U.S. Government Issues General Licenses Suspending Sanctions on Burma and Imposes Responsible Investment Reporting Requirements
Nearly eight weeks
after the Obama Administration announced that it would “suspend” and “ease” sanctions
on Myanmar (still referred to the U.S. as Burma), the U.S. Government
today implemented the necessary changes to permit new investment in Burma for the first time in
15 years and to reauthorize the exportation of financial services to Burma. See our original May
17, 2012 post here.
The changes to the existing
sanctions were made by OFAC via the issuance of two general licenses, OFAC
Burmese Sanctions Regulations General Licenses 16 and 17 (see below) and are effective immediately.
By issuing the general licenses OFAC
was able to “suspend” the existing sanctions, but left open the possibility
that they could be reimposed in the future by simply revoking the general
licenses in the event that the Government of Myanmar fails to implement the
promised reforms.
For the first time
ever the U.S. Government will require companies that engage in new investment
in Burma exceeding $500,000 to submit an annual “Responsible Investment” report
to the State Department. The report will include information on the company’s corporate social responsibility policies and procedures with respect to a number of issues, including human rights, workers’ rights,
anti-corruption, environmental stewardship, land acquisitions, arrangements
with security service providers and annual payments exceeding $10,000 to
Burmese government entities.
These reporting requirements, which will not take effect until the notice
and comment period have been completed later this year, are included at pages four through six of the document below. The term “new investment”, as defined in OFAC's Burmese Sanctions Regulations, refers to the
development of economic resources in Burma and not to other types of investment
activities, such as entering into an agreement to buy a manufacturing facility in Burma that is unrelated to the development of natural resources.
In addition to OFAC's general licenses, the President also issued a new Executive Order
that provides new authority to include on the SDN List individuals or
entities that have been determined to, among other things, threaten the
peace, security, or stability of Burma or and those who conduct certain
arms
trade with North Korea.
In addition, OFAC added two Burmese entities to the SDN List, including
Burma's Directorate of Defense Industries and Innwa bank.
Although OFAC's General Licenses 16 and 17 make significant changes to the existing U.S. sanctions on Burma, it is important to note the following:
1.No changes were made to the existing prohibition on the importation of goods of Burmese origin into the
U.S. (this includes jewelry containing gems mined or extracted from Burma).
2.
No changes were made to the U.S. arms embargo on Burma that
has been in place since 1993. As a result, "defense articles" and
"defense services" subject to the jurisdiction of the International
Traffic in Arms Regulations are still prohibited from be exported to Burma, whether directly or indirectly. (See section 126.1 of the ITAR).
3. The sale of goods to Burma and receipt of payment for such products was previously authorized under the Burmese Sanctions Regulations as long as no financial services were provided. General License 16 now authorizes U.S. companies to extend credit to customers and receive payment via letters of credit for sales to Burma.
4.
U.S. exports of commercial (i.e., "dual-use") goods to Burma remain subject to export control requirements
administered by the Commerce Department's Bureau of Industry and Security
(BIS). Exports of goods, technology and software on the Commerce
Control List (i.e., not classified as EAR99) typically require a BIS export
license. Therefore, exporters need to determine whether an export license from
BIS may be required before goods are exported or reexported to Burma.
5. A large number of banks, entities and individuals in Burma are on OFAC's SDN List. Therefore, banks, exporters and other companies engaged in transactions with Burma must check the SDN List and other U.S. Government restricted party lists to determine whether transactions with the parties are blocked or otherwise restricted. Section (d) of Burma General License 16 authorizes the transfer of funds to or from SDNs as long as the transaction does not involve a bank located in the U.S. This is one of the rare situations that allows a transaction to occur with a party on the SDN, albeit the transaction has to take place indirectly (i.e., funds transfers via a third country bank are okay).
Burma Sanctions - OFAC GLs and Reporting Requirements (July 11, 2012)
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