National Milk Producers Federation

Release Date: March 16, 2005

ARLINGTON, VA – Two organizations representing America's dairy farmers and processors today expressed concern that a recent decision by the Treasury Department to impose an unusually strict payment policy for food purchased by Cuba could derail U.S. dairy product sales there.

The Treasury's Office of Foreign Assets Controls (OFAC) recently changed the meaning of the term “cash in advance” that has governed payments for U.S. agricultural sales to Cuba since 2000. OFAC's new interpretation of the existing policy requires that cash payment be provided before goods are shipped from the U.S., significantly complicating food sales to Cuba, according to the groups.

“Cuba both needs and wants more U.S.-produced dairy products, and that market represents a growth opportunity for our industry,” said Tom Suber, President of the U.S. Dairy Export Council. ”OFAC's ruling introduces significantly greater costs and risk into our trading relationship with Cuba, putting at jeopardy our ability to keep supplying this market.”

One of USDEC's member organizations, a consortium of milk powder exporters called DairyAmerica, has a contract to provide 8,000 metric tons (17.6 million pounds) of skim milk powder to Cuba by Sept. 30th, 2005. Under OFAC ‘s new policy, DairyAmerica can only continue shipping powder under the existing payment terms through March 24th. After that date, if the current OFAC ruling remains unchanged, agricultural exporters would need to explore the possibility of using other more costly and complicated payment arrangements.

One important question is whether Cuba would agree to renegotiate the payment terms for dairy imports, or whether it would simply decide to buy all of its food products from other countries, according to a DairyAmerica executive.

“If this rule stays in effect, we risk losing the business from the remainder of our contract, in addition to any future sales,” said Rich Lewis, Chief Operating Officer of DairyAmerica. Lewis testified Wednesday morning before the House Agriculture Committee, which held a hearing on this issue. “It is extremely difficult for us to understand why the U.S. government intends to force U.S. companies to forego export opportunities” through the change in policy, Lewis told the committee.

In light of the recent OFAC decision to change the export payment rules, legislation has been introduced in both the Senate (S. 328) and the House (H.R. 719) to increase exports to Cuba by simplifying the licensing process for agricultural export sales, authorizing direct payments to U.S. banks for those sales, and further clarifying the language authorizing legal sales to Cuba under the Trade Sanctions Reform and Export Enhancement Act (TSREEA), passed in 2000.

“We have been working with lawmakers and our trade negotiators to develop more opportunities to export U.S. dairy products,” said Jerry Kozak, President and CEO of NMPF. “Unfortunately , we're headed in the wrong direction where Cuba is concerned, and if it takes getting Congress involved to fix the laws and keep that market open, then we'll support that effort.”

The National Milk Producers Federation, based in Arlington, VA, develops and carries out policies that advance the well-being of U.S. dairy producers and the cooperatives they collectively own. The members of NMPF's 33 cooperatives produce the majority of the U.S. milk supply, making NMPF the voice of nearly 50,000 dairy producers on Capitol Hill and with government agencies.
     
The U.S. Dairy Export Council (USDEC) is a non-profit, independent membership organization that represents the export trade interests of U.S. milk producers, proprietary processors, dairy cooperatives, and export traders. Its mission is to increase the volume and value of U.S. dairy product exports. USDEC maintains offices in Mexico City, Tokyo, Seoul, Hong Kong, Shanghai, Taipei, London, Bangkok and Sao Paulo to assist in the export of U.S. dairy products worldwide. Working through these offices and in numerous other countries, USDEC creates demand in consumer, foodservice and ingredient channels to help drive sales of U.S. dairy products. In short, the organization provides all the services necessary to assist U.S. dairy exporters to penetrate foreign markets.