On September 20, 2017, President Trump issued Executive Order 13810 setting forth measures intended to further isolate North Korea through the imposition of additional sanctions on North Korean persons and on persons doing business with North Korea. The U.S. Treasury Department, Office of Foreign Assets Control (“OFAC”) followed the Executive Order with the designation on September 26, 2017, of twenty-six (26) individuals (from China, Russia, Libya and the United Arab Emirates) and nine (9) banks (in China and North Korea) as Specially Designated Nationals (“SDN”) pursuant to the North Korea sanctions programs.
Among the provisions in the Executive Order intended to further isolate North Korea are restrictions on aircraft and vessels that have landed or called at a place or port in North Korea from landing or calling at places or ports in the United States within 180 days after their departure from North Korea. Vessels that have engaged in a ship-to-ship transfer with a vessel that has called at a port in North Korea are also prohibited from calling at ports within the United States for 180 days following the transfer.
In addition, the Executive Order expands the criteria under which the U.S. Secretary of the Treasury may designate persons as Specially Designated Nationals and Blocked Persons (“SDNs”) pursuant to the North Korean sanctions. The Executive Order authorizes the imposition of sanctions against:
- Persons who operate in the construction, energy, financial services, fishing, information technology, manufacturing, medical, mining, textiles, and transportation industries in North Korea;
- Persons who own, control or operate any seaport, airport, or land port in North Korea;
- Persons who have engaged in at least one significant importation from or exportation to North Korea of goods, services, or technology;
- North Korean persons, including those who have engaged in business activities that generate revenue for the Government of North Korea or the Workers’ Party of Korea;
- Persons who assist, sponsor or provide financial, material or technical support for, or goods or services to or in support of persons blocked pursuant to the Executive Order; and
- Persons owned or controlled by or acting on behalf of persons blocked pursuant to the Executive Order.
The Executive Order also authorizes the Secretary of the Treasury to block funds originating from, destined for, or passing through foreign bank accounts determined to be owned or controlled by North Korean persons or to have been used to transfer funds in which North Korean persons have an interest. Finally, the Executive Order provides for the imposition of secondary sanctions on foreign financial institutions that conduct or facilitate significant trade-related transactions with North Korea or persons blocked pursuant to Executive Orders relating to North Korea.
The Executive Order indicates a desire by the Administration to force non-U.S. persons to choose to conduct business with either the United States or with North Korea, but not with both. The restrictions on aircraft and vessels are particularly important for companies involved in the global transport of goods. In addition, OFAC’s expanded authority to designate as SDNs entities and persons listed above is likely to affect the manner in which some companies conduct business. In this regard, it will be important for companies to not only understand their activities vis a vis North Korea, but it will also be important for U.S. persons to understand the activities of the parties with which they conduct business (e.g., their customers, vendors, and lenders) to properly assess the risk to their operations should such parties become targets of U.S. sanctions. Companies might consider conducting additional diligence on parties with which they conduct business to assess that risk. Putting into place processes to ensure that any future changes to the U.S. sanctions, including the designation of additional persons and entities, are captured and implemented timely might also be warranted.