Myanmar has been under various international economic sanction for more than a decade, which has crippled its international trade. Below article gives a background of economic sanctions on Myanmar, recent relaxations in these sanctions and what will be its likely impact on trade finance from Indian importers perspective.
Background on Myanmar Sanctions
Under Burmese Freedom and Democracy Act 2003 (BFDA) and Junta’s Anti-Democratic Efforts (JADE) Act 2008 and US Government placed Myanmar under economic sanctions which resulted into
- Restriction on Imports from Burma: With certain exceptions, goods of Burmese origin could not be imported into the United States.
- Blocking of Property: Blocking of all property and interests in property of the persons listed in Special Designated Nationals and Blocked Persons List (SDN List).
- New Investments: New Investments in Burma were prohibited by U.S. person.
- Exportation of Financial Services to Burma: With certain exceptions, the exportation or re-exportation of financial services to Burmawere prohibited. The term exportation or re-exportation of financial services to Burma would broadly mean (as defined in 31 C.F.R. § 537.305):
- Transfer of funds, directly or indirectly, from the United States or by a U.S. person, wherever located to Burma; or
- The provision, directly or indirectly, to persons in Burma of insurance services, investment or brokerage services (including but not limited to brokering or trading services regarding securities, debt, commodities, options or foreign exchange), banking services, money remittance services; loans, guarantees, letters of credit or other extensions of credit; or the service of selling or redeeming traveler’s cheques, money orders and stored value.
Along with US, other countries like European Union (EU), UK, Norway, Switzerland, Australia and Canada also imposed various sanctions on Burma.
From International Trade / Trade Finance perspective, 3rd condition and various other countries sanctions brought International Trade from Myanmar to a standstill. Reason: Currencies widely used in international trade among countries was now not available for Myanmar transactions.
Recent Relaxation in Myanmar Sanctions
United States (under General License) and other countries started the process of easing restrictions on imports of Burmese goods in response to the substantial and significant reforms that have taken place in that country over the past years. Some of these relaxations related to international trade are:
- Authorizing the Exportation or Re-exportation of Financial Services to Burma: On 11-07-2012, exportation or re-exportation of financial services to Burma, directly or indirectly, from the United States or by a U.S. person,was authorized subject to below mentioned limitations:
- Exportation or Re-exportation of Financial Services to Burma as defined in 31 C.F.R. § 537.305 (as given in above paragraph).
- This general license does not authorize, in connection with the provision of security services, the exportation or re-exportation of financial services, directly or indirectly, to the Burmese Ministry of Defense, including the Office of Procurement; any state or non-state armed group; or any entity in which any of the foregoing own a 50 percent or greater interest.
- This general license does not authorize the exportation or re-exportation of financial services, directly or indirectly, to any person whose property and interests in property are blocked as per SND List.
- Importation of Products of Burma: On 16-11-2012, Import of goods of Burma originare authorized except
- For jadeite or rubies mined or extracted from Burma or article of jewelry containing jadeite or rubies mined or extracted from Burma.
- Import from block person or entity as per SDN list.
Note: Above relaxation are under General Licence. A general licence authorize a particular type of transaction for a class of person without the need to apply for a license. Further details are given in FAQ.
Impact of Relaxation on Bilateral Trade between India and Myanmar & Trade Finance
India bilateral trade with Myanmar in year 2010 – 11 was $1070.88 Million (Source: website of Indian Embassy in Myanmar).
India’s imports from Myanmar (US$ 876.13) are dominated by agricultural and forest based products. Myanmar is the second largest supplier of beans and pulses to India, accounting for one third of India’s total requirements of imported pulses. Myanmar contributes to nearly one fifth of India’s imports of timber.
India’s exports (US$ 194.75) to Myanmar , though small, are diverse, ranging from primary commodities to manufactured products. Primary and semi-finished steel along with steel bars and rods constitute over one third of India’s exports. In 2010-11, coupled with metals, this commodity accounted for more than 30% of India’s exports to Myanmar. Pharmaceuticals are the next most important item and accounted for 27% (nearly US$ 60 mn) of India’s exports to Myanmar in 2009-10. The other products exported to Myanmar are Iron & Steel (US$ 43 mn), Electrical machinery, Mineral oil, Rubber and articles, Plastics etc. Export of chemicals, plant & machinery and consumer goods, though small, shows potential for growth.
From Exporters and Importers Perspective it further opens up the market and ease of using various trade finance products. For Example, Indian Importers Importing Wood log into India from Myanmar earlier were not able to take benefit of Trade Finance products like LC, Buyers Credit etc from their banks. With recent relaxation, importers will now be able to avail various benefit of trade finance products thus resulting in cost saving.
Frequently Asked Questions (FAQ)
- What is OFAC ? The Office of Foreign Assets Control administers and enforces economic sanctions programs primarily against countries and groups of individuals, such as terrorists and narcotics traffickers. The sanctions can be either comprehensive or selective, using the blocking of assets and trade restrictions to accomplish foreign policy and national security goals.
What is a license? A license is an authorization from OFAC to engage in a transaction that otherwise would be prohibited. There are two types of licenses: general licenses and specific licenses. A general license authorizes a particular type of transaction for a class of persons without the need to apply for a license. A specific license is a written document issued by OFAC to a particular person or entity, authorizing a particular transaction in response to a written license application. Persons engaging in transactions pursuant to general or specific licenses must make sure that all conditions of the licenses are strictly observed. OFAC’s regulations may contain statements of OFAC’s specific licensing policy with respect to particular types of transactions.
What is an SDN? As part of its enforcement efforts, OFAC publishes a list of individuals and companies owned or controlled by, or acting for or on behalf of, targeted countries. It also lists individuals, groups, and entities, such as terrorists and narcotics traffickers designated under programs that are not country-specific. Collectively, such individuals and companies are called “Specially Designated Nationals” or “SDNs.” Their assets are blocked and U.S. persons are generally prohibited from dealing with them
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- US Department of The Treasury: Burma (Myanmar) Sanction.
- General License No. 16 : Authorizing the Exportation or Reexportation of Financial Services to Burma Dated: 11-07-2012
- General License No. 18: Authorizing the Importation of Products of Burma Dated: 16-11-2012
- Summary of Myanmar Sanction by EU, UK, Norway, Swiss, Australia, Canada, US OFAC Sanction and FATF Warning List
- Specially Designated National List
- FICCI: India-Myanmar Trade Relations
- Indian Embassy of Myanmar