Banks in third-countries have been winning a multi-million dollar payment lottery every month for eighteen (18) years.
Members of the United States Congress should request U.S. Secretary of Agriculture Sonny Perdue and U.S. Secretary of the Treasury Steven Mnuchin to support Direct Correspondent Banking (DCB) for Cuba exports- which will immediately provide benefits for U.S. companies- and require the Republic of Cuba to make payments in less time.
United States food product and agricultural product exports, on a cash-only basis, to the Republic of Cuba have increased a combined 48% during the last two years- 36% from 2015 to 2016 and 12% from 2016 to 2017; for 2017, the Republic of Cuba ranked 54th of 229 United States export markets. A total of US$5.5 billion since December of 2001 under provisions of the Trade Sanctions Reform and Export Enhancement Act (TSREEA) of 2000.
Reducing transaction fees, which can range to 2% or more, will permit United States exporters to a) be more competitive on pricing and b) be more competitive on transportation where a 2% difference in a proposed contract may make a difference.
The Honorable John Boozman (R- Arkansas), The Honorable Heidi Heitkamp (D- North Dakota) and The Honorable Rick Crawford (R- Arkansas) should immediately redirect their respective legislative efforts along with Members of Congress who support those legislative efforts, including the sixty-two (62) co-sponsors of Representative Crawford’s legislation to seek a regulatory change.
The Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury is responsible for the implementation of Direct Correspondent Banking (DCB).
The Obama Administration, without explanation, refused to assist United States exporters by authorizing DCB.
DCB will eliminate a three-way payment process and create a two-way payment process resulting in more efficiency and less cost to United States exporters; and, important to the Trump Administration, removing an unnecessary eighteen-year (18) multi-million dollar revenue stream for third-country financial institutions.
DCB far more benefits United States exporters than it does Republic of Cuba-based importers. DCB means less time for United States exporters to be paid and less cost to receive those payments.
According to one senior-level executive of a New York, New York-based financial institution, "banks in other countries have been lottery winners since December 2001; I'm confident the Trump Administration appreciates that United States farmers should not have to give-up anything in order to export their products. The Obama Administration could have, should have done something. They didn't. Now, the Trump Administration can right that wrong and authorize direct correspondent banking transactions."
More than 6,300 days have passed since the last legislation seeking to expand the United States-Republic of Cuba commercial landscape introduced in the United States Congress became law.
During this time, however, there have been substantial regulatory export-supportive changes which would have been far more impactful (commercially and politically) if the government of the Republic of Cuba had permitted those changes to be implemented.
Reasons for the fluctuations in United States exports to the Republic of Cuba include, but are not limited to, global commodity pricing, lack of DCB, and lack of payment terms from United States companies.
DCB may be implemented by regulation. Payment terms require legislation. A change to regulation is easier than a change to law.
United States companies and United States financial institutions would not provide the payment terms preferred by the Republic of Cuba which are government-to-government long-term payment (financing) agreements and purchasing from government-controlled entities.
Government of Vietnam-operated Vinafood 1 & Vinafood 2 have provided payment terms to Republic of Cuba government-operated Alimport of two (2) years to pay for rice (25% to 30% broken). United States producers can provide this product; payment terms without the use of United States government programs would be cash to 30 days; and for credit-worthy customers, generally not exceed sixty (60) days to ninety (90) days.
Have United States companies and United States financial institutions publicly offered (through media releases, congressional statements, company policies) that they are prepared (meaning today) to provide payment terms (and disclose what those would be) for exports of agricultural commodities and food products to the Republic of Cuba? Lacking these public positions, the successful advocacy for legislation remains stagnant.
Thus far, only Moline, Illinois-based John Deere (2017 revenues approximately US$27 billion) has publicly confirmed the company will provide, through internal sourcing, payment terms for agricultural equipment exported from the United States to the Republic of Cuba. The company has a distribution center, authorized by the OFAC, in the Republic of Cuba.
Has Alimport publicly shared what (specific) payment terms it would require from United States companies as a predicate for increasing purchases? No.
Alimport reported that it imported approximately US$1.8 billion in food products and agricultural commodities in 2017, compared with approximately US$1.8 billion in 2016, US$1.8 billion in 2015, and US$2.55 billion in 2014. Alimport reported that the country imports approximately 70% to 80% its food product and agricultural commodity requirements.
The authorization of DCB will increase revenues for United States exporters, which is a focus of the Trump Administration.