New sanctions impose further restrictions on North Korea

by Reed Smith

The United Nations, the European Union and United States recently expanded sanctions on North Korea, issuing new restrictions which impact the mineral, energy, shipping, banking, finance, and aviation industries. United Nations Resolution 2270 bans the supply of luxury goods to North Korea and implements a mandatory cargo inspection requirement for DPRK-flagged vessels or cargo transiting North Korea. The European Union has imposed additional export bans and restrictions for financial institutions, while the United States has added additional primary and secondary sanctions prohibiting trade with North Korea.

The European Union and the United States recently imposed a series of new sanctions against the Democratic Peoples’ Republic of North Korea (DPRK), in response to nuclear and ballistic weapons tests conducted by the country earlier this year. The United Nations (U.N.) has also imposed harsh sanctions through Resolution 2270 in response to the testing, and expressed “deep concern at the grave hardship that the DPRK people are subjected to” and that arms sales are generating revenue for nuclear weapons while “DPRK citizens have great unmet needs.”1 The U.N. Security Council unanimously approved Resolution 2270, which contains some of the most stringent sanctions against North Korea to date.

United Nations Resolution 2270 U.N. Resolution 2270 places restrictions on illicit foreign trade channels, shipping, mineral exports and financial activities involving North Korea. The Resolution requires that the DPRK suspends all activities related to nuclear weapons and ballistic missile testing. Some of the significant provisions of the resolution include:

  • Luxury goods: The resolution bans the supply of luxury goods to North Korea, including luxury watches, jet skis, and snowmobiles valued at over $2,000.
  • Minerals: The DPRK is prohibited from all direct or indirect sales and transfers of gold, titanium, vanadium ore and other materials with member states. The DPRK’s sale of coal and iron is also prohibited, but certain exceptions may apply if the sale does not generate revenue for prohibited activities.
  • Cargo inspection: The U.N. Security Council imposed mandatory cargo inspections to and from North Korea in the recent sanctions. This includes cargo that has been brokered or facilitated by North Korean nationals. The cargo inspections are required at all North Korean airports, seaports, and free trade zones. Previously, states were only required to inspect cargo where there were reasonable grounds to believe that the shipment contained illicit items.
  • Asset freezes: An asset freeze applies to all funds owned or controlled by entities of the DPRK Government or Worker’s Party of Korea.
  • Airplanes and vessels: A ban applies to the leasing or chartering of vessels and airplanes and provision of crew services to North Korea. The ban also restricts the registration, certification and provision of insurance for vessels flagged by the DPRK.

The U.N. sanctions expand an embargo on all arms exports and imports to North Korea, to include small arms. The expanded restrictions also prohibit any items which can improve North Korea’s military capabilities. Further, the U.N. Security Council has listed an additional 16 individuals and 12 entities for an asset freeze in Annex I and II. The listed entities include North Korean banks, shipping and trading companies, government agencies, and defense research academies.

European Union sanctions on North Korea The EU has had restrictive measures in place against North Korea since 2007. They have now been augmented by Council Regulation (EU) 2016/682 of 29 April 20162 amending Council Regulation (EC) No 329/2007 of 27 March 2007 concerning restrictive measures against the Democratic People’s Republic of Korea (the ‘Regulation’), implementing U.N. Resolution 2270 (2016).

Export, import, transport and related restrictions

The existing export, import and transport restrictions remain and, in addition, it is now prohibited to:

  • Sell, supply, export or transfer aviation fuel to North Korea or transport to North Korea aviation fuel on board the flag vessels or aircraft of member states, whether or not originating in the territories of member states.3
  • Purchase, import, transfer, or transport on board the flag vessels or aircraft of a member state gold, titanium ore, vanadium ore and rare earth minerals4 or coal, iron and iron ore5 from North Korea.6
  • Sell, supply, transfer or export, directly or indirectly to North Korea, or purchase, import or transport from North Korea any item, except food or medicine, where the exporter, importer or transporter knows or has reasonable grounds to believe that the item is destined directly or indirectly for North Korea’s armed forces or the export of the item could support or enhance the operational capabilities of the armed forces of a state other than North Korea.7

There are now cargo inspection powers8 and a revamped prohibition in respect of access to ports9 in EU territory.

Freezing of funds and economic resources

The existing provisions freezing funds and economic resources remain and have been augmented.

  • The definition of “economic resources” has been amended to extend it to “actual or potential” assets of every kind, whether tangible or intangible, movable of immovable and to include “vessels, such as maritime vessels.”10
  • It is prohibited to provide funds or economic resources to persons, entities or bodies of the Government of North Korea, the Worker’s Party of Korea, persons or entities acting on their behalf or at their direction, or entities owned or controlled by them where it has been determined by the competent authority of the member state that to do so would contribute to North Korea’s illicit programs.11
  • It is prohibited to participate directly or indirectly in joint ventures or any other business arrangements with listed12 entities, as well as individuals or entities acting for or on their behalf or direction.13

Provisions relating to credit and financial institutions

Credit and financial institutions to which the Regulation applies shall (by 31 May 2016):

  • Close any bank account with credit or financial institutions domiciled in North Korea, EU branches of such credit or financial institutions, non-EU branches of such credit or financial institutions as listed14 and credit or financial institutions that are controlled by persons or entities domiciled in North Korea as listed15 (together “such credit or financial institutions”),16 where it has been determined by the competent authority of the member state that such accounts could contribute to North Korea’s illicit programs.17
  • Terminate any correspondent banking relationship with such credit or financial institutions.18
  • Close representative offices, branches and subsidiaries in North Korea,19 where it has been determined by the competent authority of the member state that office branches or subsidiaries could contribute to North Korea’s illicit programs.20
  • Terminate joint ventures with such credit or financial institutions.21
  • Relinquish any ownership interest in such credit or financial institutions.22

Credit and financial institutions must promptly inform the competent authority of the member state if they suspect that the operation of any account or office referred to above might contribute to North Korea’s illicit programs.23

It is now prohibited to operate or facilitate the operation of a representative office, branch or subsidiary of such credit or financial institutions.24

It is also prohibited to provide financial support to trade with North Korea, including the granting of export credits, guarantees or insurance to persons or entities involved in such trade, where such financial support could contribute to North Korea’s nuclear of ballistic missile programs or other prohibited activities.25

It is prohibited to (subject to certain derogations):26

  • Lease or charter vessels or aircraft or provide crew services to North Korea, listed persons or entities, or any person or entity acting on behalf of, or at the direction of, any such person or entity, and entities owned or controlled by them.27
  • Own, lease, operate, insure or provide vessel classification services or associate services to any vessel flagged to North Korea.28
  • Register or maintain on the register, any vessel that is owned, operated or crewed by North Korea or North Korean nationals, or has been deregistered by another state pursuant to paragraph 19 of U.N. Security Council Resolution 2270 (2016).29

United States sanctions on North Korea The United States has long maintained a comprehensive sanctions program against North Korea. The Office of Foreign Assets Control (OFAC) administers and enforces the North Korea sanctions regime through the North Korea Sanctions Regulations, 31 C.F.R. § 510. As a result of North Korea’s recent activities, the United States has imposed even stricter sanctions on that nation through the North Korea Sanctions and Policy Enforcement Act of 2016 on February 18, 2016. This Act directs the president to impose sanctions against individuals who aid North Korea in nuclear development, human rights abuses, money laundering, and arms trade, among other sanctionable activities. The Act further distinguishes between mandatory ‘blacklist’ designations the president must make, and those that are within his discretion to make.

The Act and U.N. Resolution 2270 were implemented through Executive Order 13722 (E.O. 13722) on March 15, 2016. E.O. 13722 broadly prohibits U.S. persons from exporting or re-exporting goods, services, or technology to North Korea. It also broadly prohibits all new investments in North Korea by U.S. persons. U.S. persons are prohibited from facilitating activities that would otherwise be prohibited under U.S. law. What constitutes ‘facilitation’ is often fact-specific, but generally refers to assisting or supporting transactions with sanctioned parties. In this context, it includes financing, approval, or guaranteeing the export of goods, services, and technology to North Korea, as well as facilitating investments in North Korea by non-U.S. persons.

E.O. 13722 imposes “blocking” sanctions, which are a prohibition (asset freeze) on any transfers in financial instruments or other property to specific individuals and entities that the U.S. government have identified. Specifically, E.O. 13722 imposes sanctions against both U.S. and non-U.S. persons dealing in luxury goods, minerals, and certain industries (transportation, mining, energy and financial services). The sanctions also apply to those who engage in human rights abuses, undermine U.S. cybersecurity, or promote censorship on behalf of the North Korean government.

Actions by OFAC and new general licenses OFAC has also designated an additional 15 North Korean companies, 29 vessels, and two individuals as Specially Designated Nationals (SDNs). These include entities in North Korea’s banking, financial services, trade and shipping industry.

OFAC issued nine general licenses in association with the enhanced sanctions against North Korea.30 A general license provides an authorization without the need for a written license application to OFAC. Individuals should be careful in utilizing the general licenses and ensure that all conditions are fulfilled. A summary of the general licenses is below:

  • U.N. missions: Provision of goods and services for the personal use of United Nations employees involved in the diplomatic mission of North Korea are authorized.
  • Legal services: Provision of legal services to or on behalf of the North Korean Government or Workers’ Party, and to ensure compliance with sanctions laws, are authorized.
  • Payment of service fees: Debit to blocked accounts for the payment of service fees are authorized.
  • Personal remittances: Personal remittances to individuals in North Korea are authorized. Charitable donations and funds transfers to businesses (including family-owned businesses) are not permitted.
  • NGO projects: Services in support of non-government organizations (NGOs) are authorized, such as humanitarian projects, non-commercial development projects, educational activities, and environmental activities.
  • Diplomatic missions: The processing of funds for third-country diplomatic missions or consular missions of North Korea is authorized.
  • Telecommunications: Transactions necessary for the receipt and transmission of telecommunications and mail are authorized. This general license does not include the provision, sale, or lease of telecommunications equipment or facilities.
  • Intellectual property: Transactions connected to intellectual property, such as applications, patent renewals, filings, and assignment, are authorized.
  • Emergency medical services: Emergency medical services are authorized.

  1. See
  2. O.J. L 117, 3.5.2016, p. 1 with effect from 3 May 2016. References to articles and annexes in this document are references to the provisions of and annexes to the Regulation as amended.
  3. Article 2 (1) (b) and Annex Ie. This prohibition does not apply with respect to the sale or supply of aviation fuel to civilian passenger aircraft outside North Korea exclusively for consumption during its flight to North Korea and its return to the airport of origin, Article 2 (6). There is also a derogation requiring permission from the relevant competent authority, Article 2 (7)
  4. Article 2 (4) (a) and Annex Id.
  5. Article 2 (4) (a) and Annex Id.
  6. There are derogations requiring permission from the relevant competent authority, Article 2 (5).
  7. Article 2a (1) and (2). There are certain derogations, Article 2a (3).
  8. Article 3a (3) and (4).
  9. Article 3a (6).
  10. Article 1 (6).
  11. Article 6 (6). There are derogations, Article 6(7).
  12. Annex IV.
  13. Article 6a.
  14. Annex VI.
  15. Annex VI.
  16. Article 5a (1d) (a).
  17. Article 5a (1e).
  18. Article 5a (1d) (b).
  19. Article 5a (1d) (c).
  20. Article 5a (1e).
  21. Article 5a (1d) (d).
  22. Article 5a (1d) (e).
  23. Article 5a (1e).
  24. Article 5a (2) (e).
  25. Article 9c.
  26. Article 11b (2) and (3).
  27. Article 11b (1) (a).
  28. Article 11b (1) (b).
  29. Article 11b (1) (c).
  30. A list of OFAC’s general licenses can be viewed at:

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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