Will Farm Bill Retain Provisions Giving Cuba Access To MAP & FMD?

What is known as the “Farm Bill” is revisited by the United States Congress every five (5) years.

During the last twenty-six (26) years, there have been three (3) Republic of Cuba-focused legislative initiatives that have become law: 1992 Cuban Democracy Act (CDA), 1996 Libertad Act (“Helms-Burton”) and 2000 Trade Sanctions Reform and Export Enhancement Act (TSREEA).  For perspective, it’s been eighteen (18) years or 6,400+ days since the last Republic of Cuba-focused legislative initiative became law.

On 18 June 2018, the United States Senate Committee on Agriculture, Nutrition, & Forestry reported, on a vote of 20-1, S. 3042, the 1,210-page The Agriculture Improvement Act of 2018 which included an amendment [Link To Text] authored by The Honorable Heidi Heitkamp (D- North Dakota): “To provide for the use of market access program and foreign market development cooperator program funds in Cuba.”  The United States Senate has scheduled a vote on 3042 for 26 June 2018.  

A representative of a member of the United States Senate Committee on Agriculture, Nutrition, & Forestry shared “[t]here is no set amount of funds that would be made available specifically for Cuba.  The amendment would only allow producers and agricultural trade associations who are already utilizing these programs to also use them to promote their goods in Cuba.  So to that point, yes these funds are only going towards agriculture producers who are represented by trade associations and state regional trade groups.”  

On 21 June 2018, the United States House of Representatives passed H.R. 2, the 748-page Agriculture and Nutrition Act of 2018 by a vote of 213-211.  H.R. 2 has no provision similar to the amendment in S. 3042. 

For Fiscal Year 2018, the United States Department of Agriculture (USDA) allocated US$26,484,947.00 in taxpayer funds to twenty-three (23) cooperators under the Foreign Market Development Program (FMD), an average of US$1,021,084.00 per distribution.

https://www.fas.usda.gov/programs/foreign-market-development-program-fmd/fmd-funding-allocations-fy-2018

For Fiscal Year 2018, the USDA allocated US$173,802,447.00 in taxpayer funds to sixty-six (66) participants under the Market Access Program (MAP), an average of US$2,633,370.00 per distribution.

https://www.fas.usda.gov/programs/market-access-program-map/map-funding-allocations-fy-2018

NOTE: Since 2000, when the TSREEA re-authorized the direct export of food product and agricultural commodities from the United States to the Republic of Cuba, more than US$5.6 billion in food products and agricultural commodities have been delivered to the Republic of Cuba on a “cash in advance” basis as required by the TSREEA.  Thus far in 2018, TSREEA-authorized exports have increased 25% compared to the same period in 2017.  The government of the Republic of Cuba maintains that prohibition on payment terms and financing are the primary impediments to increasing purchases.

Text Of S. 3042 In PDF Format

Text Of H.R. 2 In PDF Format

Confiserie Sprungli AG & Dieter Meier Of Switzerland Use Cocoa Beans From Cuba

Confiserie Sprungli AG & Dieter Meier Of Switzerland Use Cocoa Beans From Cuba  

http://www.spruengli.ch

https://www.spruengli.ch/en/shop/chocolates-truffes/cuba-autentica-coleccion-de-trufas-gran-cru-gr-1-en.html

https://www.spruengli.ch/en/search?q=cuba

https://www.spruengli.ch/en/cuba-chocolate-negro-en.html

From The Company:

“Since we are a traditional Zurich-based company we sell our products exclusively through our own Spruengli stores (Switzerland, Dubai and Abu Dhabi) and via our E-Shop.

We regret to inform you that it is not our business policy to export our products through a franchising system nor do we sell any licenses.  Furthermore, we also do not have any expansion plans for the United States.

For our Cuba auténtica collección products we only use cocoa beans from Baracoa, Cuba. 

The beans are obtained by another company, Max Felchlin AG located in Schwyz, Switzerland. Link: https://www.felchlin.com/en/company/company-portrait

They import the cocoa beans and process them to couverture chocolate which we then use for our well-known products.”

Zurich, Switzerland-based Dieter Meier is also creating chocolate products using cocoa beans from the Republic of Cuba.

https://www.chocolatdietermeier.com/

Editor’s Note: The products from Confiserie Sprungli and Dieter Meier taste very good.    

And, chocolate goes well with a cup of Nespresso Café de Cuba Vertuo… 

https://www.nespresso.com/us/en/order/capsules/original/cafecito-de-cuba-limited-edition-coffee

Secretary Of State Pompeo Speaks At Detroit Economic Club; He Answers 6 Questions- One Is About Cuba

Remarks
Mike Pompeo
Secretary of State
Detroit Economic Club
Detroit, Michigan
June 18, 2018

excerpts......

MR ANDERSON: Well, maybe we will wrap up with one international question that’s a little closer to home, and that’s a question about Cuba. So Cuba now has the first non-Castro president in many decades. Do you continue to think we’ll grow closer with Cuba? How do you see that relationship evolve?

SECRETARY POMPEO: It’s true his last name’s not Castro. (Laughter.) But you wouldn’t know it from looking at his policies and plans. So I don’t see significant changes in the Cuban Government. Having said that, I do see significant opportunity. I think over time that its proximity to the United States, the nature of the human beings there, I think we – I think ultimately we end up in a much better place in Cuba. The question has always been speed, how quickly can you get there, and what are the right toolsets to reinforce that and make that more likely to happen. President Trump’s made clear he wants us to do that, he wants us to be engaged in ways that increase the capacity for ordinary Cubans to have the opportunities that we all have in America, both economic freedoms and political freedoms. And today we still have a lot of work to do.

President Trump Has A Problem: Tariffs By Canada, China, EU & Mexico

Updated…. New Export Data

President Trump Has A Problem: Tariffs By Canada, China, EU & Mexico
Here’s One Solution
He’d Support It If He Knew About It
A Good, Strong Simple Quick Decision
Where Are Secretaries Mnuchin, Perdue & Ross?

Thus Far In 2018:
U.S. Food/Ag Exports To China Decreased 12.2%
U.S. Food/Ag Exports To Mexico Increased .2%
U.S. Food/Ag Exports To Canada Increased 1.1%
U.S. Food/Ag Exports To The EU Increased 13.4%

U.S. Food/Ag Exports To Cuba Increased 25.3%
Cuba Imported More Food/Ag Products From U.S. Than 19 Of 28 EU Members
Cuba Ranks 52nd Of 229 Countries For U.S. Food/Ag Exports

No Change To Law
One OFAC License Could Increase Exports
Home BancShares In Arkansas
Removing Foreign Banks From Transactions Can Increase U.S. Exports
Direct Banking Can Save Exporters 2%+ From Each Payment  
Where’s Arkansas’s Republican Governor & All-Republican Congressional Delegation?

To some, The Honorable Donald J. Trump, President of United States, views trade as binary, having two parts- a winner and a loser.  Perhaps, it’s more ternary, having three parts- a winner, a loser and a component that equates to fairness.

He believes in overtly rewarding good behavior and overtly punishing bad behavior.  He believes in good (strong) deals and not bad (poor) deals.  He believes in high risk, high reward strategies.  All binary.  He espouses and did so during the decades prior to his presidency that trade should be “fair” and the United States should be “treated fairly” and not “treated badly” or “treated poorly.”

President Trump can appreciate the absurdity where a bank located in Canada, Mexico, Panama or the EU receives a fee from a transaction between a farmer, cooperative or company in the United States and the Republic of Cuba. 

Thus far in 2018, according to the United States Department of Commerce (USDOC), the Republic of Cuba has purchased, in U.S. Dollar value, more agricultural commodities and food products from the United States, on a cash-in-advance basis as required by U.S. law, than have nineteen (19), or 68% of the twenty-eight (28) members of the European Union (EU). 

The Republic of Cuba’s 25.3% increase in agricultural commodity and food product purchases from the United States thus far in 2018 is also a higher percentage increase than nineteen (19) of the twenty-eight (28) members of the EU.

President Trump does not consider the government of the Republic of Cuba to be good, a friend.  To him, the government of the Republic of Cuba is a bad actor, a disruptor, deserving to be punished until it changes its behavior voluntarily or through coercion.  He has stated he is a friend (“loves”) to the 11.3 million citizens of the 800-mile long archipelago, whose closest point is approximately one hundred (100) miles from the United States; he separates those who lead from those who are led, as have his predecessors. 

How does the President maintain punishment, remain tough, strong, be a winner, show love, embrace a good deal, accept high risk… and balance (or re-balance) the interests of politically and economically significant constituencies in those among the fifty states where agricultural exports and food product exports are first without equal?

The President’s position is tariffs are necessary to correct macro-imbalances in bilateral and multilateral trade agreements; and that short-term to medium-term micro-impact upon certain constituencies in certain states may be required to create a far better long-term. 

He’s asking those who support him to trust him by accepting pain from his decisions; to those who oppose him, they will come around once he has secured victory.  “Make America Great Again” is not without pain- perceived or real.  There is a means to mitigate that pain.

For the Republic of Cuba to have a role in providing that victory, that “againness,” President Trump needs to permit one United States bank in Arkansas to obtain a portion of a license it does not have from the United States Department of the Treasury. 

One signature from The Honorable Steven Mnuchin, United States Secretary of the Treasury or Ms. Andrea Gacki, Acting Director of the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury makes it happen.

That license would immediately benefit United States agricultural commodity and food product exporters from the first transaction- United States exporters will get paid safer, faster and with less cost for each payment they receive from the Republic of Cuba.  And, ports in Alabama, Florida, Georgia, Louisiana, Mississippi, Texas and Virginia would benefit.

President Trump appreciates that straight line transactions are generally good; triangular transactions are generally bad.  He appreciates spending less and receiving more. 

That’s a view also appreciated by The Honorable Lawrence Kudlow, Director of the National Economic Council at The White House and his colleague The Honorable Peter Navarro, Director of the National Trade Council at The White House.  For both gentlemen, exports matter.

Since December 2001, when the first deliveries from the United States to the Republic of Cuba commenced under provisions of the Trade Sanctions Reform and Export Enhancement Act (TSREEA) of 2000, the Republic of Cuba has purchased, on a cash-in-advance basis, more than US$5.652 billion in agricultural commodities and food products from United States companies. 

In 2017, the Republic of Cuba ranked 53rd amongst 229 agricultural commodity and food export markets for United States companies according to the United States Department of Commerce; ahead of Poland, Jordan, Argentina, Russia, Qatar and Greece and ahead of twenty (20) of the twenty-eight (28) members of the EU among others. 

During the last seventeen (17) years, the Republic of Cuba has purchased approximately US$1.4 billion in soybean products: more than US$623 million in soybeans, more than US$531 million in soybean oil cake, and more than US$251 million in soybean oil.

Thus far in 2018, the Republic of Cuba has purchased approximately US$15 million in soybeans and soybean oil, compared with US$8,493,537.00 (soybeans; no soybean oil) during the same period in 2017.  That is a 76.6% increase.

Soybean products represent approximately 25% of all agricultural commodities and food products exported from the United States to the Republic of Cuba since December 2001.

During the last seventeen (17) years, the Republic of Cuba has purchased approximately US$1.15 billion in corn.

Thus far in 2018, the Republic of Cuba has purchased approximately US$9.4 million in corn, compared with US$14,462,001.00 during the same period in 2017.  That is a 53.8% decrease.              

Corn represents approximately 20% of all agricultural commodities and food products exported from the United States to the Republic of Cuba since December 2001.

On 15 June 2018, President Trump said that the United States “The United States will pursue additional tariffs if China engages in retaliatory measures, such as imposing new tariffs on United States goods, services, or agricultural products; raising non-tariff barriers; or taking punitive actions against American exporters or American companies operating in China.”

On 31 May 2018, President Trump announced that the United States was “taking action to protect America’s national security from the effects of global oversupply of steel and aluminum. Following extensive discussions and a months-long process, the President will implement tariffs on steel and aluminum imports from Canada, Mexico, and the European Union.”

Following the announcement, the governments of Canada, Mexico and twenty-eight members of the EU reported that tariffs on products, including agricultural commodities and food products, from the United States would be implemented.

On 4 May 2018, President Trump was quoted as saying: “My people are coming back right now from China, and we will be doing something, one way or the other, with respect to what's happening in China.  And let me say this:  I have great respect for President Xi.  That's why we're being so nice.  And we have a great relationship.  But we must bring fairness into trade between the U.S. and China.  And we'll do it.”

On 5 May 2018, The Wall Street Journal reported that exports of soybeans and corn from the United States to the People’s Republic of China had substantially decreased.  According to The Honorable Charles Grassley (R- Iowa), a member of the United States Senate, “If [the Chinese] market closes, it could be devastating for local communities across the Midwest.” 

Increasing the export of soybeans and corn, and other agricultural commodities and food products from the United States to the Republic of Cuba would not be a panacea, but could materially offset without risk to United States taxpayers because United States law requires payment of cash-in-advance for deliveries of agricultural commodities and food products from the United States to the Republic of Cuba.  The law does not need to be altered for exports to increase.

President Trump could take immense satisfaction from using rational commercial logic to correct simple commercial arithmetic that escaped comprehension of the Obama Administration: When export opportunities exist, assist and do no harm.  And, if there are two parts to create success, don’t authorize one part and then self-congratulate for not authorizing the other part.  President Trump would concur that’s terrible.

To assist towards increasing agricultural commodity and food product exports, along with other authorized exports (agricultural machinery, farm implements, and medical equipment, for example), Conway, Arkansas-based Home BancShares (2018 assets approximately US$14 billion), who through its Centennial Bank subsidiary purchased Pompano Beach, Florida-based Stonegate Bank in September 2017, must augment its existing license from the OFAC.  Home BancShares has experience with agriculturally-focused transactions on behalf of its customers in Arkansas, Alabama, Florida and New York.

Mr. C. Randall Sims, President and Chief Executive Officer of Home BancShares, along with Mr. John W. Allison, Chairman of Home BancShares, should seek assistance from their Governor (who visited the Republic of Cuba in 2015) and their Members of Congress:

The Honorable Asa Hutchinson (R), Governor of the State of Arkansas; United States Senators: The Honorable John Boozman (R) and The Honorable Tom Cotton (R); and the four members of the United States House of Representatives: The Honorable Eric “Rick” Crawford (R) who has visited the Republic of Cuba, The Honorable French Hill (R), The Honorable Steve Womack (R), and The Honorable Bruce Westerman (R).

In 2015, the OFAC authorized Stonegate Bank (2017 assets approximately US$2.9 billion) to have an account with Republic of Cuba government-operated Banco Internacional de Comercia SA (BICSA). 

However, the Obama Administration would not authorize BICSA under a general OFAC license or in the OFAC license issued to Stonegate Bank, so United States export-related payments have been sent and received through Panama City, Panama-based Multibank, which has dealings with the Republic of Cuba. 

Without bilateral direct correspondent banking accounts, the payment process for funds from the United States to the Republic of Cuba and from the Republic of Cuba to the United States remains triangular rather than a straight line- which would be more efficient, more secure, more transparent, more timely (same day versus two or more days), and less costly. 

The augmentation of the OFAC license would be consistent with the export-focused mandates of the United States Department of Agriculture (USDA) and United States Department of Commerce (USDOC) by the Trump Administration.

Previously, officials within the OFAC and United States Department of State shared that if a license application were submitted, the license application would likely be approved.

OFAC Regulations:

55.  Are financial institutions other than banks permitted to open correspondent accounts in Cuba?  Depository institutions, as defined in 31 CFR §515.333, which include certain financial institutions other than banks, are permitted to open correspondent accounts at banks in Cuba. See 31 CFR §515.584(a).

(f) Any banking institution, as defined in §515.314, that is a person subject to U.S. jurisdiction is authorized to provide financing for exports or reexports of items, other than agricultural commodities, authorized pursuant to §515.533, including issuing, advising, negotiating, paying, or confirming letters of credit (including letters of credit issued by a financial institution that is a national of Cuba), accepting collateral for issuing or confirming letters of credit, and processing documentary collections. With the exception of transactions related to exports or reexports of medicines or medical supplies, items associated with the provision of telecommunications and internet services for the Cuban people, or items associated with air and sea operations that support permissible travel, cargo, or trade, nothing in this paragraph authorizes a direct financial transaction prohibited by §515.209.

56.  Are Cuban banks permitted to open correspondent accounts at U.S. banks? No. U.S. depository institutions are permitted to open correspondent accounts at Cuban banks located in Cuba and in third countries, and at foreign banks located in Cuba, but Cuban banks are not generally licensed to open such accounts at U.S. banks. See note to 31 CFR §515.584(a).

What To Do?

Home BancShares should seek the 50% of its correspondent banking license from the OFAC that it does not possess to then transparently, securely, and efficiently receive funds from the Republic of Cuba and transfer funds to the Republic of Cuba.

A fully-implemented direct correspondent banking agreement will lessen transaction costs by up to 2% or more; and that 2% could result in additional soybean products and corn and other agricultural commodities and food products exported from the United States to the Republic of Cuba.  

Since December 2001, the Republic of Cuba has transferred more than US$5.6 billion to United States-based companies for the purchase of agricultural commodities, food products and healthcare products (medical instruments, medical equipment, medical supplies and pharmaceuticals); approximately US$150 million went to third-country financial institutions to process those payments.

Additional effort.  Additional time.  Additional expense.  And, additional reasons for the government of the Republic of Cuba to avoid United States-based companies.

The government of the Republic of Cuba may believe, and not without some reasonableness, that if the OFAC does not want United States companies to save on transaction fees and gain from the potential savings in terms of increased product exports, then so be it.  And, providing additional revenues to banks located in Canada, Mexico and the EU creates goodwill for the Republic of Cuba.

The government of the Republic of Cuba has a responsibility to gain as much as possible from each bilateral commercial relationship; and United States companies can provide high quality product, with competitive pricing, on a consistent basis, through efficient ground and rail and port transportation networks.  That’s a benefit to the 11.3 million citizens of the 800-mile long archipelago.  

United States companies (large, medium and small; and individual farmers) who engage in authorized transactions with any country should not be financially penalized by the United States government.

There exists an available OFAC licensing pathway to solve a payment problem.  Home BancShares and BICSA should make use of it.  The USDA, USDOC and OFAC should support it.  

It’s the type of good deal for the United States that President Trump looks to support… he just needs to know about it.

Complete Text In PDF Format

Link To Previous Blog Post:

https://www.cubatrade.org/blog/2017/12/12/president-trump-deserves-opportunity-to-right-an-obama-administration-wrong-sftcp-dcb?rq=Stonegate%20Bank

FedEx Seeks Another Delay From USDOT To Initiate Services To Cuba

MOTION OF FEDERAL EXPRESS CORPORATION FOR ADDITIONAL EXTENSION OF START-UP DATE

14 June 2018

Federal Express Corporation ("FedEx") hereby respectfully moves the Department of Transportation ("DOT") for a six-month extension of time (i.e., through December 15, 2018) to inaugurate U.S.-Cuba scheduled, all-cargo air services. In its July 15, 2016 Notice of Action Taken, the DOT granted FedEx an allocation of five weekly frequencies to provide business daily (i.e., Monday-Friday) all-cargo air services between Miami, Florida (MIA) and Matanzas/Varadero, Cuba (VRA). Under the Notice's standard ninety (90) day start-up requirement, FedEx was required to inaugurate its U.S.-Cuba air services by April 15, 2017. However, the DOT granted FedEx two extensions of this start-up deadline, the latest giving FedEx until June 15, 2018, to inaugurate its U.S.-Cuba all-cargo services. FedEx needs this new extension to provide it with additional time to work through the continuing doing-business challenges and operational constraints that persist in the Cuba market, especially given its emergent nature and the Cuban and U.S. legal, regulatory and policy complexities overlaying such matters.

In additional support of this Motion, FedEx respectfully submits the following:

As the only all-cargo participant in the Department's 2016 U.S.-Cuba Frequency Allocation Proceeding, FedEx is pleased to have received authority from the Department to operate five weekly all-cargo flights between MIA and VRA. Since FedEx is the only U.S. all-cargo carrier seeking to provide U.S.-Cuba scheduled air services, DOT's granting this request for an additional extension will not adversely affect any other U.S. carriers nor the U.S. shipping public.

As previously indicated in this docket, FedEx began the rigorous preparatory and planning work for its Cuba services some time ago. However, FedEx requires another six-month extension of time because of several continuing inextricable dynamics, such as securing and establishing business relationships with Cuban service providers in relation to air operations support services, customs clearance, and ground/ delivery operations. The company must ensure these service providers would appropriately complement the express delivery services for which FedEx is world­ renowned while simultaneously remaining within the limits of the existing, relevant

U.S. and Cuban laws, regulations and policies.

The Department's grant of FedEx's extension request would be consistent with the public interest and Department precedent. FedEx remains committed to using its Cuba authority to provide the highest quality of reliable and efficient U.S.-Cuba air express and general cargo services, which would maximize the public benefit of the U.S.-Cuba Memorandum of Understanding for U.S. shippers and commerce alike. The six-month extension requested herein would not impact such longer-term benefits.

Moreover, all other U.S. carriers who received U.S.-Cuba authority from the Department have requested, and ultimately received, start-up extensions relating to certain U.S.-Cuba flights, including flights serving markets which are in much higher demand than VRA.

WHEREFORE, FedEx respectfully requests that the Department grant this motion for a six-month extension of time, to December 15, 2018, for the start-up of FedEx’s scheduled all-cargo air services between Miami, Florida, and Matanzas/Varadero, Cuba.

Complete Filing In PDF Format

One Year Since President Trump's Speech About Cuba.... Then Regulations

On their own, the changes to regulations enacted in 2017 by the Trump Administration have materially impacted the Republic of Cuba.

The regulations coupled with the lessening of economic support from Venezuela, increase in oil price imports, decrease in agricultural product exports, increase in cost of overall imports, and self-imposed impediments on the re-emerging self-employed will have the Republic of Cuba’s challenging 2017 continuing through 2018 and into 2019 unless the Diaz-Canel Administration takes dramatic, and potentially destabilizing actions.

The Diaz-Canel Administration may be a one-term transitional moment in a series of moments as its success may ironically be defined by the pain that is inflicted upon the population, which must be for 11.3 million citizens of the Republic of Cuba to be tomorrow what they are not today.

The Diaz-Canel Administration will preside over the destabilizing merging of the dual currencies, the implementation of the constitutional changes recommended by the commission led by his predecessor, General Raul Castro, the lessening of the role of the government throughout society, and a realignment of the relationship with the United States. 

Its most fundamental societal role will be to guide government institutions and a population made suspicious of self-employed “success” to appreciate the role of “success” in a society.  What it means for the self-employed to be “successful” and to what level those residing on the 800-mile long archipelago need accept differences in income will be a lengthy debate.   

The Trump Administration regulatory changes most impacted travel to Cuba by individuals subject to United States jurisdiction. 

The announcement of the regulations and implementation of the regulations by the United States Department of the Treasury, United States Department of Commerce, and United States Department of State were crafted and presented in a manner designed to create uncertainty with goals of fewer individuals subject to United States jurisdiction visiting the Republic of Cuba and fewer United States companies seeking engagement with the Republic of Cuba.  Both goals have succeeded.

Although the regulatory changes were written in a manner which lessened their direct impact, and retained most travel-related opportunities, cruise lines benefited while airlines saw fewer passengers.

Once seemingly contradictory regulation: An individual subject to United States jurisdiction may not directly make payment to an entity listed by the United States Department of State as under the control of or affiliated with the Revolutionary Armed Forces (FAR) of the Republic of Cuba.  However, an indirect payment may be permitted.

Important to remember that the Trump Administration was only able to do what it did because the Obama Administration and Castro Administration failed to do more when they were in office.

Had both administrations been more proactive and planned for a November 2016 outcome other than a victory by Hillary Clinton, the bilateral commercial landscape would have been rooted in such a manner that the Trump Administration would have been far more cautious in what it implemented in 2017. That’s the tragedy.

Trump Administration May Be Focusing Upon Certified Claims Unlike Obama Administration

Media Note
Office of the Spokesperson
Washington, DC
June 14, 2018

The United States and Cuba held the seventh Bilateral Commission meeting in Washington, D.C. on Thursday, June 14. Deputy Assistant Secretary of State for Western Hemisphere Affairs John Creamer led the U.S. delegation. The Cuban delegation was led by Carlos Fernandez de Cossio, the Foreign Ministry’s Director General for U.S. Affairs.

The United States reiterated the urgent need to identify the source of the attacks on U.S. diplomats and to ensure they cease. We also reiterated that until it is sufficiently safe to fully staff our Embassy, we will not be able to provide regular visa services in Havana. We expressed our continued concerns about the arbitrary detention of independent journalists and human rights defenders. The United States acknowledged progress in repatriating Cubans with final orders of removal from the United States, but emphasized Cuba needs to accept greater numbers of returnees.

The delegations also reviewed other areas for engagement that advance the interests of the United States and the Cuban people including combatting trafficking in persons; facilitating safe civil aviation; law enforcement cooperation; agricultural cooperation; maritime safety and search and rescue cooperation; resolution of certified claims; advancing understanding of environmental challenges; and protecting the national security and public health and safety of the United States.

The delegations agreed to hold the next rounds of the biannual Migration Talks and the Law Enforcement Dialogue this summer. The Bilateral Commission last met in September 2017.

Media Note
Office of the Spokesperson
Washington, DC
September 20, 2017

The United States and Cuba held the sixth Bilateral Commission meeting in Washington, D.C. on Tuesday, September 19. Deputy Assistant Secretary of State for Western Hemisphere Affairs John Creamer led the U.S. delegation. The Cuban delegation was led by Josefina Vidal, the Foreign Ministry’s Director General for U.S. Affairs.

The meeting provided an opportunity to discuss the incidents affecting diplomatic personnel at the U.S. Embassy in Havana. The United States reiterated its deep concern for the safety and security of the U.S. Embassy community in Havana and the urgent need to identify the cause of these incidents and to ensure they cease. The delegations also reviewed the Administration’s priorities and areas for engagement in the interests of the United States and the Cuban people, including human rights; implementation of the Migration Accords; and protecting the national security and public health and safety of the United States.

The Bilateral Commission last met in December 2016.

Media Note
Office of the Spokesperson
Washington, DC
December 7, 2016

The United States and Cuba held the fifth Bilateral Commission meeting in Havana, Cuba on Wednesday, December 7. Acting Assistant Secretary of State for Western Hemisphere Affairs Mari Carmen Aponte led the U.S. delegation. Embassy Havana Chargé d’Affaires Jeffrey DeLaurentis and Deputy Assistant Secretary John Creamer also attended for the United States. Josefina Vidal, the Foreign Ministry’s Director General for U.S. Affairs, led the Cuban delegation.

The United States and Cuba reviewed the achievements of the Bilateral Commission since diplomatic relations were re-established in July 2015. The Commission has prioritized and sequenced a number of bilateral initiatives since its first quarterly meeting in November 2015. The United States and Cuba have established dialogues on law enforcement, claims, human rights, and economic and regulatory issues, and have continued biannual Migration Talks. The Bilateral Commission has provided a framework to address trafficking in persons and the return of fugitives, as well as to schedule technical exchanges on law enforcement and environmental issues.

In the last 18 months, the United States and Cuba concluded 11 non-binding agreements, including Memoranda of Understanding on health, cancer research, agriculture, environmental cooperation, hydrography, marine protected areas, counternarcotics, federal air marshals, civil aviation, and direct transportation of mail. In the coming weeks, the United States and Cuba expect to sign agreements formalizing cooperation on law enforcement, conservation, seismology, meteorology, search and rescue, and oil spill response protocols.

The United States and Cuba have coordinated a number of high-level visits, including that of President Obama in March 2016, seven cabinet-level officials, and Dr. Jill Biden. Seven U.S. governors from New York, Louisiana, Arkansas, Texas, Virginia, Missouri, and West Virginia have led trade delegations to Cuba since April 2015. More than 80 Members of Congress, both Democrats and Republicans, have visited Cuba in the last two years, many for the first time.

Purposeful travel by Americans to Cuba increased by approximately 75 percent from 2014 to 2015. Ten U.S. airlines now provide scheduled service between U.S. and Cuban cities, and Carnival cruises are docking in several Cuban cities, further connecting the U.S. and Cuban people. Under the Bilateral Commission, the United States and Cuba expanded educational and cultural exchanges. The number of Cubans studying in the United States increased 63 percent in academic year 2015-16. More than 2,000 U.S. students visited Cuba as part of their academic program in academic year 2014-15. The United States welcomed the first Cuban Hubert H. Humphrey Fellow to the United States. Four U.S. cellular providers offer roaming service in Cuba, further connecting Cuba and the United States.

The delegations agreed the Bilateral Commission has provided a framework for discussion of a wide range of issues. Where U.S. and Cuban interests align, including on counternarcotics, health, and environmental issues, the United States and Cuba have made important strides for the benefit of both peoples. Where the two countries have disagreements, including on human rights, the United States and Cuba have articulated those differences in a clear, productive, and respectful manner. The dialogues and working groups that fall under the Bilateral Commission framework have allowed the United States and Cuba to establish working relationships with counterparts, which are essential to continued bilateral cooperation, advancement of U.S. interests, and progress toward normalization.

The United States looks forward to hosting the next Bilateral Commission Meeting in Washington, DC at the earliest opportunity.

Media Note
Office of the Spokesperson
Washington, DC
September 30, 2016

The United States and Cuba held the fourth Bilateral Commission in Washington, D.C., on Friday, September 30. Acting Assistant Secretary of State for Western Hemisphere Affairs Mari Carmen Aponte led the U.S. delegation, supported by Chargé d’Affaires Jeffrey DeLaurentis, Deputy Assistant Secretary John Creamer, and Chief of Staff and Director of Policy Planning Jon Finer. The Cuban delegation was led by Josefina Vidal, the Foreign Ministry’s Director General for U.S. Affairs, supported by Cuban Ambassador to the United States Jose Ramon Cabanas.

The Bilateral Commission advances the normalization process between the United States and Cuba. The meeting took place in a cooperative and productive environment. The U.S. and Cuban delegations discussed the way forward on key issues such as agriculture, health, environmental protection, economic engagement, science and technology, civil aviation, regulatory affairs, claims, culture and education, law enforcement, nonproliferation, trafficking in persons, human rights, maritime borders, and migration. The delegations also discussed prospects for upcoming high-level visits and their shared desire to achieve as much progress as possible by the end of the year.

The United States looks forward to the next Bilateral Commission Meeting in Havana in December 2016.

Media Note
Office of the Spokesperson
Washington, DC
May 12, 2016

The United States and Cuba will hold the third Bilateral Commission in Havana, Cuba on Monday, May 16. Following the successful visit of President Obama to Havana in March 2016, Secretary Kerry asked Ambassador Kristie Kenney, the Counselor of the U.S. Department of State, to lead the delegation. The Secretary places a top priority on deepening our dialogue with the Government of Cuba, the primary mechanism for which is the Bilateral Commission. Deputy Assistant Secretary John S. Creamer will also attend for the United States. The Cuban delegation will be led by Josefina Vidal, the Foreign Ministry’s Director General for U.S. Affairs.

The meeting will provide an opportunity to review progress on a number of shared priorities since the last Bilateral Commission meeting in November 2015, including progress made during the President’s historic trip to Cuba in March. The United States and Cuba expect to plan continued engagements on environmental protection, agriculture, law enforcement, health, migration, civil aviation, direct mail, maritime and port security, educational and cultural exchanges, telecommunications, trafficking in persons, regulatory issues, human rights, and claims for the remainder of 2016.

Media Note
Office of the Spokesperson
Washington, DC
November 10, 2015

The United States and Cuba held the second Bilateral Commission in Washington, D.C., today. Deputy Assistant Secretary for Western Hemisphere Affairs Alex Lee led the delegation for the United States, and the Foreign Ministry’s Director General for U.S. Affairs, Josefina Vidal, led the Cuban delegation.

The Bilateral Commission is the primary coordination vehicle for advancing the normalization process between the United States and Cuba. The meeting took place in a respectful, cooperative, and productive environment. It provided an opportunity to review progress on shared priorities, including regulatory issues, telecommunications, claims, environmental protection, human trafficking, human rights, migration, and law enforcement. It also provided an opportunity to discuss priorities for 2016 and to identify mechanisms to continue narrowing our differences.

The United States looks forward to the next Bilateral Commission Meeting in Havana in early 2016.

Media Note
Office of the Spokesperson
Washington, DC
September 11, 2015

The United States and Cuba held the inaugural session of the bilateral commission in Havana today. The discussions were full and frank, extensive and conducted in a courteous and respectful manner. Both governments agreed to concrete steps to continue on the path toward normalized relations.

The group discussed a preliminary timeline through the end of this year for engagements on key topics including human rights, combating trafficking in persons, claims, migration, counter-narcotics, regulatory issues, environmental cooperation, civil aviation, telecommunications and the internet, and direct mail.

The bilateral commission agreed to meet again in November in Washington, D.C. to review progress in these areas and to chart areas of cooperation for 2016.

April Food/Ag Exports Increase 39.8%; Purchases Up 25.3% Compared To 2017

ECONOMIC EYE ON CUBA©
June 2018

April 2018 Food/Ag Exports To Cuba Increased 39.8%- 1
25.3% Increase Year-To-Year-5
Cuba Ranks 52nd Of 229 U.S. Food/Ag Export Markets- 2
April 2018 Healthcare Product Exports US$59,934.00- 2
April 2018 Humanitarian Donations US$640,778.00- 3
Obama Administration Initiatives Exports Continue To Increase- 3
U.S. Port Export Data- 15

APRIL 2018 FOOD/AG EXPORTS TO CUBA INCREASED 39.8%- Exports of food products & agricultural commodities from the United States to the Republic of Cuba in April 2018 were US$25,159,062.00 compared to US$17,988,565.00 in April 2017 and US$18,188,315.00 in April 2016.  

Complete Report In PDF Format

Secretary Of State Pompeo Discusses Cuba In Speech To OAS

Secretary's Remarks: Remarks at the General Assembly of the Organization of American States (OAS)

Remarks
Mike Pompeo
Secretary of State
OAS Headquarters
Washington, DC
June 4, 2018

SECRETARY POMPEO: Thank you. Thank you, Secretary General Almagro and your team, for organizing this 48th General Assembly of the OAS. We are incredibly grateful for your leadership.

It is a pleasure to be here at the OAS for the first time as Secretary of State of the United States of America, and I am delighted to meet many of my fellow foreign ministers here and today.

I would also like to acknowledge the great work of our permanent representative, Ambassador Trujillo, and his team, and – as well as all of those – work of the perm-reps to the Organization of American States.

Before I continue, I’d like to express our solidarity with the Guatemalan people and send our condolences to the families and loved ones of those who perished as a result of the volcano eruption in Guatemala on Sunday.

Just as we did when this first body met 70 years ago, the United States continues to place a great deal of value on the OAS and its role in forging a hemisphere distinguished by democracy, peace, respect for human rights, and cooperation. We must all do our part to strengthen the OAS to deal effectively with the challenges to our values we face together today and, of course, those we will face in the future.

I would like to thank our fellow member-states for their support of a decision at last year’s General Assembly to reduce the OAS’s dependence on a single member-state: mine. This is an important step rooted in increasing buy-in and burden sharing to achieve our shared goals. This year I hope that we can agreeably adopt a plan to implement this decision in order to put the OAS on more sustainable financing footing.

As for confronting shared challenges in the region, at the Summit of the Americas our leaders agreed upon steps to combat corruption, a cancer that eats away at the underpinnings of democracy and stifles the dreams of our citizens. We must continue to improve transparency in government and public procurement, and call out and prosecute corrupt officials.

Transnational criminal organizations kill our people, they destabilize our societies, and they challenge our democratic institutions. The United States will not stand for this. We will continue to cooperate with our Mexican counterparts and with leaders from the Northern Triangle to build on our gains in addressing the drivers of illegal immigration and the illicit trafficking.

Our fight to crush these TCOs will continue with the implementation of the Caribbean Basin Security Initiative. We will also continue to pursue Caribbean 2020, our strategy-focused – our strategy for enhanced Caribbean engagement in the areas of security, diplomacy, prosperity, energy, education, and health.

The natural disasters of the past year have tested our people’s resilience. The United States is proud to help OAS countries bounce back in the aftermath of such tragedies. One way we are doing this is helping small businesses in the vital Caribbean tourism industry get back on their feet again after hurricanes.

In Cuba today, we see an expectation that change is inevitable and that it can't come quickly enough. Young Cubans born under a dictatorship are uninterested in hollow revolutionary slogans. They demand educational opportunities free from political constraints or a totalitarian regime’s repression. They want what youth everywhere else wants: opportunities to use their talents, to exercise their voice, achieve their potential, and build a bright future for themselves. As democratic societies, we must support young people in Cuba and elsewhere in the hemisphere in their hopes for democratic change.

In Nicaragua police and government-controlled armed groups have killed dozens, merely for peacefully protesting. I echo what Vice President Pence said in this very building on May 7th: “We join with nations around the world in demanding that Ortega Government [respond] to the Nicaraguan people’s demands for the democratic reform and hold accountable those responsible for violence.” The United States supports the work of the Inter-American Commission on Human Rights and what it is doing in Nicaragua, and strongly urges the Nicaraguan Government to implement the recommendations issued by the commission this past May 21st.

But there is no greater challenge today than the full-scale dismantling of democracy and the heartbreaking humanitarian disaster in Venezuela. While the United States welcomes the release of the unjustly imprisoned Holt family, our policy towards Venezuela remains unchanged. The United States stands steadfast in support of the Venezuelan people and their efforts to return to democracy. The Maduro regime’s efforts towards – to move towards unconstitutional government and its human rights abuses are now well known by all. All these actions have, among other ill consequences, resulted in an unconstitutional alteration of Venezuela’s constitutional order.

Given these circumstances, we are all challenged to act under the Inter-American Democratic Charter, which this body has already begun to do.

On more than one occasion, Venezuela has squandered opportunities to have the kind of dialogue that the charter calls for. We seek only what all the nations of the OAS want for our people: a return to the constitutional order, free and fair elections with international observation, and the release of political prisoners. The regime’s refusal to take meaningful action on these issues has demonstrated unmistakable bad faith and exhausted options for dialogue under current conditions.

Just two weeks ago, the Venezuelan Government staged sham elections that offered no real choice to Venezuelan people and its voters. Many of them responded sensibly by simply staying home.

For all of these reasons, Vice President Pence challenged member-states last month to do what the Democratic Charter asks of us when faced with an unconstitutional interruption in democratic order of a member-state: suspend Venezuela from this body.

That suspension is not a goal unto itself. But it would show that the OAS backs up its words with action. And it would send a powerful signal to the Maduro regime: Only real elections will allow your government to be included in the family of nations.

In addition to suspension, I call on fellow member-states to apply additional pressure on the Maduro regime, including sanctions and further diplomatic isolation, until such time as it undertakes the actions necessary to return genuine democracy and provide people desperately needed access to international humanitarian aid.

We call on all OAS nations to do this today regarding Venezuela, and in the future, wherever necessary, for good of the region and the world. Thank you. (Applause.)

President Trump Can Help Offset Import Tariffs By Canada, Mexico, EU & China

President Trump Can Help Offset Import Tariffs By Canada, Mexico, EU & China
Binary & Ternary Strategies
He’d Likely Support It If He Knew About It
Good, Strong Decision

U.S. Food/Ag Exports To Canada Increased 2.2% In 2018
U.S. Food/Ag Exports To Mexico Decreased 3.5% In 2018
U.S. Food/Ag Exports To The EU Increased 9.3% In 2018
U.S. Food/Ag Exports To China Decreased 15.2% In 2018

U.S. Food/Ag Exports To Cuba Increased 20.8% In 2018
In 2018, Cuba Imported More Food/Ag Products From U.S. Than 20 Of 28 EU Members

One OFAC License Could Increase Exports; Secretary Mnuchin Can Authorize It
Home BancShares In Arkansas Has 50% Of The License
Removing Foreign Banks From Transactions Can Increase U.S. Exports
Direct Banking Can Save Exporters 2%+ From Each Payment  
Where’s Arkansas’s Republican Governor & All-Republican Congressional Delegation?

To some, The Honorable Donald J. Trump, President of United States, views trade as binary, having two parts- a winner and a loser.  Perhaps, it’s more ternary, having three parts- a winner, a loser and a component that equates to fairness.

He believes in overtly rewarding good behavior and overtly punishing bad behavior.  He believes in good (strong) deals and not bad (poor) deals.  He believes in high risk, high reward strategies.  All binary.  He espouses and did so during the decades prior to his presidency that trade should be “fair” and the United States should be “treated fairly” and not “treated badly” or “treated poorly.”

President Trump can appreciate the absurdity where a bank located in Canada, Mexico, Panama or the EU receives a fee from a transaction between a farmer, cooperative or company in the United States and the Republic of Cuba.  

Thus far in 2018, according to the United States Department of Commerce, the Republic of Cuba has purchased, in U.S. Dollar value, more agricultural commodities and food products from the United States, on a cash-in-advance basis as required by U.S. law, than have twenty (20) of the twenty-eight (28) members of the European Union (EU).  

Putting this another way, the Republic of Cuba has thus far in 2018 purchased more agricultural commodities and food products than has 71% of the members of the EU.  

The Republic of Cuba’s 20.8% increase in agricultural commodity and food product purchases from the United States thus far in 2018 is also a higher percentage increase than twenty (20) of the twenty-eight (28) members of the EU.

President Trump does not consider the government of the Republic of Cuba to be good, a friend.  To him, the government of the Republic of Cuba is a bad actor, a disruptor, deserving to be punished until it changes its behavior voluntarily or through coercion.  He has stated he is a friend (“loves”) to the 11.3 million citizens of the 800-mile long archipelago, whose closest point is approximately one hundred (100) miles from the United States; he separates those who lead from those who are led, as have his predecessors.  

How does the President maintain punishment, remain tough, strong, be a winner, show love, embrace a good deal, accept high risk… and balance (or re-balance) the interests of politically and economically significant constituencies in those among the fifty states where agricultural exports and food product exports are first without equal?

The President’s position is tariffs are necessary to correct macro-imbalances in bilateral and multilateral trade agreements; and that short-term to medium-term micro-impact upon certain constituencies in certain states may be required to create a far better long-term.  

He’s asking those who support him to trust him by accepting pain from his decisions; to those who oppose him, they will come around once he has secured victory.  “Make America Great Again” is not without pain- perceived or real.  There is a means to mitigate that pain.

For the Republic of Cuba to have a role in providing that victory, that “againness,” President Trump needs to permit one United States bank in Arkansas to obtain a portion of a license it does not have from the United States Department of the Treasury.  

One signature from The Honorable Steven Mnuchin, United States Secretary of the Treasury or Ms. Andrea Gacki, Acting Director of the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury makes it happen,  

That license would immediately benefit United States agricultural commodity and food product exporters from the first transaction- United States exporters will get paid safer, faster and with less cost for each payment they receive from the Republic of Cuba.  And, ports in Alabama, Florida, Georgia, Louisiana, Mississippi, Texas and Virginia would benefit.

President Trump appreciates that straight line transactions are generally good; triangular transactions are generally bad.  He appreciates spending less and receiving more.  

That’s a view also appreciated by The Honorable Lawrence Kudlow, Director of the National Economic Council at The White House and his colleague The Honorable Peter Navarro, Director of the National Trade Council at The White House.  For both gentlemen, exports matter.

On 31 May 2018, President Trump announced that the United States was “taking action to protect America’s national security from the effects of global oversupply of steel and aluminum. Following extensive discussions and a months-long process, the President will implement tariffs on steel and aluminum imports from Canada, Mexico, and the European Union.”

Following the announcement, the governments of Canada, Mexico and twenty-eight members of the EU reported that tariffs on products, including agricultural commodities and food products, from the United States would be implemented.

On 4 May 2018, President Trump was quoted as saying: “My people are coming back right now from China, and we will be doing something, one way or the other, with respect to what's happening in China.  And let me say this:  I have great respect for President Xi.  That's why we're being so nice.  And we have a great relationship.  But we must bring fairness into trade between the U.S. and China.  And we'll do it.”

On 5 May 2018, The Wall Street Journal reported that exports of soybeans and corn from the United States to the People’s Republic of China had substantially decreased.  According to The Honorable Charles Grassley (R- Iowa), a member of the United States Senate, “If [the Chinese] market closes, it could be devastating for local communities across the Midwest.”  

Increasing the export of soybeans and corn, and other agricultural commodities and food products from the United States to the Republic of Cuba would not be a panacea, but could materially offset without risk to United States taxpayers because United States law requires payment of cash-in-advance for deliveries of agricultural commodities and food products from the United States to the Republic of Cuba.  The law does not need to be altered for exports to increase.

President Trump could take immense satisfaction from using rational commercial logic to correct simple commercial arithmetic that escaped comprehension of the Obama Administration: When export opportunities exist, assist and do no harm.  And, if there are two parts to create success, don’t authorize one part and then self-congratulate for not authorizing the other part.  President Trump would certainly concur that’s a terrible deal.

Since December 2001, when the first deliveries from the United States to the Republic of Cuba commenced under provisions of the Trade Sanctions Reform and Export Enhancement Act (TSREEA) of 2000, the Republic of Cuba has purchased, on a cash-in-advance basis, more than US$5.6 billion in agricultural commodities and food products from United States companies.  

In 2017, the Republic of Cuba ranked 53rd amongst 229 agricultural commodity and food export markets for United States companies according to the United States Department of Commerce; ahead of Poland, Jordan, Argentina, Russia, Qatar and Greece and ahead of twenty (20) of the twenty-eight (28) members of the EU among others.  

During the last seventeen (17) years, the Republic of Cuba has purchased approximately US$1.4 billion in soybean products: more than US$621 million in soybeans, more than US$531 million in soybean oil cake, and more than US$245 million in soybean oil.

Thus far in 2018, the Republic of Cuba has purchased approximately US$15 million in soybeans and soybean oil, compared with US$8,493,537.00 (soybeans; no soybean oil) during the same period in 2017.  That is a 76.6% increase.

Soybean products represent approximately 25% of all agricultural commodities and food products exported from the United States to the Republic of Cuba since December 2001.

During the last seventeen (17) years, the Republic of Cuba has purchased approximately US$1.15 billion in corn.

Thus far in 2018, the Republic of Cuba has purchased approximately US$9.4 million in corn, compared with US$14,462,001.00 during the same period in 2017.  That is a 53.8% decrease.

Corn represents approximately 20% of all agricultural commodities and food products exported from the United States to the Republic of Cuba since December 2001.

To assist towards increasing agricultural commodity and food product exports, along with other authorized exports (agricultural machinery, farm implements, and medical equipment, for example), Conway, Arkansas-based Home BancShares (2018 assets approximately US$14 billion), who through its Centennial Bank subsidiary purchased Pompano Beach, Florida-based Stonegate Bank in September 2017, must augment its existing license from the OFAC.  Home BancShares has experience with agriculturally-focused transactions on behalf of its customers in Arkansas, Alabama, Florida and New York.

Mr. C. Randall Sims, President and Chief Executive Officer of Home BancShares, along with Mr. John W. Allison, Chairman of Home BancShares, should seek assistance from their Governor (who visited the Republic of Cuba in 2015) and their Members of Congress:

The Honorable Asa Hutchinson (R), Governor of the State of Arkansas; United States Senators: The Honorable John Boozman (R) and The Honorable Tom Cotton (R); and the four members of the United States House of Representatives: The Honorable Eric “Rick” Crawford (R) who has visited the Republic of Cuba, The Honorable French Hill (R), The Honorable Steve Womack (R), and The Honorable Bruce Westerman (R).

In 2015, the OFAC authorized Stonegate Bank (2017 assets approximately US$2.9 billion) to have an account with Republic of Cuba government-operated Banco Internacional de Comercia SA (BICSA). 

However, because the Obama Administration would not authorize BICSA under a general OFAC license or in the OFAC license issued to Stonegate Bank, United States export-related funds have been sent and received through Panama City, Panama-based Multibank, which has extensive dealings with the Republic of Cuba.  

Without bilateral direct correspondent banking accounts, the payment process for funds from the United States to the Republic of Cuba and from the Republic of Cuba to the United States remains triangular rather than a straight line- which would be more efficient, more secure, more transparent, more timely (same day versus two or more days), and less costly.  

The augmentation of the OFAC license would be consistent with the export-focused mandates of the United States Department of Agriculture (USDA) and United States Department of Commerce (DOC) by the Trump Administration.

Previously, officials within the OFAC and United States Department of State shared that if a license application were submitted, the license application would likely be approved.

OFAC Regulations:

55.  Are financial institutions other than banks permitted to open correspondent accounts in Cuba?  Depository institutions, as defined in 31 CFR §515.333, which include certain financial institutions other than banks, are permitted to open correspondent accounts at banks in Cuba. See 31 CFR §515.584(a).

(f) Any banking institution, as defined in §515.314, that is a person subject to U.S. jurisdiction is authorized to provide financing for exports or reexports of items, other than agricultural commodities, authorized pursuant to §515.533, including issuing, advising, negotiating, paying, or confirming letters of credit (including letters of credit issued by a financial institution that is a national of Cuba), accepting collateral for issuing or confirming letters of credit, and processing documentary collections. With the exception of transactions related to exports or reexports of medicines or medical supplies, items associated with the provision of telecommunications and internet services for the Cuban people, or items associated with air and sea operations that support permissible travel, cargo, or trade, nothing in this paragraph authorizes a direct financial transaction prohibited by §515.209.

56.  Are Cuban banks permitted to open correspondent accounts at U.S. banks? No. U.S. depository institutions are permitted to open correspondent accounts at Cuban banks located in Cuba and in third countries, and at foreign banks located in Cuba, but Cuban banks are not generally licensed to open such accounts at U.S. banks. See note to 31 CFR §515.584(a).

What To Do?

Home BancShares should seek the 50% of its correspondent banking license from the OFAC that it does not possess to then transparently, securely, and efficiently receive funds from the Republic of Cuba and transfer funds to the Republic of Cuba.

A fully-implemented direct correspondent banking agreement will lessen transaction costs by up to 2% or more; and that 2% could result in additional soybean products and corn and other agricultural commodities and food products exported from the United States to the Republic of Cuba.   

Since December 2001, the Republic of Cuba has transferred more than US$5.6 billion to United States-based companies for the purchase of agricultural commodities, food products and healthcare products (medical instruments, medical equipment, medical supplies and pharmaceuticals); approximately US$150 million went to third-country financial institutions to process those payments.

Additional effort.  Additional time.  Additional expense.  And, additional reasons for the government of the Republic of Cuba to avoid United States-based companies.

The government of the Republic of Cuba may believe, and not without some reasonableness, that if the OFAC does not want United States companies to save on transaction fees and gain from the potential savings in terms of increased product exports, then so be it.  And, providing additional revenues to banks located in Canada, Mexico and the EU creates goodwill for the Republic of Cuba.

The government of the Republic of Cuba has a responsibility to gain as much as possible from each bilateral commercial relationship; and United States companies can provide high quality product, with competitive pricing, on a consistent basis, through efficient ground and rail and port transportation networks.  That’s a benefit to the 11.3 million citizens of the 800-mile long archipelago.   

United States companies (large, medium and small; and individual farmers) who engage in authorized transactions with any country should not be financially penalized by the United States government.

There exists an available OFAC licensing pathway to solve a payment problem.  Home BancShares and BICSA should make use of it.  The USDA and DOC should support it.  

It’s the type of good deal for the United States that President Trump looks to support… he just needs to know about it.

Link To Complete Analysis In PDF Format

Link To Previous Blog Post:

https://www.cubatrade.org/blog/2017/12/12/president-trump-deserves-opportunity-to-right-an-obama-administration-wrong-sftcp-dcb?rq=Stonegate%20Bank

Cuba Reports That USPS Agreement Is Permanent; USPS Has Also Confirmed

From Prensa Latina

1 June 2018

Cuba, USA Announce Direct and Permanent Postal Exchange

Havana, Jun 1 (Prensa Latina) Cuba and the United States agreed today to implement the permanent and direct postal exchange between both countries. 

The announcement made by the Correos de Cuba company states that the decision was adopted after the implementation of the Pilot Plan for more than one year for direct exchange between the two nations, as announced in March 2016.

According to the Correos of Cuba Business Group and the Portal Service of the United States, the service in its current format began on April 16, 2018 and takes into account the technical, operational and security requirements identified by the two sides during the execution of the Pilot Plan.

The restoration of this service allows direct mails between Cuba and the United States, parcels, and express courier, through the post offices of both countries.

Through the website www.correos.cu, those interested can obtain all information they require about services, rates and regulations, the note of the Institutional Communication Department of the entity states.

At the same time, people can track and monitor shipments with registration code, among other benefits, and includes the possibility of downloading and having the website on Android mobile devices.

Statement From The USPS Received By Email Per Request

4 June 2018 (Not On Its Internet Site Nor Issued As A Media Release)

The United States Postal Service started direct transportation of mail service with Cuba on March 16, 2016, as directed by the Cuban Democracy Act, under a one-year pilot plan using charter flights.  After that pilot plan expired, the Postal Service, after consultation with the Department of State and clearance by interagency partners, made the necessary transportation arrangements with regularly scheduled airlines to resume direct transportation of letters, parcels and Express Mail Service.  This direct service resumed on April 16, 2018. 

Cubana Operational Issues May Provide Intra-Cuba Opportunities For U.S. Airlines

On Friday, 18 May 2018 a thirty-nine-year-old Boeing 737 aircraft leased by Republic of Cuba government-operated Cubana de Aviacion (Cubana) from Celaya, Guanajuato, Mexico-based Damojh Aerolineas S.A. de C.V. crashed, killing 110 of 113 passengers.  The crew, all of whom died, was provided by Damojh Aerolineas S.A. de C.V.

This event may create impetus for Cubana and United States-based airlines (American Airlines, Delta Air Lines, Jet Blue Airways, Southwest Airlines, and United Airlines among others) to seek approval, if required, from the United States Department of Transportation (USDOT) and/or Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury and/or United States Department of Commerce (USDOC) for United States-based airlines to a) lease aircraft (with or without repainting) to Cubana and/or b) offer aircraft to code-share with Cubana for intra-Republic of Cuba routes. 

Either action would provide increased safety, increased frequency, and increased connective opportunity for Republic of Cuba nationals to travel throughout the country and authorized travelers originating in the United States. 

For example, Miami-Havana-Santiago de Cuba-Havana-Miami.  Miami-Havana-Holguin-Havana-Miami.  Ft. Lauderdale-Havana-Camaguey-Havana-Ft. Lauderdale.  Tampa-Havana-Cienfuegos-Havana-Tampa.  

From the USDOT:

In January 2016, EAR Section 746.2 (15 CFR § 746.2) was amended by revising paragraphs (b)(2) and (b)(2)(v) to read as follows:  (b)(2) Exports and re-exports that generally will be approved. Applications for licenses to export or re-export the following generally will be approved:  (b)(2)(v) Items necessary to ensure the safety of civil aviation and the safe operation of commercial aircraft engaged in international air transportation, including the export or re-export of such aircraft leased to state-owned enterprises.

On February 16, 2016, the United States and Cuba signed a Memorandum of Understanding (MOU) that will allow for the resumption of scheduled air services between the United States and Cuba. For scheduled combination or all-cargo services to and from Havana, under the terms of the MOU, U.S. carriers may operate up to twenty (20) daily round-trip frequencies. For scheduled combination or all-cargo services to and from each of the other nine (9) international airports in Cuba, U.S. carriers may operate up to ten (10) daily round-trip frequencies, for a total of ninety (90) daily non-Havana U.S.-Cuba round-trip frequencies.1 The MOU also allows for unlimited charter services to and from any point in Cuba, in accordance with the regulations of each country.2 This proceeding accordingly will not address charter services. Its sole focus will be on the allocation of scheduled service frequencies.

1 The nine airports, other than Havana’s José Marti International Airport (HAV), that are authorized for international services are: the Ignacio Agramonte International Airport in Camagüey (CMW); the Jardines del Rey Airport in Cayo Coco (CCC); the Vilo Acuña Airport in Cayo Largo (CYO); the Jaime González Airport in Cienfuegos (CFG); the Frank País Airport in Holguín (HOG); the Sierra Maestra Airport in Manzanillo (MZO); the Juan Gualberto Gómez Airport in Matanzas (VRA); the Abel Santamaría Airport in Santa Clara (SNU); and the Antonio Maceo Airport in Santiago de Cuba (SCU). 

2 The MOU does not place limits on the number of carriers that may provide U.S.-Cuba services, nor does it limit aircraft capacity for scheduled or charter services.  

LINK TO COMPLETE TEXT OF 2016 MEMORANDUM OF UNDERSTANDING

PBS NewsHour Continues Depersonalization Of U.S.-Cuba Relationship

On Friday, 18 May 2018, during the PBS NewsHour "News Wrap" segment, anchor Ms. Judy Woodruff mentioned the crash of a Boeing 737 aircraft leased by Republic of Cuba government-operated Cubana de Aviacion from Celaya, Guanajuato, Mexico-based Damojh Aerolineas S.A. de C.V.

Significant is Ms. Woodruff not referencing the name of the President of the Republic of Cuba, Miguel Diaz-Canel, who was inaugurated on 19 April 2018.  President Diaz-Canel is the successor to H.E. General Raul Castro.

Not mentioning the name of the president of the Republic of Cuba represents a continuing depersonalization of the relationship between the United States and the Republic of Cuba.

JUDY WOODRUFF:

"In the day’s other news: A Cuban passenger plane crashed shortly after takeoff today, killing over 100 people on board. State media reported that the three survivors were in critical condition. The Boeing 737 was headed toward the eastern city of Holguin, when it plummeted into a field just outside Havana.

Cuba’s president visited the scene and said officials would investigate the cause."

UK Cautions: "Take care in central Havana at night. Use a taxi rather than walk, even if you’re only a few blocks away from your destination."

On 18 May 2018, the Government of the United Kingdom issued an updated Travel Advice for the Republic of Cuba.

The Travel Advice included the following passage:

"Car-related crime and muggings occur from time to time, not only in Havana but also in Santiago de Cuba and other areas. Take care in central Havana at night. Use a taxi rather than walk, even if you’re only a few blocks away from your destination. There have been attacks on foreigners in hire cars after their tyres have been deliberately punctured. If you get a puncture in a remote area, drive on to a town before stopping. Don’t stop for hitch-hikers as they’ve also been known to carry out attacks."

The complete Travel Advice:

https://www.gov.uk/foreign-travel-advice/cuba

32nd Hotel On Conde Nast Traveler Magazine's "The Hot List" Is In Havana

In the May/June 2018 issue of Conde Nast Traveler Magazine, "The Hot List- What's Hot Now" contains 102 properties from throughout the world.

The 32nd listed property is the Gran Hotel Manzana Kempinski in Havana, Republic of Cuba, which opened in 2017.

Geneva, Switzerland-based Kempinski Hotels SA has a management contract with Republic of Cuba government-operated Gaviota SA., controlled by Republic of Cuba government-operated Grupo de Administracion Empresarial S.A. (Enterprise Management Group), or GAESA, which is, in turn, controlled by the Revolutionary Armed Forces of the Republic of Cuba (FAR).  

Kempinski Hotels SA operates seventy-five (75) five-star properties in thirty (30) countries.  The Bangkok, Thailand-based Thailand Crown Property Bureau has a majority shareholding in Kempinski AG, which owns Kempinski Hotels SA.

From the Kempinski Hotels Internet site: "Originally built between 1894 and 1917 as the first European style shopping arcade in Cuba, Gran Hotel Kempinski Manzana La Habana is situated in the heart of the old Havana with a direct view of the Capitol and the Great Theatre of Havana and amidst UNESCO World Heritage sites. The famous Castillo del Morro is accessible within a 10 minute drive. Experience the first true luxury hotel in Cuba and indulge yourself while staying in one of our 246 large rooms or suites with extra high ceilings and French windows opening out to the old city. Experience a variety of restaurants and bars, which also includes a one of a kind cigar lounge and a roof top Panoramic Restaurant and Bar with spectacular views over the old city. Relax in our spa, fitness center and rooftop pool."

Link To Previous Blog Post:

https://www.cubatrade.org/blog/2017/4/29/cubas-1st-potentially-five-star-aaa-diamond-property-kempinski-manzana-la-habana-welcoming-guests-on-9-june-2017?rq=Kempinski

Vice President Pence Mentions Cuba In Remarks To OAS

THE WHITE HOUSE
Office of the Vice President
For Immediate Release
May 7, 2018

REMARKS BY VICE PRESIDENT PENCE DURING A PROTOCOLARY MEETING AT THE ORGANIZATION OF AMERICAN STATES

Organization of American States
Washington, D.C.

Excerpts.......

THE VICE PRESIDENT:  Ambassador Gonzalez, Secretary General Almagro, Ambassador Trujillo, permanent representatives, distinguished members of Congress, ambassadors, all of our honored guests, it is my great honor to be here in the House of the Americas to address this session of the Organization of American States.  Thank you for the honor of being with you today.  (Applause.)

And I bring greetings first and foremost from a great champion of security, prosperity, and freedom in the Western Hemisphere.  I bring greetings from the 45th President of the United States of America, President Donald Trump.  (Applause.)

I’m here today because the Western Hemisphere is a key priority of our administration and our country.  Under President Trump, the United States will always put the security and prosperity of America first.  But America first does not mean America alone.

Our nation has always cared deeply about our neighbors across the Western Hemisphere.  This region is filled with diverse cultures, distinctive traditions, and unique identities beyond number, but we are all bound together by geography, by history, and by the enduring aspiration for freedom.

Ours was always meant to be a hemisphere of freedom, and that vision is why the Organization of American States exists.

One week ago today, this body celebrated the 70th anniversary of its founding, when 21 nations from across the Western Hemisphere declared to the world, and I quote, “that the historic mission of America is to offer a land of liberty.”  And that vision endures to this very day.

Today, this institution essentially represents our entire Western Hemisphere.  And the United States is proud -- proud to stand with the OAS.  And we're especially grateful for the principled leadership of Secretary General Almagro.  Thank you for your outstanding words today.  

Yet even as we celebrate this exercise in freedom, the dark cloud of tyranny still hangs heavy over too many of our neighbors in this hemisphere.

In Cuba, the longest-surviving dictatorship in the Western Hemisphere still clings to power.  For nearly 60 years, the Castro family systematically sapped the wealth of a great nation and of the Cuban people.  While the Castro name is now fading, the oppression and police state they imposed is as powerful as ever.

Today, the United States once again stands with the Cuban people in their stand for freedom.  No longer will our dollars fund Cuba’s military, security, and intelligence services -- the core of that regime.  And in this administration, we will stand and we will always say, "Que Viva Cuba Libre."  (Applause.)

But Cuba’s leaders have never been content to stifle just their own people’s freedom.  For generations, that communist regime has sought to export its failed ideology across the wider region.  And today, the seeds of Cuban tyranny are bearing fruit in Nicaragua and Venezuela.

President Trump Can Help Offset China’s Decrease In Soybean & Corn Imports With One OFAC License

President Trump Can Help Offset China’s Decrease In Soybean & Corn Imports 

CEO of Home BancShares In Arkansas Has A Key To Unlock Potential

US$1.4 Billion In Soy Products & US$1.1 Billion In Corn Purchased Under TSREEA

One OFAC License Could Increase Exports

In 2018, China Imports Have Decreased 15.5%; Cuba’s Imports Have Increased 20.8%

One Governor, Two Senators, Four Members Of The House Of Representatives

On 4 May 2018, The Honorable Donald J. Trump, President of the United States, was quoted as saying: “My people are coming back right now from China, and we will be doing something, one way or the other, with respect to what's happening in China.  And let me say this:  I have great respect for President Xi.  That's why we're being so nice.  And we have a great relationship.  But we must bring fairness into trade between the U.S. and China.  And we'll do it.”

On 5 May 2018, The Wall Street Journal reported that exports of soybeans and corn from the United States to the People’s Republic of China had substantially decreased.  According to The Honorable Charles Grassley (R- Iowa), a member of the United States Senate, “If [the Chinese] market closes, it could be devastating for local communities across the Midwest.”  

Increasing the export of soybeans and corn, and other agricultural commodities and food products, from the United States to the Republic of Cuba would not be a panacea, but could be a material offset with no risk to United States taxpayers because United States law requires payment of cash-in-advance for deliveries of agricultural commodities and food products from the United States to the Republic of Cuba.  The law does not need to be altered for exports to increase.

President Trump could take immense satisfaction from using rational commercial logic to correct simple commercial arithmetic that escaped comprehension of the Obama Administration: When export opportunities exist, assist and do no harm.  And, if there are two parts to create success, don’t authorize one part and then self-congratulate for not authorizing the other part.  President Trump would certainly concur that’s a terrible deal.

Since December 2001, when the first deliveries from the United States to the Republic of Cuba commenced under provisions of the Trade Sanctions Reform and Export Enhancement Act (TSREEA) of 2000, the Republic of Cuba has purchased, on a cash-in-advance basis, more than US$5.6 billion in agricultural commodities and food products from United States companies.  

In 2017, the Republic of Cuba ranked 53rd amongst 229 agricultural commodity and food export markets for United States companies according to the United States Department of Commerce; ahead of Poland, Jordan, Argentina, Russia, Qatar and Greece among others.  

Thus far in 2018, the Republic of Cuba maintains that ranking with 2017-to-2018 exports having increased 20.8% while exports from the United States to the People’s Republic of China have decreased 15.5% according to the United States Department of Commerce.

During the last seventeen (17) years, the Republic of Cuba has purchased approximately US$1.4 billion in soybean products: more than US$621 million in soybeans, more than US$531 million in soybean oil cake, and more than US$245 million in soybean oil.

Thus far in 2018, the Republic of Cuba has purchased approximately US$15 million in soybeans and soybean oil, compared with US$8,493,537.00 (soybeans; no soybean oil) during the same period in 2017.  That is a 76.6% increase.

Soybean products represent approximately 25% of all agricultural commodities and food products exported from the United States to the Republic of Cuba since December 2001.

During the last seventeen (17) years, the Republic of Cuba has purchased approximately US$1.15 billion in corn.

Thus far in 2018, the Republic of Cuba has purchased approximately US$9.4 million in corn, compared with US$14,462,001.00 during the same period in 2017.  That is a 53.8% decrease.

Corn represents approximately 20% of all agricultural commodities and food products exported from the United States to the Republic of Cuba since December 2001.

To assist towards increasing agricultural commodity and food product exports, along with other authorized exports (agricultural machinery and farm implements, for example), Conway, Arkansas-based Home BancShares (2018 assets approximately US$14 billion), who through its Centennial Bank subsidiary purchased Pompano Beach, Florida-based Stonegate Bank in September 2017, should seek to augment its existing license from the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury.  Home BancShares has experience with agriculturally-focused transactions on behalf of its customers in Arkansas, Alabama, Florida and New York.

Mr. C. Randall Sims, President and Chief Executive Officer of Home BancShares, along with Mr. John W. Allison, Chairman of Home BancShares, may want to seek assistance from their Governor (who visited the Republic of Cuba in 2015) and their Members of Congress:

The Honorable Asa Hutchinson (R), Governor of the State of Arkansas; United States Senators: The Honorable John Boozman (R) and The Honorable Tom Cotton (R); and the four members of the United States House of Representatives: The Honorable Eric “Rick” Crawford (R) who has visited the Republic of Cuba, The Honorable French Hill (R), The Honorable Steve Womack (R), and The Honorable Bruce Westerman (R).

In 2015, the OFAC authorized Stonegate Bank (2017 assets approximately US$2.9 billion) to have an account with Republic of Cuba government-operated Banco Internacional de Comercia SA (BICSA).  

However, because the Obama Administration would not authorize BICSA under a general or specific license from the OFAC to have an account with Stonegate Bank, United States export-related funds have been sent and received through Panama City, Panama-based Multibank, which has extensive dealings with the Republic of Cuba.  

Without bilateral direct correspondent banking accounts, the payment process for funds from the United States to the Republic of Cuba and from the Republic of Cuba to the United States remains triangular rather than a straight line- which would be more efficient, more secure, more transparent, more timely (same day versus two or more days), and less costly.  

The augmentation of the OFAC license would be consistent with the export-focused mandates of the United States Department of Agriculture (USDA) and United States Department of Commerce (DOC).

Previously, officials within the OFAC and United States Department of State shared that if a license application were submitted, the license application would likely be approved.

From the OFAC:

55.  Are financial institutions other than banks permitted to open correspondent accounts in Cuba?  Depository institutions, as defined in 31 CFR §515.333, which include certain financial institutions other than banks, are permitted to open correspondent accounts at banks in Cuba. See 31 CFR §515.584(a).

(f) Any banking institution, as defined in §515.314, that is a person subject to U.S. jurisdiction is authorized to provide financing for exports or reexports of items, other than agricultural commodities, authorized pursuant to §515.533, including issuing, advising, negotiating, paying, or confirming letters of credit (including letters of credit issued by a financial institution that is a national of Cuba), accepting collateral for issuing or confirming letters of credit, and processing documentary collections. With the exception of transactions related to exports or reexports of medicines or medical supplies, items associated with the provision of telecommunications and internet services for the Cuban people, or items associated with air and sea operations that support permissible travel, cargo, or trade, nothing in this paragraph authorizes a direct financial transaction prohibited by §515.209.

56.  Are Cuban banks permitted to open correspondent accounts at U.S. banks? No. U.S. depository institutions are permitted to open correspondent accounts at Cuban banks located in Cuba and in third countries, and at foreign banks located in Cuba, but Cuban banks are not generally licensed to open such accounts at U.S. banks. See note to 31 CFR §515.584(a).

What To Do?

Home BancShares should be proactive and seek the 50% of its correspondent banking license from the OFAC that it does not possess to then transparently, securely, and efficiently receive funds from the Republic of Cuba and transfer funds to the Republic of Cuba.

A fully-implemented direct correspondent banking agreement will lessen transaction costs by up to 2%; and that 2% could result in additional soybean products and corn and other agricultural commodities and food products exported from the United States to the Republic of Cuba.   

Since December 2001, the Republic of Cuba has transferred US$5.6 billion to United States-based companies for the purchase of agricultural commodities, food products and healthcare products; approximately US$150 million went to third-country financial institutions to process those payments.

Additional effort.  Additional time.  Additional expense.  And, additional reasons for the government of the Republic of Cuba to avoid United States-based companies.

The government of the Republic of Cuba may believe, and not without some reasonableness, that if the OFAC does not want United States companies to save on transaction fees, and gain from the potential savings in terms of increased product exports, then so be it.  

The government of the Republic of Cuba has a responsibility to gain as much as possible from each bilateral commercial relationship; and United States companies can provide high quality product, with competitive pricing, on a consistent basis, through efficient ground and rail and port transportation networks.  That’s a benefit to the 11.3 million citizens of the 800-mile long archipelago.   

United States companies (large, medium and small; and individual farmers) who engage in authorized transactions with any country should not be financially penalized.

There exists an available use of the OFAC licensing pathway to solve a payment problem.  Home BancShares and BICSA should make use of it.  The USDA and DOC should support it.

Complete Text In PDF Format

Link To Previous Blog Post:

https://www.cubatrade.org/blog/2017/12/12/president-trump-deserves-opportunity-to-right-an-obama-administration-wrong-sftcp-dcb?rq=Stonegate%20Bank

USDOT Finalizes New US-Cuba Routes Without Changes; United Receives Approval For Aircraft Change

The United States Department of Transportation (USDOT) has finalized its new route awards for the Republic of Cuba, receiving no objections to it interim decisions of April 2018.

LINK To USDOT Final Decision

Chicago, Illinois-based United Airlines received approval on 4 May 2018 from the USDOT for its Newark-Havana aircraft change request.

LINK to USDOT Final Decision

Home BancShares Reports On Its Risks Associated With Cuba-Related Banking Services

In September 2017, Conway, Arkansas-based Home BancShares (2018 assets approximately US$14 billion) through its Centennial Bank subsidiary purchased Pompano Beach, Florida-based Stonegate Bank.

In 2015, the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury authorized Stonegate Bank (2017 assets approximately US$2.9 billion) to have an account with Republic of Cuba government-operated Banco Internacional de Comercia SA (BICSA).  

However, because the Obama Administration would not authorize BICSA under a general or specific license from the OFAC to have an account with Stonegate Bank, United States export-related funds have been sent and received through Panama City, Panama-based Multibank, which has extensive dealings with the Republic of Cuba.  

Without bilateral direct correspondent banking accounts, the payment process for funds from the United States to the Republic of Cuba and from the Republic of Cuba to the United States remains triangular rather than a straight line- which would be more efficient, more secure, more transparent, more timely (same day versus two or more days), and less costly.

2017 Annual Report Of Home BancShares

Page 8

Stonegate Bank – On September 26, 2017, the Company, completed the acquisition of all of the issued and outstanding shares of common stock of Stonegate Bank (“Stonegate”), and merged Stonegate into Centennial. The Company paid a purchase price to the Stonegate shareholders of approximately $792.4 million for the Stonegate acquisition. Under the terms of the merger agreement, shareholders of Stonegate received 30,863,658 shares of HBI common stock valued at approximately $742.3 million at the time of closing plus approximately $50.1 million in cash in exchange for all outstanding shares of Stonegate common stock. In addition, the holders of outstanding stock options of Stonegate received approximately $27.6 million in cash in connection with the cancellation of their options immediately before the acquisition closed, for a total transaction value of approximately $820.0 million.

Including the effects of the purchase accounting adjustments, as of acquisition date, Stonegate had approximately $2.89 billion in total assets, $2.37 billion in loans and $2.53 billion in customer deposits. Stonegate formerly operated its banking business from 24 locations in key Florida markets with significant presence in Broward and Sarasota counties.

Page 15

Other Banking Services

As a result of our acquisition of Stonegate in September 2017, we also offer credit cards to both consumers and businesses. Credit cards typically involve a higher degree of credit risk since outstanding balances are unsecured and repayment of such balances is often negatively impacted by a decline in economic conditions. Our credit cards offer a variety of benefits and features designed to meet the needs of our customer. In addition, our consumer credit cards can be used in Cuba.

Page 40

Our banking relationships with the Cuban government and Banco Internacional de Comercia, S.A. (“BICSA”) as a result of our Stonegate acquisition may increase our compliance risk and compliance costs.

U.S. persons, including U.S. banks, are restricted in their ability to establish relationships and engage in transactions with Cuba and Cuban persons pursuant to the existing U.S. embargo and the Cuban Assets Control Regulations. However, we maintain a customer relationship to handle the accounts for Cuba’s diplomatic missions at the United Nations and for the Cuban Interests Section (now the Cuban Embassy) in Washington, D.C. This relationship was established in May 2015 pursuant to a special license granted to Stonegate Bank by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) in connection with the reestablishment of diplomatic relations between the U.S. and Cuba. In July 2015, Stonegate Bank established a correspondent banking relationship with Banco Internacional de Comercio, S.A. (“BICSA”) in Havana, Cuba.

Cross-border correspondent banking relationships pose unique risks because they create situations in which a U.S. financial institution will be handling funds from a foreign financial institution whose customers may not be transparent to the U.S. financial institution. Moreover, Cuban financial institutions are not subject to the same or similar regulatory guidelines as U.S. banks; therefore, these foreign institutions may pose a higher money laundering risk to their respective U.S. bank correspondent(s). Investigations have determined that, in the past, foreign correspondent accounts have been used by drug traffickers and other criminal elements to launder funds. Shell companies are sometimes used in the layering process to hide the true ownership of accounts at foreign correspondent financial institutions. Because of the large amount of funds, multiple transactions, and the U.S. bank’s potential lack of familiarity with a foreign correspondent financial institution’s customer, criminals and terrorists can more easily conceal the source and use of illicit funds. Consequently, we may have a higher risk of noncompliance with the Bank Secrecy Act and Anti-Money Laundering (“BSA/AML”) rules due to its new correspondent banking relationship with BICSA and will likely need to more closely monitor transactions related to correspondent accounts in Cuba, potentially resulting in increased compliance costs. Our failure to strictly adhere to the terms and requirements of our OFAC license or our failure to adequately manage our BSA/AML compliance risk in light of our new correspondent banking relationship with BICSA could result in regulatory or other actions being taken against us, which could significantly increase our compliance costs and materially and adversely affect our results of operations.

Page 54

Acquisitions

Stonegate Bank

Through our acquisition and merger of Stonegate into Centennial, we maintain a customer relationship to handle the accounts for Cuba’s diplomatic missions at the United Nations and for the Cuban Interests Section (now the Cuban Embassy) in Washington, D.C. This relationship was established in May 2015 pursuant to a special license granted to Stonegate by the U.S. Treasury Department’s Office of Foreign Assets Control in connection with the reestablishment of diplomatic relations between the U.S. and Cuba. In July 2015, Stonegate Bank established a correspondent banking relationship with Banco Internacional de Comercio, S.A. in Havana, Cuba. As of December 31, 2017, this correspondent banking relationship does not have a material impact to the Company’s financial position and results of operations.

LINK to Home BancShares 2017 Annual Report