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Payments must now be received in cash before goods leave a US port

WASHINGTON, DC - 02/24/05 - The Department of the Treasury's Office of Foreign Assets Control (OFAC) has ruled that US agricultural and medical exports to Cuba must be paid for in cash before the goods leave US ports.

Some US financial institutions had requested that the OFAC clarify whether cash in advance payments permit the shipments of goods to Cuba prior to receipt of the payment by US exporters.

The OFAC clarification of payment rules was issued following discussions within the Bush Administration, and with the input of Congress and industry officials, the OFAC said.

The Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA) provides that agricultural products, medicines and medical supplies may be exported 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 US financial institution or by payment of cash in advance.

Cash in advance of shipment "is a widely held interpretation of the terminology, notably by other agencies in the US government," the agency said in a statement, adding that the new payment policy "conforms to the common understanding of the term "payment in cash in advance" in international trade finance."

OFAC said that the ruling "balanced [the government's] responsibility to administer effective sanctions against Cuba with the need to ensure that the Caribbean island nation can continue to receive food shipments, medicine, and medical supplies from US exporters."

The final rule on the payment policy was submitted to the Federal Register yesterday and becomes effective immediately.

The language in the final rule provides a 30-day "transition" window for exporters to continue to engage in transactions under financing terms resembling Cash Against Documents, but requires that payment for such transactions to be completed within the 30-day period.

Some members of Congress have expressed concern over how the clarification will affect the competitiveness of US exports to Cuba.

Commenting on the decision, Senator Max Baucus (D - Montana) said that the clarification "could jeopardize recent agricultural accords between his state and Cuba."

As a result of the ruling, Baucus said he will "actively" block the Bush Administration's nominees for positions in the Treasury Department.

The US imposed sanctions against Cuba in 1963, in response to hostile actions by the Cuban government.

The country is listed as a "state sponsor of terrorism" by the US Department of State, and Cuban dictator Fidel Castro "continues to oppress the Cuban people under his totalitarian regime," according to the Treasury Department statement. 

"Economic sanctions against rogue nations - including denying them access to the US financial system and hard currency - can prompt real and positive change by pressuring regimes to change behavior or policies," it said.

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