The EO imposes targeted sanctions in response to Burma’s military coup
On 11 February 2021 the Biden Administration issued Executive Order 14014 (EO) launching a new, targeted sanctions regime in response to the Burmese military's 1 February 2021 coup.
While the EO does not place territorial or comprehensive sanctions on Burma, the EO's designation criteria are broad and include authority to designate Burmese government entities and entities in the Burmese defense sector. Businesses should note that foreign persons found to operate in the Burmese defense sector can also face sanctions exposure under the EO, creating a secondary sanctions risk even when no U.S. nexus is involved.
Specifically, the EO authorizes the Treasury Department, in consultation with the Secretary of State, to sanction foreign persons that it has determined to:
- Operate in the defense sector of the Burmese economy, or other sectors as determined by the U.S. government.
- Have been involved in actions to undermine democracy in Burma or actions involving human rights abuses.
- Be or have been a leader or official of:
- The military or security forces of Burma, or any successor entity of such entities.
- The Government of Burma on or after 2 February 2021.
- Entities involved in actions undermining democracy or actions involving human rights abuses.
- Any entity sanctioned pursuant to the EO.
- Be a political subdivision, agency, or instrumentality of the Government of Burma.
- Be a spouse or adult child or any person sanctioned pursuant to the EO.
- Have materially assisted, sponsored, or provided financial, material, or technology support for, goods or services to or in support of any person sanctioned pursuant to the EO.
- Be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, the military or security forces of Burma or any person sanctioned pursuant to the EO.
The EO defines the "Government of Burma" to mean the Government of Burma, any political subdivision, agency, or instrumentality thereof, including the Central Bank of Myanmar, and any person owned or controlled by, or acting for or on behalf of, the Government of Burma.
OFAC adds Burmese individuals and entities to its SDN List
Pursuant to the EO, OFAC announced that it has added new individuals and entities to its SDN List. The designations include 10 current and former military officials in Burma and three Burmese entities in the Burmese jade and rubies business, which are wholly owned subsidiaries of a large conglomerate owned or controlled by the Burmese military.
As a result of the OFAC designations, all property – and interests in property – of the individuals and entities named on the SDN List are blocked and must be reported to OFAC. The same applies to any entities that are at least 50 percent owned (directly or indirectly) by the named individuals or entities – whether individually or with other SDNs – when such property and interest in property are in the United States or are in the possession or control of U.S. persons.
BIS issues export restrictions
Also on 11 February 2021 the BIS announced that it is taking immediate action to limit exports of sensitive goods to Burma's Ministry of Defense (MOD), the Ministry of Home Affairs, armed forces, and security services. A BIS press release outlines the following restrictions that are in effect as of 11 February 2021:
- BIS will apply a presumption of denial for items requiring a license for export and reexport to Burma's MOD, the Ministry of Home Affairs, armed forces, and security services.
- BIS is revoking certain previously issued licenses to Burma's MOD, the Ministry of Home Affairs, armed forces, and security services which have not been fully utilized.
- BIS will suspend certain license exceptions previously available to Burma including License Exception Shipments to Country Group B countries (GBS) and License Exception Technology and Software under restriction (TSR).
BIS has not issued official implementing regulations at this time, so the exact scope of entities to which this applies is not yet clear. The press release states that BIS is considering additional actions, including possible Entity List additions; adding Burma to the list of countries subject to the Export Administration Regulation (EAR) military end use and end user (MEU) and military intelligence end use and end user (MIEU) restrictions; and downgrading Burma's Country Group status in the EAR.
Biden administration signals that further actions may be taken
In coordination with the EO, the White House has published a fact sheet summarizing the recent sanctions and export control developments.
The State Department also released a statement stating that it has "gone to great lengths to ensure" that the new sanctions "do not target the economy or people of Burma." This may signal the continued use of more targeted sanctions measures and a careful calibration of the impact on Burma’s economy as a whole.
In a press release, the Treasury Department stated that it "stands with the people of Burma" and, as such, is "prepared to take additional action should Burma's military not change course." Secretary Yellen warned that "if there is more violence against peaceful protestors, the Burmese military will find that today's sanctions are just the first."
U.S. companies should review their activities to ensure they are not engaging with any of the newly designated SDNs (or entities owned by them) and that their activities are not impacted by any of the new BIS export restrictions. While the EO does not sanction the entire Burmese government or whole sectors within Burma, businesses should remain alert to the possibility of additional actions.
Hogan Lovells lawyers will continue to monitor new developments and can assist you with assessing the potential impact of these restrictions on your company.