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Archive for the ‘Burma Sanctions’ Category

May

12

Re: Burma (or is it Myanmar?): Why We Are All Lost in Translation

Posted by George Murphy at 10:33 am on May 12, 2013

Baganmyo http://commons.wikimedia.org/wiki/File:Baganmyo.jpg [Public Domain] The White House last week issued a notice continuing the national emergency with respect to Burma. The notice itself is an annual rite of passage for all U.S. sanctions programs under IEEPA, including those relating to Burma. What is surprising this time around is that nothing has changed from past notices. The current notice still refers to the “unusual and extraordinary threat to the national security and foreign policy of the United States” by “the actions and policies of the Government of Burma.”

This is where the head-scratching should begin. A lot has happened in the past year or so that one would think warrants an updated (and apt) notice. In late 2011, Secretary of State Clinton made the first State visit to Burma since 1955. Last May, the President nominated the first U.S. ambassador to the country in over two decades. Just this past November, the President became the first sitting president to visit Burma. Most important to U.S. businesses was OFAC’s significant relaxation last year of countrywide sanctions prohibiting the export of financial services to Burma, new investments in Burma and imports from Burma.

All of these events are major developments in U.S.-Burmese relations. So why would the White House use a boilerplate notice when it could have taken the opportunity to depict an accurate picture of what U.S. foreign policy currently is? The notice is, of course, a legal requirement and the Burmese government has not shed all doubt over its commitment to democracy and human rights. But describing the situation as an “unusual and extraordinary threat” to the United States without any further context? In light of all this Administration has accomplished with Burma, it seems odd and misleading to use an off-the-shelf response in this instance.

One consequence of this on the U.S. business community will likely be time and resources many spend confirming that the sanctions that have been lifted against Burma have now not been repealed. Such a sanity check would be reasonable given the notice and especially for those who have begun exploring business with Burma.

The Administration should have a complete and consistent script of what U.S. foreign policy is with respect to Burma so it, and the rest of us, can all be on the same page.

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Apr

30

The Bad News Is You’re Still on the SDN List

Posted by George Murphy at 6:37 pm on April 30, 2013

Category: Burma Sanctions • Economic Sanctions • OFAC • Sanctions • SDN List • Zimbabwe Sanctions

U.S. Navy photo by Mass Communication Specialist 2nd Class Jesse B. Awalt/Released (DefenseImagery.mil, VIRIN 090202-N-0506A-310) [Public domain], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ARobert_Mugabe%2C_12th_AU_Summit%2C_090202-N-0506A-310.jpg

ABOVE: Robert Mugabe

OFAC last week issued its first general license for U.S. sanctions relating to Zimbabwe. The license authorizes for the most part “all transactions involving Agricultural Development Bank of Zimbabwe and Infrastructure Development Bank of Zimbabwe.” Both banks, however, are on OFAC’s SDN List.

Since the two banks have been and remain on the SDN List, the license does not unblock the banks’ property interests that had been blocked as of the date of the license. OFAC issued a similar general license in February of this year authorizing dealings with four banks in Burma but kept the banks on the SDN List and continue to block the banks’ property interests blocked prior to the license. A major development from these licenses is, of course, giving U.S. exporters local banking options that were previously unavailable and without them likely stymied business development in those countries.

Exporters should also take note, however, of how OFAC’s easing of sanctions through these licenses has an onerous side-effect on U.S. companies. If a company’s policy is to determine whether to deal with entities or individuals based on their presence on the SDN List or other relevant sanctioned party lists, the authorization granted to deal with listed banks through these general licenses would go unnoticed. Exporters now must check all the lists they routinely do as well as stay on top of licenses issued by OFAC to know whether someone has, from most exporters’ perspectives, been in effect delisted.

If these SDN-lite designations continue, exporters will either need to monitor closely OFAC’s daily activity or make sure their screening software is doing so for them, at least if they want to be sure they are not unnecessarily limiting their export opportunities.

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Mar

19

Government Ministers Who Are Also SDNs Can Make Deals Hazardous

Posted by Clif Burns at 8:49 pm on March 19, 2013

Category: Burma Sanctions

Burma The Office of Foreign Assets Control (“OFAC”) has just released new guidance on the Burma sanctions and, more importantly, what’s left of the Burma sanctions. Buried at the end of the guidance is something of an answer to a conundrum we have addressed before, namely, if a government member is on the SDN list, what restrictions are thereby imposed on dealings by a U.S. person with that government.

This blog first addressed that question not too long ago when Specially Designated National Nalinee Taveesin was appointed the Prime Minister’s Office Minister of Thailand. I suggested that this meant that U.S. persons and companies could not deal with her either in her private or her official capacity and cautioned that transactions in which she was any way involved for the Thai government should be avoided.

That question is posed again by Burma where many members of the current government are holdovers from the military regime and remain on the SDN list. The omnipresence of designated cronies of the old junta in Burma was uncomfortably brought home to U.S. Assistant Secretary of State Jose Fernandez when he got caught in a grip and grin photo op in Burma with the Union of Myanmar Federation of Chamber of Commerce and Industry President (and Specially Designated National) Win Aung. Oops.

Here is what OFAC has to say about Burmese government officials who also happen to be SDNs:

285. If a Burmese Government minister is an SDN, how does that impact the ministry he leads?

A government ministry is not blocked solely because the minister heading it is an SDN. U.S. persons should, however, be cautious in dealings with the ministry to ensure that they are not, for example, entering into any contracts that are signed by the SDN.

Unfortunately, the more you examine this “guidance,” the less actual guidance it provides. The problem, of course, is with the phrase “for example” stuffed into the last sentence. The SDN can’t “for example” sign any contracts. But what else “for example” would pose a problem? Negotiating the contract? Approving the contract? Recommending changes to the contract? Taking actions that implement the contract? To be safe, a U.S. company needs to make sure that the SDN official has never heard of the contract and is on a different continent when the contract is negotiated, signed and performed.

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Nov

20

What Makes The Dawn Come Up Like Thunder? Imports!

Posted by Clif Burns at 3:59 pm on November 20, 2012

Category: Burma Sanctions

Burma Landscape The Office of Foreign Assets Control (“OFAC”) has taken another step in polishing off the economic sanctions against Burma by issuing General License 18 which authorizes most imports from Burma. This action was no doubt timed to coincide with the presidential visit to Burma which just took place.

Under the General License, all imports of items from Burma are now permitted, with two exceptions. First, the license prohibits import of any items from persons whose assets are still blocked under the Burma sanctions. A number of individuals associated with the Burmese military dictatorship are still blocked. Second, the new license does not authorize the import of rubies or jadeite mined in Burma or articles of jewelry containing rubies or jadeite mined in Burma.

If it seems odd that OFAC would leave in place the import ban on rubies and jadeite while permitting all other imports, it is odd, but OFAC had little discretion here. The ban on rubies and jadeite is mandated by the Tom Lantos Block Burmese JADE (Junta’s Anti-Democratic Efforts) Act of 2008, so OFAC has no discretion here without Congressional authorization. Don’t hold your breath that Congress will get around to recognizing that things in Burma have changed and that the Lantos Act no longer serves any real purpose.

A second obstacle to Burmese imports also complicates matters somewhat. On November 18, 2003, the Secretary of the Treasury designated Burma as a jurisdiction of primary money laundering concern; and then, on April 12, 2004, applied a “special measure” against Burma under Section 311 of the USA PATRIOT Act. That special measure prohibits any U.S. financial institution from maintaining a correspondent account for any Burmese bank, which will certainly complicate paying for imports from Burma. There is an exception in the special measure for correspondent accounts only used for permitted activities, which may ameliorate the situation somewhat, but banks may be justifiably hesitant to worry about whether correspondent accounts satisfy this requirement and may not permit accounts that would otherwise be permissible under this exception.

[Thanks to Rudyard Kipling, via the Cowardly Lion, more of less, for the title!]

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Jul

13

Burma Sanctions Shaved

Posted by Clif Burns at 1:41 am on July 13, 2012

Category: Burma Sanctions • OFAC

Burma Back in May this blog reported on Secretary of State Clinton’s announcement that the U.S. would issue general licenses permitting export of financial services to, and investment in, Burma. Yesterday those general licenses were issued by the Department of Treasury’s Office of Foreign Assets Control (“OFAC”).

As I had reported, Secretary Clinton’s announcement of the upcoming general licenses suggested that there would be some qualifications based on potential humans rights concerns relating to certain companies or sectors of the Burmese economy, although she didn’t suggest what those might be. Now we know: the General Licenses do not cover certain dealings with the Burmese Ministry of Defense, state or non-state armed services or groups owned by these services or the MOD. No new investments may involve these groups but financial services may be exported to those groups as long they are not “in connection with the provision of security services.” Security services are not defined, and OFAC staff is unlikely to provide any guidance into what this term means if you call them up, so, for all practical purposes, no financial services may be exported to these groups. This means, in its broadest sense, no money may be transferred to these groups by a U.S. person for any reason.

The general licenses also do not permit export of financial services, or investments in, an blocked person, i.e., any person on OFAC’s List of Specially Designated Entities and Blocked Persons. The general license does, however, permit, notwithstanding the prohibition on dealing with blocked persons, exports of financial services to Burma which involve

transfers to or from an account of a financial institution whose property and interests in property are blocked pursuant to those authorities, provided that the account is not on the books of a financial institution that is a U.S. person.

The part of this provision permitting transfers from accounts of blocked Burmese financial institutions seems to be contradicted by the very next provision of the General License

This general license does not authorize any debit to a blocked account.

Because a transfer from a blocked account and a debit to a blocked account are the same thing and because an account of a blocked financial institution would normally be considered a blocked account, the provision prohibiting all debits to blocked accounts would seem to prohibit the transfers from a non-U.S. account of a blocked financial institution permitted by the former provision. Perhaps the point here is that the non-U.S. account of a blocked entity is not a blocked account, but then there is no need for the language permitting the debit “provided that the account is not on the books of a financial institution that is a U.S. person.” In any event, exporters can avoid this ambiguity by assuring that payments for exported goods do not originate from blocked financial institutions in Burma. A number of private banks in Burma are not on the SDN list, although several are, such as Myawaddy Bank and the Innwa Bank which was just designated simultaneously with the release of the new general licenses for Burma.

Two other important points bear stating regarding these new general licenses. First, investments in Burma in excess of $500,000 and any investments with Myanma Oil and Gas Enterprise will be subject to required annual reports to the Department of State. The reporting requirements, which appear extensive and burdensome, are detailed on this State Department web page. Interestingly, the report will require a copy of, or a “concise summary” of, the reporting company’s anti-corruption policy regarding its operations in Burma.

Second and finally, nothing in these general licenses permits the import of goods from Burma, which remain generally prohibited with certain exceptions, including exceptions for household goods, personal effects and informational materials.

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