On July 11, 2012, the White House issued a triad of regulatory steps consisting of two General Licenses and an Executive Order that, taken together, liberalize current U.S. sanctions on Burma in several important respects, effective as of their issuance. The two General Licenses broadly authorize (i) “new investment in Burma” (which previously had been prohibited by Section 537.204 of the Office of Foreign Assets Control’s (OFAC) Burmese Sanctions Regulations, 31 CFR 537.204), subject to certain exceptions and reporting requirements; and (ii) the exportation of financial services to Burma, also subject to certain exceptions. The new Executive Order expands the “list-based” elements of existing Burma sanctions by prohibiting transactions with certain named persons or entities who threaten the peace, security or stability of Burma.
Authorization of New Investment in Burma
OFAC General License No. 17 authorizes “new investment” in Burma, except when the new investment is pursuant to an agreement with the Burmese Ministry of Defense, state or non-state armed groups (which includes the military), entities 50 percent or more owned by the foregoing, or any person or entity blocked under OFAC’s Burmese Sanctions Regulations.
Reporting requirements apply in the case of significant new investments. Any U.S. person engaging in new investment in Burma pursuant to General License No. 17 whose aggregate new investment exceeds $500,000 must provide to the State Department information set forth in the State Department’s “Reporting Requirements on Responsible Investment in Burma,” available at www.HumanRights.gov/BurmaResponsibleInvestment. The State Department will issue these reporting requirements in the Federal Register with an opportunity for comment. Investors subject to these reporting requirements, which are triggered by the $500,000 threshold, will be required to file reports with the State Department annually, and the reports will include a version that the State Department will make publicly available. Investors must report on information regarding policies and procedures with respect to human rights, workers’ rights, environmental stewardship, land acquisitions, arrangements with security service providers and aggregate annual payments exceeding $10,000 to Burmese government entities, including state-owned enterprises. These reporting requirements apply to any new investment, whatever corporate form it might take. In addition, any investor making a new investment under an agreement with the Myanma Oil and Gas Enterprise (MOGE) must notify the State Department within 60 days of the new investment.
Authorization of Export of Financial Services to Burma
The second general license, General License No. 16, authorizes the exportation by U.S. persons of financial services to Burma, subject to certain limitations. It does not authorize the exportation of financial services to the Burmese Ministry of Defense, state or non-state armed groups (including the military), or entities 50 percent or more owned by the foregoing. It also does not authorize the exportation of financial services to any person or entity blocked under OFAC’s Burmese Sanctions Regulations. However, transfers of funds to or from an account of a financial institution that is blocked under the Burmese Sanctions Regulations are authorized, provided the account is not on the books of a U.S. financial institution. Because the transactions authorized by General License No. 16 include activities that were formerly authorized by other general licenses (such as financial transactions in support of humanitarian, religious or other nonprofit activities in Burma and noncommercial personal remittances to Burma), General License No. 14-C and General License No. 15 are replaced and superseded by General License No. 16.
Expansion of List-Based Sanctions
The final component of the triad of actions is an Executive Order blocking the property of persons or entities threatening the peace, security or stability of Burma. As noted above, this is a list-based sanctions mechanism and applies only to persons or entities designated by the Department of the Treasury in consultation with the Department of State and whose names will be placed on the SDN List. More specifically, it is aimed at designated persons or entities who (i) threaten the peace, security or stability of Burma (such as through obstructing the political reform process); (ii) are responsible for or complicit in human rights abuses in Burma; (iii) have engaged in arms trade between Burma and North Korea; (iv) are senior officials of any entity that is engaged in the acts described above; or (v) are any person or entity who materially assists or supports the acts described above or (vi) is owned or controlled by, or who has acted on behalf of, any person or entity whose property is blocked under the Executive Order. In each case, however, the person or entity must be formally and specifically designated. The Executive Order designates two such entities specifically: the Directorate of Defence Industries and Innova Bank Ltd. Their property and property interests subject to U.S. jurisdiction must be blocked, and “new investment” involving these entities is prohibited.
The Executive Order also prohibits donations to persons or entities blocked under the order, as well as the provision of funds, goods or services to or from any such blocked person or entity. Persons blocked pursuant to the Executive Order also are restricted from entry into the United States. Notwithstanding the above prohibitions, the Executive Order generally authorizes the conduct of official business of the U.S. government by employees, grantees or contractors thereof unless a statutory waiver is required and it has not been issued.