Top Story
‘‘Cash in Advance’’ Means Hunger Pangs
for Cuba & Trade Loss for U.S.

By Conner Gorry

In 2000, Cuba ranked dead last among the 226 countries to which US producers exported
food. That year, Congress passed reforms to the US trade embargo permitting sales of food
to the island, and Cuba started buying chicken, rice, corn, wheat, and other foodstuffs
steadily; the country currently purchases US$400 million in US food products annually.
Clearly natural trading partners, Cuba became each year a bigger buyer of American
agricultural goods, so that by 2005, the country had skyrocketed to number 21 on the US'
list of importers. Today, this mutually-beneficial arrangement is in jeopardy.

Amid industry and Congressional protests, on February 22, the Treasury Department (the agency charged with implementing the embargo), issued a reinterpretation of the language of the Trade Sanctions Reform and Export Enhancement Act (TSRA) of 2000. Up to this point, Cuba had been allowed to purchase food from the United States by 'payment of cash in advance;' to view the Treasury's press release, click here. It should be noted that neither the TSRA of 2000, nor the reinterpretation of the wording, ever applied to medicines sold to Cuba.

Heretofore, Cuba had to pay for these goods en route or as the freighters docked in Havana, but before the perishable cargo was off-loaded; normal contracts for such purchases are payable within 30 days of receipt of goods. The Bush Administration decided 'payment in advance' means prior to shipment and not prior to delivery. Therefore, the Cuban government must now pay for any American food products before they ever leave US ports; for the three years the TSRA terms were in place, Cuba satisfactorily complied with all payment requirements without incident.

The latest impediment to US-Cuba commerce could threaten the hearty food trade between the two nations that has swelled from the first post-TSRA shipment of US$300,000 in December 2001, to US$1.25 billion in food sales to date, (including shipping, handling and banking fees). Indeed, Cuba is now the second largest buyer of US rice and chicken. Such robust figures - especially considering the  growth potential of a country that has been locked out for over 40 years - guarantee a fight over the new regulations that many, on both sides of the Strait, regard as an unrealistic restriction on what already amount to onerous trade terms.

Even before the Bush administration issued the new interpretation, the US' trade policy towards Cuba had galvanized Congressional representatives, who submitted the Agriculture Export Facilitation Act of 2005. Co-sponsored by Republican Senator Larry Craig of Idaho and Democratic Senator Max Baucus of Montana and supported by nearly two dozen Congresspeople on both sides of the aisle, the legislation seeks to streamline and simplify procedures for US firms wishing to sell food products to Cuba. Most importantly, the bill (S. 328) calls for new purchasing terms which would allow Cuba to pay for goods directly to US banks; the TSRA of 2000 only permitted Cuba to pay with letters of credit through third countries, adding fees to each transaction and introducing delays into the process.

The new bill would also facilitate the visa process for Cuban businesspeople wishing to inspect the goods they intend to purchase from US producers. Most of the bill's co-sponsors are from farm states working for more trade with Cuba rather than less, so as to augment the economic possibilities of their constituents. This bill is still before Congress; see http://ciponline.org/cuba for the latest.

Following the White House announcement regarding the 'cash in advance' understanding, Alimport, Cuba's food import company, stated that the new interpretation "gives ground to competitors in foreign countries that are keen to develop the Cuban market." There is also a fear that taking possession of paid-in-full agricultural products before shipment could put those goods at risk of attachment by exiles and companies with outstanding claims against the Cuban government.

Among politicians favoring a change in US policy is Louisiana's Governor Blanco, who visited the island in March to sign a US$15 million agricultural goods deal - a clear indication that disposition to trade with Cuba is intensifying. Indeed, competition for Cuban trade is fierce among states with powerful farm interests and port authorities especially, which hope to create new jobs through increased trade. Among the 23 ports currently shipping to Cuba, those in Louisiana account for 49% of goods headed to Cuba - an edge Governor Blanco, (who also presides over the consortium of Gulf State Governors), is not anxious to lose.

The new interpretation has also fueled expectations for Cuban Action Day, April 27, when bi-partisan members of Congress, policy makers, and grassroots and non-profit organizations favoring normalized relations with Cuba, including the Latin America Working Group (www.lawg.org), will converge on Capitol Hill seeking engagement, rather than isolation, of the island.