{"id":620,"date":"2018-07-24T19:06:52","date_gmt":"2018-07-24T19:06:52","guid":{"rendered":"http:\/\/ielrblog.com\/?p=620"},"modified":"2018-07-24T19:10:04","modified_gmt":"2018-07-24T19:10:04","slug":"u-s-issues-sanctions-risks-for-businesses-with-n-korean-supply-chain-links","status":"publish","type":"post","link":"https:\/\/ielrblog.com\/index.php\/2018\/07\/24\/u-s-issues-sanctions-risks-for-businesses-with-n-korean-supply-chain-links\/","title":{"rendered":"U.S. Issues Sanctions Risks for Businesses with N. Korean Supply Chain Links"},"content":{"rendered":"

On July 23, 2018, the U.S. Department of State, with the U.S. Department of the Treasury\u2019s Office of Foreign Assets Control (OFAC) and the U.S. Department of Homeland Security\u2019s (DHS) Customs and Border Protection (CBP) and immigration and Customs Enforcement (ICE), issued an advisory to high sanctions evasions tactics used by North Korea<\/a> that could expose businesses \u2013 including manufacturers, buyers, and service providers \u2013 to sanctions compliance risks under U.S. and\/or U.N. sanctions authorities.\u00a0 The advisory also helps businesses in complying with the requirements under Title III, the Korean Interdiction and Modernization of Sanctions Act of the Countering America\u2019s Adversaries through Sanctions Act (CAATSA<\/a>).\u00a0 The advisory warns businesses to be aware of deceptive practices employed by North Korea in order to implement effective due diligence policies, procedures, and internal controls to ensure compliance with applicable legal requirements across their entire supply chains.<\/p>\n

Multiple U.S. and U.N. sanctions impose restrictions on trade with North Korea and the use of North Korean labor.\u00a0 Annex 1 to the advisory sets forth a more detailed description of the North Korean sanctions prohibitions related to supply chains.\u00a0 The two primary risks are:\u00a0 (1) inadvertent sourcing of goods, services, or technology from North Korea; and (2) the presence of North Korean citizens or nationals in companies\u2019 supply chains, whose labor generates revenue for the North Korean government.\u00a0 The advisory also provides due diligence references for businesses.<\/p>\n

The heightened risk for and potential indicators of goods, services, and technology with a North Korean nexus includes:<\/p>\n

Sub-contracting\/consignment firms [e.g., third country suppliers (Chinese) shift manufacturing or sub-contracting work to a North Korean factory without informing the customer or relevant parties);<\/p>\n

Mislabeled Good\/Services\/Technology:\u00a0 N. Korean exporters disguise the origin of goods produced in N. Korea by affixing country-of-origin labels that identify a third country.<\/p>\n

Joint Ventures:\u00a0 North Korean firms have established hundreds of joint ventures with partners from China and other countries in various industries, such as apparel, construction, small electronics, hospitality, minerals, precious metals, seafood and textiles (see Annex 2 of the advisory for a list of known North Kean joint ventures).<\/p>\n

Raw Materials or goods provided with Artificially Low Prices:\u00a0 North Korean exporters sell goods and raw materials well below market prices to intermediaries and other traders.<\/p>\n

Information Technology (IT) Services:\u00a0 North Korea sells a range of IT services and products abroad, including website and app development, security software, and biometric identification software that have military and law enforcement applications.<\/p>\n

The advisory also discusses heightened risk for North Korean overseas labor producing revenue for the government of North Korea.\u00a0 The North Korean government exports large numbers of laborers to meet a single contract in various industries, including but not limited to apparel, construction, footwear manufacturing, hospitality, IT services, logging, medical, pharmaceuticals, restaurant, seafood processing, textiles, and shipbuilding.\u00a0 China and Russia continue to host more North Korean laborers than all other countries and jurisdictions combined.\u00a0 The advisory lists 42 jurisdictions hosting North Korean laborers.<\/p>\n

The advisory sets forth potential indicators of North Korean overseas labor.<\/p>\n

The advisory gives due diligence best practices, namely those businesses closely examine their entire supply chain(s) for North Korean laborers and goods, services or technology, and adopt appropriate due diligence best practices<\/a>.\u00a0 This especially applies to those businesses with operations in high-risk countries, or who operate in high-risk industries.\u00a0 Well-documented due diligence policies and practices may be considered mitigating factors when the U.S. government determines the appropriate enforcement response.<\/p>\n

The advisory reminds businesses of the penalties on individuals and entities for violations of sanctions and enforcement actions and activities that could result in designation by OFAC.\u00a0 The advisory also provides where interested individuals can find additional information on OFAC sanctions.<\/p>\n

During the second week of July the U.S. complained to the Security Council North Korea sanctions committee that as of May 30, North Korea had made 89 illicit ship-to-ship transfers of refined petroleum products.\u00a0 The U.S. asked the committee to notify all U.N. member states of the violations of a refined petroleum cap of 500,000 barrels a year – imposed by the council in December – and order an immediate halt to all transfers.\u00a0 On July 19, 2018, China and Russia delayed a U.S. effort for a U.N. Security Council committee to order a ban on refined petroleum exports to North Korea.\u00a0 China and Russia requested more detail on a U.S. accusation that Pyongyang breached sanctions.<\/p>\n

In the coming weeks the U.S. will try to both unilaterally and multilaterally strengthen North Korean sanctions unless and until North Korea starts implementing the June 12 \u201cdenuclearization agreement\u201d or joint statements<\/a>\u00a0 to the satisfaction of the U.S. government.<\/p>\n

The next issue of the IELR will have additional information on the North Korean sanctions.<\/p>\n","protected":false},"excerpt":{"rendered":"

On July 23, 2018, the U.S. Department of State, with the U.S. Department of the Treasury\u2019s Office of Foreign Assets Control (OFAC) and the U.S. Department of Homeland Security\u2019s (DHS) Customs and Border Protection (CBP) and immigration and Customs Enforcement (ICE), issued an advisory to high sanctions evasions tactics used by North Korea that could […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[25,8,23,33,45,6,16,19,43,11],"tags":[],"class_list":{"0":"post-620","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-arms-trade","7":"category-counterterrorism-and-international-human-rights","8":"category-crimes-against-humanity","9":"category-cybercrime","10":"category-cybercrime-and-cryptocurrency","11":"category-economic-sanctions","12":"category-foreign-intelligence-and-surveillance","13":"category-gatekeeper-obligations","14":"category-international-regimes","15":"category-transnational-organized-crime-cybercrime-narcotics","16":"entry"},"yoast_head":"\nU.S. Issues Sanctions Risks for Businesses with N. 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