Cuba: The Current Situation
An economic, commercial, and financial embargo has been in place on Cuba since 1962. Exports of U.S. agricultural products, including wheat, have been allowed since 2001 under the Trade Sanctions Reform Act (TSRA) but travel and financing restrictions make it difficult to conduct a free flow of trade. The Treasury Department’s Office of Foreign Assets Control (OFAC) enforces the embargo, which negatively affects U.S. wheat export potential in the Cuban market.
In 2005, OFAC amended the regulation to require Cuba to obtain and present letters of credit from a third-party, foreign bank, proir to vessel loading with the cash payment coming from the bank, not directly from Alimport, the Cuban food importer. The change increased the cost of buying U.S. wheat, and added an excessive and unnecessary administrative burden on Alimport that has had a negative effect on U.S. export potential. While the payment in advance of vessel loading has been waived on a yearly basis, the change is not permanent. Meanwhile, U.S. wheat exports to Cuba continue to fall and totaled just over 100,000 metric tons in 2009/10 as Cuba sources its wheat needs from countries that do not have burdensome trade requirements and even extend credits.
The most restrictive aspects of the embargo to the U.S. wheat industry are:
- Travel restrictions and licensing requirements through OFAC
- Financing restrictions that force Cuba to go through third party banks and pay cash up front.
- Travel restrictions on Cuban officials to the U.S.
- A negative policy environment between the U.S. and Cuba that is not conducive to doing business.
Potential for U.S. Wheat Exports
With sales totaling $135 million, wheat was the one of the top U.S. commodities exported to Cuba in 2008, second only to corn. Total U.S. agricultural exports to the island have been declining slightly for a number of years and while the dollar value is up in 2008 due to high commodity prices, the full potential for wheat exports is far from realized. With no domestic wheat production, Cuba represents substantial potential for U.S. wheat growers. Cuba’s 11.4 million people consumed an average of 850,000 MT of wheat per year over the past ten years. According to USDA’s Foreign Agricultural Service, Cuba is the largest importer of wheat and wheat products in the Caribbean.
The island’s proximity, historical and cultural ties should make Cuba a natural trading partner for the United States. Instead, the United States is sharing a substantial portion of the Cuban market with Europe, Canada, Argentina and even Black Sea countries. In neighboring Caribbean markets, U.S. wheat has maintained an average 85 percent market share over the last decade while averaging around 35 percent of the Cuban market since TSRA was enacted. USW estimates an annual loss of $40 million in wheat exports because of the restrictions placed upon U.S. wheat producers that do not burden our competitors.
U.S. Wheat Industry Position
The U.S. wheat industry believes easing travel restrictions, increasing access to USDA commercial loan programs, allowing direct banking, and permanently overturning the 2005 regulation change requiring payment ahead of vessel loading will level the playing field and give U.S. wheat producers the best opportunity to realize the full sales potential in Cuba. Such changes will also benefit the Cuban economy and its people, which in turn will create an economic environment that is more conducive to democratic reform.
Wheat Farmers Want Cuba and the United States to Get Down to Business
By Rebecca Bratter, Director of Policy, U.S. Wheat Associates
Wheat farmers have a big crop to sell this year and U.S. Wheat Associates works hard t... Treasury's Cuba Rule Change Might Force Contract Changes
The following is reprinted, with permission, from the National Journal's Congress Daily, March 8, 2005:
The Bush administration's decision to tighte... USW renews commitment to working for "free and open trade" with Cuba
On March 17, 2003, the U.S. Wheat Associates Board of Directors approved the following resolution:
WHEREAS U.S. Wheat Associates has played a major... USW struggles with U.S. rules to develop wheat market in Cuba
Testimony offered by
Nelson Denlinger, Vice President, U.S. Wheat Associates
on behalf of
U.S. Wheat Associates
Wheat Export Trade Education Commi... Remove Agriculture from Unilateral Sanctions
Half of the wheat grown in the U.S. is destined for export markets. Producers want to be reliable exporters. We therefore urge the World Trade Organi...
ISAAA Report on Biotech/GM Crops
"For the first time since the introduction of biotech/GM crops almost two decades ago, developing countries have grown more hectares of biotech crops than industrialized countries, contributing to food security and further alleviating poverty in some of the world’s most vulnerable regions."
2013 Trade Policy Priorities
U.S. wheat producers and their customers face a number of trade policy challenges. Trade barriers harm not just U.S. farmers but also their customers by impeding their product choices or raising the price of products they want.