By Grant Leach
Cuba’s Minister of
Agriculture, Gustavo Rodriguez Rollero, made an official visit to the U.S. last
week together with a delegation of officials from other Cuban ministries.
Minister Rollero’s visit was preceded by a February 2016 visit from Rodrigo
Malmierca, Cuba’s Foreign Trade Minister. These visits marked the first
U.S. visits from senior Cuban government officials in over 50 years.
President Obama, U.S. Agriculture Secretary
Tom Vilsack and Missouri Governor Jay Nixon have also made their own
historic visits to Cuba within recent months. Secretary Vilsack’s visit
included a meeting in Havana to sign a Memorandum of Understanding (the “MOU”) between the
U.S. Department of Agriculture and the Cuban Ministry of Agriculture enabling
the two agencies to cooperate in fields such as phytosanitary standards, plant
and animal sanitation, organic production methods, climatology and irrigation
through collaborative efforts such as information exchange and scientific
research.
During his visit, Minister
Rollero discussed the MOU and informed the U.S. Chamber of Commerce that Cuba is currently
importing $2 billion in agricultural commodities every year. Cuba’s
Ministry of Agriculture expects Cuba’s food demands to increase as the Cuban
tourism industry continues to expand. As a result, the Cuban Ministry of
Agriculture has developed a long-term plan to eliminate 50% of Cuba’s commodity
imports by the year 2030.
This plan consists of:
1.
developing approximately 6.2 million hectares of
ground for local crop and livestock production in order to produce food locally
instead of importing it
2.
revising Cuba’s commodity importing practices in order
to more strategically import crops such as wheat and rice which are difficult
to grow in Cuba
3. increasing exports of
specialty Cuban commodities such as tropical fruit, coffee, tobacco and honey
(particularly in organic markets).
Minister Rollero acknowledged
that Cuba will need to acquire a significant amount of modern farming equipment
to accomplish its 2030 plan and noted that most of the farming machinery
currently available in Cuba is more than 40 years old. He also noted that
Cuban buyers and the Cuban government (which purchases farming equipment on
behalf of government-owned farming cooperatives) will request extended payment
terms when purchasing this equipment.
U.S. machinery exporters may
be able to assist Cuba in realizing its 2030 agricultural plan under relatively
new rule amendments issued by the U.S. Department of Commerce’s Bureau of
Industry and Security (“BIS”) and the U.S. Department of Treasury’s Office of
Foreign Assets Control (“OFAC”) (Our team discussed these new rules in previous
posts, here and here). The new BIS and OFAC
rules provide several license exceptions, including an exception that allows
exports of agricultural production equipment to private sector buyers in Cuba
without a license.
Separate provisions allow U.S. companies to obtain
licenses in order to export agricultural machinery to farms owned by the Cuban
government in circumstances where the machinery will be used to produce crops
or livestock for the benefit of the Cuban people. Exporters who either
export under a license exception or obtain a BIS license may also perform
certain related services in Cuba and, in some instances, establish physical and
business presences in Cuba. Subject to certain conditions, eligible
exporters may also make preliminary trips to Cuba in order to perform market
research, marketing or contract negotiations.
If farming machinery exports
qualify under a license exception or receive the proper license, then the
amended rules also permit U.S. depository institutions to provide additional
financing and related financial services beyond those previously allowed for
Cuban exports. However, agricultural exporters should be aware that
commodities exports to Cuba are still governed separately under the Trade
Sanctions Reform and Export Enhancement Act of 2000 (the “TSRA”), which imposes
stricter limitations on payment terms and financing options for agricultural
commodities exports to Cuba. Congress would have to either repeal or
amend the TSRA in order for U.S. commodities exporters to offer Cuban buyers
better payment and financing terms for future commodities exports to Cuba under
its 2030 plan.
While these developments are
promising, U.S. exporters should remember that the U.S. trade embargo against
Cuba remains in effect and continues to impose significant penalties on
unauthorized exports of goods or services to Cuba. Agriculture exporters
interested in doing business with Cuba should review the amended rules
carefully in order to be sure that their contemplated transaction is permitted
or, if necessary, has been authorized under the proper license.
Our Cuba
team is monitoring Cuban sanctions and related trade developments carefully and
will be happy to assist with any inquiries you might have. Please contact Grant Leach, Cortney Morgan or Linda Tiller with questions.
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