On February 23, 2018, the US Government issued new sanctions and an extensive advisory targeting North Korea‘s shipping practices.
First, under authority of two North Korea-related Executive Orders, the US Treasury‘s Office of Foreign Assets Control (OFAC) placed twenty-seven (27) entities and twenty-eight (28) vessels on the US list of Specially Designated Nationals (SDNs).
Second, OFAC, along with the State Department and Coast Guard, issued an advisory on "Sanctions Risks Related to North Korea’s Shipping Practices" (the Advisory), alerting "persons globally to deceptive shipping practices used by North Korea to evade sanctions". The Advisory notes that North Korea’s deceptive practices “may create significant risk for parties involved in the shipping industry, including insurers, flag registries, shipping companies, and financial institutions.”
The Advisory sets forth certain risk mitigation measures that parties should consider implementing to reduce the risk of engaging in prohibited activities resulting from North Korea's deceptive practices. It notes that North Korea has deployed deceptive practices with respect to shipping to evade sanctions and the increasing pressure they have on North Korea. The Advisory provides a non-exclusive list of deceptive practices that North Korea has deployed, stating:
Physically Altering Vessel Identification: Maritime vessels meeting certain tonnage thresholds are required to display their name and International Maritime Organization ("IMO") number . . . in a visible location either on the ship's hull or superstructure. A vessel's IMO number is intended to be permanent and should remain consistent regardless of a change in a vessel's ownership or name. North Korean-flagged merchant vessels have physically altered their vessels to pass themselves off as different vessels. These physical alterations include painting over vessel names and IMO numbers with alternate ones.
North Korean STS Transfers: STS transfers are a method of transferring cargo from one ship to another while at sea rather than while located in port. STS transfers can conceal the origin or destination of cargo. North Korea operates a fleet of 24 tankers capable of engaging in STS transfers of refined petroleum products and other banned goods. The names and IMO numbers of these vessels are listed in Annex 2, though they are subject to change as North Korea seeks to conceal the identity of vessels it owns and operates . . . .
Falsifying Cargo and Vessel Documents: Complete and accurate shipping documentation is critical to ensuring all parties to a transaction understand the parties, goods, and vessels involved in a given shipment. Bills of lading, certificates of origin, invoices, packing lists, proof of insurance, and lists of last ports of call are examples of documentation that typically accompany a shipping transaction. North Korea has been known to falsify vessel and cargo documents to obscure the origin or destination of cargo.
Disabling Automatic Identification System (“AIS”): AIS is a collision avoidance system, which transmits, at a minimum, a vessel's identification and select navigational and positional data via very high frequency ("VHF") radio waves. While AIS was not specifically designed for vessel tracking, it is often used for this purpose via terrestrial and satellite receivers feeding this information to commercial ship tracking services. Ships meeting certain tonnage thresholds and engaged in international voyages are required to carry and operate AIS; however, North Korean-flagged merchant vessels have been known to intentionally disable their AIS transponders to mask their movements. This tactic, whether employed by North Korean-flagged vessels or other vessels involved in trade with North Korea, could conceal the origin or destination of cargo destined for, or originating in, North Korea.
Manipulating AIS: North Korean-flagged merchant vessels have also been known to manipulate the data being transmitted via AIS. Such manipulation could include altering vessel names, IMO numbers, Maritime Mobile Service Identities ("MMSIs"), or other unique identifying information. This tactic could also be used to conceal a vessel’s next port of call or other information regarding its voyage.
The Advisory also displays a general depiction of the area where North Korean STS transfers have been observed.
The Advisory recommends that parties consider implementing the following types of measures in their due diligence practices:
- monitor for AIS manipulation
- conduct research prior to STS transfers
- review all applicable shipping documentation
- clear communication with international partners and
- leverage available resources
Lastly, the Advisory contains a list of twenty-four (24) North Korean vessels capable of engaging in sanctionable STS transfers of petroleum.