On July 11, 2012, President Obama and the US Department of State announced a significant easing of US economic sanctions against Burma (also called Myanmar).  The easing of sanctions was implemented through two general licenses issued by the Treasury Department's Office of Foreign Assets Control (OFAC), authorizing US persons (individuals and entities) to export financial services to Burma (General License 16) and to make new investments in Burma (General License 17).  These general licenses have no renewal date, so they will remain valid unless revoked by the President.  These changes reflect the United States' recognition of substantial political reforms that have taken place in Burma.  The revised US sanctions policy toward Burma, however, also reflects lingering concerns with the progress of those reforms.  While US persons now are authorized to make new investments in Burma, this liberalization is subject to certain reporting requirements, as well as limits on the Burmese entities and individuals that can be involved in the new investment and financial services, as discussed below.  Concurrently, the President also issued Executive Order 13619 blocking the property of individuals and entities threatening the peace, security or stability of Burma.  

Under the Burmese Sanctions Regulations, (BSR) US persons have been prohibited from making "new investment" in Burma since May 20, 1997.  The prohibited "new investment" has included, among other things, any contract with the Government of Burma or a nongovernmental entity in Burma for the economic development of resources in Burma.  In addition, since July 28, 2003, US persons have been prohibited from exporting, directly or indirectly any "financial services" to Burma.  Prohibited activity included funds transfers from the United States or by a US person to Burma, as well as the provision of a wide variety of financial services to persons in Burma.  As discussed in more detail below, OFAC's two new general licenses allow US persons to engage in these activities, subject to certain limitations.  Importantly, however, key aspects of the sanctions against Burma remain.  The BSR continue to prohibit the importation any product of Burma into the United States.  Further, based on prior legislation and executive orders (as well as new Executive Order 13619), numerous individuals and entities remain subject to blocking orders and US persons may not conduct transactions with such blocked parties. 

Steps Leading to Current Easing of Sanctions

Secretary of State Clinton announced on April 4, 2012, after the conclusion of parliamentary by-elections in Burma, that the United States was planning a "targeted easing" of bans on the export of US financial services and investment in Burma.  (See Steptoe advisory.)  The United States took a step toward easing the Burmese sanctions on April 17, 2012, when OFAC issued General License No. 14-C authorizing US persons to export financial services in support of humanitarian, religious, and other not-for-profit activities in Burma.  (See Steptoe advisory.)  Later, in May, Clinton announced that the United States planned to suspend its restrictions on financial services and inv estment and that US companies would "be able to deal in every sector of the economy with any business."  The European Union announced its own temporary suspension of certain Burma Sanctions on May 14, 2012 (see Steptoe advisory), following the easing of sanctions by Canada and Australia.

US investment in Burma is now permitted for the first time in 15 years.  In a statement, President Obama was cautiously optimistic, citing significant progress made by Burmese President Thein Sein and opposition activist Aung San Suu Kyi but noting that "Burma's political and economic reforms remain unfinished."  The changes to US policy, he hoped, will "allow US companies to responsibly do business in Burma."

The most significant changes are described further below.

Export of Financial Services to Burma Authorized

General License 16 authorizes the export and reexport of US financial services to Burma, subject to certain limitations.  Prior to the issuance of this general license, the BSR prohibited US companies and US citizens from exporting "financial services," directly or indirectly to Burma, except under certain narrowly defined circumstances (such as in connection with lawful exports from the United States, and the circumstances set forth in General Licenses 14-C and 15).  General License 16 replaces and supersedes General Licenses 14-C and 15. 

Authorized financial services, defined at 31 C.F.R. § 537.305, include the transfer of funds from the United States or by a US person to Burma; or the provision to Burma of insurance services, investment or brokerage services, banking services, money remittance services; loans, guarantees, letters of credit or other extensions of credit; or the service of selling or redeeming traveler's checks, money orders and stored value. 

While broadly authorizing the provision of financial services, General License 16 does not authorize, in connection with the provision of security services, the exportation of financial services to the Burmese Ministry of Defense, including the Office of Procurement, any state or non-state armed groups, or any entity in which the foregoing individuals and entities own a 50 percent or greater interest.  The phrase "security services" is not defined, so it is not clear when the exportation of financial services to the above-listed groups is authorized.  Financial services may not be exported to any person or entity whose property or interests in property are blocked pursuant to the BSR or an Executive Order, or any entity in which a blocked party owns a 50 percent or greater interest.  Although US persons may not provide financial services to any blocked entity, the general license authorizes transfers of funds to or from accounts of blocked financial institutions, provided that the accounts in question are not on the books of a financial institution organized under the laws of the United States.  The general license does not, however, authorize any debit to a blocked account.   

A key remaining aspect of the sanctions against Burma is the set of restrictions blocking the assets of particular individuals and entities in Burma.  Accordingly, US persons should ensure that they do not provide financial services to parties that have been blocked under the BSR, prior executive orders and/or prior legislation.

New Investment Authorized, Including Oil and Gas Sector, Subject to Reporting Requirements

General License 17 authorizes US persons to make new investments in Burma, subject to certain limitations and requirements.  General License 17 does not authorize new investment pursuant to an agreement entered into with the Burmese Ministry of Defense, including the Office of Procurement, any state or non-state armed group, or any entity in which the foregoing individuals and entities own a 50 percent or greater interest. 

General License 17 also does not authorize a US person to make new investment pursuant to an agreement with an individual or entity whose property and interests in property are blocked pursuant to the BSR, Executive Order 13448 of October 18, 2007, Executive Order 13464 of April 30, 2008, or Executive Order 13619 discussed further below.

US persons engaging in new investment in Burma pursuant to General License 17 are required to report their investment under certain conditions set forth in the State Department's "Reporting Requirements on Responsible Investment in Burma."  These reporting requirements will undergo public notice and comment.  The reporting requirement shall not give rise to any liability beyond that which exists under US law. 

There are two circumstances in which US persons must report new investment in Burma to the Department of State.  First, any US person undertaking new investment related to an agreement with Myanma Oil and Gas Enterprise (MOGE) must notify the Department of State within 60 days of such investment.  Second, any US person whose aggregate investment in Burma exceeds $500,000 must provide certain information to the Department of State. 

US authorization of investments involving MOGE has been criticized by some non-governmental organizations, including Human Rights Watch.  Long-time democracy advocate and political opposition figure Aung San Suu Kyi had warned foreign companies against investing in MOGE, citing accountability and transparency concerns.  Many US politicians and corporations expressed concern, however, that if the US did not ease its sanctions regime, it would lose business opportunities to companies in Europe and elsewhere, where sanctions had already been lifted. 

Additionally, US companies with more than $500,000 in aggregate new investment will be asked to file annual reports.  This reporting requirement includes two reportsâ€"one report will be publicly available, while the other will be provided to the Government and will not be made public.  The public report requires that the investor provide information regarding the nature of operations in Burma; human rights, worker rights, anti-corruption and environmental policies and procedures; arrangements with security providers; property acquisition; and transparency concerns, including payments over $10,000 to any Government or administrative entity that claims to possess authority over the new investment's activities in Burma.  According to a joint statement by the Departments of Treasury and State "The purpose of the public report is to promote greater transparency an d encourage civil society to partner with our companies toward responsible investment."  The Government report asks companies to provide information regarding meetings or other communications with the armed forces of Burma and/or other armed groups, and any risk mitigation or due diligence with regard to human rights, worker rights, and/or environmental issues. 

Additional Entities Threatening Peace and Security in Burma Blocked

Simultaneously with the issuance of two general licenses easing the sanctions in Burma, President Obama announced an Executive Order blocking the property of persons threatening the peace, security or stability of Burma.  The Order blocks any person who, acting directly or through other forms of support, is determined to have engaged in threatening the peace, security or stability of Burma, such as by undermining or obstructing the political reform process or the peace process with ethnic minorities; to be responsible for directing or participating in human rights abuses in Burma; or to be involved in arms trade between Burma and North Korea.  The Order also blocks senior officials of any entity that has engaged in these activities, parties that have materially assisted in such activities, and parties that are owned or controlled by or have acted or purported to act on behalf of any party that has engaged in such activities.  The Order prohibits any designated persons from entering the United States.

In conjunction with the Executive Order, OFAC has added the following entities to its list of Specially Designated Nationals:

  • Directorate of Defence Industries
  • Innwa Bank LTD (a.k.a. Innwa Bank)

Remaining Burma Sanctions and Export Controls

Although the joint announcement significantly eases the provisions of the BSR pertaining to financial services and investment in Burma, other portions of the BSR remain intact. 

Prior to the July 11th actions, the sanctions on Burma primarily prohibited US persons and companies from engaging in the following activities involving Burma:

  • Exportation of financial services to Burma
  • New Investment in Burma
  • Facilitation of Prohibited Transactions in Burma
  • Prohibited Importation of Burmese Goods
  • Dealing in property of blocked Burmese persons and entities

As of July 11, 2012, only the first two of the above-listed prohibitions have been suspended (subject to conditions identified above).  The scope of the facilitation ban has been decreased by the suspension of certain sanctions, but US persons continue to be prohibited from facilitating a transaction by a foreign person that a US person would be prohibited from performing.  

The July 11th changes do not remove any individuals or entities from OFAC's list of SDNs.  The US continues to designate Burmese persons and entities as SDNs.  These include senior Government officials and other persons and entities deemed to have engaged in public corruption, perpetrated human rights violations, or impeded the democracy movement in Burma.  No US persons can conduct transactions or dealings with such SDNs, and US persons must block the property or interests of property of such SDNs.  The prohibition against dealing with SDNs also extends to entities owned 50 percent or more by SDNs. 

In addition, US prohibitions against importing certain goods from Burma remain in effect.  These include: a prohibition on the importation of certain Burmese-origin gemstones under the Tom Lantos JADE Act of 2008 (P.L. 110-286), and a general ban on the importation of Burmese goods and services under the Burmese Freedom and Democracy Act of 2003 (P.L. 108-61).  These sanctions are mandated by statute, and can only be waived if the President determines, and notifies appropriate House Committees, that a waiver of these provisions is in the national interest of the United States.  Senior US officials have noted that they may ask Congress to lift these sanctions in the future, but there is currently no plan to remove the legislative sanctions. 

The July 11th changes to the Burmese Sanctions also do not affect export controls undertaken by the Commerce Department's Bureau of Industry and Security (BIS) or the State Department's Directorate of Defense Trade Controls.  BIS currently requires a license for certain exports, reexports and transfers of items to Burma that are identified on the Commerce Control List.  In addition, no "defense articles" or "defense services" subject to the jurisdiction of the International Traffic in Arms Regulations (ITAR) can be exported to Burma. 

US persons doing business in Burma should continue to closely monitor future sanctions developments.  Because the suspension of sanctions is accomplished through the issuance of general licenses, the former sanctions laws and regulations remain on the books, and could be easily reinstated or modified if the US becomes disappointed by the reforms in Burma.  Secretary of State Clinton expressly noted that keeping the relevant sanctions on the books is an "insurance policy" despite the US goal to expand investment opportunities in Burma.

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