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SANCTIONS, DIPLOMACY, AND INFORMATION:

PRESSURING NORTH KOREA

HEARING

BEFORE THE

COMMITTEE ON FOREIGN AFFAIRS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTEENTH CONGRESS

FIRST SESSION

SEPTEMBER 12, 2017

Serial No. 115–91

Printed for the use of the Committee on Foreign Affairs

(

Available via the World Wide Web: http://www.foreignaffairs.house.gov/ or

http://www.gpo.gov/fdsys/

(II)

COMMITTEE ON FOREIGN AFFAIRS 

EDWARD R. ROYCE, California, Chairman 

CHRISTOPHER H. SMITH, New Jersey 

ILEANA ROS-LEHTINEN, Florida 

DANA ROHRABACHER, California 

STEVE CHABOT, Ohio 

JOE WILSON, South Carolina 

MICHAEL T. MCCAUL, Texas 

TED POE, Texas 

DARRELL E. ISSA, California 

TOM MARINO, Pennsylvania 

JEFF DUNCAN, South Carolina 

MO BROOKS, Alabama 

PAUL COOK, California 

SCOTT PERRY, Pennsylvania 

RON DESANTIS, Florida 

MARK MEADOWS, North Carolina 

TED S. YOHO, Florida 

ADAM KINZINGER, Illinois 

LEE M. ZELDIN, New York 

DANIEL M. DONOVAN, JR., New York 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

ANN WAGNER, Missouri 

BRIAN J. MAST, Florida 

FRANCIS ROONEY, Florida 

BRIAN K. FITZPATRICK, Pennsylvania 

THOMAS A. GARRETT, JR., Virginia 

ELIOT L. ENGEL, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

ALBIO SIRES, New Jersey 

GERALD E. CONNOLLY, Virginia 

THEODORE E. DEUTCH, Florida 

KAREN BASS, California 

WILLIAM R. KEATING, Massachusetts 

DAVID N. CICILLINE, Rhode Island 

AMI BERA, California 

LOIS FRANKEL, Florida 

TULSI GABBARD, Hawaii 

JOAQUIN CASTRO, Texas 

ROBIN L. KELLY, Illinois 

BRENDAN F. BOYLE, Pennsylvania 

DINA TITUS, Nevada 

NORMA J. TORRES, California 

BRADLEY SCOTT SCHNEIDER, Illinois 

THOMAS R. SUOZZI, New York 

ADRIANO ESPAILLAT, New York 

TED LIEU, California

AMY PORTER, Chief of Staff THOMAS SHEEHY, Staff Director

JASON STEINBAUM, Democratic Staff Director 

(III)

C O N T E N T S 

Page

WITNESSES 

Ms. Susan A. Thornton, Acting Assistant Secretary, Bureau of East Asian 

and Pacific Affairs, U.S. Department of State ................................................... 5

The Honorable Marshall Billingslea, Assistant Secretary, Office of Terrorism 

and Financial Intelligence, U.S. Department of the Treasury ......................... 12

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Ms. Susan A. Thornton: Prepared statement ........................................................ 8

The Honorable Marshall Billingslea: Prepared statement ................................... 15

APPENDIX 

Hearing notice .......................................................................................................... 56

Hearing minutes ...................................................................................................... 57

The Honorable Gerald E. Connolly, a Representative in Congress from the 

Commonwealth of Virginia: Prepared statement .............................................. 59

Questions submitted for the record by the Honorable Eliot L. Engel, a Representative in Congress from the State of New York, and responses from: 

Ms. Susan A. Thornton ........................................................................................ 61

The Honorable Marshall Billingslea ................................................................... 67

Questions submitted for the record by the Honorable Ami Bera, a Representative in Congress from the State of California, and responses from: 

Ms. Susan A. Thornton ........................................................................................ 72

The Honorable Marshall Billingslea ................................................................... 75

Questions submitted for the record by the Honorable Ann Wagner, a Representative in Congress from the State of Missouri, and responses from: 

Ms. Susan A. Thornton ........................................................................................ 78

The Honorable Marshall Billingslea ................................................................... 80

Questions submitted for the record by the Honorable Bradley S. Schneider, 

a Representative in Congress from the State of Illinois, and responses 

from: 

Ms. Susan A. Thornton ........................................................................................ 81

The Honorable Marshall Billingslea ................................................................... 82

(1)

SANCTIONS, DIPLOMACY, AND INFORMATION: 

PRESSURING NORTH KOREA 

TUESDAY, SEPTEMBER 12, 2017

HOUSE OF REPRESENTATIVES,

COMMITTEE ON FOREIGN AFFAIRS,

Washington, DC. 

The committee met, pursuant to notice, at 10:05 a.m., in room 

2172, Rayburn House Office Building, Hon. Ed Royce (chairman of 

the committee) presiding. 

Chairman ROYCE. Before we gavel the hearing in, I would just 

like to remind audience members that disruption of committee proceedings is against the law and will not be tolerated. Although, 

wearing themed shirts while seated in the hearing room is certainly permissible, holding up signs during the proceedings, that is 

not permissible. So any disruptions will result in a suspension of 

the proceedings until the Capitol Police can restore order. 

With that, I would like to call us to order here for our hearing 

this morning, and ask all the members to take their seats, if you 

could. On September 3rd, North Korea detonated a nuclear device 

that, according to news reports, was stronger than all of its previous tests combined. This hydrogen bomb represents the latest advancement in North Korea’s long-running nuclear and intercontinental ballistic missile program, which now pose an urgent threat 

to the United States. Moreover, the apparent speed in which these 

North Korean advancements have occurred are challenging the security structure across East Asia, creating dangerous instability in 

the region, and that instability we will likely be dealing with for 

decades to come. 

So today, this committee is going to discuss the tools that must 

be deployed and fully utilized to address these threats. And I believe the response from the United States and our allies should be 

supercharged. We need to use every ounce of leverage. When I had 

breakfast this morning with Secretary Tillerson, we laid out these 

issues. That leverage includes sanctions, it includes diplomacy, it 

includes projecting information into North Korea to put maximum 

pressure on this rogue regime. Time is running out. 

And let us be clear, sanctions can still have an important impact. 

North Korea’s advanced weapons programs rely on foreign-sourced 

technology. Much of these programs are made outside the country. 

North Korea pays an inordinate amount of money, and it has to 

have hard currency to do it, to run this very expensive ICBM program and this nuclear weapons program. Since it requires hard 

currency, that is the Achilles heel. Unfortunately, years have been 

2

wasted as sanctions have been weak, allowing North Korea to access financial resources and build its nuclear and missile programs. 

Any sanction that crimps North Korea’s access to technology is urgently needed. 

Congress has done its part to ramp up economic pressure. We 

passed a North Korea Sanctions bill last February, authored by 

myself and Mr. Eliot Engel, our ranking member. In July, we increased the tools at the administration’s disposal, as part of the big 

sanctions package that we passed here, including sanctions on 

North Korea and Russia and the Iran missile program. Part of that 

included targeting North Korean slave labor exports. Part of it, 

again, refined some of the focus on banking. And part of it, also, 

was focused on exports to ports around the world from North 

Korea. 

In August, the administration secured a major victory with the 

unanimous adoption of U.N. Security Council Resolution 2371, 

which Ambassador Haley called ‘‘the strongest sanctions ever imposed in response to a ballistic missile test.’’ She is now hard at 

work on another resolution. 

To be effective, these tools need to be implemented aggressively. 

The administration deserves credit for increasing the pace of designations. And I appreciate Treasury Secretary Mnuchin’s statements that more are coming. But we need to dramatically ramp up 

the number of North Korea-related designations. 

These designations do not require Beijing’s cooperation. We can 

designate Chinese banks and companies unilaterally, giving them 

a choice between doing business with North Korea or the United 

States. And I would just observe that not doing business with the 

United States for many of these companies would risk bankruptcy 

for these institutions. 

Earlier this year, Treasury sanctioned the Bank of Dandong, a 

regional Chinese bank. And that is a good start. But we must target major Chinese banks doing business with North Korea, such as 

China Merchants Bank, and even big state-owned banks, like the 

Agricultural Bank of China. They have a significant presence in 

the United States. And if they do not stop doing business with 

North Korea, they should be sanctioned now. 

It is not just China, we should go after banks and companies in 

any countries that do business with North Korea the same way. 

Just as we pressed China to enforce U.N. sanctions banning imports of North Korea coal and iron and seafood, we should press 

countries to end all trade with North Korea. This grave nuclear 

risk demands it. 

Sanctions are not the only way to apply pressure on the regime. 

We must maintain a united front with our allies. I just returned 

from South Korea where people are on edge. We were there when 

the missile was launched over Japan. It doesn’t matter if you are 

talking to government officials there, or the business community, 

or the average person on the street; they all understand the threat. 

So I am pleased that the THAAD missile defense system has been 

fully deployed. I am also pleased that the administration is 

strengthening regional deterrence through additional U.S. armed 

sales to Japan and South Korea, which we discussed this morning. 

3

Finally, we need to do much better at getting information into 

North Korea so that North Koreans can better understand the brutality and corruption of the self-serving Kim regime. And these efforts are already pressuring the regime, creating some unrest and 

increasing defections from North Korea. But I am afraid our efforts 

here grade poorly. International broadcasting and fomenting dissent just have not been a priority, and that is unacceptable in this 

situation. While we should take a diplomatic approach to North 

Korea, the reality is that this regime will never be at peace with 

its people, its neighbors, or us, and now is the time to apply that 

pressure. 

With that said, let me turn to the ranking member of our committee, Mr. Eliot Engel of New York. 

Mr. ENGEL. Mr. Chairman, thank you for calling this hearing. 

You and I have worked together for a long time on the Korean situation. We had a hearing on this topic to start the year. This committee works in a bipartisan manner to advance some of the toughest sanctions ever on North Korea, which are now U.S. law. 

Yesterday the United Nations Security Council unanimously 

agreed to Resolution 2375, in response to the Kim regime’s sixth 

nuclear test. And we are revisiting the threat of North Korea today 

so we can hear directly from the administration. 

Mr. Chairman, I am grateful for your unwavering leadership on 

this issue. To our witnesses, welcome to the for Foreign Affairs 

Committee and thank you for your service. 

Acting Assistant Secretary Thornton, I have tremendous confidence in you and our career diplomats, but it is hard to believe 

that nearly 8 months into this administration, there is no nominee 

for Assistant Secretary for East Asian and Pacific Affairs. The 

same goes for Ambassador to South Korea, Under Secretary for 

Arms Control and International Security, and a range of other senior State Department officials. This administration has said that 

North Korea is its top foreign policy priority; but between the 

President’s dangerous and irresponsible communication on the 

matter, and the inexplicable reluctance to get personnel in place, 

he is, in my opinion, undercutting his own peaceful pressure strategy. 

I view the Kim regime’s nuclear program as the single greatest 

threat to American national security and to global security. Right 

now, we need all hands on deck and focused on the same objective. 

We do that here in this committee. But that objective, of course, 

also gets to one of the main questions. While we all share the desire to rid North Korea of nuclear weapons, some have said that 

Kim will never give them up regardless of the pressure. 

I have been to North Korea twice, Mr. Chairman, as you know, 

and I can tell you and everybody else, that this is not a regime that 

looks at the world the way any other government does. The Kim 

regime is bent on self-preservation above all else and is very willing to sacrifice their own people to achieve that end. That makes 

them obviously incredibly dangerous. The military options in the 

North Korea contingency are incredibly grim and it is hard to overstate just how devastating a conflict on the Korean peninsula 

would be. If this conflict escalates into a war, we could be measuring the cost in millions of lives lost. 

4

Time is clearly running out. Once the regime in Pyongyang possesses nuclear weapons that can strike the United States, it will 

immediately raise questions about the reliability of our security 

commitments to our alliance partners, Japan and South Korea. Nuclear capabilities of this kind would likely embolden the North Koreans to engage in other bad behavior, such as harassment of our 

allies and continued proliferation of nuclear technologies. Some 

even speculate that the Kim regime might even seek reunification 

of the peninsula on its own terms. 

So we need a smart strategy, first of all, and then definitely consistent execution of that strategy, and obviously, that is no easy 

task. Administrations of both parties were unable to put a stop to 

North Korea’s nuclear program. North Korea detonated its first nuclear weapon in 2006, and a few years later the Bush administration removed North Korea from the State sponsor of terrorism list 

as an inducement to join the Six-Party talks. 

Since Kim Jong Un assumed power, bomb and missile tests have 

increased in frequency. And this year, since the start of the Trump 

administration, we have seen an alarming increase in the frequency and the significance of tests, and of course, the detonation 

a few weeks ago of what appears to be a thermonuclear device. 

So where do we go from here? Personally, I agree with Secretary 

of Defense Mattis that we are ‘‘never out of diplomatic solutions 

when it comes from North Korea,’’ although, I am not sure President Trump shares that view. Frankly, I am not sure he even 

knows what his views are on this. At present, however, Kim Jong 

Un doesn’t seem to be anywhere close to sitting down for talks of 

any kind, much less sincere negotiations. 

The first order of business should be to have a moratorium on 

testing, to halt the progress of North Korea’s nuclear program. Our 

objective has long been a denuclearized North Korea, and we cannot lose sight of that aim. In my view, we have not exhausted economic pressure through sanctions, and we need to do all we can to 

keep pressure up on the Kim regime. But at the same time we increase pressure, we must also ramp up coordination with our allies. 

We must demonstrate that defensive military measures are at the 

ready, both to reassure our allies and to deter the regime from any 

action that could lead to deadly escalation. 

I am interested in hearing from our witnesses today about how 

we are going to pursue those aims. Under ordinary circumstances, 

I would say this is a tall order. But I have to say again, the President’s behavior surrounding this crisis is making the situation even 

more challenging. Outrageous red lines like threats of fire and 

fury, shaming our allies through tweets, inconsistently from one 

day to the next about Kim Jong Un or China or economic partnership with South Korea, picking a fight with South Korea right at 

this time, loose talk about expanding America’s nuclear arsenal, 

and the proliferation of these devastating weapons. All these actions undermine the credibility of the Office of the President, and 

the credibility of the U.S. Government, effectively undermining 

U.S. leadership, and driving a wedge between Washington and our 

friends, creating grave uncertainty with China, whose cooperation 

we need, and with North Korea, whose leader is, as we know, single-minded and ruthless. 

5

Our country faces a serious national security challenge, and we 

need principled and visionary leadership. We need to be standing 

with our allies, acting with integrity, and reaffirming our commitments. The President needs to lead on the global stage, pushing 

China and Russia to enforce sanctions effectively, and building consent is about a path forward, not waiting to see who does what 

next and then reacting with the first words that come to mind. 

So I look forward to hearing from our witnesses about what 

American leadership should look like in this crisis, and how we 

find the right path forward. I thank you again, Mr. Chairman, and 

I yield back. 

Chairman ROYCE. Thank you. This morning we are pleased to be 

joined by a distinguished panel. We have with us Ms. Susan Thornton, Acting Assistant Secretary in the Bureau of East Asian Affairs 

at the Department of State. And as a career member of the foreign 

service, she has spent the last 20 years working on U.S. policy in 

Europe and Asia, focused on the countries of the former Soviet 

Union and on East Asia. 

Assistant Secretary Marshall Billingslea is the Assistant Secretary in the Office of Terrorism and Financial Intelligence at the 

Department of the Treasury. Mr. Billingslea previously served as 

managing director of business intelligence services for Deloitte, 

where we focused on illicit finance. So we welcome both our witnesses to the committee. 

Without objection, the witnesses’ full, prepared statements are 

going to be made part of the record. And all members here are 

going to have 5 calendar days to submit any statements or any additional questions of you, or any extraneous material for the record. 

And with that, I would just suggest—and we will begin with you, 

Assistant Secretary Thornton. If you could summarize your remarks, and then we will go to Mr. Billingslea, and then we will go 

to questions. 

STATEMENT OF MS. SUSAN A. THORNTON, ACTING ASSISTANT 

SECRETARY, BUREAU OF EAST ASIAN AND PACIFIC AFFAIRS, U.S. DEPARTMENT OF STATE 

Ms. THORNTON. Thank you very much, Mr. Chairman. Chairman 

Royce, Ranking Member Engel, members of the committee, thank 

you so much for the opportunity to appear before you today to discuss the ever-increasing challenge that North Korea poses. The 

threat posed by North Korea’s ballistic missile and nuclear program is grave. 

North Korea’s sixth nuclear test on September 3 is an unacceptable provocation that ignores repeated calls from the international 

community for a change in their behavior. It followed the August 

28 ballistic missile launch that overflew portions of Hokkaido, 

Japan, and two ICBM launches in July. These provocations represent a tangible threat to the security of Japan and South Korea, 

our allies, and to the entire globe. We cannot allow such flagrant 

violations of international law to continue. 

North Korea has also made dramatic threats regarding its ability 

to hit Guam and other parts of the United States. Secretary of Defense Mattis has made clear that we have the ability to defend ourselves and our allies from any attack, and that our commitments 

6

to our allies remain iron clad. This administration, though, has developed a clear strategy of applying international pressure to hold 

Pyongyang to account. 

First, we continue to push for strong U.N. sanctions. Last night 

the U.N. Security Council passed another significant set of international sanctions, the second set of sanctions in the last 2 months, 

unanimously adopted by the U.N. Security Council. 

Second, we are using our domestic laws to impose sanctions on 

individuals and entities that enable the DPRK’s illicit activities. 

Third, we are pressing countries to fully implement the U.N. Security Council resolutions and sanctions, and to harmonize their 

domestic sanctions regimes with those Security Council designations. 

Fourth, we are urging the international community to cease normal political interactions with the DPRK, and increase its diplomatic isolation. 

And, fifth, we are calling on countries to cut trade ties with 

Pyongyang to choke off revenue sources that finance the regime’s 

weapons programs. Even as we pursue denuclearization on the Korean peninsula, deterrence, as was mentioned by the ranking member, is an essential part of our strategy. We have deployed the 

THAAD anti-missile system to the Republic of Korea, and continue 

to take other measures to prepare ourselves to respond to any 

DPRK attack, whether on the United States, South Korea, or 

Japan, with overwhelming force. 

We have been clear, we are not seeking regime change or collapse in North Korea, and we do not seek accelerated reunification, 

or an excuse to send troops north of the demilitarized zone. We do 

seek peaceful denuclearization of the Korean peninsula, and a 

North Korea that stops belligerent actions and is not presenting a 

threat to the United States or our allies. 

We recognize that the success of this pressure strategy will depend on cooperation from international partners, especially China. 

And we are clear-eyed in viewing China’s growing, if uneven support, for international measures against the DPRK. China has 

taken some notable steps on implementing sanctions, but we would 

like to see them do more. 

We continue to engage with China and Russia to further pressure the DPRK, but if they do not act, we will use the tools at our 

disposal. Just last month, we rolled out new sanctions targeting 

Russian and Chinese individuals and entities that were doing illicit 

trade with North Korea. So while there is more work to be done, 

we do see encouraging signs of progress on increasing the pressure 

on the North Korean regime. 

Countries spanning the globe have issued strong statements 

against the ICBM test and the most recent nuclear test. We have 

seen countries expel sanctions, North Korean officials, prevent certain individuals from entering their jurisdictions, reduce the size of 

North Korean diplomatic missions in their countries, and cancel or 

downgrade diplomatic engagements or exchanges. 

Just in the recent days, we have had two announcements by two 

countries, Mexico and Egypt, about their efforts to downgrade relations with North Korea. Countries have halted visa issuances to 

North Korean laborers and are phasing out the use of these workVerDate 0ct 09 2002 16:39 Jan 11, 2018 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 F:\WORK\_FULL\091217\26836 SHIRL
7

ers. South Korea, Japan, and Australia have implemented unilateral national sanctions against targeted entities and individuals, 

and European partners are collaborating with us on maximizing 

pressure on the DPRK. 

Unfortunately, despite all of this, we have yet to see a notable 

change in the DPRK’s dangerous behavior or signs that it is interested in credible talks on denuclearization. We will continue to step 

up efforts to sanction individuals and entitles, enabling the DPRK 

regime and its weapons programs. Following the nuclear test, we 

are pressing hard for a new Security Council resolution, which, of 

course, was adopted last night. And we hope that these new sectoral sanctions, including textiles, provisions on oil, provisions on 

shipping, et cetera, will allow us to increase our pressure. 

China and Russia should continue to exert their unique leverage, 

of course, on the DPRK. And it should be clear that we will never 

accept North Korea as a nuclear state. We will continue to work 

within our alliances to develop additional defense measures to protect the people of the United States, and also of our allies. And at 

the same time, we will not lose sight of the plight of the three remaining U.S. citizens who have been unjustly detained by North 

Korea, nor of the regime’s egregious human rights violations. 

We will continue to reiterate our willingness to resolve this issue 

through diplomacy. And if the DPRK indicates an interest in serious engagement, we will explore that option, but with clear eyes 

about the DPRK’s past track record of violating negotiated agreements. 

Thank you, again, for letting me testify today, and I am looking 

forward to your questions. 

[The prepared statement of Ms. Thornton follows:]

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North Korea Policy 

Statement of Susan Thornton 

Acting Assistant Secretary 

Bureau of East Asian and Pacific Affairs 

U.S. Department of State 

Before the House of Foreign Affairs Committee 

September 12, 2017 

Chairman Royce, Ranking Member Engel, and Members of the Committee 

Thank you for the opportunity to appear before you today for this timely hearing on North 

Korea. Thank you also for your attention to the North Korea threat and how the United States is 

addressing it. 

The threat posed by North Korea's ballistic missile and nuclear weapons and other weapons of 

mass destruction (WMD) program is gravely serious, and one that warrants immediate and 

urgent attention, as this Administration has provided. The test of a nuclear device on September 

3, North Korea's sixth nuclear test, is an unacceptable provocation that ignores repeated calls 

from the international community for a change in North Korea's behavior. It followed the 

August 28 ballistic missile launch that overflew portions of Hokkaido, which underscored the 

direct threat posed by Pyongyang's missile and nuclear programs. It is the first declared ballistic 

missile overflight of Japan, and represents a clear and tangible threat to the security of Japan and 

the entire East Asia region. Let me emphasize that we continue to stand with our allies, Japan 

and South Korea, in the face of this escalating threat. 

Since the beginning of2017 alone, North Korea has launched more than fifteen ballistic missiles 

into the seas around it, including two ICBMs. In 2016 it tested two nuclear devices. And of 

course, North Korea has made a number of dramatic threats regarding its ability to hit specific 

targets including Guam and other parts of the United States. Secretary of Defense Mattis has 

made clear that we have the ability to defend ourselves and our allies- South Korea and Japanfrom any attack and that our commitments to our allies remain ironclad. 

We cannot allow such flagrant violations of international law to continue. We must hold 

Pyongyang to account. 

This administration has developed a clear strategy for doing just that. The strategy involves 

forging an all-encompassing international coalition to apply diplomatic, economic, and political 

pressure on North Korea to bring the regime to understand the only path to peace, prosperity and 

international acceptance is to cease its provocative actions and to abandon its destabilizing 

missile and nuclear programs. 

We have used different monikers for this strategy- "maximum pressure," "peaceful pressure," 

and "strategic accountability," but the strategy's components are the same: (1) We continue to 

push for strong multilateral sanctions against the DPRK at the United Nations. Through this 

forum, we are galvanizing the international community to stand together in rebuke of North 

Korea's belligerent acts and to pressure Pyongyang to abandon its unlawful programs. (2) We 
9


26836a-2.eps

are using the authorities granted in our domestic law under the North Korean Sanctions and 

Policy Enhancement Act and the new authorities under the Countering America's Adversaries 

Through Sanctions Act to impose sanctions on individuals and entities that enable the DPRK's 

illicit activities, deterring such conduct and sending a strong signal to the regime that we're 

watching their movements. (3) We continue to press countries around the world to fully 

implement UN Security Council Resolutions against North Korea- including UNSCRs 2270, 

2321, 2356, and 2371, and to consider harmonizing their domestic sanction regimes with our 

designations on North Korean and third-country entities ( 4) Likewise, we continue to urge the 

international community to cease normal political interactions with the DPRK, including by 

suspending or downgrading diplomatic relations with North Korea and ending diplomatic visits 

and exchanges. (5) Finally, we continue to call for all countries to cut trade ties with Pyongyang 

to increase North Korea's financial isolation and choke off revenue sources- both licit and illicit 

-that finance the regime's weapons programs. 

Even as we pursue denuclearization, deterrence is also a central part of our DPRK strategy. We 

are fully committed to the defense of the United States and our allies and are ready to respond to 

any DPRK attack. We have partially deployed THAAD to the ROK and continue to take other 

measures to prepare ourselves, South Korea, and Japan to respond to any DPRK attack with 

overwhelming force. We must be unequivocal in our messaging to North Korea that any attack 

on the United States or our allies will be met with an overwhelming response. 

Throughout our execution of this strategy, we have been clear about what our strategy is not: We 

are not seeking regime change or collapse. Nor do we seek an accelerated reunification of 

Korea, or an excuse to send troops north of the Armistice Agreement's Military Demarcation 

Line. We have no desire to inflict harm on the long-suffering North Korean people, whom we 

view as distinct from the hostile regime in Pyongyang. 

We recognize that the success of the pressure strategy will depend on cooperation from 

international partners, especially Beijing. We are working closely with China to execute this 

strategy and are clear-eyed in viewing the progress- growing if uneven- that China has made 

on this front. We are conferring closely with our Chinese counterparts to ensure strict 

implementation of China's commitment to curb imports of North Korean coal, iron, iron ore, 

lead and lead ore, and seafood If fully implemented UNSCR 2371's ban on these items could 

substantially reduce DPRK revenues this year from the $1.5 billion North Korea earned from the 

export of these items to China in 2016. 

We continue to work with China and Russia to improve the implementation of sanctions, but 

there is more to be done. Secretary Tillerson said it best when he called China's support for the 

pressure campaign "notable, but uneven." We hope to work with China and Russia to resolve 

this issue and will continue to engage in a dialogue on how to further pressure the DPRK. We 

have also made clear that if China and Russia do not act, we will use the tools we have at our 

disposal. Just last month we rolled out new sanctions targeting Russian and Chinese individuals 

and entities supporting the DPRK. We will continue to take action multilaterally and unilaterally 

to disrupt North Korea's illicit activities wherever they are located. 

2 
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Signs of Progress 

While there is more work to be done, we see encouraging signs of progress from our partners 

around the globe on increasing pressure on North Korea: 

Countries spanning all regions of the globe issued strong statements against the DPRK's 

July 3 and July 28 intercontinental ballistic missile (ICBM) tests, as well as the most 

recent launches and the September 3 nuclear test. These include countries that have not 

traditionally aligned with the United States on this matter- countries like Mexico and 

Sudan. 

• We have seen countries expel sanctioned North Korean officials and North Korean 

diplomats engaged in illicit commercial or arms-related activities, and prevented certain 

North Korean individuals from entering or transiting their jurisdictions. 

Countries have reduced the size of the North Korean diplomatic mission in their 

countries, and canceled or downgraded diplomatic engagements or exchanges with North 

Korea. For example, Peru and Kuwait are two of several countries that reduced the size 

of the North Korean embassies they host 

• Across the globe, countries are beginning to view visiting North Korean official 

delegations with caution, recognizing that welcoming these delegations not only lends 

tacit support to North Korea's nuclear and ballistic missiles programs, but comes at a cost 

to their international reputation and relations with the United States and others. 

• Countries in the Middle East, Europe, and Southeast Asia halted visa issuances to North 

Korean laborers and are phasing out the use of these workers, whose wages are garnished 

to fund the regime and its unlawful nuclear and missile programs. Malaysia deported 

hundreds of DPRK workers and suspended issuing further work permits. 

Other countries, such as the Republic of Korea (ROK), Japan, and Australia have 

implemented their own unilateral sanctions on entities violating UN sanctions. EU 

partners are augmenting autonomous restrictive measures to implement UN Security 

Council resolutions, and key European partners, particularly the UK, France, and 

Gennany, are collaborating with us on maximizing pressure on the DPRK. 

Countries have tightened restrictions on the DPRK's ability to use its diplomatic missions 

to generate revenue. For example, Germany is shutting down a hostel located on DPRK 

embassy grounds in Berlin. 

• On August 5, ASEAN Foreign Ministers issued their strongest statement to date in 

response to the DPRK's ICBM launch. Their joint statement expressed "grave concern" 

over the escalation of tensions and recent missile tests, expressed commitment to a 

denuclearized Korean Peninsula, and urged the DPRK to comply immediately with all 

relevant lJNSC resolutions. We welcomed this strong, principled statement ahead of 

UNSCR 2371. 

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26836a-4.eps

Next Steps 

Unfortunately, despite the way the international community has come together to pressure the 

DPRK, we have yet to see a notable change in DPRK's dangerous behavior or any signs that it is 

willing or interested in credible talks on denuclearization at this stage. Our military, together 

with our allies, remains prepared to respond immediately and resolutely to any attack or threat of 

attack. There should be no doubt about our resolve to defend our allies and our homeland. We 

will not ape Pyongyang's well-honed practice of carelessly and needlessly escalating tensions, 

but we are ready to respond if necessary. Meanwhile, we remain open to diplomacy, but the 

DPRK must show it is ready for serious engagement. We have not seen any such indication. In 

fact, each ballistic missile launch from North Korea- to say nothing of its most recent nuclear 

test- only signals the opposite. As a result, we will continue to urge countries around the world 

to take actions to make clear to the DPRK that its behavior is intolerable, and continue to build 

pressure. 

We will step up efforts to sanction individuals and entities enabling the DPRK regime, 

irrespective of location or nationality. Following the nuclear test, we are pressing hard for a new 

Security Council Resolution, which we hope will include new sectoral sanctions, including oil, 

textiles, and workers. Countries like China and Russia must continue to exert their unique 

leverage over the DPRK. We will never recognize North Korea as a nuclear state. 

We will continue to stand with our allies in the region and will work with Japan and South 

Korea. We are enhancing U.S.-Japan-ROK trilateral diplomatic and security cooperation. We 

will continue to work within our alliances to develop additional defense measures to answer the 

threat posed by the DPRK's nuclear and ballistic missile programs, and to protect the people of 

the United States, Japan, and the Republic Korea. Third parties will not deter us from taking 

appropriate defensive measures in the face of the DPRK's growing security challenge. 

While addressing the nuclear and ballistic missile threat is our most pressing issue, we have not 

and will not lose sight of the plight of the three remaining US. citizens who have been unjustly 

detained by North Korea nor of the regime's egregious human rights violations. Due to 

mounting concerns over the serious risk of arrest and long-term detention, the Department 

imposed a travel restriction on all U.S. nationals' use of a passport to travel in, through, or to 

North Korea which went into force September 1. We seek to prevent the future detentions of 

U.S. citizens by the North Korean regime to avoid another tragedy like that which Otto 

Warmbier and his family endured. We will continue to press for accountability for those 

involved in such deplorable abuses. 

We will also continue to reiterate our willingness to solve this issue through diplomacy. If the 

DPRK indicates an interest in serious engagement, we will explore that option, but we will do so 

with clear eyes about the DPRK's past track record of violating the spirit and the letter of 

negotiated agreements. 

We appreciate the strong interest in this issue from Congress, and we look forward to continuing 

our cooperation. Thank you for inviting me to testify today. lam pleased to answer any 

questions you may have. 

4 
12

STATEMENT OF THE HONORABLE MARSHALL BILLINGSLEA, 

ASSISTANT SECRETARY, OFFICE OF TERRORISM AND FINANCIAL INTELLIGENCE, U.S. DEPARTMENT OF THE TREASURY 

Mr. BILLINGSLEA. Chairman Royce, Ranking Member Engel, distinguished members of this committee, thank you for the opportunity to appear before you today to update you on the measures 

that the Treasury Department is undertaking in concert with the 

Department of State, and the broader administration efforts to deal 

with the unacceptable provocations and threats posed by North 

Korea. 

In order to constrain Kim Jong Un, the international community 

has unanimously enacted multiple United Nations Security Council 

resolutions. In fact, with each provocation by North Korea’s dictator, the nations of the world have responded with steadily tightening constraints of sanctions and embargoes. 

Under previous administrations, the United Nations had already 

prohibited trade in matters such as arms, luxury goods, minerals, 

monuments, and the maintenance of offices and subsidiaries and 

bank accounts in North Korea. And while this had clearly inhibited 

North Korea’s quest for weapons of mass destruction, it was not 

enough. 

On August 5, our administration worked with the other permanent members of the U.N. Security Council to pass Resolution 

2371, striking at the core of North Korea’s revenue generation. 

That resolution, drafted by the United States, embargoes all importation of North Korean coal, iron, lead, and seafood now requires 

nations to cap employment of North Korean citizens sent abroad as 

slave labor. 

Very importantly, last night, under Ambassador Haley’s leadership, the United States passed, with the U.N. Security Council, 

Resolution 2375, which now targets North Korea’s few remaining 

sources of revenue; very importantly, the export of textiles. It further restricts North Korea’s ability to acquire revenue from overseas slave labor, and it cuts off about 55 percent of the refined petroleum products that are going into North Korea, and it bans further joint ventures with that regime. 

These two recent resolutions are central to our efforts to mobilize 

the international community, and to deny funds to Kim Jong Un’s 

weapons programs. The fact, however, is that North Korea has 

been living under U.N. sanctions for over a decade. It has nevertheless made significant strides toward its goal of building a nucleartipped ICBM. As is the case with any international agreement, the 

effectiveness of U.N. Security Council resolutions depends upon implementation and enforcement. 

Kim Jong Un has two key financial vulnerabilities, which we are 

targeting in the Treasury Department: First, he needs revenue to 

maintain and expand his WMD and ballistic missile programs; and 

second, he needs access to the international and financial system 

to acquire the hard currency that Chairman Royce mentioned, to 

transfer funds, and to pay for goods, both licit and illicit. 

There are only a number of finite ways that North Korea can 

raise significant amounts of foreign exchange, and for many years, 

coal has been the center of gravity for revenue generation. By our 

13

estimates, prior to the latest U.N. Security Council resolutions, coal 

shipments brought in more than $1 billion a year to the regime. 

North Korea was making an additional $500 million or so from 

iron, lead, and seafood, and the textile ban will deny them around 

$800 million that they were generating in previous years. This is 

why these resolutions are so important. Again, effective implementation of this and all of the prior U.N. Security Council resolutions 

is essential. 

Consistent with this, on August 22, we struck at the heart of 

North Korea’s illegal coal trade with China. Treasury designated 

16 individuals and entities, including three Chinese companies that 

are among the largest importers of North Korean coal. We estimate 

that collectively, these companies were responsible for importing 

nearly $1⁄2 billion worth of North Korean coal between 2013 and 

2016. In doing this, we sent two clear messages: The first was to 

North Korea. We intend to deny the regime its last remaining 

sources of revenue unless and until it reverses course and 

denuclearizes. 

The second message was to China, we are capable of tracking 

North Korea’s trade in banned goods, such as coal, despite elaborate evasion schemes, and we will act even if the Chinese Government will not. 

On June 1 of this year, we targeted a different kind of North Korean revenue, labor. We designated three individuals and six entities involved in that set of actions, and we also took actions in 

March. In total, under this administration, the Treasury Department is engaged in a full court press on Kim Jong Un’s revenue 

generation networks, and we have singled out 37 specific entities 

involving the most lucrative types of trade. 

Mr. Chairman, I want to share with you today another type of 

evasion scheme in which North Korea is engaged. As part of the 

efforts to acquire revenue, the regime employs deceptive shipping 

practices to conceal the true origin of goods. Pyongyang falsified 

the identity of vessels to make it harder for governments to determine if ships docking in their ports are linked to North Korea. And 

despite this evasion, we will expose the individuals and companies 

that are providing insurance, maintenance, or other services to 

North Korean vessels. 

For instance, in June, we designated Dalian Global Unity, a Chinese company, that apparently was transferring about 700,000 tons 

of freight annually between China and North Korea. I am pleased 

to provide for the committee today, additional exposures of these 

duplicitous actions. The intelligence community has provided to 

your committee today evidence of how vessels originate in China, 

they turn off their transponders as they move into North Korean 

waters, they dock at North Korean ports, and they on-load commodities such as coal. They keep those transponders off, and then 

they turn them back on as they round to the South Korean peninsula, and they head into a Russian port. 

In this particular case, this vessel, MV Bai Mei 8 registered from 

St. Kitts and Nevis, sat in that Russian port for a period of time, 

and then headed back out to water, ultimately docking back in 

China with North Korean origin coal. Sanctions evasion. 

14

Of the second slide, which we will show now, is yet another example. In this particular example, you have a vessel that pulled 

into North Korea, kept its transponder off, in violation of international maritime law, docked in Russia, offloaded the North Korean coal. Another vessel, that one was Panamanian, another vessel from Jamaica, the Jamaican flag, pulled in, picked up the North 

Korean coal, and headed straight to China, again, to circumvent 

U.N. sanctions. 

Mr. Chairman, the other prong of our effort is to close in on the 

way North Korea seeks to access the international financial system. Because of the sanctions regimes we have in place, it is difficult for North Korean individuals and entitles to do business in 

their true names, and so that is why they maintain representatives 

abroad who are engaged in all manner of obfuscation of creation of 

shell and front companies—in fact, I dealt with many of these entities when I served in the private sector—to help conceal North Korea’s overseas footprint. 

These individuals are crucial to the North Korean regime because they have the expertise needed to establish front companies, 

open bank accounts, and conduct transactions to move and launder 

funds. It is incumbent upon the financial services industry, both 

here and abroad, to stay vigilant, and I urge those who might be 

implicated in the establishment of shell or front companies for the 

DPRK, or anyone who is aware of such entitles, to come forward 

with that information now, before they find themselves swept up 

in our net. 

We are closing in on North Korea’s trade representatives. This 

year we have already designated several bank and trading 

operatives in China, Cuba, Russia, and Vietnam. And we are closely coordinating with the Department of Justice and others to target 

these various North Korean networks that are transferring funds. 

The chairman mentioned our actions with the Bank of Dandong. 

We have designated that bank under Section 311 of the U.S.A. Patriot Act, and found it to be of a primary money laundering concern, and issued a notice for proposed rule making. 

Again, I recognize that I am over time with the committee, therefore, I will wrap up my comments. But suffice to say, that our actions—this was the first Treasury Department action in over a decade that targeted a non-North Korean bank for facilitating North 

Korean financial activity. It demonstrates our commitment to take 

action. We look forward to taking action with the Chinese where 

possible. And in the event that that is not possible, we will, nevertheless, move forward to safeguard the U.S. and international financial system. Thank you, Chairman. 

[The prepared statement of Mr. Billingslea follows:]

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Testimony of Assistant Secretary Marshall S. Billingslea 

House Foreign Affairs Committee 

Tuesday, September 12, 2017 

Chairman Royce, Ranking Member Engel, and distinguished members of this Committee, thank 

you for the opportunity to update the Committee on the Treasury Department's efforts to counter 

the urgent threat posed by North Korea. 

This is my first time testifying as Treasury's Assistant Secretary for Terrorist Financing. I am 

honored to represent the Department today. Under the leadership of Secretary Mnuchin and 

Under Secretary Mandelker, Treasury has developed and is actively implementing a campaign 

designed to impose maximum pressure on North Korea's finances and economy. We are 

working as part of the Administration's overall effort to eliminate the danger posed to the United 

States and our allies by Kim Jong-Un's nuclear and ballistic missile programs. I am here today 

to publicly share aspects of the plan, assess our progress thus far and describe the challenges we 

face. 

The Threat Posed by North Korea 

North Korea poses a grave and growing threat to the security of the United States, our friends 

and allies in Asia, and- indeed- the world as a whole. Kim Jong-Un has dramatically increased 

the pace of ballistic missile testing since coming to power. This year alone, North Korea has 

conducted sixteen missile tests, including two intercontinental ballistic missile (ICBM) tests. 

Just a few days ago, on August 28, North Korea launched a missile directly over Japan. Not only 

was this a violation of United Nations Security Council resolutions, it imperiled Japanese 

airspace and clearly was meant as a blatant threat to the people of Japan, and to us and our armed 

forces stationed there. North Korea's latest test of a nuclear device, conducted over the Labor 

Day weekend, marks an unacceptable provocation. 

Kim Jong-Un has issued multiple threats to target American cities and territories. His recent 

pronouncements regarding the conduct of salvo missile launches at Guam are just one example. 

We take these threats with the utmost seriousness, and are determined to constrain Kim JongUn's capacity to act on such threats in the future. We will not allow North Korea to extort and 

threaten the world with its nuclear and missile programs. 

In order to constrain Kim Jong-Un, the international community has unanimously enacted 

multiple United Nations Security Council resolutions. In fact, with each provocation by North 

Korea's dictator, the nations of the world have responded with steadily tightening constraints of 

sanctions and embargoes. 

Under previous Administrations, the UN had prohibited trade in arms, luxury goods, minerals, 

monuments, and the maintenance of representative offices, subsidiaries or bank accounts in 

North Korea. While this clearly had inhibited North Korea's quest for weapons of mass 

destruction (WMD), it was not enough. On August 5, our Administration worked with the other 

Permanent Members of the Security Council to pass UN Security Council Resolutions 2371, 

striking at the core ofNorth Korea's revenue generation. That resolution, drafted by the United 
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States, embargoes all importation of North Korean coal, iron, lead and seafood and now requires 

nations to cap employment of North Korean citizens sent abroad as workers. Very importantly, 

last night, on September 11, the UN passed resolution 2375, targeting North Korea's ability to 

export textiles, further restricting North Korea's ability to acquire revenue from overseas 

laborers, cutting off over 55 percent of refined petroleum products going to North Korea, and 

fully banning all joint ventures with North Korea to cut off foreign investments. These two 

recent resolutions are central to our efforts to mobilize the international community and to deny 

funds to Kim Jong-Un's weapons programs. 

The fact is, however, that North Korea has been living under UN sanctions for over a decade, 

and nevertheless has made significant progress toward its goal of building a nuclear-tipped 

ICBM. As is the case with any international agreement, the key to effectiveness of UN Security 

Council resolutions is implementation 

All nations must join us in implementing all relevant United Nations Security Council 

resolutions, including the most recently enacted ones. North Korea continues to defy the UN 

arms embargo and is continually engaged in efforts to evade the sanctions and prohibitions 

adopted in nine separate UN Security Council resolutions. As both the UN and the U.S. 

sanctions regimes expand in response to Kim Jong-Un's reckless behavior, so too does the depth 

and breadth of North Korea's sanctions evasion efforts. Because of uneven, and sometimes 

nonexistent, international implementation, North Korea shrugs off the practical impact of many 

restrictions, and is still exporting prohibited goods such as weapons, minerals, and statues. 

North Korea's leadership also continues to smuggle in luxury goods while neglecting the urgent, 

basic needs of its citizens. The humanitarian suffering of the North Korean people stands in 

stark contrast to the opulent lifestyle of Kim Jong-Un and North Korea's senior leaders. To 

finance their excesses, as well as the nuclear and ballistic missile programs, the regime is 

evading financial restrictions by using overseas financial representatives and a web of front and 

shell companies. North Korea has proven adept at using the interconnected global financial 

system to its advantage and employing deceptive financial practices to cover its tracks. North 

Korea is at times very sophisticated in how it sets up financial intermediaries. But in some 

countries where the will to fully implement and enforce sanctions has been lacking, North Korea 

can often be brazen in how it accesses financial networks. 

Using all the information available to the U.S. government, the Treasury Department is mapping 

out North Korea's financial and revenue-generating mechanisms. 

Applying Maximum Economic Pressure on North Korea 

Kim Jong-Un has two key financial vulnerabilities. First, he needs revenue to maintain and 

expand his WMD and ballistic missile programs. Second, he needs access to the international 

financial system to acquire hard currency, transfer funds, and pay for goods for both licit and 

illicit purposes We are therefore actively working to cut off Kim Jong-Un's ability to both raise 

and move money through the international financial system. 

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Targeting DPRK Revenue 

There are only a finite number of ways that North Korea can raise significant amounts of foreign 

exchange. For many years, coal has been the center of gravity for North Korea's revenue 

generation. By our estimates, prior to the latest UN Security Council resolutions, coal shipments 

brought in $1 billion in revenue annually for the regime. Prior to the latest UNSCR, North 

Korea made another estimated $500 million annually from iron, lead, and seafood. In the past, 

an important source of funding was the export of weapons and missile technology, but now 

North Korea acquires revenue from exporting commodities. That is why the August 5 UN 

Security Council Resolution 2371 is so important. It prohibits UN Member States from 

importing any of these items from North Korea. 

But, as I noted, effective implementation of all UNSCRs is essential ifwe are to deny North 

Korea its current, principal sources of funds. Treasury, in coordination with the State 

Department, is working to accomplish just that. We do this in a number of ways. With friends 

and allies, we share detailed information regarding North Korean activities to assist them in 

disrupting sanctions evasion and illicit trade. The Treasury Department routinely engages at 

multiple levels with partner nations to help them conduct detailed forensic investigation and 

analysis to target North Korean financial networks where they exist. 

For instance, on August 22, we struck at the heart of North Korea's illegal coal trade with China. 

Treasury designated 16 individuals and entities, including three Chinese companies that are 

among the largest importers of North Korean coal. We estimate that collectively these 

companies were responsible for importing nearly half a billion dollars' worth of North Korean 

coal between 2013 and 2016. These funds are used to support the Government of North Korea 

and the Workers' Party of Korea, including its nuclear and ballistic missile programs. On top of 

that, we know that some of these companies were also buying luxury items and sending an array 

of products back to the North Korean regime. On August 22 we sent two clear messages. The 

first was to North Korea: we intend to deny the regime its last remaining sources of revenue, 

unless and until it reverses course and denuclearizes. The second message was to China. We are 

capable of tracking North Korea's trade in banned goods, such as coal, despite elaborate evasion 

schemes, and we will act even if the Chinese government will not. 

Importantly, our August actions were matched by swift legally-binding domestic designations in 

Japan, and by a public advisory from South Korea's Ministry of Strategy and Finance cautioning 

all South Korean nationals from conducting financial transactions with these U.S. designated 

individuals and entities. It strongly advised that South Korean nationals exercise particular 

caution against transactions with the designated individuals and entities. Our disruption efforts 

against North Korean networks are maximized when nations act forcefully, in concert. We 

appreciate the steps taken by Japan and South Korea, and we look to other friendly and allied 

nations in the region to do the same. 

I also note, for the Committee, that our August actions followed two earlier rounds of domestic 

sanctions. On June I of this year, the Administration targeted a different type of North Korean 

revenue: labor. We designated three individuals and six entities, including the Korea Computer 

Center (KCC), a state-run IT research and development center that was operating in Germany, 

China, Syria, India, and the Middle East. Using overseas North Korean laborers, KCC was 

earning foreign currency for North Korea's Munitions Industry Department, which is responsible 
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for overseeing the ballistic missile program. In addition to these sanctions, behind the scenes, 

both we and the State Department have aggressively engaged dozens of countries where North 

Korean workers were employed, often by so-called construction companies. l am pleased that in 

many cases, our efforts have led to the scaling back or outright expulsion of these workers- yet 

another financial blow to the regime. 

Finally, recall that on March 1, Treasury designated twelve individuals and entities, including 

North Korea-based Paeksol Trading Corporation, which was selling coal and iron ore to China. 

The revenue from these sales supported the UN- and U.S.-designated Reconnaissance General 

Bureau, North Korea's premiere intelligence organization that is also involved in the 

government's conventional arms trade. 

In total, under this Administration, the Treasury Department is engaged in a full court press on 

Kim Jong-Un's revenue generation networks. We have singled out 37 specific entities involved 

in the most lucrative types of trade remaining to the regime, such as coal, iron, and labor. These 

are just the companies and people that we have decided to designate publicly. As noted, other 

parts of the network we have chosen to disrupt through non-public measures, working with 

friends and allies. North Korea will certainly continue to morph its procurement and sales 

networks in response to our actions, and we will be relentless in our pursuit. 

As part of North Korea's efforts to acquire revenue, the regime uses shipping networks to import 

and export goods. North Korea employs deceptive practices to conceal the true origin of these 

goods. Pyongyang has been found to routinely falsify a vessel's identity and documentation, 

complicating the ability of governments to determine if a vessel docking in their ports is linked 

to North Korea. We are actively increasing our understanding of North Korea's shipping 

networks, and we will expose individuals and companies that are providing insurance, 

maintenance, or other services to North Korean vessels. In June, the Treasury Department 

designated Dalian Global Unity, a Chinese company that was reported to transport 700,000 tons 

of freight annually between China and North Korea. Dalian Global Unity was also involved in 

smuggling luxury goods, with middlemen from the company giving specific instructions about 

how to evade the UN-mandated luxury goods ban. The Treasury Department has extensive 

experience mapping and dismantling illicit shipping networks, having worked for many years to 

uncover deceptive Iranian shipping practices. We are applying lessons learned in the Iran 

context to target commercial shipping moving in and out of North Korea. 

Accordingly, I am pleased to offer for the Committee's consideration today several images, 

provided by the Intelligence Community, which clearly shows deceptive shipping practices used 

by the North Koreans. In the following images, you see examples that demonstrate that North 

Korea is using deceptive practices to mask the origin of exported coal to Russia and China. In 

the first example, the ship travels from China and declares that it is travelling to Russia. During 

its journey, the ship turns off its automatic identification system (AIS), probably stops in North 

Korea to load coal, travels to Vladivostok, Russia, and then returns to China probably to oft1oad 

the coal. 

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We are making this information available today to the Committee and to the public, and are also 

sharing with other nations as we take steps to curtail these deceptive practices and enforce the 

UN embargoes on coal, iron and iron ore, and other commodities. 

Preventing Access to the Global Financial System 

North Korea also uses deceptive practices to access the global financial system. As we constrain 

North Korea's ability to generate revenue, we continue to disrupt the regime's attempts to access 

the U.S. and international financial systems. North Korea seeks to use the funds it earns abroad 

to pay its bills and purchase goods. Because of the robust international sanctions regime in 

place, it is difficult for North Korean individuals and entities to do business in their true names. 

So in order to access the international financial system, North Korea maintains representatives 

abroad who work on behalf of UN- and U.S.-designated North Korean banks and trading 

companies, helping North Korea conceal their overseas footprint 

These individuals are important to North Korean networks because they have expertise that they 

use to establish front companies, open bank accounts, and conduct transactions enabling North 

Korea to launder funds. Without them, Kim Jong-Un's regime will find it much harder to 

develop the layers of obfuscation necessary to evade our steadily constricting campaign. We 

urge the private sector, particularly in Asian financial hubs, to stay vigilant. North Korean 

financial facilitators are violating both international and U.S. law. Those who collaborate with 

them are exposing themselves to enormous jeopardy. So too are the bankers, accountants, tax 

advisors, and notaries who participate in North Korean deception. Tt is incumbent on those in the 

financial services industry who might be implicated in the establishment of shell or front 

companies for the DPRK, and anyone who is aware of such entities, to come forward with that 

information now, before they find themselves swept up in our net 

We are committed to stopping this activity wherever it occurs. Treasury is working with foreign 

governments, U.S. law enforcement, and the private sector to expose North Korea's deceptive 

practices, prevent them from conducting international transactions, and freeze these funds. 

This year, Treasury designated North Korean bank and trading representatives who were 

operating in China, Cuba, Russia, and Vietnam. These designations prohibited these individuals 

from accessing the U.S. financial system, alerted banks to the risk they posed, and pressured 

governments harboring these facilitators to abide by their UN Security Council obligations, expel 

these representatives, and freeze their assets. We expect more actions to come. 

North Korea's illicit financial activity is not just conducted in dollars. Nor is it limited to a 

handful of legal jurisdictions. We also are concerned about North Korea's use of euros and other 

currencies. Once a North Korean trade representative successfully places revenue into a nation's 

financial system, that revenue often then flows indirectly through global banks, who are 

unwittingly conducting currency clearing operations for North Korean front companies. 

Obviously, financial institutions conducting transactions or clearing funds for North Korean front 

companies are likely violating UN sanctions. The challenge, however, is how to identify the 

North Korean front companies in the first place. Treasury is working with governments around 

the world, particularly those with banks engaged in euro-clearing, to share typologies of North 

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Korean sanctions evasion. This includes the sharing of specific infonnation with Ministries of 

Finance, Central Banks, and Financial Intelligence Units to assist in protecting their currency 

clearing processes from abuse by North Korea. 

Similarly, Treasury is also closely coordinating with the Department of Justice to target North 

Korean networks transferring money through the U.S. financial system. In June and August, 

Treasury designated a Russian network selling petroleum to North Korea. The Independent 

Petroleum Company (IPC), a Russian company, has reportedly shipped over $1 million worth of 

petroleum products to North Korea. In order to pay for the petroleum, North Korea set up front 

companies that could transfer funds on behalf of the UN- and U.S.-designated Foreign Trade 

Bank Treasury designated the three individuals and two front companies involved in the 

scheme and froze the funds moving through the U.S. financial system. On the same day, the 

Department of Justice issued a civil forfeiture complaint against the companies to seize almost 

$7 million held by U.S. banks, belonging to those entities and individuals. 

Similarly, on June 29, Treasury took action against a Chinese bank Bank of Dan dong. Pursuant 

to Section 311 of the USA PATRIOT Act, Treasury found the bank to be of"primary money 

laundering concern" and issued a notice of proposed rulemaking, which, if finalized, would 

essentially cut Bank ofDandong off from the U.S. financial system. Among other things, Bank 

of Dandong is believed to act as a financial conduit for North Korea to access the U.S. and 

international financial systems, including by facilitating millions of dollars of transactions for 

companies involved in North Korea's WMD and ballistic missile programs. 

This was the Treasury Department's first action in over a decade that targeted a non-North 

Korean bank for facilitating North Korean financial activity. It clearly demonstrates the 

Administration's commitment to protecting the integrity of both the U.S. and international 

financial systems. Financial institutions in China, or elsewhere, that continue to process 

transactions on behalf of North Korea should take heed. We will continue to target North 

Korea's illicit activity, regardless of location. 

Challenges and Opportunities 

It is essential that the international community work together to increase economic pressure on 

North Korea. North Korea is a threat to global peace and security. Moreover, Kim Jong-Un's 

regime operates globally, and therefore we need global cooperation to constrain its finances. All 

UN Member States must, at minimum, implement and enforce UN Security Council Resolutions, 

which are binding. 

But we can, and should, do more. We are working bilaterally with key partners to coordinate our 

domestic sanctions programs. We are pleased that, this year, Australia expanded its sanctions 

programs to target additional sectors of the North Korean economy, and that Japan and South 

Korea- as I noted- have issued domestic actions targeting North Korea. Under Secretary 

Mandelker is currently in Europe discussing our work with our European allies to increase 

sanctions and combat North Korea's sanctions evasion, and Treasury's leadership is engaged 

with leaders from Southeast Asia and Africa on the importance of implementing UNSCRs. We 

are also working bilaterally with governments and through the Financial Action Task Force to 

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ensure that countries have the regulatory framework in place to detect and freeze assets linked to 

North Korea. 

But challenges remain. Certainly China and Russia are to be recognized for supporting adoption 

of the most recent Security Council Resolution. Nevertheless, both countries must do much 

more to implement and enforce the sanctions called for by the United Nations. Russian 

companies continue to provide support to North Korea. DPRK bank representatives operate in 

Russia in flagrant disregard of the very resolutions adopted by Russia at the UN. This summer, 

for instance, Treasury designated Russian companies Gefest and Ardis Bearings, as well as their 

directors, for providing support directly to North Korean entities involved in WMD and ballistic 

missile procurement. This activity is unacceptable, and we will continue to target those entities 

and individuals anywhere, including Russia, who provide any support to North Korea's 

procurement networks. 

China is even more central to a successful resolution of the crisis caused by Kim Jong-Un. 

China accounts for at least 90 percent of North Korea's exports. North Korea is overwhelmingly 

dependent upon China for both trade and access to the international financial system. China's 

full and effective enforcement of UN sanctions is therefore essential. Unfortunately, I cannot 

assure the Committee today that we have seen sufficient evidence of China's willingness to truly 

shut down North Korean revenue flows, expunge the North Korean illicit actors from its banking 

system, and expel the North Korean middlemen and brokers who are establishing webs of front 

companies. We will continue to work with the Chinese to maximize economic pressure on North 

Korea, but we will not hesitate to act unilaterally. Tf China wishes to avoid future measures, such 

as those imposed on Bank of Dandong or the various companies sanctioned for illegal trade 

practices, then it urgently needs to take demonstrable public steps to eliminate North Korea's 

trade and financial access. 

Conclusion 

Mr. Chairman, Ranking Member Engel, and Members of the Committee: l reiterate my 

appreciation for the opportunity to testify before you today on this administration's efforts to 

combat the threat posed by North Korea's deadly weapons programs. Treasury is engaged on a 

daily basis in "hand-to-hand" financial combat with North Korea's illicit networks. We do this 

with the full recognition that our success in curtailing North Korea's revenue streams and 

shutting off its access to financial systems is essential to a peaceful resolution of the growing 

crisis. As l have indicated, we will target North Korea's economic activities and sanctions 

evasion schemes regardless of where they occur. We are approaching the problem strategically, 

but given the urgency of the threat, we will continue to apply maximum pressure on North 

Korea, and on those countries where the DPRK operates, at every turn. 

Thank you and I look forward to your questions. 

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Chairman ROYCE. Assistant Secretary Billingslea, thank you 

very much. Let me make a point in terms of when we have seen 

sanctions that were effective. In 2005, we had the sanctions on 

Banco Delta Asia. At that point in time, in talking to a senior defector that worked in their missile program, he indicated that because we had cut off the hard currency, they had to shut down 

their ICBM program. 

One of the things he indicated also, or was indicated by the conversations we had with senior defectors, was that during that period of time, the ability of the regime, or the dictator as they called 

him, to get his hands on hard currency, was blocked. And the inability of a dictator to be able to pay his generals—and this was 

the quote—‘‘is a very bad position for a dictator to be in.’’

In retrospect, we, therefore, say two things happen during that 

period of time in terms of the desperation of the situation within 

the Kim regime. This was under his father, Kim Jong Il. We have 

the ability to replicate that if we have the will to do what was done 

in 2005. And in 2005, it was maybe a dozen banks that were being 

used. At that time, Treasury found that North Korea was counterfeiting $100 U.S. bills, and that gave Treasury the authority to do 

this until such time as the Department of State forced them to lift 

the asset freezes. 

But during that time, we had an enormous amount of pressure 

being brought to bear. In this particular case—and let me use your 

words here—but it is China that is primarily involved in the support system in terms of, I would estimate, 90 percent of the hard 

currency that the regime needs. Now, we have managed to cut off 

a lot of that because it is very expensive to run an ICBM program, 

or a nuclear weapons program, billions and billions and billions of 

dollars. North Korea’s money has no value, so they have to get this 

foreign currency into the country in order to pay for it on a month 

to month basis, in terms of what they are trying to build out. 

You said if China wishes to avoid future measures such as those 

imposed on Bank of Dandong, or the various companies sanctioned 

for illegal trade practices, then it urgently needs to take demonstrable public steps to eliminate North Korea’s trade and financial 

access. That is the point to us here in Congress. Some of our opinion on this, in terms of Congress, is affected by the fact that China’s biggest banks, even state-owned banks, still do business with 

North Korea. That has got to end completely. We cannot accept 

half measures on this. These transactions are what supports the 

regime’s nuclear program. 

And I understand the administration is pressing Beijing to take 

action here. I understand that many of these banks have significant operations in the United States, and that there would be consequences to our economy. However, U.S. presence is the very 

thing that makes our sanctions so powerful. They would rather do 

business with us than North Korea in terms of how consequential 

that is to these institutions. 

So at what point do we designate these major Chinese banks for 

doing business with North Korea? We have done our outreach to 

Beijing, with limited results. Shouldn’t we demonstrate the seriousness with which we take the North Korean nuclear threat, while 

further isolating that regime in North Korea, Kim Jong Un, from 

23

the financial system that he uses to build out his atomic weapons 

program? 

Mr. BILLINGSLEA. Chairman, first, let me say that China and 

Russia are to be recognized for supporting the adoption of the two 

most recent U.N. Security Council resolutions, which are significant for the clamp-down that they enable us to place on Kim Jong 

Un’s revenue. However, we have been very clear that if China 

wishes to avoid further measures, such as that which happened to 

the Bank of Dandong, we urgently need to see demonstrable action. 

I cannot tell the committee today that we have seen sufficient 

evidence of China’s willingness to truly shut down North Korean 

revenue flows, to expunge North Korean illicit actors from its banking system, or to expel the various North Korean middlemen and 

brokers who are continuing to establish webs of front companies. 

We need to see that happen. 

Chairman ROYCE. To both our Assistant Secretaries, let me say 

this: Last night we saw the Security Council unanimously approve 

its third U.N. sanctions resolution this year on North Korea. And 

this latest measure restricts the regime’s oil imports while banning 

textile exports in joint ventures. However, the nature of the Security Council means that this was a compromise to ensure the regime cannot claim this compromise that came out of this was a victory, which is what they will try to do. We have got to demonstrate 

the impact of these new international sanctions by making certain 

that this time, no one is skirting those sanctions. 

So what steps will the Departments of State and Treasury take 

in the coming days to implement the new Security Council resolution? And how will these actions that you are about to take, send 

this clear message to Kim Jong Un on the reality that this time, 

we are going to follow through with enforcement and give them no 

space in terms of additional hard currency? 

Ms. THORNTON. Thank you, Mr. Chairman. It is very clear in the 

process of ramping up this peaceful pressure campaign on the 

North Korean regime, that one of the key elements is to keep to 

global coalition that we have got behind these sanctions together, 

and to keep every single country in the coalition working actively 

to continue to squeeze on trade, on labors, on financial transactions, on shipping, et cetera. And what we have been doing in the 

Department of State is working across the board with every one of 

our diplomatic partners around the world. The Secretary raises the 

North Korea issue in every single one of his meetings with foreign 

leaders. And we have seen a great response from countries around 

the world who are increasingly outraged over North Korea’s provocative behavior. 

So we have really been working hard to close the net. We have 

seen diplomatic establishments closed, ambassadors kicked out, 

other North Korean representatives kicked out. The Philippines announced recently they are going to cut complete trade with North 

Korea. So we are having an effect on a lot of the networks that the 

North Koreans have built around the world. 

I think the sanctions, 2371, last month, and now, 2375, last 

night, we are going to be working aggressively to make sure that 

we and all of our partners around the world, too, are working with 

every country that we can to make sure that every country has the 

24

capacity to track illicit transactions, to go after violators, and raising consciousness, but, also, giving them the tools to go after those 

bad actors, is what we are focused on. 

We are trying to clean up ship registries and give countries the 

ability to better track the shipping of ships that are flagged under 

their flag, et cetera. So I think we are still working on implementing these most recent two U.N. Security Council resolutions. 

We also have an ongoing, very close dialogue with the Chinese on 

what they are doing to track sanctions, and we share a lot of information with them, but we will also drive them to shut down networks that we find. 

Chairman ROYCE. Thank you, Assistant Secretary Thornton, my 

time has expired. I am going to go to Mr. Engel for his questions. 

Mr. ENGEL. Thank you, Mr. Chairman. You know, when I was 

in North Korea, and this is a while back, but twice, one of the 

things that struck me, we had just deposed Saddam Hussein, and 

one of the top North Korean officials—it wasn’t the leader, but it 

was a very high ranking official—said to us, Saddam Hussein 

didn’t have nuclear weapons, and look where he is now. From those 

two trips I took, that is the one thing that rang in my ears. And 

now, of course, they are carrying out those horrific words. 

Secretary Thornton, let me ask you, in Europe we have NATO. 

Obviously, in Asia, we don’t have a treaty group like NATO. So 

how do we reassure, in your view, our allies who doubt our resolve 

to defend Tokyo or Seoul, because we are afraid of what might happen in Los Angeles or Guam or any other place? How do we reassure our allies? 

Ms. THORNTON. Yes, thank you, Ranking Member. I think we 

have been working very, very closely with both South Korea and 

Japan, but also with all the other counties in the Asia-Pacific region on confronting the North Korea challenge. Obviously, we have 

a very close and continuing conversation with both Japan and 

Korea, not just the State Department, but the Department of Defense, on managing our alliances. Obviously, we have been talking 

to both Japan and Korea, as the chairman mentioned, about additional defensive needs and capabilities that they may have, that 

they want to move ahead on. And so, I think the reassurance that 

we have been providing them with, and the constant close communication with them, and with others in the region, has been of significant reassurance to them about our ongoing commitment to defense of our allies. 

Mr. ENGEL. Thank you very much. Secretary Billingslea, could 

you identify the top, say, 25 firms that compose North Koreans illicit network? And if so, would you be willing to provide that information to this committee in classified form, if necessary? 

Mr. BILLINGSLEA. Ranking Member, yes. We would be pleased to 

have a classified discussion with you on a number of North Korean 

entities that we are actively targeting. However, once we choose to 

move with designations and blocking of assets and so forth, we 

would want to keep that kind of information very close hold until 

we are ready to move so that the money doesn’t flee in advance of 

our actions. 

25

Mr. ENGEL. Okay. I think it would be interesting in this committee for such a gathering, so we will be in touch with you. We 

will do it together, the chairman and I. 

Let me ask you about these entities. If Beijing and the other relevant governments haven’t taken sufficient action to close these entities and curb their activities, have we taken action to designate 

these entities under U.S. law? 

Mr. BILLINGSLEA. Yes, sir, we have. We have done a couple of 

waves of that under this administration. Our August 22 actions 

that I referenced were probably the most noteworthy, and are definitely a signal of things to come. 

Mr. ENGEL. It is my understanding that these entities operate in 

China in a small number of the jurisdictions. Have we informed 

Beijing of the activities of these entities and communicated the expectation of the U.S. Government that their actions be curbed? 

Mr. BILLINGSLEA. Yes, sir. Both the Department of the Treasury 

and the Department of State are in repeated communications with 

our counterparts in China, often very specifically with respect to 

entities that we believe are associated with the North Korean regime, and we make very specific requests for action on these entities. 

Mr. ENGEL. Thank you. Look, this is a problem that goes back 

to a number of administrations before this one, and the President 

did inherit a complex and intractable foreign policy in North Korea, 

but his mixed and inconsistent messaging is self-inflicted—it is a 

self-inflicted wound. Again, I don’t see the purpose of arguing with 

South Korea on trade at a time when we need to show strong and 

resolve. 

So let me ask you this: I have so many questions to ask, I never 

can get them in in a short period of time. But let me go back to 

you, Secretary Billingslea, the chairman mentioned several large 

Chinese banks in his remarks. China Merchants Bank was one of 

them. Have we taken action against them, and if we haven’t, why 

haven’t we? 

Mr. BILLINGSLEA. So, Congressman, we have taken action 

against Bank of Dandong, as was discussed earlier, which we believe is a money laundering concern associated with North Korea. 

And our actions have had a very clear effect on that bank’s operations. That is a signal of our intent to move forward with 

expunging from the international financial system any financial institution which is taking insufficient action from an anti-money 

laundering standpoint against North Korea. 

We believe that the next most important thing to do here is to, 

very specifically, target and expose those individuals who are the 

financial facilitators for the North Korean regime who set up these 

elaborate front and shell company structures, which are then used 

to get the bank accounts to launder the money. That is a priority 

focus area for us, and we are driving very quickly forward on that 

matter. 

Mr. ENGEL. Thank you. Secretary Thornton, did you want to add 

something to——

Ms. THORNTON. Yeah. I just wanted to note for the committee 

that the Chinese have announced in the last couple of days, measures against all of their big banks operating, particularly in northVerDate 0ct 09 2002 16:39 Jan 11, 2018 Jkt 000000 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 F:\WORK\_FULL\091217\26836 SHIRL
26

east China, issuing warnings and prohibitions about opening accounts for North Korean actors. So they are actually feeling some 

pressure on this and making public statements. 

Mr. ENGEL. One quick thing. You both would agree that any kind 

of resolution or partial restitution of this crisis has to go through 

China, that it is virtually impossible to not involve China. China, 

I think we all think is the one country that can influence North 

Korean behavior. Do you both agree with that? 

Mr. BILLINGSLEA. I do. 

Mr. ENGEL. Okay. Thank you. Thank you, Mr. Chairman. 

Chairman ROYCE. Thank you, Mr. Engel. We go now to Mr. Chris 

Smith of New Jersey, whose subcommittee leads our work on 

human rights. 

Mr. SMITH. Thank you very much, Mr. Chairman, for your leadership, and for putting together this important hearing. And I do 

want to thank our distinguished witnesses for painstakingly working the details of this. It is an extremely difficult fight, and I want 

to thank you for what you are doing every day to make a difference. 

I also want to express my deepest respect to Ambassador Haley 

and the administration for drafting Resolution 2375. As you have 

pointed out, the toughest sanctions ever meted out against North 

Korea. My hope is that China and Russia will comply with the 

terms and conditions, and you might want to speak to your expectations about that, because obviously in the past, it has been lackluster in many ways. 

I would also appreciate your thoughts on how you judge the success or failure of strategic patience, and whether or not you 

thought that aided and got us to where we are at now, or was this 

inevitable anyway? For many, there is a significant, and I think a 

profoundly significant, under-appreciation for Juche, the dictatorship cult, deification of Kim Il-sung. I read books about it. I have 

talked to many of the diaspora and refugees who speak, and they 

say: ‘‘You Americans don’t get it.’’ The worship of Kim Il-sung is 

so profound, so deeply embedded, and it does lead to a fanaticism 

that rivals ISIS-like fanaticism about what they would do for their 

leader, the great leader, going back, and now the current leader. 

Do you think an information surge—there is nothing that precludes us from broadcasting, despite jamming capabilities that they 

might have. Can de-mythify the Kims because the big lie has certainly been imbedded in the hearts and minds of so many North 

Koreans for so long? 

Every time I talk to a group of defectors, and I ask them that 

question, they explain eloquently about how from the youngest age 

right up—and those expressions when one of the leaders die, and 

the tears and people throwing themselves on the ground, it is not 

fake. It is fanaticism. And when it comes to the military, that 

means that that fanaticism will be carried out with horrific consequences for those that are defending liberty in South Korea and 

elsewhere. 

Finally, we know that China subsidizes North Korea’s bad behavior. It enables torture of asylum seekers by repatriating those 

who escape to China, in direct contravention of the refugee convention, and provides Kim Jong Un needed currency by employing 

27

thousands of trafficked workers. And I am wondering if the Department is looking at, with regards to China, imposing Magnitsky-like 

sanctions against those who are complicit in those crimes? 

Even the U.N. Commission on Inquiry for North Korea recommended that sanctions be used to target individuals. We have 

got the law. And I hope that is something that is under active consideration, and hopefully we will hear soon about individuals being 

so targeted. Ms. Thornton. 

Ms. THORNTON. Yeah, thank you very much. I think, you know, 

of course, the U.S. State Department has been very concerned 

about the egregious human rights situation in North Korea for decades. We have had a special representative working on these 

issues. We have worked very closely with him. I think we have 

made some good progress, or at least we have taken a number of 

very significant actions in this area, and will continue to do so. 

I think the question of increasing information access inside 

North Korea is one that we certainly have looked at and are working on, and whether we can do more there, I think we are always 

looking at whether we can do more and what we can do more effectively. But I think, from my standpoint, one of the biggest ways we 

can get people inside North Korea to question what the regime is 

doing is by making it very difficult for them to pay the military and 

to provide for their citizens, and I think that is really what we are 

very focused on, in addition to trying to knock down the proliferation networks that are contributing to the weapons program. So 

there is a litany of egregious behavior across the board, and we 

want to go after every single aspect of that. But I think looking at 

cutting off the economic flows to North Korea is another way of——

Mr. SMITH. Of course, that would include the complicity of Iran 

with the ballistic missile program in North Korea? 

Ms. THORNTON. Sorry, I didn’t get the connection. 

Mr. SMITH. The cooperation between the Iranians and Pyongyang 

when it comes to ballistic missiles, that was something that I and 

others asked when the Iran deal was being contemplated. And, unfortunately, that was left off the table in the final agreement, that 

the concern is that that cooperation continues today, and I hope 

that that is something that is very aggressively being pursued as 

well. 

Ms. THORNTON. Yeah. We are certainly looking at that. 

Mr. BILLINGSLEA. Yes, sir. 

Mr. SMITH. But you didn’t want to speak to Juche? 

Mr. BILLINGSLEA. Well, first of all, Congressman, your leadership 

on human rights matters has been—for quite a long time. I had a 

chance to work for you when I was a staffer on the Senate Foreign 

Relations Committee back in the 1990s under Chairman Helms in 

those days. Again, I appreciate the stand that you take on these 

matters. 

We are very specifically looking at a number of individuals in 

North Korea who are engaged in egregious, outrageous human 

rights abuses. This matter of Juche, I think you have articulated 

it exactly correctly. However, I am not sure that the cult personality necessarily extends to all of the elites right around the dear 

leader. He very much depends upon this hard currency revenue, as 

the chairman noted, to maintain his opulent lifestyle and the peoVerDate 0ct 09 2002 16:39 Jan 11, 2018 Jkt 000000 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 F:\WORK\_FULL\091217\26836 SHIRL
28

ple around him. And so the extent to which draining his ability to 

generate hard currency not only constricts his ability to engage in 

WMD and missile programs, but it also presumably increases the 

fragility of the regime around him. This is, as we would say, a 

twofer in our view. 

Chairman ROYCE. Mr. Brad Sherman of California. 

Mr. SHERMAN. Soon, North Korea will have more nuclear weapons than they feel is absolutely necessarily to defend themselves 

from us. But they will need hard currency. They might prefer actual cash currency. Iran is having some constraints on its ability 

to develop nuclear weapons. Mr. Secretary, do we have any understanding with China that nonstop flights between Pyongyang and 

Tehran will be forced to stop for fueling, or do we have anything 

else that would prevent this obvious economic deal? 

Mr. BILLINGSLEA. I will defer to the State Department on the 

specific discussions on Air Koryo and flights in——

Mr. SHERMAN. Right. 

Mr. BILLINGSLEA [continuing]. And from North Korea. I would 

also, Congressman, note that, as we move forward on these two 

successive——

Mr. SHERMAN. I am not asking—I have very limited time. Do we 

have anything or not? 

Ms. THORNTON. I know that we have limitations on air refueling. 

I know the Chinese have refused to refuel. So there is pressure 

on——

Mr. SHERMAN. No, I am not asking—I am saying, do we have any 

understanding with China that there will be nonstop, no refueling 

planes going from Tehran to Pyongyang loaded with currency or 

coming back with a nuclear weapon? 

Ms. THORNTON. No, we don’t. 

Mr. SHERMAN. We don’t. Okay. 

Ms. THORNTON. A nonstop plane from——

Mr. SHERMAN. So we have one country that has over $1 billion 

in Saran wrapped hard currency. And we have another country 

that, if the Assistant Secretary’s work is done well, will need $1 

billion in currency and will have quite a number of nuclear weapons that they could sell. 

Folks, I have been coming to this room for 20 years, and not 

much has changed. We have Ileana smiling down upon us; that is 

good. We got some electronics. But for 20 years, administrations 

have been coming here and telling me that we don’t have to make 

any concessions to North Korea, we don’t have to do anything that 

would make any single American company upset, and we are going 

to make the American people safe. And for 20 years, I have been 

hearing that over and over again. I hear that we are going to have 

unprecedented sanctions, which means that we found a few more 

companies to sanction, just as they have invented a few more companies and created them. Whether we can list them faster than 

they can create them, I don’t know. But the fact is that North Korea’s real GDP has grown 50 percent in the last 20 years. 

Assistant Secretary, if you were successful with your sanctions, 

you might just cause them not to increase their GDP, which means 

they still have 50 percent more than they found necessary to hold 

on to power back in 1997. But while we haven’t made the American 

29

people safer, we have met the political objectives here in the 

United States. We don’t threaten China, even a little bit, with 

country sanctions, because that would be politically difficult for the 

United States to do. We don’t adopt reasonable objectives, like a 

freeze in the North Korean program, because that would be politically difficult to do. 

What we do is what we have been doing—for 20 years, and then 

Chairman Royce has always come up with this or that better sanction. Sometimes his ideas are listened to; sometimes they are not. 

But there is never enough pressure on the North Korean regime to 

cause regime-threatening levels. This is a regime that survived the 

famines in the 1990s, late 1990s. Now their GDP is higher than it 

has been—it has gone up just about every year. And China is not 

going to allow us to put regime-threatening pressure on the North 

Korean regime. They may, you know, punish them a little bit for 

what they are doing and how they are doing it and how disruptive 

they are and how headline-grabbing they are. 

But, Mr. Assistant Secretary, do we even have a plan for threatening China with country sanctions, tariffs on all goods? Or is it 

just a matter that, ‘‘Well, your number seven bank won’t be able 

to do business in the United States, so your number eight bank 

and numbers one through five banks will’’? If you were running a 

retailer, would you think there was the slightest risk of your supply chain to China because of China’s unwillingness to engage in 

the kinds of sanctions necessary just to get a freeze of the nuclear 

program? 

Mr. BILLINGSLEA. Congressman, I think you raise a good point. 

And the chairman noted that China is central to this matter. Ninety percent of North Korean——

Mr. SHERMAN. And we are not doing enough to force them to 

change their behavior, which is to punish North Korea a little bit 

for being a little bit too flamboyant in their actions but to make 

sure that the regime can survive. And this regime won’t even agree 

to a freeze of their nuclear program unless you have something relatively, at least halfway, toward regime-threatening sanctions. 

Mr. BILLINGSLEA. Yeah, I am not sure I agree with that. We 

are——

Mr. SHERMAN. You think the regime would give up its nuclear 

program, even if they said, well, we can survive these sanctions, 

but we care so much about our people that we are going to—we 

care about our GDP, we might——

Mr. BILLINGSLEA. No, I wouldn’t speculate on regime thought 

processes. What I would focus on is the Chinese as the center of 

gravity here. And I think that—in fact, I know that, from a tempo 

standpoint and from a pressure standpoint, the pace of action that 

we have taken, even on my——

Mr. SHERMAN. It is unprecedented, just like the last 19 years 

people have sat in that chair and told me it is unprecedented. But 

it has certainly not been enough stop——

Chairman ROYCE. Will the gentleman yield? 

Mr. SHERMAN. I will yield. 

Chairman ROYCE. I think the gentleman is raising exactly the 

bottom-line question here. In other words, we are deferential here 

to a point, but it has been a long time since the 1994 framework 

30

agreement with North Korea. It has been a long, long time of waiting for China to comply with the sanctions we pass and, frankly, 

with the sanctions that the United Nations pass. 

As you have just laid out for us with the charts that you provided, China understands that that coal is coming, circumventing 

the sanctions, and being unloaded, just as they understand that 

these banks are not complying with the provisions that have been 

passed by the Security Council. 

I think that Mr. Sherman raises a point. I have only seen once, 

in 2005, in response, as I said, to North Korea counterfeiting our 

currency—and that power was soon taken away from the Treasury—that I ever saw anything that cut off hard currency into the 

regime. And that was because we didn’t give anyone an option, 

anywhere. If you were doing business, we were shutting down 

those institutions. 

So I would just say this is where the discussion needs to go next 

if there isn’t full compliance with the sanctions that the U.N has 

passed, because what is at risk is our national security. And there 

is only one way to shut a program down with a country like North 

Korea that doesn’t have its own revenues. And I thank the gentleman from California for raising the point. And I yield back to 

him. 

Mr. SHERMAN. I will just say that, for 20 years, we have talked 

about company sanctions instead of country sanctions. For 20 

years, China has carried out a policy where they smile at us but 

they have done enough with North Korea so that their GDP is 50 

percent higher in real terms. That is much better economic growth 

than we have achieved. So the sanctions have not prevented a high 

level of economic growth. And my guess is that we will continue 

the policies that we have in the past, perhaps at a louder volume. 

And I would finally point out that we have to also remember how 

small the North Korean economy is, how difficult it is to squeeze. 

Yes, we are trying to go after their oil, but they use about the same 

amount of oil as 150 gas stations, total, the whole country. That 

is less than there are on Ventura Boulevard. And, of course, they 

can liquify their coal and use that in lieu of oil. So it is going to 

be tough to put this regime under enough pressure to even get a 

freeze. And the idea that we would ever get this regime—and having seen Saddam, having seen Qadhafi—to actually give up its nuclear weapons. 

I yield back. 

Chairman ROYCE. We go to Mr. Dana Rohrabacher of California, 

chairman of the Europe, Eurasia, and Emerging Threats Subcommittee. 

Mr. ROHRABACHER. Thank you very much, Mr. Chairman. And 

thank you and Congressman Engel for providing the leadership on 

this committee to be dealing with issues of this magnitude. Thank 

you very much for your responsible leadership. 

I share my colleague Mr. Sherman’s frustration and skepticism 

that was just expressed. Let me note, my father was a Korean war 

veteran. And I would hope the very last thing that is on anybody’s 

mind is to try to exercise more influence by putting more American 

troops in South Korea. That is not the path to a solution to this 

problem. So what are the solutions? I mean, obviously, we are 

31

being told, even from everything you are saying—in terms of economic sanctions, I agree with Mr. Sherman. I am very skeptical 

that any of that is going to have impact. 

I remember being here and sitting a little bit over there at the 

time when President Clinton proposed and passed through this 

Congress a plan that would give the North Koreans billions of dollars of American assistance. Of course, we just did that with Iranians now too, with the same idea, that we are going to take some 

bloodthirsty tyrants and we are going to pay them off by giving 

them some sort of aid program for their countries. 

So what is the solution? First of all, what is the challenge? Am 

I mistaken that I have heard quotes from the official head of the 

North Korean Government threatening to rain mass destruction of 

some kind upon the United States? Has he actually made threats 

to in some way kill millions of Americans with a nuclear attack? 

Ms. THORNTON. I don’t know if he said those specific words, but 

there certainly have been a litany of threats, including at Guam, 

including videos showing, you know, bombs raining on American 

cities. So I think——

Mr. ROHRABACHER. Okay. So he has made it clear that he is willing, as the leader of that country, to murder millions of Americans 

with the technology. Let me note, then, that I would hope, while 

we do not consider putting U.S. troops in South Korea as a solution, I would hope that we would be willing to use force, which is 

something that nobody seems to want to mention. And I think this 

is perhaps the only thing people like that understand. 

And so I would suggest—I won’t ask what type of force has been 

ruled out. And I am sure the administration has got the parameters of what type of force they are willing to use. But I would certainly think that the use of defensive forces—and, again, thank 

you, Ronald Reagan, for insisting that we have antimissile systems 

available. 

I would hope that the next time the North Koreans launch a 

rocket, especially one that will traverse over our ally Japan, I 

would hope that we shoot it down as a message to the North Koreans and to other people, like in Japan, who are counting on us. And 

unless we demonstrate we are willing to use force, there is no reason for them to believe we will. 

Also, not only an antimissile-defense type of approach, but I 

would hope that, if indeed another missile is launched, or they are 

preparing for a launch, that we conduct a cyber attack on North 

Korea. And, yes, it is a very small economy and a small country. 

A cyber attack against that type of threat should be effective, but 

it is a use of force without major loss of life, which is what Ronald 

Reagan talked about all the time. We don’t want to be put in a position where our alternative is murdering millions of people who 

are basically the victims themselves of a totalitarian regime. 

So I won’t ask what parameters we have in the use of force, but 

let me just note, I don’t believe that sanctions alone will have an 

impact on tyrants that murder their own family and have been so 

abusive and murderous to their own people. And I don’t believe 

buying them off, as President Clinton tried to do—now we are 

stuck with this—down the road from that deal, we now have this. 

And those billion of dollars of assistance we gave North Korea, I 

32

would imagine, provided them other money that they could put into 

developing their own nuclear weapon system. 

So, with that said, good luck to you all. Thank you very much. 

And thank you to our leadership in this committee. We are all 

Americans in this. Let’s hope for the best but prepare for the worst. 

Chairman ROYCE. Thank you, Mr. Rohrabacher. We now go to 

Mr. Gerry Connolly of Virginia. 

Mr. CONNOLLY. Thank you, Mr. Chairman. And welcome. 

We talk a lot about bipartisanship, and we want bipartisan on 

this committee and in our foreign policy. But we don’t get bipartisan when we ignore history or when we whitewash the statements and actions of the current President with respect to North 

Korea. 

We have a model that works—of course, a lot of people on this 

committee didn’t support it—and that is called JCPOA, the Iran 

nuclear agreement. They have met the metrics. Recently, the 

United Nations certified they are complying. It rolled back a nuclear program. It involved cooperation not just with our allies but 

with our adversaries, Russia and China. And it had Iran at the 

table. 

To what end is U.S. policy? What I didn’t hear from my friends 

on the other side of the aisle, including the chairman in his opening statement, a powerful opening statement—I support tougher 

sanctions, always have. But it is one part of a policy, not the whole 

policy. As the Iran experience demonstrated, there has to be some 

reward for compliance and cooperation at the end of the day, or you 

are left with a policy only of talking loudly and carrying a stick. 

We haven’t talked about the fact—the ranking member did—that 

the President of the United States, in the midst of this crisis, 

threatened our ally, the most vulnerable party to North Korea’s actions, South Korea, with abrogation of a free trade agreement we 

worked so hard to get. He accused the new South Korean President 

of appeasement. He threatened to cut off trade with any country 

that trades with North Korea. Well, that list is 80, including allies 

like India and Germany, Portugal, France, Thailand, the Philippines. Are we, in fact, going to cut off economic relations or trade 

with 80 nations? It is an empty threat. He talked about a response 

by the United States of fire and fury, but, frankly, the policy looks 

more like fecklessness and failure. 

Ms. Thornton, is it the policy of the United States Government 

to abrogate the free trade agreement with South Korea? And has 

anyone at the State Department looked at the negative consequences of such an action, especially at this time? 

Ms. THORNTON. Thank you, Mr. Connolly. Yes, we have looked 

very carefully at the Korea free trade agreement, KORUS. We are 

currently undergoing a very rigorous review of all the provisions. 

The United States Trade Representative recently held a——

Mr. CONNOLLY. My question—I am sorry. I am limited in time. 

Forgive me. My question is direct: Is it the position of the State Department that abrogating the free trade agreement with South 

Korea would be helpful in our diplomatic efforts and in our efforts 

to respond to the North Korean threat at this time? 

33

Ms. THORNTON. No. I think what we would like to do is work to 

improve the trade agreement at the same time that we work with 

the South Koreans, obviously, on facing the North Korean——

Mr. CONNOLLY. Is it the policy of the State Department that the 

new President, President Moon, of South Korea is engaged in a policy of appeasement in any respect with respect to the north? 

Ms. THORNTON. No. I think we have been working very hard to 

get the South Koreans to come around and be on the same page 

as we and the rest of our allies. And they have come around very 

nicely, I think. 

Mr. CONNOLLY. Thank you. Mr. Billingslea, like you, I also 

served on the Senate Foreign Relations Committee and worked 

with your former boss, Mr. Helms. I was on the other side of the 

aisle. But we actually made a lot of music together sometimes, 

which always surprised the Reagan administration and the Bush 

administration afterwards. 

You talked a lot about China. So China has been violating—and 

you provided some graphic evidence of that—with impunity, violating sanctions other flags shipping coal and providing badly needed foreign exchange for the North Korea regime. They just signed 

on in this unanimous U.N. resolution a new round of sanctions. Do 

we have any reason to believe that that would signal a change in 

Chinese behavior for the better, or is it another empty promise that 

will be violated with impunity? 

Mr. BILLINGSLEA. To be determined. 

Mr. CONNOLLY. Can you speak louder into your microphone? 

Mr. BILLINGSLEA. Sorry, Congressman. It is to be determined. 

The reason I wanted to highlight for you the evasion schemes is 

that maritime enforcement now becomes crucial. With the two U.N. 

Security Council resolutions that are in effect, not sanctions but 

embargoes, complete embargoes, at least on paper, of coal, iron, 

lead, now textiles, seafood, gasoline, maritime enforcement of those 

U.N. Security Council resolution decisions, which are binding on all 

members of the U.N., that is going to be crucial going forward. 

Mr. CONNOLLY. And if the chair would just indulge me for one 

followup question. So, at the end of the day—and either or both of 

you can answer. So let’s say, by tightening sanctions, which I favor, 

we get North Korea to the table saying ‘‘Uncle,’’ what do we give 

them in return? What are we prepared to do to entice North Korea, 

that there is, you know, a pot of something at the end of the rainbow if you freeze the program and start to reverse it under international observation? 

Ms. THORNTON. I think——

Mr. CONNOLLY. Because isn’t that the goal? 

Ms. THORNTON. I will just be quick. I think the Secretary of 

State has been pretty clear in public remarks that we would be 

willing to look at economic enticements, at development opportunities for their economy, at their security concerns, and other things 

that we have talked about during negotiations with them in the 

past. And so I think all of that would be on the table, assuming 

we could get to—you know, we don’t want to pay for negotiations 

or negotiate to get to the negotiating table. That is where we are 

right now. 

34

Mr. CONNOLLY. At the end of the day, I will give you one word 

that has to guide U.S. foreign policy in all respects but especially 

North Korea. That word is ‘‘efficacy,’’ which is defined as the ability 

to produce a desired and intended result. And I think that is also 

to be determined, Mr. Billingslea. 

Thank you, Mr. Chairman, for your indulgence. 

Chairman ROYCE. Thank you very much, Mr. Connolly. 

We now go to Mr. Steve Chabot of Ohio. 

Mr. CHABOT. Thank you, Mr. Chairman. And I want to again 

thank you and the ranking member, as others have said, for your 

at least attempts to get sanctions worked up. I think it is something worthwhile to pursue. 

That being said, just one thing I wanted to make sure that I am 

accurate on this. Ninety percent, perhaps more, of what North 

Korea, the regime especially, needs to survive they get in one 

source or another from China. Is that—I am seeing nodding. Ms. 

Thornton, would you agree with that also? Okay. 

That being said, obviously, China is the key, has been a long 

time, continues to be. It seems to me there are two things which 

could get China’s attention. They have given us lip service for decades now, but one of those things is the trade with the U.S. is significant, and it seems that if we literally—I mean, some sanctions 

on banks, that may help a little bit, but it is not going to have the 

result, I think, that we all want, and that is to avoid military action and get North Korea to back off this march to madness in 

their nuclear program. 

So one way is if we actually did cut off trade. And, of course, if 

we did that, would it have an adverse impact on the American 

economy? Of course it would. However, I would say that pales in 

comparison to the impact on the American economy if we see a 

thermonuclear device go off in Seattle or San Francisco or L.A. Or 

New York or Washington. So that is one thing that I think could 

actually get China’s attention. 

I think the other thing—and, Ms. Thornton, you sort of may have 

been at least thinking about this when you said that we are discussing with Japan and South Korea what they may want to move 

ahead on. And I don’t know if this is what you had in mind or not, 

but it is certainly what I have in mind and have said this for years: 

They do not want Japan or South Korea to have their own nuclear 

programs. And I have thought for a long time that we should at 

least be discussing that with them. And I think the discussions 

alone could have gotten their attention, to get them to put pressure 

on North Korea to back off. It may be too late for that now. But 

could you comment on those two items which perhaps could get 

China to actually put sufficient pressure on North Korea to back 

away from this madness? 

Ms. THORNTON. Sure. Well, I mean, we are certainly looking at 

every option to put more pressure on China. We are also using all 

of our global partners to speak up and also, from their perspectives, 

put pressure on China, because we do see China as the key to the 

solution of this problem, if we can get there. 

As for cutting off trade, obviously that would be a huge step, and 

there are a lot of ramifications of that. I think going after entities 

and banks is a way of going more directly after the North Korean 

35

angle here, but I agree with you that, trade is preferable to seeing 

any kind of military confrontation, especially one that would involve people in the United States. 

But on the issue of defenses in Japan and South Korea, we have 

certainly been talking to Japan and South Korea about beefing up 

their defenses and their ability to, themselves, take action in the 

event of an attack. And even those discussions have gotten China’s 

attention. You probably know the Chinese have been very vocal 

about their opposition to the THAAD deployment in South Korea, 

which we have moved ahead on now and gone ahead and deployed 

over and above their objections. And we have made clear that the 

Japanese are seeking additional defensive systems to enable them 

to ward off a direct attack from North Korea. And it is quite clear, 

I think, already to the Chinese that this is an area that is going 

to be further developed if we can’t rein in the threat from North 

Korea. 

Mr. CHABOT. It is my view that, short of one of those two actions, 

I think we are going to continue down this path where Kim Jongun will continue to move forward on this nuclear program. And 

that will leave only the military option, and there is no good to 

come from that. We know if we take that action, they can target 

Seoul, and literally tens, maybe hundreds of thousands of lives 

could be lost, including American lives. So that is the last resort, 

although it may ultimately come to that. 

Or the alternative—some people are suggesting now, as well, we 

have a nuclear China, we have a nuclear Russia, we don’t like that, 

so maybe we end up with a nuclear North Korea. Either one of you, 

why can we not allow that to happen? How are they different? 

Ms. THORNTON. A lot of times, people talk about the North Koreans needing a nuclear program for their own defense. The fact of 

the matter is that there has been basically a mutual deterrence in 

effect since the end of the Korean War. They have a conventional 

position that allows them to target Seoul. And so the idea that they 

need nuclear weapons for their own defense, when there has never 

been a retaliation for any of their provocative, hostile, or even kinetic actions that they have taken, is a bit of a bridge too far. 

So the concern is that they are pursuing a nuclear program in 

order to use that program to conduct blackmail and hold other 

countries hostage and continue to take even worse sorts of steps in 

their behavior. Proliferation is another major concern, of course. It 

undermines the entire global nonproliferation system and would 

be, we presume, ripe for sale and proliferation around the world. 

So I think two major angles there. 

Mr. CHABOT. Thank you. My time has expired. 

Chairman ROYCE. Mr. David Cicilline of Rhode Island. 

Mr. CICILLINE. Thank you, Mr. Chairman. Thank you to our witnesses for being here. 

I start with you, Ms. Thornton. You said, ‘‘We will never accept 

North Korea as a nuclear state.’’ What did you mean by that? I 

mean, aren’t they already a nuclear state? 

Ms. THORNTON. No, we do not recognize them as a nuclear state. 

And——

Mr. CICILLINE. What does that mean? 

36

Ms. THORNTON. We do not recognize them as a nuclear weapons 

state. We don’t recognize their program, and we won’t consider 

them to have nuclear weapons. We are pursuing denuclearization. 

Mr. CICILLINE. Well, we can’t imagine it away. Either they are 

a nuclear state or they are not. The recognition of one—I am not 

understanding that point. I mean, we have to have a realistic context before we can shape smart——

Chairman ROYCE. Will the gentleman yield for just a second? 

Mr. CICILLINE. Sure. 

Chairman ROYCE. Because there is an additional complexity 

here. 

Mr. CICILLINE. About delivery. 

Chairman ROYCE. Exactly. 

Mr. CICILLINE. Yeah. 

Chairman ROYCE. And I just wanted to make that point. 

Mr. CICILLINE. No, no, I understand, but—okay. Let me move on. 

Mr. Secretary, you said that U.N. Resolution 2371 prevents 55 

percent of refined petroleum products from coming into North 

Korea and that new sanctions prevent $1⁄2 billion of coal, which 

leaves another $1⁄2 billion of coal and about 45 percent of petroleum 

products. Am I understanding that our sanctions don’t reach the 

balance of that? And if not, why not? 

Mr. BILLINGSLEA. So, Congressman, a couple of things. So all 

coal is prohibited to be transacted. That was under the prior——

Chairman ROYCE. Mr. Assistant Secretary, just pull the microphone a little closer. 

Mr. BILLINGSLEA. Sorry. So, Congressman, it is not allowed to 

trade in North Korean coal, period, nor in iron, iron ore, lead, lead 

ore. North Korean——

Mr. CICILLINE. So those percentages relate to noncompliance. 

Mr. BILLINGSLEA. The 55-percent number I gave you is kind of 

the fuzzy math done on how much gasoline versus crude oil is imported today into North Korea from China. 

Mr. CICILLINE. Okay. Thank you. I think we have heard from a 

number of my colleagues in response to those questions about pretty clear noncompliance by the Chinese. The U.N. experts on North 

Korea in February found that they were using this livelihood exception to trade banned goods and allow companies to send rocket 

components to North Korea. 

And you said, Ms. Thornton, and I think also Mr. Secretary, that 

we need to see that happen—that is, compliance by the Chinese. 

You described the Chinese as the center of gravity. And then, Ms. 

Thornton, you said, if China doesn’t comply with the sanctions, we 

will use the tools at our disposal. What are those tools, and why 

aren’t we already using them? 

I mean, otherwise, these sanctions sound good in a press release, 

but if they are not actually being honored by the parties, they are 

not effective, as Mr. Connolly said. So what are the tools that you 

intend to use, and why aren’t we already using them? 

Ms. THORNTON. Well, one of the things to remember—I think the 

Assistant Secretary mentioned this—is that North Korea has been 

under sanctions for many decades. So their networks—it is a criminal enterprise, and their networks are deeply embedded, and they 

37

have designed them to escape detection. So it is a little bit complicated to go after these things. 

But what I meant when I say using our tools, we have these 

international sanctions regimes. The international community has 

signed up to it and is obliged to enforce that. We have a running 

discussion with many of the countries around the world on information we have about what we find as illicit networks and ask 

them to go after those. If they don’t, then we will use our domestic 

authorities to sanction those entities. 

Mr. CICILLINE. I guess my question is, I think most military experts would acknowledge that there is not a good military option. 

We can talk about it, but there actually isn’t one. And so, if we surrender the use of the sanctions regime to produce the result that 

we want, by not using every tool that is available to us, aren’t we 

in the end acquiescing to North Korea’s nuclear capabilities? 

Ms. THORNTON. I think our strategy is to ramp up the sanctions 

regime, and that is exactly what we have been doing. We have had 

two unanimous U.N. Security Council resolutions in 2 months. 

That is unprecedented. 

Mr. CICILLINE. No, no, I understand. But they have to be implemented in a meaningful way and fully. Otherwise, they are nice 

resolutions, but it sends the wrong message——

Ms. THORNTON. But that is exactly——

Mr. CICILLINE [continuing]. It seems to me, to North Korea if 

they don’t see that that is real engagement by the Chinese to make 

these sanctions work. 

Ms. THORNTON. Right. But that is exactly what we are working 

on. And I think, on sanctions regimes, a lot of people say the sanctions won’t work either. But in past cases where we have used 

sanctions, I just want to note, you are a chump if you are implementing sanctions and they are not working until you are a genius 

when they do. 

Mr. CICILLINE. No, no. I think sanctions do work if they are implemented. My last question is this. It seems to me that this suggestion that China is the center of gravity is right and that the 

only way that we will get China to fully implement the sanctions 

regime is for them to conclude that it is in their own interest to 

do that. And that will only happen when they arrive at the point 

that their fear of a unified Korean Peninsula aligned with the 

United States is outweighed by their fear of a military conflict on 

the Korean Peninsula. And I think that is the calculation. 

And I guess my question is, what are the strategies that the administration is pursuing that bring China to that point where they 

conclude that it is in their interest to enforce the sanctions because 

the danger of a conflict on the peninsula is greater than their fear 

of some alignment by a unified Korean Peninsula with the United 

States? Or do you agree or disagree with that assessment? And I 

would ask Mr. Secretary and Ms. Thornton. 

Ms. THORNTON. I think that that is right. And I think we have 

seen the Chinese moving in their system, for them, pretty swiftly 

toward a recalculation of what they are worried about on the Korean Peninsula. They see North Korea’s actions undermining their 

own security through the beefing up of defenses in their region. 

They are certainly very alarmed at North Korea’s behavior. And 

38

the explosion of the sixth nuclear test, the hydrogen bomb, right on 

their border is very concerning to them. 

So I think we see them moving in this direction. It is not fast 

enough or sort of deep enough for us to be satisfied, but we are certainly pushing them in that direction. And we have an ongoing conversation with them about this at the highest levels. 

Mr. BILLINGSLEA. I would also add that, as the chairman has 

pointed out, the Banco Delta Asia sanctions had a crippling effect 

on the regime, but that was more than a decade ago. We have for 

the first time in more than a decade taken action against, in this 

case, a Chinese bank. This was Bank of Dandong. 

That was a very clear warning shot that the Chinese understood. 

And we are in repeated discussions with them that we cannot accept continued access in the international financial systems by 

North Koreans through their financial networks. 

Mr. CICILLINE. Thank you. And I thank you, Mr. Chairman. I 

yield back. 

Chairman ROYCE. Mr. Ted Yoho is chairman of our Asia-Pacific 

subcommittee. And he joined us in South Korea and has passed 

legislation to improve our ability to get information actually into 

North Korea. Mr. Yoho. 

Mr. YOHO. Thank you, Mr. Chairman. And I thank you for holding this hearing today. 

North Korea’s recent provocations are its most dangerous yet. In 

launching a ballistic missile over Japan and detonating its most 

powerful nuclear device to date, the Kim regime has shown it is 

more emboldened than ever before. Kim Jong-un says we are 

backed into a corner. However, I think he is wrong. He is getting 

into a decreasing corner by his actions, and we are on the outside 

of that corner looking in. 

But year after year, successive administrations have failed to 

fully implement the sanctions and China continues underwriting 

DPRK’s programs, either financially via trade, doing 90 percent of 

their trade, or through technological exchanges, as we have seen 

with the rocket North Korea launched up and we recovered—or not 

we, but the South Koreans recovered the second stage and it was 

full of Chinese components. So China is complicit in this. 

The implementation of the secondary sanctions authorized by 

Congress, as established, that we have done over the past years is 

often controversial, but as North Korea’s nuclear technology has 

advanced, the need has become imminent. With these recent tests, 

implementation has been an existential need for millions of North 

Koreans, Japanese civilians, perhaps the United States, and really 

the world community. 

And I find myself agreeing with my colleague Mr. Sherman again 

when he was talking about China. We have been here multiple 

times, his experience of 20 years in this committee, hearing the 

same story over and over again. And my questions are going to be 

focused on what do we do from this point forward. 

You two are both in the seat that you are watching this at a very 

close level of engagement. You know what is working, what is not 

working. How do we go forward so that we are not back here in 

a year discussing what we should have done? I want to know what 

39

we did do and what tools you need to move forward so that these 

sanctions really do work. 

Ranking Member Sherman and I both—we wrote a letter both to 

State and to the Treasury providing a list of Chinese banks that 

may have provided North Korean banks with indirect correspondence. And I am happy to say that the State Department have sanctioned recently—and China has been complicit with this and gone 

along with this—the Agricultural Bank of China and the China 

Construction Bank. These are great, positive moves, but there are 

still 10 more banks that China can sanction or put pressure on to 

stop doing business with North Korea. 

And my question to you: Do you guys have enough tools in your 

arsenal to make sure that the world community—because it can’t 

be just us. And that is why sanctions haven’t worked in the past. 

It has to be a buy-in from the world community, because this is 

something that is affecting all of the world community, to get to a 

point where we have diplomacy that works so that we don’t have 

any kinetic conflicts. Certainly, this world does not want to see a 

nuclear device go off in a homeland of anybody’s. And this is this 

generation’s fight, to make sure this doesn’t happen. So, Ms. 

Thornton, is there anything else that you need that would make 

these other countries complicit with the sanctions? 

Ms. THORNTON. Thank you very much, Mr. Subcommittee Chairman. We definitely believe that the U.N. Security Council actions 

are the most significant actions that we can take on the sanctions 

front, and that is because every country in the world is obligated 

to enforce those sanctions. It gives them the legal authority to do 

so, and it obliges them do so. And it opens up a whole sphere of 

enforcement for us to work with other countries on. 

So I think the most significant actions in the U.N., which U.N. 

Security Council—our representative, Ambassador Haley, has undertaken, have been really key. The other key, I think, authorities 

are our domestic enforcement authorities, which back up the U.N. 

Security Council——

Mr. YOHO. Let me stop you there and ask you this. North Korea 

was on the state sponsors of terrorism list. And, certainly, we can 

look at their acts that they have done. In fact, you have said that 

North Korea was using intimidations, acts of intimidation—words 

you used to describe terrorism. So when we took them off the state 

sponsors of terrorism list, do you feel it would be important to put 

them back on that? And would it help toughen the sanctions and 

get compliance by the other countries? 

Ms. THORNTON. I think the state sponsors of terrorism list is another statutory tool that we have, and, certainly, the Secretary is 

looking at that in the context of North Korea. I don’t know that 

there are any——

Mr. YOHO. I am about out of time. Would it be prudent for us 

to——

Ms. THORNTON. I don’t know if there are additional authorities 

there that would give us additional tools to go after things. I think 

it would be just another layer. But we are certainly——

Mr. YOHO. Another layer would be good. 

Ms. THORNTON. Yes. 

40

Mr. YOHO. And I appreciate your time. And I am sorry I didn’t 

get to you, Assistant Secretary. I yield back. Thank you, Mr. Chairman. 

Chairman ROYCE. Thank you, Mr. Yoho. We go now to Mr. Brad 

Schneider from Illinois, who was also with our delegation for our 

meetings with President Moon and other senior U.S. and South Korean officials during that time when the North Korean missile was 

shot over Japan. 

Mr. SCHNEIDER. Thank you, Mr. Chairman. And, again, thank 

you for leading that delegation. It was an extraordinary opportunity to understand the situation better, to understand the threat, 

but also understand the strategy. 

Today, we have talked a lot about strategy. We have talked 

about North Korea’s strategy of accelerating testing, trying to miniaturize a weapon and put it on a missile. We have talked a lot 

about U.S. strategy and working within our laws as well as the 

United Nations. 

But strategies follow goals. And we have had some discussion of 

our goals. If I could summarize our goals, it seems to be where priority number one is to eliminate the nuclear threat by North 

Korea. A secondary goal is to bring stability to the peninsula. 

Ms. Thornton, you talked about what our goals are not. I just 

want to emphasize those. Not regime change or collapse; nor do we 

seek an accelerated unification of Korea or an excuse to send troops 

north of the armistice agreement’s Military Demarcation Line. We 

have no desire to inflict harm on the long-suffering North Korean 

people, who we view as distinct from the hostile regime in 

Pyongyang. I think that is important. What I would like to ask you 

is if you could succinctly describe, what are North Korea’s goals? 

Ms. THORNTON. I think it is pretty hard to get inside the mind 

of the North Korean leader, but I think he has been fairly clear in 

public statements that he seeks to complete his nuclear weapons 

program in order to be able to sit down at the table with us as a 

sort of nuclear weapons fully developed state and——

Mr. SCHNEIDER. Well, that seems part of the strategy, but their 

long-term goals—Mr. Deputy Secretary? 

Mr. BILLINGSLEA. I really do have to defer to State Department 

on this. My job is to drag them to the table through economic pressure. But I defer to State Department on any——

Mr. SCHNEIDER. Okay. 

Ms. THORNTON. I think that most experts on Korea would say 

that the main, overarching goal—and I think one of the members 

mentioned the Juche philosophy, Representative Smith. I think 

that regime survival, regime perpetuation is pretty much an overarching purpose and goal. 

Mr. SCHNEIDER. Okay. I mean, that seems to be the shared, collective wisdom. How about China? Because they have different 

goals, obviously, than ours, in many ways. How would you describe 

their goals in this dynamic? 

Ms. THORNTON. I think China has been also pretty clear in their 

public comments that they don’t want chaos, war, or nukes on the 

Korean Peninsula. Those are their stated three main goals in this 

particular issue. Of course, they are also looking to maintain staVerDate 0ct 09 2002 16:39 Jan 11, 2018 Jkt 000000 PO 00000 Frm 00044 Fmt 6633 Sfmt 6633 F:\WORK\_FULL\091217\26836 SHIRL
41

bility in their region and to create the conditions for further economic development. 

Mr. SCHNEIDER. Okay. So it seems that there is this shared perspective, at least between the U.S. and China, that achieving each 

of our respective goals—denuclearization, elimination of the nuclear threat—we should have—sanctions are the path to put pressure on Korea. 

But how do we create—and this is a broad message, maybe, beyond here—a clear message for North Korea that the only path for 

survival, the only path for them to achieve their goals is through 

denuclearization, that they are taking the wrong path? What offramps, what mechanisms can we provide to show them that the 

way they are headed is a risk to their regime, a dire risk to their 

regime, every option being on the table, and that there is a different path and that path is open to them? 

Ms. THORNTON. Well, it is difficult to do this when they are 

shooting ICBMs, threatening Guam, and exploding hydrogen 

bombs on the border of China. But I think we have been very clear 

in our public statements that denuclearization is the goal. We have 

used both words and actions to try to drive them in the direction 

that we want them to go—public statements by us, public statements by many of our partners and allies, in messages directly to 

the North Korean regime but also through public messaging, which 

the North Koreans definitely are picking up on, to tell them that 

denuclearization is the only path to survival for the regime. 

And we have been quite explicit about that. We are trying to 

show them that through our deterrence actions, through our sanctions actions, through our diplomatic actions. And I think, you 

know, they have a different view so far, but we are continuing to 

press on that. 

Mr. SCHNEIDER. And I don’t mean this next question any other 

way than the way I am asking it. It really is an honest question. 

Is it better to have a very clear, consistent message that you take 

these steps, this is what we will do, or is it better, in your mind, 

to leave uncertainty and perhaps have a mix of messages? 

Ms. THORNTON. Well, I think it is good to have consistent, clear 

messages, especially for a regime like North Korea that has a very 

opaque communication system and difficulty, probably, for information to reach the top leader, which is why we use public messaging 

in some cases, so that we can be sure that he can get it directly. 

But I think it is also important not to take any options off the table 

so that there is sufficient motivation for them to move toward the 

negotiating table. 

Mr. SCHNEIDER. Yeah, I would share that. And I am out of time. 

I will ask a question maybe for later, someone else will touch on. 

We talked about the outside pressure in trying to get alignment 

with the U.S. and China in putting pressure on North Korea. But 

I would appreciate the opportunity for further discussion on how 

we create that internal pressure from within, not just making it 

harder for payment of the military, but for the public to understand what is really happening within North Korea and, in contrast, what the opportunities are without and pursuing that different path. And, with that, I thank you for the extra time, and I 

yield back. 

42

Chairman ROYCE. Would the gentleman yield? 

Mr. SCHNEIDER. Yes. Please. 

Chairman ROYCE. I think you make a very important point, in 

terms of that focus. And there is another element, I thought, with 

respect to the conversations we have had. This is the second time 

we have talked to a senior North Korean defector who said, no, 

they already have the ability, they are not afraid of a South Korean 

attack or a North Korean attack because they have a million-man 

army on the border and the 100,000-plus missiles and all the other 

hardware. 

What the issue is for North Korea is that they feel it is an illegitimate government in South Korea; that the founding of the Korean 

Peninsula, when the occupation was over from Japan, it should 

have been unified under the Kim dynasty. And the focus of the 

Kim regime, of Kim Jong-un, is on getting enough nuclear weapons, hydrogen bombs, that they can turn to Seoul and say, we are 

going to be reunified, but we are going to be doing it under the regime. 

I think that is interesting information in that it comes from 

those who in one case was the head of propaganda for the regime. 

And if that is indeed the calculus, it really complicates things in 

terms of the feelings of the Kim regime. Both seemed to indicate 

that, although that was the focus of the Kim family, it may not 

necessarily be the focus of most North Koreans, who tend to understand that that drive to do that is what is costing the country its 

standard of living, its ability to give anyone else opportunity. It is 

solely in the interest of the megalomaniac who is currently in 

power. 

I think that concept is an interesting one when it is shared with 

us by those who were actually part of the North Korean regime. 

But I do think we need to begin the process to having hearings to 

dig deeper into this whole calculus. 

Mr. SCHNEIDER. And if I can, I think that is critically important. 

I couldn’t agree more. And this is why I was talking about goals. 

If the goal is regime survival, that strategy, there is an opportunity 

to have—one direction. If the goal is the submission of South 

Korea, that is a different—the strategy can be the same with the 

development of nuclear weapons, but trying to create an opportunity for engagement is entirely different and much more challenging. So I think that is a critical conversation to have. Thank 

you. 

Chairman ROYCE. Yes, indeed. Mr. Adam Kinzinger of Illinois. 

Mr. KINZINGER. Thank you, Mr. Chairman. I just want to thank 

all of you for being here. And, personally, I want to commend the 

President, frankly, for finally taking a tough perspective on North 

Korea; I think, being very open about this is the challenge of our 

generation. We all know terrorism is a huge issue, but this is a bigger challenge. This is an existential threat, I would say, to the 

United States, to world order, to denuclearization of the world, to 

nuclear proliferation. And, as far as I see it, there are a lot of folks, 

and whether it is here at the hearing or if you watch the media, 

they all say there is no military option. They say, well, there is a 

military option, but not really; it is unthinkable, so we will never 

use it. 

43

And I look at it this way: In order to actually achieve our objectives—and we have almost accepted defeat even prior to actually 

going about these objectives, in some circles. We have three areas. 

Number one is diplomacy, which we are ramping up in a big way 

through economic use, through actual diplomacy, everything else. 

Number two is missile defense, which we would obviously need in 

the case that we have to defend ourselves. Number three is a military option. People that understand instruments of power and how 

they work and the various instruments of power that our Nation 

has to understand that you cannot do diplomacy with an adversary 

without a big stick to use, whether that is military, whether that 

is economic, whatever, that there has to be on the table basically 

the unthinkable in order to make diplomacy work. 

So, number one, diplomacy is good, but if we are ruling out a 

credible military option, I think it is going to be unsuccessful ultimately. The idea of missile defense is great, and we need it. But 

the reality is, if we just back up and say, well, as long as we build 

a missile defense, North Korea will be allowed to have a nuclear 

weapon, I think that leads to massive proliferation around the 

world. How do you tell Iran that they can’t have a nuclear weapon 

when the JCPOA is up, actually fairly soon, when, in fact, you have 

just given North Korea de facto access to a nuclear weapon? 

And so let me just ask—I will ask a question, Mr. Billingslea, to 

you. So when people go out and they say there really is no military 

option, even though it is unthinkable—by the way, the military 

should be used in doomsday scenarios, of which I think this ranks 

up there with doomsday scenarios—does that strengthen your diplomatic hand, does that strengthen your ability to get North Korea 

to the table, or does it weaken it? 

Mr. BILLINGSLEA. I think we would be exceedingly unwise to take 

anything off the table. I was a Senate staffer up here on the Foreign Relations Committee when the agreed framework was negotiated. And that was designed to freeze the Yongbyon reactor and 

so on. And we gave all kinds of heavy fuel oil under the Clinton 

administration. And look where we are now. 

So this administration has made very clear, at the Cabinet level 

and the President himself, that we are not going to kick this can 

down the road. We can’t. He is testing advanced nuclear designs 

and ICBMs. It is a matter of time now before he mates the warhead to the missile and poses an existential threat not just to our 

friends and allies but to us. 

Mr. KINZINGER. Let me ask you a question to follow up. As a 

prior administration official said—and I don’t like to throw stones 

at past administrations, so I am not doing that. But as this person 

wrote in an op-ed, we have to just live with a nuclear North Korea, 

in essence, for me, saying that the prior administration was willing 

to live with a nuclear North Korea. 

Let me ask you a question. If we say, as long as we have missile 

defense, we are unwilling to do what is difficult for North Korea, 

we are unwilling to engage in economic action against the Chinese, 

push the Chinese back in their territorial disputes in the South 

China Sea, whatever. If we do that, can you talk about what the 

rest of the world will look like when we de facto accept North 

Korea as a—even if we don’t say we have accepted them, if we de 

44

facto accept them, what does that do when the JCPOA runs out of 

time, what does that do to South Korea, Japan, other countries’ nuclear ambitions, and what does that do to our moral authority to 

enforce the nuclear nonproliferation? 

Mr. BILLINGSLEA. Well, I will defer to State Department on sort 

of the broader implications, but I would tell you, we are not willing 

to live with a nuclear North Korea. North Korea has proven that 

they are certainly willing to share nuclear technology with all manner of pariah regimes, to sell capabilities. I think Ambassador 

Bolton just had an op-ed where he pointed out it was a recent anniversary of the Israeli strike on a Syrian nuclear facility which was 

alleged to have been constructed with North Korean support, for 

instance. So these are big issues. We are determined to induce the 

Chinese to help solve this problem. 

Mr. KINZINGER. Well, let me commend you on that. And, Ms. 

Thornton, I would give you the time; I am out. So I am not ignoring 

you. I just—the clock ran out. But let me say at the end, to reiterate what the Secretary said, I couldn’t imagine in the situation 

that Syria is in today, which I think is tragic—and I think there 

has been a lack of action on our part to fix that—I couldn’t imagine, had they had a nuclear program, what we would be looking at 

today. 

And there is a lot of concern of social instability in North Korea. 

Look, people don’t like to be oppressed. They won’t be oppressed, 

even in a place like North Korea. What happens someday when 

that government is destabilized and you see something? I think 

these are all important questions. 

And, again, I want to commend you and the administration and 

the State Department for their hard work on this issue. And I yield 

back. 

Chairman ROYCE. We will go to Congresswoman Norma Torres 

of California. 

Mrs. TORRES. Thank you once again, Mr. Chairman, for bringing 

us together for this very, very important and critical issue that we 

have here in dealing with North Korea and all of the problems that 

they have caused most recently. 

I think we pretty much all agree that there is no magic bullet 

in dealing with this regime. And I think that we pretty much are 

in agreement that, so far, all the sanctions and everything that we 

have done hasn’t worked. So where have we gone wrong? I don’t 

know. Part of that we are trying to address here. I think that we 

have to be pretty realistic that this regime that we are dealing 

with is willing to do anything, put its people and the entire world 

at risk in order to achieve what they ultimately want to achieve, 

and that is a nuclear weapon that would come far enough to reach 

American citizens. And we have been talking a lot and calling out 

Los Angeles—I represent L.A. County—San Francisco. We haven’t 

really mentioned Hawaii, which is a lot closer, and our territories. 

Another issue that we have neglected to address, and that is the 

consumer issue. We haven’t really engaged consumers and a more 

global inclusion to deal with North Korea and China’s appetite to 

have slave-type workers working in their companies. So, as a consumer, when I am buying products, where is that chain of where 

this product was made and who it was made by? We know that 

45

many of our products are made in China, but not by whom. Correct? 

So, to me, the bigger issue is, are we hitting the right targets? 

Are we being surgical enough to inflict the maximum pain on the 

regime versus inflicting the maximum pain on the people of North 

Korea? 

Congresswoman Wagner and I have introduced the North Korea 

Follow the Money Act, H.R. 3261, which would direct the Director 

of National Intelligence to produce a national intelligence estimate 

of the revenue sources of the North Korean regime. My hope is that 

this bill will make our sanctions policy more precise and a bit more 

effective. 

But I think that we still cannot get away from engaging, you 

know, more people. If foreign governments are not willing to engage—everyone is interested in a doomsday clock. It was advanced 

by another 30 seconds in January. And I think that we missed another opportunity to talk about what is happening in the Korean 

area more closely. 

I would like to ask if you would agree that a clear picture of 

North Korea revenues—if we need to have a better picture of North 

Korea revenues in order for our sanction to be more effective. 

Mr. BILLINGSLEA. So, Congresswoman, you are always going to 

find that I and the Treasury Department are interested in more intelligence, not less. We are an intelligence-driven organization, and 

the more precise information that can be generated, the better. 

I would say that one—back to your point about opportunities 

missed. We are at the point now where enforcement is crucial. We 

have the various U.N. Security Council resolutions. In the past, it 

was sometimes very difficult to judge the proper enforcement of 

these different provisions because they weren’t complete embargoes. You could get into arcane arguments about how much——

Mrs. TORRES. The best embargo that you can get is for the consumer to be more informed and for the consumer to say, I will no 

longer purchase any good that comes from this country——

Mr. BILLINGSLEA. One hundred percent. 

Mrs. TORRES [continuing]. Because they are failing to support us 

in ensuring that we have a nuclear-safe world. 

Mr. BILLINGSLEA. I agree 100 percent. And I would highlight two 

particular areas. You talked about labor. One of the successes that 

Ambassador Haley has had at the U.N. is getting past this idea 

that while we would just cap North Korean labor at whatever level 

it is, the slave labor in these various countries, we are now—under 

the new resolution passed last night, this is going to be wound 

down. That is important. 

Seafood is the other area to really talk to consumers about to 

make sure that we go after any efforts to smuggle North Korean 

seafood into——

Mrs. TORRES. Can you give me an estimate of what percentage 

of North Korean revenues are from illicit sources? 

Mr. BILLINGSLEA. At this stage, virtually all revenue is now illicit 

and illegal because the U.N. Security Council has banned just 

about every single——

Mrs. TORRES. So what are our options in dealing with that? 

46

Mr. BILLINGSLEA. Maritime enforcement. The single most important thing we can do is enforce a complete prohibition on the sale 

of North Korean raw materials. 

Mrs. TORRES. Thank you. My time has expired. I yield back. 

Chairman ROYCE. We go now to Congressman Ted Poe of Texas. 

Mr. POE. Thank you, Mr. Chairman. Thank you all for being 

here. 

I think always when we make big decisions, we should look at 

history. My understanding is that the Russians, Stalin, put the 

Kim regime in power; first, to invade the South, in my opinion, to 

prevent the West being aware of what is taking place in Eastern 

Europe when the Soviet Union kept moving through and taking 

that area. 

We have had three Kims in charge. They have all been very belligerent, they all have committed crimes, going all the way back to 

the hijacking of the Pueblo, to the KAL Flight 858, the attempted 

assassination of the South Korean President. They have a history 

of doing bad things. But it has always been the goal that they feel 

entitled because they are put there by Stalin to be in charge of 

North Korea. And as the chairman said, they want to concur the 

South. The war has never ended. It is a cease fire or a truce or an 

agreement not to—there is no treaty involved. 

And we have been played by the Kims for years. They talk about 

causing war, nuclear capability, and the West says, oh, we will pay 

you not to do that if you promise to be nice. And so they promise 

not to declare war on anybody, they take our money, supposedly to 

feed their starving people, and then what do they do a few years 

later? They do the same thing. And this has been going on all the 

way back to the Clinton administration. 

They understand one thing, that the West, the United States, 

can be bought off if they just make a lot of noise about doing bad 

things to the rest of us. We should understand that. We should understand that being nice and saying that we will take care of you 

and encouraging them in a diplomatic way to not declare war has 

not worked. And I’m not saying we ought to go to war, I am just 

saying that is what they understand. 

So this President has taken a different point of view. He is talking in a language that I think little Kim can understand, that 

those days are over. And I commend Ambassador Nikki Haley for 

her work in getting these two latest rounds of sanctions through 

the U.N. The idea that the Chinese and the Russians are going to 

agree to sanctions on North Korea, I think that is a stroke of genius. I don’t know how she did that. Especially the Russians, who 

started all of this with Stalin back in 1950. 

So I want to know what our options are, not just one. I want to 

know where we are going. You know, we all want sanctions. Well, 

sanctions, they hadn’t really done much to stop anything, but we 

want sanctions, and we want more sanctions, and we want little 

Kim to stop this. But what if he doesn’t stop it? What is the U.S.’s 

plan? And surely the U.S. has a contingency plan down the road. 

What is it? 

You all are looking at each other. What is the contingency plan? 

Sure, we want sanctions. We want to cripple the economy. We want 

them to stop the slave trade. We want them to do all those things. 

47

But what have you done, because little Kim, he doesn’t think like 

we do. So what are the rest of the options? 

Ms. THORNTON. So, thank you. Yes, Mr. Congressman, I think we 

have a strategy. I mean, you all have heard from the Secretary, 

from other secretaries——

Mr. POE. What is it? 

Ms. THORNTON. It is the pressure strategy. We want to solve this 

through negotiated settlement peacefully, but we are not taking 

any options off the table——

Mr. POE. Which are? 

Ms. THORNTON [continuing]. Understand——

Mr. POE. I only have a minute, so you have to kind of cut to the 

chase. What are the other options? 

Ms. THORNTON. Options to use force, options to use sanctions, 

pressure to choke off the regime’s revenues, et cetera, to get them 

to come to the negotiating table. And I think we have been very 

clear about the strategy. We are not going to pay for negotiations, 

as has been done previously, as you mentioned. In past history, 

when we have dealt with the regime, they have sought payoffs. 

And we have made it very clear, the President and the Secretary, 

that we are not going to go down that road this time. We are going 

to band together with the coalition of global partners to choke off 

all of their economic revenue. And if we——

Mr. POE. So we have a military option down the road, if nothing 

works? 

Ms. THORNTON. Sure. 

Mr. POE. Would you agree with that, Assistant Secretary? 

Ms. THORNTON. Yes. Absolutely. And as I said, we are not going 

to take any of those options off the table. 

Mr. BILLINGSLEA. I would additionally offer, at a much more very 

precise level, and you will see it in my full written remarks, but 

we are targeting two things here. We are targeting his access to 

hard currency, because he needs these dollars for his WMD and 

missile programs. And we are targeting the way he still has access 

to the international financial system. We need to rip that out root 

and stem. 

And that is what we are focused on, is shutting down his access 

to hard currency through these new U.N. embargoes that Ambassador Haley has successfully gotten in place. These are total cutoffs. You cannot trade in North Korean coal. That is a huge percentage of the revenue left to this dictator, given that we actually 

have relatively well shut off his arms trade and a number of the 

other things he was trading in. He has basically been reduced to 

high-volume, low-margin commodities, minerals, things like that, 

and we have to choke that off. 

But, secondly, because of lack of enforcement in the international 

system by countries, we have talked about China today, Russia, he 

still has access to the international financial system because he has 

North Korean brokers and agents operating with impunity brazenly abroad in foreign jurisdictions. That has to stop. And so that 

is our next step. 

Mr. POE. Thank you, Mr. Chairman, for the extra time. 

Chairman ROYCE. Mr. Ted Lieu of California. 

48

Mr. LIEU. Thank you, Mr. Chair. And, first of all, thank you to 

the witnesses for your public service. 

I served on active duty under U.S. Pacific Command in the 1990s 

at Guam, and we did a whole series of different exercises, most of 

them were directed at North Korea, and it was really clear there 

were no good military options. And the reason I bring that up is 

because diplomatic economic options depends on whether, in fact, 

you have a good military option, and often it is not for us to say; 

it is dictated by the facts on the ground. And if we do have amazingly great military options, then we might do less diplomacy and 

less economic sanctions. But if we really have no good options militarily, then you might have to double down on what you are doing. 

So I think it is important to just walk through some of those not 

so very good military options. And let me start with this question. 

The Trump administration’s goal is to denuclearize North Korea. 

That is correct, right? But we don’t know how many nuclear weapons they have. Isn’t that correct? 

Ms. THORNTON. We have estimates. 

Mr. LIEU. Say that again. 

Ms. THORNTON. We have estimates. 

Mr. LIEU. You have estimates. And we also don’t know where all 

those nuclear weapons are, correct? They are pretty good at hiding 

them. 

Ms. THORNTON. They are good at hiding things. 

Mr. LIEU. Right. So in order to get rid of those weapons to get 

the Trump administration’s goal through military force, we would 

need a ground invasion, find those weapons, and destroy them. 

Isn’t that correct? 

Ms. THORNTON. Sorry, I didn’t get the connection. 

Mr. LIEU. Right. Since we don’t know where the nuclear weapons 

are, we don’t know how many they have. In order to denuclearize 

North Korea through a military option, we would need a ground invasion to find those weapons and destroy them. Isn’t that correct? 

Mr. BILLINGSLEA. I suspect we would need our Department of 

Defense colleagues here to really truly answer that. 

Mr. LIEU. No, I understand. But for you to do your job, you also 

need to understand the military option, right? 

So let me just go on. North Korea also has the knowledge to 

build nuclear weapons. Isn’t that correct? 

Ms. THORNTON. Yes. 

Mr. LIEU. And they have got the knowledge to build ICBMs. And 

you can’t unlearn that. So to keep them from doing this in the future, we would need to occupy the country or have South Korea or 

one of our allies occupy the country and keep them from doing this 

again in the future. Isn’t that correct? If we were to do this through 

military force. 

Mr. BILLINGSLEA. Well, I don’t know that that is necessarily—

and, again, I am putting my old Pentagon treaty negotiator hat on, 

but there are countries that have abandoned their nuclear programs and their missile ambitions. South Africa is a good example. 

Argentina is a good example. So there are examples. 

Mr. LIEU. After the use of military force? No. Right? 

Mr. BILLINGSLEA. Actually——

49

Mr. LIEU. Through other means. I mean, I can understand North 

Korea giving up or freezing the nuclear weapons, if we apply economic or diplomatic pressure. But what I am saying is if we were 

to use military force and they are going to resist it, and then to 

keep them from doing nuclear weapons in the future, we would 

need regime change to occupy the country. At least that is my 

sense. I don’t know how we otherwise would do that. Let’s just step 

away from nuclear weapons. They have also got about 5,000 tons 

of chemical weapons. Isn’t that correct? 

Ms. THORNTON. They do have chemical weapons, yes. 

Mr. LIEU. Okay. And then they have this massive conventional 

arsenal of rockets and artillery and so on, correct? And they can 

launch all of that at South Korea. They can use missiles against 

Japan. They can use missiles against Guam, where we have got 

hundreds of thousands of Americans in those three areas, correct? 

And we have millions of civilians in all those areas, correct? So 

with any military option, we wouldn’t be able to contain escalation. 

Isn’t that correct? 

Ms. THORNTON. It is all hypothetical, so I think it depends on 

things that are happening and it depends on a lot of other scenarios, but you are telling the story, so go ahead. 

Mr. LIEU. Okay. So Defense Secretary Mattis has said, basically, 

there are no good military options, and the options would be very 

ugly, which then leads me to believe that your job is very critical. 

We essentially have diplomacy and economic sanctions. It seems 

like if we are going to proceed to diplomacy, might it not be a good 

idea to have an ambassador to South Korea that can help us? 

Ms. THORNTON. Yes. 

Mr. LIEU. Okay. Where are we with that? Why hasn’t the President nominated an ambassador of South Korea? 

Ms. THORNTON. We are working on it. I know the Secretary 

spoke to this the other day, I think. We are working on it. 

Mr. LIEU. I am just saying it does send a message that we are 

not pursuing diplomacy seriously, and we are also disrespecting our 

critical ally, South Korea. And I urge the Trump administration to 

get its act together and nominate an ambassador to South Korea. 

With that, I yield back. 

Chairman ROYCE. Thank you, Mr. Lieu. We go now to Mr. Lee 

Zeldin of New York. 

Mr. ZELDIN. Well, Thank you, Mr. Chairman. And thank you to 

both of our witnesses for being here. 

I believe that the administration has done a great job over the 

course of the first several months in office in making new strides, 

in bringing China to the table, to bring Russia to the table, to ramp 

up sanctions effort, to have more multilateral diplomacy, to have 

increased economic pressure, to engage in further information campaigns within North Korea that didn’t exist previously. And I think 

Ambassador Haley, especially, deserves a whole lot of credit for her 

hard work at the United Nations with the success that she has 

achieved there. And we wish her nothing but the best. 

Some of our colleagues have spoken about the idea of not using 

a military option. I think we all should agree that the military option should be the last possible option that we would be using after 

everything else were to fail. But some of my colleagues would go 

50

a little bit further, almost to suggest taking the military option off 

of the table. And I think from some of the other testimony here and 

your answers, there is certainly an agreement amongst others who 

would disagree believing that having the military option on the 

table is one that helps with multilateral diplomacy and increased 

economic pressure and all of the other efforts. So it would not be 

wise; it would be unwise to take the military option off of the table. 

I wanted to ask you a little bit about what that red line is and 

has the administration taken a public position on a red line? Do 

you believe we should have one? What does it look like? Because, 

for me, the red line should be that North Korea should not have 

the ability to deliver a nuclear warhead to the United States. And 

there is still a component of their development that appears to not 

be there. The chairman got to it a little bit earlier as he was engaging one of our colleagues on the other side of the aisle as far as 

surviving reentry. 

So we are pursuing the diplomacy angle. We are pursuing the 

economic angle and the information angle. Thinking of military option as the last possible option. Preparing the whole slate of conventional to unconventional military options. What is that red line? 

Ms. THORNTON. Well, the assistant secretary and I are here representing the economic sanctions lever and the diplomatic levers in 

this. And I have said that we are determined to pursue a peaceful 

resolution through a negotiated settlement. Of course, we are not 

taking any options off the table. We realize this is a very difficult 

problem, as has been outlined by Congressman Lieu here. 

I would say about red lines, we and the Secretary of State are 

determined to use this pressure campaign to get the North Korean 

regime to change its path and to come to the negotiating table with 

a serious set of proposals on denuclearization. How we verify that, 

complete verifiable, irreversible denuclearization is what we are 

seeking through a negotiated settlement. 

I think we think we have a lot more room to go to squeeze them 

and increase the pressure of the international community. And I 

think we are continuing to see that that strategy is working, that 

the North Koreans are feeling that pressure. And we are focused 

on getting them back to the table. 

So I think as far as red lines go for a military option, I would 

certainly want to defer that question to some future point where 

we are not as much engaged in the diplomatic and economic pressure part of the campaign. 

Mr. ZELDIN. I personally believe that when the President said 

that North Korea would be met with fire and fury, that if North 

Korea were to attack the United States, they would be met with 

fire and fury. I was not offended, by any means. And I believe that 

Kim Jong-un needs to know. And as someone who is homicidal and 

not suicidal, he needs to know that he would be putting himself 

and his regime at great risk by attacking us. 

There is a lot of hard work that has been done by the administration doubling down, tripling down, and quadrupling down, making a lot of progress, great progress specifically to the United Nations. I would just say if we truly want to prevent North Korea 

from having the ability to deliver a nuclear warhead to the United 

States, they are getting so much closer to it, that if we are actually 

51

serious about that military option, that we are going to have to 

start seriously having that discussion, because that may be imminent. I yield back. 

Chairman ROYCE. Mr. Mike McCaul, who also chairs the Committee on Homeland Security. 

Mr. MCCAUL. Thank you, Mr. Chairman. I appreciate that. 

I view this as probably one of the biggest threats to the homeland, if they are capable of delivering an ICBM with a nuclear warhead to either Guam or the mainland of the United States. I know, 

looking back historically, A.Q. Khan and his network, this access 

between Pakistan, Iran, and North Korea. Once Pakistan got it, we 

couldn’t take it away. Iran, we had our negotiations. And now, it 

looks like North Korea has it. 

And I think once a country has this capability, it is very difficult 

to take it away. So I don’t envy your positions in terms of trying 

to negotiate our way out of this. And I think the last previous administrations have failed to get us to that point, and now we are 

where we are. And I think Iran is probably watching this whole 

thing play out in terms of what is their next step going to be as 

well. 

I am not going to get into military options. I know it is not your 

expertise. I do think cyber should be looked at as something that 

could be done to shut them down. And I know we have tremendous 

capability in that regard. But my question is—I know it has been 

talked a lot about Russia and China, are they going to cooperate 

with these sanctions, and how much leverage is China putting on 

North Korea. But my question really has to go to the more illicit 

side of the house. 

Kim Jong-un has this North Korean Office 39 that raises—sells 

basically drugs, illegal exports of minerals, as you mentioned, counterfeit cigarettes, a lot of other things. What are we doing to try 

to counteract that? And, also, when it comes to proliferation and 

the sale of arms, can you tell me, how much do you estimate North 

Korea is making off proliferation to countries like Iran and Syria? 

Mr. BILLINGSLEA. Congressman, it is good to see you. 

Mr. MCCAUL. Yeah, you too. 

Mr. BILLINGSLEA. So one of the things that is very important to 

underscore is that the Treasury Department and the authorities we 

wield are not, as you know from your time with the Department 

of Justice, they are not just sanctions. Sanctions is one of many 

tools we have. What we use to, in effect, collapse the Bank of 

Dandong was not a sanction; it was a—section 311 under the PATRIOT Act, action to root out the North Koreans in that bank. 

In terms of the proliferation of weaponry, because of previous 

U.N. Security Council resolutions, we have been able to dry up 

much of the illicit sales that they were engaged in to various African regimes and so on. There are still several transactions that 

they periodically float that we are actively engaging various countries to deter signing of contracts and going down that road. It 

would be very unwise for them to take these actions. We are in a 

full court press on this. 

Because of the success that Ambassador Haley and State Department have had at the U.N., in effect—you were asking about sort 

of illicit transactions—in effect, nearly every export coming out of 

52

North Korea today, as of last night, nearly every export is now illicit. Textiles are now illicit. You cannot trade in North Korean textiles. You cannot trade in basic minerals anymore. 

Under the previous administration, talking about bureau 39, one 

of the things they would do is sell these huge overpriced bronze 

statues, and then the weapons were the kicker on the side as a little sweetener for paying six times the going rate for a bronze statue. So that organization, the Mansudae Fine Arts Studio was sanctioned. And under our administration, we started rooting out the 

rest of that particular arts and monuments revenue-generating 

schema. 

North Korean labor is another category that they are getting significant money from. And with the results last night, there is now 

not a freeze or a cap on North Korean laborers, there is a requirement to wind it down. I am not a big fan of wind-downs, because 

it is real hard to verify that. But that is, nevertheless, a big step 

forward, and we intend to enforce that as well. 

I have reiterated on multiple occasions with counterparts in the 

Gulf and elsewhere that we need to see the North Koreans gone. 

The Department of State has been very active on this front, and 

we are seeing a drying up of revenue associated with the slave 

labor that the North Korean’s employ. 

Mr. MCCAUL. And then to my last question, North Korea proliferating weapons to Iran and Syria. 

Ms. THORNTON. So we do track any kind of illicit proliferation 

networks from the North Koreans and go after those transactions, 

again, with colleagues at Treasury and other agencies in the U.S. 

Government. When we find them, we try to block them or deter 

them. And we have had some success. It is a continuing effort on 

our part, and we devote a lot of attention to that in our Bureau 

of Nonproliferation. 

Mr. MCCAUL. But it is happening? 

Ms. THORNTON. I think there are transactions that we are worried about, yes. 

Mr. MCCAUL. Okay. And I know some of that may be in another 

setting than this. So thank you very much. 

Chairman ROYCE. Well, I want to thank the witnesses for their 

testimony. I thank you for answering the members’ questions here 

today. I am sure more of those questions will be submitted for the 

record for you to answer. There are a few issues that are urgent 

for us, but I don’t think any of them are more urgent than the 

North Korean threat at this time. 

And to its credit, the administration recognized this early on. 

Secretary Tillerson’s first focus as Secretary of State was North 

Korea. And he has been extensively engaged, working with allies 

in the region, while pressuring China and Russia and other countries that are funding the Kim regime. We need more sanctions, 

tougher sanctions. We need to supercharge this right now. And the 

administration is moving in the right direction. And China, each 

day, is rethinking the cost of its financial support for North Korea. 

The administration’s focus on Korean slave labor abroad is very 

good. Sanctions are just one element of power we need to bring to 

bear. We need to stop giving only lip service to the power of information inside North Korea, broadcasting information in to change 

53

attitudes and conditions in North Korea. We simply aren’t doing 

this well enough, and it must be a priority. 

And, again, thank you for your testimony. We look forward to 

your follow-up, and this hearing stands adjourned. 

[Whereupon, at 12:25 p.m., the committee was adjourned.] 

(55)

A P P E N D I X 

MATERIAL SUBMITTED FOR THE RECORD

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FULL COMMITTEE HEARING NOTICE 

COMMITTEE ON FOREIGN AFFAIRS 

US HOUSE OF REPRESENTATIVES 

WASHINGTON. DC 20515-6128 

Edward R. Royce (R-CA), Chairman 

September 12, 2017 

TO: MEMBERS OF THE COMMITTEE ON FOREIGN AFFAIRS 

You arc respectfully requested to attend an OPEN hearing of the Committee on Foreign Affairs. to be held 

In Room 2172 of the Rayburn House Office Building (and a,,-ailablc live on the Committee website at 

h!t!lJL:.>v \V\\ .ForeignAff.1irs.housr,:: g:ov ): 

DATE: 

TIME: 

SUBJECT: 

WITNESSES: 

TuesdaY. September 12,2017 

10:00 a.m. 

Sanctions, Diplomacy. and Infom1ation Pressuring North Korea 

Ms. Susan A. Thornton 

Acting Assistant Secretary 

Bureau of East Asian and Pacific Affairs 

U.S. Department of State 

The Honorable Marshall Billingslea 

Assistant Sccrctarv 

Office of Terrorism and Financial Intelligence 

U.S. Department of the Treasury 

By Direction of the Chairman 
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COMMITTEE ON FOREIGN AFFAIRS NITNUTESOFFULLCO~ThflTTEEHEARI\G 

Day __ 'l:..:'u:::e"'s"'da::;.Y:___Date. __ __c_0.:..:9/-'l-=2/2=0-'-1-'-7 ___ .Roum ___ =-21=-7c::2:__ __ 

Starting Time .lfi:05A M Ending Time 12:30PM 

Ree.esses l:_o. J (_to __ ) (_to __ ) (_to__) (_to __ ) (_to __ ) (_to___) 

Pre•iding Member(•) 

rhainnatt Rdward .R. Royce. 

Check all of the following that apply: 

Open Session 0 Executive ~sed) Session D Televised [l] 

TITLE OF HEARING: 

Eleetronically Record~ taped) 0 

Stenographic Record lL1 

Sanctions, Diplomacy, and Information: Pressuring North Korea 

COMMITTEE MEMBERS PRESENT: 

See attached. 

NUN-COMMITTE.£ MK~ERS PRESENT: 

NIA 

HEARING WITNESSES: Same as meeting notice attached? YesEJ KoQ 

ar "no", please list below and include title, agency, department, or organization.) 

STATEMENTS FOR THE RECORD: (List any smternents submitted/or the record) 

Mr. Connol(y 

TlltlESCHEDULEDTURECON~ENE ___ _ 

or 

TIMEADJUURNE·D }2;_1{/PM 
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PRESE\T 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

HOUSE COMMITTEE ON FOREIGN AFFAIRS 

FULL COMMITTEE HEARING 

MEMBER PRESBT ME\JBER 

Edward R Royce, CA. X Eliot L Engel, NY 

Christopher H. Smith, NJ X Brad Sherman, CA. 

Ileana Ros-Lehtinen, FL Gregory W. Meeks, NY 

Dana Rohrabacher, CA. Albio Sires, NJ 

Steve Chabot, OH X Gerald E. Connolly, VA 

Joe Wilson, SC Theodore E. Deutch, FL 

Michael T. McCaul, TX X Karen Bass, CA 

Ted Poe, TX William Keating, MA 

Darrell Is sa, C A X David Cicilline, RT 

Tom Marino, P A AmiBera,CA 

Jeff Duncan, SC Lois Frankel, FL 

Mo Brooks, AL X Tulsi Gabbard, Hl 

Paul Cook, CA. X Joaquin Castro, TX 

Scott Perry, PA Robin Kelly, lL 

Ron DeSantis, FL Brendan Boyle, P A 

Mark Meadows, NC Dina Titus, NV 

Ted Yoho, FL X Norma Torres, C A 

Adam Kinzinger,IL X Brad Schneider, lL 

Lee Zeldin, NY Tom Suozzi, NY 

Dan Donovan, NY Adriano Espaillat, NY 

James F. Sensenbrenner, Jr., Wl X Ted Lieu, CA. 

Ann Wagner, MO 

Brian J. Mast, FL 

Brian K. Fitzpatrick, PA 

Francis Rooney, FL 

Thomas A Garrett, Jr., VA 
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Statement for the Record 

Submitted by Mr. Connolly of Virginia 

On September 3, the North Korean regime conducted its sixth and most powerful nuclear test to 

date, involving its first true thermonuclear device - "the hydrogen bomb." The Democratic 

People's Republic of Korea (DPRK) now claims that it has technical knowledge of a two-stage 

thermonuclear warhead, meaning that it can mount a miniature hydrogen bomb on an 

intercontinental ballistic missile (ICBM). The regime's drive to become a nuclear power presents 

a real and dangerous threat to U.S. national security and that of our allies. Our priority must be to 

de-escalate tensions on the Korean Peninsula by providing steady leadership, reassurance for our 

allies, and a comprehensive strategy with carrots and sticks to bring North Korea to the 

negotiating table. Instead, the Trump Administration is destabilizing an already volatile situation 

with bellicose rhetoric, uninformed and conflicting messages, and attacks on our allies. 

With tensions flaring, President Trump warned that he would meet North Korean threats with 

"fire and fury like the world has never seen." But frankly, his response looks more like 

fecklessness and failure. Just as he has been with Iran, the President appears to be singularly 

focused on military solutions to this intractable global flashpoint on the Korean Peninsula. His 

administration has proposed dramatic increases to the defense budget o±Iset by an evisceration of 

our diplomatic capabilities, and he has failed to make key diplomatic appointments, including an 

Ambassador to Seoul and an Assistant Secretary for East Asian and Pacific Affairs. The 

President's inflammatory rhetoric and failure to resource U.S. diplomatic efforts are more likely 

to blunder us into war than set the stage for peace. 

Now, it is more important than ever to stand strong with our allies, especially South Korea and 

Japan, and project a unified front. Amidst this extreme volatility on the Korean Peninsula, Trump 

has declared his intent to withdraw from the U.S.-Korea Free Trade Agreement (KORUS), 

dealing a heavy blow to U.S.-Republic of Korea (ROK) relations, our 6'h largest trading partner. 

The President also criticized South Korea for its "talk of appeasement with North Korea." I 

recently joined my fellow co-chairs of the Congressional Caucus on Korea to write to the 

president and rebuff him for opening fissures in the U.S.-ROK alliance- an alliance forged in 

blood - which has served U.S. security interests in the region and acted as a guarantor for the 

safety of 50 million South Koreans. 

Following the most recent nuclear test, Trump suggested ending all trade with countries doing 

business with North Korea. Around 80 countries traded with Pyongyang in 2016, including 

China, Russia, India, Pakistan, Singapore, Germany, Portugal, France, Thailand and the 

Philippines. If the U.S ended trade with China alone, we would forego 4.4 percent of US GDP, 

compared to just 0 92 percent lost due to the Great Recession in 2008. Cutting off trade with 80 

nations is an empty threat. 

1 
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We need to discuss a credible and comprehensive strategy that includes defensive military 

measures, economic pressure, and diplomacy. Last week, South Korean President Moon Jae-in 

reversed his opposition to the Terminal High Altitude Area Defense (THAAD) system and 

completed the deployment of four additional launchers. THAAD provides a shield against 

ballistic missiles launched from north of the 38'" Parallel. 

Tn August 2017, the President enacted the Countering America's Adversaries Through Sanctions 

Act (P.L. 115-44), which is the strongest sanctions regime ever passed by Congress. This hardfought measure updates and expands the North Korea Sanctions Policy Enhancement Act of 

2016 (P.L. 114-122) that was enacted last year. It authorizes new sanctions provisions related to 

sanctions evasion, the use of North Korean exported labor, correspondent banking, and trade in 

oil, textiles, and food and agriculture products. The bill included my amendment, which will 

ensure that U.S. sanctions against North Korea do not impede the provision of vital U.S. 

assistance to developing countries for maternal and child health, and disease prevention and 

response. 

U.S. sanctions are a necessary but insufficient tool to address the threat of North Korea's 

weapons program. The United States must undertake a rigorous diplomatic etl'ort to urge the 

global community, and China in particular, to fully enforce international sanctions on North 

Korea. On September II, the U.N. Security Council unanimously passed UNSCR 2375 against 

North Korea in response to its latest nuclear test. The resolution reduces Pyongyang's 

oil/petroleum imports by thirty percent, bans all textile exports, and prohibits new work pennits 

for North Korean workers. 

The Korean Peninsula remains one of the most dangerous flashpoints on the globe. Navigating 

this complex web of regional stakeholders and competing interests will require patient and 

committed U.S. leadership to avert the ever-present potential of conflict that looms over 75 

million Koreans. We have accomplished such diplomatic feats before, most recently through the 

Joint Comprehensive Plan of Action (JCPOA), which reversed the Iranian nuclear program. I 

look forward to hearing tram our witnesses today regarding how best to achieve our 

nonproliferation goals for the Korean Peninsula. 

2 
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Qnestion: 

Questions for the Record Submitted to 

Acting Assistant Secretary Thornton by 

Representative Eliot Engel 

House Foreign Affairs Committee 

September 12, 2017 

The Trump Administration says that North Korea is their top foreign policy priority. However, 

with vacancies across the interagency including the Department of State, what Senior 

Administration ot1icial in the US government is taking the lead on driving North Korea policy? 

Does this person have sut1icient rank and relationship to the White House to be perceived as 

credible to the Nortb Koreans as speaking for the U.S. government? 

Answer: 

The President's top priority remains protecting the homeland, US. territories, and our allies 

against North Korean aggression. The Department of State is devoting substantial resources to 

ensure strong enforcement of our DPRK policies, including better implementation of sanctions 

already in place. 

The Secretary considers DPRK amongst our most urgent priorities. He has been leading overall 

department efforts. Ambassador Joseph Y Yun is our Special Representative for North Korea 

Policy and has coordinated Department efforts in support of the Secretary's strategy. 

Ambassador Yun brings significant experience and expertise on North Korea to the table, having 

worked on this issue in various roles throughout his career, most notably while previously 

serving as the Principal Deputy Assistant Secretary in the Bureau of East Asian and Pacitic 

A±Iairs. Ambassador Yun, with the support of Secretary Tillerson and Deputy Secretary 

Sullivan, is actively leading our peaceful pressure campaign to apply maximum diplomatic and 

economic pressure on North Korea to convince its government to cease its unlawful, dangerous, 

and destabilizing actions, to reduce tensions in North East Asia, and to end its prohibited nuclear 

weapons and ballistic missile programs. 

Question: 

While Secretary of State Tillerson proposes elimination of the Special Envoy for North Korean 

Human Rights, the Secretary of Defense and National Security Advisor are urging greater 

diplomatic e±Iort in our approach toward the North. Ot1icials serving in this position over the last 

several years have succeeded in getting a UN. Commission of Inquiry on North Korea that 

contributed to the United States designating Kim Jung Un personally for his egregious human 

rights violations. Does Secretary Tillerson see human rights as an important aspect of US. policy 

toward North Korea? If so, given the global duties of the Under Secretary for Civilian Security, 

Democracy and Human Rights is there time to focus meaningful attention on North Korea? 
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Answer: 

I can assure you that this Administration remains deeply concerned by gross human rights 

violations and abuses committed by the North Korean government, which were clearly 

documented in the 2014 UN Commission of Inquiry's report. In July, Secretary Tillerson 

highlighted the regime's systematic use of forced labor to generate illicit revenue and our 

pressure campaign has sought to end the regime's exportation of labor through diplomatic 

pressure and the two most recent UNSCRs. 

Our strategy to promote human rights in North Korea focuses on three core objectives, including 

increasing international awareness, expanding access to independent information, and promoting 

accountability for those responsible for human rights violations and abuses in North Korea. We 

support the free ±1ow of independent information into, out ot: and within the isolated nation so 

the North Korean people have access to voices of freedom and democracy, and greater visibility 

into current events inside their country and in the outside world. 

The Secretary believes that integration will make knowledge and resources more accessible, 

provide clarity in reporting authority, strengthen communication channels, and create a more 

efficient and integrated diplomacy. By dual hatting the North Korea Human Rights Envoy 

position with the Under Secretary for Civilian Security, Democracy and Human Rights, we will 

realign the position within the family of bureaus focused on issues within the envoy's mandate. 

The title would remain and would continue to be a position confirmed by the Senate, consistent 

with the applicable statutory requirements. 

Question: 

Notwithstanding recent designations, we still have a long way to go before we are exerting 

"maximum pressure'' on North Korea's economic interests. Open-source researchers have 

demonstrated that there is a centralized limited and vulnerable network of third-party gateway 

t!rms in China and elsewhere that form North Korea's illicit network. 

• Can the US. identify the top 20-30 firms that compose North Korea's illicit network? 

Please provide that information, in classified form if necessary. 

• It is my understanding that most of these entities operate in China and a small number 

of other jurisdictions. Have we informed Beijing (and/or the relevant governments) of 

the activities of these entities and unequivocally communicated the expectation of the 

US. government that their actions be curbed" 

• Please provide, in classified fonn if necessary, a detailed accounting of all the cases 

you have raised with China and Russia (and/or the relevant governmentsF 

• China and Russia (and/or the relevant governments) have not taken sufficient action 

to close these entities and curb their activities, what action has our government taken 

to designate these entities under U.S. law" If not, what is the impediment to doing so 

in each case" 
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Answer: 

Regarding China, it is well known that over 90% of the DPRK's exports go through orto 

China. That is a lot of economic leverage. That is why we have told the Chinese that their 

willingness to cooperate with us to solve the Asia Pacific region's most acute threat to peace and 

stability will be a benchmark of its commitment to pursue constructive, results-oriented relations 

with the United States. If they so choose, this can be a highlight of bilateral cooperation. 

China pledged to work with the United States on North Korea during the President's April 

meeting with President Xi Jinping. In total, China has endorsed seven UN Security Council 

resolutions on the DPRK since 2006, six of which included increasingly robust sanctions. 

Following its earlier suspension of DPRK coal imports- depriving the regime of its largest coal 

export market and diminishing its single largest source of revenue - China announced a 

comprehensive ban on the import of coal, iron, iron ore, lead, lead ore, seafood, and aquatic 

products etTective August 15 in compliance with UNSCR 2371. 

In fact, we have seen reports that Chinese banks have adopted stronger measures to protect 

themselves from DPRK connections that would make them vulnerable to economic measures by 

the United States. While we defer to Treasury on the status of the rule proposed against the 

Bank of Dan dong, the reputational cost of doing business with the DPRK has been made clear. 

Of course, we would like to see China do more, even above and beyond the most recent 

UNSCRs' provisions. The UN Security Council has designated dozens ofDPRK entities, many 

of which do business through China, and we're working with China to implement these UN 

Security Council resolutions. In particular, we are pushing for robust implementation of UN 

Security Council Resolution 2371 and 2375 by China, which would remove up to a billion 

dollars trom North Korea's annual export revenue-money that North Korea might otherwise 

use to fund its WMD programs. 

We remain clear-eyed about China's track record on North Korea and will continue to carefully 

monitor Chinese compliance with these agreements. We have told the Chinese in no uncertain 

tenns that we will utilize all tools at our disposal, including U.S. sanctions, to choke off 

resources that fund the DPRK.'s proscribed nuclear, missile, and other WMD programs. The U.S. 

and China regularly exchange infonnation on particular cases of concern in implementing 

UNSCRs. In some cases, China has taken its own action against illicit DPRK. entities 

The following is a list of some examples highlighting actions that our government has taken to 

target North Korean entities working in China, Russia or other locations, as well as Chinese 

and/or Russian entities that provided tlnancial or relevant assistance to North Korea: 

• On September 26, the Department of the Treasury designated eight North Korean 

banks and 26 individuals and identified two banks as part of the Government of North 

Korea, in response to North Korea's ongoing development of weapons of mass 

destruction (WMD) and continued violations of United Nations Security Council 

resolutions (UNSCRs). Pursuant to Executive Order (E.O.) 13687 and E.O. 13810, 
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issued on September 20, 2017, these actions target North Korean nationals operating 

in Libya, United Arab Emirates, China, and Russia who act as representatives of 

North Korean financial institutions. 

• On August 22, the United States announced 16 new sanctions designations targeting 

third-country companies and individuals, including in China and Russia, which 

operate in North Korea's coal, energy, shipping, and labor sectors, all of which 

generate revenue for the regime's weapons of mass destruction programs. 

• These designations follow the Department of the Treasury's finding announced June 

29 that Bank of Dandong, a Chinese bank that acts as a conduit for illicit North 

Korean financial activity, is a foreign bank of primary money laundering concern. ln 

addition, Treasury's Office of Foreign Assets Control (OFAC) designated two 

Chinese individuals and one Chinese company in response to North Korea's ongoing 

WMD development and continued violations of UN Security Council resolutions. 

• Furthennore, on June I, 2017, the Treasury Department designated a Moscow-based 

company and its director for their support for a procurement company involved with 

North Korea's WMD and missile programs. Treasury also designated Russia-based 

Independent Petroleum Company and one of its subsidiaries for involvement in the 

North Korean energy industry and possible sanctions evasion activities. As part of 

this tranche, the State Department also designated two North Korean proliferationrelated entities. 

Question: 

On September 26, 2016, the Department of Justice unsealed a criminal complaint 

against a Chinese company, Dandong Hongxiang Industrial Development Co., and 

four Chinese nationals for: conspiracy to violate the International Emergency 

Economic Powers Act (IEEPA) and defraud the United States; conspiracy to launder 

monetary instruments; and violation of lEEP A The Department of Treasury 

designated these same entities under E.O. 13382 which targets weapons of mass 

destruction proliferators and their supporters. 

We know China is violating the UN sanctions it agreed to in the United Nations Security 

Council. The United Nations Panel of Experts on North Korea found in February that China has 

used so-called "livelihood exemptions" to trade banned goods and allow its companies to send 

rocket components to North Korea. What is the administration's plan for holding Chinese entities 

accountable for Sino-North Korean business transactions that violate existing sanctions? What 

metrics will the administration use to determine when more secondary sanctions are necessary 

and how broad those measures should be? 

Answer: 

Over 90% of the DPRK's exports gothrough orto China. That gives China significant 

economic leverage. That is why we have told the Chinese that Beijing's willingness to cooperate 
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with us to solve the Asia Pacific region's most acute threat to peace and stability will be a 

benchmark of its commitment to pursue constructive, results-oriented relations with the United 

States. If they so choose, this can be a highlight of bilateral cooperation. 

We have told the Chinese clearly and repeatedly that we will use all tools at our disposal, 

including US. sanctions, to choke off resources that fund the DPRI(' s proscribed nuclear, 

missile and other WMD programs. We want to work with China, but we've said many times that 

we will not hesitate to act alone, including by sanctioning Chinese or other third-country 

individuals and entities tbat provide support to North Korea's unlawful activities. In short, this 

Administration will go wherever the evidence leads to impose legally available sanctions on 

entities or individuals that support North Korea's proscribed programs. 

Question: 

Some experts assert that Beijing is playing a "double game" whereby they agree to certain 

sanctions at the UN but then fail to enforce them. Meanwhile, as other countries do take actions 

to cut otl'ties with North Korea, China simply picks up the slack. China has a responsibility to be 

transparent and provide the international community with detailed, real-time information about 

their trade with North Korea. Crude oil appears to be North Korea's largest import from China, 

but China stopped reporting crude oil shipments in 2014. China is North Korea's gateway to the 

world -- what are we doing to hold China accountable for providing real-time data transparency 

on both sanctions enforcement as well as their "licit" trade with North Korea? 

Answer: 

We remain clear-eyed about China's track record on North Korea and will continue to caretully 

monitor Chinese compliance with UN Security Council Resolutions. We have told the Chinese 

clearly and repeatedly that we will use all tools at our disposal, including US. sanctions, to 

choke otl' resources that tund the DPRK' s proscribed nuclear, missile, and other WMD 

programs. The United States and China ret,>ularly exchange information on particular cases of 

concern in implementing UNSCRs, and, in some cases, China has taken its own action against 

illicit DPRI( entities. China has published customs and other trade data about its trade with 

North Korea in nearly all circumstances and in nearly all sectors, and we work bilaterally with 

China and through our own intelligence analysis to monitor China's implementation of the 

UNSCRs. 

Question: 

Two of China's poorest provinces, Liaoning and Jilin, border North Korea, and China has put 

forward trade with North Korea as a path to greater economic grow1h. Today, the development 

plan for the provinces lay out policies designed increase trade with North Korea. At a time when 

the international community is trying to cut otl' sources of hard currency to the Kim regime, is it 

reasonable to expect compliance from officials in Northeastern China? Given Beijing's concerns 

about stability, is it not more likely that the central government will look the other way and allow 

cross-border trade to continue7 
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Answer: 

We remain clear-eyed about China's track record on North Korea and will continue to caretully 

monitor Chinese compliance with UN Security Council Resolutions. We have received recent 

reports about stepped-up enforcement by China's central and local government in its 

Northeastern provinces bordering North Korea, especially since the adoption of UNSCRs 2371 

and 2375. For a country that has is a conduit for 90% of North Korea's exports, China is bound 

to bear a disproportionate burden - and responsibility - in implementing the UNSCRs. In this 

context, we are closely monitoring China's compliance with UN Security Council Resolutions. 
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Questions for the Record Submitted to 

Mr. Marshall Billingslea 

House Foreign Affairs Committee 

"Sanctions, Diplomacy, and Information: Pressuring North Korea" 

September 12,2017 

Representatiye Eliot Engel 

I. Russia has recently emerged along with China as opposing further sanctions at the United 

Nations and some believe that Putin is giving Xi space to navigate. Additionally, there 

are reports Russia is providing materials to North Korea for their nuclear program. Do 

we have evidence of Russian components or technology and what the North Koreans are 

using to develop their weapons? What is that evidence and how have we acted on this 

knowledge? 

Answer: 

Russia is to be recognized for supporting the adoption of the most recent UN Security 

Council Resolution. Nevertheless, they can and must do more to implement and 

enforce UN sanctions. Treasury is committed to targeting any Russian individuals 

and entities providing support to North Korea. 

Tn June and August 2017, Treasury designated Russian individuals and companies 

involved in supporting the UN- and U.S.- designated Korea Tant,>un Trading 

Corporation (Tangun), also known as Korea Kuryonggang Trading Corporation. 

OFAC designated Moscow-based Gefest-M LCC and its director, Russian national 

Ruben Kirakosyan, as well as Moscow-based Ardis-Bearings LLC and its director, 

Igor Aleksandrovich Michurin. Tangun is responsible for the procurement of 

materials in support of North Korea's WMD and delivery systems programs and have 

been involved in procurements for Tangun's Moscow Ofi'ice. 

In June and August 2017, Treasury designated Russian individuals and companies 

involved in selling petroleum to North Korea. In June, Treasury designated the 

Independent Petroleum Company, a Russian company that has reportedly shipped 

over $1 million worth of petroleum products to North Korea. In August, Treasury 

designated three Russians who were also involved in providing gasoil to North Korea. 

Treasury will continue to investigate and target individuals and entities that provide 

support to North Korea's economy. 

2. Notv\iithstanding recent designations, we still have a long way to go before we are exerting 

"maximum pressure" on North Korea's economic interests. Open-source researchers have 

demonstrated that there is a centralized, limited and vulnerable network of third-party 

gateway firms in China and elsewhere that form North Korea's illicit network. 

a. Can the U.S identify the top 20-30 firms that compose North Korea's illicit 

network? Please provide that information, in classified form if necessary. 
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Answer: 

Open source research, when it contains primary source material such as 

corporate registrations, ownership structure, and company literature, can be 

extremely useful in mapping illicit networks. The Treasury Department actively 

works to map out North Korea's financial and revenue-generating mechanisms. 

North Korea employs deceptive financial practices and is constantly adapting to 

U.S. sanctions. Therefore, the Treasury Department is constantly investigating 

North Korea's financial netvvorks as they change. We do not hesitate to use opensource due diligence products as part of our effort. We would be happy to provide 

a classified briefing on this matter. 

b. It is my understanding that most of these entities operate in China and a small 

number of other jurisdictions. Have we informed Beijing (and/or the relevant 

governments) of the activities of these entities and unequivocally communicated 

the expectation of the US government that their actions be curbed? 

Answer: 

Treasury leadership regularly engages with Chinese government representatives 

to find ways in which we can work together to implement and 

enforce UN Security Council Resolutions, with a view toward restricting the 

North Korean regime from acquiring and accessing the revenues it needs to fund 

its nuclear program. 

This includes times when I and other Treasury leadership engage with Chinese 

government officials on specific entities that we believe are associated with 

North Korea. Nevertheless, the time for incremental changes has passed. We are 

now pushing the Chinese government to conduct a widespread crackdown on 

trade with North Korea, and to ensure that Chinese banks are not holding 

accounts for North Korean financial facilitators. 

c. Please provide, in classified fonn if necessary, a detailed accounting of all the cases 

you have raised with China and Russia (and/or the relevant governments)? 

Answer: 

While we defer to the Department of State on furnishing details to its oversight 

committee, we stress that the Treasury Department is committed to 

rapidly increasing economic pressure on North Korea. Time is not on our side. 

We can no longer slow! y prod countries to expel North Korean trade and financial 

representatives one at a time. We are at the point where widespread and swift 

action by China and Russia is needed to curtail any economic relationship with 

North Korea. 

On September 26, Treasury designated twenty-six North Korean tinancial 

facilitators Nineteen of them were operating in China and three were based in 

Russia. Under UNSCR 2321, adopted in November 2016, UN Member States 

are required to expel North Korean banking officials, if a Member State 
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determines that an individual is working on behalf of or at the direction of a North 

Korean bank or financial institution. These designations demonstrate 

our commitment to action. 

d. China and Russia (and/or the relevant governments) have not taken sufficient 

action to close these entities and curb their activities, what action has our 

government taken to designate these entities under U.S. law~ If not, what is the 

impediment to doing so in each case? 

Answer: 

As described above, the Treasury Department is actively targeting North 

Koreans operating in China. We are also targeting Chinese and Russian 

individuals and entities providing economic support to North Korea. 

Treasury's sanctions are not intended to punish China and Russia; they are 

intended to stop individuals and entities from cooperating with North Koreaand 

prevent North Korea from accessing the U.S. tlnancial system. When we see 

instances of sanctions evasion, we will act. 

3. We know China is violating the UN sanctions it agreed to in the United Nations Security 

Council. The United Nations Panel of Experts on North Korea found in February that China 

has used so-called "livelihood exemptions" to trade banned goods and allow its companies 

to send rocket components to North Korea. What is the administration's plan for holding 

Chinese entities accountable for Sino-North Korean business transactions that violate 

existing sanctions~ What metrics will the administration use to detennine when more 

secondary sanctions are necessary and how broad those measures should be? 

Answer: 

On September 20, the President issued Executive Order (E.O.) 13810, greatly 

expanding Treasury's sanctions authorities and expressly authorizing Treasury to use 

secondary correspondent account sanctions in the North Korea program. For example, 

E.O. 13810 allows Treasury to suspend or restrict U.S. correspondent account access to 

any foreign bank that knowingly conducts or facilitates significant transactions tied to 

trade with North Korea or certain designated persons. The E.O. also enables Treasury 

to target any person conducting significant trade in goods, services, or technology with 

North Korea, and to ban them from accessing the U.S. tinancial system. 

The Treasury Department actively investigates individuals and entities that are providing 

support to North Korea, including Chinese individuals and entities. I cannot comment on 

timing for the next round of designations, but I will note that the 

Treasury Department is committed to designating any individual or entity that is 

providing support to North Korea. We will use all of our authorities to act when we 

see instances of individuals and entities providing support to North Korea. 

Additionally, Treasury prefers to maintain t1exibility in our sanctions targeting, 

especially in our ongoing dialogue with the Chinese government, which is limited when 

North Korea-related sanctions statutes call for mandatory sanctions on those continuing 

to engage with North Korea. 
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4. Some experts assert that Beijing is playing a "double game" whereby they agree to certain 

sanctions at the U.N. but then fail to enforce them. Meanwhile, as other countries do take 

actions to cut otT ties with North Korea, China simply picks up the slack. China has a 

responsibility to be transparent and provide the international community with detailed, realtime information about their trade with North Korea. Crude oil appears to be North Korea's 

largest import trom China, but China stopped reporting crude oil shipments in 2014. China 

is North Korea's gateway to the world-- what are we doing to hold China accountable for 

providing real-time data transparency on both sanctions enforcement as well as their "licit" 

trade with North Korea? 

Answer: 

Under the current UN sanctions regime, UN Member States are prohibited from 

importing coal, iron, iron ore, lead and seafood Exports of raw crude and petroleum 

are capped. North Korean overseas labor is restricted. North Korean banks are cut off 

from the international financial system, and also are prohibited from maintaining 

representatives abroad. 

Executive Order 13810 gives Treasury the authority to target any anyone conducting 

significant trade in goods, services, or technology with North Korea. We are using all 

the data available to the U.S. government to detect North Korea's sanctions evasion. We 

are mapping their illicit networks. We are investigating any individuals and entities that 

continue to trade with North Korea. 

We have already demonstrated that we are willing to target companies trading with North 

Korea. For example in June and August Treasury designated individuals and companies 

involved in selling petroleum to North Korea. We have already demonstrated that we are 

willing to target companies trading with North Korea. For example in June and Aut,'l!st 

Treasury designated individuals and companies involved in selling petroleum to North 

Korea. We will continue to do so as we dedicate staff resources to meet competing 

requirements to research, draft, review, and submit all of the periodic reports required by 

North Korea-related sanctions statutes. 

5. Two of China's poorest provinces, Liaoning and Jilin, border North Korea, and China has 

put forward trade with North Korea as a path to greater economic growth. Today, the 

development plan for the provinces lay out policies designed increase trade with North 

Korea. At a time when the international community is trying to cut oft' sources of hard 

currency to the Kim Regime, is it reasonable to expect compliance from officials in 

Northeastern China? Given Beijing's concerns about stability, is it not more likely that 

the central government will look the other way and allow cross-border trade to continue? 

Answer: 

We expect the Chinese to comply with UN Security Council Resolutions. Executive 

Order 13810 put individuals and entities, including banks, on notice that they must 

choose between doing business with North Korea and doing business with the United 

States. 
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We recognize that China-North Korea trade occurs along the border, but we expect that 

China will crack down on this trade. Moreover, we have used sanctions targeted at the 

activity occurring in this region to specifically highlight to China that it disrupt this 

activity. On August 22, Treasury designated Chinese companies for importing North 

Korean coal and other UNSCR-prohibited items like vanadium. Four of these 

companies were located in Liaoning Province. On June 29, pursuant to Section 311 of 

the USA Patriot Act, Treasury found Bank of Dandong to be of "primary money 

laundering concern" and issued a notice of proposed rulemaking which, if finalized, 

would essentially cut Bank of Dandong off from the U S. financial system. Bank of 

Dandong is also based in Liaoning Province. We will not hesitate to target any individual 

and entity that continues to trade with North Korea.6. Some experts are calling for 

sudden and overwhelming economic pressure on North Korea- such as China cutting 

off oil to the Regime -to serve as a kind of "shock therapy." Would a sudden and 

overwhelming increase in economic pressure on North Korea be possible? Would it be 

advisable? How might the North Korean regime respond to such pressure? 

Answer: 

Our goal is to put maximum economic pressure on North Korea. We assess that North 

Korea is dependent on imports of both raw crude and petroleum and that constraining 

and cutting off their access to these resources would increase economic pressure on 

the regime. lt is precisely for that reason that the US Government pushed for a UN 

Security Council Resolution that targets crude and oil. UNSCR 2375 puts a cap on 

countries' exports of oil and refined petroleum to North Korea, which is a first step. 

We are already working in coordination with our allies to further reduce North 

Korea's supply of oil. In 2017, Treasury designated Russian individuals who were 

operating Singapore-based companies and selling gasoil to North Korea. These 

designations reinforce our commitment to ending all trade with North Korea, 

including the exportation of petroleum and crude. On October 16, the European 

Union announced a total ban on the sale ofretined petroleum and crude oil to North 

Korea. We commend the EU for this new measure and we will continue pressing 

allies around the world to adopt similar restrictions. 

1 would be happy to discuss in a classified setting additional aspects to this important 

matter. 
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Question: 

Questions for the Record Submitted to 

Acting Assistant Secretary Thornton by 

Representative Ami Bera 

House Foreign Affairs Committee 

September 12, 2017 

Trade with China makes up about 90% of total North Korean trade. China has signed on to UN 

sanctions aimed at restricting North Korean access to cash and weapons, but have been 

circumventing the sanctions through several avenues, including "livelihood exemptions." What 

is the administration's plan for holding Chinese entities accountable for Sino-North Korean 

business transactions that violate existing sanctions? What metrics will the administration use to 

determine when more secondary sanctions are necessary and how broad those measures should 

be? 

Answer: 

Over 90% of the DPRK's exports go through or to China. That gives China significant 

economic leverage. That is why we have told the Chinese that Beijing's willingness to cooperate 

with us to solve the Asia Pacific region's most acute threat to peace and stability will be a 

benchmark of its commitment to pursue constructive, results-oriented relations with the United 

States. If it so chooses, China's use of its leverage over the DPRK could be a highlight of our 

bilateral cooperation. We welcome the positive steps that China has taken since the adoption of 

UNSCRs 2371 and 2375 to implement these resolutions. We want to see China fulfill its 

obligations completely and are hopeful that this additional economic pressure will change the 

calculus of the North Korea regime. 

We have told the Chinese clearly and repeatedly that we will use all tools at our disposal, 

including US. sanctions, to choke ofT resources that fund the DPRK' s proscribed nuclear, 

ballistic missile, and other WMD programs. We want to work with China, but we have said 

many times that we will not hesitate to act alone, including by sanctioning Chinese or other 

third-country individuals and entities that provide support to North Korea's unlawful activities. 

The Administration will go wherever the evidence leads to impose legally available sanctions on 

entities or individuals that support North Korea's proscribed programs. 

Question: 

Ms. Thornton, while we seek the cooperation of China to pressure North Korea, we have 

traditionally confronted them on a variety of fronts, including over the South China Sea, human 

rights, and sometimes trade. Many of our allies abroad, and Americans at home, are rightfully 

worried over the sometimes seemingly transactional approach to diplomacy the administration 

has. How has our desire for cooperation with China impacted the other aspects of our 

relationship with that country? As the Assistant Secretary responsible for East Asia, how does 
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North Korea impact your own policy recommendations to Secretary Tillerson for areas outside 

of North Korea? 

Answer: 

This Administration has laid out a vision for U.S.-China relations that is constructive and resultsoriented. In furthering this relationship. we are expanding areas of cooperation on issues ,,;here 

we have shared interests. But we also address, directly and frankly, areas where we face 

threats or areas where we have differences so that ;,ve can narrow differences and solve the 

problems. The U.S.-China relationship is one of the most consequential and broadest 

relationships the United States has in the world. We will - and must - be able to make progress 

in multiple areas. But will not turn a blind eye to problems that undermine American security or 

prosperity simply because China -or any country-is cooperating with us elsewhere 

When North Korea obtains the ability to strike the U.S. homeland with a nuclear weapon, our 

allies immediately start to doubt the veracity of the US nuclear umbrella. When choosing to 

defend Seoul at the cost of Los Angeles, the risk for the U.S. is clearly far higher if we chose to 

honor our commitments. In Europe, the US. was able to reassure our allies by making certain 

commitments under NATO, but there is no equivalent to NATO in Asia. Our "hub and spokes" 

alliance structure means there is greater risk that South Korea and Japan will explore their own 

means of defense independent from U.S. security commitments. 

What is the administration doing to reassure our allies? 

With no Ambassador in Seoul, what are we saying to the South Koreans? 

Have we taken steps to elevate our dialogues on extended deterrence with South Korea and 

Japan? 

The President's top priority remains protecting the homeland, U.S territories, and our allies 

against the threat posed by North Korea. We remain fully committed to the defense of our allies, 

the Republic of Korea (ROK) and Japan, and onr commitments are backed by the fnll range of 

our conventional and nuclear capabilities, including extended deterrence. We view these 

commitments as both ironclad and durable 

In light of these commitments and in the face of continued DPRK provocations, we deployed a 

Tenninal High Altitude Air Defense (THAAD) Battery to the ROK We continue to rapidly 

deploy a broad range of strategic capabilities to the region in preparing to respond to, defend 

against, and if necessary defeat any DPRK attack - whether on the United States, South Korea, 

or Japan- with immediate, etTective, and overwhelming force. 
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We want to be clear to the North Korean regime that the United States has the unquestionable 

ability to defend itself and its allies. As we and others have made clear, we will never accept a 

nuclear-armed North Korea nor abandon our commitments to our allies and partners in the 

region. 

We are reassuring our ROK allies that our bilateral relationship remains a high priority. 

Secretary Tillerson has had multiple phone and face-to-face conversations with ROK Foreign 

Minister Kang, and leaders of the Administration at all levels have taken the opportunity to 

engage with their ROK counterparts. 

Question: 

Relations between Japan and South Korea have cooled in recent months. Given the urgency of 

the North Korea situation, it would seem to make sense to repair the relationship. 

How would you characterize the level of Japan-South Korea- U.S. cooperation? 

What steps are we taking to enhance all aspects of the relationship? 

The United States values our robust and productive trilateral relationship with Japan and the 

Republic of Korea. The United States, Japan, and the Republic of Korea (ROK) continue to 

engage regularly to remain in close coordination in response to the North Korea threat. The 

United States is steadfast in its defense commitments to the Republic of Korea and Japan, 

including the commitment to provide extended deterrence, backed by the full range of our 

nuclear and conventional defense capabilities. President Trump met trilaterally with Japanese 

Prime Minister Abe and ROK President Moon in Hamburg and, most recently, in New York on 

the margins of the UN General Assembly. Secretary Tillerson also met trilaterally with his 

Japanese and ROK counterparts in Bonn and Manila. Our continuous engagement at the highest 

levels of our government is a testament to the importance of our trilateral cooperation. 

While historical issues continue to a±Iect ROK-Japan bilateral relations, our two allies recognize 

the significant value of our trilateral cooperation as we seek to counter the North Korean threat 

and enhance not only our security cooperation, but also our global cooperation. Both Japanese 

Prime Minister Abe and ROK President Moon have committed publicly to pursue a futureoriented ROK-Japan bilateral relationship. 
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Questions for the Record Submitted to 

Mr. Marshall Billingslea 

House Foreign Affairs Committee 

"Sanctions, Diplomacy, and Information: Pressuring North Korea" 

September 12, 2017 

Regresentatjye A mj Bera 

1. Trade with China makes up about 90% of total North Korean trade. China has signed on 

to UN sanctions aimed at restricting North Korean access to cash and weapons, but have 

been circumventing the sanctions through several avenues, including "livelihood 

exemptions." 

What is the administration's plan for holding Chinese entities accountable for Sino-North 

Korean business transactions that violate existing sanctions" 

Answer: 

North Korea is an important issue in our bilateral relationship with China, as China 

accounts for more than 90 percent ofNorth Korea's trade. Not only is North Korea a shared 

security concern, its illicit financial activity threatens the integrity of both the US and 

Chinese tinancial systems. 

We are having direct conversations with China on how to work together to denuclearize 

the peninsula and implement the UN Security Council resolutions. Our preference is to 

work with China, but if necessary, Treasury can and will act unilaterally to impede 

illicit activity and protect the U S. financial system from abuse. 

On June 29 and on August 22, Treasury designated Chinese individuals and entities 

involved in importing North Korean coal in support of the North Korean government, 

importing North Korean minerals in violation of UN Security Council Resolutions, or 

for providing tinancia1 services to North Korean banks. Additionally, on June 29 

Treasury took steps to prevent China-based Bank of Dandong from continuing to serve 

as a gateway for North Korea to access the U.S. and international financial system by 

issuing a Notice of Propose Ru1emaking pursuant to Section 311 of the USA PATRIOT 

Act. 

These designations and our 311 action show our resolve to target Chinese sanctions 

evasion and economic support to North Korea. 

2. What metrics will the administration use to determine when more secondary sanctions are 

necessary and how broad those measures should be" 

Answer: 

U.S. sanction programs generally block the assets under U.S. jurisdiction of a foreign 

individual or entity engaged in enumerated activity, prohibiting US. persons from 

dealing with the sanctions target. "Secondary correspondent account sanctions" can be 

interpreted as severing or restricting foreign tinancial institutions' access to the US. 
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financial system for knowingly dealing with the U.S. sanctions targets or engaging in 

other enumerated activities. 

On September 20, the President issued new Executive Order (E.O.) 13810, greatly 

expanding Treasury's sanctions authorities and expressly authorizing Treasury to use 

secondary correspondent account sanctions in the North Korea program. For example, 

E.O. 13810 authorizes Treasury to suspend or restrict U.S. correspondent account access 

to any foreign bank that knowingly conducts or facilitates significant transactions tied to 

trade with North Korea or certain designated persons. These sanctions will be forward 

looking, applicable to behavior that occurs after the issuance of the E.O. Additionally, the 

E.O. authorizes Treasury to designate any person that has engaged in at least one 

significant importation or exportation to North Korea of any goods, services, or 

technology. The international community and foreign financial institutions are now on 

notice that, going forward, they can choose to do business with the United States or with 

North Korea, but not both. 

We will carefully monitor foreign financial institutions to ensure that they are living up to 

UN obligations and not knowingly conducting or facilitating significant transactions in 

connection with trade with North Korea or on behalf of UN- and U.S.- designated persons. 

We will let facts lead us to any future decisions we make. We must be judicious, strategic, 

and targeted in how we use our powerful authorities. Overall, the most crucial "metrics" 

we apply are the assessments of how effective the USG's actions have been at denying 

revenue to the DPRK, and introducing changes 

in behavior with North Korean trading partners. 

3. Notwithstanding recent designations, we still have a long way to go before we are exerting 

"maximum pressure" on North Korea's economic interests. The organization C4ADS and 

other open-source researchers have demonstrated that there is a centralized, limited and 

vulnerable network of third-party gateway firms in China and elsewhere that form North 

Korea's illicit network. One now-sanctioned Chinese firm (Dandong Hongxiang Industrial 

Development Co. Ltd.) used shell companies to process more than $70 million in transactions 

through the U.S. financial system. 

Assistant Secretary Billingslea, can the U.S identify the top 20-30 finns that compose North 

Korea's illicit network? It is my understanding that most of these entities operate in China and 

a small number of other jurisdictions. 

Have we informed Beijing (and/or the relevant governments) of the activities of these 

entities and unequivocally communicated the expectation of the U.S. government that their 

actions be curbed? 

Answer: 

Treasury leadership regularly engages with their Chinese counterparts on working together 

to implement and enforce UN Security Council Resolutions and end funding 

and facilitation to the North Korean regime. If those activities are classified, would you be 

willing to offer a detailed accounting of all the cases in which the U.S. raised the activities 

with the Chinese (and/or relevant governments)? 

2 
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Answer: 

At Treasury we have had very specitic conversations with our Chinese counterparts, 

as well as other government interlocutors, with respect to entities that we believe are 

associated with the North Korean regime, and we have made very specific requests 

for action on these entities. There are also times, depending on the sensitivity of the 

target, we choose not to engage with other governments and instead take unilateral 

action. 

Nevertheless, time is not on our side. North Korea is rapidly advancing its weapons 

programs. The current UN sanctions regime prohibits countries from importing most 

North Korean goods and commodities. We are pushing China to conduct a widespread 

crackdown on trade with North Korea. We are pushing the Chinese government to 

ensure that Chinese banks are not holding accounts for North Korean financial 

facilitators. 

4 If Beijing (and/or the relevant governments) has not taken sufficient action to close these 

entities and curb their activities, has our government taken action to designate these 

entities under U.S. law and if not, what is the impediment to doing so? 

Answer: 

Tn August, Treasury designated three coal companies involved in importing nearly half a 

billion dollars' worth of North Korean coal between 2013 and 2016. At least one of those 

companies, Dandong Zhicheng, used shell companies to transfer funds through the U.S. 

financial system. On the same day as Treasury's designations, the Department of Justice 

issued a complaint for forfeiture to seize 4 million USD. 

These actions reinforce that Treasury is committed to using our authorities under U.S. law 

to designate entities that provide any economic support to North Korea. 
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Question: 

Question for the Record Submitted to 

Assistant Secretary Thornton 

by Representative Wagner 

House Foreign Affairs Committee 

September 12, 2017 

Assistant Secretary Thornton, the United States must demonstrate leadership in ending North 

Korean slave labor and extracting commitments from countries worldwide to end the 

employment of North Korean workers and payments to the Kim regime. The September UN 

sanctions exempted existing contracts and work authorizations involving North Korean workers; 

to what degree will these exemptions impact the t1ow of payments to the regime? And by when 

will the existing authorizations expire? 

a. I appreciated your witness statement You wrote that we have not seen any 

indication that the Kim regime is open to serious engagement. Barring a threat to 

the Kim regime's very survival, it will never give up its nuclear weapons. I'm not 

talking about regime change efforts; I'm talking about changing Kim's financial 

calculus. How does the U.S propose to do that without the tull inclusion of oil in 

UN resolutions? 

b. What is the United States doing to bring Kim Jong-un to the International 

Criminal Court for crimes against humanity? 

There is a unitied international voice echoing our messages for greater pressure on the DPRK. 

The Security Council spoke clearly following the September 6 nuclear test to condemn North 

Korea's reckless and dangerous behavior, and we call on all nations to use every means of 

int1uence to make clear to the DPRK that further provocations are unacceptable. 

With respect to your question about changing Kim's financial calculus, we are encouraged by the 

prompt adoption ofUNSCR 2375, a resolution that includes the strongest sanctions ever imposed 

on North Korea, and introduces a partial ban on oil for the first time. We will continue to work 

with our diplomatic partners to ensure that this and previous UNSCRs on the DPRK are tully 

implemented. The UNSCR 2375 ban on textiles and overseas laborers alone will cut otJ $1.3 

billion of revenue each year to the North Korean regime. Further, as we've made clear, we will 

not hesitate to act alone. On September 21, President Trump issued a new executive order with 

respect to North Korea, authorizing the United States to impose sanctions on persons involved in 

at least one significant importation from or exportation to North Korea of any goods, services, or 

technology. The Administration intends to make full use of these new authorities. 

UNSCR 2375 does not proscribe an end date for existing DPRK labor contracts. Therefore, we 

will continue coordinating with like-minded nations to pressure countries still hosting DPRK 

laborers to cancel these contracts and expel DPRK overseas laborers as soon as possible. 
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Finally, the plight of the Korean people suffering at the hands of the Kim regime continues to be 

a major concern. We support Security Council consideration of the Commission of Inquiry 

report and its recommendations, including consideration of the recommendation that Kim Jung 

Un's situation be referred to the International Criminal Court. Our efforts are focused on 

continuing to shine a spotlight on North Korea's widespread and serious human rights violations 

and to lay the groundwork for holding those most responsible for these violations to account. 

We continue to co-sponsor tough resolutions at the UN General Assembly and Human Rights 

Council stressing the importance of accountability. We have also taken domestic action, 

including naming and designating for sanctions over 30 persons, including Kim Jong Un, for 

being responsible for or associated with serious human rights abuses in the DPRK 
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Questions for the Record Submitted to 

Mr. Marshall Billingslea 

House Foreign Affairs Committee 

"Sanctions, Diplomacy, and Information: Pressuring North Korea" 

September 12, 2017 

Rcpresegtatjye Ann Wagner 

1. Thank you, Mr. Chairman, for hosting this timely hearing. In Aut,'l!st, I traveled to Korea, 

Japan, and China to better understand current events on the Peninsula and dialogue with 

our allies. I had the opportunity to visit not only the DMZ, but also Dandong, where I 

watched Chinese trucks loaded with goods drive across the China-Korea Friendship 

Bridge into North Korea. 70% of North Korea's trade passes over that bridge, and it was 

a stark reminder that the United States should prioritize secondary sanctions against the 

Chinese companies and banks that sustain the regime. 

Assistant Secretary Billingslea, what steps is the Administration taking to levy secondary 

sanctions against every foreign company or bank funding the Kim regime? Why are we 

not seeing more secondary sanctions? When can we expect to see a comprehensive list? 

Answer: 

Subsequent to my testimony, the Treasury has sanctioned multiple North Korean 

banks and a substantial number of their financial intermediaries. On June 29, 

pursuant to Section 311 of the USA Patriot Act, Treasury found Bank of Dan dong 

to be of "primary money laundering concern" and issued a notice of proposed 

rulemaking which, if finalized, would essentially cut Bank of Dandong off from 

the US. financial system. 

To employ secondary sanctions under Executive Order 13810, we must have clear 

evidence that a bank "knowingly" facilitated any significant transaction in connection 

with a North Korean entity, subsequent to when the order was signed. We are carefully 

monitoring the behavior of a wide range of financial institutions, and will not hesitate 

to act when the evidentiary threshold is met and our national security would be 

enhanced by the action. 
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Question for the Record Submitted to 

Assistant Secretary Thornton by 

Representative Brad Schneider 

House Foreign Affairs Committee 

September 12, 2017 

In the July 51

h call with Egyptian President Sisi, President Trump emphasized that Egypt should 

"stop hosting North Korean 6'llest workers and stop providing economic or military benefits to 

North Korea." Egypt is the second largest recipient of U.S. security assistance. 

Question: 

What does Egypt get out of its relationship with North Korea that is worth risking their 

partnership with the United States? 

Egypt's foreign relations are based on its own assessments of national priorities and national 

interests. Cairo has had a longstanding relationship with North Korea, including military 

cooperation. 

There is also a direct Egyptian economic investment in excess of half a billion dollars in North 

Korea. We would be happy to provide more comprehensive information in a classified briefing. 

Question: 

What is the Administration doing to press upon the Egyptians the importance of severing ties 

with North Korea~ 

We have raised our concerns about North Korea, and Cairo's continued relationship with it, with 

the Egyptians repeatedly and at the highest levels. We also made it clear that Egypt's ties with 

the DPRK are a major concern when the Secretary decided in Au6'l!St to issue a national security 

waiver for $195 million in FY 2016 Foreign Military Funds (FMF), but hold availability of these 

funds pending positive Egyptian steps and also reprogrammed away from Egypt $65.7 million in 

FMF and $30 million of Economic Support Fund (ESF) funds. We believe that the 

reprogramming of these funds will reinforce U.S. concerns regarding Egyptian policies that run 

counter to our national interests and underscore the importance of Egypt's responsiveness to key 

U.S. asks without undermining Egypt's ability to fight ISIS and other threats to its security. 
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Questions for the Record Submitted to 

Mr. Marshall Billingslea 

House Foreign Affairs Committee 

"Sanctions, Diplomacy, and Information: Pressuring North Korea" 

September 12, 2017 

Representative Brad Schneider 

lo the July 5th call with Egyptian President Sisi, President Trump emphasized that Egypt should 

"stop hosting North Korean guest workers and stop providing economic or military benefits to 

North Korea." Egypt is the second largest recipient of U.S. security assistance. 

1. What does Egypt get out of its relationship with North Korea that is worth risking their 

partnership with the United States? 

Answer: 

The current relationship between Egypt and North Korea is unacceptable. We have 

made it clear to allies around the world that they must choose between doing business 

with North Korea or with the United States. We are prepared to reinforce that 

message through our designations. T also have reinforced that message recently with 

my Egyptian counterparts. 

2. What is the Administration doing to press upon the Egyptians the importance of severing 

ties with North Korea? 

Answer: 

Treasury leadership discusses the threat posed by North Korea with our counterparts 

on a daily basis. The need to impose maximum economic pressure on North Korea 

is discussed in meetings with leaders from Africa, Asia, Europe, and the Middle 

East. That includes our engagement with Egypt as well as bilateral engagement 

conducted by the State Department.