Yesterday the Office of Federal Assets Control (“OFAC”) published a notice in the Federal Register that reversed, at least temporarily, the absurd interpretation that it had adopted of the statutory requirement in the Trade Sanctions Reform and Export Enhancement Act (“TSRA”) that exports of agricultural and medical goods to Cuba required “payment of cash in advance.” In February 2005, OFAC changed its interpretation of that language to require that payment be made prior to the departure from the U.S. of the ship loaded with the goods destined for Cuba.

By yesterday’s Federal Register notice OFAC restored its previous interpretation of TSRA’s statutory language. That previous interpretation was consistent with prevailing commercial law which holds that delivery of goods is made, and payment is due, when a negotiable bill of lading for the goods is delivered to the buyer or its agent. The notice re-adopted the “cash against documents” rule that states that payment must be made “before the transfer of title to, and control of, the exported items to the Cuban purchaser” which would occur at the delivery of a negotiable bill of lading or other document of title.

This change is effective through September 30, 2010, at which point the old interpretation will become effective again. This is apparently because section 619 of the 2010 Omnibus Appropriation Act (P.L. 110-117), which required the change, was restricted to fiscal year 2010 which, obviously, ends on September 30, 2010. However, there is no reason that OFAC needed Congressional authorization to return to its previous “cash against documents” rule and to make that rule effective beyond 2010.

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