Sanctions - North Korea
Sanctions have been in place against North Korea for some time but both the European Union and the United States have intensified their sanctions programmes beginning in May 2016, largely in reaction to UN Security Council Resolutions.
UN Security Council Resolution 2270 (2016)
The Club has produced two News Items on these enhanced sanctions, on 12 May 2016 and 7 July 2016. These contain links to helpful briefings prepared by Holman Fenwick Willian (to whom we are grateful for their permission to use these briefings) as well as the relevant EU, US and UN materials.
The sanctions now include the following provisions:
- Ban on the purchase or transportation from North Korea of gold, titanium ore, vanadium ore, rare earth minerals, coal, iron and iron ore
- Ban on the sale and supply of aviation and rocket fuels
- Expansion of the list of banned luxury goods which cannot be supplied to North Korea
- Ban on all leasing and chartering of vessels and the provision of crew services
- Ban on owning and operating of or providing classification or similar services to North Korean-flagged vessels
- Expanded arms embargo
- Potential for vessels proceeding to or from North Korea to be searched
- Expansion of persons and entities on SDNs lists, including banks and shipping companies
- Ban on the purchase and transportation of petroleum products from North Korea
- Extension of the list of prohibited luxury goods (the list can be found by clicking here)
- Ban on vessels entering EU ports which are owned, operated or crewed by North Korea
- Ban on investing on North Korean mining, refining and chemical industries
They also include a prohibition of all financial transfers to and from North Korea for amounts above €15,000 without prior permission from the relevant EU competent authority and certain restrictions on payments below that threshold. This may significantly impact on the ability of the Club to pay claims and fees or to provide bail for any incident which may occur in North Korea or elsewhere involving North Korean entities.
Unilateral US actions
In August 2017 the US enacted the Countering America’s Adversaries Through Sanctions Act, which included new sanctions against North Korea. Some of these may potentially impact on shipping. The Club produced a News Item on the Act on 7 August 2017, which contained a link to a helpful Client Alert issued by Freehill Hogan & Mahar detailing the new provisions.
A further Executive Order was issued by President Trump on 21 September 2017 which, in conjunction with additional measures agreed by the UN Security Council, signifiantly increased the sanctions against North Korea. Details can be found in the Club's News Item of 26 September 2017. These include the imposition of a 180-day rule - similar to that which the US has operated against Cuba for many years - so that any vessel which calls at a North Korean port or engages in a STS operation with a vessel which has done so may not trade in US waters for the next six months.
The U.S. authorities issued a Sanctions Advisory Note in March 2019, setting out the deceptive practices employed in an effort to draw unsuspecting parties into trade with North Korean entities and risk avoidance measures to be adopted, as well as starkly warning of the consequences of breaching sanctions against North Korea.
UN Security Council Resolutions in 2017
The United Nations implemented significant new sanctions against North Korea during 2017. Those with a particular impact on maritime trade are as follows:
UN Security Council Resolution No. 2371 of 5 August 2017:
- Bans all exportation of coal, iron, iron ore, lead and lead ore from North Korea and prohibits the transport of said North Korean origin commodities by the vessels of any Member State of the United Nations;
- Bans all exportation of seafood from North Korea, and prohibits the transport of North Korean origin seafood by the vessels of any Member State of the United Nations;
- Authorises the UN Committee monitoring the sanctions against North Korea to designate any vessels engaged in activities prohibited by various UN Resolutions relating to North Korea, and calls upon UN Member States to ban said vessels from entry to their ports;
- Prohibits new joint ventures or cooperative entities with North Korean entities or individuals.
UN Security Council Resolution No. 2375 of 11 September 2017:
- Bans the supply, sale or transfer of all condensates or natural gas liquids to North Korea;
- Imposes a cap of 2 million barrels per year of all refined petroleum products imported to North Korea (since reduced to 500,000 barrels and is heavily controlled, requiring the Member State to advise the Security Council every thirty days of the amounts supplied and the parties to the transaction);
- Restricts the supply, sale or transfer of crude oil to North Korea in any 2-month period after the Resolution was passed to the amount which any UN Member State supplied, sold or transferred to North Korea in the 12 months before the Resolution was passed;
- Bans the exports of textiles from North Korea;
- Bans UN Member States from providing work authorisations for North Korean nationals, after the date of the Resolution;
- Prohibits all joint ventures or the expansion of current joint ventures with North Korean entities or individuals;
- Calls upon Member States to inspect vessels, with the consent of the flag State, if there are reasonable grounds to believe that such vessels are carrying cargoes whose supply, sale or export is prohibited under various UN Security Council Resolutions;
Member States of the UN are rigorously enforcing these measures and with a clear focus on the shipping industry. Further details of these enforcement efforts and the potential penalties for those parties who are found to have breached sanctions against North Korea can be found in our News Item of 13 March 2018 and Notice to Members No.12 2018/2019 which we strongly recommend Members read.
Impacts on maritime trade
Members should be in no doubt that any trade with North Korea will be subject to the greatest scrutiny. Vessels may be subject to search and detained at ports whilst suspicious activity is investigated. Any activity in breach of sanctions will result in insurance coverage being immediately withdrawn and a very high likelihood of severe penalties being imposed which will at best affect the future trading of the vessel and at worst could prove fatal to the future viability of a Member's whole enterprise.
Even if it were possible to undertake legitimate trade with North Korea, Members should bear in mind that the Club is very unlikely to be able to support vessels trading to North Korean ports, with payment of claims and fees and the provision of security liable to be very delayed and perhaps completely prohibited. Any vessel doing so will also be automatically banned from US waters for the following 180 days.
All Members are therefore strongly urged to re-assess the risks of undertaking any business with North Korea and should also exercise the fullest possible due diligence to ensure that they are not unwittingly entering into prohibited activities with North Korean entities.
The information provided by the Club and in particular through its website is not and is not intended to be exhaustive. Every effort is made to ensure the accuracy of the information provided. However this cannot be guaranteed given that sanctions measures are subject to alteration by Governmental organisations at short notice. Further the information on this site is not, and should not be relied upon as, independent legal advice.
Members are strongly advised to undertake due diligence before fixing any business to or from a sanctioned country in order to ensure that neither the prospective cargo nor the parties to the planned venture are sanctioned. The Club is willing to assist Members where possible but they may nevertheless wish to take independent legal advice.