House, Senate Launch Efforts to Change Cuba Trade Policy

Efforts to ease trade with Cuba are beginning to move forward in Congress. Both the House and Senate took steps this week to expand bilateral commerce with the island nation, which has been under a U.S. embargo for over 40 years. Supporters say opening the Cuban market could provide a significant boost to the struggling U.S. economy.

In the Senate, a bipartisan group of 15 senators wrote to Treasury Secretary Timothy Geithner this week to oppose the continuation of a policy that has curtailed exports of agricultural and medical products to Cuba. The letter called on Geithner to reverse the recent action by Treasury’s Office of Foreign Assets Control, which they said runs contrary to the intent of Congress, as expressed in the fiscal year 2009 omnibus appropriations bill, to facilitate agricultural trade with Cuba.

In a March 11 notice, OFAC stated that the Cuba trade provisions in the omnibus bill “directed that none of the funds made available in [that bill] may be used to administer, implement, or enforce” a February 2005 regulatory amendment concerning the definition of “cash in advance,” one of the methods of payment for agricultural exports to Cuba allowed by the Trade Sanctions Reform and Export Enhancement Act of 2000. This amendment stated that “cash in advance” should be given its ordinary commercial meaning, which requires payment to be received by the seller or the seller’s agent prior to the shipment of goods from the port at which they are loaded. OFAC stated last week that because the omnibus bill does not amend the TSRA language, those statutory provisions remain in place, implying that OFAC’s position will not change either.

However, the senators charged that the agency’s interpretation of the term “cash in advance” as requiring payment prior to the shipment of goods is legally inaccurate. The letter cited the American Law Division of the Congressional Research Service as saying that “it appears customary within the international trade and finance community to place the emphasis on the legal transfer of control, rather than on the date of shipment” and that “OFAC’s interpretation appears to limit the available payment options to those that are considered risky, undesirable, and underutilized.” The letter added that prior to OFAC’s regulatory change cash-based sales of agricultural products to Cuba “were taking place and working well,” with no reported instances of a Cuban buyer taking possession of U.S. goods prior to completing payment to the seller.

The letter called on Geithner to stand by a pledge he made during Senate consideration of his nomination earlier this year to take “great care to follow congressional intent … [and] to ensure that OFAC’s activities with regard to Cuba are achieving its important objectives without unnecessary hurdles or unreasonable administrative delays.” Sen. Max Baucus, D-Mont., added that he fully expects Geithner to “revisit this issue to get U.S.-Cuba relations back on track and get our Cuba policy right.”

Baucus said he plans to soon introduce legislation that would ease restrictions on travel to and payment from Cuba, but House Ways and Means Committee Chairman Charles Rangel, D-N.Y., beat him to the punch. On March 16 Rangel introduced three bills to increase economic engagement with Cuba, including one [H.R. 1531] that would overturn OFAC’s interpretation of “payment of cash in advance.” That bill would also establish a government program to promote agricultural exports to Cuba and ease various requirements associated with travel to and doing business with Cuba.

Rangel also introduced a bill (H.R. 1530) that would eliminate the U.S. trade embargo completely within 60 days of its enactment. This bill asserts that the embargo is counterproductive because it adds “to the hardships of the Cuban people while making the United States the scapegoat for the failures of the communist system.” It also states that the best way to support democratic change in Cuba is by promoting trade and commerce, travel, communications and person-to-person exchanges, an approach the U.S is already using in other countries with similar governments.