Myanmar Sanctions Renewal and Changes
The US Administration announced today several sanctions changes that it said are intended to demonstrate support for continued political reform and broad-based economic growth in Myanmar, while maintaining sanctions pressure where needed, and providing further clarity to the private sector for engagement in Myanmar. The US Treasury Department’s Office of Foreign Assets Control (OFAC) issued new regulations to support trade to, from, and within Myanmar, allow transactions by US individuals residing there, and permit most transactions involving all the currently sanctioned Myanmar financial institutions. Additionally, in consultation with the State Department, OFAC removed sanctions against seven state-owned enterprises and three state-owned banks. OFAC also identified and added to the list of sanctioned Specially Designated Nationals (SDNs) six companies that are owned 50 percent or more by Steven Law or Asia World Co. Ltd., which were already sanctioned by application of the OFAC “50 Percent Rule” even though they did not yet appear on the SDN List. Separately, the president today renewed the statutory authorities underlying these sanctions and their regulatory rules and requirements.
OFAC added a general license that allows US individuals residing in Myanmar to conduct most otherwise prohibited transactions related to living there, including paying rent and other living expenses and buying goods and services for personal use. This means that US individuals living in Myanmar will be able to deal with companies and properties for those purposes that otherwise would be off limits, which is intended to make it easier for US individuals to reside and work in Myanmar.
To support Myanmar trade, OFAC extended indefinitely and incorporated into regulations the authorization for transactions related to exports to or from Myanmar involving sanctioned individuals or companies that was originally in General License 20. This should give banks and businesses comfort that this authorization will not expire before longer term trade finance transactions are completed. Further, OFAC added a general license permitting transactions related to the movement of goods within Myanmar, such as transportation of goods inside Myanmar from a warehouse for further distribution to retail outlets. These changes are intended to facilitate commerce into and throughout Myanmar, and in turn bolster trade and commercial opportunities for both US and Myanmar businesses.
OFAC also updated the existing general license authorizing most transactions with certain sanctioned financial institutions in Myanmar. Sanctions against two of those financial institutions have been removed, as described below, and their inclusion is no longer necessary, and two other Myanmar financial institutions that are currently sanctioned have been added to the general license. Accordingly, other than investment, most transactions – including opening and maintaining accounts and conducting a range of other financial services – with Asia Green Development Bank, Ayeyarwady Bank, Innwa Bank and Myawaddy Bank are authorized. As a result of this and other actions today, there are few restrictions on dealings with Myanmar banks.
Additionally, OFAC today removed sanctions against seven state-owned enterprises and took them off the SDN List – 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 – as well as three state-owned banks – Myanma Economic Bank, Myanmar Foreign Trade Bank, and Myanma Investment and Commercial Bank. The announcement noted that the entities removed from the SDN List are organized and transparently managed under civilian control or no longer exist. US individuals and companies may engage in all transactions with any non-sanctioned Myanmar bank or company, including those that have just had sanctions removed, subject to applicable rules and reporting requirements. Also, as a result of the removal Myanma Economic Bank, the Yangon Stock Exchange is no longer sanctioned by operation of the 50 Percent Rule. While US parties may now provide services to or involving the Yangon Stock Exchange, trading by foreign parties in not currently permitted by Myanmar.
No Myanmar individuals were removed in today’s action, and the SDN List still includes many of the country’s most prominent businesspersons and their companies, whose holdings span all sectors, including transportation, infrastructure, real estate, tourism, financial services, food and beverages, and extractive industries. In light of this and the 50 Percent Rule, many economic interests in Myanmar are still totally off limits to US parties. Under OFAC regulations, individuals and entities on the SDN List may seek to be removed, including where the circumstances resulting in sanctions no longer apply, by submitting a written request to OFAC. While the US government has expressly stated that potential removals would be pursued as appropriate, so far very few individuals have been successful in such efforts.
Identification of Certain Companies Sanctioned by the 50 Percent Rule
OFAC also identified as sanctioned and added to the SDN list six companies that are owned 50 percent or more by Steven Law and Asia World Co. Ltd., who were themselves sanctioned in 2008 for providing support to the military regime then ruling Myanmar. The companies being identified as owned 50 percent or more are 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. These companies were already sanctioned by application of the 50 Percent Rule and off limits to US parties even though they did not previously appear on the SDN List. Except as licensed or otherwise authorized, US parties generally remain prohibited from dealings with any sanctioned individuals and companies, including entities owned 50% or more in the aggregate by one or more other sanctioned individuals or entities. The announcement explained that the identifications are intended to provide additional clarity to assist the private sector to comply with US sanctions as engagement in the Myanmar market increases.
Separately, the president today renewed the authorities underlying these sanctions. The International Emergency Economic Powers Act (IEEPA) provides the basis for most US sanctions programs, including the remaining requirements and restrictions for Myanmar. The renewal of the IEEPA authorities for Myanmar follows discussions about sanctions between the US and new Myanmar government.
All IEEPA sanction programs, which span the globe, require annual renewal, and the Myanmar program needed to be renewed by May 20 in order to continue. Such renewals are a standard technical operation; however, the stock IEEPA language has in the past been cause for confusion and misperception that this annual action is a “reimposition,” rather than maintenance, of sanctions. IEEPA authorizes the president to declare a “national emergency” and impose economic and trade sanctions in response to “unusual and extraordinary” threats to the national security, foreign policy, or economy of the United States. Notwithstanding the very different circumstances in Myanmar when the original national emergency was declared, some have raised concern that this language is contradictory to the progress the country has made, particularly since the election last November that ushered in the new government of Aung San Suu Kyi and the National League for Democracy.
The renewal of IEEPA authorities most prominently retains sanctions against the individuals and entities on the SDN List other than those removed by OFAC today. This action also maintains the ban on imports of Myanmar jade and rubies into the United States. In addition, the renewal preserves the State Department’s Responsible Investment Reporting Requirements. Any US individuals or companies investing in Myanmar must continue to file an annual report with the State Department outlining information regarding policies and procedures with respect to human rights, worker rights, environmental stewardship, land acquisitions, arrangements with security service providers, and payments to Myanmar government entities. Reportedly, the State Department will be increasing the aggregate investment reporting threshold from US$500,000 to US$5 million.