Following upon the recent easing of sanctions against Burma/Myanmar ("Burma") by many governments, the U.S. Government yesterday significantly relaxed U.S. sanctions related to Burma, particularly with respect to the export of financial services and new investment. Background information about the previous relaxation of Burma sanctions is available in our earlier Client Alert.
In May 2012, the White House and the State Department announced that the Administration was working on a relaxation of sanctions against Burma in light of the reforms occurring in that country. On July 11, 2012, the Office of Foreign Assets Control ("OFAC") in the U.S. Treasury Department officially announced the easing of those sanctions through General License No. 16 authorizing the exportation of financial services to Burma, and General License No. 17 authorizing new investment in Burma.
These measures do not relax the prohibitions on the importation of Burmese origin goods into the United States or "U.S. Person" dealings with Specially Designated Nationals ("SDNs"), both of which remain in place. "U.S. Person" includes (i) entities organized under U.S. laws and their non-U.S. branches, (ii) individuals and entities in the United States, and (iii) U.S. citizens and permanent resident aliens wherever located or employed.
On July 11, the President also signed Executive Order 13619 ("EO 13619") targeting persons threatening the peace, security, or stability of Burma. OFAC announced that it was designating two parties under EO 13619. The White House's statement on these developments is available here, and the OFAC statement here.
- Authorizes exports by U.S. Persons of financial services to Burma, subject to certain restrictions noted below.
- Previously, U.S. Persons were prohibited from exporting financial services to Burma, including making payments or transferring funds into Burma, except when incidental to permissible exports. Such payments and funds transfers are now authorized.
- Does not authorize, in connection with the provision of security services, the export of financial services to the Burmese Ministry of Defense, state or non-state armed groups (including the military), or entities 50% or more owned by the foregoing.
- Does not authorize the export of financial services to any SDN under the Burma sanctions program. (However, transfers of funds to or from an account of a financial institution that is an SDN are authorized, provided that the account is not on the books of a U.S. financial institution.)
- Replaces and supercedes General License 14-C (authorizing the export of financial services in connection with certain not-for-profit activities) and General License 15 (authorizing certain noncommercial, personal remittances).
- Authorizes new investment in Burma by U.S. Persons that was previously prohibited.
- Does not authorize new investment pursuant to an agreement entered into with the Burmese Ministry of Defense, state or non-state armed groups (which includes the military), entities 50% or more owned by the foregoing, or any SDN under the Burma sanctions program.
- Requires any U.S. Person (individuals or entities) engaging in new investment in Burma whose aggregate new investment exceeds $500,000 to provide the State Department the information set forth in the "Reporting Requirements on Responsible Investment in Burma." Investors will be required to file reports with the State Department on an annual basis. There will be two forms of the report, one for the government and one for the public. Reports will include information such as, for example, policies and procedures with respect to human rights, workers' rights, environmental stewardship, anti-corruption, land acquisitions, arrangements with security service providers, and annual payments exceeding $10,000 in the aggregate to Burmese government entities, including state-owned enterprises.
- Individuals or entities undertaking new investment pursuant to an agreement, or pursuant to the exercise of rights under such an agreement, that is entered into with the Myanma Oil and Gas Enterprise ("MOGE") must notify the State Department within 60 days of their new investment.
- Authorizes the Treasury Department to designate as SDNs any persons threatening the peace, security, or stability of Burma.
- The Treasury Department has added two parties to its List of Specially Designated Nationals and Blocked Persons under this new authority: Directorate of Defence Industries and Innwa Bank.
As before, except for restrictions on exports/reexports to SDNs described below, normal U.S. export and reexport controls under the Export Administration Regulations ("EAR") apply for "items subject to the EAR" destined for Burma. Such items subject to the EAR include U.S.-origin goods, software, and technology (collectively, "items"); foreign-made items with more than 25% controlled U.S. content; and foreign direct products of certain technology controlled for national security reasons.
The export/reexport by either U.S. Persons or non-U.S. persons of items subject to the EAR to SDNs under the Burma sanctions program requires a license from the Commerce Department. Exports/reexports of certain non-controlled agricultural commodities, medicine, or medical devices to these SDNs do not require a Commerce Department license. However, OFAC authorization would be required for U.S. Person involvement in exports/reexports of such items.
Finally, Burma remains designated as a "jurisdiction of primary money laundering concern" by the U.S. Government.