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Emerson measure could halt OFAC payment rule

House Appropriations Committee members have agreed to an amendment offered by Missouri Bootheel Rep. Jo Ann Emerson that would deny funding to the Office for Foreign Asset Control for enforcing its new rule on credit sales to Cuba.

Rep. Emerson is one of several lawmakers who have criticized what many see as a sop to anti-Castro Cubans living in the Miami area. They say the rule — which requires Cuba to pay for agricultural products before they leave U.S. ports — threatens U.S. access to the Cuban market.

Since trade restrictions were lifted in December 2001, Cuba has purchased more than 320,000 metric tons of U.S. rice. In 2004, Cuba bought $64 million worth, making it the fastest-growing market for U.S. rice and one of the top five customers for long grain rice.

The majority of the sales have been on a cash basis under licenses issued by the Commerce Department. Cuban purchasers have paid promptly and no credit has been extended by U.S. entities, which would be a violation of the law.

All told, Cuba has contracted to purchase more than $1.25 billion worth of U.S. agricultural products with more than $1 billion of that amount already delivered and paid for. But such contracts could be at risk because of the OFAC rules.

A spokesman for the U.S. Rice Producers Association and USA Rice Federation told a congressional committee that U.S. exporters had pending contracts for sales of 950,000 metric tons of agricultural products to Cuba when OFAC issued its new regulations.

“Losing the sales — unless the Cubans are gracious enough to renegotiate the payment terms — will expose exporters to the possibility of experiencing a loss on any hedge position that the exporter took when he entered into the contract,” said Dennis DeLaughter, a Texas rice farmer.

DeLaughter said the OFAC rule “sends the wrong message to America's trading partners. We understand this is the first time since the 1980 grain embargo that the United States has adopted regulations that preclude exporters from performing existing contracts.”

The rule also comes at a time when more questions are being raised about the effectiveness of U.S. embargoes against Cuba and other countries.

A study by the Institute of International Economics shows that U.S. sanctions on 26 countries now cost the United States between $15 billion and $19 billion in exports annually and have worked less than 13 percent of the time.

Those figures come from a column by Newsweek's Fareed Zakaria who argues that harsh U.S. sanctions against Iraq — before Saddam Hussein's ouster — Iran and Cuba have had the opposite of the desired effect while less stringent actions against Libya and Vietnam have caused a turnaround in those countries.

The Emerson amendment to the fiscal 2006 Transportation, Treasury, Housing and Urban Development appropriations bill now goes to the full House. The Senate has not considered its bill, but strong criticism of the OFAC rule in that chamber could lead to similar language being inserted.

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