OFAC Issues Final Rule on "Payment of Cash in Advance" for Authorized Exports to Cuba, Etc. (Grace Period Through March 24, 2005)
The Office of Foreign Assets Control (OFAC) has issued a final rule, effective February 22, 2005, which amends the Cuban Assets Control Regulations (31 CFR Part 515) to clarify the meaning of the term "payment of cash in advance" which is used in the restrictions on payment and financing terms for certain authorized exports (e.g. agricultural commodites) from the U.S. to Cuba.
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(According to a July 2004 OFAC embargo guide for Cuba, the Commerce Department may authorize (license) the sale and export or re-export of food, agricultural commodities, medicine and medical supplies to Cuba. Those interested in engaging in such exports or re-exports must first obtain authorization from the Commerce Department. Such licensed sales must be financed by "cash in advance" or by third-country banks that are not Specially Designated Nationals. In addition, foreign subsidies of U.S. banks are authorized to directly finance licensed sales of agricultural products. All U.S. banks may advise or confirm any of the above.)
"Payment of Cash in Advance"
OFAC is amending 31 CFR 515.533(a)(2) to indicate that "payment of cash in advance" (for the purposes of this section) means that payment is received by the seller or the seller's agent prior to shipment of the goods from the port at which they are loaded.
Grace Period Through March 24, 2005 Under OFAC General License
In order to avoid a disruption in agricultural shipments to Cuba, OFAC states it is adding a new paragraph (d) to 31 CFR 515.533 to provide a general license authorizing the processing of payments received for certain exports to Cuba that are shipped prior to receipt of payment for a limited time. This newly added general license states:
In addition to those transactions authorized in 31CFR 515.533(a), all transactions ordinarily incident to the processing of payments received for items exported from the U.S. to any person within Cuba are authorized, provided that:
The exportation is licensed or otherwise authorized by the Department of Commerce under the provisions of the Export Administration Act of 1979, as amended (50 USC App. 2401-2420, see Export Administration Regulations (15 CFR Parts 730-774));
The items are shipped from the port at which they are loaded on or before March 24, 2005; and
Payment is received by a U.S. banking institution on or before March 24, 2005 and prior to the transfer of title to, and control of, the exported items to the Cuban purchaser.
(According to an OFAC press release, these guidelines have been issued as some U.S. financial institutions began requesting that OFAC clarify whether payments of cash in advance permits the shipment of these authorized goods to Cuba prior to receipt of the payment by U.S. exporters.
OFAC states that Treasury determined that only having payments made to U.S. exporters before shipment effectively met the "payment of cash in advance" provision of the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA).
See press release and final rule for details of OFAC's interim policy prior to the issuance of this OFAC final rule.)
OFAC Contacts - Policy Planning/Program Management (202) 622-4855
Licensing (202) 622-2480
Compliance (202) 622-2490
Chief Counsel (202) 622-2410
OFAC Final Rule (FR Pub 02/25/05) available at http://a257.g.akamaitech.net/7/257/2422/01jan20051800/edocket.access.gpo.gov/2005/pdf/05-3651.pdf
OFAC embargo guide for Cuba (dated 07/04), available at http://www.treas.gov/offices/enforcement/ofac/sanctions/t11cuba.pdf
OFAC press release (dated 02/22/05), available at http://www.treasury.gov/press/releases/js2268.htm