Overview
On December 7, 2015, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued General License No. 20, which authorizes, for an initial period of six months, certain transactions that are “ordinarily incident” to the exportation of goods, technology, or non-financial services to or from Myanmar. Trade with Myanmar in goods, technology and non-financial services is not currently prohibited by OFAC (though exports may require a license from the US Department of Commerce), but complications have arisen when companies have discovered the involvement of Specially Designated Nationals and Blocked Persons (SDNs) in intermediary roles.
This new general license clarifies that US persons are permitted to acquire from SDNs who have been designated under the Burma sanctions program a narrow range of services ordinarily incident to trade transactions, such as certain financial, transportation, and insurance services. The general license is clear that it does not apply if the exportation itself is to, from, on behalf of or for the benefit of an SDN. Nor does the general license otherwise lift the prohibition on US persons dealing with SDNs (or the property of entities owned 50% or more by SDNs), or allow US financial institutions to advise or confirm financing by SDNs. The general license authorizes limited unblocking of previously blocked property, subject to a requirement to report to OFAC. Specifically, it authorizes US financial institutions to engage in all transactions necessary to unblock and return transactions that were blocked on or after April 1, 2015, if the transactions would have been authorized under this new general license had they taken place after it was issued.
Because of the widespread presence of SDNs in Myanmar’s economy, including in the operation of several of its major banks, ports, roads, and airports, US persons will face less risk in trading with Myanmar under this new authorization for certain trade-related ancillary services from SDNs. It has been reported that OFAC issued this general license in response to feedback from industry that otherwise authorized trade was being restricted by financial institutions due to concerns about shipments transiting Myanmar’s main port in Yangon, which is operated by an SDN. In addition to mitigating the risk of using SDN-affiliated ports, this general license clarifies that payment-related transactions in connection with authorized trade with Myanmar are permissible, provided certain conditions are met (although many financial services with Myanmar, even using certain SDN banks, were already authorized).
US officials have been reported as stating that the issuance of this general license is not a reaction to the recent elections held in Myanmar and does not represent a change in sanctions policy, but rather that it was intended to be a technical fix to what was considered an unintended consequence of the US sanctions regime. Still, the timing of this action, coming soon after the Myanmar military began taking steps to accept the recent electoral victory of the National League for Democracy (NLD), suggests that it may reflect some level of satisfaction on the part of the US Government with how the military has handled the election and its immediate aftermath. The course of events over the next few months, in particular the ability of the NLD to form a government and implement its electoral platform without undue interference from the military, could lead to further relaxation of the sanctions regime.
The US Government has already tailored most of its remaining sanctions on Myanmar to target activities that it views as being contrary to US foreign policy interests, and the core prohibitions still on the books are not likely to be lifted any time soon. Those include prohibitions on 1) importing jadeite and rubies from Myanmar, 2) new investment in Myanmar involving SDNs, the military or other state or non-state armed groups, and 3) exporting financial services to the military or other state or non-state armed groups in connection with the provision of security services or to SDNs under certain circumstances. On the other hand, OFAC has already removed from the SDN list senior government officials and one major private sector actor, and it may de-list on a case-by-case basis additional SDNs whose conduct the US Government finds no longer presents serious foreign policy concerns.
We will continue to keep you apprised of sanctions developments. You can also follow us on Twitter (@SteptoeIntlReg).
