S TACTICS In fact, nearly everyone contacted by CubaNews for this story asked not to be quoted by name, for fear of retribution from White House officials. Said one Washington-based Cuba expert: “With the results of the election, the extremists in the administration have begun looking for an opening to mess with and disrupt U.S.-Cuba trade, which has been very successful. “Regretfully, OFAC is allowing itself to become the policy playground for right-wing Cuban-American congressmen, and it’s shameful that these people would hurt U.S. businesses and jobs.” The expert claimed that zealots in the Bush administration “want to create an air of uncertainty. They want everyone who’s going [to the Alimport conference] to have doubts that this will continue. Ultimately, while TSRA is the law, their objective is to find every possible way to frustrate it.” A Texas food executive told CubaNews that “this is the beginning of the end,” while Ala-bama Agriculture Commissioner Ron Sparks said “such a reinterpretation of this law would be a reckless act at the expense of Alabama’s poultry farmers and producers.” In 2003, U.S. sales of frozen turkey and chicken came to $61 million, double the previous year’s total. Sen. Byron Dorgan (D-ND) said “it’s clear the administration wants to shut down agricultural trade with Cuba.” Dorgan, who sponsored the original TSRA legislation, said he’d ask Treasury’s inspector-general to investigate whether OFAC is exceeding its legal authority by using its resources to block Cuba food sales. “With our trade deficit soaring, you would think the administration would be working to boost exports,” Dorgan fumed in a Dec. 2 statement. “Instead, OFAC is using resources that could fight terrorists to thwart the cash sales of hundreds of millions of dollars in farm products to Cuba. Those sales would mean more income for family farmers in North Dakota and across the nation.” Dorgan said this new tactic by OFAC is another attempt to make food sales to Cuba virtually impossible by increasing red tape and raising shipping times and costs, making U.S. farm products uncompetitive. OFAC has still not publicly announced the moves, and farm exporters are learning of the new tactics only when told by their banks. In a Dec. 2 letter to House and Senate members, 18 industry associations note that “Cuba has become our 21st-largest agricultural market valued at $400 million per year, and one we cannot afford to lose” (see box at left). “This serious and alarming consequence of any reinterpretation of ‘cash in advance’ would force Cuba to pre-pay for goods prior to shipment: Cuban-owned goods would be sitting in a U.S. warehouse at a U.S. port until payment has been received,” the letter said. “Cuban goods on U.S. property are subject to court-ordered seizures that could result from legal claims against Cuba. Neither U.S. exporters nor Cuban buyers are in a position to accept such extraordinary legal risks.” NOT EVERYBODY IS NERVOUS At present, 15 companies account for over 90% of the $1.04 billion in cumulative U.S. food sales to Alimport since 2001, with only three of them — ADM, Cargill and FCStone — accounting for 60-70% of the total. “What made companies livid was the fact this was done without notification,” Kavulich said. “It’s the sneakiness which is malicious, because in essence, the Treasury Depart-ment equated the exporters with terrorists.” Yet not all food executives are complaining about OFAC’s proposed revisions. Craig Jacobs, VP of Splash Tropical Drinks in Fort Lauderdale, Fla., said his company has already sold $600,000 worth of frozen daiquiri and piña colada mix to Alimport. “I don’t think these changes will affect us,” Jacobs told CubaNews. “The only thing we worry about is how Cuba will view these changes. Whether we lose sales to other countries as a result remains to be seen.” Another wild card is President Bush’s sel-ection last week of Cuban-born Carlos Guti-érrez as secretary of commerce. Gutiérrez, whose family fled the island in 1960 when he was 6 years old, went on to become CEO of Kellogg Co. Despite the fact that Kellogg showed some interest in exporting breakfast cereals to Cuba at a 2002 trade show in Havana, Gutiérrez is known to be solidly pro-embargo. In June, he donated $4,000 to the U.S.-Cuba Democracy PAC, an anti-Castro organization. Asked what kind of impact Gutiérrez could have on future U.S. food sales to Cuba, Kavulich was pessimistic. “The question is not how they’ll be impacted, but how negatively,” he said. “Gutiérrez will be as fully engaged [in anti-Cuba policy] as the White House wants him to be. With Mel Martínez in the Senate, Condi Rice as secretary of state and Lincoln Díaz-Balart and Ileana Ros-Lehtinen moving up in seniority, there may be changes in U.S. policy toward Cuba, but not the kind of changes people in the U.S. business community want.”

Luxner News Inc, PO Box 938521 - Margate, FL 33093 USA tel=301.365.1745 fax=301.365.1829 email=larry@luxner.com web site design washington dc