United States: U.S. Imposes Ban On Exports And Reexports To, And Further Sanctions On, North Korea

Less than one month after signing into law the North Korea Sanctions and Policy Enhancement Act of 2016 (the "Act")—as reported in a previous Alert—and in response to the Government of North Korea's continuing pursuit of its nuclear and missile programs, on March 16, 2016, U.S. President Barack Obama issued an executive order implementing provisions of the Act and further tightening U.S. sanctions on North Korea. Unlike the Act, which primarily impacted non-U.S. companies that do business with North Korea, the executive order impacts U.S. companies in a number of ways. Summaries of certain key aspects of the executive order are provided below.

Prohibitions on Exports and Reexports to, and New Investment in, North Korea

The executive order prohibits the exportation or reexportation, direct or indirect, from the United States, or by U.S. persons, of any goods, services (including financial services), or technology to North Korea. The U.S. Department of Commerce, Bureau of Industry and Security ("BIS") maintains authority to license exports and reexports of goods and technology subject to the Export Administration Regulations to persons in North Korea who are not designated on the list of Specially Designated Nationals and Blocked Persons ("SDN List") maintained by U.S. Department of the Treasury, Office of Foreign Assets Control ("OFAC") and to the Government of North Korea and the Workers' Party of Korea. To export to designated parties, U.S. persons must obtain a license from OFAC and BIS.

The executive order also prohibits new investment in North Korea by U.S. persons.

Blocking of the Government of North Korea and the Workers' Party of Korea

In addition, the executive order blocks the property, and interests in property, of the Government of North Korea and the Workers' Party of Korea. As a result, U.S. persons generally are prohibited from engaging in transactions with such parties without authorization from OFAC, and are required to block such parties' property or interests in property that are in, or come within, the United States or their possession or control.

Additional Designation Criteria

The executive order also provides new criteria for designation of parties on the SDN List, some of which are mandatory under the Act.Specifically, the executive order blocks the property and interests in property of any person determined to:

  • operate in certain industries in the North Korean economy as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State, including, as a result of a determination by the Secretary of the Treasury on the same day the executive order was issued, the transportation, mining, energy, andfinancial services industries in the North Korean economy;
  • have sold, supplied, transferred, or purchased, directly or indirectly, to or from North Korea or any person acting for or on behalf of the Government of North Korea or the Workers' Party of Korea, metal, graphite, coal, or software, where any revenue or goods received may benefit the Government of North Korea or the Workers' Party of Korea, including North Korea's nuclear or ballistic missile programs;
  • have engaged in, facilitated, or been responsible for an abuse or violation of human rights by the Government of North Korea or the Workers' Party of Korea or any person acting for or on behalf of them;
  • have engaged in, facilitated, or been responsible for the exportation of workers from North Korea, including exportation to generate revenue for the Government of North Korea or the Workers' Party of Korea;
  • have engaged in significant activities undermining cybersecurity through the use of computer networks or systems against targets outside of North Korea on behalf of the Government of North Korea or the Workers' Party of Korea;
  • have engaged in, facilitated, or been responsible for censorship by the Government of North Korea or the Workers' Party of Korea;
  • have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any person blocked pursuant to the executive order;
  • be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person blocked pursuant to the executive order; or
  • have attempted to engage in any of the above-described activities.

In connection with the issuance of the executive order and the determination by the Secretary of the Treasury referenced above, two officials of North Korea's Ministry of State Security, 15 North Korean entities, and 20 vessels were added to the SDN List.

General Licenses

OFAC issued nine general licenses authorizing certain activities involving North Korea. The general licenses authorize, among other things: (i) U.S. depository institutions, including banks and U.S.-registered money transmitters, to process non-commercial, personal remittances to or from North Korea, or for or on behalf of an individual ordinarily resident in North Korea; (ii) nongovernmental organizations to export or reexport services to North Korea in support of certain types of activities; and (iii) the provision of goods or services in the United States to employees of the official mission of the Government of North Korea to the United Nations or of employees of the United Nations, their families, or other persons forming part of their household.

Jones Day will continue to monitor developments associated with the U.S. sanctions on North Korea.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Fahad Habib
 
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