WASHINGTON - The Bush administration is in the process of rewriting rules on agricultural trade with Cuba in a way that members of Congress, farm and agribusiness leaders say could halt the Cuba trade that is now valued at close to $400 million per year and has made Cuba the 21st most important market for U.S. agricultural products.

In an apparent effort to discourage U.S. agricultural sales to Cuba, the Bush administration temporarily halted the transfer of money to U.S. agricultural firms making sales to Cuba during Thanksgiving week and now is reviewing its definition of a law requiring Cuba to make "payments in advance" for U.S. agricultural imports so that the Cubans would be required to make payments before shipment. An industry source said Bush administration officials met Dec. 2 on the subject and that new regulations could be issued very soon.

Letter written

The situation has infuriated members of Congress and agricultural business leaders. Reps. Jo Ann Emerson, R-Mo., Sam Farr, D-Calif., and Jeff Flake, R-Ariz., wrote to Treasury Secretary John W. Snow last week to protest the plans to tighten payments. Sen. Byron Dorgan, D-N.D., one of the authors of the law that allows agricultural sales to Cuba, wrote to Secretary of State Colin Powell Dec. 2 that "there is no justification for asserting that the law requires cash in advance of shipment." Senate Finance Committee ranking member Max Baucus, D-Mont., Sen. Christopher Dodd, D-Conn., Sen. Mike Enzi, R-Wyo., and Sen. Arlen Specter, R-Pa., also signed Dorgan's letter to Powell.

Eighteen farm groups including the American Farm Bureau Federation and key wheat and rice groups wrote every member of the House and Senate Dec. 2 asking them to call the White House, State and Treasury departments to oppose the change. "Cuba has become our 21st largest agricultural market and valued at almost $400 million per year and one we cannot afford to lose," the groups wrote.

John Kavulich, president of the New York-based U.S.-Cuba Trade and Economic Council, said, "Company executives are livid about this," particularly because the government did not give any advance notice that the funds would be stopped. In an interview, Kavulich said the situation is very complex, involving actions by both the Cuban government and the Bush administration, but probably is a portent of U.S.-Cuban relations in Bush's second term.

Cash sales

The conflict has arisen from a provision in the Trade Sanctions Reform and Export Enhancement Act of 2000 that allows sale of U.S. agricultural products to Cuba, but allows those sales only on a cash basis with "payment of cash in advance." Kavulich said that when agricultural sales to Cuba began in December 2001 the Bush administration agreed that the "payment in advance" provision would follow the common business practice of allowing buyers to pay for goods after they have been shipped but before they are unloaded. Kavulich said that after he reported last July in a newsletter to his members that Alimport, the Cuban food import agency, had been late with some payments administration officials began questioning whether this delay amounted to sales on credit, which is prohibited under the law, and to consider requiring payment before the goods leave the United States. The Treasury Department's Office of Foreign Assets Control, which oversees the Cuba trade, began telling U.S. financial institutions to halt payments to some U.S. companies doing business with Cuba and last week halted all payments.

House members led by Emerson wrote Snow last week, "There are no legitimate grounds for considering U.S. agricultural sales transactions a credit sale of goods" because the exporter retains title and the goods are not unloaded in Cuba until payment is received. In addition, the House members noted that requiring payment before the goods leave the United States would "end all U.S. agriculture sales to Cuba" because the goods would be considered Cuban-owned goods located at a U.S. port and would be subject to seizure. A Treasury spokeswoman said last week that OFAC "is working directly with the companies to unblock their payments while the determination is made on (policy) guidance."

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