The Clearing House Association – which is owned by many of the world’s largest commercial banks – and the Bankers Association of Finance and Trade (BAFT) wrote to the Office of Foreign Assets Control (OFAC) in July, after discovering that a significant amount of trade, including from the US, moves through AWPT.
The port is owned and operated by a subsidiary of Asia World Company, a Specially Designated National (SDN), subject to US sanctions. This means that US financial institutions and their worldwide branches can’t do business with the port, unless granted special permission to do so by OFAC.
The associations have requested that OFAC considers issuing a waiver, to allow US trade to and from terminals and jetties operated by AWPT.
The letter was written following “an unusual circumstance”, in which a BAFT member noticed that Asia World’s port terminal was named in their trade documents. Usually, documents just reference the port city – for example Yangon – rather than the name of an individual terminal.
The BAFT member obtained informal guidance from OFAC, which confirmed the requirement “to block the original documents and payments referencing AWPT”.
This is a problem, according to the associations, because the port is a critical artery of foreign trade for Myanmar. Yangon has just four container terminals – Asia World’s is the cheapest, fastest, and most frequently used, say industry sources.
Myanmar International Terminals Thilawa, operated by Hong Kong-based Hutchison Port Holdings, is the country’s largest terminal, but for many, AWPT remains the facility of choice.
“[It] offers the deep waters necessary for large container vessels, ‘state of the art’ equipment and ease of access to Yangon and the adjacent industrialised area where most manufacturing takes place in [Myanmar],” said the letter to OFAC.
As a result, around half of all the country’s trade flows through the port, “likely including the vast majority of containerised trade of the sort financed or facilitated by US and other global financial institutions”.
An Asia World representative said that import and export cargo in Myanmar through the ports of Yangon has increased “tremendously” since 2011. Cargo volume for Yangon’s ports in 2011 was 383,990 twenty-foot equivalent units (TEU) and with more than 20pc growth each year, total cargo passing through the ports of Yangon rose to 719,567 TEU in 2014, he said.
“Asia World Port Terminal handled a total containers and general cargo volume of 436,936 TEU [in 2014]. This is about 60 percent of the total cargo volume of ports in Yangon. The efficiency of Asia World Port Terminal is recognised by many within the shipping industry.”
Logistics managers and brokers in Yangon confirmed that a majority of imports, from the US and elsewhere, go through Asia World’s port terminal.
This is likely due to a lack of awareness rather than a deliberate violation of sanctions, they said. One director at a Yangon-based logistics company said he had only recently received his first request from a client to avoid Asia World’s terminal.
However, now that OFAC has provided specific guidance against using the port, US financial institutions and US dollar clearing institutions are likely to begin blocking AWPT related transactions, said the letter to OFAC. “Due to the significant trade flows through AWPT such actions are likely to negatively impact trade with Burma,” it said.
“Furthermore, global, non-US financial institutions with US dollar activity related to [Myanmar] may implement similar measures in light of the global impact of OFAC regulations. In a relatively short span of time, these actions could amount to a de-facto trade embargo on Burma.”
BAFT and the Clearing House Association said they are concerned this may not be consistent with the intention of recently amended Myanmar sanctions regulations, and US foreign policy goals – given multiple supportive policy statements by the US administration.
US trade relations with Myanmar have improved significantly over the last few years. Until 2010, US imports from Myanmar were nil, and exports averaged around US$10 million per year, according to the United States Census Bureau.
Since the US lifted a number of sanctions on trade with Myanmar, bilateral trade has increased fast. This year to date, exports to from the US to Myanmar are worth $120 million and imports are worth $68.2 million – rising from $92.9 million in exports and $92.7 million in imports for the whole of last year.
“A reversal of this trend may have the unintended consequences of damaging the Burmese economy and potentially being interpreted by the government of Burma as a change in policy on the part of the US government,” said the letter.
It requests that OFAC consider issuing a general licence under the sanctions regulations, to allow trade transactions involving the shipment to, or from, a terminal or jetty owned, operated or managed by Asia World, “provided that no funds are being paid directly to or from Asia World”.
The licence should allow trade transactions in any currency for US financial institutions and their branches, and in US dollars for foreign financial institutions, it said.
The Clearing House is owned by a number of global banks including Bank of America, Barclays, BNY Mellon, Citi, Deutsche Bank, HSBC, JP Morgan, Santander and UBS.
A spokesperson for the US Treasury told The Myanmar Times that OFAC is unable to comment on whether transactions involving AWPT are subject to US sanctions.
However, he noted that the SDN list includes a number of well-known businesspeople and their businesses including Steven Law, Asia World and Asia World Port Management.
“US persons are prohibited from any transaction or dealing, directly or indirectly, in property in which a blocked person has an interest,” he said.
A US embassy spokesperson said the country remains committed to supporting Myanmar’s ongoing transition toward a more democratic, open society. “This includes encouraging responsible investment in this country to support development and to improve the quality of life and standard of living of the people,” he said.
“Among the tools that we use to encourage progress, including diplomatic engagement, are the remaining financial sanctions.”
Source: Myanmar Times