North Korea: Legislative Basis for U.S. Economic Sanctions
Released: 2018-06-11T00:00:00

Background

The United States imposes economic sanctions on North Korea for activities related to weapons proliferation, particularly its pursuit of nuclear weapons capability and a missile delivery system; regional disruptions; narcotics trafficking; undemocratic governance; and illicit activities in international markets, including money laundering, counterfeiting of goods and currency, and bulk cash smuggling. The entirety of North Korea is identified by the United States as a "jurisdiction of money laundering concern," which makes DPRK-origin or DPRK-related transactions to or through the U.S. financial system off limits. And the Government of North Korea is designated as a state sponsor of acts of international terrorism, which quashes most U.S. foreign aid, trade, investment, and support in international financial institutions.

United States law has been applied to North Korea in the following ways in response to the North Korean government's objectionable activities:

North Korea poses a threat to U.S. national security because of "the current existence and risk of the proliferation of weapons-usable fissile material on the Korean Peninsula," as declared by President George W. Bush on June 26, 2008, under the terms of the National Emergencies Act (NEA) and the International Emergency Economic Powers Act (IEEPA); North Korea is cited by the United Nations Security Council for its nuclear weapons and ballistic missiles pursuits, withdrawal from the Treaty on the Non-Proliferation of Nuclear Weapons, and contribution to regional tensions; the United States meets the requirements as a member state of the United Nations pursuant to the United Nations Participation Act of 1945 to implement sanctions adopted by the U.N. Security Council; North Korea committed an unprovoked attack that resulted in the sinking of a South Korean naval vessel, Cheonan ; announced a new nuclear test and missile launches in 2009; and engaged in money laundering, counterfeiting of goods and currency, bulk cash smuggling, and narcotics trafficking, all in violation of U.N. Security Council Resolutions, leading President Barack Obama to expand the national emergency in 2010, 2011, 2015, and 2016. President Donald Trump, in 2017, cited the "provocative, destabilizing, and repressive actions and policies of the Government of North Korea"; its intercontinental ballistic missile launches; its nuclear tests; violation of Security Council resolutions; and human rights abuses to continue the national emergency and impose additional sanctions. North Korea is a Marxist-Leninist state, with a Communist government, and stated as such in the Export-Import Bank Act of 1945, as amended, and further restricted under the Foreign Assistance Act of 1961; North Korea has engaged in proliferation of weapons of mass destruction, the State Department finds pursuant to the Arms Export Control Act; Export Administration Act of 1979; Iran, North Korea, and Syria Nonproliferation Act of 2000; and a national emergency declared by President George H. W. Bush relating to the proliferation of such weapons; North Korea is not cooperating fully with U.S. antiterrorism efforts, the State Department has determined, under terms of the Arms Export Control Act; North Korea has detonated a nuclear explosive device, President George W. Bush has determined, pursuant to the Arms Export Control Act, the Atomic Energy Act, and the Export-Import Bank Act of 1945; and North Korea engaged in "provocative, destabilizing, and repressive actions and policies," including "destructive, coercive cyber-related actions during November and December 2014," actions in violation of a multitude of U.N. Security Council resolutions, and commission of serious human rights abuses.

At the President's discretion, North Korea also could be subject to economic sanctions provided in three provisions of law addressing human rights conditions: the Foreign Assistance Act of 1961, the International Religious Freedom Act of 1998, and the Trafficking Victims Protection Act of 2000.

The United States' concerns about North Korea's pursuit of nuclear weapons capability emerged in the 1980s when that country's nuclear weapons program became apparent. In the 1990s, the two countries negotiated and signed (in 1994) an Agreed Framework to freeze North Korea's plutonium-based nuclear energy program and provide heavy fuel oil until light-water reactors could be brought online, all funded to varying degrees by the European Union, Japan, South Korea, and the United States. Through the late 1990s, the United States and North Korea engaged in negotiations, initially to curtail missile tests and expanded to include differences on nuclear weapons and international terrorism. In October 2002, it came to light in negotiations between U.S. and North Korean government officials that North Korea was pursuing a uranium-based nuclear weapons capability. Diplomacy over North Korea's nuclear weapons program then entered a new phase; the Agreed Framework was abandoned and the United States, North Korea, South Korea, China, Japan, and Russia convened a new forum—the Six Party Talks, which held its first negotiations in August 2003. Despite several steps forward, including the United States ending decades-long sanctions imposed at the outset of the 1950-1953 conflict and its delisting of North Korea as a supporter of international terrorism, the Six Party Talks collapsed in late 2008.

During this period and through 2017, North Korea has engaged in a number of acts that the international community deems provocative. It has tested short-, mid-, and long-range ballistic missiles since mid-2006, with varying degrees of success, abrogating a moratorium it complied with since 1998. In early 2009, North Korea began to test satellite launches, contrary to U.N. Security Council restrictions, and may have succeeded in placing a satellite in orbit in 2012. Most recently, it has tested missile launches from under the sea.

On October 9, 2006, May 25, 2009, February 12, 2013, January 6, 2016, September 9, 2016, and again on September 3, 2017, North Korea reported that it had detonated a nuclear explosive device. The international community responded to the missile tests and nuclear detonations by taking the issue to the U.N. Security Council, which adopted resolutions that condemned the weapons tests and called on member states to impose economic sanctions.

On March 26, 2010, a South Korean Navy ship, the Cheonan , was struck by a torpedo while sailing in the West Sea. The ship sank and 46 crew members were killed. The South Korean Ministry of National Defense formed a Civilian-Military Joint Investigation Group—with participants from five other nations including the United States—which found that the Cheonan was torpedoed by a North Korean submarine. North Korea denied involvement. The U.N. Security Council, in a presidential statement, condemned the attack, and acknowledged both the findings of the Investigation Group and the disavowal by North Korea.

President Obama assigned responsibility to North Korea for the sinking of the Cheonan when, on August 30, 2010, he announced he was expanding the scope of the national emergency declared in 2008, and the United States was taking additional steps to curtail economic activity with North Korea:

the continued actions and policies of the Government of North Korea, manifested most recently by its unprovoked attack that resulted in the sinking of the Republic of Korea Navy ship Cheonan and the deaths of 46 sailors in March 2010; its announced test of a nuclear device and its missile launches in 2009; its actions in violation of UNSCRs 1718 and 1874, including the procurement of luxury goods; and its illicit and deceptive activities in international markets through which it obtains financial and other support, including money laundering, the counterfeiting of goods and currency, bulk cash smuggling, and narcotics trafficking, destabilize the Korean peninsula and imperil U.S. Armed Forces, allies, and trading partners in the region, and thereby constitute an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States.

President Obama's explicit identification of all features of North Korea's objectionable behavior constituting the threat is unusual compared to other invocations of his IEEPA authorities. The statute requires only that the President find that a threat to U.S. national security, foreign policy, or economy exists, and that its source is "in whole or substantial part outside the United States." The President identified North Korea's attack of the Cheonan and other acts of regional destabilization, pursuit of weapons of mass destruction and the means to deliver them, noncompliance with U.N. requirements, money laundering, counterfeiting, smuggling, and narcotics trafficking as compounding the threat. To this list, the President added, in January 2015, "cyber-related actions ... and commission of serious human rights abuses," the latter a nod to ground-breaking efforts in December 2014 in the United Nations General Assembly to refer reports of human rights atrocities in North Korea's prison system to both the U.N. Security Council and the International Criminal Court. Justifying the declaration of the emergency based on these wide-ranging activities accomplishes a number of goals:

It confirms the United States' full support of and participation in implementation of the U.N. Security Council resolutions. It provides a clear list of concerns members of the U.S. diplomatic corps might raise and emphasize when speaking with North Korea's trading partners and benefactors. It states indisputable goals for North Korea to strive toward, meet, and surpass.

It should be noted, however, that each of these forms of objectionable behavior likely would be grounds, under current law, for restricting trade, aid, arms sales, and access to assets even if the national emergency were to be revoked.

U.S. Economic Sanctions Currently in Place

United States economic sanctions imposed on North Korea, as a result both of requirements in U.S. law and decisions made in the executive branch to exercise discretionary authorities, have the following impact:

Trade is limited to food, medicine, and other humanitarian-related goods, all of which require a license. Imports from North Korea are prohibited as of June 2011; exports to North Korea of most U.S.-origin goods, services, or technology are prohibited as of March 2016. U.S. persons are further prohibited from engaging in transactions with the Government of North Korea or the Workers' Party of Korea related to trade in metal, graphite, coal, or software. Trade in luxury goods is banned. The Department of Commerce denies export licenses for reasons of nuclear proliferation, missile technology, U.N. Security Council requirements, and international terrorism. Using a North Korea-flagged vessel for any transaction is prohibited. Arms sales and arms transfers are fully denied. Financial transactions are prohibited . U.S. persons are prohibited from providing financial services for the purpose of evading sanctions, or from providing financial services to a person or entity designated for sanctions. The President, in September 2017, authorized the Secretary of the Treasury to designate for sanctions any foreign financial institution that conducts or facilitates "any significant transaction on behalf of any [designated] person," or "in connection with trade with North Korea." North Korea is designated as a jurisdiction of primary money laundering concern by the Department of the Treasury's Financial Crimes Enforcement Network (FinCEN), effective December 9, 2016. FinCEN had issued advisories and warnings about North Korea's deceptive and illicit banking practices as early as 2005. This rule is subject to review by the U.S. financial sector and other departments of the U.S. government. If FinCEN's recommendations are adopted, U.S. banks will be prohibited from providing U.S. correspondent accounts to third-country banks to process transactions for North Korean financial institutions. U.S. new investment is prohibited , and investment in North Korea's transportation, mining, energy, or financial sectors is prohibited. North Korea is also ineligible to participate in any U.S. government program that makes credit, credit guarantees, or investment guarantees available. U.S. f oreign aid is minimal and mostly limited to refugees fleeing North Korea; broadcasting into the country; nongovernmental organization programs dedicated to democracy promotion, human rights, and governance; and emergency food aid. In past years, aid related to disabling and dismantling the country's nuclear weapons program has been made available. By law, U.S. representatives in the international financial institutions (IFI) are required to vote against any support for North Korea due to its nuclear weapons ambitions and international terrorism. Human rights and environmental activities would also likely result in U.S. objections to North Korea's participation in the IFI. U.S.-based assets are blocked for North Korean individuals, entities, and vessels designated by the Department of the Treasury's Office of Foreign Assets Control (OFAC). U.S. persons are prohibited from entering into trade and transaction with these designees and, most recently, foreign financial institutions could become subject to U.S. sanctions for facilitating transactions for designated persons. Kim Jong-un, the Korean Workers' Party, and others —banks, shipping companies, seagoing vessels, state agencies, and other individuals affiliated with the state's security regime—are identified as being among those engaged in illicit and punishable activities, possibly including nuclear or ballistic missile programs, undermining cybersecurity, censorship, and sanctions evasion. As a result, effective March 15, 2016, any of their assets under U.S. jurisdiction are frozen, and U.S. persons and entities are prohibited from entering into trade and transactions with the designees. U.S. travel requires a special validation passport issued by the State Department. Such passports are reserved only for travel in the U.S. national interest and are intended for professional reporters, officials with the American Red Cross or International Committee of the Red Cross, or those who have a "compelling humanitarian" justification.

The U.S. sanctions are a result of requirements incorporated into U.S. law by Congress, decisions made in the executive branch to exercise discretionary authorities, and obligations placed on the United States, as a member state of the United Nations, by the U.N. Security Council. Economic sanctions may restrict or prohibit all manner of bilateral relationships, but broadly can be categorized as impeding aid, trade, travel, and the finances related to these activities. Three Executive Branch Departments—State, Commerce, and Treasury—together have the lion's share of responsibilities to administer the restrictions affecting these activities.

Trade

The United States curtails trade with North Korea for reasons of regional stability, that country's support for acts of international terrorism, lack of cooperation with U.S. antiterrorism efforts, proliferation, and its status as a Communist country and a nonmarket economy. The United States also prohibits transactions relating to trade with certain North Korean entities identified as those who procure luxury goods, launder money, smuggle bulk cash, engage in counterfeiting goods and currency, and traffic in illicit narcotics.

National Emergency Because of Threat to U.S. National Security

Trade with North Korea is significantly restricted because of that country's demonstrated pursuit of nuclear weapons and the means to deliver them. In addition, the Department of Commerce has treated North Korea a s a state sponsor of international terrorism, even in the period that the North Korean government was removed from the terrorism list, from mid-2008 through most of 2017. Secretary of State Rex Tillerson redesignated the Government of North Korea as a state sponsor of international terrorism in late 2017.

Commerce's primary means of controlling exports is through the administration of Export Administration Regulations (EAR), in which goods to be controlled for a variety of reasons—national security, foreign policy, short supply, or compliance with international agreements, to name a few—are categorized. Recipient countries are also characterized, from allies for which little licensing is required, to rogue states for which export licensing is all but completely denied. Commerce identifies North Korea among the most restricted trade destinations—Country Group E:1, Terrorist Supporting Countries—which severely limits its access to computers, software, national security-controlled items, items on the Commerce Control List (CCL), and service or repair of such items. A U.S. exporter intending to ship any goods subject to the Export Administration Regulations (EAR), except for food and medicine not on the CCL, is required to obtain an export license.

Commerce also identifies North Korea in the most restrictive country group—Country Group E. U.S. exports to countries in Group E are restricted for reasons of international terrorism. As a result, U.S. exporters are likely to be denied licenses to export any controlled item if North Korea is the destination. In June 2007, Commerce eased licensing requirements so that food, medicine, and humanitarian assistance items could be made available, but at the same time imposed new licensing prohibitions on the export and reexport of luxury goods to implement the terms of U.N. Security Council Resolution 1718.

Thus, a U.S. company may apply for a license to export to North Korea, but for nearly all items other than food and medicine, there is a presumption of denial. The EAR identify license exceptions; those wishing to export to North Korea, however, are not eligible for these exceptions except in highly circumscribed instances.

The Office of Foreign Assets Control, within the Department of the Treasury, must approve any U.S. importation from North Korea, and weighs all requests in the context of proliferation, money laundering, counterfeiting, bulk cash smuggling, narcotics trafficking, international terrorism, or other illicit economic activity, and who in North Korea might profit. Any transfer involving the Government of North Korea, any senior DPRK government official, or a DPRK person or entity designated as a Specially Designated National pursuant to any of the series of executive orders relating to North Korea, to a person under U.S. jurisdiction is prohibited. The President, in Executive Order 13570 of April 18, 2011, stated the following:

Except to the extent provided in statutes or in licenses, regulations, orders, or directives that may be issued pursuant to this order, and notwithstanding any contract entered into or any license or permit granted prior to the date of this order, the importation into the United States, directly or indirectly, of any goods, services, or technology from North Korea is prohibited.

United States persons are also prohibited from registering a vessel in North Korea; obtaining authorization to fly the North Korean flag on a vessel; or owning, leasing, operating, or insuring any vessel so flagged.

Terrorism

The Government of North Korea is designated as a state sponsor of acts of international terrorism under several statutes governing U.S. export policy, arms trade, and foreign assistance.

Most elements of trade, Beneficiary Developing Country status, sales of items on the U.S. Munitions List, most foreign aid, Export-Import Bank funding, and support in international financial institutions are denied to countries found to be supporting international terrorism under the Export Administration Act of 1979. North Korea was added to the list effective January 20, 1988. Placement on the Section 6(j) list not only results in the constriction of trade possibilities; placement also may trigger denial of beneficial trade designation (NTR or GSP), unfavorable tax status for investors, new limits on diplomatic relations, opposition in international financial institutions, and stricter licensing requirements for trade with the United States in food and medicine.

North Korea is also among those countries listed as being in violation of Section 40A of the Arms Export Control Act, which prohibits the selling or licensing of defense articles or defense services to any country that the President finds "is not cooperating fully with United States antiterrorism efforts." The President is required to make such a determination annually, and the prohibition may be waived on grounds that it is in the national interest to do so.

Nonmarket Economy

The Trade Agreement Extension Act of 1951 required the suspension of Most-Favored-Nation trade status (MFN, which is now known as Normal Trade Relations [NTR]) for all Communist countries except Yugoslavia. As a result, North Korea was denied MFN trade status on September 1, 1951.

North Korea remains listed in the headnotes of the Harmonized Tariff Schedule of the United States (HTSUS) as a Rate of Duty Column 2 country (along with Cuba). As a result, while trade is not prohibited with North Korea under the relevant trade laws, tariffs are set at the highest rates for imports from that country. A side result of being denied MFN or NTR status is that any such country is also denied preferential trade treatment under the Generalized System of Preferences (GSP), pursuant to the Trade Act of 1974. As a nonmarket economy found to deny its citizens the right or opportunity to emigrate, North Korea is not eligible to participate in any U.S. government program that makes credit, credit guarantees, or investment guarantees available, nor may the President enter into any commercial agreement with the country.

Proliferator

On several occasions, North Korean entities have been found to be in violation of U.S. missile nonproliferation laws. Once a finding is made, the imposition of sanctions is mandatory, though sanctions may be waived if the President finds it "essential to the national security of the United States" to do so. The severity of the sanction depends on the type of material or technology transferred. The duration of the sanction also depends on the material or technology involved; generally sanctions are imposed for two years or more.

Sanctions include, at a minimum, a denial of contracts with agencies of the U.S. government, denial of licenses for items on the U.S. Munitions List (USML), and, at a maximum, a denial of all licenses for importing into the United States for the foreign person or entity.

Because North Korea is a nonmarket economy, all relevant activities of the Government of North Korea are also sanctioned when entities in North Korea are found to have engaged in proliferation under U.S. law.

With the nuclear weapons test of October 8, 2006, President Bush exercised the authority granted his office to cut off all foreign aid except humanitarian and food aid, deny sales or transfers of defense articles and defense services, deny export licenses for items on the USML, deny foreign military financing, deny credit underwritten or provided by government coffers, withhold U.S. support in the international financial institutions, deny export licenses for dual-use items, and withhold Export-Import Bank support. At the time, the United States already maintained a fairly comprehensive sanctions regime on North Korea, thus most of these relationships were already broken or limited.

Access to Landing or Ports

President Trump, in Executive Order 13810 of late 2017, determined that "no aircraft in which a foreign person has an interest that has landed" in North Korea would be permitted to land in the United States within 180 days from its departure from North Korea. Seagoing vessels are similarly restricted. The order allows for completion of standing contracts.

Aid

Terrorism

Because the Secretary of State has identified the Government of North Korea as a state sponsor of acts of international terrorism, it is denied most aid under the Foreign Assistance Act of 1961. North Korea's access to U.S. foreign assistance is also limited in annual foreign operations appropriations measures. In most instances, it is not expressly stated that the restriction or prohibition is associated with North Korea's place on the terrorist list. Even if the appropriations law prohibits the availability of foreign aid, there are numerous exceptions to the law. Thus, programs in nonproliferation, demining, child survival, conservation and biodiversity, food aid, debt buybacks, health and disease prevention, unanticipated contingencies, international disaster assistance, and antiterrorism may be funded or supported in spite of country-specific restrictions.

Under the Department of State, Foreign Operations, and Related Programs Appropriations Act, North Korea is generally denied direct foreign aid, economic support funds (ESF) for energy-related programs, and direct loans, credits, insurance and guarantees of the Export-Import Bank. The prohibitions on direct foreign aid to North Korea also make that country ineligible for Millennium Challenge Account programs.

At the President's discretion, North Korea is also subject to the economic sanctions provided in three provisions of law addressing human rights conditions: the Foreign Assistance Act of 1961, under which North Korea is annually castigated for its human rights record; the International Religious Freedom Act of 1998, under which the administration has identified North Korea as a "country of particular concern" since 2001; and the Trafficking Victims Protection Act of 2000, under which the administration has, since 2003, classified North Korea as a Tier 3 (most severe) offender of standards pertaining to the trafficking of persons for slavery or sex trade. Because of North Korea's failure to comply with minimum standards relating to trafficking in persons, President Obama, in 2010, strengthened the sanctions against North Korea to deny foreign assistance and also to deny "funding for participation by officials or employees of such governments in educational and cultural exchange programs for the subsequent fiscal year." Any sanctions imposed pursuant to these acts would be largely redundant, however, with penalties already prescribed to North Korea for the above-stated reasons.

Under Department of Defense Appropriations, 2018, North Korea is denied assistance under that act "unless specifically appropriated for that purpose."

Nonmarket Economy

The Export-Import Bank Act of 1945 singles out Marxist-Leninist countries for denial of guarantees, insurance, credit, or other Bank funding programs. North Korea is specifically cited as a Marxist-Leninist country for purposes of the Export-Import Bank.

The Foreign Assistance Act of 1961 denies most nonhumanitarian foreign assistance to any Communist country. North Korea is among five countries so designated, though the law is not limited to those countries named.

Several laws deny benefits or assistance to Communist countries, but do not explicitly name any particular state. Because North Korea has been denied such benefits or aid in the course of the events of the early 1950s and thereafter, these other sections of law would probably be redundant if applied to or cited for North Korea.

In some instances, the President may determine that, for purposes of a particular law, North Korea is no longer a "Marxist-Leninist state." If, however, all other aspects of the U.S.-North Korea relationship were to improve, it would probably be necessary for Congress to remove North Korea from the list set out in the Export-Import Bank Act and the Foreign Assistance Act of 1961, or necessary for the President to exercise waiver authority made available to his office under those acts, to make these other laws inapplicable to North Korea.

Arms Sales and Arms Transfers

The International Traffic in Arms Regulations (ITAR), administered by the Department of State, begins "It is the policy of the United States to deny licenses and other approvals for exports and imports of defense articles and defense services, destined for or originating in certain countries." Reasons include requirements of the U.N. Security Council, terrorism, and policies that include arms embargoes and sanctions. Countries broadly restricted for arms trade include Belarus, Burma, China, Cuba, Iran, North Korea, Syria, and Venezuela.

The first ITAR was issued on August 26, 1955; North Korea has been listed as a restricted country from the ITAR's inception. North Korea is also restricted under ITAR as the United States denies North Korea conventional arms to comply with U.N. Security Council requirements.

Importing of defense articles and defense services is similarly restricted by the Department of Justice's Bureau of Alcohol, Tobacco, Firearms, and Explosives, the regulations of which state the following:

It is the policy of the United States to deny licenses and other approvals with respect to defense articles and defense services originating in certain countries or areas. This policy applies to Afghanistan, Belarus (one of the states composing the former Soviet Union), Cuba, Iran, Iraq, Libya, Mongolia, North Korea, Sudan, Syria, and Vietnam. This policy applies to countries or areas with respect to which the United States maintains an arms embargo (e.g., Burma, China, the Democratic Republic of the Congo, Haiti, Liberia, Rwanda, Somalia, Sudan, and UNITA (Angola)). It also applies when an import would not be in furtherance of world peace and the security and foreign policy of the United States.

Again, the President has the authority to change these regulations by removing North Korea from the list of restricted countries.

Access to Assets

Declaration of National Emergency

On June 26, 2008, when the Six Party Talks appeared to be making progress, President Bush determined it was no longer in the national interest to continue certain restrictions imposed on trade and transactions with North Korea, in place since 1950. At the same time, however, he found that

… the current existence and risk of the proliferation of weapons-usable fissile material on the Korean Peninsula constitute an unusual and extraordinary threat to the national security and foreign policy of the United States, and I hereby declare a national emergency to deal with that threat. I further find that, as we deal with that threat through multilateral diplomacy, it is necessary to continue certain restrictions with respect to North Korea that would otherwise be lifted pursuant to a forthcoming proclamation that will terminate the exercise of authorities under the Trading With the Enemy Act…. Accordingly, I hereby order… the following are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in:

all property and interests in property of North Korea or a North Korean national that … were blocked as of June 16, 2000, and remained blocked immediately prior to the date of this order.

United States persons may not register a vessel in North Korea, obtain authorization for a vessel to fly the North Korean flag, or own, lease, operate, or insure any vessel flagged by North Korea.

In a series of executive orders, the Presidents in succession have used the national emergency to block access to assets of designated individuals and entities:

Executive Order 13466 of June 26, 2008 (President Bush; 73 F.R. 36787)—continuing the block of assets that were blocked as of June 16, 2000; Executive Order 13551 of August 30, 2010 (President Obama; 75 F.R. 53837)—blocking assets of Kim Yong Chol, and the entities Green Pine Associated Corporation, Reconnaissance General Bureau, and Office 39; Executive Order 13570 of April 18, 2011 (President Obama; 76 F.R. 22291)—to prohibit the import of goods, services, or technology form North Korea; Executive Order 13687 of January 2, 2015 (President Obama; 81 F.R. 14943)—blocking assets that come under U.S. jurisdiction of any agency, instrumentality, or controlled entity of the North Korean government or the Workers' Party of Korea, or any official of those entities; those found to materially support transactions with or act on behalf of those blocked entities; Executive Order 13722 of March 15, 2016 (President Obama; 81 F.R. 14943)—blocking property and interests in property that come under U.S. jurisdiction of the Government of North Korea, the Workers' Party of Korea, and designated entities that operate in DPRK's transportation, mining, energy, or financial services sectors (or other sectors as designated). Designees include Kim Jong-un; and Executive Order 13810 of September 20, 2017 (President Trump; 82 F.R. 44705)—blocking property and interests in property that come under U.S. jurisdiction of designated persons and entities that operate in the DPRK's "construction, energy, financial services, fishing, information technology, manufacturing, medical, mining, textiles, or transportation industries"; persons who own, control, or operate any of North Korea's sea-, land-, or airports; or those who generate income for the government or Workers' Party.

Generally, the President has the authority to change regulations, as long as those changes meet the requirements of any relevant law. He must also annually revisit his declaration of a state of national emergency; it expires if the President does not renew it. He could allow the declaration to expire, or he could lift it at any time. And Congress could terminate a declaration of national emergency by passing a joint resolution under terms of the National Emergencies Act.

Proliferation of Weapons of Mass Destruction

On June 28, 2005, President George W. Bush expanded the authority granted his office to address the threat posed by the proliferation of weapons of mass destruction—authority first exercised by President George H. W. Bush in 1990—to freeze assets and property of those engaged in the proliferation of weapons of mass destruction. The 41 st President had declared that the United States faced a national emergency relating to weapons proliferation (in the absence, at the time, of a reauthorized Export Administration Act), and thus took steps in 1990 to control the exports of certain goods and services, and authorized a ban on foreign aid and credit, procurement contracts, imports and exports, support in international financial institutions, and landing rights. Fifteen years later, the 43 rd President's executive order took additional steps to block property and assets under U.S. jurisdiction of any person found, in part

... to have engaged, or attempted to engage, in activities or transactions that have materially contributed to, or pose a risk of materially contributing to, the proliferation of weapons of mass destruction or their means of delivery (including missiles capable of delivering such weapons), including any efforts to manufacture, acquire, possess, develop, transport, transfer or use such items, by any person or foreign country of proliferation concern;

... to have provided, or attempted to provide, financial, material, technological or other support for, or goods or services in support of, any activity or transaction described [above] ... or any person whose property and interests in property are blocked pursuant to this order ...

At its outset, Executive Order 13382 identified eight foreign entities as contributors to proliferation, of which three were North Korean. The Office of Foreign Assets Control subsequently added North Korean entities and individuals to this restricted list; of the 294 entities and individuals designated as weapons proliferators, 37 are cited as located in DPRK. In the same findings, OFAC identified entities operating out of Switzerland, Iran, China, South Korea, Russia, Sudan, Syria, United Arab Emirates, Venezuela, Belgium, and Belarus as entities engaging in WMD proliferation.

Counterfeiting and Money-Laundering

Banco Delta Asia

On September 12, 2005, the Department of the Treasury found that Banco Delta Asia—a Macau-based bank in which North Korea had holdings of more than $ U.S. 50 million—was a "financial institution of primary money laundering concern." The Treasury Department's Financial Crimes Enforcement Center (FinCEN) found that North Korea may reap as much as $500 million annually from counterfeiting, and another $100 million to $200 million annually from narcotics trafficking. The finding authorizes the Secretary of the Treasury to require "special measures" on the part of U.S. financial institutions and financial agencies that involve increased record keeping and reporting on Banco Delta Asia's transactions. Treasury issued a final rule, effective April 18, 2007, to impose the most stringent fifth special measure—to prohibit certain bank transactions—and issued regulations to implement the rule. The finding and initial proposed rulemaking had a chilling effect on Banco Delta Asia's international business relations. Department of the Treasury officials testified that

some two dozen financial institutions across the globe have voluntarily cut back or terminated their business with North Korea, notably including institutions in China, Japan, Vietnam, Mongolia, and Singapore. The result of these voluntary actions is that it is becoming very difficult for the Kim Jong-Il regime to benefit from its criminal conduct.

North Korea's funds held in Banco Delta Asia were released in 2007.

Access to the U.S. Financial System

Money Laundering Concern Determined in 2016

Congress called on the Secretary of the Treasury, in consultation with the Secretary of State and Attorney General, to determine not later than mid-August 2016 "whether reasonable grounds exist for concluding that North Korea is a jurisdiction of primary money laundering concern." On May 27, 2016, Treasury's Acting Director of FinCEN found that such reasonable grounds exist. In December 2016, FinCEN finalized a rule that prohibits U.S. banks from providing U.S. correspondent accounts to third-country banks to process transactions for North Korean financial institutions. The Department of the Treasury, on announcing the finding, noted the following:

While current U.S. law already generally prohibits U.S. financial institutions from engaging in both direct and indirect transactions with North Korean financial institutions, this NPRM [notice of proposed rulemaking], if finalized, would require U.S. financial institutions to implement additional due diligence measures in order to prevent North Korean banking institutions from gaining improper indirect access to U.S. correspondent accounts. While North Korea's financial institutions do not maintain correspondent accounts with U.S. financial institutions, North Korean financial institutions frequently conduct transactions on behalf of the North Korean government and state-controlled corporations. The NPRM, if finalized, would prohibit the use of third-country banks' U.S. correspondent accounts to process transactions for North Korean financial institutions.

Other Actions Related to Money Laundering

President Obama also addresses money laundering and counterfeiting in Executive Order 13551 as one of North Korea's many objectionable behaviors to be deterred. The order requires the access to property and interests in property be blocked for any individual or entity identified by the Secretary of the Treasury to have, directly or indirectly

imported, exported, or reexported to, into, or from North Korea any arms or related materiel; provided training, advice, or other services or assistance, or engaged in financial transactions, related to the manufacture, maintenance, or use of any arms or related materiel to be imported, exported, or reexported to, into, or from North Korea, or following their importation, exportation, or reexportation to, into, or from North Korea; imported, exported, or reexported luxury goods to or into North Korea; engaged in money laundering, the counterfeiting of goods or currency, bulk cash smuggling, narcotics trafficking, or other illicit economic activity that involves or supports the Government of North Korea or any senior official thereof; materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, prohibited activities or any person whose property and interests in property are blocked; or be owned or controlled by, or to have acted or purported to act for or on behalf of, any person whose property and interests in property are blocked.

Targeting Foreign Financial Institutions

In September 2017, President Trump authorized the Secretary of the Treasury to "prohibit the opening and impose strict conditions on the maintenance of correspondent accounts or payable-through accounts in the United States" of any foreign financial institution found to have "conducted or facilitated any significant transaction on behalf of any person" already designated for U.S. sanctions, or to have conducted or facilitated such a transaction related to trade with North Korea. In addition, the U.S.-based assets of any foreign financial institution found to engage in such transactions are to be blocked.

Sanctions Required by the United Nations

U.N. Security Council Resolutions—10 have been adopted between 2006 and September 2017—that form the requirements of the U.N. member states often incrementally clarify, expand on, enhance, or strengthen the previous U.N. actions. Resolutions, however, are not revoked until the problem at hand is resolved, nor are they amended (with a few exceptions).

U.N. Security Council resolutions also establish considerable opportunity for member states to appeal to the Sanctions Committee—established to implement the DPRK resolutions with representatives from each of the 15 Security Council states—for an exception prior to executing a transaction. Overall, the Security Council has sought to protect DPRK's civilian population from the consequences of economic sanctions. UNSCR 2371 (2017), agreed to in August 2017, for example, provides the following:

[The United Nations Security Council] Reaffirms that the measures imposed by resolutions 1718 (2006), 1874 (2009), 2087 (2013), 2094 (2013), 2270 (2016), 2321 (2016), 2356 (2017), and this resolution are not intended to have adverse humanitarian consequences for the civilian population of the DPRK or to affect negatively or restrict those activities, including economic activities and cooperation, food aid and humanitarian assistance, that are not prohibited by resolutions..., and the work of international and non-governmental organizations carrying out assistance and relief activities in the DPRK for the benefit of the civilian population of the DPRK and decides that the Committee may, on a case-by-case basis, exempt any activity from the measures imposed by these resolutions if the committee determines that such an exemption is necessary to facilitate the work of such organizations in the DPRK or for any other purpose consistent with the objectives of these resolutions, and further decides that the measures specified in paragraph 8 (d) of resolution 1718 (2006) shall not apply with respect to financial transactions with the DPRK Foreign Trade Bank or the Korea National Insurance Corporation if such transactions are solely for the operation of diplomatic or consular missions in the DPRK or humanitarian assistance activities that are undertaken by, or in coordination with, the United Nations....

Similar language to exempt humanitarian activities is provided in each resolution, and such exemptions are stated throughout each resolution but tailored to particular kinds of transactions.

The Sanctions Committee of the Security Council may designate entities, individuals, vessels, and aircraft to be subject to economic sanctions at any time. In addition, beginning in 2013, the Security Council added annexes to resolutions to name designees, as well as to make the ban on exporting luxury goods to DPRK more explicit, and to define goods and services with military applications that are also subject to an export prohibition.

Currently, the United Nations requires its member states to restrict trade and engagement with North Korea as follows:

The U.N. Sanctions Committee, originally established by UNSC Resolution 1718 (2006) and comprising representatives of each of the 15 states serving on the Security Council, to date, has designated 75 North Korean entities and 80 individuals for sanctions that target their foreign-based assets, freedom to enter into trade and contracts, and ability to travel, as required in the various resolutions. Designees appear to span a range of activities, including trade and development related to missiles, satellites, aerospace, munitions, energy, mining, space technology, shipping, and electronics. Pursuant to Resolution 1874 (2009), the U.N. Secretary-General established a Panel of Experts, with a maximum of seven experts, to analyze reports and make recommendations regarding implementation of UNSC Resolutions against North Korea.

Concluding Observations

The U.S. economic sanctions imposed on North Korea exemplify both the independent and intertwined aspects of the relationship between the legislative and executive branches. Congress defers the broadest power to the President, in the National Emergencies Act and the International Emergency Economic Powers Act, to curtail trade and transactions between the United States and North Korea. Congress authorizes the President to fine-tune the relationship with North Korea for foreign policy and national security reasons with each waiver authority it incorporates into legislation. At the same time, Congress closely influences the President's choices by enacting issue-driven legislation—addressing human rights matters or proliferation concerns, for example—and by adopting North Korea-specific statutes—most particularly the North Korean Human Rights Act of 2004 ( P.L. 108-333 ), the North Korean Human Rights Reauthorization Act of 2008 ( P.L. 110-346 ), the North Korea Sanctions and Policy Enhancement Act of 2016 ( P.L. 114-122 ), the Korean Interdiction and Modernization of Sanctions Act (title III of the Countering America's Adversaries Through Sanctions Act; P.L. 115-44 ), and the inclusion of North Korea into the Iran, North Korea, and Syria Nonproliferation Act of 2000 ( P.L. 106-178 ).

As Congress and the President consider proposals to reform foreign aid, streamline export controls, fund defense and international programs, keep proliferation regimes relevant, assess and enter into treaties and international agreements, and participate in multilateral fora, the effectiveness of economic sanctions as a foreign policy and national security tool is likely to be considered. U.S. policy toward North Korea, expressed both unilaterally and in the United States' position in multilateral fora, is further complicated by other considerations—not the least of which include relations with other states in the region, security responsibilities with South Korea and Japan, trade with China, a determination to keep key stakeholders engaged in nonproliferation efforts in both North Korea and elsewhere, and finding the means to balance all U.S. foreign policy and national security interests in a meaningful way.

Appendix A. North Korea—Economic Sanctions Currently Imposed in Furtherance of U.S. Foreign Policy or National Security Objectives

Appendix B. DPRK Sanctions: Comparison of U.N. Security Council Requirements and U.S. Sanctions