On Thursday September 21st, President Trump signed Executive Order 13810 Imposing Additional Sanctions with Respect to North Korea (” the E.O.” or “E.O. 13810”).  E.O. 13810 significantly expands the U.S. Treasury Department’s authority to impose a broad range of sanctions unlike those we’ve seen before. The expansion of authority includes the ability to impose “secondary sanctions” on non-U.S. parties who take part in foreign activities involving certain North Korean sectors or entities.  For example, OFAC now has the power to block U.S. correspondent account access to any foreign bank that knowingly conducts or facilitates significant transactions tied to trade with North Korea.

The Trump Administration is taking a hard line. In briefing reporters, Treasury Secretary Steven Mnuchin said foreign banks “can choose to do business with the United States or with North Korea but not both,” adding that the sanctions not only allow the U.S. to sanction individuals or entities but to “freeze or block any transactions with any financial institution, anywhere in the world, that facilitates any transactions with the blocked person.”  And the sanctions are not limited to banking.  The E.O. gives OFAC the power to block entities in a variety of sectors if found to have ties to North Korea.

The new Executive Order comes the same week the President warned North Korea, in a speech before the UN, of possible military action if refuses to suspend its nuclear weapons program.  The sanctions also come the same day that the People’s Bank of China reportedly instructed its banks to comply with UN sanctions and stop doing business with North Korea.

The following is a broad overview of the additional sanctions implemented under the new E.O. :

• Targets North Korea’s shipping and trade networks and issues a 180-day ban on vessels and aircraft that have visited North Korea, prohibiting them from landing in the United States. The ban also targets vessels that have engaged in a ship-to-ship transfer with a vessel that has visited North Korea within 180 days.
• Authorizes the Treasury Department to impose sanctions on any foreign financial institution that knowingly conducts or facilitates any significant transaction 1) on behalf of listed individuals or entities, or 2) in connection with trade with North Korea.
• Blocks all funds originating from, destined for, or passing through a foreign bank account determined to be owned or controlled by a North Korean person or used to transfer funds in which any North Korean person has an interest.
• Authorizes the Treasury Department to impose sanctions on persons involved in:
• Industries: The construction, energy, financial services, fishing, information technology, manufacturing, medical, mining, textiles, or transportation industries in North Korea;
• Ports: Ownership, control, or operation of any port in North Korea, including any seaport, airport, or land port of entry;
• Imports/Exports: at least one significant importation from or exportation to North Korea of any goods, services, or technology.

More guidance should be released shortly as the situation moves forward and the Administration cements its position. In the meantime, U.S. businesses should be assessing their global partners, supply chains, and activities to identify any points of liability.  If you or your company may be doing business with a foreign party that could become listed as a specially designated national due to its connections to North Korea, it is important to assess whether 1) it is worth maintaining the current business relationship in this unpredictable environment, and 2) whether you should prepare a strategy to quickly cut ties with any foreign partner that does become suddenly sanctioned.