Back in May this blog reported on Secretary of State Clinton’s announcement that the U.S. would issue general licenses permitting export of financial services to, and investment in, Burma. Yesterday those general licenses were issued by the Department of Treasury’s Office of Foreign Assets Control (“OFAC”).

As I had reported, Secretary Clinton’s announcement of the upcoming general licenses suggested that there would be some qualifications based on potential humans rights concerns relating to certain companies or sectors of the Burmese economy, although she didn’t suggest what those might be. Now we know: the General Licenses do not cover certain dealings with the Burmese Ministry of Defense, state or non-state armed services or groups owned by these services or the MOD. No new investments may involve these groups but financial services may be exported to those groups as long they are not “in connection with the provision of security services.” Security services are not defined, and OFAC staff is unlikely to provide any guidance into what this term means if you call them up, so, for all practical purposes, no financial services may be exported to these groups. This means, in its broadest sense, no money may be transferred to these groups by a U.S. person for any reason.

The general licenses also do not permit export of financial services, or investments in, an blocked person, i.e., any person on OFAC’s List of Specially Designated Entities and Blocked Persons. The general license does, however, permit, notwithstanding the prohibition on dealing with blocked persons, exports of financial services to Burma which involve

transfers to or from an account of a financial institution whose property and interests in property are blocked pursuant to those authorities, provided that the account is not on the books of a financial institution that is a U.S. person.

The part of this provision permitting transfers from accounts of blocked Burmese financial institutions seems to be contradicted by the very next provision of the General License

This general license does not authorize any debit to a blocked account.

Because a transfer from a blocked account and a debit to a blocked account are the same thing and because an account of a blocked financial institution would normally be considered a blocked account, the provision prohibiting all debits to blocked accounts would seem to prohibit the transfers from a non-U.S. account of a blocked financial institution permitted by the former provision. Perhaps the point here is that the non-U.S. account of a blocked entity is not a blocked account, but then there is no need for the language permitting the debit “provided that the account is not on the books of a financial institution that is a U.S. person.” In any event, exporters can avoid this ambiguity by assuring that payments for exported goods do not originate from blocked financial institutions in Burma. A number of private banks in Burma are not on the SDN list, although several are, such as Myawaddy Bank and the Innwa Bank which was just designated simultaneously with the release of the new general licenses for Burma.

Two other important points bear stating regarding these new general licenses. First, investments in Burma in excess of $500,000 and any investments with Myanma Oil and Gas Enterprise will be subject to required annual reports to the Department of State. The reporting requirements, which appear extensive and burdensome, are detailed on this State Department web page. Interestingly, the report will require a copy of, or a “concise summary” of, the reporting company’s anti-corruption policy regarding its operations in Burma.

Second and finally, nothing in these general licenses permits the import of goods from Burma, which remain generally prohibited with certain exceptions, including exceptions for household goods, personal effects and informational materials.

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