Archive for the ‘North Korea Sanctions’ Category


Feb

1

Leaving on a Jet Plane (for Masikryong)


Posted by at 9:32 am on February 1, 2018
Category: BISNorth Korea SanctionsOFAC

Joint Press Corps vihttp://koreajoongangdaily.joins.com/news/article/article.aspx?aid=3044038&cloc=joongangdaily%7Chome%7Ctop [Fair Use]The Olympics are, in theory, a time when foreign policy should be put aside and world athletes simply compete in the probably vain hope that peaceful athletic games might have a spill-over effect into the stormier regions of international relations.   That being said, UN and US sanctions have gotten tangled up in the upcoming Winter Games in South Korea.

First, the International Olympic Committee, following its checkered past, ignored UN sanctions by shipping recreational sports equipment to the Nork athletes for training.   If any of that equipment was U.S. origin, the IOC would have violated U.S. sanctions all well.  Both prohibit the export of “recreational sports equipment” to North Korea.

Recently, an obscure provision in Executive Order 13810 reared its ugly head. Section 2(a) prohibits foreign aircraft that have landed in North Korea from visiting the United States for 180 days after the aircraft has departed North Korea. When the Executive Order came out, it was hard to imagine that this would ever apply to anything.  Who flies into Nork airports that would want to later fly those planes to the United States?  But now, it turns out, the South Korean ski team had chartered an Asiana aircraft to fly to North Korea’s Masikryong Ski Resort for training with the North Korean team.  The plane would then to return to South Korea on the following day with the North Korean skiers who would remain in South Korea to participate in the Winter Games. Oops.

Apparently, according to this source, OFAC was initially reluctant to waive section 2(a) for the chartered Asiana flight, which would have pretty much put the kibosh on the flight to the joint training session. But minutes before the flight was to take off on 10:40 a.m. Wednesday time, Korea time, OFAC had a change of heart and the airplane left for North Korea.

The Bureau of Industry and Security (“BIS”) was not involved, even though BIS has said that the Airbus 321 is subject to the EAR as a result of havingU.S. origin engines which constitute more than 10 percent of the value of the aircraft. Presumably everyone felt that License Exception AVS would cover the temporary sojourn of the A321 in North Korea, even though the regulations are poorly written in this regard and do not clearly cover foreign manufactured aircraft subject to the EAR flying from a foreign country to North Korea.

License Exception AVS covers (1) foreign registered aircraft on temporary sojourn in the United States departing for foreign destinations, (2) U.S. registered aircraft departing for a temporary sojourn in a foreign destination, and (3) “[c]ivil aircraft legally exported from the United States.” Section 764.4(c)(6) says that AVS may be used for North Korea to the extent that it involves civil aircraft legally exported from the United States. Asiana’s A321 was not itself exported from the United States, although the U.S. origin engines that make the aircraft subject to the EAR were. To reach the result that AVS applies here, you have to interpret “civil aircraft legally exported from the United States” to cover aircraft where U.S. origin parts which make the aircraft subject to the EAR were legally exported, a plausible (if not certain) reading, I suppose, of that language.

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Oct

6

Squid Pro Quo: CBP May Ban Imports from Chinese Factories with Nork Workers


Posted by at 12:37 pm on October 6, 2017
Category: CBPNorth Korea Sanctions

160823-NMTC-GF-0318 by Customs and Border Protection via Flickr https://flic.kr/p/SoTFxD [Public Domain - Work of U.S. Government]Customs and Border Protection, a federal agency not particularly known for its ability to analyze legal questions and follow the law, has apparently issued a statement that it will block imports of goods which were produced with any North Korean labor even though the North Korean workers were employed outside North Korea. The agency position arises from press reports that North Korean workers were employed in seafood processing plants in China that shipped salmon, squid and cod to U.S. stores, including Walmart and ALDI.

Executive Order 13570, promulgated in 2011, prohibited “the importation into the United States, directly or indirectly, of any goods, services, or technology from North Korea.” Section 510.201(c) of OFAC’s North Korea Sanctions Regulations prohibits any and all transactions that would violate Executive Order 13570 and thereby also effectively prohibits the import of goods “from North Korea” into the United States without an OFAC license. Certainly, if the squid in question were being processed in North Korea itself, the unlicensed import of the squid into the United States would violate OFAC’s rules.

But nothing in the rules or Executive Order 13570 prohibit the import of items made by North Koreans outside North Korea.  Although the North Korean Sanctions Regulations do not define “North Korea,” Section 4(d) of the Executive Order does, and that definition therefore controls.  The Executive Order defines “North Korea” as “the territory of the Democratic People’s Republic of Korea and the Government of North Korea.” It does not define North Korea to include any location where a North Korean, who is not a member of the Nork Government, just happens to be working. An item imported from China does not magically become an item from North Korea because a private Nork citizen in China touched it somewhere along the way.

This, of course, is basic Sanctions 101 and applies to all sanctions regimes. An item made in France does not come from Iran because a private Iranian citizen is employed in the French factory that produces the item. Of course, I understand the policy reasons for not wanting to import items made with Nork slave labor in China as the wages earned by these workers simply go back into Kim Jong Un’s XXXL pockets. But a new legal framework needs to be put in place to accomplish that result.

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Copyright © 2017 Clif Burns. All Rights Reserved.
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May

16

Send 3 Bitcoins to the Norks or You’ll Never See Your Files Again!


Posted by at 9:42 pm on May 16, 2017
Category: North Korea SanctionsOFAC

Kim Jong Un Wonders What To Do With Tennis Shoes via DPRK Twitter Feed[Fair Use]Security researchers have indicated that they have found Kim Jong Un’s pawprints all over the code used for the WannaCry ransomware, stolen from the CIA vaults by Vladimi Putin’s BFFs at WikiLeaks.  This, of course, raises the question as to whether companies that got locked out of their files by the ransomware violated the U.S. sanctions on North Korea if they paid the Bitcoin ransom to free their files.

The first part of that question that needs to be answered is whether U.S. sanctions are violated just by sending money to someone in North Korea.  You can’t answer that question by looking at OFAC’s Nork sanctions regulations, because they are woefully out of date.  The provisions in the regulations prohibit dealings with blocked parties in North Korea. But Executive Order 13722, issued on March 18, 2016, prohibits the unlicensed export of services by a United States person or from the United States to North Korea.  In OFAC’s view, sending money to North Korea is an export of financial services to that country.

So obviously a Bitcoin ransom payment, if it winds up in Kim Jong Un’s hands, is a problem for U.S. persons.   It looks like most of the ransom payments made so far came from outside the United States.   What about them?  All my readers should know that OFAC takes the position that if payments are made to sanctioned countries in U.S. Dollars, that is an export of financial services from the clearing bank in the United States to the sanctioned country.  But Bitcoin payments  don’t involve any banks.  That’s the whole point.  So no problem, right?

Not so fast.   Think about how Bitcoin and the blockchain works.  Any time a payment is made it will be reflected on the blockchain of all Bitcoin transactions and will be propagated to all computers running Bitcoin software — including a massive number of computers in the United States.

All that being said, there are a few practical roadblocks between a Bitcoin ransom payment to the Norks and an OFAC investigation.  First, the Chiquita case aside, there has been a general hesitance to go after people who pay these ransoms.   To begin with, it looks bad.   What government agency wants to go after a shipping company that pays off Somali pirates to protect their crew and property even if one or more of the pirates turns out to be an SDN?  (The most OFAC has done here has been to say that payments should not be made to SDN pirates but never explained how to figure out whether the pirate is an SDN.   Do you ask him to fax you his passport before the helicopter drops the ransom money on the deck?)

Second, there are difficulties in proving the identity of persons to whom Bitcoin payments are made.  Presumably the Norks would not have been stupid enough to establish the Bitcoin wallet or wallets using traceable IP addresses and were using clean addresses for each ransom transaction.  So the de-anonmyzing of the people receiving the Bitcoin payments would rely on vulnerabilities in TOR and methods to link multiple transactions by analyzing the blockchain itself. The various techniques do not always work but they can in certain circumstances. However, how likely is it that OFAC will engage in these analyses to track down the ultimate recipient of the ransom payments?

Bonus round:  In case you haven’t been reading the Twitter feed of the Nork news service, you will have missed this

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(No republication, syndication or use permitted without my consent.)

Apr

6

Wilkommen im Hotel Norkschwein


Posted by at 8:03 pm on April 6, 2017
Category: North Korea SanctionsOFAC

Cityhostel Berlin via https://www.facebook.com/cityhostelinberlin/photos/a.148927855171875.32730.112639112134083/968420149889304/?type=3&theater [Fair Use]One of the problem with the Nork sanctions passed by the U.N. is that they rely on member states for their enforcement and not all member states are, well, super excited about sanctioning the Norks. We’re looking at you, China.

But it seems the Germans may also be looking the other way.  Consider the Cityhostel Berlin tucked away on the Glinkastraße, barely spitting distance from the Brandenburg Gate and, more importantly, the North Korean Embassy.  According to this article in Deutsche Welle, the Cityhostel is actually part of a large complex of buildings ceded to North Korea by the East Germans (bless their hearts) before the Berlin Wall was torn down.   They use it for their Embassy, and they rent space to the Berlin Cityhostel, which thereby provides extra income to Kim Jong Un and his nuclear program.

The problem is UN Resolution 2321 prohibits member states from allowing the Norks to use real property that they own for anything other than diplomatic or consular activities.  The German foreign ministry, when asked about this, did a creditable imitation of Baron Munchausen, with this obvious exaggeration:

We are closely monitoring potential violations of the sanctions regime imposed by the UN Security Council and, together with our partners, strictly observing the sanctions against North Korea.

Right. And I bet that the ministry also just saved itself from drowning by pulling on its hair and then, just for fun, took a ride on a cannonball.

Some of my U.S. readers are now probably wondering, besides how you can ride on a cannonball, whether they can stay at Hotel Norkschwein, I mean the Cityhostel, on their next trip to Berlin. Executive Order 13722 blocks all property of the North Korean government and, more importantly, prohibits any U.S. person from “making of any contribution or provision of funds, goods, or services by, to, or for the benefit of” the North Korean government. Certainly there is an argument that paying a hotel bill in a hotel leased from the Norks might be considered to fall within this prohibition.

The question, then, is whether the travel exemption would permit U.S. citizens to spend the night in Kim Jong Un’s little Berlin hideaway. That exemption prohibits regulation under the International Emergency Economic Powers Act (“IEEPA”), of transactions “ordinarily incident to travel to or from any country.” This would normally cover, and exempt from prohibition, paying for hotels while in Berlin. But Executive Order 13722 was also enacted pursuant to the North Korea Sanctions and Policy Enhancement Act of 2016, which means that the travel exemption in IEEPA would not apply. Nor has OFAC promulgated regulations under Executive Order 13722 which would exempt travel related transactions.

So, even if you are completely comfortable with throwing your hard-earned money into Kim Jong Un’s nuclear piggy bank, you do so at your own risk if you are a U.S. citizen.

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Copyright © 2017 Clif Burns. All Rights Reserved.
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Mar

1

Assassination In Malaysia Leads To Calls to Redesignate DPRK As A Terrorist State


Posted by at 9:14 pm on March 1, 2017
Category: BISDDTCNorth Korea Sanctions

Kim Jong Un Smoking via KCNA [Fair Use]The assassination by the Norks of Kim Jong Un’s brother in a Malaysian airport with the help of gullible stooges and some VX nerve agent has reignited the debate as to whether the State Department should redesignate the DPRK as a state sponsor of terrorism. The DPRK was first put in the list after it bombed a Korean Air Flight in 1987, killing 115 people. The country was removed in 2008 in return for shutting down its plutonium plant and permitting inspections.

In order to designate a country as a state sponsor of terrorism, a determination must be made that the country “repeatedly provided support for acts of international terrorism.” See, e.g., section 6(j) of the (zombie) Export Administration Act. None of the statutes that invoke that phrase define “acts of international terrorism,” although section 40(d) of the Arms Export Control Act states that the term includes activities that “aid or abet the efforts of an individual or group to use … chemical, biological, or radiological weapons.” I suppose that might cover the murder of an individual with a chemical weapon in an airport, although terrorism seems more readily to mean an act that indiscriminately targets multiple civilians in order to instill fear in a population or community.

Advocates of redesignation have argued that the cyber attack on Sony (in connection with its distribution of the hilarious and decidedly anti-Nork film The Interview) and other assassinations abroad demonstrate repeated acts of terrorism. But again, it’s hard to argue that these acts, while reprehensible, are designed to instill fear in a community.

In any event, the redesignation would be most symbolic. Once designated, U.S. law prohibits arms sales, which are already prohibited. Licenses would be required for certain specified goods, but section 746.4 of the EAR already requires licenses for all items subject to the EAR other than food and medicine. Being designated as a state sponsor of terrorism means that under the Trade Sanctions and Export Reform Act of 2000 a one-year license is required for exports to that country of agricultural commodities, medicine or medical devices, but North Korea is explicitly exempted from this by section 7205(a)(2)

Given that the redesignation of the loathsome Norks would be mostly symbolic, it seems to be a bad idea to torture the definition of “international terrorism” to include computer hacking and individual murders to get there.

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Copyright © 2017 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)