International Law Advisory - Burma Faces Expanded US Sanctions and Export Controls, Additional Import/Export and Investment Restrictions Likely From EU

The past month has seen a flurry of US government activity aimed at further restricting the range of permissible dealings with Burma.  The Commerce and Treasury Departments both took actions that broaden the scope of the Burmese sanctions, respectively amending the relevant regulations and adding Burmese nationals to the Specifically Designated Nationals (SDN) list.  These actions, and the related Presidential orders, were taken in response to the Government of Burma’s continued crackdown on democratic opposition.

In light of these developments – and keeping in mind the recent increase in civil and criminal fines that can be imposed for violations of export control, anti-boycott, and economic sanctions regulations (see our advisories of October 2, 2007 and October 16, 2007) – companies should update their compliance screening mechanisms and continue to take the necessary measures to ensure that any existing business relationships or future transactions are in compliance with the Burmese sanctions regime.

The Addition of EO 13448 to the Burma Sanctions Regime

On October 19, 2007, the US President issued Executive Order 13448 (EO 13448) aimed at blocking the property and prohibiting certain transactions related to Burma.  (See 72 Fed Reg. 60221-60226.)  EO 13448 follows the President’s September 25, 2007 announcement that additional steps would be taken to block the property and financial interests and restrict the travel to the US of those individuals who are responsible for human rights violations and for impeding Burma's transition to democracy.

Accordingly, EO 13448 essentially designates individuals and entities for sanctions and grants the Treasury Department expanded authority to designate individuals and entities (and those who back them) responsible for human rights abuses and public corruption.  EO 13448 is the latest step in a series of related policy actions, dating back to the 1990s, taken to increase pressure for democratic change in Burma, including a freeze on the assets of senior Burmese officials. 

(For a timeline of key events in Burma’s history since 1962, see the Guardian Unlimited’s special report, Timeline: Burma.) 

Recent BIS Action

Further to the issuance of EO 13448, on October 24, 2007, the Department of Commerce, Bureau of Industry and Security (BIS) issued a final rule amending the Export Administration Regulations (EAR) to move Burma into more restrictive country groupings and impose a license requirement for exports, reexports, or transfers of most items subject to the EAR to persons designated pursuant to Executive Orders 13310 (which prohibits the export of financial services to Burma from the United States or by a US person) and 13448.  See 72 Fed Reg. 60248-60250.  Here is a summary of the relevant provisions:

• Burma is moved from Computer Tier 1 to Tier 3, which restricts a much larger group of computer and micro-processing equipment and technology.  Not only must computer and electronics companies be vigilant of this, but anyone using such equipment and wishing to bring it into Burma must now be concerned (and assess whether any existing license exceptions are now no longer available).

• Burma is removed from Country Group B (a very permissive export licensing group that includes many US allies) and placed in Country Group D:1, which is much more restrictive in terms of license requirements, licensing policy, and limits on use of license exceptions.

• All exports, re-exports, or transfers by persons in the US or abroad to any person or entity designated pursuant to EOs 13310 and 13448 now require authorization (subject to the medicine, agricultural product, and EAR 99 medical device carve-out).  Therefore, not only must US persons screen their customers for Burmese SDNs, but so must foreign persons who may wish to transfer US-origin items to Burma.  Note also that no license exceptions are available for exports, re-exports, or transfers of US-origin items (except food, medicine and medical devices classified as EAR 99) to designated persons or entities.  The licensing policy for exports, re-exports and transfers to designated Burmese persons and entities will be one of denial.

• The rule is effective as of October 24, 2007, but there is a savings clause allowing certain shipments/transactions that are already in process (on a loading dock or en route for export) to proceed under previous license exceptions or “NLR” determinations until December 10, 2007.  If not shipped by December 10, then license applications are required as per the new rules.

The new rule does not appear to restrict or curtail any existing export or re-export licenses that have been issued prior to this new rule.

New OFAC Designations

On October 25, 2007, the Department of the Treasury’s Office of Assets Control (OFAC) published a notice adding eleven individuals to the SDN list pursuant to Executive Order 13310.  See 72 Fed Reg. 60713-60714.  This follows OFAC’s October 3, 2007 designation of fourteen individuals.  See 72 Fed Reg. 56437-56438.  The SDN list is available via the OFAC website.  OFAC’s actions have the effect of blocking, with certain exceptions, all property and interests in property that are in or that come within the US, or within the possession or control of US persons, of the designated individuals and entities.

Likely EU Action

The US is not alone in its efforts to pressure the Burmese government to discontinue its crackdown.  The EU is also planning to increase its restrictions on Burma.  On October 15-16, 2007, the principle of additional measures was agreed upon by the General Affairs and External Relations Council.  See Council Conclusions on Burma/Myanmar.  The measures would impose an import/export ban on various equipment used in the logging and mining industries, as well as an investment ban in those industries.

The Council’s conclusions must be followed by a Common Position, which is to be prepared by the Portuguese Presidency with the support of the Council Secretariat.  Discussions with the Secretariat suggest that the Common Position will list the above-described restrictions but will also reinforce existing measures (travel ban, asset freeze, and investment ban on certain companies) as requested by the Council.  (See our International Law Advisory dated November 10, 2004 for more on the EU’s sanctions against Burma.)  It is our assessment that the precise scope of the additional measures is still open for discussion – a number of Member States would be in favor of further sanctions, e.g., a complete ban on investment in all sectors (including energy), an export ban on luxury goods, and banking sanctions.

Following adoption of the Common Position (most probably in the first half of November), the Commission will propose a draft Regulation for adoption by the Council. The Regulation will reiterate the measures in the Common Position and will provide more details in respect of the list of equipments concerned.

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Taken together, these developments illustrate that restrictions on dealings with Burma have broadened and will likely be closely enforced.  These events also highlight the need for all affected parties, especially exporters and re-exporters, to review and update their compliance measures.

If you have any questions regarding the Burmese sanctions regime or any related export control issues, please contact Ed Krauland at 202.429.8083 or ekrauland@steptoe.com in our Washington, DC office, or contact Guy Soussan at +32 2 626 0510 or gsoussan@steptoe.com in our Brussels office.