Wednesday, March 18, 2009

Fifteen Senators Push Back on Ag Trade Interpretation

March 16, 2009

Secretary Timothy F. Geithner
Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

Dear Secretary Geithner,

We are concerned by a March 11 Office of Foreign Assets Control (OFAC) notice outlining its planned implementation of provisions passed in the Omnibus Appropriations Act of 2009. The intent of those provisions was to facilitate already legal agricultural trade with Cuba.

The Trade Sanctions Reform and Export Enhancement Act (TSRA) of 2000 authorized agricultural exports to Cuba by payment of cash in advance or third-country bank letters of credit. For several years, until early 2005, such cash-based sales were taking place and working well. After goods shipped from U.S. ports, the Cuban buyers initiated payments, routing them through third-country banks, as required by the law. There were no reported instances in which a Cuban buyer took possession of U.S. goods prior to completing payment to the U.S. seller, a fact acknowledged by the Treasury Department during the confirmation hearing of Deputy Secretary Kimmitt in July 2005.

Despite this fact, OFAC issued a rule in February 2005 that defined “payment of cash in advance” as payment prior to shipment of goods. The change in definition has brought all cash-based sales to a halt, rendering the cash in advance provision useless and undermining Congress’s intent to facilitate agriculture sales to Cuba. Your March 5, 2009 letter stated that OFAC will continue to use this definition. This is contrary to the intention of the provisions included in the Omnibus legislation to halt this use.

We are troubled to see OFAC continue this practice. Its March 11 notice mistakenly suggests that the “ordinary commercial meaning” of “cash in advance” requires payment prior to shipment of goods. Such an interpretation is legally inaccurate. The American Law Division of the Congressional Research Service has studied this issue in depth and concluded that, “[I]t would appear difficult to find legal support for OFAC’s interpretation that ‘payment of cash in advance’ requires payment be received prior to shipment. As a review of four traditional methods of payment indicates, 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…OFAC’s interpretation appears to limit the available payment options to those that are considered risky, undesirable, and underutilized….”

In your Questions for the Record during consideration of your nomination earlier this year, you committed to “… taking great care to follow congressional intent and working closely with members of Congress to ensure that OFAC’s activities with regard to Cuba are achieving its important objectives without unnecessary hurdles or unreasonable administrative delays.” We urge you to stand by that pledge.

We look forward to working closely with you on this matter.


Senator Max Baucus
Senator Richard Lugar
Senator Jeff Bingaman
Senator Mike Enzi
Senator Tom Harkin
Senator Pat Roberts
Senator Blanche Lincoln
Senator Mike Crapo
Senator Jon Tester
Senator Kit Bond
Senator Patty Murray
Senator Mark Pryor
Senator Mary Landrieu
Senator Maria Cantwell
Senator Tim Johnson

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