On 16 March 2016, President Barack Obama issued a new Executive Order (the “Order”) imposing additional sanctions on the Democratic People’s Republic of Korea (“North Korea”). As a result of these new sanctions, US Persons (defined below) are prohibited from engaging in virtually all transactions with North Korea. Additionally, pursuant to the Order, the US Treasury Department’s Office of Foreign Assets Control (“OFAC”) announced that it had designated 2 individuals, 15 entities, and 20 vessels as Specially Designated Nationals (“SDNs”). OFAC also issued nine general licenses for certain activities involving North Korea and published frequently asked questions ("FAQs") pertaining to the Order and general licenses.
These additional measures are in response to North Korea’s continuing nuclear and missile program activities, including North Korea’s 6 January 2016 nuclear test and 7 February 2016 launch using ballistic missile technology. These measures build upon recent steps by the US Government targeting North Korea, including the passage of the North Korea Sanctions and Policy Enhancement Act of 2016 on 18 February 2016 (previously discussed here) and the designation of several North Korean individuals and entities on 2 March 2016 following the adoption of Resolution 2270 by the UN Security Council (previously discussed here).
New Restrictions on US Person Dealings with North Korea
The Order significantly strengthens US sanctions targeting North Korea. The Order requires that US Persons block all property and interests in property of the Government of North Korea and the Workers’ Party of Korea. For purposes of the Order, “US Persons” include (i) entities organized under US laws and their non-US branches, (ii) individuals or entities in the United States, and (iii) US citizens or permanent resident aliens (“Green Card” holders) wherever located or employed.
Additionally, the Order prohibits the exportation and reexportation from the United States or by US Persons of goods, services (including financial services), and technology to North Korea. The Order also prohibits new investment in North Korea by US Persons. Finally, any US Person approval, financing, facilitation, or guarantee of a North Korea-related transaction by a non-US Person where the transaction would be prohibited if performed by a US Person or within the United States is prohibited.
Broadened Criteria for SDN Designations
The Order is significant not only because of the broad restrictions it applies to US Person dealings with North Korea but also because it broadens the types of activities that could result in any party (including a non-US Person) being designated as an SDN. These new criteria include, among other things, dealing in metal, graphite, coal, or software with North Korea for the benefit of Government of North Korea or the Workers’ Party of Korea, undermining cybersecurity on behalf of these entities, engaging in activities related to human rights abuses, and exporting workers from North Korea.
In addition, the Order authorizes the US Secretary of the Treasury (in consultation with the US Secretary of State) to identify specific sectors of the North Korean economy and designate as SDNs any parties that operate in those sectors. On the same day that the Order was issued, the US Secretary of the Treasury published a determination targeting the transportation, mining, energy, and financial services sectors of the North Korean economy as subject to the Order. OFAC also added 2 individuals, 15 entities, and 20 vessels to the SDN list because they were determined to operate in these targeted sectors.
New General Licenses
OFAC issued nine general licenses for certain activities involving North Korea that would otherwise be prohibited under the Order. Pursuant to these general licenses, US Persons may engage in certain activities without needing to apply for, or receive, a specific license. The authorized activities include:
- The provision of certain legal services (General License 2);
- Noncommercial, personal remittances (General License 4);
- Certain services in support of nongovernmental activities, including certain humanitarian projects to meet basic human needs in North Korea (General License 5); and
- Certain transactions related to patents, trademarks, and copyrights (General License 8).
Although OFAC’s FAQs state that travel to North Korea is not prohibited under the Order, given the recent developments in North Korea and compliance obligations under this Order and other US sanctions and export controls, caution is required.