Letters of credit (L/Cs), which are required by law for US exports of food and medicine to Cuba, may soon not be needed.

New legislation backed by the American Farm Bureau Federation (AFBF) would make it easier for US firms to export to the island state and allow Cuban importers to pay their US suppliers direct.

Raised hopes

The ailing health of Cuba's President Fidel Castro is raising the prospect of better relations and trading links between the US and Cuba.

Trade with Cuba is very limited due to embargoes that date back to 1961 and which were supposed to limit Castro's power base.

Last year's transfer of power from the Cuban leader to his brother Raú , however, has US companies wondering whether a thaw in relations is likely.

L/C implications

If passed by Congress, the legislation backed by AFBF would allow Cuba's state-owned agricultural import company Alimport and other Cuban buyers to wire money directly to their suppliers banks in the US.

Current US legislation forces exporters to use banks in third-party countries in L/C transactions.

Background

In 2000, Congress passed the Trade Sanctions Reform and Export Enhancement Act that allowed limited exports to Cuba such as food, agriculture and medical products for humanitarian reasons.

Washington tightened the financial rules under this legislation in 2005 by introducing stricter requirements for L/C transactions. (DC World News, 23 February 2005).

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