Want To Have A Legislative Victory?
Then Be Specific… Define Payment Terms
An increasing number of United States-based companies, advocacy groups, lobbyists, and Members of Congress are supporting a repeal of the Trade Sanctions Reform and Export Enhancement Act (TSREEA), signed into law in October 2000 by President William J. Clinton and first implemented in November 2001 by President George W. Bush.
The TSREEA re-authorized the direct export of food products and agricultural commodities from the United States to the Republic of Cuba, albeit on cash-in-advance payment terms.
Since the first exports in December 2001, the government of the Republic of Cuba has purchased more than US$5.1 billion in TSREEA-authorized products.
The Cuban Democracy Act (CDA) of 1992 regulates the export from the United States of medical equipment, medical instruments, medical supplies, medicines and pharmaceuticals to the Republic of Cuba; there are no restrictions on payment terms.
Primary impediments to moving revisionist TSREEA-legislation through the United States Congress have been a) the absence of the government of the Republic of Cuba stating what payment terms it would seek if permitted to do so for food products and agricultural commodities and b) the absence of United States-based companies that have, are or desire to export food products and agricultural commodities to the Republic of Cuba stating publicly what payment terms they would provide, today, to Republic of Cuba government-operated entities.
Is the issue for the government of the Republic of Cuba about simply wanting the prohibition on payment terms to be removed from the TSREEA or is there a grander progressive strategy?
Once the TSREEA restrictions are removed, and normal commercial terms are permitted (from companies and from financial institutions), will the response from the government of the Republic of Cuba be, “this is good, but….” This is especially likely if the payment terms offered by United States-based companies are reflective of the Republic of Cuba’s commercial payments legacy with non-United States-based companies and governments.
The “but” being the Republic of Cuba remains as a discriminated party because of an inability by it and United States-based companies and United States-based financial institutions to access programs administered by the United States Department of Agriculture (USDA), Export-Import Bank (Ex-Im), Overseas Private Investment Corporation (OPIC), and Small Business Administration (SBA), as well as, remaining subject to provisions of Platt Amendment (Lease for Guantanamo Bay) of 1901; Trading With The Enemy Act of 1917; Cuban Democracy Act of 1992; Libertad Act of 1996; Trade Sanctions Reform And Export Enhancement Act of 2000; and Cuban Assets Control Regulations (CACR). So, friends in the United States, you have more work to do…
Government of Vietnam-operated Vinafood 1 and Vinafood 2 have provided payment terms to Republic of Cuba government-operated Empresa Cubana Importadora Alimentos (Alimport), under the auspice of the Ministry of Foreign Trade of Cuba (MINCEX), of up to two years to pay for rice (25% to 30% broken); and there have been reports of payment arrears. United States-based producers can provide this product. Payment terms, however, without the use of United States government programs, would be, according to United States-based companies, cash-on-delivery to 30 days; and for credit-worthy customers, generally not exceed sixty days to ninety days.
The United Kingdom Trade & Investment Office reported in February 2016 that “despite the increasing opportunities for UK companies in Cuba, the market still offers challenges which include: very slow decision-making, with most important business decisions being referred to high-level government; all sales in Cuba are public sales, controlled by heavy regulation; payment delays are common; standard practice for the Cuban state to expect to buy on credit terms of 1 to 2 years; potentially increased market competition due to easing of US sanctions.”
For United States-based companies, the lack of public statements relating to what payment terms they would be prepared to offer to Alimport and other Republic of Cuba government-operated companies has created an unnecessary self-inflicted credibility wound. Is Minnesota-based Cargill, Arkansas-based Riceland Foods, Maryland-based Perdue Grain and Oilseed, Georgia-based AJC International, and Illinois-based PCS Sales among others prepared to provide payment terms of 180 days to 720 days?
The Obama Administration has authorized payment terms for other products, including agricultural equipment. What payment terms is Illinois-based Caterpillar willing to provide to Republic of Cuba-based authorized entities? Specifics would encourage other companies to follow and present the government of the Republic of Cuba with commercial opportunities- and commercial accountability.
There is some self-serving incrementalism to the process. Advocates advocate for removing the TSREEA payment terms knowing that as a result the government of the Republic of Cuba may, perhaps, incrementally increase selected commodity purchases. Then, the advocates pivot to seeking for the government of the Republic of Cuba and for United States-based companies access to programs administered by the United States government. A multi-year advocate full-employment initiative.
That’s not going to happen until the government of the Republic of Cuba has created a financial payments record of compliance with United States-based companies and United States-based financial institutions.
There would be far greater support for a TSREEA-related legislative initiative if those United States-based companies that have and are and desire to export food products and agricultural commodities from the United States to the Republic of Cuba would be on-the-record with what payment terms they would offer for contracts with Alimport and other Republic of Cuba government-operated entities.
Memories seem selective…
In 1999 and throughout 2000, United States-based companies were not supportive of including authorization for payment terms other than payment of cash in advance. This was due to a concern that with the Republic of Cuba’s commercial credit issues- delays and defaults in payments to companies and to governments, and despite best intentions there would likely be a delay or default to a United States-based company; and there was fear that a Chief Executive Officer (CEO) having to explain to reporters during a television interview on CNBC why the company provided payment terms to a Republic of Cuba government-operated entity and there was delay or default that impacted quarterly earnings… would simultaneously watch the share price of the company decrease and with it the expectation that other companies would provide payment terms to Republic of Cuba government-operated entities.
The position of United States-based companies was that advocacy would be more productive if there was no risk to the companies; they would have the benefit of exports and would be able to promote that the Republic of Cuba was “the safest export market in the world.” Always known was there would be a limit to which the government of the Republic of Cuba would spend valuable currency when long-term financing options were available through non-United States-based government programs.
The government of the Republic of Cuba put pressure upon United States-based advocacy groups to lobby for payment terms other than cash in advance to be included in the TSREEA. The United States-based companies prevailed.
When President Clinton signed the TSREEA into law in 2000, the government of the Republic of Cuba responded that it would not purchase a grain of rice or a kernel of corn because of the payment restrictions. The result was a year during which the United States business community and advocacy groups ignored the Republic of Cuba; the feeling was after a two-year effort (initially led by United States-based rice producers) to achieve a change in United States law, there would be some moment of gratitude from the government of the Republic of Cuba. There wasn’t.
It was the fall of 2001, after a hurricane, that the government of the Republic of Cuba shared that it would make a “one-off” purchase of some products to replenish stockpiles damaged during the hurricane. The list of products to be purchased included wood.
The Bush Administration worked cooperatively with the United States business community to arrange for the timely export of the first commodities in December 2001 (corn and poultry valued at US$4,318,906.00). And the wood? … it would not be purchased until 2003.
What does the government of the Republic of Cuba want, and need, but may not receive for a while?
Rescind relevant provisions:
Platt Amendment (Lease for Guantanamo Bay) of 1901
Trading With The Enemy Act of 1917
Cuban Democracy Act of 1992
Libertad Act of 1996
Trade Sanctions Reform And Export Enhancement Act of 2000
Cuban Assets Control Regulations (CACR)
United States Department of Agriculture (USDA)
Commodity Credit Corporation
Export Credit Guarantee Program
Facilities Guarantee Program
Export-Import Bank (ExIm)
Export Working Capital Program
Working Capital Guarantee Program
Loan Guarantee Program
Direct Loan Program
Finance Lease Guarantee Program
Overseas Private Investment Corporation (OPIC)
Direct Loans and Loan Guarantees
Small Business Administration (SBA)
Export Express Program
International Trade Loan Program