Burmese Sanctions Regulations

DEPARTMENT OF THE TREASURY

Office of Foreign Assets Control

31 CFR Part 537

Burmese Sanctions Regulations

AGENCY: Office of Foreign Assets Control, Treasury.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Office of Foreign Assets Control of the U.S. Department of

the Treasury is issuing the Burmese Sanctions Regulations to implement

Executive Order 13047 of May 20, 1997, ``Prohibiting New Investment in

Burma.''

EFFECTIVE DATE: May 21, 1998.

FOR FURTHER INFORMATION CONTACT: Steven I. Pinter, Chief of Licensing,

tel.: 202/622-2480, or William B. Hoffman, Chief Counsel, tel.: 202/

622-2410, Office of Foreign Assets Control, Department of the Treasury,

Washington, DC 20220.

SUPPLEMENTARY INFORMATION:

Electronic Availability

This document is available as an electronic file on The Federal

Bulletin Board the day of publication in the Federal Register. By

modem, dial 202/512-1387 and type ``/GO FAC,'' or call 202/512-1530 for

disk or paper copies. This file is available for downloading without

charge in WordPerfect 5.1, ASCII, and Adobe AcrobatR

readable (*.PDF) formats. For Internet access, the address for use with

the World Wide Web (Home Page), Telnet, or FTP protocol is:

fedbbs.access.gpo.gov. The document is also accessible for downloading

in ASCII format without charge from Treasury's Electronic Library

(``TEL'') in the ``Business, Trade and Labor Mall'' of the FedWorld

bulletin board. By modem, dial 703/321-3339, and select self-expanding

file ``T11FR00.EXE'' in TEL. For Internet access, use one of the

following protocols: Telnet = fedworld.gov (192.239.93.3); World Wide

Web (Home Page) = http://www.fedworld.gov; FTP = ftp.fedworld.gov

(192.239.92.205). Additional information concerning the programs of the

Office of Foreign Assets Control is available for downloading from the

Office's Internet Home Page: http://www.ustreas.gov/treasury/services/

fac/fac.html, or in fax form through the Office's 24-hour fax-on-demand

service: call 202/622-0077 using a fax machine, fax modem, or (within

the United States) a touch-tone telephone.

Background

On May 20, 1997, the President issued Executive Order 13047 (the

``Order''), effective at 12:01 a.m. EDT on May 21, 1997, certifying to

Congress under section 570(b) of the Foreign Operations, Export

Financing, and Related Programs Appropriations Act, 1997, (Public Law

104-208) (the ``Act'') that the Government of Burma has committed

large-scale repression of the Democratic opposition in Burma after

September 30, 1996, thereby invoking the prohibition on new investment

in Burma by U.S. persons, contained in that section. The President also

declared a national emergency to deal with the threat posed to the

national security and foreign policy of the United States by the

actions and policies of the Government of Burma, invoking the

authority, inter alia, of the International Emergency Economic Powers

Act (50 U.S.C. 1701-1706). The Order authorizes the Secretary of the

Treasury, in consultation with the Secretary of State, to take such

actions, including the promulgation of rules and regulations, as may be

necessary to carry out the purposes of the Order. In implementation of

the Order, the Treasury Department is issuing the Burmese Sanctions

Regulations, 31 CFR part 537 (the ``Regulations'').

Section 537.201 of the Regulations implements section 1 of the

Order, and prohibits new investment in Burma by U.S. persons. The term

new investment, defined in section 4(d) of the Order, means any of the

following activities, if such an activity is undertaken pursuant to an

agreement, or pursuant to the exercise of rights under such an

agreement, that is entered into with the Government of Burma or a

nongovernmental entity in Burma on or after May 21, 1997:

(1) the entry into a contract that includes the economic

development of resources located in Burma;

(2) the entry into a contract providing for the general supervision

and guarantee of another person's performance of a contract that

includes the economic development of resources located in Burma;

(3) the purchase of a share of ownership, including an equity

interest, in the economic development of resources located in Burma; or

(4) the entry into a contract providing for the participation in

royalties, earnings, or profits in the economic development of

resources located in Burma, without regard to the form of the

participation.

Section 537.202 of the Regulations implements section 2(a) of the

Order and prohibits any approval or other facilitation by a United

States person, wherever located, of a transaction by a foreign person

where the transaction would constitute prohibited new investment in

Burma if engaged in by a United States person or within the United

States.

Section 537.203 of the Regulations implements section 2(b) of the

Order and prohibits any transaction by a U.S. person or within the

United States that evades or avoids, or that has the purpose of evading

or avoiding, or attempts to violate, any of the prohibitions set forth

in the Order.

The prohibitions contained in these sections are subject to the

exemption contained in section 3 of the Order, implemented in

Sec. 537.204 of the Regulations, which excludes from the new investment

and facilitation prohibitions the entry into or performance or

financing of a contract to sell or purchase goods, services, or

technology. This exemption, however, does not apply where the entry

into such a contract on or after the effective date of the Order is for

the general supervision and guarantee of another person's performance

of a contract for the economic development of resources located in

Burma; or where such

[[Page 27847]]

contract provides for payment, in whole or in part, in: (1) shares of

ownership, including an equity interest, in the economic development of

resources located in Burma; or (2) participation in royalties, earnings

or profits in the economic development of resources located in Burma.

Section 537.301 indicates that the term economic development of

resources located in Burma shall not be construed to include not-for-

profit educational, health, or other humanitarian programs or

activities. See Sec. 537.301.

Transactions otherwise prohibited under Sec. 537.201 may not be

authorized unless the President, or the President's duly authorized

designee, exercises waiver authority provided in section 570(e) of the

Act, upon a determination and certification to Congress that

application of the waived sanction would be contrary to the national

security interests of the United States. Transactions otherwise

prohibited under Secs. 537.202 and 537.203 but found to be consistent

with U.S. policy may be authorized by a general license contained in

subpart E of this part or by a specific license issued pursuant to the

procedures described in subpart C of 31 CFR part 501. Civil and

criminal penalties for violation of the Regulations are described in

subpart G.

Since the Regulations involve a foreign affairs function, the

provisions of Executive Order 12866 and the Administrative Procedure

Act (5 U.S.C. 553)(the ``APA'') requiring notice of proposed

rulemaking, opportunity for public participation, and delay in

effective date are inapplicable. Because no notice of proposed

rulemaking is required for this rule, the Regulatory Flexibility Act (5

U.S.C. 601-612) does not apply.

Paperwork Reduction Act

As authorized in the APA, the Regulations are being issued without

prior notice and public comment procedure. The collections of

information related to the Regulations are contained in 31 CFR part 501

(the ``Reporting and Procedures Regulations''). Pursuant to the

Paperwork Reduction Act of 1995 (44 U.S.C. 3507), those collections of

information have been approved by the Office of Management and Budget

(``OMB'') under control number 1505-0164. An adjustment to the approved

burden hours to reflect the additional burden imposed in administering

the Regulations has been filed with OMB. An agency may not conduct or

sponsor, and a person is not required to respond to, a collection of

information unless the collection of information displays a valid

control number.

List of Subjects in 31 CFR Part 537

Administrative practice and procedure, Burma, Penalties, New

investment, Reporting and recordkeeping requirements.

For the reasons set forth in the preamble, 31 CFR part 537 is added

to read as follows:

PART 537--BURMESE SANCTIONS REGULATIONS

Subpart A--Relation of this Part to Other Laws and Regulations

Sec.

537.101 Relation of this part to other laws and regulations.

Subpart B--Prohibitions

537.201 Prohibited new investment by U.S. persons.

537.202 Prohibited approval or other facilitation by a U.S. person

of a foreign person's investment.

537.203 Evasions; attempts; conspiracies.

537.204 Exempt transactions.

Subpart C--General Definitions

537.301 Economic development of resources located in Burma.

537.302 Effective date.

537.303 Entity.

537.304 Foreign person.

537.305 General license.

537.306 Government of Burma.

537.307 License.

537.308 New investment.

537.309 Nongovernmental entity in Burma.

537.310 Person.

537.311 Resources located in Burma.

537.312 Specific license.

537.313 United States.

537.314 United States person; U.S. person.

Subpart D--Interpretations

537.401 Reference to amended sections.

537.402 Effect of amendment.

537.403 Economic development of resources located in Burma.

537.404 Purchase of shares in economic development projects in

Burma.

537.405 Investment in entities involved in economic development

projects in Burma.

537.406 General supervision and guarantee.

537.407 Activities under pre-May 21, 1997 agreements.

537.408 Sale or purchase of goods, services or technology.

537.409 Approval or other facilitation of a foreign person's

investment.

Subpart E--Licenses, Authorizations and Statements of Licensing Policy

537.501 General and specific licensing procedures.

537.502 Effect of license or authorization.

537.503 Exclusion from licenses and authorizations.

537.504 Divestiture of U.S. person's equity investment in Burma.

Subpart F--Reports

537.601 Recordkeeping and reporting requirements.

Subpart G--Penalties

537.701 Penalties.

537.702 Prepenalty notice.

537.703 Response to prepenalty notice; informal settlement.

537.704 Penalty imposition or withdrawal.

537.705 Administrative collection action; referral to United States

Department of Justice.

Subpart H--Procedures

537.801 Procedures.

537.802 Delegation by the Secretary of the Treasury.

Subpart I--Paperwork Reduction Act

537.901 Paperwork Reduction Act notice.

Authority: 3 U.S.C. 301; 31 U.S.C. 321(b); 50 U.S.C. 1601-1651,

1701-1706; sec 570, Pub. L. 104-208, 110 stat. 3009-166; E.O. 13047,

61 FR 28301, 3 CFR, Comp., p. 202.

Subpart A--Relation of This Part to Other Laws and Regulations

Sec. 537.101 Relation of this part to other laws and regulations.

(a) This part is separate from, and independent of, the other parts

of this chapter. Differing foreign policy and national security

contexts may result in differing interpretations of similar language

among the parts of this chapter. No license or authorization contained

in or issued pursuant to those other parts authorizes any transaction

prohibited by this part.

(b) No license or authorization contained in or issued pursuant to

this part relieves the involved parties from complying with any other

applicable laws or regulations.

Subpart B--Prohibitions

Sec. 537.201 Prohibited new investment by U.S. persons.

Except to the extent provided in regulations, orders, directives,

or licenses that may by issued in conformity with section 570 of the

Foreign Operations, Export Financing, and Related Programs

Appropriations Act, 1997 (Public Law 104-208)(the ``Act''), new

investment in Burma by United States persons is prohibited.

Note to Sec. 537.201: Section 570 of the Act provides that the

prohibition contained in this section may be waived, temporarily or

permanently, by the President if he determines and certifies to

Congress that the application of this sanction would be contrary to

the national interests of the United States. Licenses are thus not

available for purposes of authorizing transactions prohibited under

this section in the absence

[[Page 27848]]

of such a waiver determination and certification to Congress.

Sec. 537.202 Prohibited approval or other facilitation by a U.S.

person of a foreign person's investment.

Except to the extent provided in regulations, orders, directives,

or licenses that may be issued pursuant to this part, any approval or

other facilitation by a United States person, wherever located, of a

transaction by a foreign person where the transaction would constitute

prohibited new investment in Burma under this part if engaged in by a

United States person or within the United States is prohibited.

Sec. 537.203 Evasions; attempts; conspiracies.

Except to the extent provided in regulations, orders, directives,

or licenses that may be issued pursuant to this part, any transaction

by a United States person or within the United States that evades or

avoids, or has the purpose of evading or avoiding, or attempts to

violate, any of the prohibitions set forth in this part is prohibited.

Sec. 537.204 Exempt transactions.

Nothing in this part shall be construed to prohibit the entry into,

performance of, or financing of a contract to sell or purchase goods,

services, or technology, except:

(a) Where the entry into such a contract on or after the effective

date is for the general supervision and guarantee of another person's

performance of a contract for the economic development of resources

located in Burma; or

(b) Where such contract provides for payment, in whole or in part,

in:

(1) Shares of ownership, including an equity interest, in the

economic development of resources located in Burma; or

(2) Participation in royalties, earnings, or profits in the

economic development of resources located in Burma.

Note to Sec. 537.204: The term economic development of resources

located in Burma is defined in Sec. 537.301 to exclude not-for-

profit educational, health or other humanitarian programs or

activities.

Subpart C--General Definitions

Sec. 537.301 Economic development of resources located in Burma.

The term economic development of resources located in Burma shall

not be construed to include not-for-profit educational, health, or

other humanitarian programs or activities.

Sec. 537.302 Effective date.

The term effective date refers to the effective date of the

applicable prohibitions and directives contained in this part which is

12:01 a.m. EDT, May 21, 1997.

Sec. 537.303 Entity.

The term entity means a partnership, association, trust, joint

venture, corporation, or other organization.

Sec. 537.304 Foreign person.

The term foreign person means any citizen or national of a foreign

state or any entity not organized under the laws of the United States.

Sec. 537.305 General license.

The term general license means any license or authorization the

terms of which are set forth in this part.

Sec. 537.306 Government of Burma.

The term Government of Burma includes:

(a) The state and the Government of Burma, as well as any political

subdivision, agency, or instrumentality thereof;

(b) Any entity owned or controlled directly or indirectly by the

foregoing.

Sec. 537.307 License.

Except as otherwise specified, the term license means any license

or authorization contained in this part, or issued pursuant to the

authority of this part under procedures set forth in this part or in

subpart C of part 501 of this chapter.

Sec. 537.308 New investment.

The term new investment means any of the following activities, if

such an activity is undertaken pursuant to an agreement, or pursuant to

the exercise of rights under such an agreement, that is entered into

with the Government of Burma or a nongovernmental entity in Burma on or

after the effective date:

(a) The entry into a contract that includes the economic

development of resources located in Burma;

(b) The entry into a contract providing for the general supervision

and guarantee of another person's performance of a contract that

includes the economic development of resources located in Burma;

(c) The purchase of a share of ownership, including an equity

interest, in the economic development of resources located in Burma; or

(d) The entry into a contract providing for the participation in

royalties, earnings, or profits in the economic development of

resources located in Burma, without regard to the form of the

participation.

Sec. 537.309 Nongovernmental entity in Burma.

The term nongovernmental entity in Burma means a partnership,

association, trust, joint venture, corporation, or other organization,

wheresoever organized, that is located in Burma or exists for the

exclusive or predominant purpose of engaging in the economic

development of resources located in Burma or derives its income

predominantly from such economic development, and is not the Government

of Burma.

Sec. 537.310 Person.

The term person means an individual or entity.

Sec. 537.311 Resources located in Burma.

The term resources located in Burma means any resources, including

natural, agricultural, commercial, financial, industrial and human

resources, located within the territory of Burma, including the

territorial sea, or located within the exclusive economic zone or

continental shelf of Burma.

Sec. 537.312 Specific license.

The term specific license means any license or authorization not

set forth in this part but issued pursuant to the authority of this

part.

Sec. 537.313 United States.

The term United States means the United States, its territories and

possessions, and all areas under the jurisdiction or authority thereof.

Sec. 537.314 United States person; U.S. person.

The term United States person or U.S. person means any United

States citizen, permanent resident alien, juridical person organized

under the laws of the United States (including foreign branches), or

any person in the United States.

Subpart D--Interpretations

Sec. 537.401 Reference to amended sections.

Except as otherwise specified, reference to any section of this

part or to any regulation, ruling, order, instruction, direction, or

license issued pursuant to this part shall be deemed to refer to the

same as currently amended.

Sec. 537.402 Effect of amendment.

Any amendment, modification, or revocation of any section of this

part or of any order, regulation, ruling, instruction, or license

issued by or under the direction of the Director of the Office of

Foreign Assets Control shall not, unless otherwise specifically

provided, be deemed to affect any act done or omitted to be done, or

any civil

[[Page 27849]]

or criminal suit or proceeding commenced or pending prior to such

amendment, modification, or revocation. All penalties, forfeitures, and

liabilities under any such order, regulation, ruling, instruction, or

license shall continue and may be enforced as if such amendment,

modification, or revocation had not been made.

Sec. 537.403 Economic development of resources located in Burma.

The term economic development of resources located in Burma refers

to activities pursuant to a contract the subject of which includes

responsibility for the development or exploitation of resources located

in Burma, including making or attempting to make those resources

accessible or available for exploitation or economic use. Examples

include contracts conferring rights to explore for, develop, extract,

or refine petroleum, natural gas, or minerals in the ground in Burma;

contracts to take over a mining operation in Burma; acquire a forest or

agricultural area and exploit the timber or other crops; or acquire

land and construct and run a hotel or factory on it. The term economic

development of resources located in Burma is defined in Sec. 537.301

specifically to exclude contracts for not-for-profit educational,

health or other humanitarian programs or activities. See also

Sec. 537.204 for the exception that applies to the entry into,

performance of, or financing of a contract to sell or purchase goods,

services or technology.

Sec. 537.404 Purchase of shares in economic development projects in

Burma.

The purchase of shares, including an equity interest, in the

economic development of resources located in Burma, is prohibited when

those shares are purchased after the effective date directly or

indirectly from the Government of Burma or a nongovernmental entity in

Burma, unless purchased pursuant to an agreement entered into prior to

May 21, 1997. U.S. persons may purchase debt instruments issued by the

Government of Burma or a nongovernmental entity in Burma, directly or

indirectly, provided that such instruments are not convertible into

equity, and do not provide for participation, including as collateral

or security, in royalties, earnings, or profits in the economic

development of resources located in Burma.

Sec. 537.405 Investments in entities involved in economic development

projects in Burma.

(a) The purchase of shares in a third-country company that is

engaged in the economic development of resources located in Burma is

prohibited by Sec. 537.201 where the company's profits are

predominantly derived from the company's economic development of

resources located in Burma.

(b) If a U.S. person holds shares in an entity which subsequently

engages exclusively or predominantly in the economic development of

resources located in Burma or subsequently derives its income

exclusively or predominantly from such economic development, the United

States person is not required to relinquish its shares, but may not

purchase additional shares. Divestment of the shares in such an entity

to a foreign person -- constituting the facilitation of that foreign

person's investment in Burma -- is authorized under general license

pursuant to Sec. 537.504.

Sec. 537.406 General supervision and guarantee.

Section 537.201 prohibits the entry by a U.S. person into a

contract providing for the general supervision and guarantee of another

person's performance of a contract that includes the economic

development of resources located in Burma, if the U.S. person's

contract is entered into on or after the effective date, unless

undertaken pursuant to, or in exercise of rights under, a pre-effective

date agreement. For the purposes of Sec. 537.201, only the entry into

contracts for supervision and guarantee at the top level of project

management, such as entry into a contract with a development project's

sponsor or owner to become a prime contractor or general manager for a

development project, will be considered new investment in Burma. By

contrast, subcontracts to provide goods, services, or technology to a

prime contractor or general manager of a development project are exempt

from the prohibitions of this part pursuant to Sec. 537.204 unless:

(a) The functional scope of the subcontractor's obligations is

substantially similar to that of a prime contractor's or general

manager's obligations; or

(b) The consideration for such subcontracts includes a share of

ownership in, or participation in the royalties, earnings or profits

of, the economic development of resources located in Burma.

Sec. 537.407 Activities under pre-May 21, 1997 agreements.

(a) Activities undertaken by a U.S. person pursuant to an agreement

entered into prior to May 21, 1997, between the U.S. person and the

Government of Burma or a nongovernmental entity in Burma are not

prohibited new investments, as defined in Sec. 537.308.

(b) A U.S. person who is a party to a pre-effective date agreement

for the development of economic resources located in Burma may enter

into subsequent agreements with foreign persons where such agreements

are pursuant to, or in exercise of rights under, the pre-effective date

agreement. The facilitation of foreign persons' investment in Burma

under these circumstances is authorized pursuant to the general license

contained in Sec. 537.504.

(c) A U.S. person may not enter into a contract for the economic

development of resources located in Burma after May 21, 1997, if

pursuant to, or in exercise of rights under, a pre-effective date

agreement, unless the contractual arrangement is specifically

contemplated in the pre-effective date agreement.

(d) The exercise of rights under pre-effective date agreements may

include the exercise of options to extend the contract, depending on

such factors as the degree of specificity with which the option to

extend is described in the pre-effective date agreement, and the degree

to which the party wishing to renew can enforce its decision to

exercise the option.

Sec. 537.408 Sale or purchase of goods, services or technology.

(a) Section 537.204 exempts from any prohibition under this part

the entry into, performance of, or financing of a contract to sell or

purchase goods, services, or technology, except:

(1) Where the entry into a contract on or after the effective date

is for the general supervision and guarantee of another person's

performance of a contract for the economic development of resources

located in Burma; or

(2) Where such contract provides for payment, in whole or in part,

in:

(i) Shares of ownership, including an equity interest, in the

economic development of resources located in Burma; or

(ii) Participation in royalties, earnings, or profits in the

economic development of resources located in Burma.

(b) Examples: The following examples are based upon the assumption

that neither Sec. 537.204(a) nor Sec. 537.204(b) applies.

(1) A U.S. person may market goods or services in Burma through a

sales representative or sales agent, or through a U.S. person or

subsidiary established and operating in Burma before May 21, 1997, or

through any established foreign (including Burmese) distributorship.

[[Page 27850]]

The U.S. person may not, however, establish and operate a new business,

branch, office or showroom in Burma to market such goods or services or

facilitate the establishment of a new foreign entity to do so. This

would constitute the development of a commercial resource.

(2) A U.S. person may rent, lease or purchase space in existing

buildings in connection with the continued operation of a business in

operation prior to the effective date. It may change locations, modify

and renovate existing space and upgrade machinery or equipment. Unless

pursuant to a pre-effective date agreement or the exercise of specific

rights under such agreement, however, the U.S. person may not expand

its business operations by opening additional stores, branches, offices

or showrooms beyond the number that were in existence immediately prior

to May 21, 1997. The U.S. person may not construct a new commercial

building to house its business as this would constitute the economic

development of land and commercial resources in Burma.

(3) A U.S. person involved in exempt activities may hire and train

Burmese employees to carry out such activities. The employment of

personnel in Burma under these circumstances is considered the purchase

of employment services which is exempt from prohibition under

Sec. 537.204. Any training incidental to the performance of the

employee's services is likewise exempt. For example, a U.S. person

engaged in the sale of copy machines may hire and train a Burmese

employee to carry out activities pursuant to such sales, including

office support personnel, personnel to provide after-sale service and

maintenance in accordance with the terms of a purchase or lease

agreement, sales representatives and supervisory personnel. A U.S.

person may not, however, open a business after the effective date, the

purpose of which is the sale of vocational skills training in the

maintenance of copy machines, as this would constitute the economic

development of human resources in Burma.

(4) Contracts for the purchase or sale of services incident to the

registration and renewal of patents, trademarks and copyrights are not

prohibited by this part.

(5) A U.S. bank is allowed to provide trade financing as a service

either to the Government of Burma or to nongovernmental entities in

Burma, but cannot provide them loans earmarked for economic development

of resources in Burma if loan repayment is secured by the project. A

U.S. bank can provide development project financing as a service, so

long as the financing instruments are not convertible into equity, and

do not provide for participation, including as collateral or security,

in royalties, earnings, or profits in the economic development of

resources located in Burma.

Sec. 537.409 Approval or other facilitation of a foreign person's

investment.

(a) The prohibition contained in Sec. 537.202 against approval or

other facilitation of a foreign person's investment in Burma bars any

action by a U.S. person that assists or supports a foreign person's

activity that would constitute prohibited new investment under

Sec. 537.201 if engaged in by a U.S. person. This facilitation

prohibition is subject to the exemption for trade in goods, services

and technology set forth in Sec. 537.204.

(b) Examples: (1) A U.S. corporation is prohibited from brokering,

financing, guaranteeing, or approving the entry by any foreign person,

including a foreign affiliate, into a contract for the development of,

e.g., a natural gas field, a tourist hotel complex, or a rubber

plantation in Burma, unless pursuant to the affiliate's exercise of

rights under an agreement entered into prior to the effective date. An

independent U.S. contractor, however, may perform brokerage, financing,

or guarantee services if under a service contract meeting the

conditions of Sec. 537.204.

(2) The sale to a foreign person of a U.S. person's equity or

income interest in a development project in Burma constitutes

facilitation of that foreign person's investment in Burma, unless

pursuant to a pre-effective date agreement. Such a sale, however, is

authorized by general license under Sec. 537.504.

(3) A U.S. national or permanent resident alien employed in Burma

or in a third country by a foreign person may participate in any

decision-making role in an activity by the foreign person that includes

economic development of resources located in Burma as exempt employment

services pursuant to Sec. 537.204, unless such services are undertaken

pursuant to a post-effective date agreement between the foreign person

and the Government of Burma or a nongovernmental entity in Burma and:

(i) involve the general supervision and guarantee of the foreign

person's performance of a contract for the economic development of

resources located in Burma, or

(ii) where the individual U.S. person's compensation is provided

for, in whole or in part, from shares of ownership in the development

project or participation in royalties, earnings, or profits in the

development project.

Subpart E--Licenses, Authorizations, and Statements of Licensing

Policy

Sec. 537.501 General and specific licensing procedures.

For provisions relating to licensing procedures, see subpart C of

part 501 of this chapter.

Sec. 537.502 Effect of license or authorization.

(a) No license or other authorization contained in this part, or

otherwise issued by or under the direction of the Director of the

Office of Foreign Assets Control, shall be deemed to authorize or

validate any transaction effected prior to the issuance of the license,

unless specifically provided in such license or authorization.

(b) No regulation, ruling, instruction, or license authorizes any

transaction prohibited under this part unless the regulation, ruling,

instruction, or license is issued by the Office of Foreign Assets

Control and specifically refers to this part. No regulation, ruling,

instruction, or license referring to this part shall be deemed to

authorize any transaction prohibited by any provision of this chapter

unless the regulation, ruling, instruction or license specifically

refers to such provision.

(c) Any regulation, ruling, instruction, or license authorizing any

transaction otherwise prohibited under this part has the effect of

removing a prohibition or prohibitions contained in this part from the

transaction, but only to the extent specifically stated by its terms.

Unless the regulation, ruling, instruction, or license otherwise

specifies, such an authorization does not create any right, duty,

obligation, claim, or interest in, or with respect to, any property

which would not otherwise exist under ordinary principles of law.

Sec. 537.503 Exclusion from licenses and authorizations.

The Director of the Office of Foreign Assets Control reserves the

right to exclude any person, property, or transaction from the

operation of any license, or from the privileges therein conferred, or

to restrict the applicability thereof with respect to particular

persons, property, transactions, or classes thereof. Such action shall

be binding upon all persons receiving actual or constructive notice of

such exclusion or restriction.

Sec. 537.504 Divestiture of U.S. person's equity investment in Burma.

Notwithstanding the prohibition in Sec. 537.202 against the

facilitation by a

[[Page 27851]]

U.S. person of a foreign person's investment, all transactions related

to the divestiture or transfer to a foreign person of a U.S. person's

share of ownership including an equity interest in the economic

development of resources located in Burma are authorized. U.S. persons

participating in such transactions valued at more than $10,000 are

required, within 10 business days after the agreement is signed, to

file a report for statistical purposes with the Office of Foreign

Assets Control, U.S. Treasury Department, 1500 Pennsylvania Avenue NW--

Annex, Washington, DC 20220.

Note to Sec. 537.504: This authorization includes arrangements

by U.S. persons with pre-effective date investments in Burma to

``farm in'' or sell a stake in the investment to a foreign person.

For purposes of this section, the term farm-in arrangement is

defined to mean the sale of an equity interest in an investment in

the economic development of resources located in Burma.

Subpart F--Reports

Sec. 537.601 Recordkeeping and reporting requirements.

For provisions relating to records and reports, see subpart B of

part 501 of this chapter.

Subpart G--Penalties

Sec. 537.701 Penalties.

(a) Attention is directed to section 206 of the International

Emergency Economic Powers Act (50 U.S.C. 1705) (the ``Act''), which is

applicable to violations of the provisions of any license, ruling,

regulation, order, direction or instruction issued by or pursuant to

the direction or authorization of the Secretary of the Treasury

pursuant to this part or otherwise under the Act. Section 206 of the

Act, as adjusted by the Federal Civil Penalties Inflation Adjustment

Act of 1990 (Pub.L. 101-410, as amended, 28 U.S.C. 2461 note), provides

that:

(1) A civil penalty of not to exceed $11,000 per violation may be

imposed on any person who violates any license, order, or regulation

issued under the Act;

(2) Whoever willfully violates any license, order, or regulation

issued under the Act shall, upon conviction, be fined not more than

$50,000, or, if a natural person, may be imprisoned for not more than

10 years, or both; and any officer, director, or agent of any

corporation who knowingly participates in such violation may be

punished by a like fine, imprisonment or both.

(b) The criminal penalties provided in the Act are subject to

increase pursuant to 18 U.S.C. 3571.

(c) Attention is also directed to 18 U.S.C. 1001, which provides

that whoever, in any matter within the jurisdiction of any department

or agency of the United States, knowingly and willfully falsifies,

conceals or covers up by any trick, scheme, or device a material fact,

or makes any false, fictitious or fraudulent statements or

representations or makes or uses any false writing or document knowing

the same to contain any false, fictitious or fraudulent statement or

entry, shall be fined under title 18, United States Code, or imprisoned

not more than 5 years, or both.

(d) Violations of this part may also be subject to relevant

provisions of other applicable laws.

Sec. 537.702 Prepenalty notice.

(a) When required. If the Director of the Office of Foreign Assets

Control has reasonable cause to believe that there has occurred a

violation of any provision of this part or a violation of the

provisions of any license, ruling, regulation, order, direction or

instruction issued by or pursuant to the direction or authorization of

the Secretary of the Treasury pursuant to this part or otherwise under

the International Emergency Economic Powers Act, and the Director

determines that further proceedings are warranted, he shall issue to

the person concerned a notice of his intent to impose a monetary

penalty. The prepenalty notice shall be issued whether or not another

agency has taken any action with respect to this matter.

(b) Contents--(1) Facts of violation. The prepenalty notice shall

describe the violation, specify the laws and regulations allegedly

violated, and state the amount of the proposed monetary penalty.

(2) Right to respond. The prepenalty notice also shall inform the

respondent of respondent's right to make a written presentation within

30 days of mailing of the notice as to why a monetary penalty should

not be imposed, or, if imposed, why it should be in a lesser amount

than proposed.

Sec. 537.703 Response to prepenalty notice; informal settlement.

(a) Deadline for response. The respondent shall have 30 days from

the date of mailing of the prepenalty notice to make a written response

to the Director of the Office of Foreign Assets Control.

(b) Form and contents of response. The written response need not be

in any particular form, but shall contain information sufficient to

indicate that it is in response to the prepenalty notice. It should

contain responses to the allegations in the prepenalty notice and set

forth the reasons why the respondent believes the penalty should not be

imposed or, if imposed, why it should be in a lesser amount than

proposed.

(c) Informal settlement. In addition or as an alternative to a

written response to a prepenalty notice pursuant to this section, the

respondent or respondent's representative may contact the Office of

Foreign Assets Control as advised in the prepenalty notice to propose

the settlement of allegations contained in the prepenalty notice and

related matters. In the event of settlement at the prepenalty stage,

the claim proposed in the prepenalty notice will be withdrawn, the

respondent is not required to take a written position on allegations

contained in the prepenalty notice, and the Office of Foreign Assets

Control will make no final determination as to whether a violation

occurred. The amount accepted in settlement of allegations in a

prepenalty notice may vary from the civil penalty that might finally be

imposed in the event of a formal determination of violation. In the

event no settlement is reached, the 30-day period specified in

paragraph (a) of this section for written response to the prepenalty

notice remains in effect unless additional time is granted by the

Office of Foreign Assets Control.

Sec. 537.704 Penalty imposition or withdrawal.

(a) No violation. If, after considering any response to the

prepenalty notice and any relevant facts, the Director of the Office of

Foreign Assets Control determines that there was no violation by the

respondent named in the prepenalty notice, the Director promptly shall

notify the respondent in writing of that determination and that no

monetary penalty will be imposed.

(b) Violation. If, after considering any response to the prepenalty

notice, the Director of the Office of Foreign Assets Control determines

that there was a violation by the respondent named in the prepenalty

notice, the Director promptly shall issue a written notice of the

imposition of the monetary penalty to the respondent.

(1) The penalty notice shall inform the respondent that payment of

the assessed penalty must be made within 30 days of the mailing of the

penalty notice.

(2) The penalty notice shall inform the respondent of the

requirement to furnish the respondent's taxpayer identification number

pursuant to 31 U.S.C. 7701 and that such number will be used for

purposes of collection and

[[Page 27852]]

reporting on any delinquent penalty amount in the event of a failure to

pay the penalty imposed.

Sec. 537.705 Administrative collection; referral to United States

Department of Justice.

In the event that the respondent does not pay the penalty imposed

pursuant to this part or make payment arrangements acceptable to the

Director of the Office of Foreign Assets Control within 30 days of the

mailing of the written notice of the imposition of the penalty, the

matter may be referred for administrative collection measures by the

Department of the Treasury or to the United States Department of

Justice for appropriate action to recover the penalty in a civil suit

in a Federal district court.

Subpart H--Procedures

Sec. 537.801 Procedures.

For provisions relating to procedures, see subpart C of part 501 of

this chapter.

Sec. 537.802 Delegation by the Secretary of the Treasury.

Any action which the Secretary of the Treasury is authorized to

take pursuant to Executive Order 13047 or any further executive orders

relating to the national emergency declared in Executive Order 13047

may be taken by the Director of the Office of Foreign Assets Control,

or by any other person to whom the Secretary of the Treasury has

delegated authority so to act.

Subpart I--Paperwork Reduction Act

Sec. 537.901 Paperwork Reduction Act notice.

For approval by the Office of Management and Budget under the

Paperwork Reduction Act of information collections relating to

recordkeeping and reporting requirements, to licensing procedures

pursuant to statements of licensing policy, and to other procedures,

see Sec. 501.901 of this chapter.

Dated: April 21, 1998.

R. Richard Newcomb,

Director, Office of Foreign Assets Control.

Approved: May 11, 1998.

James E. Johnson,

Assistant Secretary (Enforcement), Department of the Treasury.

[FR Doc. 98-13477 Filed 5-18-98; 9:52 am]

BILLING CODE 4810-25-F