U.S. Expands Sanctions on Burma
Client Alert
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
