03.10.05

Cantwell Opposes New Administration Policy Hampering Agricultural Trade With Cuba

Senator meets with Cuban Ambassador, touts Washington state agricultural products

WASHINGTON, D.C. – Senator Maria Cantwell (D-WA) today sent a letter to U.S. Treasury Secretary John Snow, voicing her opposition to a new Administration policy that will jeopardize the sale of Washington state agricultural products to Cuba.

"If you care about jobs in Washington state, you need to care about agriculture," Cantwell said. "We need to be cutting through the red tape that complicates trade with Cuba, rather than adding additional layers of bureaucracy."

On February 25, the Treasury Department's Office of Foreign Assets Control (OFAC) issued a final rule requiring "payment of cash in advance" for commodity sales to Cuba. The rule prohibits Cuba from purchasing U.S. commodities using financing or credit options, and requires cash payment to be received before the goods are even shipped. Had these rules been in place in the past, they would have seriously jeopardized the first sales of Washington state agricultural products to Cuba in decades.

Cantwell has previously led trade missions to Cuba that paved the way for these sales. In January 2002, Cantwell traveled there with a delegation from the University of Washington 's Center for Women & Democracy, and met with a number of Cuban officials. In less than six months, Cuba made its first purchase of Washington state dried peas and lentils in 40 years. Since then, Cuba has also purchased Washington state apples and pears.

In both cases, the commodities were shipped from Washington state ports while financing for the deals was being arranged through third-party banks. This is prohibited under the Administration's new policy.

"Cuba's economy presents a growing market opportunity for many crops produced in Washington state," Cantwell wrote in her letter to Secretary Snow. "Farmers, ports, and rail carriers in my state are concerned that requiring payment before shipment will greatly curtail their ability to efficiently coordinate shipments of agricultural commodities, particularly those which are perishable."

Consistent with her letter, Cantwell last month cosponsored the Agricultural Export Facilitation Act of 2005 (S. 328). The legislation would eliminate a number of current restrictions on trade with Cuba , which waste time and money and jeopardize the ability of U.S. producers to ink export deals. Since Congress passed a law in 2000 to begin reopening Cuban markets to American agricultural products, United States farmers have made nearly $800 million in sales there.

Still, trade with Cuba remains complicated by a number of restrictions including the new Treasury rule. The legislation Cantwell has cosponsored would lower a number of these barriers. For example, it would allow agricultural producers to use U.S. banks to receive payments directly from Cuba for authorized sales. Today, these sales must be routed through European banks, which impose surcharges of up to 5 percent—money that could otherwise be used to purchase more Washington state products. The legislation would also ease U.S./Cuba travel restrictions for agricultural producers and port officials, simplifying product inspections and allowing trade meetings.

"Economic engagement – not isolation – will be the most effective method of promoting political reform in Cuba," Cantwell said. "Trade relationships can only improve the lives of people on both ends of the cargo."

Also yesterday, Cantwell met with Cuban Ambassador Dagoberto Rodriguez Barrera, to discuss options for expanding the market for Washington state agricultural products. Ambassador Barrera is the highest ranking Cuban official in the U.S. and is the chief of the Cuban Interests Section in Washington . Because the U.S. does not maintain diplomatic relations with Cuba, Ambassador Barrera's office is housed in the Swiss Embassy in Washington, D.C.

[Text of Sen. Cantwell's letter to Secretary Snow follows]

March 10, 2005

The Honorable John W. Snow

Secretary

U.S. Department of the Treasury

1500 Pennsylvania Avenue NW Washington , D.C. 20220

Dear Secretary Snow:

I write today in opposition to the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) decision to alter the requirements of the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSREEA) as they relate to trade with Cuba.

On February 25, 2005, OFAC issued a Final Rule, published in the Federal Register, clarifying the definition of "payment of cash in advance" under the Cuban Assets Control Regulations (CACR). As stated in the rule, the meaning of the term "payment of cash in advance," as it pertains to Commerce-licensed shipments to Cuba, means that payment be received by a seller, or a seller's agent prior to shipment of goods from the port of origin.

Under TSREEA, the term "payment of cash in advance" simply established that Cuba is not entitled to financing or credit options when purchasing U.S. goods and prohibits providing financing terms for authorized sales of agriculture goods to Cuba other than through "payment of cash in advance." TSREEA does not specify that a shipment cannot be in transit while the financial transaction is taking place and makes no distinction on where a shipment is permitted to be located through the duration of the financial transaction. Payment of cash before the shipment of goods was not the intent of TSREEA. As you know, U.S. exporters have routinely allowed goods destined for Cuba to be in transit or sitting in a Cuban port during the financial transaction time – transferring ownership of the shipment only after receipt of payment.

OFAC's rule to "clarify" this payment regulation is unnecessary and will have the effect of significantly reducing the aggregate level of trade between the two countries. Since passage of TSREEA in 2000, U.S. exports to Cuba to have grown to nearly $800 million per year including more than $400 million in farm products. Cuba 's economy presents a growing market opportunity for many crops produced in Washington state. Farmers, ports, and rail carriers in my state are concerned that requiring payment before shipment will greatly curtail their ability to efficiently coordinate shipments of agricultural commodities, particularly those which are perishable. My constituents also contend that this payment regulation runs contrary to the traditional norms of conducting international trade.

In addition, concerned constituents were not able to submit comment to OFAC during the development of this rule, something they ordinarily would have been afforded an opportunity to do under a standard rulemaking procedure. It is my understanding that OFAC decided that since the rule governs international trade, the requirements of Administrative Procedure Act (APA) would not apply. That decision left my constituents and other U.S. producers – who will be adversely impacted by this "clarification" – without the opportunity for comment. I request that you provide me with additional information regarding how OFAC reached this decision, including any legal justification issued by the agency to support this action.

Concerned constituents have already informed me that OFAC's rule will greatly impede U.S. business transactions with Cuba by disrupting the smooth flow of goods leaving our ports. Further, they believe that the 30-day window provided by OFAC for "transition" will do little to ensure that Cuba does not experience an interruption in agricultural shipments. U.S. exporters are greatly dependent upon a highly efficient system to transport large volumes of goods and the transition period afforded U.S. businesses under this rule provides them little time to develop business plans to meet this new requirement.

The result of OFAC's rule, which establishes an additional barrier for U.S. exporters to overcome in exporting to Cuba , runs unmistakably contrary to the original intent of TSREEA. TSREEA was enacted by Congress as a measure to help facilitate and expand trade to Cuba . However this rule sends the message to Cuban officials that the U.S. is reconsidering its interest in expanding trade with their country.

OFAC's rule is clearly an attempt by this Department agency to define the will of Congress put forth in TSREEA. I vehemently oppose this action. I ask for your personal attention in providing some additional clarity to me that I can share with my constituents as to the agency's decision making process on this rule and whether my constituents can seek its reconsideration. If OFAC does not reconsider, this rule will hinder recent progress to expand trade between the U.S. and Cuba and will adversely affect American exporters as well as Cuban consumers.

Sincerely,

Maria Cantwell

United States Senator

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