Military Takeover in Burma Leads to New US Sanctions and Export Controls

On February 1, 2021, the Burmese military announced that it had seized control of the country from the country's democratically elected government.¹ In response to the coup, the US has so far designated 12 individuals and three entities and imposed restrictions on certain exports. Allied governments, including the European Union, the United Kingdom and Canada, either have promulgated their own sanctions or are considering doing so. The US has signaled that it is preparing additional measures targeting the individuals responsible for the coup and ensuing violence. Given the Burmese military's pervasive presence in Burma's economy, companies are advised, as a matter of priority, to assess their commercial ties with Burma.

Background

In Burma's November 2020 national elections, the civilian-led National League for Democracy ("NLD") won an overwhelming victory over the military-backed Union Solidarity and Development Party ("USDP"). On Feb. 1, 2021, the military responded by detaining the country's civilian leadership, including State Counsellor Daw Aung San Suu Kyi, and declaring a one-year state of emergency.

The coup has drawn significant domestic opposition and the Burmese military's reaction has raised human rights concerns. In countering the protests, security forces have resorted to increasing violence leading to a large number of fatalities.² They have reportedly used various foreign-origin technologies and products, in some cases obtained in violation of various countries' export controls.³ The coup has placed foreign companies active in Burma in a delicate position. Since the coup, some have reiterated their support for the rule of law and human rights protection. However, the Burmese military may impose new conditions on businesses that conflict with those values.⁴

Biden Administration Response

President Joseph R. Biden pledged immediate action in response to the Burmese military's seizure of power in a statement issued on Feb. 1, 2021.⁵ On Feb. 10, President Biden laid out the steps his Administration would be taking, which included: (i) imposing sanctions under the authority of a new executive order; (ii) implementing strong export controls; and (iii) pursuing measures to prevent Burmese military leaders from accessing US$1 billion of Burmese government funds held in the United States.⁶ The following day, the President issued Executive Order ("EO") 14014, "Blocking Property with Respect to the Situation in Burma."⁷

EO 14014

EO 14014 targets the Burmese military, its leaders and their business interests. The EO authorizes the blocking of the property and interests in property of any foreign person⁸ determined by the Secretary of the Treasury, in consultation with the Secretary of State:

• to operate in Burma's defense sector or any other sector of the Burmese economy as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State;
• to be responsible for or complicit in, or to have directly or indirectly engaged or attempted to engage in: (a) actions or policies that undermine democratic processes or institutions in Burma; (b) actions or policies that threaten the peace, security or stability of Burma; (c) actions or policies that prohibit, limit or penalize the exercise of freedom of expression or assembly by people in Burma, or that limit access to print, online or broadcast media in Burma; or (d) the arbitrary detention or torture of any person in Burma or other serious human rights abuse in Burma;
• to be or have been a leader or official of: (a) the military or security forces of Burma, or any successor entity to any of the foregoing; (b) the Government of Burma⁹ on or after February 2, 2021; (c) an entity that has, or whose members have, engaged in the actions or policies described above or serious human rights abuses related to the leader's or official's tenure; or (d) an entity whose property and interests in property are blocked pursuant to EO 14014 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 Burma;
• to be a spouse or adult child of any person whose property and interests in property are blocked pursuant to EO 14014;
• to have materially assisted, sponsored or provided financial, material or technological support for, or goods or services to or in support of, any person whose property and interests in property are blocked pursuant to EO 14014; or
• to 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 whose property and interests in property are blocked pursuant to EO 14014.

On the same day as the announcement of EO 14014, the US Department of the Treasury's Office of Foreign Assets Control ("OFAC") designated, pursuant to the EO, ten individuals whom OFAC described as current and former military officials responsible for the coup or associated with the Burmese military regime, and three businesses.¹⁰

The individuals sanctioned on Feb. 11, 2021, include six members of the National Defense and Security Council¹¹ and four military officials.¹² All ten individuals were designated for being current or former leaders or officials of the military or security forces of Burma. Two of the individuals were previously designated on Dec. 10, 2019, under EO 13818 (the Executive order implementing the Global Magnitsky Human Rights Accountability Act, together constituting the "US Global Magnitsky sanctions program") in connection with atrocities committed against ethnic minorities in Burma.

In addition, OFAC designated three entities¹³ operating in Burma's gem industry that OFAC described as wholly owned subsidiaries of a large military-owned conglomerate in Burma.¹⁴

On Feb. 22, OFAC designated two individuals whom the Burmese military had announced would serve on the State Administration Council.¹⁵ OFAC's press release stated that OFAC made the designations in response to the Burmese security forces' killing of peaceful protestors after the Feb. 11 action.

As a result of the designations, US persons are generally prohibited from dealing directly or indirectly with the designated persons or any of their property or interests in property (or any entity owned 50 percent or more by one or more designated person), unless authorized or exempt. A non-US person may be subject to an enforcement action by engaging in nearly any transaction with the designated person that has a US nexus. In addition, the US government may impose additional targeted sanctions on persons meeting one or more designation criteria.

To date, OFAC has issued no general licenses or guidance in the form of Frequently Asked Questions ("FAQs"). Nevertheless, certain observations are possible:

• Although EO 14014 should be understood as part of a broader US (and global) push to use "smart sanctions" to target malign actors and minimize consequences on others, the broad designation criteria of EO 14014 allows OFAC to designate any person determined to be a part of the government, or a political subdivision, agency or instrumentality of the government. Arguably, EO 14014 grants OFAC the authority to block the Burmese government, including all of its subdivisions (an authority that is usually reserved for the US President).
• Although the US government likely could have designated many of the individuals and entities pursuant to designation criteria under the US Global Magnitsky sanctions program, which contains authorities similar to EO 14014 (and indeed, two of the individuals designated under EO 14014 were already designated under the US Global Magnitsky sanctions program), the President decided to introduce a new sanctions program targeting activities specific to Burma.¹⁶
• EO 14014 targets one sector of Burma's economy but authorizes sanctions on additional sectors that may be named by the Secretary of the Treasury. It is possible that the US government will add additional sectors as it has done under other sanctions programs (e.g., Russia and Venezuela).

Export Controls

On Feb. 17, 2021, the US Commerce Department's Bureau of Industry and Security ("BIS") announced restrictions on specified exports to Burma of items subject to the Export Administration Regulations ("EAR"). BIS announced that it would apply a "presumption of denial," effective immediately, for items requiring a license for export and re-export to Burma's Ministry of Defense, Ministry of Home Affairs, armed forces and security services.¹⁷ Additionally, BIS announced the revocation of certain previously issued licenses to these departments and agencies, and a suspension of certain license exceptions previously available to Burma as a result of its current Country Group placement under the EAR. These license exceptions included Shipments to Country Group B countries ("GBS") and Technology and Software under restriction ("TSR").

On March 8, BIS published additional rules further restricting exports to Burma. The first rule moves Burma from Country Group B to the more restrictive Country Group D:1; adds Burma to the list of countries subject to military end use and end user ("MEU") and National Security ("NS") licensing policy restrictions; and moves Burma from Computer Tier 1 to the more restrictive Computer Tier 3 in the Computers ("APP") license exception.¹⁸ The second rule adds four Burmese entities to BIS's Entity List:¹⁹ the Ministry of Defense, the Ministry of Home Affairs, the Myanmar Economic Corporation ("MEC") and MEHL.²⁰ An accompanying press release states that BIS is reviewing "potential additional measures as warranted by the military's actions."²¹

Other Sanctions Programs: UK, Canada and the EU

Since the issuance of EO 14014, other governments have taken restrictive measures in response to the coup in Burma or are reportedly considering such measures.

• On Feb. 18, 2021, the UK imposed sanctions against three officials in the Burmese military and security forces for human rights violations in connection with the coup. The UK sanctioned an additional six individuals on Feb. 25 for human rights violations in connection with the coup, one of whom was already listed under the UK's Global Human Rights Sanctions Regulations 2020. Only one individual targeted by the UK sanctions is not also designated under EO 14014. The UK-sanctioned individuals are now subject to an asset freeze.²²
• On Feb. 18, Canada also announced the imposition of sanctions against nine Burmese military and security officials as being either directly involved in the coup or as being members of the State Administrative Council. All Canadian-sanctioned individuals are also designated under EO 14014.²³ Under Canada's Special Economic Measures (Burma) Regulations, the sanctioned individuals are subject to an asset freeze in Canada, as well as prohibitions on several categories of transactions, services and dealings involving the property of designated persons.²⁴
• The EU has not yet settled on a response to the Feb. 1 coup. According to a Feb. 22 statement, the EU is ready to impose restrictive measures on persons responsible for the coup.²⁵ Recent reporting suggests the EU will introduce sanctions against companies "generating revenue for, or providing financial support to, the Myanmar Armed Forces" around Mar. 22.²⁶ The EU currently maintains a limited sanctions regime against Burma that includes travel bans and asset freezes for 14 senior military officers in response to human rights abuses perpetrated against minority populations, as well as an enhanced arms embargo, a ban on the supply of internal repression equipment and monitoring/interception software, and restrictions on the supply of dual-use items.²⁷ In addition, the EU has announced that it will suspend all direct financial support from EU development aid to the country's reform programs.²⁸ The EU has not at this stage suspended tariff preferences granted to Burmese products under the EU's Generalized Scheme of Preferences.

Summary of historical human rights-related developments in and restrictions on relations with Burma 

The February 2021 coup in Burma took place against the backdrop of prior human rights abuses committed by the Burmese military. An earlier generation of sanctions and export controls targeting Burma was progressively relaxed from approximately 2009 through 2016. Thereafter, as the international community became increasingly aware of the military’s campaign against minority populations, including the Rohingya, the US and other governments re-introduced restrictive measures under human rights-based sanctions authorities.

Conclusion

The new wave of international restrictions on Burma marks the beginning of a period of serious challenges, both for Burma and for foreign businesses operating in the country. On Mar. 4, 2021, the US State Department announced that the United States will continue and expand efforts to promote accountability for the military's actions, in coordination with other governments.⁵⁰

Companies are advised to assess their commercial ties in Burma, some of which may be targeted by US or other sanctions programs. Companies should take steps to address their exposure with respect to these sanctions. Such steps may include:

• Screening counterparties to ensure they are not sanctioned persons (including 50 Percent Rule entities);
• Ensuring counterparty sanctions compliance programs are effective and obtaining certifications from counterparties that activity undertaken pursuant to contracts complies with applicable sanctions;
• Undertaking due diligence to ensure companies are not involved in transactions or with persons engaged in activities targeted by sanctions;
• Introducing sanctions compliance clauses into contractual arrangements; and
• Implementing risk mitigation measures designed to address supply-chain sanctions risks.

Failure to address sanctions exposure preemptively can expose a company not only to the risk of sanctions violations and enforcement, but also to broader commercial and reputational risks emanating from involvement with companies or regimes engaged in human rights abuses.

_{1 Shibani Mahtani and Lyaw Ye Lynn, "Myanmar military seizes power in coup after detaining Aung san Suu Kyi," The Washington Post (Jan. 31, 2021). Note that the US Government continues to use the name "Burma" instead of "Myanmar" despite the country’s name change in 1989.
2 See, e.g., Richard Roth, Angela Dewan and Helen Regan, "Myanmar a 'War Zone' as Security Forces Open Fire on Peaceful Protesters, Killing 38," CNN (Mar. 4, 2021).
3 See, e.g., Hannah Beech, "Myanmar's Military Deploys Digital Arsenal of Repression in Crackdown," The New York Times (Mar. 1, 2021).
4 For example, the military has already drafted a new cybersecurity law that is drawing broad condemnation, including from global businesses, based on sweeping powers it grants the government to access user data and censor Internet content.
5 White House, "Statement by President Joseph R. Biden, Jr. on the Situation in Burma" (Feb. 1, 2021), available here.
6 White House, "Remarks by President Biden on the Administration's Response to the Coup in Burma" (Feb. 10, 2021), available here.
7 White House, "Executive Order Blocking Property with Respect to the Situation in Burma" (Feb. 10, 2021), available here.
8 The EO does not define "foreign person," but we expect it will be defined broadly. The EO defines "United States person" as any United States citizen, permanent resident alien, entity organized under the laws of the United States or any jurisdiction within the United States (including foreign branches), or any person in the United States.
9 For purposes of the EO, the term "Government of Burma" means 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.
10 US Department of the Treasury, Press Release, "United States Targets Leaders of Burma’s Military Coup Under New Executive Order" (Feb. 11, 2021), available here.
11 The full list of military officials sanctioned for being "responsible for the February 1, 2021 coup or associated with the Burmese military regime" comprises: (1) Commander-in-Chief Min Aung Hlaing; (2) Deputy Commander-in-Chief Soe Win; (3) First Vice President and retired Lieutenant General Myint Swe; (4) Lieutenant General Sein Win; (5) Lieutenant General Soe Htut; and (6) Lieutenant General Ye Aung.
12 The full list of military officials sanctioned for being members of the State Administration Council comprises: (1) General Mya Tun Oo, appointed Minister of Defense; (2) Admiral Tin Aung San, appointed Minister for Transport and Communications; (3) Lieutenant General Ye Win Oo, appointed Joint Secretary of the SAC; and (4) Lieutenant General Aung Lin Dwe, appointed Secretary of the SAC.
13 Specifically, (1) Myanmar Ruby Enterprise; (2) Myanmar Imperial Jade Co. LTD; and (3) Cancri (Gems and Jewellery) Co., LTD.
14 The three entities are subsidiaries of Myanmar Economic Holdings Limited ("MEHL"), a military-controlled commercial conglomerate that was previously sanctioned by OFAC from July 2008 to October 2016. One consequence of listing a holding company is that many subsidiaries (not simply the three entities listed in OFAC’s Feb. 11 announcement) will become sanctioned per OFAC’s 50 Percent rule. OFAC’s 50 Percent Rule states that an entity that is owned directly or indirectly 50 percent or more by one or more blocked persons is automatically blocked, even if it is not included on the SDN List. By contrast, an entity that is controlled but not owned 50 percent or more by one or more blocked persons is not considered automatically blocked pursuant to OFAC’s 50 Percent Rule.
15 US Department of the Treasury, Press Release, "United States Targets Members of Burma’s State Administrative Council following Violence against Protestors" (Feb. 22, 2021). The sanctioned individuals were Lieutenant General Moe Myint Tun and General Maung Kyaw.
16 There are several possible reasons for this: a country-specific program may send a specific message to a domestic audience that is keen to see the administration confront the coup, particularly given the United States’ prior sanctions on Burma, and/or the EO may be meant to encourage multilateral sanctions cooperation.
17 US Department of Commerce Bureau of Industry and Security, Federal Register Rule, 86 Fed. Reg. 10011, "Burma: Implementation of Sanctions" (Feb. 18, 2021).
18 US Department of Commerce Bureau of Industry and Security, Federal Register Rule, 86 Fed. Reg. 13173, "Burma: Implementation of Sanctions".
19 In general, adding an entity to the Entity List restricts the export, re-export, or transfer (in-country) of items subject to the EAR to it. The EAR imposes additional license requirements on and limits the availability of most license exceptions for exports, re-exports, and transfers (in-country) to listed entities. Such Entity List licensing requirements apply whenever a listed entity is party to the transaction, regardless of the role that a listed entity has in the transaction (i.e., as a "purchaser," "intermediate consignee," "ultimate consignee," or "end-user").
20 US Department of Commerce Bureau of Industry and Security, Federal Register Rule, 86 Fed. Reg. 13179, "Addition of Entities to the Entity List" (Mar. 8, 2021). MEC and MEHL are military-owned conglomerates whose subsidiaries participate in a broad range of activities in the Burmese economy.
21 US Department of Commerce, Press Release, "Commerce Implements New Export Controls on Burma and Makes Entity List Additions in Response to the Military Coup and Escalating Violence against Peaceful Protesters" (Mar. 4, 2021).
22 See Gov.uk, "UK Sanctions List," (last visited Mar. 4, 2021).
23 Government of Canada, "Regulations Amending the Special Economic Measures (Burma) Regulations" (Feb. 17, 2021).
24 Government of Canada, "Canadian Sanctions Related to Myanmar" (Feb. 18, 2021).
25 European Council, Press Release, "Myanmar/Burma: Council adopts conclusions" (Feb. 22, 2021).
26 Gabriela Bacyznska, Robin Emmott, "Exclusive: EU Preparing sanctions on Myanmar Military Businesses, Documents Show," Reuters, (Mar. 8, 2021).
27 See EU Sanctions Map, Burma,(last visited Mar. 4, 2021).
28 See EU Foreign Affairs Council press release (Feb. 22, 2021).
29 See Michael F. Martin, Congressional Research Service, US Restrictions on Relations with Burma 2-3 (2020); see also Michael F. Martin, Congressional Research Service, US Sanctions on Burma 1-2 (2012).
30 Council Common Position 96/635/CFSP of 28 October 1.
31 Council Common Position 2009/615/CFSP of 13 August 2009.
32 Government of Canada, Canadian Sanctions Related to Myanmar (Feb. 18, 2021).
33 Michael F. Martin, Congressional Research Service, US Restrictions on Relations with Burma 3 (2020).
34 European External Action Service, EU-Myanmar Relations (Jun. 25, 2018).
35 Government of Canada, Canadian Sanctions Related to Myanmar (Feb. 18, 2021).
36 Michael F. Martin, Congressional Research Service, US Restrictions on Relations with Burma 3 (2020).
37 Human Rights Council, Report of the Independent International Fact-Finding Mission on Myanmar, UN Doc. A/HRC/39/64, at 16-17 (2018).
38 US Department of the Treasury, Press Release, "United States Sanctions Human Rights Abusers and Corrupt Actors Across the Globe" (Dec. 21, 2017).
39 Government of Canada, "Regulations Amending the Special Economic Measures (Burma) Regulations: SOR/2018-135" (Jun. 25, 2018); European External Action Service, "EU-Myanmar Relations (Jun. 25, 2018)".
40 US Department of the Treasury, Press Release, "Treasury Sanctions Commanders and Units of the Burmese Security Forces for Serious Human Rights Abuses" (Aug. 17, 2018).
41 The UN FFM reports are available here.
42 Human Rights Council, The Economic Interests of the Myanmar Military, UN Doc. A/HRC/42/CRP.3, at 5 (2019).
43 Id.
44 Id. at 3.
45 US State Department, Trafficking in Persons Report (2019).
46 See 22 USC § 7107 (d).
47 US Department of State, Press Statement, "Public Designation, Due to Gross Violations of Human Rights, of Burmese Military Officials" (Jul. 16, 2019).
48 US Department of the Treasury, Press Release, "Treasury Sanctions Individuals for Roles in Atrocities and Other Abuses" (Dec. 10, 2019).
49 See Gov.uk, "UK Sanctions List," available here.
50 See US State Department, "Department Press Briefing – March 4, 2021"; see also White House, "Statement by National Security Advisor Jake Sullivan on Violence Against Peaceful Demonstrations in Burma" (Feb. 28, 2021).}

John Hannon (White & Case, Associate, Washington, DC) contributed to the development of this publication.

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