Selling Food and Raw Materials to Cuba ... Legally

Selling Food and Raw Materials to Cuba ... Legally

by Tony Martinez

Cuba represents a new market for food and dietary supplement ingredientsuppliers. With a current population of 11.5 million and the close geographicproximity to the United States, it is a natural market for business and a newopportunity for the industry. However, isnt there an embargo on Cuba? Yes.However, that embargo was modified to make it legal to sell food and medicine toCuba.

Legal U.S. sales of food and medicine to Cuba developed in 2000, when Rep.George Nethercutt (R-Wash.) sponsored an amendment authorizing U.S. food andmedicine sales on a cash basis. This amendment to the Trade Sanctions Reform andExport Enhancement Act passed Congress and was signed into law by then-PresidentBill Clinton. Cuba first refused to purchase products under terms of theamendment, and kept in place other aspects of the embargo. Then, a series ofevents led to the first purchase of U.S. products by Cuba in more than 40 years.On Sept. 11, 2001, Cuba publicly condemned the terrorist attacks on the UnitedStates and offered the country its assistance. The gesture was reciprocated inNovember 2001 when Hurricane Michelle devastated half of the island of Cuba andthe U.S. government offered the country humanitarian aid. At that point, Cubaproposed purchasing food from the United States to replenish its inventories andrequested the U.S. licensing process be expedited. The first purchase for foodwas for US$35 million.

American businesses quickly showed interest in the Cuban market. The U.S.Commerce Department began issuing export and shipping licenses. Since November2001, sales have grown dramatically, to more than $700 million with a projectionof $1 billion by 2005. One key advantage for U.S. businesses is the regulationsrequire all business transactions to be paid in cash by Cuba up front. Treasuryregulations require payment be deposited into an account before purchasedproduct can be unloaded at the docks in Cuba. There are no regulations allowingfor credit to Cuba.

ALIMPORT, the Empresa Comercializadora de Alimentos de Cuba, is the mainentity responsible for purchasing. Any company interested in selling itsproducts should contact ALIMPORT, [email protected], where they can learnabout Cuban opportunities for sales. Some companies do this work on their own.While not required, others retain brokers and consultants for this purpose. Cubais interested in American products for their high quality, competitive pricesand cost savings on freight due to geographic proximity. Currently, ALIMPORT hassigned deals with more than 124 firms for products originating in 35 states andPuerto Rico; it has contact with more than 2,700 companies and organizations in45 states; and it has access to more than 300 food & agricultural items(e.g., lumber, paper, cattle).

Selling in Cuba

The market for dietary supplement ingredients in Cuba is emerging. ThisApril, Cuba signed a letter of intent for the purchase of Beta Glucan 1-3Dmanufactured by Transfer Point of Columbia, S.C. This is a significantdevelopment, as Cuba is very interested in natural products for their healthcare benefits. The key is preparing to take a multi-step approach to educate andsell products to both ALIMPORT & MINSAP, Cubas Ministry of Health. Cubandoctors and scientists are knowledgeable in this area and should be included insales presentations and negotiations. Science and substantiation matters and youmust have both to support your product.

When exploring the Cuban market, due diligence is critical. Investigatedemand for a product, or ascertain whether the product could be of value inCuba. Cubans are always seeking to expand their base of supply and are eager tolearn about innovative food and medical products. The business future for thismarket is bright, as it constitutes 11.5 million neighbors living only within anhour or more by air and under 24 hours by ship from the southern United States.This region is demanding U.S. food and health care products, and the interest isgrowing.

Tony Martinez is a principal in the firm of Martinez Bass & Associates.The firm provides guidance and assistance in facilitating legal sales of foodand medicine to Cuba. He can be contacted at [email protected].