Biden Administration Imposes Sanctions in Response to Myanmar Coup, Warns of “Strong” Export Controls to Come

On February 11, 2021, President Biden issued an Executive Order (“EO”) in response to the February 1, 2021, coup in Myanmar.  The same day, the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) designated ten individuals and three entities connected to the Myanmar military as “specially designated nationals” or “SDNs” pursuant to the EO.

In sum, the EO authorizes the Treasury Secretary (in consultation with the Secretary of State) to block the property and interests in property that are in the United States, that come within the United States, or that are or come within the possession or control of U.S. persons, of persons determined to be:

• Operating in the defense sector of the Myanmar economy, or any other sector of the Myanmar economy as may be determined by the Treasury Secretary in consultation with the Secretary of State;
• Undermining democracy, peace, security and stability, or freedom of expression and assembly in Myanmar;
• Engaging in arbitrary detention, torture, or other serious human rights abuses in Myanmar;
• Leaders or officials of: (i) the Myanmar military or security forces; (ii) the Government of Myanmar on or after February 2, 2021; (iii) any entity that has, or whose members have, engaged in the undermining activities or human rights abuses described above; or (iv) any entity whose property is blocked pursuant to the EO as a result of activities related to the leader’s or official’s tenure. The EO defines “Government of Burma” (i.e., Myanmar) as “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”;
• Political subdivisions, agencies, or instrumentalities of the Government of Myanmar;
• Spouses or adult children of any person blocked pursuant to the EO; or
• Owned or controlled by, or determined 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 order.

As a result of the EO, U.S. persons—including U.S. citizens, permanent resident aliens, persons in the United States, and U.S. entities and their foreign branches—are effectively prohibited from dealing, directly or indirectly, with persons or entities designated pursuant to the EO.

The EO also authorizes the blocking of the property and interests in property of persons determined “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” the EO.  Thus, for example, non-U.S. persons may be subject to designation as SDNs if they engage in material dealings with persons blocked under the order.

The EO and subsequent designations partially reverse the Obama Administration’s decision (pursuant to EO 13742 of October 7, 2016) to lift many of the sanctions previously imposed on Myanmar, following successful democratic elections in the country in 2016.  Prior to this lifting, U.S. sanctions against Myanmar included: (i) a general ban on the import of goods from Myanmar; (ii) a ban on the import of Burmese jadeite and rubies, and products containing Burmese jadeite and rubies; (iii) a ban on the import of goods from certain Burmese companies; (iv) asset freezing of certain Burmese nationals; (v) a prohibition on providing financial services to certain Burmese nationals; (vi) restrictions on U.S. investments in Myanmar; (vii) restrictions on bilateral assistance to Myanmar; and (viii) restrictions on U.S. support for multilateral assistance to Myanmar.

President Biden also warned that the U.S. government would impose “strong export controls” on Myanmar, many of which had also been lifted after the 2016 democratic elections. Myanmar is currently subject to some export control restrictions, including arms and chemical and biological weapons restrictions. Myanmar is currently in “Country Group B,” under the Export Administration Regulations (“EAR”). However, in the past, Myanmar was subject to more stringent restrictions. For example, Myanmar was previously identified as a “D:1” country under the EAR, which made a wide variety of EAR-regulated exports and re-exports to Myanmar ineligible for license exceptions. As such, it is possible that the Biden Administration will look to re-impose these export control restrictions.

We will continue to monitor developments in this area. Please contact the authors or your usual Herbert Smith Freehills contacts for more information.