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On February 18, 2017, China's Ministry of Commerce and its General Administration of Customs jointly announced a suspension of China's imports of coal from North Korea, also known as the Democratic People's Republic of Korea (DPRK), for the remainder of 2017. The suspension, if not offset by economic cooperation that provides North Korea with other income, could signal a new willingness on China's part to impose economic pressure on the North Korean regime in response to its nuclear and missile programs. Some analysts speculate it could be the first in a series of Chinese and U.S. moves to restart diplomacy over Pyongyang's nuclear and missile programs. China's announcement also could be an effort to avoid violating United Nations Security Council (UNSC) sanctions against Pyongyang at a time when the Trump Administration is accusing China of not doing all it can to rein in North Korea appeared to signal China's intention to keep its 2017 imports of North Korean coal in line with United Nations restrictions imposed in November 2016 in response to Pyongyang's continued development of its nuclear and missile programs. China's announcement came at a time when the Trump Administration was calling on China to do more to rein in North Korea. The suspension of coal imports is unlikely to have a significant financial impact on Pyongyang, however, due to China's large imports of North Korean coal in the months preceding Beijing's suspension.
Coal is believed to be North Korea's top export item. From 2010 to 2015, according to estimates by the Seoul-based Korea Trade-Investment Promotion Agency (KOTRA), coal shipments accounted for an average of a third of North Korea's total export revenues. According to import statistics available through Global Trade Atlas, North Korea's coal exports generated more than $1 billion in revenue for Pyongyang each year in this period. More than 97% of the exports went to China.
After North Korea conducted its fourth nuclear test in January 2016, the U.N. Security Council on March 2, 2016, passed UNSC Resolution 2270 (UNSCR 2270), which required U.N. member states to cease importing North Korean coal. China successfully pushed for an exception for coal transactions that were deemed to be "exclusively for livelihood purposes and unrelated to generating revenue for the DPRK's nuclear or ballistic missile programs." China appears to have encouraged its businesses to make use of this "livelihood" exception. China's imports of coal from North KoreaNorth Korean coal grew in both volume and value during 2016. (Table 1. See CRS Insight IN10647, Why Did March 2016 U.N. Sanctions Not Curb China's Imports of Coal from North Korea?)
Table 1. Chinese Imports of North Korean Coal Before and After March 2016 U.N. Ban
April-December Comparisons, 2014-2016
Unit |
April-Dec. 2014 |
April-Dec. 2015 |
April-Dec. 2016 |
% Change 2016/2015 |
Metric Tons |
12 million |
16 million |
17 million |
7.2% |
U.S. Dollars |
$862 million |
$808 million |
$929 million |
15.0% |
Source: Chinese Customs. Downloaded from Global Trade Atlas, February 27, 2017.
Note: Coal trade was banned in UNSCR 2270, which China began implementing on April 5, 2016.
Following North Korea's fifth nuclear test in September 2016, the Security Council on November 30, 2016 passed UNSCR 2321, limiting North Korea's total exports of coal under the "livelihood" exception. For the month of December 2016, UNSCR 2321 capped North Korea's coal exports at 1 million metric tons or a value of U.S.$53.5 million, whichever was lower. Starting in 2017, UNSCR 2321 capped North Korea's annual coal exports under the "livelihood" exception at the lower of 7.5 million metric tons or a value of $400.1 million.
Analysts have offered several possible explanations:
For the first month of 2017, China reported importing nearly one fifth of the full-year volume cap for 2017. With coal prices rising, and assuming that China imported North Korean coal from February 1-18, 2017, at the same rate as it did in January, one analyst estimates that China may have reached around two thirds of UNSCR 2321's full-year value cap before the suspension took effect. The annual caps in the resolution already stood to reduce North Korea's coal exports in 2017 by either 15 million tons or nearly $800 million, compared to 2016. If China does not re-start imports to reach the full value cap for 2017, North Korea could lose another $100-$150 million in export earnings this year. In 2015, according to KOTRA and South Korea's Ministry of Unification, North Korea's total export earnings were an estimated $4.1 billion.
Figure 1. Value of China's Imports of DPRK Coal, Dec. 2016–Feb. 2017, as a Percent of U.N. Security Council Resolution (UNSCR) 2321 Caps on the Value of DPRK Coal Exports
Source: CRS; Data from U.N. Security Council, "Procurement of DPRK coal by Member States"; UNSC Resolution 2321 (2016).
Note: UNSCR 2321outlines how the value of trade is calculated; the reported volume of imports is multiplied by a monthly "average mean price" established by a U.N. panel of experts. These figures may differ from the value of trade reported by Chinese Customs.