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On January 26, several U.S. agencies published a&nbsp;<a href="https://home.treasury.gov/system/files/126/20220126_burma_advisory.pdf" target="_blank" rel="noopener">Burma Business Advisory</a> focused on heightened risk associated with doing business in the country. The business advisory follows Executive Order 14014 (February 11, 2021) authorizing blocking sanctions against certain entities and individuals involved in the military coup that took place on February 1, 2021, and OFAC’s subsequent designations of various Burmese entities and individuals in the Specially Designated Nationals and Blocked Persons (SDN) list.

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The advisory identifies four categories of entities and sectors of “greatest concern” and risk to U.S. businesses: (1) state-owned enterprises (SOEs); (2) gems and precious metals; (3) real estate and construction projects; and (4) arms, military equipment, and related activities. These entities and sectors have been identified as primary industries providing economic resources for Burma’s military regime. The advisory cautions businesses and individuals with potential exposure to, or involvement in operations or supply chains tied to the Burmese military regime to conduct appropriate due diligence, or otherwise run the risk of engaging in conduct that may expose them to significant reputational, financial, and legal risks, including violations of U.S. anti-money-laundering (AML) laws, anti-corruption laws, forced labor laws, export controls, and sanctions.

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The large SOEs in Burma identified in the advisory are involved in the natural resources, telecom, and other sectors:

MGE and MPT were designated as SDNs in April 2021. According to the advisory, any affiliates of MGE and MPT, and SOEs in Burma generally in these sectors are at high risk for sanctions.

The military controls a large portion of the gems and precious metals sector through two military holding companies, Myanma Economic Holdings Limited (MEHL) and Myanmar Economic Corporation (MEC), and their numerous subsidiaries. MEHL and MEC and Myanmar Pearl Enterprise (MPE) were designated as SDNs in March 2021. Transactions in this sector or with these entities and their affiliates present high risk for sanctions violations.

The Pyinmabin Industrial Zone, the Golden City residential development in Rangoon, and the Sule Shangri-La Hotel and Sule Square Commercial Project are owned or controlled by the military. The military collects rent through MEHL and MEC from foreign companies that rent spaces to maintain a physical presence in Burma. MEHL and MEC were also identified as joint venture partners for foreign firms looking to develop and build on properties within Burma.

Construction materials sourced from Burma present a high risk of forced labor including bamboo, bricks, and rubber. Conducting real estate and construction transactions in or sourcing construction materials from Burma present heightened risk for sanctions, forced labor, and money laundering.

There are extensive controls and sanctions related to Burma’s defense sector. The advisory warns businesses that the following countries continue to trade in arms and military equipment with Burma: China, India, Israel, Japan, North Korea, Philippines, Russia, Serbia, Singapore South Africa, and Ukraine. U.S. companies should be alert to diversion risk when engaging in defense-sector transactions with customers in these countries.

Additionally, on March 8, 2021, the Department of Commerce’s Bureau of Industry and Security added Burma to the list of countries subject to the military end use and military end user controls, restricting export and reexport of certain items for military use or users.

The advisory also notes that “Burma faces significant money laundering risks and gaps in implementing its anti-money laundering (AML) and counter financing of terrorism (CFT) legal framework. The international financial sector should recognize that deficiencies within Burma’s financial sector and lack of adequate measures to address its money laundering risks led the Financial Action Task Force (FATF) to publicly identify Burma in 2020 on the list of jurisdictions under increased monitoring.”

The advisory also highlights that a number of goods from Burma have been tied to labor abuses, including child and forced labor. The Department of Labor’s List of Goods Produced by Child Labor or Forced Labor and List of Products Produced by Forced or Indentured Child Labor, include 14 items:

Businesses should update their risk assessments based on the considerations set forth in the Burma business advisory.

David M. Schwartz Partner &amp; Practice Group Leader, International Trade 202.263.4170 <a href="mailto:David.Schwartz@ThompsonHine.com">David.Schwartz@ThompsonHine.com</a>

Francesca M.S. Guerrero Partner, International Trade 202.973.2774 <a href="mailto:Francesca.Guerrero@ThompsonHine.com">Francesca.Guerrero@ThompsonHine.com</a>

Michelle Li Partner, International Trade 202.263.4162 <a href="mailto:Michelle.Li@ThompsonHine.com">Michelle.Li@ThompsonHine.com</a>

Samir D. Varma Partner, International Trade 202.263.4136 <a href="mailto:Samir.Varma@ThompsonHine.com">Samir.Varma@ThompsonHine.com</a>

Dan Ujczo Senior Counsel, International Trade 614.469.3319 <a href="mailto:Dan.Ujczo@ThompsonHine.com">Dan.Ujczo@ThompsonHine.com</a>

Joyce Rodriguez Managing Associate, International Trade 202.973.2724 <a href="mailto:Joyce.Rodriguez@ThompsonHine.com">Joyce.Rodriguez@ThompsonHine.com</a>

Kerem Bilge Associate, International Trade 202.263.4104 <a href="mailto:Kerem.Bilge@ThompsonHine.com">Kerem.Bilge@ThompsonHine.com</a>

Scott E. Diamond* Senior Legislative &amp; Regulatory Policy Advisor,&nbsp;International Trade 202.263.4197 <a href="mailto:Scott.Diamond@ThompsonHine.com">Scott.Diamond@ThompsonHine.com</a>

William L. Matthews* Senior Manager of International Trade 202.263.4137 <a href="mailto:William.Matthews@ThompsonHine.com">William.Matthews@ThompsonHine.com</a>

This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.

This document may be considered attorney advertising in some jurisdictions.

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New Multiagency Business Advisory on Heightened Risk of Doing Business in Burma