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Mainland Chinese Shipping Companies Hit with North Korea-Related Sanctions

The U.S. Department of the Treasury's Office of Foreign Assets Control has imposed sanctions against two shipping companies based in mainland China – Dalian Haibo International Freight Co. Ltd. and Liaoning Danxing International Forwarding Co. Ltd. – for helping North Korea evade U.S. sanctions. Any property or interests in property of these companies that are in the possession or control of U.S. persons or within the United States may not be transferred, paid, exported, withdrawn or otherwise dealt in, and U.S. persons are generally prohibited from dealing with either of these companies.

The action against Liaoning Danxing International Forwarding Co. Ltd. is being taken under executive order 13810, which was issued in September 2017 and significantly expanded Treasury’s authorities to target those who enable the North Korean regime’s activity wherever they are located. This includes (i) targeting those conducting significant trade in goods, services or technology with North Korea and banning them from interacting with the U.S. financial system; (ii) blocking and freezing the assets of actors supporting North Korea’s textiles, manufacturing, information technology, fishing and other industries; and (iii) suspending U.S. correspondent account access to any foreign bank that knowingly conducts or facilitates significant transactions tied to trade with North Korea or certain designated persons. In this case the company was sanctioned for operating in the transportation industry in North Korea and routinely using deceptive practices that enabled North Korean procurement officials based in the European Union to operate and purchase goods for the North Korean regime.

The action against Dalian Haibo International Freight Co. Ltd. was taken under EO 13722 , which targets, among others, persons involved in transactions that generate revenue for the North Korean government or the Workers’ Party of Korea, and blocks the property and interests in property of the North Korean government and the Workers’ Party of Korea. In this case, the company was sanctioned for shipping cargo from mainland China to a North Korean corporation aboard North Korean-flagged vessels. The North Korean corporation was previously designated by OFAC 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.

Exporters should note that OFAC has also updated a related shipping advisory with new information about North Korea’s deceptive shipping practices, which include disabling or manipulating automated identification systems, physically altering vessels, conducting ship-to-ship transfers and falsifying cargo documentation. This updated advisory also provides additional guidance on how to mitigate the risk of involvement in these practices, a new graphic depicting ports visited before and after STS transfers, and new annexes on (i) guidance for avoiding illicit North Korean maritime trade, (ii) vessels believed to have engaged in STS transfers with North Korean tankers, and (iii) vessels that may have exported North Korean coal since 5 August 2017.

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