Source: https://www.federalregister.gov/documents/2020/04/10/2020-07497/north-korea-sanctions-regulations
Timestamp: 2020-07-10 17:13:50
Document Index: 591066907

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A Rule by the Foreign Assets Control Office on 04/10/2020
This rule is effective April 10, 2020.
85 FR 20158
20158-20163 (6 pages)
2020-07497
NKSPEA
https://www.federalregister.gov/d/2020-07497
OFAC: Assistant Director for Licensing, tel.: 202-622-2480; Assistant Director for Regulatory Affairs, tel.: 202-622-4855; or Assistant Director for Sanctions Compliance & Evaluation, tel.: 202-622-2490.
On November 4, 2010, OFAC issued the North Korea Sanctions Regulations, 31 CFR part 510 (75 FR 67912, November 4, 2010) (the “Regulations”). Since then, OFAC has amended the Regulations several times. This rule amends the Regulations to incorporate the Treasury-administered provisions of the North Korea Sanctions and Policy Enhancement Act of 2016, Public Law 114-122, 130 Stat. 93 (22 U.S.C. 9201-9255) (NKSPEA), as amended by the Countering America's Adversaries Through Sanctions Act, Public Law 115-44, 131 Stat. 886 (22 U.S.C. 9201 et seq.) (CAATSA) and the National Defense Authorization Act for Fiscal Year 2020, Public Law 116-92, 133 Stat. 1198 (FY 2020 NDAA).
On February 18, 2016, the President signed NKSPEA into law. Among other things, section 104 of NKSPEA provides that the President, with certain exceptions, shall block and prohibit all transactions in property and interests in property that are in the United States, that come within the United States, or that are or come within control or possession of a U.S. person of: The Government of North Korea, the Workers' Party of Korea, and other persons the President determines knowingly engage in certain North Korea-related activities.
On August 2, 2017, the President signed CAATSA into law. Title III of CAATSA, among other things, amends NKSPEA. Section 311(a) of CAATSA amends section 104(a) of NKSPEA to provide that the President shall, with certain exceptions, block and prohibit all transactions in property and interests in property that are in the United States, that come into the United States, or that are or come into the possession of U.S. persons of any person the President determines knowingly, directly or indirectly, imports, exports, or reexports to or from North Korea any defense article or defense service or engages in certain other North Korea-related activities. Section 104(b) of NKSPEA provides that the President may, with certain exceptions, block any person that knowingly engages in, contributes to, assists, sponsors, or provides financial, material, or technological support for, or goods and services in support of, any sanctioned person.
On December 20, 2019, the President signed the FY 2020 NDAA. Title LXXI of the 2020 NDAA, titled the “Otto Warmbier North Korea Sanctions and Enforcement Act of 2019,” among other things, amends NKSPEA by adding new sections 104(g), 201B, and 201C. NKSPEA section 104(g) requires the President to designate any person that he determines knowingly engages in certain specified North Korea-related activities.
New section 201B of NKSPEA requires the Secretary of the Treasury to impose sanctions with respect to any foreign financial institution (FFI) that the Secretary of the Treasury determines, in consultation with the Secretary of State, knowingly on or after April 18, 2020, provides significant financial services to any person designated for the imposition of sanctions with respect to North Korea under NKSPEA subsections 104(a), 104(b), or 104(g), an applicable Executive order, or an applicable United Nations Security Council resolution. Section 201B provides that the Secretary may impose blocking sanctions on such FFIs, or may prohibit or impose strict conditions on the opening or Start Printed Page 20159maintenance of a correspondent account or a payable-through account in the United States.
New section 201C of NKSPEA requires the Secretary of the Treasury, in consultation with the Secretary of State, to prohibit an entity owned or controlled by a U.S. financial institution and established or maintained outside the United States from knowingly engaging in any transaction, directly or indirectly, with the Government of North Korea or any person designated for the imposition of sanctions with respect to North Korea under NKSPEA subsections 104(a), 104(b), or 104(g), an applicable Executive order, or an applicable United Nations Security Council resolution.
With this rule, OFAC is incorporating the blocking and correspondent or payable-through account sanctions contained in sections 104(a), 104(b), 104(g), and 201B of NKSPEA, as amended by CAATSA and the FY 2020 NDAA (NKSPEA, as amended), into the Regulations as new § 510.201(a)(3)(vii) through (x), respectively. OFAC is incorporating the correspondent or payable-through account sanctions of section 201B of NKSPEA, as amended, in § 510.210(c), and adding a new provision at § 510.214 to implement section 201C of NKSPEA, as amended.
OFAC is also incorporating certain statutory exemptions under NKSPEA, as amended, in new paragraph (f) to § 510.213; amending the definition of luxury goods at § 510.317 to create a regulatory exception to exclude items approved for import, export, or reexport to or into North Korea by the United Nations Security Council; making technical and conforming edits to the definitions of “effective date” in § 510.304, “financial, material, or technological support” in § 510.306, and “North Korean person” in § 510.319; amending the interpretive provision at § 510.413 related to significant transactions; updating the authorities section of the Regulations to incorporate the FY 2020 NDAA and to shorten citations to conform with Federal Register guidance; and amending the delegation section at § 510.802 to add the delegation of certain functions with respect to the FY 2020 NDAA.
Because the amendment of the Regulations involves a foreign affairs function, the provisions of Executive Order 12866 and the Administrative Procedure Act (5 U.S.C. 553) requiring notice of proposed rulemaking, opportunity for public participation, and delay in effective date, as well as the provisions of Executive Order 13771, are inapplicable. Because no notice of proposed rulemaking is required for this rule, the Regulatory Flexibility Act (5 U.S.C. 601-612) does not apply.
For the reasons set forth in the preamble, the Department of the Treasury's Office of Foreign Assets Control amends 31 CFR part 510 as follows:
1. The authority citation for part 510 is revised to read as follows:
2. Amend § 510.201 as follows:
a. Remove the word “or” at the end of paragraph (a)(3)(v)(F).
b. Remove the period at the end of paragraph (a)(3)(vi)(B) and add a semicolon in its place.
c. Redesignate Notes 3, 4, and 5 to paragraph (a) as Notes 4, 5, and 6 to paragraph (a).
d. Add paragraphs (a)(3)(vii) through (x).
e. Revise newly redesignated Note 4 to paragraph (a).
(H) Directly or indirectly, sells, supplies, or transfers to or from the Government of North Korea or any person acting for or on behalf of that Government, a significant amount of precious metal, graphite, raw or semi-finished metals or aluminum, steel, Start Printed Page 20160coal, or software, for use by or in industrial processes directly related to weapons of mass destruction and delivery systems for such weapons, other proliferation activities, the Korean Workers' Party, armed forces, internal security or intelligence activities, or the operation and maintenance of political prison camps or forced labor camps, including outside of North Korea;
(E) Engages in a significant activity to charter, insure, register, facilitate the registration of, or maintain insurance or Start Printed Page 20161a registration for, a vessel owned, controlled, commanded, or crewed by a North Korean person; or
Note 3 to paragraph (a)(3)(x):
See § 510.210(c) for alternative sanctions that can be imposed on a foreign financial institution when the determination specified in paragraph (a)(3)(x) of this section is made.
The names of persons listed in or designated or identified pursuant to E.O. 13551, E.O. 13687, E.O. 13722, or E.O. 13810 and whose property and interests in property are blocked pursuant to those orders and who are referenced in paragraph (a) of this section are published in the Federal Register and incorporated into OFAC's Specially Designated Nationals and Blocked Persons List (SDN List) with the following identifiers: for E.O. 13551: “[DPRK];” for E.O. 13687: “[DPRK2];” for E.O. 13722: “[DPRK3];” and for E.O. 13810: “[DPRK4].” The names of persons designated or identified pursuant to NKSPEA, as amended, will be incorporated into the SDN List with the identifier “[DPRK-NKSPEA].” Certain transactions with persons blocked pursuant to paragraph (a) of this section, or blocked pursuant to other parts of 31 CFR chapter V in connection with North Korea-related activities, may result in the imposition of secondary sanctions, and therefore such blocked persons' entries on the SDN List will also include the descriptive prefix text “Secondary sanctions risk:”, followed by information about the applicable secondary sanctions authority. Pursuant to § 510.214, persons owned or controlled by a U.S. financial institution are subject to certain prohibitions under this part; as a result, the entries of persons blocked pursuant to paragraph (a) of this section, or blocked pursuant to other parts of 31 CFR chapter V in connection with North Korea-related activities, will also include the descriptive prefix text “Transactions Prohibited For Persons Owned or Controlled By U.S. Financial Institutions:”, followed by information about the applicable sanctions authority. The SDN List is accessible through the following page on OFAC's website: www.treasury.gov/​sdn. Additional information pertaining to the SDN List can be found in appendix A to this chapter. See § 510.411 concerning entities that may not be listed on the SDN List but whose property and interests in property are nevertheless blocked pursuant to paragraph (a) of this section. The property and interests in property of persons who meet the definition of the term Government of North Korea, as defined in § 510.311, are blocked pursuant to paragraph (a) of this section regardless of whether the names of such persons are published in the Federal Register or incorporated into the SDN List.
3. Amend § 510.210 as follows:
a. In the heading of paragraph (b), add “prohibited by Executive Order 13810” after the word “institutions”.
b. Remove Note 1 to Paragraph (b).
c. Redesignate paragraphs (c) and (d) as paragraphs (d) and (e).
e. In newly redesignated paragraph (d) introductory text, add “or (c)” after the words “paragraph (b)”.
f. Add Note 1 to § 510.210.
(c) Sanctionable activity by foreign financial institutions prohibited by NKSPEA, as amended. The Secretary of the Treasury, in consultation with the Secretary of State, may determine that a foreign financial institution has, on or after April 18, 2020, knowingly provided significant financial services to any person designated for the imposition of sanctions with respect to North Korea described in § 510.201(a)(3)(vii) through (ix) and under an applicable Executive order (as defined in NKSPEA, as amended) or an applicable United Nations Security Council resolution (as defined in NKSPEA, as amended).
Note 1 to § 510.210:
For information regarding persons blocked pursuant to this part, or another part of 31 CFR chapter V in connection with North Korea-related activities, including identifier information for entries on the SDN List, see Note 4 to § 510.201(a).
4. Amend § 510.213 by adding paragraph (f) to read as follows:
(f) Exemptions under the North Korea Sanctions and Policy Enhancement Act of 2016, as amended by the Countering America's Adversaries Through Sanctions Act and the National Defense Authorization Act for Fiscal Year 2020. The prohibitions contained in §§ 510.201(a)(3)(vii) through (x), 510.210(c), and 510.214 do not apply to the following activities:
5. Add § 510.214 to read as follows:
§ 510.214
Prohibitions on persons owned or controlled by U.S. financial institutions.
Except as otherwise authorized pursuant to this part, any person that is owned or controlled by a U.S. financial institution and established or maintained outside the United States is prohibited from knowingly engaging in any transaction directly or indirectly with the Government of North Korea or any person designated for the imposition of sanctions with respect to North Korea described in § 510.201(a)(3)(vii) through (ix) and under an applicable Executive order (as defined in NKSPEA, as amended) or an applicable United Nations Security Council resolution (as defined in NKSPEA, as amended).
Note 1 to § 510.214:
For information regarding persons blocked pursuant to this Start Printed Page 20162part, or another part of 31 CFR chapter V in connection with North Korea-related activities, including identifier information for entries on the SDN List, see Note 4 to § 510.201(a).
Note 2 to § 510.214:
A U.S. financial institution is subject to the civil penalties provided for in section 206(b) of the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) if any entity that it owns or controls violates, attempts to violate, conspires to violate, or causes a violation of the prohibitions set forth in this section. See § 510.701.
6. Amend § 510.304 as follows:
a. In paragraph (a)(4), remove the period at the end of the paragraph and add in its place a semicolon.
b. In paragraph (a)(8), remove the word “and” after the semicolon.
c. In paragraph (a)(9), remove “§ 510.210” everywhere it appears and add in its place “§ 510.210(b)” and remove “such prohibition, condition, or blocking.” and add in its place “such prohibition or condition; and”.
d. Add paragraph (a)(10).
e. In paragraph (b), add “, or a notice of the imposition of a prohibition or strict condition pursuant to § 510.210,” after the words “interests in property”.
(10) With respect to the prohibition set forth in § 510.210(c), April 18, 2020. The effective date of a prohibition or strict condition imposed pursuant to § 510.210(c) on the opening or maintaining of a correspondent account or a payable-through account in the United States by a U.S. financial institution for a particular foreign financial institution is the earlier of the date the U.S. financial institution receives actual or constructive notice of such prohibition or condition.
7. In § 510.306, remove “§ 510.201(a)(3)(ii)(E), (a)(3)(iii)(D), (a)(3)(iv)(G), and (a)(3)(v)(E),” and add in its place “§ 510.201(a),”.
8. Revise § 510.317 to read as follows:
The term luxury goods, as used in § 510.201(a) includes those items listed in 15 CFR 746.4(b)(1) and supplement no. 1 to part 746, similar items, and items so designated under an applicable United Nations Security Council resolution (as defined by the North Korea Sanctions and Policy Enhancement Act of 2016, as amended by the Countering America's Adversaries Through Sanctions Act and the National Defense Authorization Act for Fiscal Year 2020), except as specifically approved by the United Nations Security Council for import, export, or reexport to or into North Korea.
9. In § 510.319(b), remove “§ 510.201(a)(3)(v)” and add in its place “§ 510.201(a)”.
10. Revise § 510.413 to read as follows:
Significant activity or activities; significant transaction(s); significant financial service(s).
In determining, for purposes of §§ 510.201(a) and 510.210, whether an activity or activities, transaction(s), or financial service(s) are significant, the Secretary of the Treasury or the Secretary's designee may consider the totality of the facts and circumstances. As a general matter, the Department of the Treasury may consider some or all of the following factors:
(d) Nexus. The proximity between the foreign financial institution engaging in the activity or activities, transaction(s), or financial service(s) and North Korea or a person blocked pursuant to § 510.201, a person sanctioned pursuant to § 510.210, or trade with North Korea.
(1) The economic or other benefit conferred or attempted to be conferred on North Korea or a person blocked pursuant to § 510.201, or sanctioned pursuant to § 510.210; and
11. Revise § 510.802 to read as follows:
Any action that the Secretary of the Treasury is authorized to take pursuant to Executive Order 13466 of June 26, 2008, Executive Order 13551 of August 30, 2010, Executive Order 13570 of April 18, 2011, Executive Order 13687 of January 2, 2015, Executive Order 13722 of March 15, 2016, Executive Order 13810 of September 20, 2017, and any further Executive orders relating to the national emergency declared in Executive Order 13466 of June 26, 2008, and any action that the Secretary of the Treasury is authorized to take pursuant to Presidential Memorandum of May 18, 2016: Delegation of Certain Functions and Authorities under the North Korea Policy Enhancement Act of 2016, Presidential Memorandum of September 29, 2017: Delegation of Certain Functions and Authorities under the Countering America's Adversaries Through Sanctions Act of 2017, the Ukraine Freedom Support Act of 2014, and the Support for the Sovereignty, Integrity, Democracy, and Economic Stability of Ukraine Act of 2014, and Presidential Memorandum of February 21, 2020: Delegation of Certain Functions and Authorities under the Start Printed Page 20163National Defense Authorization Act for Fiscal Year 2020, may be taken by the Director of OFAC or by any other person to whom the Secretary of the Treasury has delegated authority so to act.
[FR Doc. 2020-07497 Filed 4-9-20; 8:45 am]