On July 11, 2012, in an effort to support the Burmese Government's ongoing economic and political reform efforts, and pursuant to the change in U.S. policy towards Burma first expressed by Secretary of State Clinton in May, the U.S. Department of Treasury's Office of Foreign Assets Control (OFAC) substantially removed the preexisting ban on the export of financial services to Burma and on new U.S. investment in Burma. In addition, President Obama issued an Executive Order to block the property of persons threatening the peace, security or stability of Burma. The existing embargo on U.S. imports of items of Burmese origin remains in effect.
EXPORTATION OF FINANCIAL SERVICES TO BURMA
OFAC has issued General License No. 16 ("GL 16") to the Burma Sanctions Regulations (31 C.F.R. Part 537), authorizing the exportation and reexportation of U.S. financial services, including insurance and banking, to Burma, subject to some limitations. GL 16 does not allow the export of financial services to the Burmese Ministry of Defense, or state or non-state armed groups, including the military, or entities in which any of the foregoing owns a 50 percent or greater interest. It also does not authorize the export of financial services to any person blocked pursuant to the Burma sanctions program. However, it does allow the transfer of funds (even to or from an account of a blocked financial institution) provided that the account is not on the books of a U.S. financial institution.
NEW INVESTMENT IN BURMA
Additionally, in newly-issued General License No. 17 ("GL 17"), the Secretary of State has lifted the ban on new U.S. investment in Burma, subject to limitations similar to those in GL 16. GL 17 does not allow new investment undertaken pursuant to an agreement or the exercise of rights under such an agreement that is entered into with the Burmese Ministry of Defense, or with state or non-state armed groups, including the military, or entities in which any of the foregoing owns a 50 percent or greater interest. GL 17 also does not authorize transactions with any person whose property and interests are blocked under the Burmese sanctions program.
While GL 17 lifts the ban on new investment, pursuant to its terms, any person engaging in new investment in Burma must report to the Department of State in compliance with the Department of State's "Reporting Requirements on Responsible Investment in Burma." Specifically, any U.S. person whose aggregate new investment in Burma exceeds $500,000 must provide annual reports to the Department of State. The Department will make select non confidential portions of any such reports publicly available. Information that must be reported includes that relating to policies and procedures with respect to such matters as human and workers' rights, corruption, environmental stewardship, land acquisitions, arrangements with security service providers and aggregate annual payments exceeding $10,000 to Burmese Government entities. In addition, a U.S. person who enters into an agreement for new investment with the Myanmar Oil and Gas Enterprise will be required to notify the Department of State within 60 days of the new investment.
THE PRESIDENT'S EXECUTIVE ORDER
On July 11, President Obama also signed a new Executive Order blocking the property of the persons involved in activities that threaten the peace, security or stability of Burma. Specifically, the Executive Order provides for the imposition of 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, such as actions that have the purpose or effect of undermining or obstructing the political reform process or the peace process with ethnic minorities in Burma;
- To be responsible for or complicit in, or responsible for ordering, controlling or otherwise directing, or to have participated in, the commission of human rights abuses in Burma;
- To have imported, exported, reexported, sold or supplied arms or related materials from North Korea or its Government to Burma or its Government;
- To be a senior official of an entity that has engaged in the foregoing acts;
- To have materially assisted any of the foregoing acts, or a person whose property and interests in property are blocked; or
- To be owned or controlled by, or to have acted for or on behalf of, such person.
Pursuant to the Executive Order, OFAC has blocked the property of the Burmese Directorate of Defense Industries and the Innwa Bank.
The two new General Licenses should result in furthering new investment and involvement by U.S. persons in the Burmese economy, opening a market previously closed to them. However, it remains to be seen how the above changes, and potential future changes to U.S. Government policy, will ultimately impact Burma and whether democratic processes in that country will be furthered and strengthened.
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Authorship Credit: Melvin S. Schwechter, J. Garrett Cornelison and Lana Ljuboja
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