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On March 25, 2021, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated two Burmese military holding companies, Myanma Economic Holdings Public Company Limited (MEHL) and Myanmar Economic Corporation Limited (MEC).  As a result of these actions:

• U.S. companies are prohibited from engaging in any unlicensed business with MEHL, MEC, or any entities in which MEHL or MEC hold a 50 percent or greater ownership interest (hereafter, MEHL/MEC Subsidiaries).
• All property and property interests of MEHL, MEC, and MEHL/MEC Subsidiaries are now blocked and cannot be dealt in without a license from OFAC.
• Foreign companies are at risk of SDN designation for providing assistance, support, goods, or services to MEHL, MEC, or MEHL/MEC Subsidiaries.

According to the U.S. Department of the Treasury, MEHL and MEC dominate numerous sectors of Burma’s economy, including trading, natural resources, alcohol, cigarettes, and consumer goods.  MEHL, for instance, is reported to have business interests in Burma’s banking, trading, logistics, construction, mining, tourism, agriculture, tobacco, food, and beverage industries.  MEC is reported to have interests in Burma’s mining, manufacturing, telecommunications, and natural resources industries.  As relevant to forwarders, it appears that MEHL, MEC, or MEHL/MEC Subsidiaries are involved in various Burmese industries tied to the import and export of goods. 

Given the significance of these designations for Burmese trade, OFAC has also issued four general licenses that authorize certain activity and provide a wind-down period for commercial activity with MEHL, MEC, and MEHL/MEC Subsidiaries:

• General License 1 (GL1).  GL1 authorizes activity that is the official business of the US government by its employees, grantees, or contractors.
• General License 2 (GL2).  GL2 authorizes activity that is the official business of certain international organizations and other international entities by its employees, grantees, and contractors.  GL2’s authorization extends beyond UN projects and includes some development banks, international associations, and other projects.
• General License 3 (GL3).  GL3 authorizes activity that is necessary and ordinarily incident to certain types of projects by nongovernmental organizations.
• General License 4 (GL4).  GL4 authorizes activity that is necessary and ordinarily incident to winding down transactions with MEHL, MEC, or MEHL/MEC Subsidiaries until June 22, 2021.

OFAC also released FAQ 883, which states that any companies that are unable to wind-down business with MEHL, MEC, or MEHL/MEC Subsidiaries should seek formal guidance from OFAC.

Next Steps

MEHL and MEC were added to the U.S. Department of Commerce’s Entity List on March 4, 2021.  Accordingly, forwarders may have already started due diligence to identify MEHL and MEC’s involvement in their supply chains, even though the Entity List restriction only prevented the export, re-export, and in-country transfer of U.S. goods to MEHL and MEC.  In light of OFAC’s actions, however, it may be prudent for U.S. forwarders to:

• Identify any Burma-related shipments or business;
• Determine if any Burma-related shipments or business involve MEHL, MEC, or MEHL/MEC Subsidiaries;
• Determine if GL1, GL2, or GL3 authorize forwarders to continue offering services with respect to affected business;
• To the extent GL1, GL2, and GL3 do not apply, review relevant service contracts to determine the appropriate steps to wind-down affected business by June 22, 2021; and
• Take steps to wind down unlicensed business under GL4 and screen against any new business.

Similarly, it may be prudent for foreign forwarders to: (1) identify any business involving the sanctioned parties – particularly if that business also involves U.S. parties or goods; (2) evaluate the applicability of US sanctions; and (3) take any appropriate next steps.

We hope this is helpful, but please let us know if you have any questions.

Oliver Krischik

On March 2, 2021, the U.S. Department of State announced new Russia-related sanctions and Entity List additions pursuant to the Countering America’s Adversaries Through Sanctions Act (CAATSA) and Chemical and Biological Weapons Act (CBW Act) following a determination that the Russian Government used a chemical weapon against its own nationals. As relevant to forwarders, some of these sanctions included changes to export control policy regarding exports, re-exports, and in-country transfers involving Russia.

Effective March 18, 2021, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) has:

• Suspended the following license exceptions for items controlled for national security reasons (NS items) destined to Russia:
  • Servicing and Replacement Parts and Equipment (RPL)
  • Technology and Software Unrestricted (TSU), and
  • Additional Permissive Reexports (APR).

• Adopted a presumption of denial review standard for license applications for exports and re-exports to Russia of NS items, with the following exceptions:
  • Items necessary for the safety of civil fixed-wing passenger aviation
  • Deemed exports and re-exports to Russian nationals
  • Items destined for wholly-owned U.S. subsidiaries and other foreign subsidiaries of U.S. companies that are located in Russia
  • Items in support of government space cooperation, and
  • Until September 1, 2021, items in support of commercial space launch activities.

In addition, effective March 18, 2021, the Department of State’s Directorate of Defense Trade Controls (DDTC) has added Russia to the 22 CFR § 126.1 list of countries subject to a presumption of denial and ineligible for license exemptions, with some exceptions for shipments:

• Supporting government space cooperation projects, and
• Until September 1, 2021, supporting commercial space launch projects.

In light of these changes, it may be prudent for forwarders to review Russia-related exports and re-exports of NS items to ensure that they are not relying on license exceptions RPL, TSU, or APR. Similarly, it may be prudent to review Russia-related shipments of US Munitions List (USML) items to confirm they are not relying on inapplicable International Traffic in Arms Regulations (ITAR) license exemptions.

We hope this is helpful, but please let us know if you have any questions.

The massive stimulus package approved by Congress late yesterday includes long awaited relief for many 501(c)(6) organizations. The package makes 501(c)(6) organizations eligible for loans under the Paycheck Protection Program (PPP) if they meet the following requirements:

• The organization does not receive more than 15% of receipts from lobbying;
• The lobbying activities do not comprise more than 15% of activities;
• The cost of lobbying activities of the organization did not exceed $1 million during the most recent tax year that ended prior to February 15, 2020; and
• The organization has 300 or fewer employees.

Therefore, many small to mid-size organizations will be able to access the $275 billion in additional PPP funding provided under this relief package.

While some associations may have already applied for an Economic Injury Disaster Loan (EIDL), under the current regulations they can still obtain a forgivable PPP loan.

As we learn more about the relief package in the coming days, association leadership can start taking steps to determine whether a PPP loan is right for their organization. As part of this process, they should contact their banking institution to determine when and how they can apply for a PPP loan.

We will continue to provide you with ongoing updates regarding how this new relief package impacts nonprofit organizations. In the meantime, please don’t hesitate to contact a member of GKG Law’s Trade & Professional Associations team with any specific questions.