Background - News & Events (Landing) 2016
All Alerts & Newsletters

President Biden Imposes Sanctions & Export Controls on Myanmar In Response to Military Coup

Feb.16.2021

In the first material sanctions-related action of the new U.S. Administration, on February 11, 2021, President Biden issued Executive Order 14014 (EO) imposing sanctions on Myanmar (Burma) in response to the February 1, 2021, military coup and subsequent detention of government leaders, politicians, and others there. The sanctions focus on the defense sector of the Burmese economy, its military, and current military government, but provide authority to expand the scope of the sanctions. The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) subsequently sanctioned 10 individuals and three entities pursuant to the new authorities. Simultaneously, the Commerce Department’s Bureau of Industry and Security (BIS) tightened its existing licensing policy on Burma and previewed a potential substantial expansion of future export controls in the event the situation deteriorates further. 

The EO grants the Secretary of the Treasury, in consultation with the Secretary of State, the authority to block the property of any foreign person determined to:

  1. Operate in the defense sector of the Burmese economy, or any other sector of the economy;
  2. Be responsible for or complicit in, or to have engaged or attempted to engage in actions or policies that undermine democracy in Burma; threaten its peace stability or security; limit or penalize the exercise of freedom of expression or assembly; limit or penalize access to print, online, or broadcast media; or the arbitrary detention or torture or serious human rights abuses of any other person;
  3. Be a leader or official of the military or security forces of Burma or its Government on or after February 2, 2021;
  4. Be a political subdivision, agency, or instrumentality of the Government of Burma, including the Central Bank of Myanmar;
  5. Be a spouse or child of anyone whose property is blocked pursuant to the EO;
  6. Have materially assisted sponsored, or provided financial, material, or technological support for, or goods or services to or in support of anyone whose property is blocked pursuant to the EO; and
  7. Be owned or controlled by, or have acted on behalf of the military or security forces of Burma or anyone whose property is blocked pursuant to the EO.

Acting pursuant to these authorities, OFAC has designated six current military officials, four members of the State Administration Council (SAC), and three entities for being owned or controlled by the Burmese military. The individuals were all designated for being directly involved in organizing or overseeing the military coup in early February and/or taking power, via the SAC, after the coup. The three entities were targeted for being owned or controlled by the military. 

In conjunction with the newly imposed sanctions, BIS implemented a series of export restrictions focused on the following entities: Burma’s Ministry of Defense, the Ministry of Home Affairs, armed forces, and security services. BIS will immediately apply a presumption of denial for all items requiring an export license to these entities, revoke previously issued licenses involving these entities that have not been fully utilized, and suspend the availability of certain license exceptions previously available for Burma. BIS also warned that it is considering further actions, including (a) adding Burma to the list of countries subject to its Military End-Use and End-User rule (currently limited to Russia, China, and Venezuela) (MEU Rule), (b) adding more entities to the Entity List, or (c) downgrading Burma’s current country group status (currently it is Country Group B).

Key Takeaways: While the authority is still new, there are a few immediate key takeaways for clients:

  • Sharp Increase in Sanctions Risks In-Country: President Biden elected not to return to the same type of comprehensive embargo that the United States had previously maintained on Burma until its final repeal in 2016 and U.S. Persons remain permitted to transact with the country. However, the sanctions related risk has increased markedly, given (a) the broad authorities contained in the EO and (b) the substantial role that the military and defense sector continue to play in the Burmese economy.
  • More Designations Possible: Depending on how the situation in Burma develops, there is a real possibility of additional designations beyond the 13 announced today and summarized above. This could include not only additional actors in the Burmese military and current government of Burma, but given the broad authorities that the EO grants the Secretary of the Treasury, if the situation in Burma deteriorates further, we would expect the designations could expand to more entities and other sectors.
  • Expanded Export Risks: Similar risks of future expansion exist for those transacting with Burma involving items subject to the Export Administration Regulations (EAR). BIS’s first actions were relatively restrained and items subject to the EAR that did not previously require a license to Burma, still do not. However, BIS has signaled its willingness to substantially expand these restrictions in ways that would impose broader licensing requirements. In particular, adding Burma to the MEU Rule would significantly expand the universe of activity potentially requiring a license, given the extensive role of the Burmese military and military end-users in the commercial economy.
  • Increased Importance on Know Your Customer (KYC) In-Country: The impact of both the designations and the EO’s authority is substantially broader than it first appears, given the outsized role of the Burmese military in the country’s economy. OFAC designated three entities for being owned or controlled by the military, but numerous other counterparties face a similar designation risk. It will therefore be critical for companies operating in Burma to not only screen their counterparties against applicable sanctions lists, but also to identify (a) the ownership and control structure of those counterparties and (b) the sectors in which they operate, to determine if they are sanctioned already by virtue of OFAC’s “50 Percent Rule” or at risk of future designation given their activities or control. 
  • Continued Reliance on “Sectoral” Authorities: Finally, the new Administration has carried over one of the sanctions tools that former President Trump’s administration relied on heavily. While the ability to designate an entity solely for operating in a certain “sector” of an economy was first developed by President Obama in the Russia context (EO 13662), it became President Trump’s primary tool of choice to pressure non-U.S. actors in the Venezuela context. Most of the commercially relevant Venezuela-related designations over the last two years (e.g., PdVSA, Rosneft Trading, EU vessels and shipping companies, etc.) were on the basis of those companies “operating in” the gold, defense, oil, or finance sectors of the Venezuelan economy. These designation prongs give OFAC substantial flexibility to increase pressure on non-U.S. targets and we expect OFAC will continue to utilize these types of sanctions.

For more information, please contact the professional(s) listed below, or your regular Crowell & Moring contact.

Carlton Greene
Partner – Washington, D.C.
Phone: +1 202.624.2818
Email: cgreene@crowell.com
Jeffrey L. Snyder
Partner – Washington, D.C.
Phone: +1 202.624.2790
Email: jsnyder@crowell.com
David (Dj) Wolff
Partner; Attorney at Law – Washington, D.C., London
Phone: +1 202.624.2548, +44.20.7413.1368
Email: djwolff@crowell.com
Brian McGrath
Associate – New York
Phone: +1 212.895.4222
Email: bmcgrath@crowell.com
Laurel Saito
Senior Law Clerk – Washington, D.C.
Phone: +1 202.508.8871
Email: lsaito@crowell.com
Edward Goetz
Manager, International Trade Services – Washington, D.C.
Phone: +1 202.508.8968
Email: egoetz@crowell.com