If you strip out the introduction, the review of the sanctions authorities and the annex (a list of goods and components), you get a much more manageable text…
Key North Korean Ballistic Missile Procurement Entities
Many of the entities and individuals (including non-North Korean entities and individuals) supporting or providing assistance to North Korea’s ballistic missile program and related procurement activities have been designated for sanctions by the UN and/or the United States.2,3,4 Listed below are some of the key North Korean entities involved in the country’s procurement of ballistic missile-related items, including technology, all of which have been designated by both the UN and the United States. This list is illustrative and not exhaustive; please refer to OFAC’s List of Specially Designated Nationals and Blocked Persons (SDN List) for a comprehensive, consolidated, and searchable list of sanctioned persons.5 (The UN Security Council or the 1718 Committee may designate for targeted sanctions (asset freeze and, for individuals, travel ban) any individual or entity engaged in or providing support for, including through other illicit means, North Korea’s nuclear-related, other weapons of mass destruction-related, and ballistic missile-related programs).
Korea Mining Development Trading Corporation (KOMID), aka Changgwang Sinyong Corporation, External Technology General Corporation, Korea Kumryong Trading Company, Korean Mining and Industrial Development Corporation:6 KOMID is North Korea’s primary arms dealer and main exporter of goods, including equipment, related to ballistic missiles and conventional weapons. KOMID was sanctioned pursuant to Executive Order (E.O.) 13382 in 2005. It was designated for sanctions under UN Security Council resolution (UNSCR) 1718 in 2009. KOMID has offices and representatives in multiple countries around the world, including Iran, and facilitates weapons sales for the North Korean government.7 KOMID has also acquired sensitive technology via its procurement arm, the Korea Heungjin Trading Company, which procured an advanced digital controller with applications in missile design.
Munitions Industry Department (MID), aka Military Supplies Industry Department: 8 MID is involved in key aspects of the DPRK’s missile program, including the research, development and production of the DPRK’s ballistic missiles, such as the Taepo Dong-2. MID also oversees the DPRK’s nuclear program. MID was sanctioned pursuant to E.O. 13382 in 2010 and by the UN under UNSCR 2270 in 2016.
Second Academy of Natural Sciences (SANS), aka National Defense Academy: 9 SANS is a national-level organization responsible for research and development of North Korea’s advanced weapons systems, including missiles and likely nuclear weapons. SANS uses a number of subordinate organizations to obtain technology, equipment, and information from overseas for use in North Korea’s missile and probably nuclear weapons programs. SANS is subordinate to MID. SANS was sanctioned pursuant to E.O. 13382 and by the UN under UNSCR 2094 in 2013.
Second Economic Committee (SEC):10 SEC is involved in key aspects of the DPRK’s missile program. SEC is responsible for overseeing the production of the DPRK’s ballistic missiles. SEC, itself subordinate to MID, also directs the activities of KOMID. SEC was sanctioned pursuant to E.O. 13382 in 2010 and by the UN under UNSCR 2270 in 2016.
Korea Tangun Trading Corporation (Tangun), aka Korea Kuryonggang Trading Corporation, Ryungsong Trading Corporation, Ryungseng Trading Corporation:11 Tangun is subordinate to SANS and is primarily responsible for the procurement of commodities and technologies to support North Korea’s defense research and development programs, including, but not limited to, weapons of mass destruction and delivery system programs, and materials that are controlled or prohibited under relevant multilateral export control regimes. Tangun was sanctioned pursuant to E.O. 13382 in 2010 and by the UN under UNSCR 1874 in 2009.
Korea Ryonbong General Corporation (Ryonbong), aka Korea Yonbong General Corporation:12
Ryonbong is a defense conglomerate specializing in acquisition for North Korea’s defense industries and support to that country’s military-related sales. Ryonbong was sanctioned pursuant to E.O. 13382 in 2005. It was also designated for sanctions under UNSCR 1718 in 2009. Furthermore, the United States and the UN also designated Korea Hyoksin Trading Corporation, a subordinate of Ryonbong, in 2009 under E.O. 13382 and UNSCR 1874.
North Korean Procurement Tactics
As reflected in the March 2020 UN Democratic People’s Republic of Korea (DPRK) Panel of Experts (PoE) report,13 North Korea relies on foreign-sourced ballistic missile-related components that it cannot produce domestically. To obtain these components, North Korea uses an extensive overseas network of procurement agents, including officials who operate from North Korean diplomatic missions or trade offices, as well as third- country nationals and foreign companies. In recent years, the United States has sanctioned multiple North Korean nationals operating abroad and acting on behalf of designated North Korean ballistic missile entities. For example, OFAC in July 2019 designated Kim Su Il, an individual acting in Vietnam on behalf of the Munitions Industry Department. On January 24, 2018, OFAC designated ten Korea Ryonbong General Corporation representatives based mainly in China and Russia, including one official identified as the vice consul of the North Korean consulate in Nakhodka, Russia, underscoring the key role that North Korean diplomats and foreign-posted North Korean procurement representatives play in sanctions evasion and ballistic missile-related procurement. North Korean officials accredited as diplomats to one country have also been detected attempting to acquire sensitive technology in neighboring countries. For example, according to the PoE report in 2013, two North Korean diplomats based at the North Korean Trade Office in Belarus were arrested for attempting to gain access to ballistic missile-related design information in Ukraine in 2011.14
North Korea also collaborates with foreign-incorporated companies, such as Chinese and Russian entities, to acquire foreign-sourced basic commercial components. These entities will purchase items and consolidate and repackage them for onward shipment to North Korea, concealing the true end-user from the manufacturers and distributors of the items. Moreover, procurement entities mislabel sensitive goods in export documentation, falsely declaring specialized materials to instead be general-purpose items that are widely commercially available. In 2013, the PoE found that, in the debris from a December 2012 DPRK rocket launch, the fuselage that the PoE was investigating included components such as sensors, pressure switches, wire cables, and other
electronic devices, some of which were foreign made.15 The PoE’s investigation into the supply chain that procured some of the components described above indicates that they were procured indirectly through multiple intermediaries.16 Most of these components do not meet the thresholds of the UNSCR control lists—or national export control lists—and are widely available from overseas distributors, highlighting the importance of complying with “catch-all” controls, as required by UNSCR 2270. These catch-all controls are frequently and effectively employed by the United States and other UN Member States to require a national authorization, e.g. a license or permit, for unlisted items if there is any risk of WMD-related end-use or if the end-user is involved, or is suspected to be involved, in the production or development of weapons of mass destruction. For example, in Section 744.3 of the Export Administration Regulations (EAR), companies are required to obtain a license for destinations where their products may be of use in ballistic missile programs. While the United States maintains comprehensive sanctions upon North Korea for all items subject to the EAR, the catch-all control specified in Section 744.3 of the EAR emphasizes the risk of diversion through other countries to North Korea of uncontrolled, and seemingly innocuous, items that may be used in North Korea’s ballistic missile programs. Examples of these items are listed in the Annex, and further guidance on scrutinizing potential clients is provided below.
The following are additional examples of OFAC designations of third-country individuals and entities for assisting North Korea’s weapons procurement efforts. This list is also illustrative and not exhaustive; please refer to OFAC’s SDN List for a comprehensive, consolidated, and searchable list of sanctioned persons.17
1. Gefest-M LLC and its director, Ruben Kirakosyan18
2. Dandong Rich Earth Trading Co., LTD19
3. Mingzheng International Trading Limited20,21
4. Ardis-Bearings LLC and its director, Igor Aleksandrovich Michurin22
5. Beijing Chengxing Trading Co. LTD
6. Dandong Jinxiang Trade Co. LTD23
7. Dandong Hongxiang Industrial Development Co. LTD and its employees Jinhua Hong, Chuanxu Luo,
Xiaohong Ma, and Jianshu Zhou24
Minimizing Risk
The State, Treasury, and Commerce Departments strongly encourage persons subject to U.S. jurisdiction, as well as foreign persons that conduct transactions with or involving the United States and/or U.S. persons, including the making of exports and reexports of items that are subject to U.S. export controls, to employ a risk- based approach to sanctions compliance. This approach may include the development, implementation, and routine updating of a sanctions compliance program adapted to such persons’ particular business models. While
each risk-based sanctions compliance program will vary depending on several factors — including the company’s size and sophistication, products and services, customers and counterparties, and geographic locations — each program that is implemented should be predicated on and incorporate at least five essential components of compliance: (1) management commitment; (2) risk assessment; (3) internal controls; (4) testing and auditing; and (5) training. Please refer to “A Framework for OFAC Compliance Commitments”25 and the BIS Export Management and Compliance Division for more details.
The U.S. Department of State, OFAC, and the U.S. Coast Guard issued in May 2020 a global advisory to alert the maritime industry to deceptive shipping practices used to evade sanctions related to North Korea as well as Iran and Syria. The advisory outlines relevant UN obligations to prohibit the export of ballistic missiles and related technology to North Korea and includes a detailed set of best practices for private industry to consider adopting to mitigate exposure to sanctions risk. That advisory can be found here: https://www.treasury.gov/resource-center/sanctions/Programs/Documents/05142020_global_advisory_v1.pdf.
Additionally, entities dealing in goods identified by the UN DPRK PoE should adopt due diligence practices that ensure North Korea and North Korean entities are not the final destination for their products. The specific goods that the PoE has identified as those that North Korea likely imports for its ballistic missile programs are as follows (more detailed examples may be found in the Annex):
Multi-axle heavy vehicles, such as 8 or 9-axle forestry vehicles, used as Transporter Erector Launchers (TELs) for ballistic missiles
Steels, aluminum, and specialty materials containing titanium.
Filament winders and winding equipment.
Carbon fiber for composite motor cases.
Solid propellant, including aluminum powder and ammonium perchlorate, to the scale of 100 tons over
the next 10 years.
Some examples of due diligence practices, derived from the “Know Your Customer” Guidance set forth in Supplement No. 3 to Part 732 of the EAR26 are listed below:
Thoroughly research any new or unfamiliar customers: Exporters should exercise increased due diligence when vetting new customers, such as reviewing the Consolidated Screening List (CSL), for parties sanctioned by the U.S. government. Exporters are advised that the following fact patterns should prompt additional scrutiny
A new customer places an unexpected and/or high-value order for sophisticated equipment. The customer is a reseller or distributor. In such cases, you should always inquire who the end user is.
The customer has no website or social media and is not listed in online business directories. The customer’s address is similar to an entity listed on the CSL, or the address indicates the customer is located close to end users of concern, including co-located with an entity listed on BIS’s Entity List.
Your customer places an order and makes all shipping arrangements through a freight forwarding service. In such cases, request that the freight forwarder provide you a copy of the Electronic Export Information (EEI) filing to ensure the information is accurate.
More broadly, the U.S. Department of the Treasury has issued the National Proliferation Financing Risk help the public and private sectors understand the proliferation financing methods used in the
United States, the threat actors behind these methods and vulnerabilities exploited, and the risks that these activities pose to the U.S. financial system and national security. In doing so, the assessment enables U.S. government agencies to understand and minimize the risk associated with weapons proliferators seeking to exploit the U.S. financial system. The risk assessment also assists the private sector in detecting the exploitative tactics used by these threat actors, allowing financial institutions and other private sector stakeholders to better mitigate their illicit finance risk.
Additionally, the Financial Action Task Force (FATF), the international standard-setter for countering weapons of mass destruction proliferation financing, provides guidelines specific to North Korea and its weapons programs. Measures in the current FATF standards, like Recommendation 2, require countries to put in place effective national cooperation and, where appropriate, coordination mechanisms to combat the financing of proliferation of weapons of mass destruction. Additionally, Recommendation 7 requires countries to implement proliferation financing-related Targeted Financial Sanctions imposed by North Korea-related UNSCRs. The 2018 FATF Guidance on Counter Proliferation Finance identifies common deficiencies in counter proliferation finance regimes and recommends an effective supervisory model that includes at least 26 specific measures that address the control and monitoring process, remedial actions and sanctions, other general supervision, and promoting understanding of obligations.