13 July, 2012
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) published yesterday long-awaited General Licenses to implement the lifting of certain Burma sanctions. Specifically, OFAC implemented the easing of sanctions initially announced in May 2012 by President Obama and Secretary of State Clinton in response to political reforms by Burma’s government. We note that a number of restrictions remain in effect under the U.S. sanctions against Burma, including prohibition on the importation of Burmese-origin goods into the United States and restrictions on any dealings with persons or entities that are Specially Designated Nationals (SDNs). Accordingly, activities in Burma should be assessed on a case-by-case basis after a trade compliance review of the parties and nature of transaction.
In parallel with the easing of certain restrictions, OFAC added two new entries to the SDN list, prohibiting transactions with those entities. Moreover, the President issued a new Executive Order yesterday, providing additional legal basis for imposing sanctions against persons and entities that threaten the peace, security, or stability of Burma, including those responsible for human rights abuses in Burma and those who conduct arms trade with North Korea.
The new General Licenses are aimed broadly at encouraging further democratic change and economic development, but they contain certain limitations. Unlike the EU measures, these new U.S. authorizations are not limited to a 12-month period.
General License 16 broadly authorizes the exportation of U.S. financial services to Burma, which include but are not limited to banking/investment services, processing of payments, provision of insurance, loans, or guarantees. However, given human rights considerations, the general license does not authorize the exportation of such services, in connection with the provision of security services, to the Burmese Ministry of Defense, state or non-state armed groups (which includes the military), or entities owned by these organizations. Nor does the license authorize the exportation of financial services to any SDN but transfers of funds to or from an account of a financial institution that is an SDN of Burma are authorized, provided that the account is not on the books of a U.S. financial institution.
General License 16 supersedes General Licenses 14-C and 15, which pertained to humanitarian activities and personal remittances, respectively.
General License 17 permits new investment in Burma for the first time in almost 15 years, subject to certain reporting requirements. However, this general license does not authorize new investment resulting from an agreement with the Burmese Ministry of Defense, state or non-state armed groups (which includes the military), entities owned by these organizations, or any dealings with an SDN of Burma.
As a condition of this license, U.S. persons must comply with the reporting requirements set forth in the State Department’s "Reporting Requirements on Responsible Investment in Burma." These requirements will undergo public notice and comment procedure, and will apply to investors with more than US$500,000 in aggregate new investment in Burma. These investors will be required to file annual reports (which may be made public) that address key policies regarding, for example, human rights, environmental stewardship, and arrangements with security service providers. In addition, entities entering into agreements or exercising rights under agreements with the Myanma Oil and Gas Enterprise (MOGE) must notify the State Department within 60 days of their new investment.
The Executive Order issued yesterday provides new authority to impose sanctions on persons determined by the Secretary of the Treasury (in consultation with the Secretary of State) to be threatening to the peace or security of Burma. This includes the undermining of Burma’s political and peace processes, the commission of human rights abuses, and the supplying of arms from North Korea.
Finally, OFAC added the following two entities to the SDN list, restricting all dealings with these entities and blocking any property/interests in property of these entities that was within the possession or control of a U.S. person:
DIRECTORATE OF DEFENCE INDUSTRIES (a.k.a. KA PA SA; a.k.a. "DDI"), Burma; Ministry of Defence, Shwedagon Pagoda Road, Yangon, Burma [BURMA].
INNWA BANK LTD (a.k.a. INNWA BANK), 554-556 Corner of Merchant Street and 35th Street, Kyauktada Township, Yangon, Burma; SWIFT/BIC AVAB MM M1 [BURMA].
For further information, please contact:
Michael Aldrich, Partner, Hogan Lovells