Cash in Advance for Ag Sales

What is ‘cash in advance’?
Jerry Hagstrom, Agweek
Published: 03/23/2009

WASHINGTON — Sen. Byron Dorgan, D-N.D., thought he had found a way to force the Treasury Department to go to back to the more liberal Clinton-era rules on how Cuba pays for its U.S. agricultural imports when he put a provision in the fiscal year 2009 omnibus appropriations bill to force Treasury to use the Clinton rules, but Treasury Secretary Tim Geithner says the Dorgan provision isn’t enough for him to change the regulations.

Now Dorgan and other senators and House members are protesting Geithner’s unwillingness to change the Cuba provisions.

Defining ‘advance’

At issue is whether the term “cash in advance” requires payment before goods are received or shipped.

The Trade Sanctions Reform and Export Enhancement Act of 2000 authorized the sale of agricultural products to Cuba but required that Cuba make payment “cash in advance” through a third-country bank. Under rules developed by the Clinton administration and in effect until 2005, Treasury’s Office of Foreign Assets Control allowed Cuba to pay for farm products in advance of arrival. But in 2005, the Bush administration changed the rule to require payment before shipping.

The normal commercial definition of “payment in advance” means that goods often are shipped and payment is made before they arrive in the port of the purchaser. Farm groups have charged that the Bush rule discourages Cuba from buying U.S. agricultural products. There have been several attempts in Congress to change the rule, but either Republicans in Congress or the Bush administration stopped it.

This year, Dorgan and other advocates of trade with Cuba thought they had fixed the problem when they inserted a provision in the omnibus appropriations bill that said Treasury could not spend any money to enforce the Bush rules. But some Cuban Americans still oppose any dealings with the Castro regime in Cuba. In reaction to protests from the Cuban American communities in New Jersey and Florida, Sens. Robert Menendez, D-N.J., and Bill Nelson, D-Fla., threatened not to vote for the omnibus because of the Cuba language. The Obama administration wanted the omnibus bill passed, and Geithner wrote them that he thought the 2000 law that allowed agricultural sales to Cuba required payment in advance of shipping.

Geither stands firm

After the omnibus bill passed March 11, Geithner issued a notice that he would not change the payment rules because the omnibus provision only stopped implementation of the Bush rule for one year and did not amend TSREEA.

Dorgan and other senators and House members did not protest Geithner’s interpretation before the omnibus passed, but have since written Geithner that they do not agree with his interpretation.

On March 11, Dorgan wrote Geithner, “Your interpretation of these provisions appears to undermine the intent of Congress” and demanded a briefing on the issue.

On March 13, House Agriculture Appropriations Subcommittee Chairman Rosa DeLauro, D-Conn., and a bipartisan group of House members in the Cuba Working Group also wrote Geithner asking for a meeting to discuss his actions on Cuba. DeLauro said they want to discuss how Geithner will implement provisions in the omnibus requiring Treasury to liberalize rules on travel to Cuba.

And on March 16, a bipartisan group of 15 senators led by Senate Finance Chairman Max Baucus, D-Mont., wrote Geithner that they are disturbed by his plans not to take steps to make agricultural sales to Cuba easier.

“I’m dismayed that the spirit and intent of the law has been disregarded by Treasury, but I fully expect that Secretary Geithner will revisit this issue to get U.S.-Cuba relations back on track and get our Cuba policy right for America’s farmers and ranchers,” Baucus said. “In these difficult economic times we have an opportunity in Cuba as a growing and loyal trading partner with the U.S. I’ve worked to build ties and open Cuba to U.S. products, including world-class Montana wheat and peas, and I will continue to press Treasury on this until the issue gets resolved.”

Senators joining Baucus on his letter included Senate Foreign Relations Committee ranking member Richard Lugar, R-Ind.; Senate Agriculture Committee Chairman Tom Harkin, D-Iowa; Sen. Pat Roberts, R-Kan.; Sen. Blanche Lincoln, D-Ark.; Sen. Tim Johnson, D-S.D.; and Sen. Jon Tester, D-Mont.

And on March 18, a spokesman for House Ways and Means Chairman Charles Rangel, D-N.Y., said Rangel has introduced three bills to liberalize U.S. relations with Cuba. One Rangel bill would end the U.S. embargo on trade with Cuba, a second would liberalize travel to Cuba, and a third would expedite trade, including making the provision in the omnibus into permanent law. Rangel’s bill presumably would amend TSREEA, but the Rangel spokesman noted that Rangel also introduced these bills last year and that Rangel did not introduce them in response to the conflict between members of the appropriations committees and Geithner.