North Korean Trade Rules Eased
January 1, 2003
By: David G. Forgue
On June 19, 2000 three United States government agencies issued rules pertaining to United States relations with North Korea. First, the Treasury Department's Office of Foreign Asset Control (OFAC) issued a final rule related to trade and investment with North Korea. Second, the Commerce Department's Bureau of Export Administration (BXA) issued an interim rule related to exporting merchandise and services to North Korea. Finally, the Departments of Transportation and Commerce jointly issued a final rule related to shipping to and from North Korea. These rules all served to implement the President's September 17, 1999 decision to ease sanctions against North Korea so long as North Korea continues a moratorium on testing long-range missiles.
OFAC Final Rule
The OFAC final rule was published in the Federal Register on June 19, 2000, and can be found at 65 Fed. Reg 38165 (June 19, 2000). Because this final rule relates to foreign affairs, no public comment on the rule will be accepted. This final rule authorizes new financial, trade, and other transactions with North Korea, and North Korean nationals. Transactions which are now authorized include new investment, certain brokering transactions, and importations from North Korea. However, the property or interest in the property subject to these transactions must have arisen after June 19, 2000. Further, under the regulations, OFAC must still be notified of, and approve, imports from North Korea under the Arms Export Control Act. It is important to note that these changes do not affect any enforcement actions regarding previous violations of the North Korea embargo, and do not unblock any assets within United States jurisdiction blocked prior to June 16, 2000. In addition, reports due under any license, general or specific, must still be filed for activities prior to June 19, 2000.
BXA Interim Rule
The BXA interim rule was published in the Federal Register on June 19, 2000, and can be found at 65 Fed. Reg. 38148 (June 19, 2000). Public comments on this interim rule may be filed until July 19, 2000. This interim rule allows the vast majority of United States consumer products to be exported to North Korea without a license. The products eligible for export without a license include most agricultural, medical, and low-level industrial goods and services. Under the interim rule, items classified as EAR99, (no license required merchandise) may generally be exported and reexported to either North Korea governmental or nongovernmental entities without a license. The major exceptions to the no license required rule arise where the North Korean end-user is involved in missile, nuclear, or chemical/biological weapons proliferation. In that situation, even where the merchandise is classified as EAR99, a license is required under the interim rule. The BXA also stresses that even given the closed nature of North Korean society, exporters are still responsible for knowing the party to whom they are exporting. Guidance on gaining necessary information regarding a party to whom an exporter is exporting can be found in Supplement 3 of Part 732 of the EAR . Further, it should be noted that anti-terrorism controls on certain exports to North Korea have not been lifted. An illustrative list of products subject to anti-terrorism controls includes aircraft, aircraft parts, encryption merchandise, most telecommunications equipment, and many computers. There are also licensing requirements now in place for certain computers for export to North Korea, and specific equipment and software for North Korea.
DOT/DOC Final Rule
The Departments of Transportation and Commerce final rule was also published in the Federal Register on June 19, 2000, and can be found at 65 Fed. Reg. 38164 (June 19, 2000). Because this rule is also subject to the military and foreign affairs exemption, this rule is not open to public comment, and is final. The two agencies previously maintained joint restrictions on shipping which prohibited any ship or aircraft documented in the United States from transportation to and/or from North Korea. This final rule modifies regulation 44 C.F.R. Part 403 (Transportation Order T-2) to permit any ships documented in the United States to engage in transportation to and from North Korea subject to regulations such as export controls.