Today the Office of Foreign Assets Control (“OFAC”) announced more amendments to the Cuban Assets Control Regulations which, among other things, broadens the general license for travel to Cuba to include other activities such as professional meetings, participating in sports events, and movie and television production. The new rules alter provisions relating to financing of permissible exports of goods but, oddly, does so in such a way that there are now more restrictions on financing exports of agricultural goods than there are on financing for other permitted exports such as informational materials, building materials authorized under license exception SCP, and consumer communications devices authorized under license exception CCD.

Under the amended rules, the provisions in sections 515.533(a)(2)(i) and (ii) which described the only permissible payment and financing terms for exports to Cuba have been revised to impose that restriction only on “agricultural commodities, as that term is defined in 15 CFR part 772” and “agricultural items authorized for export or reexport pursuant to 15 CFR 746.2(b)(2)(iv).” This is a bit odd given that there is no 15 C.F.R. § 746.2(b)(2)(iv). This is presumably a reference to 15 C.F.R. § 746.2(b)(3)(iii) which deals with BIS licensing policy for “agricultural items” and which covers items that are not “agricultural commodities” as defined in Part 772 of the EAR or license exception AGR. I can only speculate that this is a reference to an amended section 746.2 which has not yet been released by BIS.

The restrictions on payment and financing terms in 515.533(a)(2) are a requirement for “payment of cash and advance” or “financing by a banking institution located in a third country” other than a Cuban or U.S. bank. The reason that these restrictions remain on exports of agricultural commodities is that these restrictions are mandated by the Trade Sanctions Reform and Export Enhancement Act of 2000, which, although it was intended to expand trade to Cuba, contains in section 7207(b)(1) these two requirements for exports of agricultural products. The paradoxical result is that the statute that was intended to liberalize trade in agricultural commodities to Cuba now requires restrictions on that trade not required for other exports.

The theoretical effect of these changes is that U.S. exporters could, in theory, offer delayed payment terms to Cuban purchasers and that U.S. banks can finance the transactions. The practical effect is likely to be less. It is doubtful that many exporters or banks will be willing to run the risk of extending payment or financing terms to Cuban purchasers.  Instead, it seems likely that exports to Cuba will follow the normal practice of payment of cash against documents of title. A new section 515.584(f) now allows U.S. banks to confirm letters of credit issued by Cuban banks with respect to non-agricultural exports, something not previously permitted, but again whether U.S. banks will confirm Cuban letters of credit remains to be seen.