U.S.-Cuba Food Trade At Crossroads

This story was written by CBS News Producer Portia Siegelbaum

Pedro Alvarez, CEO of the state import company, ALIMPORT, said, "While the American suppliers are recognized for their quality products and efficiency, to purchase from the U.S. under the new measure would be highly unreliable."

Last Tuesday, the U.S. Treasury Department issued an interpretation of the phrase "cash in advance" as it applies to Cuba. The ruling says the island has to pay cash "prior to shipment of the goods from the port at which they are loaded." Up to now, Cuba paid via a third country bank as soon as the ship carrying American goods sailed into Havana harbor. Because of the U.S. economic embargo against the communist government there are no direct financial links between U.S. and Cuban banks. Cuba is not allowed to export to the United States and all imports must be paid in cash.

Alvarez read a prepared statement to the press reiterating Cuba's "commitment to comply with its existing contractual obligations," but he conditioned "its readiness to make further purchases from U.S. businesses" to the existence of "acceptable terms and conditions ... consistent with international business practices."

The Castro government fears the goods could be seized or held up indefinitely by Cuban exiles filing court claims for damages. In the past, U.S. courts have awarded Cuban assets located in the U.S. to private parties who filed such suits.

Despite this, Alvarez this morning signed a memorandum of understanding with the Unified Port of San Diego Commissioner Kourosh Hangafarin and an agreement to purchase $30,000 worth of food products from the San Diego-based American Trading Services.

ATS chairman William Lane told the press that opening the West Coast port to Cuban trade was not just important, it was "historic."

"There are a lot of producers in the region who want to sell to Havana but it's just too expensive to transport their goods to an East Coast port for subsequent shipment to Cuba," Lane said. "Being able to go through the Port of San Diego will make a big difference for the future of this trade."

Hangafarin described the port as "an economic engine" that currently creates more than 60,000 jobs annually. Maritime trade with Cuba would increase the port's beneficial impact on the community.

Asked by CBS News to comment on the new Treasury ruling, Tony Martinez, a Washington-based consultant on U.S. food and medical sales to Cuba, warned, "The Cubans will not buy food from us if there is any legal risk they will never receive their purchases. ... I believe when our public officials realize they are hurting our own people and economy with this decision, they will reverse their position. Why are we willing to sacrifice a billion dollars plus of food sales, especially in these difficult economic times?" he concluded.

Between December 2001 and February 23, 2005, ALIMPORT signed contracts for the purchase of 1.255 billion worth of U.S. food and agricultural products (that includes shipping costs); $1.06 billion has already been delivered and paid for.

This year alone, Cuba has imported $90 million worth of American products and, according to ALIMPORT, an estimated $250 million in contracts will go through before the end of the year. All this one-way trade has made Cuba the U.S.' 22nd largest export market.

Aware that the new policy will hurt American farmers, farm state senators are objecting. Sen. Max Baucus, D- Mt., threatened to block approval of Treasury nominees to protest the move. Earlier this month, Baucus, along with 22 co-sponsors including Sens. Larry Craig, R-Id.; Pat Roberts R-Kan.; and Foreign Relations Committee Chairman Richard Lugar, R-Ind.; introduced a bill to define "cash in advance" as payment upon transfer of title. If passed it should allow U.S.-Cuba trade to continue as before.

By Portia Siegelbaum