North Korea

The President lifted the TWEA (Trading With Enemy Act) Sanctions on North Korea on June 27, 2008 after North Korea gave Chinese officials in Beijing 60 pages of documentation of its nuclear past after continued negotiations. Unfortunately for exporters and reexporters, the full scope of US export and reexport controls remain in force.

The document declares far less nuclear weaponry than the country actually houses, but Bush felt that North Korea should be rewarded for its efforts, as this is seen as a positive step in negotiations for the future of denuclearization of the Korean peninsula.

North Korea will be taken off the State Department list of nations that sponsor terrorism, but all other sanctions will remain in place. This means that all property and interests in property that were blocked are still blocked and will remain blocked. All current restrictions on imports, exports and North Korean blocked funds held by US financial institutions will continue indefinitely. The restrictions will continue until North Korea cooperates completely and gives up all of its nuclear weapons and information.

So, in a nutshell, in terms of export and reexport controls. nothing has changed, except the fact that North Korea is no longer on the list of State Sponsors of Terrorism. All prior restrictions apply, even though, “[North Korea] is no longer in the national interest of the United States.”

More information:

Proclamation by the President

The Department of State has issued to Congress that Cuba, Eritrea, Iran, North Korea, Syria, and Venezuela are not fully cooperating with the United States antiterrorism efforts. John D. Negroponte, Deputy Secretary of State has issued the decision to retain the certification of North Korea pursuant to Section 40A of the Arms Export Control Act.

There will be an ongoing review of the designation of North Korea and the outcome of the review may warrant a new assessment and possible change in certification.

More information:

• Federal Register Notice

On December 19, 2007, the Department of State issued an amendment to the International Traffic in Arms Regulations concerning exports and sales which were prohibited by United Nations Security Council embargoes. The amended list will add countries subject to such embargos. The current list includes: Cote d’Ivoire, Democratic Republic of Congo, Iraq, Iran, Lebanon, Liberia, North Korea, Rwanda, Sierra Leone, Somalia, and Sudan.

More information:

Federal Register 72FR71575.pdf (PDF)

Due to the results of an 18-month investigation, the US Treasury Department recently announced that as of April 14, 2007 all US banks and financial institutions will be barred from doing business with Macau-based Banco Delta Asia (BDA). BDA was designated as an institution of “primary money laundering concern” regarding dealings with North Korean clients in 2005 and, subsequently, nearly $24 million in funds were frozen pending an investigation. These frozen funds have recently become an issue as North Korea has tied the release of these funds to their willingness to enter an agreement to halt its nuclear weapons program. The conclusion of the investigation resulting in the regulations against BDA will allow overseas regulators to possibly release some of the frozen funds.

The final rule affecting BDA falls under Section 311 of the US Patriot Act. The majority of US financial institutions have already voluntarily severed ties with BDA, however, they will now have to be more careful that other foreign clients are not being used to conduct business on BDA’s behalf.

Specific abuses by BDA include involvement with US counterfeit currency, counterfeit cigarettes and narcotics.

It is noted that Macau is not targeted as a jurisdiction of concern regarding money laundering, only BDA specifically as a financial institution.

Source:

• US Dept. of Treasury Web Site March 14, 2007

Canadian Citizens May Seek Relief via Canadian Legal System

According to media reports, the fallout continues from conflict between tight United States ITAR requirements and Canadian defense manufacturers. US regulations prohibit Canadian citizens who have dual citizenship in a country listed in ITAR 126.1 from working on US defense projects. There are currently 19 countries whose citizens are banned from this type of work including China, Cuba, Lebanon, Syria, North Korea, Belarus, Afghanistan and Rwanda. Recently Venezuela was added to this list, which may have contributed to the termination of an employee at Montreal’s Bell Helicopter facility.

Bell Helicopter is currently working on an $849 million contract for the US Military and has had to reassign 24 employees to stay in compliance with the US regulations on who can work on their defense projects.

Jaime Vargas, a Canadian citizen with dual citizenship in Venezuela, had only worked at Bell Helicopter for several weeks when he was unexpectedly terminated. There are conflicting stories from Mr. Vargas and Bell representatives on the quality of work performed by the employee. Though Bell claims that he had performed poorly, Mr. Vargas states that he had had nothing but positive reviews and had recently been congratulated by his supervisor on the high quality of his work.

The Canadian Centre for Research-Action on Race Relations says that it will be filing a civil suit on Mr. Vargas’ behalf stating that they believe he was terminated solely based on his connection with Venezuela. They will ask for $110,000 in compensation for Mr. Vargas. The suit will be based on allegations that the termination violated Canadian Human Rights laws.

John Black’s Note: I hope Mr. Vargas wins the suit. I seriously doubt that DDTC will want to revise the ITAR if that happens, but I love it when DDTC digs in its heels and refuses to bend its policies to take into account issues outside of its own control. I look forward to the eloquent statement of the DDTC position, “We don’t care if you win a law suit, we don’t care if the ITAR causes good Canadian companies to violation Canadian laws, we aren’t changing the ITAR.”

Source: “Canoe Network Money” February 6, 2007

Full story on Canoe Network

In June of 2005, President Bush issued Executive Order 13382 authorizing significant financial sanctions on WMD proliferators and any firms or individuals who provided support or services to them. Upon its issuance, the President identified eight entities in North Korea, Syria and Iran for their support of WMD proliferation.

Iran’s 5th largest bank, Bank Sepah, was designated for doing business with three of those designated entities: Iran’s AIO (Aerospace Industries Organization) which oversees all of Iran’s missiles programs, the Shahid Hemmat Industries Group (SHIG) which oversees Iran’s ballistic missile program, and the Shahid Bakeri Industries Group (SBIG) which is also involved in the missile program of Iran.

Also designated were Ahmad Derakhshandeh, Bank Sepah’s Chairman and Director, and Bank Sepah International Plc, a subsidiary of Bank Sepah in the UK.

Due to the flagrant and defiant actions of North Korea over the past year relating to missile testing and the detonation of a nuclear device, the United States is imposing new export and reexport controls on North Korea. This new rule is in accordance with UN Security Council Resolution 1718 which prohibits the direct or indirect sale of arms and other specified items to North Korea by UN Member States.

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As a result of North Korea’s recent nuclear test, the UN passed a resolution imposing multilateral sanctions on that country (U. N. Resolution 1718).  In early November, 2006, the U. N. distributed a list to its member countries of equipment, technology and industrial products that will be prohibited from being exported to North Korea.  All of these items have direct applications in missile and nuclear related activities.

In addition, members agreed to prohibit exports of luxury goods, because those will vary from nation to nation, each country will be responsible for formulating its own list of such luxury goods.  As an example, Switzerland ’s list includes watches, caviar, wine, tobacco, luxury clothes, carpets, fur overcoats, electronic appliances and cars.  The United States plans to stem the flow of iPods, among other things, to North Korea .

The ban on luxury goods will impact only the elite in North Korea because most North Koreans are not rich enough to buy iPods and caviar.  No doubt, without more iPods and fancy wrist watches, the North Korean leadership will cancel its aggressive pursuit of nuclear weapons capability and dump its stockpile of missile into the sea because there is no way anybody would smuggle such difficult to conceal items into the country.