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:
- developing approximately 6.2 million hectares of ground for local crop and livestock production in order to produce food locally instead of importing it
- 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
- 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.