Alternative Options Will be Available to Participate in Next Week's BIS Update Conference

The Bureau of Industry and Security's Annual Update Conference on Export Controls and Policy will take place in Washington, DC from July 17 - 19, 2012.

While registration for Update is now closed BIS has announced that it will be offering a number of  opportunities for those not able to attend the conference in person to participate in the program. This is an excellent opportunity to learn more about the pending export control reform efforts underway in Washington, DC.

First, there will be a live Web cast of the morning Update sessions on July 17 and July 18 (click here for the Update agenda). Viewers can log on from the following links:

Tuesday, July 17 – 8:30am-10:00 am EDT:
http://mtitv.com/ConferenceOnExportControls1.html

Wednesday, July 18 – 8:30am-10:00 am EDT:
http://mtitv.com/ConferenceOnExportControls2.html

In addition, Assistant Secretary for Export Administration Kevin Wolf and other BIS regulatory and technical specialists will address issues related to the current export control reform effort in open forum telephone conference calls on July 19th from 10:00 am-12:00 pm EDT and from 1:00 pm-3:30 pm EDT. While live questions will not be taken, callers are encouraged to submit questions to BIS in advance by e-mail the following email address: OESDSeminar@bis.doc.gov. The dial-in number and passcode for the teleconferences is as follows: Call in Number: 888-455-8218; Passcode: 6514196.

Speaker presentations received as of July 11 are now posted on the BIS web site, Update 2012 Presentations or on the BIS BETA web site Update 2012 Presentations.

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U.S. Government Issues General Licenses Suspending Sanctions on Burma and Imposes Responsible Investment Reporting Requirements

Nearly eight weeks after the Obama Administration announced that it would “suspend” and “ease” sanctions on Myanmar (still referred to the U.S. as Burma), the U.S. Government today implemented the necessary changes to permit new investment in Burma for the first time in 15 years and to reauthorize the exportation of financial services to Burma. See our original May 17, 2012 post here.

The changes to the existing sanctions were made by OFAC via the issuance of two general licenses, OFAC Burmese Sanctions Regulations General Licenses 16 and 17 (see below) and are effective immediately.  

By issuing the general licenses OFAC was able to “suspend” the existing sanctions, but left open the possibility that they could be reimposed in the future by simply revoking the general licenses in the event that the Government of Myanmar fails to implement the promised reforms. 

For the first time ever the U.S. Government will require companies that engage in new investment in Burma exceeding $500,000 to submit an annual “Responsible Investment” report to the State Department. The report will include information on the company’s corporate social responsibility policies and procedures with respect to a number of issues, including human rights, workers’ rights, anti-corruption, environmental stewardship, land acquisitions, arrangements with security service providers and annual payments exceeding $10,000 to Burmese government entities. 

These reporting requirements, which will not take effect until the notice and comment period have been completed later this year, are included at pages four through six of the document below. The term “new investment”, as defined in OFAC's Burmese Sanctions Regulations, refers to the development of economic resources in Burma and not to other types of investment activities, such as entering into an agreement to buy a manufacturing facility in Burma that is unrelated to the development of natural resources. 

In addition to OFAC's general licenses, the President also issued a new Executive Order that provides new authority to include on the SDN List individuals or entities that have been determined to, among other things, threaten the peace, security, or stability of Burma or and those who conduct certain arms trade with North Korea. In addition, OFAC added two Burmese entities to the SDN List, including Burma's Directorate of Defense Industries and Innwa bank. 

Although OFAC's General Licenses 16 and 17 make significant changes to the existing U.S. sanctions on Burma, it is important to note the following:

1.No changes were made to the existing prohibition on the importation of goods of Burmese origin into the U.S. (this includes jewelry containing gems mined or extracted from Burma).  

2. No changes were made to the U.S. arms embargo on Burma that has been in place since 1993. As a result, "defense articles" and "defense services" subject to the jurisdiction of the International Traffic in Arms Regulations are still prohibited from be exported to Burma, whether directly or indirectly. (See section 126.1 of the ITAR). 

3. The sale of goods to Burma and receipt of payment for such products was previously authorized under the Burmese Sanctions Regulations as long as no financial services were provided. General License 16 now authorizes U.S. companies to extend credit to customers and receive payment via letters of credit for sales to Burma.   

4. U.S. exports of commercial (i.e., "dual-use") goods to Burma remain subject to export control requirements administered by the Commerce Department's Bureau of Industry and Security (BIS). Exports of goods, technology and software on the Commerce Control List (i.e., not classified as EAR99) typically require a BIS export license. Therefore, exporters need to determine whether an export license from BIS may be required before goods are exported or reexported to Burma. 

5. A large number of banks, entities and individuals in Burma are on OFAC's SDN List. Therefore, banks, exporters and other companies engaged in transactions with Burma must check the SDN List and other U.S. Government restricted party lists to determine whether transactions with the parties are blocked or otherwise restricted. Section (d) of Burma General License 16 authorizes the transfer of funds to or from SDNs as long as the transaction does not involve a bank located in the U.S. This is one of the rare situations that allows a transaction to occur with a party on the SDN, albeit the transaction has to take place indirectly (i.e., funds transfers via a third country bank are okay). 

Burma Sanctions - OFAC GLs and Reporting Requirements (July 11, 2012)

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Update on U.S. Sanctions on Burma/Myanmar

It has now been nearly four weeks since President Obama and Secretary of State Clinton announced a change in U.S. policy that will lead to the "easing" and "suspension" of the existing sanctions on Burma (Myanmar). (See our original May 17th report here.)

Despite various media reports to the contrary, no changes in U.S. sanctions laws or regulations have actually occurred to date.

While there has been a great deal of interest by the business community in reengaging with Burma, the State Department and OFAC have yet to make any further public announcements on when changes to U.S. law actually will occur.

However, a Department of State spokesperson recently provided the following update:

“Implementation of the easing, in line with our calibrated approach, requires several general licenses, an executive order, and revisions to existing designation criteria. An interagency process to finalize these complicated steps is well underway.” 

Unlike some other sanctions programs, the U.S. sanctions on Burma are very complex since they are included in five federal laws, four Executive Orders, one Presidential Determination and one Presidential Proclamation.

Further complicating matters is that many businesses and government entities in Burma are included on OFAC's List of Specially Designated Nationals (SDN List) and determinations will have to be made on how to handle those parties in terms of the general licenses and other authorizations that are issued.

Finally, the Obama Administration is also trying to figure out how to implement the various Corporate Social Responsibility initiatives that were mentioned in Secretary of Clinton's May 17th statement.

While no timetable has been announced on when the required changes to U.S. law will be announced, it could still be several weeks before these changes are made.

In the meantime, U.S. companies and U.S. persons should be reminded that no changes in the U.S. sanctions on Burma have actually occurred and that they should seek guidance before making any changes in their current business policies or practices.

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NCITD to Present Program Featuring Head of the U.K.'s Export Control Organisation on May 23, 2012 in Washington, DC

The National Council on International Trade Development (NCITD) will be hosting a program in Washington on May 23, 2012 featuring Tom Smith, head of the United Kingdom's Export Control Organisation (ECO).

The ECO, part of the United Kingdom's Department of Business Innovation and Skills (BIS) is responsible for legislating, assessing and issuing export, trade transshipment and trade control licenses for military and dual-use goods.

Mr. Smith, who has served as the head of the ECO since 2009, has a great deal of experience working with trade-related issues in the U.K. Government and in the private sector. Mr. Smith will discuss the latest export control and sanctions developments in the U.K. and European Union, including information on export enforcement and penalty matters.

The program, which will include lunch, will be held from 12 pm to 1:30 pm at GE's Washington, DC office, located at 1299 Pennsylvania Ave., NW.

The program is free for NCITD members and $45 for non-members.

Registration will close Tuesday May 22, 2012. RSVP at www.ncitd.org.

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U.S. to "Suspend" Sanctions on Burma

This afternoon Secretary of State Clinton announced that the U.S. is “suspending” the existing financial and investment sanctions on Burma (Myanmar).

However, the details on how the existing sanctions will be suspended are still being worked out and the existing Burmese Sanctions Regulations (31 CFR. Part 537) (BSRs) administered by the Treasury Department's Office of Foreign Assets Control (OFAC) will remain in effect until further notice.

It appears likely that OFAC will issue a general license that will amend the BSRs to enable U.S. companies to enter into contracts relating to the "economic development of resources in Burma" and other investment activities. In addition, the general license will also authorize financial institutions and other parties to provide financial services to Burma.

In today's announcement, Secretary Clinton indicated that U.S. companies doing business in Burma will be expected to implement certain Corporate Social Responsibility measures and U.S. companies will be expected, but not required to "to conduct due diligence to avoid any problems, including human rights abuses . . . create a grievance process that will be accessible to local communities; to demonstrate appropriate treatment of employees, respect for the environment; to be a good corporate citizen; and to promote equitable, sustainable development that will benefit the people."

Senior Administration officials today also reminded U.S. companies of the extensive corruption in Burma. Given the Burmese Government's extensive role in the company's business sector, particularly in the oil and gas sector, U.S. companies will have to take additional steps to ensure compliance with the U.S. Foreign Corrupt Practices Act. 


Existing U.S. Sanctions on Burma

The current U.S. sanctions on Burma are unique and are far less restrictive than the broad sanctions imposed by the U.S. Government on Cuba, Iran, North Sudan, Syria and North Korea. Unlike the other broad-based U.S. sanctions programs, the BSRs generally do not prohibit U.S. companies or U.S. citizens from exporting goods classified as EAR99 to Burma and receiving payment for such goods.

The BSRs currently prohibit U.S. persons and companies from engaging in the following activities involving Burma:

1. Exportation of Financial Services to Burma - No U.S. company or U.S. citizen, wherever located, can make any payment, directly or indirectly, to Burma.

2. New Investment in Burma - No U.S. person or company can enter into any contracts with the Government of Burma or nongovernmental entities in Burma for the "economic development of resources in Burma". The phrase "economic development of resources located in Burma" is defined to mean, among other things, activities pursuant to a contract that involves the development or exploitation of natural resources in Burma, such as contracts conferring rights to explore for, develop, extract or refine petroleum or natural gas in Burma. A "nongovernmental entity in Burma" include most types of business organizations that exist for engaging in economic development of resources in Burma.

3. Facilitation of Prohibited Transactions in Burma - U.S. companies and U.S. citizens are prohibited from approving, aiding or supporting a foreign person’s investment in Burma, if the foreign person’s activity would constitute prohibited new investment if engaged in by a U.S. person. This prohibition does not apply to contracts involving the sale of goods, services or technology to Burma or for use in Burma.

4. Prohibited Importation of Burmese Origin Goods - Most goods of Burmese origin are prohibited from being imported into the U.S.

Existing Export Controls on Burma 

U.S. exports of commercial goods to Burma will remain subject to export control requirements administered by the Commerce Department's Bureau of Industry and Security (BIS). Currently, exports of goods, technology and software on the Commerce Control List (i.e., not classified as EAR99) typically require a BIS export license.

Burma has been subject to a U.S. arms embargo since 1993 and therefore no "defense articles" or "defense services" subject to the jurisdiction of the International Traffic in Arms Regulations can be exported to Burma. Today's announcement will not have any impact on this aspect of U.S. law.

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ITAR Freight Forwarder Update: Schenker AG and BAX Global Removed from EPLS

As a follow-up to our February 26, 2012 post regarding the mandatory and proposed debarment of a number of freight forwarders and the resulting impact on ITAR-related transactions, today Schenker AG and BAX Global Inc. were removed from the Excluded Party List System (EPLS).

The removal from the EPLS took place after the the companies presented to the Department of the Air Force information to demonstrate the companies' present responsibility to conduct business as a federal contractor. After consideration of that information the Air Force today determined that suspension or debarment of the companies was no longer necessary.  As a result, the proposed and mandatory debarments have been terminated and both entities have been removed from the EPLS. As we previously noted, Schenker Inc. was never included on the EPLS and DDTC had continued to issue licenses including that entity. 

Because the Schenker AG entities are no longer considered to be "ineligible" parties under section 120.1(c) of the ITAR, there should be no further need for exporters to submit a "transaction exception" request to DDTC for pending or future ITAR authorizations involving any of the freight forwarders that were added to the EPLS on February 16, 2012:

• CEVA Logistics LLC (removed from EPLS on February 24, 2012)
• EGL Inc. (now owned by CEVA Logistics) (removed from EPLS on February 24, 2012)
• Kuehne and Nagel International AG (removed from EPLS in March 2012)
  
• Panalpina Welttransport (Holding) AG (removed from EPLS on March 16, 2012)
• Panalpina Inc. (removed from EPLS on March 16, 2012)
• Schenker AG (removed from EPLS on April 11, 2012)
• BAX Global Inc. (now part of DB Schenker) (removed from EPLS on April 11, 2012)

Since none of these freight forwarders are "ineligible" to participate in ITAR transactions, we urge DDTC to remove or update its February 27, 2012 Web Notice to reflect this new information.

The significant interest in this issue has heightened the awareness of the role that the EPLS and serves as an important reminder that exporters and other parties involved in ITAR-related transactions should screen all the parties involved in ITAR licenses and other authorizations, including freight forwarders, against the EPLS. 

This action taken by the Air Force against these freight forwarders also highlights the impact of the debarment provisions contained in the Consolidated Appropriations Act of 2012 (Pub. L. 112-74). Those little-noticed provisions require the debarment of companies receiving federal funds, including from the Department of Defense, that have been "convicted of a felony criminal violation under any Federal law within the preceding 24 months." (See Division A, Section 8125 for the Department of Defense language.)

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NCITD to Present Program Featuring Tom Smith, Head of the United Kingdom’s Export Control Organisation, on May 23, 2012 in Washington, DC

The National Council on International Trade Development (NCITD) is pleased to announce that it will be hosting a program in Washington on May 23, 2012 featuring Tom Smith, head of the United Kingdom’s Export Control Organisation (ECO).

The ECO, part of the United Kingdom’s Department of Business Innovation and Skills (BIS) is responsible for legislating, assessing and issuing export, trade transshipment and trade control licenses for military and dual-use goods.

Mr. Smith, who has served as the head of the ECO since 2009, has a great deal of experience working with trade-related issues in the U.K. Government and in the private sector. Mr. Smith will discuss the latest export control and sanctions developments in the U.K. and European Union, including information on export enforcement and penalty matters.

The May 23, 2012 program, which will include lunch, will be held from 12 pm to 1:30 pm at General Electric’s Washington, DC office, located at 1299 Pennsylvania Ave., NW, Ninth Floor, Washington, DC 20004. The building entrance is at the NW corner of 12th and E Streets NW.  The program is free for NCITD members and $45 for non-members. 

For more information and to register for this program visit NCITD's website at www.ncitd.org. 

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