A Treasury Department ruling that Cuba must pay for shipments of U.S. rice, wheat and other commodities before they leave this country has stirred up a hornet's nest in the nation's Capitol.

The Treasury Department's Office of Foreign Assets Control issued a “clarification” on Feb. 22 that the terminology “payment of cash in advance” with regard to shipments to Cuba means payment of cash prior to shipment of goods. The USA Rice Federation said the action would inhibit rice sales to what was once the largest market for U.S. rice.

“The OFAC ‘clarification’ is an obvious effort by the administration to further restrict trade with Cuba,” USA Rice Federation President and CEO Stuart Proctor said. “Trade sanctions imposed in 1961 have already cost American rice farmers and estimated $3 billion in lost sales.”

Bob Stallman, president of the American Farm Bureau Federation and a rice farmer from Texas, echoed Proctor's comments.

“We are greatly disappointed with the regulations announced by the Treasury Department's Office of Foreign Assets Control to require Cuban purchasers of U.S. farm products to pay for those goods prior to shipment,” said Stallman.

“The regulations are unwarranted and will have the basic effect of disrupting the shipment of U.S. farm products, and, initially, it will likely cut off all purchases of U.S. farm products to Cuba.”

In 2004, Cuba purchased more than $400 million in U.S. farm products and was expected to increase its purchases significantly this year. Some sources said it could soon become an $800-million-a-year market.

Act support

“That's why we will redouble our focus on supporting the Agricultural Export Facilitation Act of 2005, introduced recently by Sens. Larry Craig, R-Idaho, Max Baucus, D-Mont., Richard Lugar, R-Ind., Pat Roberts, R-Kansas, and others,” said Stallman. “This legislation would clarify Congress' original intent of what cash payment in advance was under the Trade Sanctions and Reform Act of 2000.”

Proctor said the USA Rice Federation also supports the legislation.

“Support for the Craig bill, the Agriculture Export Facilitation Act, was a high priority in discussions with members of Congress during USA Rice's Government Affairs Conference in Washington,” he said

“The Craig bill clarifies congressional intent on the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSREEA) and liberalizes licensing and banking requirements concerning agricultural sales to Cuba — essentially simplifying the licensing process that agricultural exporters use to facilitate sales by authorizing direct payment to U.S. banks.”

The Trade Sanctions Reform and Export Enhancement Act of 2000 (TSREEA) was meant to expand access for agriculture and medical products to the Cuban market, Senate Agriculture Committee Chairman Saxby Chambliss said.

Chambliss agrees that the announcement by OFAC will make it more difficult for U.S. agriculture producers to market goods for the export market.

“This is the wrong decision at the wrong time,” the Georgia Republican said. “We should not be making it harder to export agriculture products when the United States is experiencing a massive trade deficit. This will hurt all agriculture exports. I will work with my colleagues in the Senate to explore all available options to correct this action in the coming weeks.”

In addition to Craig, the lead author of the Agriculture Export Facilitation Act, co-authors include Sens. Jim Talent, R-Mo., Blanche L. Lincoln, D-Ark., and Mary Landrieux, D-La.

Cuba purchased 177,000 MT of U.S. rice in 2004, making it the sixth largest market in volume for U.S. rice out of nearly 120 rice export markets according to USDA Foreign Agriculture Service export tallies. Cuba is potentially a 600,000-metric-ton market for U.S. rice.

“USA Rice led the way into the Cuban market, and our members were the first to make sales there,” Proctor said. “Maintaining and expanding this market is one of our top priorities.”

e-mail: flaws@primediabusiness.com