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 OFAC Issues Clarification on Payments for Agricultural and Medical Shipments to Cuba



The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) today clarified that under the Cuban Assets Control Regulations the terminology "payment of cash in advance" with regard to Commerce-licensed shipments to Cuba means payment of cash prior to shipment of goods.

This payment policy conforms to the common understanding of the term in international trade finance. In addition, it balances OFAC's responsibility to administer effective sanctions against Cuba while ensuring the island can continue to receive food shipments, medicine and medical supplies from U.S. exporters.

The Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA) provides that agricultural products, medicines and medical supplies may be exported to Cuba as long as they are paid for through a letter of credit from a third country financial institution that may be confirmed or advised by a U.S. financial institution or by payment of cash in advance. Cash in advance of shipment is a widely held interpretation of the terminology, notably by other agencies in the U.S. Government.

Some U.S. financial institutions began requesting that OFAC clarify whether payments of cash in advance permits the shipment of goods to Cuba prior to receipt of the payment by U.S. exporters.

To mitigate the immediate impact on the transfer of these payments, OFAC adopted an interim policy to issue specific licenses to exporters whose transactions occurred while guidance was pending. OFAC created the specific licensing policy to ensure the Cuban people did not see a disruption in agricultural and medical shipments to the island and to avoid any unnecessary disruption of U.S. business.

The Treasury Department engaged in discussions within the Administration and received input from Congress and industry officials before issuing this guidance. It was determined that payments made to U.S. exporters before shipment effectively met the goals of the TSRA and the U.S. Cuba sanctions program.

The final rule on the payment policy was submitted to the Federal Register today and becomes effective immediately. The language in the final rule provides a 30 day window for exporters to continue to engage in transactions under financing terms resembling cash against documents, but requires payment for such transactions to be completed within the 30-day period.  The exporter will still need a Commerce Department license. The purpose of this 30-day window is to provide a transition period. 

The United States imposed sanctions against Cuba in 1963, in response to hostile actions by the Cuban government. Cuba is listed as a state sponsor of terrorism by the U.S. Department of State, and Cuban dictator Fidel Castro continues to oppress the Cuban people under his totalitarian regime.

Economic sanctions against rogue nations � including denying them access to the U.S. financial system and hard currency � can prompt real and positive change by pressuring regimes to change behavior or policies.

The Bush Administration is committed to helping the freedom-starved people of Cuba live lives free from Castro's oppression and tyranny. OFAC is steadfast in effectively administering the Cuba sanctions program to hasten freedom to the Cuban people.


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