`[Federal Register Volume 63, Number 98 (Thursday, May 21, 1998)]
[Rules and Regulations]
[Pages 27846-27852]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-13477]


=======================================================================
-----------------------------------------------------------------------

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`