North Korea: Economic Sanctions

North Korea:
Economic Sanctions
Updated January 12, 2007
Dianne E. Rennack
Specialist in Foreign Policy Legislation
Foreign Affairs, Defense, and Trade Division

North Korea: Economic Sanctions
Summary
U.S. economic sanctions are imposed against North Korea for five primary
reasons: (1) North Korea is seen as posing a threat to U.S. national security; (2)
North Korea is designated by the Secretary of State as a state sponsor or supporter of
international terrorism; (3) North Korea is a Marxist-Leninist state, with a
Communist government; (4) North Korea has been found by the State Department
to have engaged in proliferation of weapons of mass destruction; and (5) North Korea
has been found by the President to have detonated a nuclear explosive device. The
United States has also taken steps to isolate the Macau-based Banco Delta Asia for
counterfeiting and money-laundering activities, actions North Korea has
characterized as attacks against it. In accordance with U.S. law, the United States
limits some trade, denies trade in dual-use goods and services, limits foreign aid, and
opposes entry into or support from international financial institutions. At the
President’s discretion, North Korea would also be subject to the economic sanctions
pursuant to the International Religious Freedom Act of 1998, under which the
administration has identified North Korea as a “country of particular concern” since
2001, and pursuant to the Trafficking Victims Protection Act of 2000, under which
the administration has classified North Korea in the category of most severe offender
(Tier 3) since 2003.
In October 2002, after meetings between high-level U.S. and North Korean
government officials, the United States reported that North Korea had confirmed
suspicions that it had reactivated its nuclear weapons development program. An
international crisis ensued, with North Korea expelling International Atomic Energy
Agency (IAEA) inspectors and declaring that it would withdraw from the Non-
Proliferation Treaty. Participants in the Korean Energy Development Organization
(KEDO) — including United States, Japan, South Korea and European Union — in
turn suspended shipments of fuel oil. KEDO also suspended construction of the
light-water reactors, the completion of which had been planned for 2003. North
Korea officially withdrew from the Nuclear Nonproliferation Treaty on January 10,

2003 (effective three months hence), the first signatory country to do so.

In August 2003, North Korea joined the United States, Japan, South Korea,
China and Russia in six-party talks. The six nations have met for five rounds, most
recently in December 2006, after North Korea’s nuclear test in October 2006.
This paper explains the U.S. economic sanctions currently in place, and
summarizes recent events as they relate to the potential application of additional
restrictions. It will be updated as necessary.

Contents
Background ......................................................1
U.S. Economic Sanctions Against North Korea......................1
Recent Turn of Events..........................................2
North Korea’s Renewal of Nuclear Weapons Program.............2
Six-Party Talks............................................3
United States Imposes Financial Sanctions......................4
North Korea’s Ballistic Missiles Tests.........................5
North Korea’s Nuclear Weapons Test..........................5
Overall State of Relations...................................7
U.S. Economic Sanctions Currently In Place............................10
Trade ......................................................10
National Emergency Because of Threat to U.S. National Security...10
Terrorism ...............................................11
Nonmarket State..........................................13
Proliferator ..............................................13
Aid ........................................................14
Terrorism ...............................................14
Nonmarket State..........................................15
Arms Sales and Arms Transfers..................................16
Access to Assets..............................................17
Declaration of National Emergency...........................17
Proliferation of Weapons of Mass Destruction..................19
Counterfeiting and Money-Laundering........................20
Appendix I: Other CRS Products Relating to North Korea................21
Appendix II: North Korea — Economic Sanctions Currently Imposed in
Furtherance of U.S. Foreign Policy or National Security Objectives.....22
Appendix III: North Korean Entities Cited for Proliferation Activities
Under U.S. Law..............................................29

North Korea: Economic Sanctions
Background
U.S. Economic Sanctions Against North Korea
The United States imposes economic sanctions on North Korea for five primary
reasons: (1) North Korea poses a threat to U.S. national security, as determined by
the President and renewed annually under the terms of the Trading with the Enemy
Act and National Emergencies Act; (2) North Korea is designated by the Secretary
of State as a state sponsor or supporter of international terrorism, pursuant to the
Export Administration Act of 1979; (3) North Korea is a Marxist-Leninist state, with
a Communist government, and stated as such in the Export-Import Bank Act of 1945,
and further restricted under the Foreign Assistance Act of 1961; (4) North Korea has
been found by the State Department to have engaged in proliferation of weapons of
mass destruction pursuant to the Arms Export Control Act, Export Administration
Act of 1979, and Iran, North Korea, and Syria Nonproliferation Act of 2000; and (5)
the President has determined that North Korea has detonated a nuclear explosive
device, pursuant to the Arms Export Control Act and the Atomic Energy Act. The
U.S. Treasury also has identified Banco Delta Asia, a bank based in Macau and used
by the North Korean government, as engaging in activities “of primary money
laundering concern” as part of the Treasury Department’s law enforcement efforts
under new authority granted by the USA PATRIOT ACT to curtail international
counterfeiting and money laundering. The U.S. action led to Macau seizing Banco
Delta Asia and closing North Korea’s accounts.
At the President’s discretion, North Korea also could be subject to economic
sanctions provided in three provisions of law addressing human rights conditions: the
Foreign Assistance Act of 1961, under which North Korea is annually castigated for
its human rights record; International Religious Freedom Act of 1998, under which
the administration has identified North Korea as a “country of particular concern”
since 2001; and Trafficking Victims Protection Act of 2000, under which the
administration has, since 2003, classified North Korea as a Tier 3 (most severe)
offender of standards pertaining to the trafficking of persons for slavery or sex trade.
Any sanctions imposed pursuant to these acts would be largely redundant, however,
with penalties already prescribed to North Korea for the above-stated reasons.
In October 2002, it came to light in negotiations between U.S. and North Korean
government officials that North Korea was pursuing nuclear weapons capability.
Over July 5-6, 2006, North Korea tested short-range and long-range ballistic missiles
with varying degrees of success, the first tests since 1998. On October 8, 2006,
North Korea reported that it had detonated a nuclear explosive device. The
international community responded to the missile tests and nuclear detonation in the
United Nations, adopting U.N. Security Council Resolutions that included the
imposition of economic sanctions.

Recent Turn of Events
North Korea’s Renewal of Nuclear Weapons Program. Even with the
advantage of hindsight, there is no consensus as to when the nuclear weapon crisis
began. Some would see the beginning in the President’s 2002 State of the Union¹
speech, in which he declared North Korea part of an “axis of evil.” The subsequent
escalation of threat against another member of the of the axis — Iraq — some
contend, left North Korea feeling vulnerable to the threat of attack in the foreseeable
future. Some would cite the October 2002 meeting between State Department and
North Korean government officials, after which U.S. officials reported that North
Korea acknowledged U.S. accusations that it was renewing its nuclear weapons²
program and thus breaking the terms of the 1994 Agreed Framework and several
other international agreements and obligations to which it is party. Other analysts
might point to the crisis of 1993-1994, during which North Korea announced it was
withdrawing from the Non-Proliferation Treaty, asserting that the crisis never ended³
but instead has evolved into the current situation. Still others contend that origins
of the crisis might be found in the nuclearization of India and Pakistan in 1998, by
which the concept of nuclear weapons states and non-nuclear weapons states as a
basis for international agreements was challenged, and the subsequent world reaction
toward those events, which many cast as short-lived and relatively mild.
North Korea officially withdrew from the Nuclear Nonproliferation Treaty on
January 10, 2003 (effective three months hence), the first signatory country to do so.
In response, the IAEA Board of Governors adopted a resolution on February 12,

¹ The language used by both the United States and North Korea over the last several years,
some contend, has been part of the problem. The President’s “axis of evil” reference in

2002 gave way to then-Secretary of State nominee Condoleezza Rice’s “outposts of tyranny”

testimony in 2005 before the Senate Committee on Foreign Relations. For North Korea’s
part, President Bush has been called a “philistine,” a “half-baked man in terms of morality,”
and “a hooligan bereft of any personality as a human being,” to note the more colorful. See
President George W. Bush. State of the Union. January 29, 2002.
[ ht t p: / / www.whi t e house.gov/ news/ r el eases/ 2002/ 01/ 20020129-11.ht ml ]
“Opening Remarks By Secretary of State-Designate Dr. Condoleezza Rice,”
FDCH/Congressional Quarterly, Inc. January 18, 2005.
Sang-hun, Choe. “U.S.-North Korea Insults Get Personal,” International Herald Tribune.
May 2, 2005, p. 3;
² Initially, North Korea denied the claim. Though it announced in March 2005 that it had
a nuclear weapon, participants in the six-party talks other than the United States, particularly
China and South Korea, publicly expressed doubts about North Korea’s true capability or
emerging arsenal. See Kahn, Joseph. “China Doubts U.S. Data on North Korean Nuclear
Work,” The New York Times. March 7, 2005. p. 7; and Herman, Burt. “Electricity Is
Carrot in North Korea Talks,” Associated Press Online. March 16, 2005. Even U.S.
officials, on occasion, doubted the veracity of North Korea’s announcements: Powell, Bill.
“Walking the Tightrope; Kim Jong Il’s Nuclear Brinkmanship Has China, South Korea, and
the U.S. at Odds Over How Best to Bring Him Back to the Bargaining Table,” Time
International. February 28, 2005. p. 24.
³ The scope of this paper is to consider economic sanctions; other CRS products discuss in
detail specific aspects of the U.S.-North Korea relationship. See CRS bibliography at end
of this paper.

2003, declaring North Korea in noncompliance with its nuclear safeguard obligations
and referring the matter to the U.N. Security Council.⁴ The U.N. Security Council,
in turn, on April 9, 2003 (when the withdrawal went into effect), discussed the matter
but declined to consider a resolution of condemnation or sanctions, reportedly
because of the opposition of Russia and China — two Security Council permanent
members with veto power.⁵
Six-Party Talks. The Bush administration’s position has evolved in the years
since the October 2002 meeting, after which the United States reported that North
Korea was pursuing nuclear weapons capability. The United States participated in
six-party talks — along with North Korea and its major trading partners and
neighbors Japan, South Korea, China, and Russia — hosted by China in August
2003, February 2004, June 2004, July/August 2005, September 2005, and — after
North Korea’s nuclear test — December 2006.
The September 2005 talks, in waning moments, produced a preliminary^th
agreement signed by all parties on September 19. North Korea agreed to end its
pursuit of nuclear weapons, rejoin the Nuclear Nonproliferation Treaty, and readmit
IAEA inspectors. The other signatory states would provide North Korea with new
security commitments and aid — including electricity from South Korea. Longer-
term commitments included the United States taking steps to normalize its relations
with North Korea, and all signatories would consider taking steps to provide a light-⁶
water reactor to that country.
The September preliminary agreement did not state a timeline or sequence of
events; it is generally agreed that all parties could not have signed it if it had. It was
intended that subsequent meetings would be hosted by China, beginning probably in
November 2005, to negotiate the implementation of the agreement.⁷ These
multilateral meetings did not take place. Barely one day after the signing, President
Bush stated that North Korea’s compliance with terms of the agreement relating to
dismantlement required verification, and North Korea’s foreign minister declared it
would not abandon its nuclear weapons program before the United States and others

⁴ International Atomic Energy Agency document GOV/2003/14.
⁵ “Nuclear Ban Expires for N. Korea: U.N. Refuses to Condemn Treaty Pullout,” Associated
Press. April 11, 2003.
⁶ Kessler, Glenn. “U.S. Officials Wary of N. Korean Statement,” Washington Post. June
8, 2005. p. A17. Testimony of Christopher Hill, Assistant Secretary of State, Bureau of
East Asian and Pacific Affairs, and Richard Lawless, Deputy Assistant Secretary of
Defense, Asian and Pacific Affairs, Bureau of International Security Affairs, before the
House Committee on International Relations, Subcommittee on Asia and the Pacific.
Hearing on U.S. and Northeast Asia. May 26, 2005. Kahn, Joseph. “North Korea Says It
Will Abandon Nuclear Efforts,” The New York Times. September 19, 2005. p. 1. Kahn,
Joseph and David E. Sanger. “U.S.-Korean Deal on Arms Leaves Key Points Open,” The
New York Times. September 20, 2005. p. 1.
⁷ Kahn, Joseph. “North Korea Says It Will Abandon Nuclear Efforts,” The New York Times.
September 19, 2005. p. 1.

provided the civil-use light-water reactor.⁸ The September preliminary agreement
was essentially scuttled as increasingly tense exchanges followed.
The December 2006 round resulted in a stalemate, and was followed by new
threats from North Korea that it would test its nuclear weapons capability again soon.
United States Imposes Financial Sanctions. Around the same time, the
United States pursued two paths to increase attention to North Korea’s illicit⁹
financial activities and proliferation pursuits. On June 28, 2005, the President
initiated additional steps to impede financial transactions related to proliferation of
weapons of mass destruction, targeting the financial and trade dealings of eight
entities, of which three were North Korean (the remaining were Iranian).¹⁰ And on
September 12, 2005, coinciding with a convening of the six-party talks, the Treasury
Department found that Banco Delta Asia — a Macau-based bank in which North
Korea had substantial holdings — was a “financial institution of primary money
laundering concern.”¹¹ Treasury Department’s Financial Crimes Enforcement Center
found that North Korea may reap as much as $500 million annually from
counterfeiting, and another $100-to-$200 million annually from narcotics¹²
trafficking. The use of financial sanctions, particularly those imposed on Banco
Delta Asia, dominated post-September Accord speeches from North Korean officials.
North Korea used the Banco Delta Asia action as its justification for not attending
six-party talks, though many analysts suggest that North Korea would have stayed

⁸ “North Korea’s Nuclear Deal Needs to Verified: Bush,” Agence France Presse.
September 19, 2005; U.S. Department of State, briefing, September 20, 2005; “U.S. Stance
on North Korea Clear: No Compliance, No Nuclear Energy — First Step Must Be End To
Nuclear Weapons Programs, U.S. Officials Say,” State Department Press Releases and
Documents. September 20, 2005.
⁹ The prohibition of certain financial activities, some contend, could turn out to be a real can
of worms. Could such actions marginalize the U.S. dollar in world trade, or could such
actions transform the manner in which all countries exchange, verify, and protect,
currencies? See, for example, Weisman, Steven R. “U.S. Pursues Tactic of Financial
Isolation,” The New York Times. October 16, 2006. p. 10.
¹⁰ Executive Order 13382 of June 28, 2005 (70 F.R. 38567) and related Executive Orders
may be found at 50 U.S.C. 1701 note (see especially, Executive Order 12938 (November 14,

1994)).

¹¹ Pursuant to 31 U.S.C. 5318A, as enacted by the USA PATRIOT Act (§ 311 of P.L. 107-
56; 115 Stat. 298). In title III of that Act (International Money Laundering Abatement and
Anti-Terrorist Financing Act of 2001), Congress found that money laundering fuels
transnational criminal enterprises, including international terrorism, and threatens to
“undermine the integrity of U.S. financial institutions and...global financial and trading
systems upon which prosperity and growth depend...” 31 U.S.C. 5318A(b) authorizes the
Secretary of the Treasury to take “special measures” relative to financial institutions
operating outside U.S. jurisdiction largely requiring transparent recordkeeping and reporting
of financial transactions. Effective September 12, 2005, the Treasury Department’s
Financial Crimes Enforcement Network issued a finding (70 F.R. 55214) and a notice of
proposed rulemaking (to amend 31 CFR Part 103; 70 F.R. 55217).
¹² 70 F.R. 55215, which in turn cites Perl, Raphael. Drug Trafficking and North Korea:
Issues for U.S. Policy, CRS Report RL32167.

away in any event and the bank action just provided a convenient rationale. After the
last round of six-party talks, in December 2006, North Korea’s chief negotiator cited
the United States’ financial sanctions as his country’s primary obstacle to discussing
other matters. U.S. negotiators contend that the financial sanctions have no direct
relation to the international community’s concerns about North Korea’s nuclear
pursuits.¹³
North Korea’s Ballistic Missiles Tests. On July 5, 2006, North Korea
test-launched seven ballistic missiles, ending a self-imposed moratorium of eight
years. In response, the U.N. Security Council, on July 15, 2006, unanimously
adopted Security Council Resolution 1695. In it, the Security Council condemned
the multiple launches, demanded North Korea recommit to a moratorium, and
required all member states: “to exercise vigilance and prevent missile and missile-
related items, materials, goods and technology being transferred to DPRK’s missile
or WMD programmes; [and...] prevent the procurement of missiles or missile
related-items, materials, goods and technology from the DPRK, and the transfer of¹⁴
any financial resources in relation to DPRK’s missile or WMD programmes....”
North Korea’s Nuclear Weapons Test. On October 8, 2006, North Korea
announced that it had tested a nuclear explosive device.¹⁵ In response, on October
14, 2006, the United Nations Security Council unanimously adopted Resolution 1718
to condemn the test and call on North Korea to return to the six-party talks. UNSCR
1718 invoked Chapter VII of the United Nations Charter — but barred military
enforcement that could be allowed under Article 41 — to require member states to:¹⁶

¹³ Kahn, Joseph. “Talks End on North Korea’s Nuclear Weapons,” The New York Times.
December 23, 2006. p. 9.
¹⁴ United Nations Security Council Resolution 1695 (2006) (UNSCR 1695), July 15, 2006,
adopted 15 - 0. See also U.N. press release of the same date: “United Nations Security
Council Condemns Democratic People’s Republic of Korea’s Missile Launches,” which
includes a summary and statements of support/condemnation from representatives of Japan,
the United States, China, United Kingdom, Russian Federation, Argentina, Tanzania,
France, South Korea, and North Korea. In hearings before the Senate Committee on
Banking, Housing and Urban Affairs on September 12, 2006, Treasury Deputy Under
Secretary Daniel Glaser stated that the administration was using Executive Order 13382,
issued June 2005, to implement the requirements of UNSCR 1695.
¹⁵ On December 7, 2007, President Bush determined that North Korea, a non-nuclear-
weapon state, had detonated a nuclear explosive device, citing sec. 102(b) of the Arms
Export Control Act and sec. 129 of the Atomic Energy Act Presidential Determination No.

2007-07. Public Papers of the President. December 18, 2006.

¹⁶ UNSCR 1718 (2006) may be found on-line at [http://www.un.org/Docs/sc/unsc_
resolutions06.htm]. See also: “Security Council Condemns Nuclear Test by Democratic
People’s Republic of Korea, Unanimously Adopting Resolution 1718 (2006),” US Fed
News. October 14, 2006, which includes text of the Resolution and supporting statements
of representatives of the United States, France, China, United Kingdom, Russian Federation,
Argentina, Japan, South Korea, and North Korea. U.N. Charter may be found online at
[http://www.un.org/ aboutun/charter/].

^!prevent the direct or indirect supply, sale, or transfer to North Korea
of conventional weapons, spare parts, delivery systems, or related
items as identified by the newly established Committee of the U.N.
Security Council;
^!prevent the direct or indirect supply, sale, or transfer to North Korea
of luxury goods;
^!cease the procurement from North Korea of any conventional
weapons, spare parts, delivery systems, or related items as identified
by the newly established Committee of the U.N. Security Council;
^!prevent the transfer to/from North Korea of training, advice,
services, or assistance related to the provision, manufacture,
maintenance, or use of such weapons or systems;
^!freeze the assets and funds of individuals identified by the
Committee of the U.N. Security Council “as being engaged in or
providing support for, including through other illicit means, DPRK’s
nuclear-related, other weapons of mass destruction-related and
ballistic missile-related programmes, or by persons or entities acting
on their behalf or at their direction...,” but with significant
ex cept i ons;¹⁷
^!prevent the entry into or transit through a territory of any person, or
family member of such a person, designated by the Committee of the
U.N. Security Council “as being responsible for, including through
supporting or promoting, DPRK policies in relation to the DPRK’s
nuclear-related, ballistic missile-related and other weapons of mass
destruction-related programs...,” but with exceptions; ¹⁸
^!prevent illicit trafficking in nuclear, chemical, or biological
weapons, their means of delivery, and related materials, by engaging
in “cooperative action including through inspection of cargo to and
from the DPRK...”; and

¹⁷ Para. 9 of UNSCR 1718 (2006) exempts from freezing those financial or other assets or
resources “(a) [t]o be necessary for basic expenses, including payment for foodstuffs, rent
or mortgage, medicines and medical treatment, taxes, insurance premiums, and public utility
charges, or exclusively for payment of reasonable professional fees and reimbursement of
incurred expenses associated with the provision of legal services, or fees or service charges,
in accordance with national laws, for routine holding or maintenance of frozen funds, other
financial assets and economic resources... (b) [t]o be necessary for extraordinary expenses...
or (c) [t]o be subject of a judicial, administrative or arbitral lien or judgement...”
¹⁸ Para. 10 of UNSCR 1718 (2006) exempts “travel that is justified on the grounds of
humanitarian need, including religious obligations, or where the Committee [of the U.N.
Security Council] concludes that an exemption would otherwise further the objectives of the
present resolution”.

^!“intensify ... diplomatic efforts, o refrain from any actions that
might aggravate tension and to facilitate the early resumption of the
Six-Party Talks...” with a view to implement the September 19,

2005 agreement.

The U.N. Security Council, in UNSCR 1718, also demanded that North Korea:
^!not conduct further tests of nuclear weapons or ballistic missiles;
^!resume its self-proclaimed missile moratorium;
^!abandon its pursuit of nuclear weapons capability;
^!rejoin the Treaty on the Non-Proliferation of Nuclear Weapons;
^!return to IAEA safeguards and inspections;
^!abandon any other program in pursuit of weapons of mass
destruction capability;
^!cease the export of all conventional weapons, spare parts, delivery
systems, or related items as identified by the newly established
Committee of the U.N. Security Council; and
^!return to the six-party talks to work toward the implementation of
the September 19, 2005, agreement.
Member states of the United Nations are left to work within their own laws to
implement the UNSCR 1718 (2006). Secretary of State Rice traveled to Asia from
October 17 to 22, 2006, to meet with senior officials of most of North Korea’s major
trading partners.¹⁹
Overall State of Relations. Since 2004, North Korea has maintained that
it would consider any imposition of sanctions under the auspices of the United
Nations an act of war. On October 17, 2006, a spokesperson from North Korea’s
Foreign Ministry was credited with stating: “It is quite nonsensical to expect the
DPRK to yield to the pressure and threat of someone at this time when it has become
a nuclear weapons state.... The DPRK wants peace but is not afraid of war.”²⁰

¹⁹ Secretary Rice traveled to Japan, South Korea, China, and Russia from October 17 to 22,

2006, to discuss implementation of UNSCR 1718 (2006) and other issues.

[http://www.state.gov/secretary/trvl/2006/74017.htm] Some policy analysts have expressed
concern that Taiwan, Japan, and South Korea face near-term decisions about pursuing
nuclear capability, which, in turn raises very difficult questions about a regional arms race,
Korea’s reunification, and China’s relations with Taiwan. Giacomo, Carol, “U.S.
Reassuring Allies On Its Asia Role,” Reuters. October 12, 2006; “Rice Goes To Korea, Via
China,” USA Today.com. October 16, 2006.
²⁰ Kim, Jack. “North Korea Defiant Amid Fears of Second Nuclear Test,” Reuters. October
(continued...)

While few states have fully normalized relations with North Korea, only the
United States has, until North Korea’s nuclear test, maintained fairly comprehensive
economic sanctions against that country since the 1950-53 conflict. Indeed, in 2002
some analysts proffered that North Korea’s coyness about its nuclear weapons
pursuits was calculated, in part, to increase pressure to remove the remaining U.S.
sanctions — particularly those associated with its designation as a supporter of
international terrorism. A desire for increased economic assistance, normalization
of economic and diplomatic relations, and a nonaggression pact between North Korea
and the United States might also be motivating factors.
In response to the nuclear program start-up in 2002, and other foreign relations
matters pending between the various neighboring states and North Korea, and
without a U.N. Security Council resolution, North Korea’s trading partners imposed
unilateral economic and diplomatic sanctions. For example, Japan suspended rice
shipments and later required all ships using its ports to have substantial
environmental and accident liability insurance, a cost that few North Korean shippers
could likely bear. Japan also has stated that relations between the two countries will
not be normalized until North Korea is verifiably denuclearized. In December 2002,
Japan, South Korea, and the United States suspended oil shipments promised under
the 1994 Agreed Framework. Australia delayed opening an embassy in Pyongyang,
originally scheduled to open by mid-2003, until the nuclear weapons issue is
resolved. Reportedly in 2003, China briefly shut off deliveries through its oil
pipleline to North Korea to pressure North Korea to join the first round of six-party
talks, though subsequently declined to take this step a second time.
The new economic sanctions mandated by the United Nations barely tax the
United States economy because of its relative lack of economic engagement with
North Korea.²¹ North Korea’s neighbors — China, Japan, and South Korea —
however, conduct ever-increasing trade with North Korea, and account for 78.7% of
North Korea’s exports. In 2005, trade between North Korea and South Korea exceeds
$1 billion. Trade with China, Thailand, and Japan account for 48.4% of North
Korea’s imports.²² Trade between China and North Korea nearly doubled between
2002 and 2004, to $1.39 billion. Trade between North Korea and Russia skyrocketed
from $80.7 million in 2002 to $218.4 million in 2004.²³ Efforts to isolate and contain

²⁰ (...continued)

17, 2006; Chang, Jae-Soon. “N. Korea: Sanctions Are War Declaration,” Associated Press.

October 17, 2006.
²¹ In 1999, President Clinton announced that most export restrictions against North Korea
would be lifted; new regulations were implemented the following year. According to the
U.S. International Trade Commission, in the first year, 2000, the United States exported $2.7
million in goods to North Korea. U.S. exported in subsequent years: 2001, $0.65 million;
2002, $25.01 million; 2003, $7.98 million; 2004, $23.75 million; 2005, $5.76 million; and

2006 (through August), $0.0 million. [http://dataweb.usitc.gov]

²² Export and import figures are as of 2004. [https://www.cia.gov/cia/publications/factbook/
index.html]
²³ Faiola, Anthony. “Despite U.S. Attempts, N. Korea Anything But Isolated; Regional
Trade Boom Reflects Division Between Bush Priorities, Asian Interests,” The Washington
(continued...)

the country would require some economic sacrifice from all of North Korea’s trading
partners. The economic and social costs to North Korea, on the other hand, could be
enormous, as it has come to rely on South Korea and China for food and energy, and
in times of crisis has relied on all the six-party talk participants — including the
United States — for substantial food aid and fuel oil shipments. One concern far
greater than trade loss, of course, at least for North Korea’s geographic neighbors, is
that severe economic restrictions push the country and its government toward failure
and collapse.²⁴
Following a North/South summit in 2000, South Korean companies began to
invest in an industrial zone along the North Korea-South Korea border, in part to
alleviate South Korea’s domestic labor shortage. The industrial zone in Kaesong
(Gaesong) hosts 15 South Korean businesses overseeing and financing the
productions of garments and kitchenware, and is subsidized by the South Korean
government.²⁵ North Korea, after years of negotiation with South Korea, enacted a
law in November 2002 to guarantee visa-free access and corporate tax incentives to
encourage cross-border development and investment. It is likely that North Korea
sees benefits in South Korea’s Sunshine Policy of greater engagement, inasmuch as
its own gross domestic product (GDP) per capita at $1,000 pales to that of $18,000
in South Korea. While the goods, services, and materials that cross the North/South
border to support Kaesong or as Kaesong’s output would not be subject to the U.N.
sanctions — because the goods and services, at this time, do not have a military
application — a debate has emerged within South Korea as to the wisdom of
continuing inter-Korean ties. South Korea’s Choo Kyu-ho, spokesperson for the
Foreign Ministry, stated after the U.N. Security Council vote: “We judged that the
contents of the resolution of the U.N. Security Council do not directly affect the
economic cooperation programs between the two Koreas, including Kaesong and
Kumgang Mountain. We will go ahead with the economic cooperation programs in
harmony with the resolution.”²⁶ It is reported that inter-country cooperation at the
Kaesong Industrial Complex generates about $0.6 million each month in wages in
North Korea, of which the government takes some cut. Another South Korean
project in North Korea, a tourist resort at Mount Kumgang (Geumgang), generates
some $1.0 million each month for the north.²⁷

²³ (...continued)
Post. May 12, 2005. p. A18.
²⁴ “The Nightmare Comes to Pass — North Korea,” The Economist. October 14, 2006.
²⁵ “Seoul to Ensure Inter-Korean Cooperation Projects Continue Uninterrupted,” BBC
Monitoring International Reports. February 15, 2005. Separate from the current crisis, the
Kaesong Industrial Complex has complicated free trade agreement negotiations between the
United States and South Korea; see CRS Report RL33435, The Proposed South Korea-U-S.
Free Trade Agreement (KORUS FTA), by William H. Cooper and Mark E. Manyin.
²⁶ Onishi, Norimitsu, “Questions Grown Over U.N. Curbs on North Korea,” The New York
Times. October 16, 2006. p. 1.
²⁷ “UN Sanctions Divide S. Korea Amid Questions of Their Usefulness,” Asia Pulse.
October 17, 2006; “Suspension of Inter-Korean Business Only Hurts S. Korea: Official,”
Yonhap News Agency. October 14, 2006; “Intelligence Body Wants Inter-Korean Ties
(continued...)

U.S. Economic Sanctions Currently In Place
Because of what has been found to be a demonstrated threat to U.S. national
security, support of international terrorism, maintenance of a communist, nonmarket
economy, engagement in the proliferation of weapons of mass destruction, and illicit
use of currencies, U.S. law authorizes the President to restrict trade, aid, arms sales
and arms transfers to North Korea, and that country’s access to assets held under U.S.
jurisdiction.
Trade
National Emergency Because of Threat to U.S. National Security.
Three days after North Korea’s Armed Forces launched a full-scale invasion of South
Korea in June 1950, the United States invoked a total embargo on exports to North²⁸
Korea. The Department of Commerce imposed the most restrictive export controls
available against North Korea. Over the years, export controls were restated as the
Export Administration Regulations, or EARs. In 1965, for example, the EARs were
revised to sort countries into categories of relative restriction; North Korea was²⁹
classified as a member of Country Group Z, the most restricted lot.
In 1989, the EARs were again modified to allow the export to North Korea of
commercially-supplied goods intended to meet basic human needs. The regulations
stipulated that shipments would require validated licenses on a case-by-case basis.
In 1995, as part of the United States’ engagement of North Korea under the
1994 Agreed Framework, and again in September 1999, in response to North Korea’s
willingness to cease missile testing, President Clinton announced the lifting of most
export restrictions applied to that country. Regulations issued in June 2000 amended
the EARs to reflect North Korea’s new relatively unfettered status. Many items that
previously had required a license were now eligible for export without a license;
certain items on the Commerce Control List (CCL) moved from a policy of denial
status to case-by-case review.³⁰ Departments issuing the new regulations, however,
stated that “[t]his easing of sanctions does not affect U.S. anti-terrorism or
nonproliferation export controls on North Korea, including end-user and end-use³¹

controls maintained under the Enhanced Proliferation Control Initiative.”
²⁷ (...continued)
Cooled,” BBC Monitoring Asia Pacific. October 17, 2006.
²⁸ Pursuant to authority in sec. 3 of the Export Control Act of 1949 (P.L. 11, 81^st Congress;

63 Stat. 7). Superceded by subsequent export administration laws.

²⁹ The Export Administration Regulations are currently set at 15 CFR Parts 730-774; the
regulations have been rewritten numerous times over the past 50 years for reasons of
changing foreign policy, trade policy, and the administration of both.
³⁰ The Commerce Control List may be found at 15 CFR Part 774 Supplement No. 1.
³¹ 65 FR 38148-38166 (June 19, 2000), in which Departments of Commerce, Transportation,
and the Treasury each issued changes to regulations (15 CFR Part 730 et seq., 44 CFR Part
(continued...)

Today, the remaining export restrictions against North Korea include a range of
terms related largely to that country’s place on the State Department’s list of state
supporters of international terrorism.³² Thus, items that are controlled for national
security concerns generally are not available to North Korea. The country is on the
most restrictive list — Country Group E — which severely limits its access to
computers, software, national security-controlled items, items on the CCL, and
service or repair of such items. North Korea also is limited as an end-user by some
licenses because it is a communist state, though this problem can be overcome by
license exceptions issued by the Department of Commerce.³³
The President currently has authority to ease export restrictions imposed against
North Korea. Even if considered a supporter of international terrorism, licensing
exceptions may be considered by the Commerce Department. To lift all the export
controls applied to North Korea, that country would, at a minimum, have to be
removed from the list of countries supporting acts of international terrorism
maintained by the State Department pursuant to section 6(j) of the Export
Administration Act of 1979. The President holds the authority to make such a
change in the sec. 6(j) list.
Terrorism. Following the November 29, 1987, destruction of Korean Air
Lines 858, in flight, by a bomb reportedly planted by two North Korean agents,
Secretary of State George Shultz placed North Korea on the list of countries
supporting international terrorism. Most elements of trade, Beneficiary Developing
Country status, sales of items on the U.S. Munitions List, most foreign aid, Export-
Import Bank funding, and support in international financial institutions are denied to
countries found to be supporting international terrorism under the Export³⁴
Administration Act of 1979. North Korea was added to the list effective January

³¹ (...continued)
403, and 31 CFR Part 500, respectively) to implement the President’s June 1999
announcement. Items for which licensing was eased included computers, software, and
related technology.
³² Terrorist states comprise those countries found by the Secretary of State to be supporters
of international terrorism pursuant to sec. 6(j) of the Export Administration Act of 1979
(P.L. 96-72; 50 U.S.C. app. 2405), currently North Korea, Cuba, Iran, Syria and Sudan.
³³ The Export Administration Regulations (15 CFR Part 730 et seq.) at Part 744 address the
matter of issuing a license based on the end-user’s status. For example, the issuing of export
licenses for goods and services to South Korea is guided by that country’s placement on the
Country Chart (at 15 CFR Part 738 Supplement No. 1), the item’s placement on the
Commerce Control List (15 CFR Part 774 Supplement No. 1), and other factors particular
to South Korea. But if an item is exported to South Korea as an intermediate point, with an
end-user in North Korea, the latter country’s status relative to the Commerce Control List
comes into consideration. This is a contentious issue as South Korea pursues the
development of industrial zones in North Korea, such as Kaesong.
³⁴ Section 6(j) of P.L. 96-72 (50 U.S.C. app. 2405). Also currently listed as supporters of
international terrorism are Cuba, Iran, Syria, and Sudan. See also sec. 40 of the Arms
Export Control Act (22 U.S.C. 2780) and sec. 620A of the Foreign Assistance Act of 1961
(22 U.S.C. 2371). Each of these sections of law authorizes the promulgation of a list of
(continued...)

20, 1988.³⁵ Placement on the sec. 6(j) list not only results in the constriction of trade
possibilities; placement also may trigger denial of beneficial trade designation (NTR
or GSP), unfavorable tax status for investors, new limits on diplomatic relations,
opposition in international financial institutions, and stricter licensing requirements
for trade with the United States in food and medicine.³⁶
Following the easing of sanctions that pertained to trade, travel, and related
transactions in 2000, there was some speculation that North Korea would be
removed from the sec. 6(j) list of state sponsors of terrorism. North Korea was
particularly interested in changing its status so that it could effectively apply for
membership in the World Bank and the International Monetary Fund. The United
States is required by law to oppose membership in the international financial
institutions of, or financial support to, terrorist states. The United States discussed
the matter with South Korea and Japan in 2000. South Korea supported North
Korea’s bid for this step toward normalization; Japan opposed a change in status until
the matter of kidnaped Japanese citizens was resolved.³⁷ North Korea remains on the
United States’ sec. 6(j) list.
North Korea is also among those countries listed as being in violation of section
40A of the Arms Export Control Act, which prohibits the selling or licensing of
defense articles or defense services to any country that the President finds “is not
cooperating fully with United States antiterrorism efforts.” The President is required
to make such a determination annually, and the prohibition may be waived on
grounds that it is in the national interest to do so.³⁸

³⁴ (...continued)
supporters of international terrorism, though no list has been generated under either section.
It is generally considered that the list maintained pursuant to the Export Administration Act
of 1979 applies to all three laws.
³⁵ Once a country is designated as a supporter of international terrorism pursuant to sec. 6(j)
of the Export Administration Act of 1979, restrictions in several other laws are triggered.
For example, any third country is likely to be denied U.S. aid if it has conducted business
with a country listed under sec. 6(j), pursuant to secs. 620G and 620H of the Foreign
Assistance Act of 1961 (P.L. 87-195; 22 U.S.C. 2377, 2378), or the annual foreign aid
appropriations act.
³⁶ See sec. 502 of the Trade Act of 1974 (P.L. 93-618;19 U.S.C. 2462); sec. 901(j) of the
International Revenue Code (26 U.S.C. 901(j)); 10 United States Code § 2327 (General
Military Law); sec. 40 of the State Department Basic Authorities Act of 1956 (P.L. 84-885;

22 U.S.C. 2712); sec. 205 of the State Department Basic Authorities Act of 1956 (P.L. 84-

885; 22 U.S.C. 4305); sec. 1621 of the International Financial Institutions Act (P.L. 95-118;

22 U.S.C. 262p-4q); sec. 501 of Miscellaneous Appropriations, 2000 (H.R. 3425, enacted
by reference in P.L. 106-113; 22 U.S.C. 2395a note); and sec. 906 of the Trade Sanctions
Reform and Export Enhancement Act (H.R. 5426, enacted by reference in P.L. 106-387; 22
U.S.C. 7205), as amended.
³⁷ See sec. 1621 of the International Financial Institutions Act (P.L. 95-118; 22 U.S.C. 262p-

4q). See also Niksch, Larry A. and Raphael Perl. North Korea: Terrorism List Removal?

CRS Report RL30613.
³⁸ 22 U.S.C. 2781. The most recent certification, issued by the Secretary of State on May
(continued...)

Nonmarket State. The Trade Agreement Extension Act of 1951 required the
suspension of Most-Favored-Nation trade status (which has since been replaced by
Normal Trade Relations status) for all communist countries except Yugoslavia. As
a result, North Korea was denied MFN trade status on September 1, 1951.
North Korea remains listed in the headnotes of the Harmonized Tariff Schedule
of the United States (HTSUS) as a Rate of Duty Column 2 country (along with
Cuba). As a result, while trade is not prohibited with North Korea under the relevant³⁹
trade laws, tariffs are set at the highest rates for imports from that country. A side
result of being denied MFN or NTR is that any such country is also denied
preferential trade treatment under the Generalized System of Preferences (GSP),
pursuant to the Trade Act of 1974.⁴⁰
Proliferator. On several occasions, North Korean entities have been found to
be in violation of U.S. missile nonproliferation laws.⁴¹ Once a finding is made, the
imposition of sanctions is mandatory, though sanctions may be waived if the
President finds it “essential to the national security of the United States” to do so.
The severity of the sanction depends on the type of material or technology
transferred. The duration of the sanction also depends on the material or technology
involved; generally sanctions are imposed for two years.
Sanctions include, at a minimum, a denial of contracts with agencies of the U.S.
government, denial of licenses for items on the U.S. Munitions List (USML), and,
at a maximum, a denial of all licenses for importing into the United States for the
foreign person or entity.
Because North Korea is a nonmarket economy, all relevant activities of the
government of North Korea are also sanctioned when entities in North Korea are
found to have engaged in proliferation under U.S. law.
With the nuclear weapons test of October 8, 2006, the President has statutory
authority — and in some cases is required — to cut off all foreign aid except
humanitarian and food aid, deny sales or transfers of defense articles and defense

³⁸ (...continued)
8, 2006 (71 F.R. 28897), included Cuba, Iran, North Korea, Syria, and Venezuela. This
section of law was added to the AECA in late 1996; North Korea is included on the list each
year.
³⁹ Harmonized Tariff Schedule of the United States, general note 3(b). See also section 402
of the Trade Act of 1974, popularly referred to as the Jackson-Vanik amendment (19 U.S.C.

2432).

⁴⁰ Section 502(b)(1) of P.L. 93-618 (19 U.S.C. 2461).
⁴¹ Section 73 of the Arms Export Control Act (P.L. 90-629; 22 U.S.C. 2797b), sec. 11B of
the Export Administration Act (P.L. 96-72; 50 U.S.C. App. 2410b), and secs. 2 and 3 of the
Iran, North Korea, and Syria Nonproliferation Act of 2000 (P.L. 106-178; 50 U.S.C. 1701
note), as amended. North Korea was added to the latter Act on October 13, 2006, with the
signing into law of the North Korea Nonproliferation Act of 2006 (P.L. 109-353; 120 Stat.

2015). See appendix II for a list of North Korean entities cited for proliferation activities,

and the country in which the trading partner was likely based (when available).

services, deny export licenses for items on the U.S. Munitions List (USML), deny
foreign military financing, deny credit underwritten or provided by government
coffers, withhold U.S. support in the international financial institutions, deny export
licenses for dual-use items, and withhold Export-Import Bank support.⁴² The United
States already maintained a fairly comprehensive sanctions regime on North Korea,
thus most of these relationships were already broken or limited.
Aid
Terrorism. Because the Secretary of State has identified the government of
North Korea as a state sponsor of acts of international terrorism, it is denied most aid⁴³
under the Foreign Assistance Act of 1961. North Korea’s access to U.S. foreign
assistance is also limited in annual foreign operations appropriations measures. In
most instances, it is not expressly stated that the restriction or prohibition is
associated with North Korea’s place on the terrorist list. Even if the appropriations
law prohibits the availability of foreign aid, there are numerous exceptions to the law.
Thus, programs in nonproliferation, demining, child survival, conservation and
biodiversity, food aid, debt buybacks, health and disease prevention, unanticipated
contingencies, international disaster assistance, antiterrorism, may be funded or
supported in spite of country-specific restrictions.
Under the current Foreign Operations, Export Financing, and Related Programs
Appropriations Act,⁴⁴ North Korea is denied direct foreign aid and direct loans,
credits, insurance and guarantees of the Export-Import Bank. In the same Act,
supporters of international terrorism, of which North Korea is one, are denied

⁴² Section 102 of the Arms Export Control Act (P.L. 90-629; 22 U.S.C. 2799aa-1), popularly
referred to as the Glenn amendment; sec. 2(b)(4) of the Export-Import Bank Act of 1945
(P.L. 79-173; 12 U.S.C. 635(b)(4)); and the current Foreign Operations, Export Financing,
and Related Programs Appropriations Act, 2006, as continued (P.L. 109-102; 119 Stat.
2172), relating to Export-Import Bank funding. On December 7, 2006, President Bush
determined that North Korea, a non-nuclear-weapon state, had detonated a nuclear explosive
device, citing sec. 102(b) of the Arms Export Control Act and sec. 129 of the Atomic Energy
Act Presidential Determination No. 2007-07. Public Papers of the President. December

18, 2006.

⁴³ Section 620A of that Act (P.L. 87-195; 22 U.S.C. 2371) prohibits most aid under its
auspices as well as that of the Agricultural Trade Development and Assistance Act of 1954
(P.L. 480; 7 U.S.C. 1691 et seq.), Peace Corps Act (P.L. 87-293; 22 U.S.C. 2501 et seq.),
and Export-Import Bank Act of 1945 (P.L. 79-173; 12 U.S.C. 635 et seq.). The section,
however, also provides the President the authority to waive its application on humanitarian
or national security grounds in some instances.
⁴⁴ P.L. 109-102 (119 Stat. 2172), extended by sec. 101(a)(3) of division B of the Department
of Defense Appropriations Act, 2007 (P.L. 109-289; 120 Stat. 1257 at 1312), as amended,
until an FY2007 Act is signed into law. In P.L. 109-102, see particularly sec. 507 —
Prohibition Against Direct Funding for Certain Countries (119 Stat. 2197); sec. 527 —
Prohibition on Bilateral Assistance to Terrorist Countries (119 Stat. 2205); and sec. 565 —
Special Debt Relief for the Poorest (119 Stat. 2225). Subsequent to its nuclear tests, North
Korea would also be denied U.S. Export-Import Bank support under this Act — see title I
(119 Stat. 2172).

bilateral assistance and participation in programs designed to provide debt relief to
the poorest nations.
Under the current Department of Defense Appropriations Act, North Korea is
denied assistance “unless specifically appropriated for that purpose.”⁴⁵
At the President’s discretion, North Korea would also be subject to the
economic sanctions provided in three provisions of law addressing human rights
conditions: the Foreign Assistance Act of 1961,⁴⁶ under which North Korea is
annually castigated for its human rights record; the International Religious Freedom
Act of 1998,⁴⁷ under which the administration has identified North Korea as a
“country of particular concern” since 2001; and the Trafficking Victims Protection
Act of 2000,⁴⁸ under which the administration has, since 2003, classified North Korea
as a Tier 3 (most severe) offender of standards pertaining to the trafficking of persons
for slavery or sex trade. Any sanctions imposed pursuant to these acts would be
largely redundant, however, with penalties already prescribed to North Korea for the
above-stated reasons.
Nonmarket State. The Export-Import Bank Act of 1945 also singles out
Marxist-Leninist countries for denial of guarantees, insurance, credit, or other Bank
funding programs. North Korea is specifically cited as a Marxist-Leninist country
for purposes of the Export-Import Bank.⁴⁹
The Foreign Assistance Act of 1961 denies most non-humanitarian foreign
assistance to any Communist country. North Korea is among five countries so
designated, though the law is not limited to those countries named.⁵⁰
Several laws deny benefits or assistance to communist countries, but do not
explicitly name any particular state. Because North Korea has been denied such
benefits or aid in the course of the events of the early 1950s and thereafter, these

⁴⁵ Section 8042 of the Department of Defense Appropriations Act, 2007 (P.L. 109-289; 120
Stat. 1257).
⁴⁶ Sections 116 and 502B of P.L. 87-195 (22 U.S.C. 2151n and 2304, respectively), as
amended.
⁴⁷ P.L. 105-292 (22 U.S.C. 6401 et seq.).
⁴⁸ P.L. 106-386 (22 U.S.C. 7101 et seq.).
⁴⁹ Section 2(b)(2) of P.L. 79-173 (12 U.S.C. 635(b)(2)); amended in 1986 to include this ban
on funding to Marxist-Leninist states.
⁵⁰ Section 620(f) of P.L. 87-195 (22 U.S.C. 2370(f)). Consider also subsec. (h) of that
section, which requires the President to “adopt regulations and establish procedures to
insure that United States foreign aid is not used in a manner which, contrary to the best
interests of the United States, promotes or assistants the foreign aid projects or activities of
any country that is a Communist country for purposes of subsection (f).” Consider also sec.
5(b) of the Export Administration Act of 1979, which requires the President to “establish
as a list of controlled countries those countries set forth in section 620(f) of the Foreign
Assistance Act of 1961...”

other sections of law would probably be redundant if applied to or cited for North
Korea.
In some instances, the President may determine that, for purposes of a particular
law, North Korea is no longer a “Marxist-Leninist state.” If, however, all other
aspects of the U.S.-North Korea relationship were to improve, it would probably be
necessary for Congress to remove North Korea from the list set out in the Export-
Import Bank Act and the Foreign Assistance Act of 1961, or necessary for the
President to exercise waiver authority made available to his office under those Acts,
to make these other laws inapplicable to North Korea.⁵¹
Arms Sales and Arms Transfers
The International Traffic in Arms Regulations (ITAR), administered by the
Department of State, begins:
It is the policy of the United States to deny licenses and other approvals for
exports and imports of defense articles and defense services, destined for or
originating in certain countries. This policy applies to Belarus, Cuba, Iran, Libya,
North Korea, Syria and Vietnam. This policy also applies to countries with
respect to which the United States maintains an arms embargo (e.g., Burma,
China, Liberia, Somalia, and Sudan) or whenever an export would not otherwise
be in furtherance of world peace and the security and foreign policy of the United⁵²
States.
The first ITAR was issued on August 26, 1955; North Korea has been listed as
a restricted country from the ITAR’s inception. The ITAR further states that any
country found to be a supporter of international terrorism is subject to the ITAR
prohibitions and those stated in section 40 of the Arms Export Control Act, which
denies the export, directly or indirectly, of any munitions item, lease or loan, credits,
guarantees, or other financial assistance to a terrorist country. Section 40 further
prohibits U.S. individuals from engaging in such trade or support of such a country.
Importing of defense articles and defense services is similarly restricted by the
Department of the Treasury’s Bureau of Alcohol, Tobacco, and Firearms, the
regulations of which state:
It is the policy of the United States to deny licenses and other approvals with
respect to defense articles and defense services originating in certain countries
or areas. This policy applies to Cuba, Iran, Iraq, Libya, Mongolia, North Korea,

⁵¹ For example: sec. 620(h) of the Foreign Assistance Act of 1961 (P.L. 87-195; 22 U.S.C.

2370(h)), secs. 502(b)(1) and (b)(2)(A) of the Trade Act of 1974 (P.L. 93-618; 19 U.S.C.

2462(b)(2)(A)), sec. 5(b) of the Export Administration Act of 1979 (50 U.S.C. App.

2404(b)), and sec. 43 of the Bretton Woods Agreements Act (P.L. 79-171; 22 U.S.C. 286aa),

the latter of which requires the U.S. Executive Directors to the International Monetary Fund
“to actively oppose any facility involving use of Fund credit by any Communist
dictatorship...”.
⁵² 22 CFR Part 126.1, authorized pursuant to sec. 38 of the Arms Export Control Act (P.L.

90-629; 22 U.S.C. 2778).

Sudan, Syria, Vietnam, and some of the states that comprised the former Soviet
Union (Armenia, Azerbaijan, Belarus, and Tajikistan). This policy applies to
countries or areas with respect to which the United States maintains an arms
embargo (e.g., Burma, China, the Federal Republic of Yugoslavia (Serbia and
Montenegro), Haiti, Liberia, Rwanda, Somalia, Sudan, UNITA (Angola), and
Zaire). It also applies when an import would not be in furtherance of world peace⁵³
and the security and foreign policy of the United States.
Again, the President has the authority to change these regulations by removing
North Korea from the list of restricted countries.
Access to Assets
Declaration of National Emergency. On December 16, 1950, President
Truman invoked authority granted his office under the Trading With the Enemy Act
to declare that a U.S. national emergency existed because of recent events in Korea
(and elsewhere, as “world conquest by communist imperialism is a goal of the forces
of aggression that have been loosed upon the world”).⁵⁴ A few days later, the
Department of the Treasury issued Foreign Assets Control Regulations (FACR) to
forbid any financial transactions involving, or on behalf of, North Korea and China,
including transactions related to travel or the access to North Korean assets that were
subject to U.S. jurisdiction.⁵⁵ Korea-related FACR have been modified on numerous
occasions to take into consideration new circumstances (i.e., transactions relating to
technology not in existence at the time the regulations were issued) or to ease
restrictions in response to changing conditions (i.e., signing of the Agreed
Framework, emerging reports of famine, North Korea’s announced moratorium on
missile testing). Today the regulations continue to forbid transactions except in the
following instances, in which the regulations:
^!unblock assets of North Koreans who emigrated and established
U.S. residency (1976) (41 F.R. 16554);
^!ease travel-related restrictions for special activities (1989) (54 F.R.

5231);

⁵³ 27 CFR Part 447.52, also authorized under sec. 38 of the Arms Export Control Act.
⁵⁴ Proclamation No. 2914 (December 16, 1950; 15 F.R. 9029). Section 5(b) of the Trading
With the Enemy Act (TWEA) (P.L. 65-91; 50 U.S.C. app. 5(b)), at the time of the Korean
crisis, authorized the President to curtail a range of transactions between the United States
and a targeted country “[d]uring time of war or during any other period of national
emergency declared by the President.” Today, the presidential authority to declare that a
national emergency exists is stated in the National Emergencies Act (P.L. 94-412; 50 U.S.C.
1601 et seq.), and the authority to prohibit transactions because of a national emergency is
stated in the International Emergency Economic Powers Act (IEEPA) (title II of P.L. 95-

223; 50 U.S.C. 1701 et seq.) TWEA is amended to apply only during the time of war,

except any exercise of authorities therein that was taken prior to amendment may continue
if renewed annually by the President pursuant to authorities stated in IEEPA. The actions
against North Korea are renewed annually.
⁵⁵ 31 CFR Part 500; 15 F.R. 9040; December 19, 1950, subsequently amended.

^!allow freer flow of informational materials (change in legislation not
specifically targeting North Korea, 1989) (54 F.R. 5231;
subsequently amended);
^!establish telecommunication between the two countries (1992) (57
F.R. 58986; subsequently amended);
^!authorize travel-related transactions, greater telecommunications,
news bureaus, banking, and importing magnesite from North Korea
after the Agreed Framework was reached (1995) (60 F.R. 8934);
^!authorize donations targeting basic human needs after flooding and
famine events (1996) (61 F.R. 9344);
^!authorize certain aviation-related fee payments (1997) (62 F.R.

17548);

^!allow transactions related to the exporting of computer hardware and
software, provided there is adherence to the relevant Export
Administration Regulations (2000) (65 F.R. 38165);
^!allow North Koreans to invest in property under U.S. jurisdiction,
provided the property interest is created on or after June 19, 1999
(the date of President Clinton’s announcement to ease U.S.-North
Korea relations) (2000) (65 F.R. 38165);
^!allow imports from North Korea that do not violate various
proliferation laws and regulations (2000) (65 F.R. 38165); and
^!engage in transactions with the government of North Korea provided
those transactions do not constitute a donation to a U.S. individual
and do not violate laws and regulations relating to terrorism (2000)
(65 F.R. 38165).
Generally, the President has the authority to change regulations, as long as those
changes meet the requirements of any relevant law.⁵⁶ He also annually renews the
state of national emergency, in place against North Korea since 1950. He could
allow the declaration to expire or he could lift it at any time. Congress could
terminate a declaration of national emergency by passing a joint resolution, under
terms of the National Emergencies Act.

⁵⁶ In instances pertaining to other countries (most notably, Cuba), Congress has legislated
what should be covered in regulations, as well as their flexibility or duration. Congress has
also influenced specific regulations as they pertain to aspects of using sanctions in foreign
policy, most recently by determining that food and medicine should not generally be
restricted when sanctions are applied. That action required a restatement of several sections
of regulations.

Proliferation of Weapons of Mass Destruction. On June 28, 2005,
President Bush expanded the authority granted his office to address the threat posed
by the proliferation of weapons of mass destruction — authority first exercised by
President George H.W. Bush in 1990 — to freeze assets and property of those^st
engaged in the proliferation of weapons of mass destruction. The 41 President had
declared that the United States faced a national emergency relating to weapons
proliferation (in the absence, at the time, of a reauthorized Export Administration
Act), and thus took steps in 1990 to control the exports of certain goods and services,
and authorized a ban on foreign aid and credit, procurement contracts, imports and
exports, support in international financial institutions, and landing rights.⁵⁷ The 43^rd
President’s order took additional steps to block property and assets under U.S.
jurisdiction of any person found, in part —
... to have engaged, or attempted to engage, in activities or transactions that have
materially contributed to, or pose a risk of materially contributing to, the
proliferation of weapons of mass destruction or their means of delivery
(including missiles capable of delivering such weapons), including any efforts
to manufacture, acquire, possess, develop, transport, transfer or use such items,
by any person or foreign country of proliferation concern;
... to have provided, or attempted to provide, financial, material, technological
or other support for, or goods or services in support of, any activity or transaction
described [above]...or any person whose property and interests in property are⁵⁸
blocked pursuant to this order ...
The Executive Order identifies eight foreign entities, of which three are North
Korean. Department of the Treasury’s Office of Foreign Assets Control has
subsequently added another eight North Korean entities to this restricted list, as well
as a Swiss company that was found to engage in transactions with one of the North
Korean restricted companies.⁵⁹

⁵⁷ Executive Order 12735 of November 16, 1990. On the same day, the President announced
his intention to pocket veto H.R. 4653 — the Omnibus Export Amendments Act of 1990 —
with which Congress intended to reauthorize the then-expired Export Administration Act
of 1979. In his announcement, President Bush stated his intentions to curtail significantly
trade in goods and services that lent themselves to the proliferation of weapons of mass
destruction. See “Memorandum of Disapproval for the Omnibus Export Amendments Act
of 1990,” Public Papers of the President, November 16, 1990. 26 Weekly Comp. Pres. Doc.
1839. E.O. 12735 was subsequently overhauled by President Clinton with the issuance of
Executive Order 12938 (November 14, 1994; 59 F.R. 59099; 50 U.S.C. 1701 note). The
national emergency therein is renewed annually.
⁵⁸ Executive Order 13382, Blocking Property of Weapons of Mass Destruction Proliferators
and Their Supporters (June 28, 2005; 70 F.R. 38567).
⁵⁹ Department of the Treasury. Office of Foreign Assets Control. “Nonproliferation: What
You Need to Know About Treasury Restrictions.” Information Bulletin, most recently
updated August 15, 2006, [http://www.treas.gov/offices/enforcement/ofac/programs/wmd/
wmd.shtml]. See also testimony of Robert W. Werner, Director of the Office of Foreign
Assets Control, Department of the Treasury, before the House Committee on Financial
Services, February 16, 2006.

On January 9, 2007, the Department of the Treasury announced that it had
designated Bank Sepah, a state-owned Iranian financial institution, as an entity
materially contributing to Iran’s proliferation activities. Bank Sepah, coincidentally,
according to Treasury, is credited with transferring more than $500,000 for an
associate of the Korean Mining Development Corporation. That entity was cited on
December 28, 2006, under the Iran, North Korea, and Syria Nonproliferation Act of

2000, for exporting missile technology to Iran.⁶⁰

Counterfeiting and Money-Laundering. On September 12, 2005, the
Treasury Department found that Banco Delta Asia — a Macau-based bank in which
North Korea had substantial holdings — was a “financial institution of primary
money laundering concern.”⁶¹ Treasury Department’s Financial Crimes Enforcement
Center found that North Korea may reap as much as $500 million annually from
counterfeiting, and another $100-to-$200 million annually from narcotics trafficking.⁶²
The finding authorizes the Secretary of the Treasury to require “special measures”
on the part of U.S. financial institutions and financial agencies that involve increased
record keeping and reporting on Banco Delta Asia’s transactions. Though the
Department of the Treasury has only issued a “proposed rulemaking” to impose the
most stringent fifth special measure — to prohibit certain bank transactions — a
regulation implementing this action has not yet been issued. Nonetheless, the finding
and proposed rulemaking has had a chilling effect on Banco Delta Asia’s
international business relations. Department of the Treasury officials have testified
that “some two dozen financial institutions across the globe have voluntarily cut back
or terminated their business with North Korea, notably including institutions in
China, Japan, Vietnam, Mongolia, and Singapore. The result of these voluntary
actions is that it is becoming very difficult for the Kim Jong-Il regime to benefit from⁶³

its criminal conduct.”
⁶⁰ Department of the Treasury. Press release. Iran’s Bank Sepah Designated by Treasury:
Sepah Facilitating Iran’s Weapons Program. January 9, 2007. HP-219; Weisman, Steven.
“U.S. Prohibits All Transactions with a Major Iranian Bank,” The New York Times. January

10, 2007. p. 3.

⁶¹ Pursuant to 31 U.S.C. 5318A, as enacted by the USA PATRIOT Act (§ 311 of P.L. 107-
56; 115 Stat. 298). Effective September 12, 2005, the Treasury Department’s Financial
Crimes Enforcement Network issued a finding (70 F.R. 55214) and a notice of proposed
rulemaking (to amend 31 CFR Part 103; 70 F.R. 55217).
⁶² 31 U.S.C. 5318A(b) defines “special measures” as (1) record keeping and reporting of
certain financial transactions; (2) collection of information relating to beneficial ownership;
(3) collection of information relating to certain payable-through accounts; (4) collection of
information relating to certain correspondent accounts; and (5) prohibitions or conditions
on opening or maintaining in the United States correspondent accounts or payable-through
accounts.
⁶³ Senate Committee on Banking, Housing and Urban Affairs hearings, September 12, 2006,
testimony of Treasury Deputy Under Secretary Daniel Glaser. Congressional Quarterly.

Appendix I: Other CRS Products Relating to North
Korea
Overview
CRS Report RL33567, Korea-U.S. Relations: Issues for Congress, by Larry A.
Niksch.
CRS Report RL33389, North Korea: A Chronology of Events in 2005, by Emma
Chanlett-Avery, Mark E. Manyin, and Hannah Fischer.
CRS Report RL32743, North Korea: A Chronology of Events, October
2002-December 2004, by Mark E. Manyin, Emma Chanlett-Avery, and Helene
Machart.
CRS Report RL32493, The North Korean Economy: Background and Policy
Analysis, by Dick K. Nanto and Emma Chanlett-Avery.
Proliferation
CRS Report RL33709, North Korea’s Nuclear Test: Motivations, Implications, and
U.S. Options, by Emma Chanlett-Avery and Sharon Squassoni.
CRS Report RL33590, North Korea’s Nuclear Weapons Development and
Diplomacy, by Larry A. Niksch.
CRS Report RS21391, North Korea’s Nuclear Weapons: Latest Developments, by
Sharon A. Squassoni.
CRS Report RS21582, North Korean Crisis: Possible Military Options, by Edward
F. Bruner.
CRS Report RS21473, North Korean Ballistic Missile Threat to the United States,
by Steven A. Hildreth.
CRS Report RL31900, Weapons of Mass Destruction: Trade Between North Korea
and Pakistan, by Sharon Squassoni.
Counterfeiting, International Narcotics Control
CRS Report RL32167, Drug Trafficking and North Korea: Issues for U.S. Policy, by
Raphael F. Perl.
CRS Report RL33324, North Korean Counterfeiting of U.S. Currency, by Raphael
F. Perl and Dick K. Nanto.
Foreign Aid
CRS Report RS21834, U.S. Assistance to North Korea: Fact Sheet, by Mark E.
Manyin.
CRS Report RL31785, U.S. Assistance to North Korea: Issues and Options for U.S.
Policy, by Mark E. Manyin.

CRS-22
Appendix II: North Korea — Economic Sanctions Currently Imposed in Furtherance of U.S.
Foreign Policy or National Security Objectives
R^ATI^O^NALER^ESTRI^C^TI^O^NS^TATUTO^RYB^ASI^S[^REG^U^LATI^O^N]A^U^T^HOR^IT^Y^TO^I^M^P^O^SEA^UTH^O^R^I^T^{Y TO}^LIF^T^O^R^WA^IV^E
neral foreignLimits the export of goods orExport Administration Act of 1979 (P.L. 96-72; 50President,President, Secretary of
reasonsservicesU.S.C. 2401 et seq.)Secretary ofCommerce, generally
[15 CFR Part 730-774]Commerce,
generally
neral foreignLimits proportionate share toSec. 307, Foreign Assistance Act of 1961 (P.L. 87-StatutoryNo waiver; exemption for
ⁱ^{ki/CRS-RL31696} reasonsinternational organizations195; 22 U.S.C. 2227)requirementcertain IAEA programs
^g/wwhich, in turn, expend funds
^s^.orin North Korea
^le^ak
neral foreignProhibits assistance fromSec. 8042, Department of Defense AppropriationsStatutoryNo waiver
^://wiki reasonsdefense appropriationsAct, 2007 (P.L. 109-289; 120 Stat. 1257)requirement
^h^ttpatic relationsProhibits most foreign aid andSec. 620(t), Foreign Assistance Act of 1961 (P.L.StatutoryNo waiver
eredagricultural sales under P.L.87-195; 22 U.S.C. 2370(t))requirement
480
tional securityLimits the export of goods orSec. 5, Export Administration Act of 1979 (P.L.PresidentPresident
services96-72; 50 U.S.C. 2404)
munism[15 CFR Part 730-774]
mmunismProhibits foreign aidSec. 620(f), Foreign Assistance Act of 1961 (P.L.StatutoryPresident
87-195; 22 U.S.C. 2370(f))requirement
munismLimits proportionate share toSec. 307, Foreign Assistance Act of 1961 (P.L. 87-StatutoryNo waiver; exemption for
international organizations195; 22 U.S.C. 2227)requirementcertain IAEA programs

which, in turn, expend funds
in North Korea

CRS-23
R^ATI^O^NALER^ESTRI^C^TI^O^NS^TATUTO^RYB^ASI^S[^REG^U^LATI^O^N]A^U^T^HOR^IT^Y^TO^I^M^P^O^SEA^UTH^O^R^I^T^{Y TO}^LIF^T^O^R^WA^IV^E
munismProhibits Export-Import BankSec. 2(b)(2), Export-Import Bank Act of 1945StatutoryPresident
funding to Marxist-Leninist(P.L. 79-173; 12 U.S.C. 635(b)(2))requirement
states
munismProhibits support in the IFIsSec. 43, Bretton Woods Agreements Act (P.L. 79-StatutorySecretary of the Treasury
171; 22 U.S.C. 286aa)requirement
munismLimits the export of goods orSec. 5(b), Export Administration Act of 1979 (P.L.StatutoryPresident
services96-72; 50 U.S.C. 2404(b))requirement
munismDenies favorable trade termsSec. 401, Trade Act of 1974 (19 U.S.C. 2431)StatutoryPresident
requirement
ⁱ^{ki/CRS-RL31696}
^g/warket economyDenies favorable trade termsSec. 402, Trade Act of 1974 (19 U.S.C. 2432)StatutoryPresident
^s^.origration requirement
^le^ak
arket economyDenies favorable trade termsSec. 409, Trade Act of 1974 (19 U.S.C. 2439)PresidentPresident
^://wikiigration
^h^ttp
munism andDenies favorable trade termsSec. 406, Trade Act of 1974 (19 U.S.C. 2436)PresidentPresident
arket disruption
munismDenies Generalized System ofSec. 502(b), Trade Act of 1974 (19 U.S.C.PresidentPresident
Preferences designation2462(b))
rrorismLimits the export of goods orSec. 6(j), Export Administration Act of 1979 (P.L.Secretary of StateSecretary of State, after
services96-72; 50 U.S.C. 2504(j))the President notifies
Congress
Prohibits licenses for armsSec. 38, Arms Export Control Act (P.L. 90-629; 22Secretary of StateSecretary of State

exports/importsU.S.C. 2778)
[22 CFR Part 126.1, 27 CFR Part 447.52]

CRS-24
R^ATI^O^NALER^ESTRI^C^TI^O^NS^TATUTO^RYB^ASI^S[^REG^U^LATI^O^N]A^U^T^HOR^IT^Y^TO^I^M^P^O^SEA^UTH^O^R^I^T^{Y TO}^LIF^T^O^R^WA^IV^E
,Prohibits transactions relatedSec. 40, Arms Export Control Act (P.L. 90-629; 22Secretary of StateSecretary of State, after
to defense articles and defenseU.S.C. 2780)the President notifies
servicesCongress. President may
also waive per each
transaction.
Congress may block a
rescission by joint
resolution.
, failure toProhibits transactions relatedSec. 40A, Arms Export Control Act (P.L. 90-629;PresidentPresident, at annual
ⁱ^{ki/CRS-RL31696}to defense articles and defense22 U.S.C. 2781)review, or waived by the
^g/wservicesPresident if he finds it
^s^.or“important to the national
^le^akinterests of the United
States.”
^://wiki
^h^ttprrorismProhibits most aid under theSec. 620A, Foreign Assistance Act of 1961 (P.L.Secretary of StateSecretary of State, after
Foreign Assistance Act of87-195; 22 U.S.C. 2371)the President notifies

1961, Agricultural TradeCongress.

Development and Assistance
Act of 1954, Peace Corps Act,Waived by President if he
and Export-Import Bank Actfinds “that national
of 1945security interests or
humanitarian reasons
justify a waiver...”
rrorismProhibits importsSec. 505, International Security and DevelopmentPresidentPresident

Cooperation Act of 1985 (P.L. 99-83; 22 U.S.C.

2349aa-9)

CRS-25
R^ATI^O^NALER^ESTRI^C^TI^O^NS^TATUTO^RYB^ASI^S[^REG^U^LATI^O^N]A^U^T^HOR^IT^Y^TO^I^M^P^O^SEA^UTH^O^R^I^T^{Y TO}^LIF^T^O^R^WA^IV^E
rrorismDenies Export-Import BankSec. 2(b)(1)(B), Export-Import Bank Act of 1945PresidentPresident
financing(P.L. 79-173; 12 U.S.C. 635(b)(1)(B))
rrorismOpposes loans or fundingSec. 1621, International Financial Institutions ActSecretary of theSecretary of the Treasury
through international financial(P.L. 95-118; 22 U.S.C. 262p-4q)treasury, if a(no waiver authority)
institutionscountry is listed
under §6(j), EAA,
or §620A,
FAA’61.
rrorismOpposes loans or fundingSec. 6, Bretton Woods Agreements ActSecretary of theSecretary of the Treasury
ⁱ^{ki/CRS-RL31696}through the InternationalMonetary FundAmendments of 1978 (P.L. 95-435; 22 U.S.C.286e-11)treasury, if acountry is listed(no waiver authority)
^g/wunder §6(j), EAA,
^s^.oror §620A,
^le^ak FAA’ 61.
^://wikirrorismProhibits bilateral assistanceSec. 527, Foreign Operations, Export Financing,PresidentPresident, if he finds it in
^h^ttpand Related Programs Appropriations Act, 2006,the national security
as continued (P.L. 109-102; 119 Stat. 2205)interest, or for
humanitarian reasons
Prohibits bilateral assistanceSec. 507, Foreign Operations, Export Financing,StatutoryNo waiver
h notand Related Programs Appropriations Act, 2006,requirement
stated asas continued (P.L. 109-102; 119 Stat. 2197)
Prohibits participation inSec. 565, Foreign Operations, Export Financing,StatutoryNo waiver

programs of special debt reliefand Related Programs Appropriations Act, 2006,requirement
for the poorestas continued (P.L. 109-102; 119 Stat. 2225)

CRS-26
R^ATI^O^NALER^ESTRI^C^TI^O^NS^TATUTO^RYB^ASI^S[^REG^U^LATI^O^N]A^U^T^HOR^IT^Y^TO^I^M^P^O^SEA^UTH^O^R^I^T^{Y TO}^LIF^T^O^R^WA^IV^E
rrorismLimits export licensing forSecs. 906, 908 Trade Sanctions Reform Act ofStatutoryPresident, based on
food and medicine; prohibits2000 (P.L. 106-387; 22 U.S.C. 7205, 7207)requirementnational security interests
government financing foror humanitarian reasons
such exports
rrorismLimits provision of services toSec. 40, State Department Basic Authorities ActSecretary of StateSecretary of State
security forces, law(P.L. 84-885; 22 U.S.C. 2712)
enforcement, military,
intelligence community
,Prohibits the acquisition ofSec. 205, State Department Basic Authorities ActSecretary of StateSecretary of State
ⁱ^{ki/CRS-RL31696}munismproperty in U.S. fordiplomatic mission(P.L. 84-885; 22 U.S.C. 4305)
^g/w
^s^.or, excessiveProhibits the cancellation orSec. 501, Miscellaneous Appropriations, 2000StatutoryPresident
^le^akilitary expenditure,reduction of certain debt(H.R. 3425, enacted by reference in P.L. 106-113;requirement
^://wikian rightsolations22 U.S.C. 2395a note)
^h^ttp
ergencyProhibits imports, exports,Trading With the Enemy Act (P.L. 65-91; 50PresidentPresident

transactions related toU.S.C. app. 5(b));(Proclamation
transportationInternational Emergency Economic Powers Act2914; December
(P.L. 95-223; esp. at 50 U.S.C. 1702);16, 1950; 15 F.R.
National Emergencies Act (P.L. 94-412; 50 U.S.C.9029)

1601 et seq.)

[31 CFR Part 500]

CRS-27
R^ATI^O^NALER^ESTRI^C^TI^O^NS^TATUTO^RYB^ASI^S[^REG^U^LATI^O^N]A^U^T^HOR^IT^Y^TO^I^M^P^O^SEA^UTH^O^R^I^T^{Y TO}^LIF^T^O^R^WA^IV^E
ergency,Blocks assets of namedInternational Emergency Economic Powers ActPresident [seePresident
proliferators of weapons of(P.L. 95-223; esp. at 50 U.S.C. 1702);Executive Order
assmass destruction National Emergencies Act (P.L. 94-412; 50 U.S.C.13382, June 28,

1601 et seq.)2005; 50 U.S.C.

1701 note]

Prohibits a range ofSec. 73, Arms Export Control Act (P.L. 90-629; 22PresidentPresident
asstransactions — USGU.S.C. 2797b)
issilescontracts, export licenses,
imports into US
ⁱ^{ki/CRS-RL31696}assProhibits foreign aid, militaryaid, Sec. 101, Arms Export Control Act (P.L. 90-629;22 U.S.C. 2799aa)PresidentPresident
^g/w
^s^.orent transfers
^le^ak
^://wikiassProhibits foreign aid (excepthumanitarian), military aid,Sec. 102, Arms Export Control Act (P.L. 90-629;22 U.S.C. 2799aa-1)PresidentPresident
^h^ttpUSG defense sales and
transfers, export licenses for
USML goods and services,
USG-backed credits, support
in the IFIs, agricultural credits
or financing, US commercial
bank financing, licenses for
export of certain goods and
services
Prohibits Export-Import BankSec. 2(b)(4) of the Export-Import Bank Act ofStatutoryPresident

assfinancing1945 (P.L. 79-173; 12 U.S.C. 635(b)(4))requirement

CRS-28
R^ATI^O^NALER^ESTRI^C^TI^O^NS^TATUTO^RYB^ASI^S[^REG^U^LATI^O^N]A^U^T^HOR^IT^Y^TO^I^M^P^O^SEA^UTH^O^R^I^T^{Y TO}^LIF^T^O^R^WA^IV^E
Prohibits Export-Import BankForeign Operations, Export Financing, and RelatedStatutoryNo waiver
assfinancingPrograms Appropriations Act, 2006, as continuedrequirement
(P.L. 109-102; 119 Stat. 2172)
Prohibits a range ofSec. 11B, Export Administration Act (P.L. 96-72;PresidentPresident
asstransactions — contracts,50 U.S.C. app. 2410b)
issilesexport licenses, imports into
US
Prohibits a range ofSec. 3, Iran, North Korea, and SyriaPresidentPresident
ⁱ^{ki/CRS-RL31696}asstransactions — arms sales andexports, dual-use exports,Nonproliferation Act of 2000 (P.L. 106-178; 50U.S.C. 1701 note)
^g/wprocurement contracts,
^s^.orassistance, imports, support in
^le^akthe IFIs, credit, landing rights
^://wikian rightsProhibits non-humanitarianSec. 110, Trafficking Victims Protection Act ofPresidentPresident, waiver if in the
^h^ttping inforeign aid, cultural2000 (P.L. 106-386; 22 U.S.C. 7107)national interest
exchanges, support in
international financial
institutions
,Prohibits certain commercial31 U.S.C. 5318A (generally referred to by itsSecretary of theSecretary of the Treasury

oney-launderingbank transactionsamendatory vehicle — Sec. 311, USA PATRIOTTreasury
Act)

CRS-29
Appendix III: North Korean Entities Cited for Proliferation Activities Under U.S. Law
Effective Date/CiteNorth Korean EntityPossible Trading Partner (cited insame finding)Activity/Statute
— Lyongaksan Machineries andMinistry of Defense and ArmedCategory I missile proliferation;
Equipment Export Corporation;Forces (Iran)contribution to MTCR
— Changgwang Credit Corporationnonadherent
§73(a)(2)(B), (C), AECA
§11B(b)(1)(B)(ii), (iii), EAA
— Lyongaksan Machineries and — Syrian Scientific ResearchCategory I missile proliferation;
Equipment Export Corporation;Center;contribution to MTCR
— Changgwang Credit Corporation — Ministry of Defense (Syria)nonadherent
ⁱ^{ki/CRS-RL31696}§73(a)(2)(B), (C), AECA
^g/w§11B(b)(1)(B)(ii), (iii), EAA
^s^.or
^le^ak 24, 1996Changgwang Sinyong Corporation — Ministry of Defense ArmedCategory II missile proliferation
(Korea Mining Development TradingForces Logistics (Iran);§73(a)(2)(A), AECA
^://wikiBureau) — State Purchasing Office (Iran)§11B(b)(1)(B)(i), EAA
^h^ttp
ust 6, 1997Lyongaksan General TradingUnnamed entity cited on same date,Category II missile proliferation
Corporationseparate finding§73(a)(2)(A), AECA
§11B(b)(1)(B)(i), EAA
ust 6, 1997Korea Pugang Trading CorporationUnnamed entity cited on same date,Category II missile proliferation
separate finding§73(a)(2)(A), AECA
§11B(b)(1)(B)(i), EAA
Changgwang Sinyong CorporationKhan Research LaboratoriesCategory I missile proliferation;
(Korea Mining Development Trading(Pakistan)contribution to MTCR
Corporation) nonadherent
§73(a)(2)(B), (C), AECA
§11B(b)(1)(B)(ii), (iii), EAA

CRS-30
Effective Date/CiteNorth Korean EntityPossible Trading Partner (cited insame finding)Activity/Statute
Changgwang Sinyong Corporation — Ministry of Defense and ArmedCategory I missile proliferation;
Forces Logistics (MODAFL) (Iran);contribution to MTCR
— Aerospace Industriesnonadherent
Organization (AIO) (Iran);§73(a)(2)(B), (C), AECA
Shahid Hemmat Industrial Group§11B(b)(1)(B)(ii), (iii), EAA
(SHIG) (Iran);
— SANAM Industrial Group (Iran)
(Determination was made for an
unnamed entity April 7, 2000)
nuary 2, 2001Changgwang Sinyong CorporationIranian entity/iesWMD proliferation
ⁱ^{ki/CRS-RL31696}§§2 and 3, INA
^g/wChanggwang Sinyong CorporationIranian entity/iesWMD proliferation
^s^.or§§2 and 3, INA
^le^ak
^://wikiust 16, 2002Changgwang Sinyong CorporationUnnamed entity cited on same date,separate findingCategory II missile proliferation§73(a)(2)(A), AECA
^h^ttp§11B(b)(1)(B)(i), EAA
Changgwang Sinyong CorporationUnnamed entity cited on same date,Category I missile proliferation;
separate findingcontribution to MTCR
nonadherent
§73(a)(2)(B), (C), AECA
§11B(b)(1)(B)(ii), (iii), EAA
Changgwang Sinyong CorporationIranian entity/iesWMD proliferation
§§2 and 3, INA

CRS-31
Effective Date/CiteNorth Korean EntityPossible Trading Partner (cited insame finding)Activity/Statute
ly 25, 2003Changgwang Sinyong CorporationUnnamedCategory I missile proliferation,
contribution to MTCR
nonadherent
§73(a)(2)(B), (C), AECA
§11B(b)(1)(B)(ii), (iii), EAA
Changgwang Sinyong CorporationIranian entity/iesWMD proliferation
§§2 and 3, INA
ber 23, 2004Changgwang Sinyong CorporationIranian entity/iesWMD proliferation
§§2 and 3, INA
ⁱ^{ki/CRS-RL31696}ember 24, 2004Changgwang Sinyong CorporationIranian entity/iesWMD proliferation
^g/w§§2 and 3, INA
^s^.or
^le^akber 27, 2004Paeksan Associated CorporationIranian entity/iesWMD proliferation
§§2 and 3, INA
^://wiki
^h^ttp — Korea Mining DevelopmentN/AWMD proliferation
^a,^bTrading Corporation (ChanggwangE.O. 13382; E.O. 12938; IEEPA;
Sinyong Corp.);NEA

— Korea Ryonbong General
Corporation;
— Tanchon Commercial Bank
(Changgwang Credit Bank)

CRS-32
Effective Date/CiteNorth Korean EntityPossible Trading Partner (cited insame finding)Activity/Statute
^c — Hesong Trading Corp.;N/AWMD proliferation
— Korea Complex EquipmentE.O. 13382; E.O. 12938; IEEPA;
Import Corp.;NEA
— Korea International Chemical
Joint Venture Company;
— Korea Kwangsong Trading Corp.;
— Korea Pugang Trading Corp.;
— Korea Ryonha Machinery Joint
Venture;
Tosong Technology Trading Corp.
ⁱ^{ki/CRS-RL31696}ber 7, 2006Government of North KoreaN/ADetonating a nuclear explosive
^g/wresidential Determination No.device
^s^.or07; Public Papers of the§102(b)(2), AECA
^le^ak December 18, 2006)§129 AEA
^://wikiber 28, 2006— Korea Mining DevelopmentN/A [Iran mentioned in pressWMD proliferation
^h^ttpCorporationaccounts around the same time]§§2 and 3, INKSNA
^{CR =}^Mⁱ^ssi^l^e^T^e^c^hno^l^o^gy^Co^nt^r^o^l^Re^gi^m^e
^{D =}^W^e^a^p^oⁿ^{s o}^f^M^a^{ss De}^str^u^c^tioⁿ
^A⁼^Ar^m^s^E^x^p^o^r^t^C^oⁿ^t^r^o^l^Ac^t
^{= Ex}^port^A^d^mⁱⁿⁱ^s^t^ratⁱ^oⁿ^A^c^t^of¹⁹⁷⁹
^At^o^mⁱ^c^Eⁿ^e^r^g^y^Ac^t
^{= Iran}^N^oⁿ^p^rolⁱ^f^eratⁱ^oⁿ^A^c^t^of²⁰⁰⁰
^A^{= Iran}^an^{d S}^y^ri^{a N}^oⁿ^p^rolⁱ^f^eratⁱ^oⁿ^A^c^t^of^{2000 (IN}^A^{, as}^am^en^{ded 11/}^22/²⁰⁰⁵⁾
^S^N^A^{= Iran}^{, N}^o^rt^h^K^o^{rea, an}^{d S}^y^ri^{a N}^oⁿ^p^rolⁱ^f^eratⁱ^oⁿ^A^c^t^of^{2000 (IS}^N^A^,^as^am^en^{ded 10/}^13/²⁰⁰⁶⁾
^ecu^tiv^{e Order}
^A^{= I}ⁿ^terⁿ^atioⁿ^a^{l Em}^er^g^eⁿ^c^y^Ecoⁿ^o^m^{ic P}^o^w^e^r^s^A^c^t
^{= Natio}ⁿ^a^{l Em}^er^g^eⁿ^c^{ies A}^c^t
^C⁼^O^ffi^c^e^o^f^Fo^r^eⁱ^{gn A}^sse^t^s^Co^nt^r^o^l^,^D^e^p^a^r^t^m^e^nt^o^f^t^h^e^T^r^e^a^s^ur^y

CRS-33
ⁿ^testim^oⁿ^y^b^e^f^o^r^e^t^h^e^H^o^u^s^e^Co^m^m^{ittee o}ⁿ^Fin^aⁿ^c^{ial Ser}^v^{ices, Su}^b^c^o^m^m^{ittee o}ⁿ^Ov^er^sig^h^t^an^d^Iⁿ^v^e^stig^atioⁿ^s^{, OFA}^C^Dir^ecto^r^Ro^b^e^r^t^W^e^rⁿ^er^id^en^tif^ied^th^{e Ko}^r^{ea Min}ⁱⁿ^g
^Dev^e^lopm^en^{t T}^r^adin^g^C^o^rporation^as^“^P^y^oⁿ^g^y^an^g^’^s^prem^{ier arm}^s^deal^{er an}^{d m}^aⁱⁿ^ex^{porter of}^g^oods^an^{d equ}ⁱ^pm^en^t^related^to^ballis^t^ic^mⁱ^{ssiles an}^d^coⁿ^v^eⁿ^tioⁿ^a^{l w}^eap^oⁿ^{s”; “}^t^h^e
^North^Korean^def^eⁿ^s^{e con}^g^l^om^{erate Korea R}^y^on^bon^g^Gen^e^{ral C}^o^rporation^{...” as a specia}^lⁱ^s^t^“in^acquⁱ^sition^f^o^{r North}^Korean^def^eⁿ^s^eⁱⁿ^du^s^t^ri^es^an^{d s}^u^pport^t^o^Py^on^g^y^an^g^’^s
^m^ilitary^-^r^{elated sales...iden}^tif^{ied in}^ex^por^{t con}^t^{rol w}^a^tch^{lists in}^th^{e Un}^{ited States}^an^{d am}^on^g^{U.S. allies...”; an}^{d “}^T^an^ch^on^Co^m^m^e^r^cⁱ^a^l^B^a^nk,^h^e^a^d^q^u^a^r^t^e^r^e^dⁱⁿ^P^y^o^ngy^a^ng,
^inher^ited^f^r^o^m^{the Ko}^r^{ea Changgw}^{ang Cr}^ed^{it B}^a^{nk Co}^r^p^o^r^atio^{n...the r}^o^{le as the m}^a^{in No}^r^t^{h Ko}^r^{ean f}ⁱ^{nancial agent f}^o^r^{sales o}^f^coⁿ^v^eⁿ^tion^a^{l arm}^s^{, ballis}^{tic m}ⁱ^s^s^iles^,^an^{d g}^ood[s^]
^{related to th}^{e as}^s^e^m^b^ly^an^{d m}^aⁿ^u^f^actu^r^{e of}^s^u^ch^w^eapon^s^.^Sⁱⁿ^{ce th}^e^late^1980s^,^T^aⁿ^c^h^oⁿ^’^s^predeces^s^o^r,^[C^h^a^nggw^ang...]^co^llected^r^e^{venue f}^r^o^m^w^eap^oⁿ^s-^r^e^lated^{sales that w}^e^r^e
^con^cen^{trated in}^{a h}^aⁿ^d^f^u^{l of}^couⁿ^t^ries^m^aⁱⁿ^ly^locate^dⁱⁿ^t^h^e^Mⁱ^d^-^E^a^s^t^aⁿ^d^s^e^v^e^{ral A}^f^rican^s^t^ates^{. T}^h^es^{e rev}^eⁿ^u^e^s^prov^{ide North}^Ko^r^{ea w}^ith^{a sig}ⁿⁱ^fⁱ^can^{t p}^o^r^tioⁿ^o^f^{its ex}^p^o^r^t
^earⁿⁱⁿ^g^s^an^d^fⁱⁿ^aⁿ^c^ially^aid^P^y^oⁿ^g^y^an^g^’^{s o}^wⁿ^w^eap^oⁿ^{s d}^e^v^e^lo^p^m^en^{t an}^d^ar^m^s^-^r^elated^p^u^r^c^h^a^{ses.” Cap}^ito^{l Hill Hear}ⁱⁿ^g^T^e^stim^oⁿ^y^,^C^oⁿ^g^r^es^sⁱ^on^al^Q^u^art^e^rl^y^.^F^e^bru^a^ry^{16, 2006.}
ⁿ^March^{30, 2006, t}^h^{e D}^e^part^m^eⁿ^t^of^t^h^{e T}^r^eas^u^r^y^anⁿ^o^uⁿ^{ced i}^t^w^o^u^l^{d add K}^o^h^a^s^A^G^{, a S}^wⁱ^s^s^com^p^an^y^,^an^{d i}^t^s^presⁱ^d^en^t^,^Jak^o^b^Steig^e^r^,^oⁿ^th^{e B}^l^o^c^k^e^d^En^{tities list u}ⁿ^d^er^E.O.
^{13382, becau}^s^e^if^its^fⁱⁿ^aⁿ^c^{ial ties}^to^K^o^{rea R}^y^on^bon^g^Gen^e^{ral C}^o^rporation^.^A^s^u^bs^idiary^of^R^y^on^bon^g^owⁿ^sⁿ^early^h^a^lf^th^{e ou}^ts^t^a^ndⁱ^{ng sha}^r^e^s^o^f^K^o^ha^s.^D^e^p^a^r^t^m^e^nt^o^f^t^h^e
^T^r^e^a^s^ur^y^,^O^ffi^c^e^o^f^Fo^r^eⁱ^{gn A}^sse^t^s^Co^nt^r^o^l^.^Am^endm^ent^of^fⁱ^nal^r^u^l^e^{. 31 C}^F^R^C^h^apt^e^{r v}^.^{71 F}^.^R^.^{39708 (Ju}^l^y^{13, 2006). Ef}^f^ectⁱ^v^{e Ju}ⁿ^e^{27, 2006. A}^v^ers^a^{, Jean}ⁿⁱⁿ^e^{. “}^U^.S^.
^Freezes^A^s^s^e^ts^of^Sw^is^s^C^o^m^p^an^y^Tⁱ^{ed to North}^Korea,”^A^sso^cⁱ^a^t^e^d^P^r^e^ss.^March^{30, 2006. Stu}^a^{rt L}^e^v^e^y^,^Un^{der Secretary}^f^o^{r T}^e^rroris^m^an^{d Fin}^aⁿ^c^{ial In}^tellig^en^{ce, Departm}^eⁿ^t
^of^t^h^{e T}^r^eas^u^r^y^.^T^e^s^tⁱ^m^on^y^bef^o^{re S}^eⁿ^a^t^e^C^o^m^mⁱ^t^t^{ee on}^Ban^kⁱⁿ^g^,^H^o^u^sⁱⁿ^g^,^an^{d U}^r^ban^A^f^f^aⁱ^r^s^,^A^p^ri^l^{4, 2006,}^C^ongr^es^sⁱ^onal^Q^uar^t^e^r^l^y^.
^hⁱ^s^Febru^a^ry^{16, 2006 tes}^tim^on^y^bef^o^{re th}^{e Hou}^s^{e C}^o^m^m^{ittee on}^Fin^aⁿ^{ce, Su}^bcom^m^{ittee on}^Ov^ersⁱ^g^h^t^an^{d In}^v^e^s^tig^ation^s^{, OF}^A^C^{Director W}^e^rn^{er iden}^tif^{ied Hes}^oⁿ^g^T^r^adin^g
^Co^r^p^o^r^a^tⁱ^o^{n a}ⁿ^d^T^o^s^oⁿ^g^T^e^c^hno^l^o^gy^T^r^a^dⁱ^{ng Co}^r^p^o^r^a^tⁱ^o^{n a}^s^o^w^ne^d^o^r^c^o^nt^r^o^l^l^e^d^b^y^p^a^r^e^nt^c^o^m^p^aⁿ^y^Cha^nggw^a^{ng Si}^ny^o^{ng Co}^r^p^o^r^a^tⁱ^o^n.^H^e^f^u^rt^h^e^{r ci}^t^e^{d K}^o^{rea R}^y^on^bon^g
^Gen^e^{ral C}^o^rporation^as^th^{e paren}^t^com^p^an^y^of^th^{e rem}^aⁱⁿⁱⁿ^g^sⁱ^x^en^tities^iden^tif^{ied f}^o^{r pu}^rpos^es^of^{E.O. 13382.}

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