Worldwide: New Burma SDNs Named; Change To Existing SDN Designations

On December 17, 2013, the US Treasury Department's Office of Foreign Assets Control (OFAC) announced several additions to the Specially Designated Nationals (SDN) list under the Burma (also known as Myanmar) sanctions program for links to arms trading with North Korea.  At the same time, OFAC announced it was removing one of the two sources of authority underlying the designations of certain persons and entities in Burma, pursuant to a presidential waiver of the relevant statutory sanctions provision.

New Burmese SDNs Designated Pursuant to Executive Order 13619

OFAC added one individual and three Burmese companies to the SDN list pursuant to Executive Order 13619, which targets those involved in the arms trade between Burma and North Korea.  The individual, Lt. Colonel Kyaw Nyunt Oo, is a Burmese military staff officer who the Treasury Department found to be acting on behalf of the Burmese Directorate of Defense Industries (DDI).   DDI was designated in July 2012, also pursuant to Executive Order 13619, for purchasing military equipment and material from North Korea.   Earlier this year, OFAC had added the head of DDI to the SDN list due to his involvement in "the illicit trade of North Korean arms to Burma." 

In addition, OFAC added three Burmese companies to the SDN list.  Asia Metal Company Ltd. is alleged to have "constructed buildings and supplied construction materials on a DDI factory compound" where approximately 30 North Koreans worked.  The other two companies, Soe Min Htike Co. Ltd. and Excellence Mineral Manufacturing Co. Ltd., were said to have been "working with North Korean officials to import materiel for military weapons programs."  The Treasury Department explained that "North Korean weapons officials in Burma have operated several cover or front addresses to receive goods from overseas".

These sanctions designations are aimed primarily at North Korea, involving an effort to cut off a revenue source that North Korea could use to expand its nuclear and missile programs.  The US Government was careful to explain that it is only targeting certain entities and not the Government of Burma itself, which, according to the announcement, "has continued to take positive steps in severing its military ties with North Korea."  Therefore, these new listings should not be viewed as signaling a change in US policy toward Burma.

The new designations underscore the continuing risks in doing business in Burma.  While the US Government has substantially relaxed sanctions on Burma, the SDN list remains a major compliance consideration for companies seeking to do business there.  In addition to continuing to screen prospective business partners against the SDN list and other sanctions lists, companies should conduct risk-based due diligence on third-parties in Burma in an effort to verify that they are not owned or controlled by, or otherwise associated with, designated entities.           

Removal of JADE Act Authority for Listing Purposes

OFAC has removed one of the two sources of legal authority underlying the designations of certain persons and entities in Burma, pursuant to a presidential waiver of the relevant statutory sanctions provision.  Previously, many Burma SDNs were designated under both the International Emergency Economic Powers Act (IEEPA) (denoted on the SDN list as [BURMA]) and the Tom Lantos Block Burmese JADE Act (denoted on the SDN list as [JADE]).  Section 5(i) of the JADE Act allows the President to waive the financial sanctions provided for in Section 5(b) of that statute, which prohibits US persons' from dealing in the property or property interests of designated persons.  The President can issue such a waiver if he determines that doing so would be "in the national interest of the United States." 

President Obama made such a "national interest" determination and implemented a Section 5(i) waiver in August 2013 with the issuance of Executive Order 13651.  OFAC's recent action merely executes this presidential waiver by modifying the SDN list to reflect the removal of the [JADE] designation from certain entries.  There are no longer any [JADE] designations on the SDN list, but all of the affected persons and entities are still designated under the [BURMA] tag, pursuant to IEEPA authority.  Moreover, this waiver did not modify the other JADE Act sanctions provisions, including a visa ban.

The Administration's decision to issue the JADE Act waiver is a small step in continuing a trend of improving relations between the United States and Burma, and is not necessarily reflective of the US Government's view of any particular SDN.  While the relevant entities remain SDNs under IEEPA authority, and therefore remain subject to the same legal restrictions even after the removal of the JADE Act designation, the waiver underscores the US Government's continued efforts to seek improved relations with Burma.  

We will continue to monitor these developments.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Meredith A. Rathbone
Jack R. Hayes
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