On February 11, 2021, the White House issued an Executive Order (EO) authorizing sanctions in response to the February 1, 2021, military coup in Myanmar (Burma). The US Treasury Department’s Office of Foreign Assets Control (OFAC) named ten individuals and three entities as Specially Designated Nationals (SDNs) pursuant to the EO. At the same time, the US Commerce Department’s Bureau of Industry and Security (BIS) announced new restrictions on certain exports to Myanmar of items subject to the Export Administration Regulations (EAR).
This is the first new sanctions program adopted under the Biden administration, less than one month after the inauguration. Prior US sanctions and export controls targeting Myanmar were terminated in October 2016. Since then, the United States continued to maintain targeted sanctions against certain individuals and entities under other sanctions programs, including a number of SDNs named under the Global Magnitsky Sanctions program.
Citing the February 1 coup in which the Myanmar military “reject[ed] the will of the people of Burma as expressed in elections held in November 2020 and undermin[ed] the country’s democratic transition and rule of law,” the EO authorizes, in Section 1(a), the Treasury Department, in consultation with the State Department, to impose blocking sanctions on any foreign person determined:
- to operate in the defense sector of the Myanmar or any other sector as determined by the Treasury Secretary, in consultation with the Secretary of State;
- to be responsible for, complicit in, or to have engaged or attempted to engage in:
- actions or policies that undermine democratic processes or institutions in Myanmar;
- actions or policies that threaten the peace, security, or stability of Myanmar;
- actions or policies that restrict freedom of expression or assembly, or any media in Myanmar;
- the arbitrary detention or torture of any person in Myanmar; or
- other serious human rights abuse in Myanmar;
- to be or have been a leader or official of:
- the military or security forces of Myanmar;
- the Government of Myanmar on or after February 2, 2021;
- an entity that has, or whose members have, engaged in any of the sanctionable activities noted above as listed in subsection (a)(ii) of the EO; or
- an entity that is blocked pursuant to the EO as a result of activities related to the leader’s or official’s tenure;
- to be a political subdivision, agency, or instrumentality of the Government of Myanmar;
- to be a spouse or adult child of any person blocked pursuant to the EO;
- to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any person blocked pursuant to the EO; or
- to be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, the Myanmar military or security forces or any person blocked pursuant to the EO.
As is evident, the scope of individuals or entities (“person”) that could be subjected to the new blocking sanctions is quite broad. The process for doing so is in the hands of the Treasury Secretary who, acting through OFAC, publicly identifies such persons. Any such person who is designated as an SDN becomes off limits to business activity with US persons absent an authorization, and their property within US jurisdiction or in the custody of a US person is frozen. Furthermore, any entity that is owned 50% or more by one or more SDNs suffers the same consequences by operation of law. And for non-US persons, if they provide material support or goods or services to an SDN, or act on behalf of, or are owned or controlled by the Myanmar military or security services or an SDN, they, too, can be designated by the Treasury Secretary. So the potential sweep of these sanctions is significant.
At this time, OFAC designated ten individuals and three entities in Myanmar as SDNs. They include two individuals who were already sanctioned under the Global Magnitsky Sanctions program and three entities—Cancri Gems & Jewellery Co., Ltd., Myanmar Imperial Jade Co., Ltd., and Myanmar Ruby Enterprise—that are (according to a UN-sponsored report) subsidiaries of Myanmar Economic Holdings Limited (MEHL), a military-controlled commercial conglomerate sanctioned by OFAC from July 2008 to October 2016. We anticipate that additional designations will be forthcoming.
BIS Export Controls
At the same time as the White House and OFAC announcements, BIS announced it has “implemented a series of restrictions on exports of sensitive items to Myanmar’s Ministry of Defense, the Ministry of Home Affairs, armed forces, and security services” under the EAR. These include:
- Adopting a presumption of denial for items requiring a license for export, reexport, or in country transfer to these select Myanmar government departments and agencies; and
- Revoking certain previously-issued licenses to these departments and agencies which have not been fully utilized.
In addition, BIS has indicated that it “will suspend” certain license exceptions previously available as a result of Myanmar’s inclusion in “Country Group B” under the EAR, including License Exceptions GBS and TSR. See 15 C.F.R. §§ 740.4 & 740.6.
BIS stated it is assessing additional actions, including other restrictive list actions such as adding person to the Entity List (see 15 C.F.R.§ 744.16, , adding Myanmar (Burma) to the list of countries subject to the EAR’s military end use and end user (MEU) restrictions (see 15 C.F.R. § 744.21), and the separate military intelligence end use and end user (MIEU) restrictions, and possibly “downgrading Burma’s Country Group status in the EAR.”
More details about the BIS announcement are expected to appear in the Federal Register in the coming days.
Potential for Future Actions
Although the number of persons sanctioned under the new EO is fairly limited, and the new Myanmar sanctions regime stops well short of a country-wide embargo, the EO is broadly worded to authorize future designations against a wide range of targets depending on how the situation unfolds. Notably, the EO sets out a structure for the potential imposition of “sectoral sanctions” in sectors of Myanmar’s economy beyond the already-designated defense sector. This type of sanctions mechanism has been employed in places like Russia and Venezuela as well, with additional sectors being designated and/or restrictions tightened as the political situation within the country and with the United States deteriorated.
Apart from the export controls and sanctions steps noted above, the White House also announced other measures, which include taking unspecified “steps to prevent” Myanmar military generals “from improperly accessing more than $1 billion in Burmese government funds held in the United States” and freezing US assistance benefitting the Myanmar government and redirecting some government assistance to “programs that support and strengthen civil society and the private sector.”
For more information about this action or for assistance in responding to these developments, contact a member of Steptoe’s Sanctions or Export Controls practices in Washington, D.C., Beijing, and Hong Kong.