On May 17, 2016, the Office of Foreign Assets Control ("OFAC") amended the Burmese Sanctions Regulations to broaden the scope of permissible trade with Burma. The Burma regulations, which have been amended piecemeal rather than simply re-issued, remain a complex and confusing affair with prohibitions in various sections completely repealed in later sections. It’s not clear in these instances why the prohibitions are not just removed.
So, for example, section 537.202 prohibits the "exportation … to Burma of any financial services," which effectively eliminates all trade with Burma because transferring money to Burma is considered an "export of financial services" under the definitions in the regulations. But if you keep reading the regulations, then you'll find all the way at the end of the Burma regulations another provision, section 537.529, which says the exact opposite, namely that exports of financial services to Burma are authorized. Of course, as is always the case, it remains illegal to export financial services (i.e., transfer funds) to any blocked party.
The idea of the amendment was, obviously, to permit most trade with Burma as a reward for significant progress by Burma in eliminating the human rights abuses that led to the sanctions in the first place. The problem, however, as was soon pointed out to OFAC by a number of banks, was that the best port in Burma, and the one through which almost all goods went to and from Burma, was owned by Asia World, a blocked party, effectively foreclosing almost all U.S. trade with Burma. So on December 7, 2015, OFAC issued General License No. 20 which allowed all transactions "ordinarily incident to an exportation to or from" Burma as long as it did not involve an exportation of goods to a blocked party.
Although it's not entirely clear that shipping goods through a blocked port is not an export to or from a blocked party, the intent, if not the language, was clear and the port at Yangon was back in business, at least until June 7, 2016, when General License No. 20 was set to expire. The amendment moved General License No. 20 to a new section 537.532, effectively eliminating the expiration date for dealing with Yangon Port or other blocked individuals while moving goods to and from Burma.
The recent amendment also dealt with a similar problem confronting U.S. persons residing in Burma, although there was no comparable general license and this issue was addressed for the first time by this amendment. Blocked parties have pervasive ownership interests in Burma. Asia World, for example, owns toll roads, airports, hotels, electric companies and supermarkets. The new section 537.525 allows all transactions by U.S. persons "ordinarily incident to the routine and necessary maintenance within Burma," other than transactions related to employment of a U.S. person by a blocked party. With this amendment, U.S. persons living in Burma will not have to worry that they'll have to pay OFAC a $250,000 fine on top of a $1 highway toll, a $2 bread loaf purchase or a $30 electricity bill.
Finally, the amendment is intended to permit transactions with and through almost all banks in Burma. In addition to a number of other entities, the amendment removed three blocked banks from the SDN List. It also removed these three banks from the general license in section 537.531 inasmuch as the general license would no longer be necessary for those banks once removed from the SDN List. It then added two blocked banks to that general license. A potential problem here is that nothing in the SDN listings for these five banks covered by the new general license references that license. So screening software will likely still show these banks as hits, and funds may be needlessly blocked.
(A version of this IRB previously appeared in Export Law Blog.)
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