The U.S. on Thursday sanctioned two Chinese shipping companies for helping North Korea evade sanctions, the first DPRK related designations since December last year.
The Department of Treasury’s Office of Foreign Assets Control (OFAC) and the U.S. Coast Guard also updated an advisory on North Korea’s deceptive shipping practices.
“The U.S. Department of the Treasury’s Office of Foreign Assets Control today announced the designation of two shipping companies that have helped North Korea evade sanctions,” an OFAC press release accompanying the designations reads.
“Treasury will continue to enforce our sanctions, and we are making it explicitly clear that shipping companies employing deceptive tactics to mask illicit trade with North Korea expose themselves to great risk,” Treasury Secretary Steven Mnuchin said in the release.
OFAC designated Dalian Haibo International Freight and Liaoning Danxing International Forwarding Co. Ltd, two companies based in Dalian, China.
According to the U.S. Department of Treasury, Dalian Haibo worked with an OFAC sanctioned, North Korean company called Paeksol Trading Corporation.
“Paeksol is also subordinate to the UN- and U.S.-designated Reconnaissance General Bureau (RGB),” the OFAC press release reads.
“OFAC previously designated Paeksol for having sold, supplied, transferred, or purchased metal or coal from North Korea, where the revenue may have benefited the Government of North Korea or the Workers’ Party of Korea.”
The press release adds that Dalian Haibo shipped goods to Paeksol aboard North Korean-flagged ships from Dalian to the DPRK’s Nampho port in early 2018, though did not specify what the goods were.
Liaoning Danxing International Forwarding was blacklisted for operating in the transport industry of North Korea and using “deceptive practices that enabled EU-based North Korean procurement officials to operate and purchase goods for the DPRK regime.”
In their 2016 report, the UN Panel of Experts (PoE) tasked with monitoring DPRK sanctions enforcement investigated Liaoning Danxing for its role in shipping luxury vehicles to North Korea.
The Chinese logistics firm worked with another sanctions breaking company called Seajet International to export Mercedes-Benz S-600 limousine conversions, which North Korea sometimes uses in parades.
“Seajet instructed a United States company to name the consignee as Liaoning Danxing International Forwarding Co., a major Chinese logistics company that describes itself on its website as a Democratic People’s Republic of Korea shipping agency, which established the first container shipping line between Dalian and Nampho,” the PoE wrote.
OFAC and U.S. Coast Guard’s updated shipping advisory also provides new details on North Korea’s deceptive maritime practices, oil smuggling and lists vessels that may have been involved in illicit transfers of both coal and oil.
The advisory updates previous information from Washington on the number of ship-to-ship oil transfers, North Korea’s current primary means of obtaining refined oil products in defiance of UN resolutions.
“In 2018, North Korean ports received at least 263 tanker deliveries of refined petroleum procured from UN-prohibited ship-to-ship transfers,” the advisory reads.
“If these tankers were fully laden when they made their delivery, North Korea would have imported 3.78 million barrels, or more than seven and a half times the allowable amount of refined petroleum (i.e., 500,000 barrels/year) under UN Security Council Resolution (UNSCR) 2397.”
The OFAC advisory also added an updated graphic showing hot zones for frequent oil transfers at sea, adding three new areas when compared to last year’s advisory.
OFAC also identified which ports oil tankers call at before and after conducting the illicit shipments. Typically, tankers involved in the transfers at sea use numerous techniques to hide their journeys and obfuscate their routes.
The deceptive practices include manipulation of Auto Identification System (AIS) signals, disabling AIS tracking systems, physically altering vessel identification and falsifying cargo and vessel documents.
North Korea’s combination of sanctions evasion techniques with companies and vessels registered in foreign jurisdictions can also pave the way for companies to become involved in DPRK-linked trades unwittingly.
“North Korea’s deceptive practices are intended to circumvent existing sanctions compliance controls used by the shipping industry and other actors involved in shipping-related transactions, such as insurance companies and financial institutions,” the advisory reads.
The OFAC advisory recommended new risk mitigation techniques to help traders avoid becoming embroiled in North Korea’s networks and sanctions evasion practices.
These include monitoring for “AIS manipulation and disablement”, promoting “continuous AIS broadcasts”, due diligence in petroleum supply chains and researching ship histories.
As with the previous advisory, OFAC also warned that it will pursue individuals or companies who engage in “prohibited and sanctionable conduct.”
Lastly, the advisory added three new annexes which outline UN member state obligations, applicable UN and U.S. restrictions, lists of vessels involved in North Korea’s smuggling operations and guidance for countries and companies to avoid becoming involved in the DPRK’s illicit trade.
The new designations and advisory are the first since a failed summit between Washington and Pyongyang in Hanoi in late February.
During the talks, Pyongyang requested that international sanctions be rolled back, though both sides failed to come to an agreement and walked away from the negotiating table.
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Featured Image: Treasury Department - 2012-09-20 by Tim Evanson on 2012-09-20 18:17:23