The U.S. Broadens and Clarifies Sanctions Regulations for Humanitarian Work in North Korea

Insights The U.S. Broadens and Clarifies Sanctions Regulations for Humanitarian Work in North Korea T. James Min II · February 16, 2024

On February 15, 2024, the Office of Foreign Assets Control (“OFAC”), U.S. Department of the Treasury published revisions to the North Korea Sanctions Regulations (“NKSR”, 31 CFR Part 510), which were long overdue to assist humanitarian organizations, non-governmental organizations (“NGOs”) and news media to utilize the appropriate sanctions exemptions. Before North Korea closed its borders in response to the Covid-19 pandemic, many NGO’s expressed frustration at the regulatory ambiguity as well as the administrative cost of complying with the NKSR.

The new revisions, in particular, to 31 CFR §. 510.512, provide greater clarity and maneuverability for humanitarian groups and other NGOs. So, what are the major changes to NKSR from the previous version? Below are the major highlights:

    • Unlike the previous 31 CFR 510.512 which only authorized the export of services by the NGOs, the new section authorizes “all transactions…that are ordinarily incident and necessary to the activities” listed in the NGO section of the NKSR.
    • The NGO activities authorized under the NKSR were enlarged to now include educational activities at the primary and secondary schools as long as they do not involve math, science, technology, engineering, and computer programming. Thus, arguably, certain medical, business or English training may be authorized.
    • The NGO activities authorized under the NKSR now includes “activities to support disarmament, demobilization, and reintegration (DDR) programs and peacebuilding, conflict prevention, and conflict resolution programs.” These are what many know as Track 2 engagement between North Koreans and U.S. scholars and policy analysts. One no longer needs to get a license from OFAC for such programs as long as the reporting requirements discussed later and any other legal requirements are fulfilled.
    • Previously, any partnership or partnership agreement with the Government of North Korea, the Korean Workers Party or instrumentalities thereof required NGOs to obtain a specific license from OFAC. After years of complaints by the NGO community, it appears OFAC has narrowed this requirement by only prohibiting partnerships with any military, intelligence or law enforcement entities, although partnership with such entities is also authorized to the extent necessary to export or import items to or from North Korea that are licensed or authorized under the NKSR or EAR.  So now, partnership with, for example, the Ministry of Public Health would not require an OFAC license to dispense medical aid.
    • Another significant change is that unlike the previous NKSR, U.S. NGOs can procure beyond just food and medicine in third countries to export to North Korea. It now permits NGOs to procure agricultural commodities, medicine, medical devices and spare parts that would be classifiable as EAR99 (in other words, not dual-use goods) and not a luxury good.  In the past only food and medicine could be purchased in third countries and sent to North Korea without an OFAC license, but now the categories are broader. Unlike the past NKSR, OFAC also defined agricultural commodities, medicine, medical devices and spare parts in the NKSR.
    • While NKSR is broader and clearer in its authorizations, it does add a new reporting mechanism that shifts some regulatory oversight to the U.S. State Department. Any NGO relying on the NGO regulatory authorizations must submit a report to the State Department at least 30 days prior to the activity by emailing a copy of the UN Security Council (“UNSC”) 1718 Committee exemption or why the activity does not fall under the UNSC sanctions restrictions. If the UN exemption is pending or is not needed, additional information must be provided to the State Department. The State Department will have 2 weeks to notify a NGO that 31 CFR 510.512(a) authorization for NGOs does not apply and thus cannot proceed with the activity.
    • Lastly, the new NKSR adds a general license for journalistic activities which exist in other U.S. sanctions programs such as for Cuba, Syria, or Russia.

With these welcomed changes, what are the key takeaways for NGOs and others active with North Korea?

    • NGOs can now procure from a broader list of non-US origin commodities in third countries that fall within the definition of agricultural commodities, medicine, medical devices and spare parts to be shipped to North Korea without needing an OFAC license. However, NGOs will need to ensure that the items fall within those definitions and would be classifiable as EAR99 if U.S. origin.  Beyond those commodities, an OFAC license would still be required.  Furthermore, just because OFAC exempts them does not mean that you do not have to obtain the UNSC 1718 Committee Humanitarian Exemption for items such as machinery that may also be a medical device subject to UNSC sanctions or a water drilling machine made of steel.
    • NGOs no longer need an OFAC license to partner with the Government of North Korea or the Korean Workers Party to conduct humanitarian activities unless they are part of the military, intelligence or law enforcement entities. Even with those entities, partnering with them only for exporting or importing items that are authorized by the regulations or licenses do not require an OFAC license. This still avoids OFAC providing a regulatory definition of a “partnership” in the context of NKSR, but practically reduces the need for such a definition by the NGOs.
    • Generally, NGOs also no longer need an OFAC license to hold Track 2 meetings with North Koreans on authorized topics such as DDR as long as other conditions are met, such as reporting to the State Department at least 30 days prior.
    • NKSR exemption for NGOs now authorizes more than just the export of services, but includes all transactions ordinarily incident and necessary to the authorized NGO activities. This presumably could include transacting with Air Koryo which is a SDN to get to Pyongyang, which was not clear in the past.
    • Luxury goods ban and the need to obtain BIS licenses for U.S. origin goods (other than for food and medicine) still apply.
    • While the new regulatory revisions appear to lock in development projects as authorized (and not just for basic human needs), it is unclear what statutory authority the State Department has in interpreting OFAC regulations as it relates to whether an NGO’s activity qualifies for the 31 CFR 510.512(b) list of activities in the reporting process. Hopefully, objections will occur only in blatant cases and it will confer with OFAC. Regardless, it raises interesting legal questions and gives the State Department a more prominent role in the sanctions compliance process.
    • The restriction on the use of U.S. passports to travel to North Korea and the need to obtain a Special Validated Passport (SVP) for humanitarian assistance activities still remain.
    • De-risking by financial institutions, logistics providers, and other service providers will probably not be impacted by these changes because commercial realities often override regulatory authorizations.

In conclusion, these changes to the NKSR are helpful for NGOs to be able to carry out their activities in or with North Korea. It provides more flexibility, greater clarity, and a broader scope of authorized activities. However, there is now more reporting requirements and submission of information to the U.S. Government for NGO activities. News agencies also will not need to obtain specific licenses from OFAC.  Better late than never, but we will have to see the practical impact or benefits of these changes given North Korea’s pivot away from the U.S. humanitarian community in recent years and with its continued border restrictions.

This summary is provided for informational purposes only and is not intended to constitute legal advice nor does it create an attorney-client relationship with Rimon, P.C. or its affiliates.

James Min is a Partner with Rimon, P.C. in their Washington DC Office.  James specializes in sanctions, export control, CFIUS, and customs laws.  He is currently a member and legal advisor to the U.S. National Committee on North Korea and has previously represented many U.S. NGO’s, news agencies, investors, and multinational corporations to obtain UN, OFAC, and BIS licenses as well as defend clients against DOJ, DHS, OFAC and BIS enforcement actions under various U.S. sanctions programs. Read more here.