By NED RANDOLPH | The Advocate business writer
The Bush administration is refusing to back down from its decision to start imposing payment restrictions on U.S. exports to Cuba.
The restrictions, which require cash payments in advance of goods being loaded onto ships in the United States, will add costs to trade with Cuba, say farmers and a group of Louisiana businessmen who joined Gov. Kathleen Blanco’s trade mission to Cuba last week.
Cuba has increased purchases of U.S. agricultural and medical products each year under a 2000 law that loosened the 1963 U.S. trade embargo.
Its preferred payment method has been “cash against documents”—meaning the goods would be unloaded in Havana once the title of the property was transferred from the shipper to the Cuban government.
That all changes Thursday, according to the Office of Foreign Assets Control, which oversees U.S. trade sanctions.
In testimony before the House Agriculture Committee, OFAC Director Robert Werner reiterated the Bush administration’s position that Cuba must start paying in advance of the goods leaving the United States, a move the Cuban government strongly opposes.
Werner said that Cuba may use letters of credit through a foreign bank, which exporters say will increase the time and costs of transactions.
“It’s moronic. The Cubans are panicking like crazy,” said Gary Frankston, a Metairie shipper who joined the Louisiana trade delegation in Havana. “OFAC is not making this easy for Louisiana businesses.”
The delegation to Cuba—as well as anyone currently doing business with the communist nation—is ensnared in a political tango between the U.S. federal government and the communist country.
Cuba refuses to pay cash in advance for goods on fears that its property would be confiscated by Cuban exiles in the United States with legal claims.
Instead, the Cuban government is hoping its new clients from Louisiana will help lobby against the policy, Frankston said.
“Yes, they’re definitely hoping that. It makes very little sense the way OFAC is structuring this.”
In purchase contracts signed with Louisiana businesses last week, the state-run Cuban purchasing agency Alimport included two payment options: cash against documents, which expires Thursday, or a letter of credit option, which is more costly, said Bobby Hanks, a Crowley rice producer on the trip who got a contract with Alimport.
“I only do letters of credit when I have to,” he said. “It’s more expensive that way because you have to go through a bank.”
Under letters of credit, the goods cannot be loaded onto a Cuba-bound vessel until the letter of credit is issued. Documents are generated when the goods are loaded. The vessel then leaves for Havana, while the bank executes the letter of credit.
Any confusion or mistake during the execution bogs down the process, adding bank fees and idling the ship offshore of Havana, Hanks said.
The letter of credit can also be complicated by language barriers.
“I’ve seen letters of credit bumped back simply because ‘letter of credit’ is spelled wrong,” Frankston said.
Frankston is also awaiting guidance from OFAC on how the advance payment requirement will affect shippers, who historically invoice on a pay as they go basis.
“They’re telling me I need to be paid upfront but that’s impossible, because there’s no bill due (in advance),” he said. “I have a feeling it’s going to take someone in Congress or the Senate or whatever to explain the changes. I think George (Bush) is trying to make this as difficult as possible,” he said.