On May 17, 2016, the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC") announced the first significant amendments to its Burmese Sanctions Regulations, 31 C.F.R. Part 537 ("BSR"), since February 2013. Specifically, OFAC announced that, effective on May 18, 2016, it is: (i) expanding and extending a previously issued temporary general license on certain transactions incident to exports to, from, and now within Burma; (ii) issuing a general license authorizing U.S. persons residing in Burma to engage in certain previously prohibited transactions related to living expenses; (iii) taking steps to ease restrictions on access to banking services, including removing certain entities from its List of Specially Designated Nationals and Blocked Persons ("SDN List"); and (iv) adding certain entities, which were already considered blocked parties, to the SDN List to clarify applicable restrictions for persons operating in Burma.
Since the European Union permanently lifted its sanctions on Burma (other than its ongoing arms embargo and restrictions on the export of certain sensitive items) in 2013, the United States has continued to maintain certain sanctions on trade with Burma, and these amendments to the BSR mark a significant step toward easing those remaining restrictions in support of Burma's "political reforms and broad-based economic growth" following its "peaceful and competitive elections" in 2015.
Relaxed Restrictions on Trade-Related Transactions
In December 2015, OFAC issued a temporary general license (General License No. 20) to permit U.S. persons to engage in particular transactions ordinarily incident to exports to or from Burma involving individuals and entities designated on the SDN List pursuant to 31 C.F.R. § 537.201, or in which such designated persons directly or indirectly own, individually or collectively, a 50 percent or greater interest (collectively, "designated persons"). That general license was due to expire next month. As a result of these amendments, General License No. 20 has been extended indefinitely, expanded, and incorporated directly into the BSR at 31 C.F.R. § 537.532.
Pursuant to the expanded and extended General License No. 20 (now 31 C.F.R. § 537.532), U.S. persons are, first, authorized to conduct transactions "that are ordinarily incident to an exportation to or from Burma of goods, technology, or non-financial services" that otherwise would be prohibited by the sanctions barring transactions involving designated persons. The effect of the license is, under certain circumstances, to permit those carrying out authorized activity to use infrastructure involved in trade (e.g., roads, bridges, and ports) that is owned by designated persons. Therefore, U.S. persons may pay port fees as well as shipping and handling charges to designated persons where those transactions are associated with sending goods to or from Burma, provided the export is not to, from, or on behalf of a designated person. For example, Asia World Port Management Company Ltd., which has been designated on the SDN List, operates Asia World Port Terminal, one of Burma's main ports. Under the general license, U.S. persons can use the port for the export of goods and technology to Burma and make payments that are incident to such exports, as long as the export is not to, from, or on behalf of a designated person.
Second, OFAC has also expanded the scope of the general license to now cover "all transactions . . . ordinarily incident to the movement of goods within Burma," as long as "the goods are not being sent to, from, or on behalf of a person whose property and interests in property are blocked." As a result, a company that manufactures goods in the United States and exports them to distribution centers in Burma can now also legally transport those goods from the Burmese warehouse to stores in Burma using infrastructure owned by designated persons, again as long as the export is not to, from, or on behalf of a designated person. These sorts of transactions, until May 18, 2016, had been prohibited.
Significantly, however, the general license does not authorize transactions where goods, technology, and non-financial services are exported or shipped "to, from, or on behalf of" any designated person. Accordingly, U.S. persons still cannot, for example, export goods or services to, from, or on behalf of Asia World Port Management Company Ltd., as that entity is a person whose property is blocked pursuant to 31 C.F.R. § 537.201(a).
Expanded Authorizations for U.S. Persons Residing in Burma
OFAC has issued a new general license (codified at 31 C.F.R. § 537.525) authorizing U.S. persons who reside in Burma to engage in transactions that are "ordinarily incident to the routine and necessary maintenance within Burma, including payment of living expenses and acquisition of goods or services for personal use." The BSR had already permitted U.S. citizens to travel to and from Burma, and those authorizations remain unaffected.
Eased Restrictions on Banking Services
OFAC has taken steps to authorize most transactions involving Burmese financial institutions. First, OFAC removed three state-owned banks and seven state-owned enterprises from the SDN List, effective May 17, 2016. The banks include the Myanma Economic Bank, Myanmar Foreign Trade Bank, and Myanma Investment and Commercial Bank. The state-owned enterprises are Myanmar Timber Enterprise, Myanmar Pearl Enterprise, Myanmar Gem Enterprise, No. 1 Mining Enterprise, No. 2 Mining Enterprise, No. 3 Mining Enterprise, and Co-Operative Export-Import Enterprise. Second, OFAC has expanded an existing general license (codified at 31 C.F.R. § 537.531) to authorize certain transactions involving two Burmese banks designated on the SDN List—Innwa Bank and Myawaddy Bank. In sum, these changes open further authorized opportunities for U.S. persons to obtain banking services in Burma.
Changes to the List of Blocked Persons and Entities
Even as OFAC removed certain Burmese financial institutions from the SDN List, it also added six companies on that list. Notably, Steven Law and Asia World (two entities on the SDN List that were originally added by Executive Order 13448 in February 2008 for providing support to the Burmese government, which, at that time, was controlled by the former military regime) have a 50 percent or greater interest in each of these companies. Therefore, even prior to designation this week, each of the companies was already considered a designated person by operation of law. The additions include: Asia Mega Link Co., Ltd.; Asia Mega Link Services Co., Ltd.; Pioneer Aerodrome Services Co., Ltd.; Green Asia Services Co., Ltd.; Global World Insurance Company Limited; and Shwe Nar Wah Company Limited. According to the Department of the Treasury, these additions to the SDN List are not intended to target either the government or the people of Burma, but rather to provide clarity for entities doing business in Burma.
Sanctions Still in Effect on Burma
Despite OFAC's May 17, 2016 announcement, a variety of sanctions still remain in effect.
Reporting Requirements. U.S. persons remain subject to certain investment-related reporting requirements. First, U.S. persons and entities must report any new investments in Burma that exceed US$500,000, although the U.S. Department of State, which oversees the reporting program, may soon raise the threshold for this reporting requirement to investments over US$5 million. Second, any new investment agreements with Myanma Oil and Gas Enterprise or attempts to exercise rights under such agreements must also be reported to the Department of State.
Dealings with Designated Persons. Outside of the transactions authorized by general licenses (some of which are discussed above), U.S. persons remain prohibited from dealing with designated persons. In particular, U.S. financial institutions may not advise or confirm financing to any person or entity whose property or interests in property are blocked under 31 C.F.R. § 537.201, even when the financing relates to transactions incident to the export of goods, transactions, or non-financial services to, from, or within Burma. U.S. persons are also prohibited from exporting or reexporting financial services related to providing security services to the Burmese Ministry of Defense, any armed group, or any entity that is owned 50 percent or more by these parties.
Import Restrictions. Finally, U.S. persons and entities may not import jadeite or rubies that have been mined or extracted from Burma, or jewelry that contains these elements.