Export Compliance

U.S. reiterates that Myanmar sanctions require adherence to OFAC 50 percent rule

The United States has imposed new sanctions and export controls on Myanmar (Burma) in response to the recent military takeover of the Southeast Asian nation.

It also stressed the importance of compliance with the OFAC 50 percent rule, and warned of additional future measures if the coup leaders do not step down.

The Treasury Department’s Office of Foreign Assets Control (OFAC) added 12 current or former armed forces officials to the Specially Designated Nationals (SDN) list. This is on top of the same designations levied against three companies that are wholly-owned subsidiaries of a large conglomerate in Myanmar.

In addition, OFAC stressed that any entity that is at least 50 percent owned, directly or indirectly, by designated individuals and companies are also blocked, and any business dealings with them should be reported.

Meanwhile, the Commerce Department’s Bureau of Industry and Security (BIS) has implemented restrictions on exports of sensitive items to Myanmar’s Ministry of Defense, Ministry of Home Affairs, armed forces and security services. The action includes revoking previously-issued licenses not fully utilized.

In Europe, the EU stated that it stood “ready to adopt restrictive measures” against the Myanmar military. The United Kingdom went a step further and added six military officials to its sanctions regime.

Trade with Myanmar

In 2019, Myanmar was the U.S.’ 94th largest trading partner with US$1.2 billion in two-way trade. Goods exported to the Asian nation consisted of mainly agricultural products, while imports to America included leather items, woven and knitted apparels and jewelry.

At the same time, the EU was the third-biggest trading partner with Myanmar. EU imports from Myanmar were dominated by textiles, footwear and agricultural items, while exports included machinery, transport equipment and chemicals.

What this means for companies managing export compliance risk

Companies currently engaged in business with Myanmar are likely examining their risk exposure to make sure that they are operating on the right side of the law. This is especially in light of the fact that Washington has warned of more sanctions to come if the new leaders in Myanmar do not correct the situation.

The first area of scrutiny is whether transactions require an export license. The second is whether any party to a transaction is now on a watch list such as the SDN list, and the corollary to that is whether the Myanmar shipment consignee would be considered a sanctioned entity under the OFAC 50 percent rule.

Companies would also have to be vigilant in monitoring the situation on an ongoing basis. For example, more items could be placed under restrictive export controls. And new people and companies are added to the OFAC watch lists, requiring further research to make sure the OFAC 50 percent rule is not breached.

Of greatest importance in compliance risk management is the need to know your customer, not only with regards the people involved but also at the company entity and corporate ownership levels.

While this article is focused on Myanmar, the above risk management points hold true for any country where organizations are doing business.

To help companies manage their export compliance risk more effectively, there are solutions available for restricted party screening, export classification, license determination and management, and sanctioned party ownership screening.

Other solutions help to provide global trade intelligence (sourcing insights, trade analytics, and landed cost functionality, in addition to export compliance risk management), as well as strengthen logistics and supply chain efficiency.