Port of New Orleans will cater to Cuba as trade rules ease

24th October 2016   ·   0 Comments

By Susan Buchanan
Contributing Writer

Nearly two years ago, President Barack Obama announced that relations with Cuba would be normalized. A 1962 trade embargo remains in effect, but after an easing of restrictions through six directives from the White House since late 2014, Louisiana exporters are strengthening their Cuban ties and hoping for sales. Before the embargo, the Port of New Orleans was Cuba’s top U.S. trading terminal.

Since then, port officials have visited Cuba on commercial missions, and Louisiana has kept a foothold on the island. Meanwhile, other southern states—Virginia, Georgia, Florida and Alabama—have expanded their trade with the Caribbean nation. Virginia was Cuba’s leading U.S. supplier last year, sending the country soybeans and soy meal.

In early October, Louisiana Governor John Bel Edwards led a group of state officials and 50 local, business, port and education leaders to Cuba. They met with that nation’s ministers of trade, agriculture and foreign affairs and the National Port Administration.

“The existing embargo against Cuba covers all goods and merchandise, except for humanitarian cargo,” Matt Gresham, spokesman for the Port of New Orleans, said last week. Humanitarian cargo includes food, medical equipment and supplies, and certain bulk chemicals.

“Following a U.S. decision in 2000 to allow Cuba humanitarian aid and goods, poultry has been the main export sent there from New Orleans, with shipments of 20,000 to 24,000 tons yearly—spiking to more than 32,000 tons in 2011,” Gresham said. Frozen poultry is transported on reefer, or refrigerated, vessels chartered by the Cuban government. “Those purchases must be paid for in cash before the boats can depart for Cuba,” he said.

In 2000, the United States added an exemption to the Cuban embargo for some agricultural products, including chicken, along with pharmaceuticals and medical devices. Trade with Cuba expanded as a result. But a change in U.S. Department of Treasury rules in early 2005 required that sellers receive payment from Cuban buyers before boats carrying goods could leave U.S. ports.

After President Obama’s move to normalize relations in late 2014, the U.S. Treasury altered its interpretation of “cash in advance” before shipment to “cash before a transfer of title and control.”

Within the next few years, Louisiana hopes to expand poultry shipments to Cuba, but it faces competition from other southern states. More than $1 billion worth of America’s frozen chicken legs, thighs and other parts have been shipped to the island in the last 15 years. “Cuba has traditionally imported about 8,000 short tons of frozen poultry monthly from the United States, typically in two vessels carrying 4,000 tons each,” Gresham said. In the last few months, Cuba’s imports of U.S. poultry have spiked to 12,000 tons a month.”

Gresham weighed in on President Obama’s easing in mid-October of a 180-day-wait rule for ships leaving Cuba. He said the change in policy will help the Port of New Orleans and Cuba’s terminals. “Previously, any vessel calling at a Cuban port was banned from the United States for 180 days,” he said. “That made it impractical for shipping lines to include Cuba as a port of call on most of their services. Removing the restriction allows lines to rethink their possibilities in Cuba.”

Last week, Agriculture Commissioner Mike Strain said Louisiana is looking to export state-grown rice, soybeans, corn, poultry and sweet potatoes to Cuba, along with wheat, milk, cheese and pork that are sent down the Mississippi River from northerly states. He led a huge, 94-person delegation to Cuba in late July to promote trade, economic development and tourism.

“Imports already provide 80 percent of Cuba’s food, but more are needed to improve diets, especially in urban areas,” Strain said last week. Cuban consumers use government-issued, ration cards to buy monthly quotas of rice, beans, cooking oil and sugar at grocery stores. “In the countryside, they grow vegetables and other food, but in Havana some people eat rice and beans three meals a day,” he said.

Cuba has been allowed to buy U.S. farm goods with cash since 2000. But Louisiana’s agricultural shipments to the island fell from over $140 million in 2006 to $14 million last year, Strain said. That was because of Cuba’s lack of foreign exchange, austerity measures adopted by its officials in 2008, and better financing terms offered by nations other than the United States.

Last year, the U.S. Dept. of Agriculture said this nation’s farm exports to Cuba averaged $365 million annually from 2012 to 2014, with chicken meat, corn, soybeans and soy meal accounting for 84 percent of the total. The United States from 2003 to 2012 was the top agricultural supplier to the island, but it slid to third place by 2014, behind the European Union and Brazil.

Jonathan Hobbs, operations manager with the Russell Marine Group, a grain export-logistics firm in New Orleans, said Louisiana isn’t shipping rice to Cuba now. “The financial embargo between Cuba and the U.S., and specifically the inability for credit to be extended, makes export sales of grain prohibitive,” he said last week. But if the embargo were lifted, Louisiana could play a big role in originating and shipping as much as 400,000 tons of U.S. rice yearly to Cuba.

“Louisiana rice is the best quality in the southern U.S., Cuba’s consumption is sizable, and the Port of New Orleans is only a two-day voyage from Cuba,” Hobbs said. “That’s a little shorter than the trip from here to Haiti, which is a major importer of Louisiana rice.”

Rice from Vietnam, Cuba’s largest supplier, travels through the Panama Canal and takes 30 days or more to reach the island. “At world prices, imports from Louisiana, versus Vietnam, would be cheaper for Cuba because of the freight differential,” Hobbs said. “And on a longer voyage, anything can go wrong.” Rice, which is transported loose in bulk vessels, can be damaged by heat, moisture, pests and marine accidents.

To supplement its own production, Cuba imports 400,000 to 450,000 tons of rice, on a milled basis, yearly, with most of it from Vietnam and the rest from Brazil. Vietnam donated 5,000 tons of rice to Cuba in June, and gave the island similar amounts free of charge in 2014 and 2012.

“If Louisiana sends rice to Cuba, it would help our producers, millers, shippers and everyone in between—including stevedores, barge companies and the Port of New Orleans,” Hobbs said. “It would be like building a big, fast conveyor belt for our high-quality rice to Cuba.”

And if Louisiana resumes rice exports to the island, the Port of Lake Charles—in the state’s main growing area—is also well-suited to handle bulk exports, Hobbs said.

Will Congress lift the trade embargo any time soon? “The Obama Administration has moved forward,” Hobbs said. “Lobbying efforts by groups like Engage Cuba are educating U.S. agriculture and other industries, rallying players and letting them know about the benefits to our economy of an open-door policy. The two main U.S. presidential candidates, Clinton and Trump, appear to support lifting the embargo. Hopefully, it will happen in the near future.” Hobbs is a Louisiana representative of Engage Cuba, a Washington, DC-based advocacy group.

In May 2015, the U.S. State Department removed Cuba from its list of terrorism sponsors, and on July 20 of last year, the United States and Cuba reopened embassies in their respective capitals. Obama went to the island last March in the first visit by a U.S. president there in almost 90 years. But even with these and other steps toward normalcy, most of the economic restrictions imposed in 1962 are still in effect.

If key parts of the embargo were removed, the USDA projects that exports of rice, wheat, dry beans and dried milk to Cuba could grow quickly, especially since ports here are near the island, Mark McMinimy, agricultural policy analyst with the Congressional Research Service, noted in September. Higher-value U.S. foods might make inroads in Cuba’s market in time, particularly if the Caribbean nation were able to earn dollars by selling its own products on U.S. shores.

“A post-embargo Cuban market would be a huge growth opportunity for our port and Louisiana,” Gresham at Port of New Orleans said. “We’ve participated in trade missions to Cuba through the years and have maintained relationships there. Food imports will be critical to the island’s post-embargo growth. Other items needed by Cuba are U.S. consumer goods; farming, mining and construction equipment, building materials and paint; and automobile parts.”

But in the near term, “if the embargo were lifted today, trade would still be a challenge since Cuba doesn’t have the wealth now, or the ability to generate foreign capital, to greatly increase its imports,” Gresham said.

Changes in U.S.-Cuban relations will impact cruise business at the Port of New Orleans, Gresham said. “Tourism in Cuba is growing but it’s constrained by facilities and infrastructure, along with U.S. policies. Synergies exist between between New Orleans and Cuba, however. In the future, we expect cruise passengers from New Orleans, heading to the eastern Caribbean, Key West and Nassau, to enhance their trips with stops in Cuba.”

This article originally published in the October 24, 2016 print edition of The Louisiana Weekly newspaper.