On February 18, 2016, the President signed into law the “North Korea Sanctions and Policy Enhancement Act of 2016” (H.R. 757) (the “NKSPEA”), which passed Congress by an overwhelming majority in the U.S. House of Representatives and a unanimous vote in the U.S. Senate. NKSPEA sets out several new sanctions against North Korea, including the following:
1. Blocking of the Government of North Korea: Section 104(c) of NKSPEA requires imposition of a “blocking” order (i.e., asset freeze) against the Government of North Korea, the Workers’ Party of Korea, and certain persons designated pursuant to Section 104(a) and (b) of NKSPEA (as well as persons determined to be owned or controlled by, or acting on behalf of, any of the foregoing). As a result, all property or interests in property of such persons would be blocked (or “frozen”) if it comes within the United States or the possession or control of a US person. US persons are broadly prohibited from dealing with blocked persons, whether directly or indirectly.
2. Additional Designation Requirements and Authorities: Section 104(a) of NKSPEA requires designation of persons determined to have knowingly engaged in certain targeted activities, including, but not limited to:
o Importing or exporting controlled goods, services or technology to or from North Korea for WMD proliferation purposes;
o Facilitating human rights abuses or censorship by the Government of North Korea;
o Engaging in significant activities undermining cybersecurity against foreign persons on behalf of the Government of North Korea; or
o Selling, supplying or transferring a significant amount of precious metal, graphite, raw or semi-finished metals or aluminum, steel, coal or software, for WMD proliferation or other targeted uses.
Section 104(b) allows for discretionary designation of UN-sanctioned parties or parties contributing to bribery or misappropriation of public funds. Persons designated under Section 104(a) or (b) would be subject to the blocking restrictions described above and likely added to the List of Specially Designated Nationals and Blocked Persons (“SDN List”).
3. Government Procurement Ban: In addition to the blocking requirements, Section 204(a) of NKSPEA imposes a government procurement and contracting ban on any person designated under Section 104(a).
4. Potential Designation as a “Jurisdiction of Primary Money Laundering Concern”: Section 201(b) on NKSPEA requires the administration to determine whether there are reasonable grounds to designate North Korea as a “jurisdiction of primary money laundering concern.” This designation would block North Korean access to the US financial system and require the imposition of “special measures” against designated financial institutions.
5. Export Licensing Requirement: Section 203(a) of NKSPEA imposes a new export licensing requirement for all items classified on the US Commerce Control List for anti-terrorism (AT) reasons. This requirement has limited effects beyond existing export controls, which impose a licensing requirement for almost all exports to North Korea of items “subject to US jurisdiction,” (i.e., of US origin, exported from the United States, or containing more than 10% controlled US content), except for uncontrolled (i.e., EAR99) food or medicine. The effect of this new requirement is to remove the availability of certain license exceptions for various categories of AT-controlled exports, including humanitarian donations, personal baggage, and news media equipment. Such exports now require a validated license. There is an exception to this requirement for the “provision of assistance for human rights, democracy, rule of law, or emergency humanitarian purposes.”
With the exception of the procurement ban under Section 204, the sanctions above are subject to a waiver authority set out in Section 208 for humanitarian assistance, i.e., “assistance to meet humanitarian needs, including needs for food, medicine, medical supplies, clothing, and shelter” or for certain human rights purposes. This waiver must be affirmatively exercised by the President to be effective, and it is unclear at this time how specific or broad this waiver must be with respect to particular activities or organizations.