For almost 15 years, the United States has maintained an economic sanctions program against Burma (Myanmar), in reaction to that government’s record on human rights. Until July 11, 2012, the former sanctions program prohibited (i) the import into the U.S. of certain Burmese jadeite and ruby items, and other items of Burmese origin; (ii) the export from the U.S. to Burma of certain financial services; (iii) new investment (and the facilitation of new investment) by U.S. persons in Burma; and (iv) U.S. persons and entities from purchasing shares in a third country company if the company’s profits are predominantly derived from its economic development of resources located in Burma. The sanctions programs also blocked the property of specific people and entities as listed by the U.S. Department of the Treasury.
On July 11, 2012, President Obama issued an Executive Order that (i) eases certain financial and investment sanctions on Burma; and (ii) allows the U.S. Government to sanction individuals or entities that threaten the peace, security, or stability of Burma, including those who undermine or obstruct the political reform process or the peace process with ethnic minorities, those who are responsible for or complicit in the commission of human rights abuses in Burma, and those who conduct certain arms trade with North Korea. The new policy does not authorize new trade or investment with the Burmese Ministry of Defense, state or non-state armed groups (which includes the military), or entities owned by the foregoing. U.S. persons are still prohibited from dealing with blocked persons, including both listed Specially Designated Nationals (SDNs) as well as any entities 50% or more owned by an SDN.
In response to the Executive Order, the Office of Foreign Assets Control (OFAC) issued two new general licenses: (i) General License No. 16 (GL 16) authorizes the exportation of U.S. financial services to Burma, subject to certain limitations; and (ii) General License No. 17 (GL 17) authorizes new investment in Burma, subject to certain limitations and requirements.
As stated above, GL 16 does not authorize the exportation of financial services to the Burmese Ministry of Defense, state or non-state armed groups (which includes the military), or entities owned by the foregoing. GL 16 also does not authorize the exportation of financial services to any person blocked under the Burma sanctions program. Transfers of funds to or from an account of a financial institution that is blocked under the Burma sanctions program are authorized, however, provided that the account is not on the books of a U.S. financial institution. General License No. 14-C and General License No. 15 are replaced and superseded by GL 16.
Under GL 17, any U.S. person (both individuals and entities) engaging in new investment in Burma pursuant to GL 17 whose aggregate new investment exceeds $500,000 must provide to the State Department the information set forth in the State Department’s “Reporting Requirements on Responsible Investment in Burma.” Such reports must be filed on an annual basis and will include a version that the State Department will make publicly available. Key information that companies will report on include 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. Individuals or entities undertaking new investment with the Myanmar Oil and Gas Enterprise must notify the State Department within 60 days of their new investment. GL 17 does not authorize new investment pursuant to an agreement, or pursuant to the exercise of rights under such an agreement, that is entered into with the Burmese Ministry of Defense, state or non-state armed groups (which includes the military), or entities owned by the foregoing, or any person blocked under the Burma sanctions program.
The Executive Order also provides new authority to impose blocking sanctions on persons determined by the Secretary of the Treasury, in consultation with or at the recommendation of the Secretary of State to have engaged in acts that directly or indirectly threaten the peace, security, or stability of Burma. Also, as a result of the order, OFAC has added the following names to its SDN List: (i) Directorate of Defense Industries, Yangon, Burma; and (ii) Innwa Bank Ltd., Yangon, Burma.
The OFAC actions taken on July 11, 2012 do not lift the ban on the import into the U.S. of certain Burmese jadeite and ruby items, and other items of Burmese origin or the restriction on U.S. persons and entities from purchasing shares in a third country company if the company’s profits are predominantly derived from its economic development of resources located in Burma.