The Department of the Treasury has issued new general licenses that significantly expand the ability of U.S. persons and companies to invest in Burma, and to engage in financial transactions with Burma, but the licenses include reporting requirements that are not found in other U.S. sanctions programs. The new policy opens up the natural resources of Burma to U.S. investment, including its natural gas deposits, but public reporting requirements on transactions are largely unprecedented, and could signal a new approach to sanctions programs.
Until these two general licenses were issued on July 11, 2012, U.S. sanctions broadly prohibited U.S. persons from participating in the economic development of resources in Burma, and from providing money or financial services to Burma. These prohibitions applied to U.S. persons, a category which includes both U.S. citizens and entities organized under U.S. law, as well as persons and entities located in the United States, such as foreign residents and branches of foreign corporations.
Under General License No. 16, “Authorizing the Exportation or Reexportation of Financial Services to Burma,” U.S. persons are now authorized to provide financial services to Burma. Financial services broadly include both the transfer of funds to Burma as well as the provision of financial services, including banking services, loans, guarantees, letters of credit, and money orders. Under General License No. 17, “Authorizing New Investment in Burma,” the prohibition on most for-profit activities in Burma is lifted. U.S. persons may now enter into transactions regarding the economic development of resources − such as natural, mineral, agricultural, industrial, and human resources. Notably, the U.S. sanctions still prohibit most imports − including jade, rubies, teak, and other products of Burmese origin − from Burma into the United States.
Restrictions on U.S. exports of goods and technology still carry important limitations. It is crucial to note, for example, that neither general license authorizes transactions with the Burmese Ministry of Defense, the Burmese military, or any entity in which either of the foregoing owns a majority interest. In addition, U.S. sanctions still prohibit U.S. persons from dealing with persons whose property or interests in property are blocked, or entities owned by those persons. The U.S. government has announced its intention to add to the blocked persons list individuals and entities who threaten the stability of Burma, threaten the peace process, or engage in arms traffic with North Korea. All of this requires exporters to proceed with caution, since ownership and control are not always evident.
Furthermore, new reporting requirements apply, not only to investments in oil and gas, but also to any type of investment in Burma above a minimum threshold. All transactions with the Myanma Oil and Gas Enterprise (MOGE) − the sole operator of oil and gas production in Burma − must be reported to the Department of State within sixty days. Separately, any person or entity whose aggregate investments in Burma exceed $500,000 must publicly report those investments on an annual basis in compliance with the Department of State’s “Reporting Requirements on Responsible Investment in Burma.”
The reporting requirements for investors are not yet finalized, but require a general description of the company and its operations, locations, and employees in Burma. In an effort to maintain pressure on Burma to pursue reform, the public report must also disclose the investor’s human rights, worker rights, anti-corruption, and environmental policies and procedures in Burma, including policies for engaging local stakeholders, for hearing grievances from employees and community members, and for global corporate social responsibility. Any arrangements with security forces, any land or property acquisitions valued at over $500,000, and all payments of royalties, fees, and taxes in excess of $10,000 to the Burmese government must also be publicly reported. Additional materials, submitted only to the Department of State, must disclose both any communications with the Burmese military regarding the investment, and any due diligence steps taken regarding human rights, worker rights, and environmental risks.
U.S. investors must take care to report accurately. By requiring transparency for U.S. investments in Burma, the regulations invite scrutiny of operations by both the U.S. government as well as human rights advocates. If violations are found, anti-corruption, environmental protection, and social responsibility policies that only exist on paper (if at all) will not only prove unavailing as a defense to public criticism, but may also result in civil and criminal penalties for filing false statements with the U.S. government. Companies that invest in Burma must therefore take care to have programs and policies in place − and enforce them. Caution is also prudent. At this stage, core concepts central to the disclosure requirements, such as human rights, are not defined in the regulations. Rather, the reporting requirements reference well-established policies available in United Nations and OECD guidelines. These reporting requirements will soon be published in the Federal Register for notice and comment, after which time definitive regulations are expected to be promulgated.