December 10, 2015
Following the recent historic election in Myanmar in which Daw Aung San Suu Kyi and her National League for Democracy won a landslide victory, the political landscape in the country continues to evolve at a fast pace. Suu Kyi attended private meetings last week with President U Thein Sein, Commander-in-Chief Min Aung Hlaing and, perhaps most surprisingly, U Than Shwe, the retired and aging Senior General who led the country for almost two decades and who was responsible for Suu Kyi’s many years of house arrest. While the exact nature and content of the three meetings has not been made public, it is believed that the focus was on achieving a smooth transition of power and on national reconciliation. The meeting with Than Shwe was particularly significant because he is believed still to wield great power from behind the scenes and, according to his grandson, he has now acknowledged that Suu Kyi will be the next leader of Myanmar.
Against the above backdrop, the US has started to further ease its sanctions against Myanmar. On December 7, 2015, the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of the Treasury issued General License No. 20, lifting restrictions on certain trade-related transactions with Burma. Under the General License, individuals, companies, and financial institutions can, for the next six months, conduct transactions “that are ordinarily incident to the exportation to or from Burma of goods, technology, or non-financial services.”[1] Specifically, the General License authorizes incidental trade-related finance transactions, such as paying port fees and shipping and handling charges, so long as the transaction does not directly involve a Specially Designated National (“SDN”) or an entity in which an SDN has a 50 percent or greater interest. This license will be in effect until June 7, 2016, and retroactively authorizes financial institutions to unblock and reinstate transactions back to April 1, 2015, would they have qualified as authorized had this license been in effect.
In practice, this will mean that U.S. persons can be involved in transactions that go through ports and facilities that are owned or controlled by SDNs. This has been a major bottleneck in promoting trade with Burma as major facilities at sea and airports in the country remain owned or controlled by SDNs. In July 2015, The Clearing House and The Bankers Association for Finance and Trade–associations representing many financial institutions–requested that OFAC issue a license allowing the use of the port terminals, so long as the SDNs were not directly involved in the transaction. This General License, by allowing port-related transactions as long as “the exportation is not to, from, or on behalf of” an SDN, provides the remedy the associations requested.
General License No. 20 reflects the “U.S. government’s goal of supporting Burma’s democratic and economic transition,” which, over the last few years, has included over $375 million in assistance.[2] Since 2003, the Burmese Sanctions Regulations, 31 C.F.R. Part 537, has included broad trade restrictions and blocked all U.S. transactions, either directly or indirectly, with individuals or entities identified as SDNs. Recently, however, the Obama administration has made establishing normal trade with Burma a key foreign policy goal and gradually eased the broad trade restrictions, keeping the SDN restrictions in place.
A General License such as this one that includes an expiration date is uncommon. The six month timeframe may be insufficient to allow full-scale resumption of trade with the country — there remains uncertainty with respect to what will happen after six months or with contractual terms that may extend beyond the June 7, 2016 deadline. The U.S. government has pledged to review the License within the next several months and may renew it; it also has the power to remove the expiration date altogether. This latter option will be more likely if the political situation in the country continues to improve, and the new parliament is properly seated in March 2016. Further relief–either via removing entities from the sanctions list and/or licensing additional transactions–is also possible.
For further information on General License No. 20 or Burmese Sanctions Regulations, please see our recent webcast, “The New Era of Fluid Global Sanctions.”
[1] Office of Foreign Assets Control, General License Number 20 (Dec. 7, 2015).
[2] Fact Sheet: U.S. Assistance to Burma, White House Press Release (Nov. 13, 2014) https://www.whitehouse.gov/the-press-office/2014/11/13/fact-sheet-us-assistance-burma.
Gibson, Dunn & Crutcher’s lawyers are available to assist in addressing any questions you may have regarding the above developments. Please contact the Gibson Dunn lawyer with whom you usually work, or the authors:
Robert S. Pé – Hong Kong (+852 2214 3768, [email protected])
Judith A. Lee – Washington, D.C. (+1 202-887-3591, [email protected])
Jose W. Fernandez – New York (+1 212-351-2376, [email protected])
Adam M. Smith – Washington, D.C. (+1 202-887-3547, [email protected])
David A. Wolber – Washington, D.C. (+1 202-887-3727, [email protected])
Nicholas A. Klein – Denver (+1 303-298-5795, [email protected])
Please also feel free to contact any of the following leaders and members of the International Trade Group:
United States:
Ronald Kirk – Dallas (+1 214-698-3295, [email protected])
Marcellus A. McRae – Los Angeles (+1 213-229-7675, [email protected])
Daniel P. Chung – Washington, D.C. (+1 202-887-3729, [email protected])
Lindsay M. Paulin – Washington, D.C. (+1 202-887-3701, [email protected])
Europe:
Peter Alexiadis – Brussels (+32 2 554 72 00, [email protected])
Attila Borsos – Brussels (+32 2 554 72 10, [email protected])
Patrick Doris – London (+44 (0)207 071 4276, [email protected])
Penny Madden – London (+44 (0)20 7071 4226, [email protected])
Mark Handley – London (+44 (0)207 071 4277, [email protected])
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