Order Code RL31696
Report for Congress
Received through the CRS Web
North Korea:
Economic Sanctions
Updated January 24, 2003
Dianne E. Rennack
Specialist in Foreign Policy Legislation
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

North Korea: Economic Sanctions
Summary
U.S. economic sanctions are imposed against North Korea for four primary
reasons: (1) North Korea is seen as posing a threat to U.S. national security; (2)
North Korea is designated by the Secretary of State as a state sponsor or supporter of
international terrorism; (3) North Korea is a Marxist-Leninist state, with a
Communist government; and (4) North Korea has been found by the State
Department to have engaged in proliferation of weapons of mass destruction. In
accordance with U.S. law, the United States limits some trade, denies trade in dual-
use goods and services, limits foreign aid, and opposes entry into or support from
international financial institutions.
In October 2002, in meetings between high-level U.S. and North Korean
government officials, North Korea confirmed suspicions that it had reactivated its
nuclear weapons program. An international crisis ensued, with North Korea
expelling International Atomic Energy Agency (IAEA) inspectors and declaring that
it would withdraw from the Non-Proliferation Treaty. Participants in the Korean
Energy Development Organization (KEDO) – including United States, Japan, South
Korea and the European Union – in turn suspended shipments of fuel oil. Continued
pursuit of nuclear weapons capability on the part of North Korea could result in new
economic sanctions ordered by the United Nations Security Council. This approach
is controversial, however, particularly with North Korea’s neighbors, which generally
favor a greater emphasis on negotiations and engagement.
The 108th Congress has before it two measures addressing recent actions of
North Korea: H.J. Res. 2, the continuing resolution to provide appropriations to
several departments, agencies, and offices of the U.S. government for Fiscal Year
2003, to which the Senate added an amendment, introduced by Senator McCain,
expressing the sense of the Senate on a variety of approaches to North Korea’s
nuclear announcements; and S. 145, North Korea Democracy Act of 2003, which
would impose a new range of sanctions on North Korea in response to the nuclear
efforts.
This paper explains the U.S. economic sanctions currently in place, and
summarizes recent events as they relate to the potential application of additional
restrictions. It will be updated as necessary.

Contents
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
U.S. Economic Sanctions Against North Korea . . . . . . . . . . . . . . . . . . . . . . 1
The Current Crisis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Events and international response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Congressional response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
U.S. Economic Sanctions Currently In Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
National Emergency Because of Threat to U.S. National Security . . . . 5
Terrorism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Nonmarket State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Proliferator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Terrorism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Nonmarket State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Arms Sales and Arms Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Access to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

North Korea: Economic Sanctions
Background
U.S. Economic Sanctions Against North Korea
U.S. economic sanctions are imposed against North Korea for four primary
reasons: (1) North Korea poses a threat to U.S. national security, as determined by
the President and renewed annually under the terms of the Trading with the Enemy
Act and National Emergencies Act; (2) North Korea is designated by the Secretary
of State as a state sponsor or supporter of international terrorism, pursuant to the
Export Administration Act of 1979; (3) North Korea is a Marxist-Leninist state, with
a Communist government, and stated as such in the Export-Import Bank Act of 1945,
and further restricted under the Foreign Assistance Act of 1961; and (4) North Korea
has been found by the State Department to have engaged in proliferation of weapons
of mass destruction – to date only missile proliferation – pursuant to the Arms Export
Control Act, Export Administration Act of 1979, and Iran Proliferation Act of 2000.
In 1999 President Clinton announced that the United States would ease
economic sanctions against North Korea affecting trade and travel. Today, though
restrictions are in place related to the national security threat, terrorism, communism,
and proliferation, one may engage in many transactions with the Government of
North Korea, the country’s business entities or its people, if overarching requirements
are met. Thus, trade and related transactions are generally allowed for other than
dual-use goods. U.S. citizens may travel to North Korea; there are no restrictions on
the amount of money one may spend in transit or while there. The sanctions related
to proliferation of weapons of mass destruction generally target the offending entities.
Assets frozen prior to June 19, 2000, however, remain frozen.
Recent developments in North Korea could result in multilateral efforts to
contain and isolate that country, primarily through new economic sanctions ordered
by the United Nations Security Council. This approach is controversial, however,
particularly with North Korea’s neighbors, which generally favor a greater emphasis
on negotiations and engagement.

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The Current Crisis1
Events and international response. Even with the advantage of hindsight,
there is no consensus as to when the current crisis began. Some would see the
beginning in the President’s 2002 State of the Union speech, in which he declared
North Korea part of an “axis of evil.”2 The subsequent escalation of threat against
another member of the of the axis – Iraq – some contend, left North Korea feeling
vulnerable to the threat of attack in the foreseeable future. Some would cite the
October 2002 meeting between State Department and North Korean government
officials, in which North Korea revealed it was renewing its nuclear weapons
program and thus breaking the terms of the 1994 Agreed Framework and several
other international agreements and obligations to which it is party. Other analysts
might point to the crisis of 1993-1994, during which North Korea announced it was
withdrawing from the Non-Proliferation Treaty, asserting that the crisis never ended
but instead has evolved into the current situation.3 Still others contend that origins
of the crisis might be found in the nuclearization of India and Pakistan in 1998, by
which the concept of nuclear weapons states and non-nuclear weapons states as a
basis for international agreements was challenged, and the subsequent world reaction
toward those events, which many cast as short-lived and relatively mild.
The recent string of events evokes the possibility of an imposition of new
economic sanctions, either by each affected country shaping its foreign policy or by
the United Nations Security Council requiring action. Because a U.N. agency, the
International Atomic Energy Agency (IAEA), is primarily involved in recent events,
U.N. action is certainly an option.
On January 6, 2003, the International Atomic Energy Agency Board of
Governors, by consensus, adopted a resolution condemning North Korea’s
reactivation of its nuclear weapons program. The resolution called on North Korea
to (1) allow the reestablishment of containment, surveillance, and other safeguards
measures at nuclear facilities that North Korea had abruptly ended in December, (2)
1 It should be noted that not everyone is calling the current turn of events a “crisis.”
Policymakers, analysts, and the media have all given consideration to the Bush
Administration’s steadfast avoidance of that word. Many discuss the term “crisis” by
juxtaposing events in North Korea with developments in Iraq. See, for example: Lieberman,
Joseph I., “Crisis of Our Own Creation.” Washington Post, January 8, 2003. p. A19;
Kessler, Glenn, “Bush Stresses Iraq, N. Korea Differences.” Washington Post, January 3,
2003. p. A14; Sanger, David E., “President Makes Case That North Korea is No Iraq.” The
New York Times
, January 1, 2003. p 1; Christopher, Warren M., “Iraq Belongs on the Back
Burner.” The New York Times, December 31, 2002, p. and its counterpoint by Berger,
Samuel R. and Robert L. Gallucci, “Two Crises, No Back Burner.” Washington Post,
December 31, 2002, p. A17.
2 President George W. Bush. State of the Union. January 29, 2002.
[http://www.whitehouse.gov/news/releases/2002/01/20020129-11.html]
3 The scope of this paper is to consider economic sanctions; other CRS products discuss in
detail the U.S.-Korea relationship and North Korea’s nuclear program. See CRS Issue Brief
IB91141, North Korea’s Nuclear Weapons Program, by Larry A. Niksch; CRS Issue Brief
IB98045, Korea: U.S.-Korean Relations – Issues for Congress, by the same author.

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clarify its uranium enrichment and nuclear weapons programs in a verifiable manner,
(3) arrange for the IAEA to be able to verify that all materials in question are
declared and subject to safeguards, and (4) meet immediately with IAEA officials.
The IAEA chose to delay the logical next step: referring the issue to the United
Nations Security Council. In a statement to the IAEA Board of Governors and in
public interviews after the resolution was adopted, the IAEA’s Director General, Dr.
Mohammed El Baradei, stressed that a pause would not deny the inevitable, that
North Korea would be held accountable. Indeed, he expanded the concern beyond
the current crisis in Asia to the greater issue of compliance with international
agreements, stating,
This is clearly an unsustainable situation and sets a dangerous precedent, namely
that non-compliance with non-proliferation obligations can be tolerated. If we
aim to maintain and preserve the integrity of the non-proliferation regime then
it must be incumbent on all parties to that regime to fully meet their respective
obligations, and all cases of non-compliance must be consistently addressed in
a uniform fashion – namely zero tolerance.4
The Bush administration’s position appears to have evolved over the last few
weeks. As recently as December 23rd, Defense Secretary Rumsfeld declared that
“The United States military has the might to counter threats from North Korea and
Iraq simultaneously. We are perfectly capable of doing that which is necessary.”5
Barely two weeks later, administration officials emerged from meetings with
delegations from South Korea and Japan supporting the IAEA resolution and stating
that the “the United States is willing to talk to North Korea about how it will meet
its obligations to the international community.”6
Nonetheless, the option of international economic sanctions under a United
Nations mandate still looms and, having said that, it should be noted that North
Korea has stated that any imposition of sanctions under the auspices of the United
Nations will be considered an act of war. While few states have fully normalized
relations with North Korea, only the United States has, until recently, maintained
fairly comprehensive economic sanctions against North Korea since the conflict in
1950-53. Indeed, some analysts contend that North Korea’s recent actions have been
calculated to increase pressure to remove the remaining sanctions – particularly those
associated with its designation as a supporter of international terrorism. A desire for
increased economic assistance and a nonaggression pact between North Korea and
the United States might also be motivating factors.
In response to the nuclear program start-up, and without a U.N. Security Council
resolution, North Korea’s trading partners have imposed unilateral economic and
4 El Baradei, Dr. Mohammed, IAEA Director General. Introductory Statement to the Board
of Governors
, January 6, 2003, Vienna, Austria. [http://www.iaea.org]
5 Schweid, Barry. “Bush Administration Faces Wide Choices, None Guaranteed To Offset
Nuclear Threat.” Associated Press, December 24, 2002.
6 U.S. Department of State, Joint Statement by the Trilateral Coordination and Oversight
Group
. January 7, 2003. [http://usinfo.state.gov]

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diplomatic sanctions. For example, Japan has suspended rice shipments and
legislators are considering a ban on remittances and trade transactions, prohibiting
port access to a ferry between the two countries, and suspending cultural and sports
exchange programs. Japan has also stated that relations between the two countries
will not be normalized until North Korea is verifiably denuclearized. In December
2002, Japan, South Korea, and the United States suspended oil shipments, committed
to under the 1994 Agreed Framework. Australia has delayed opening an embassy in
Pyongyang, scheduled to open by mid-2003, until the nuclear weapons issue is
resolved.
Any new economic sanctions mandated by the United Nations would barely tax
the United States economy because of its relative lack of economic engagement with
North Korea.7 North Korea’s neighbors – China, Japan, and South Korea – however,
conduct limited but ever-increasing trade with North Korea. In 2000, North Korea
exported $708 million in goods, mostly to the three neighboring states, and imported
another $1.686 billion, mostly from the same three.8 These figures were expected to
grow dramatically in the coming years; South Korea/North Korea trade, for example,
increased by about 50 percent in the past year over the previous year.9 Thus, efforts
to isolate and contain the country would require some economic sacrifice from the
trading partners. The sacrifice by North Korea, on the other hand, would be
enormous, as it has come to rely on the United States and other trading partners for
substantial food aid and fuel oil shipments.
In the past two years, some South Korean companies have invested in North
Korea, in part to alleviate South Korea’s domestic labor shortage, though few have
found it profitable to operate there. North Korea, after years of negotiation with
South Korea, enacted a law in November 2002 to guarantee visa-free access and
corporate tax incentives to encourage cross-border development and investment. It
is likely that North Korea sees benefits in South Korea’s Sunshine Policy of greater
engagement, inasmuch as its own gross domestic product (GDP) per capita at $1000
pales to that of $18,000 in South Korea.
Congressional response. The 108th Congress has before it two measures
addressing recent actions of North Korea:
! H.J. Res. 2, the continuing resolution to provide appropriations to
several departments, agencies, and offices of the U.S. government
for Fiscal Year 2003, to which the Senate added an amendment,
introduced by Senator McCain, by voice vote, expressing the sense
of the Senate, that: (1) North Korea is not abiding by terms of the
7 In 1999, President Clinton announced that most export restrictions against North Korea
would be lifted; new regulations were implemented the following year. In 2000, the United
States exported $2.7 million in goods to North Korea; in the first 10 months of 2002, $22.7
million. [http://dataweb.usitc.gov]
8 Central Intelligence Agency. The World Factbook 2002: North Korea.
[http://www.cia.gov/cia/publications/factbook/print/kn.html]
9 Brooke, James. “Threats and Responses: The Asian Arena.” New York Times. December
30, 2002. p. A8.

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Agreed Framework, the North-South Joint Declaration on the
Denuclearization of the Korean Peninsula, and the Treaty on the
Non-Proliferation of Nuclear Weapons; (2) the current situation
presents a serious threat to the region, to the United States, and to
U.S. forces in the region; (3) the United States and its allies in the
region “should take measures” to deter and make ready, should the
worst scenario occur; and (4) Radio Free Asia should increase its
broadcasts to North Korea to 24 hours each day. The Senate passed
the amended H.J.Res. 2 by a vote of 69 - 29 and appointed conferees
on January 23, 2003.
! S. 145, North Korea Democracy Act of 2003: (1) prohibits
assistance to North Korea under the Agreed Framework, directly or
through KEDO; (2) limits the entry into force of any nuclear
cooperation agreement between the United States and North Korea,
including the transfer or trade of materials; and (3) requires that
agencies charged with enforcing sanctions against North Korea
enforce nothing “that is less restrictive than the sanctions regime in
effect against North Korea immediately prior to the September 17,
1999” easing of licensing and travel restrictions announced by
President Clinton. Nonbinding language similar to that which was
agreed to by the Senate as an amendment to H.J.Res. 2 is also
included in S. 145. Introduced by Senator Kyl on January 13, 2003;
referred to the Committee on Foreign Relations.
U.S. Economic Sanctions Currently In Place
Because of what has been found to be a demonstrated threat to U.S. national
security, support of international terrorism, maintaining a communist, nonmarket
economy, and engaging in the proliferation of weapons of mass destruction, U.S. law
authorizes the President to restrict trade, aid, arms sales and arms transfers to North
Korea, and that country’s access to assets held under U.S. jurisdiction.
Trade
National Emergency Because of Threat to U.S. National Security.
Three days after North Korean Armed Forces launched a full-scale invasion of South
Korea in June 1950, the United States invoked a total embargo on exports to North
Korea.10 The Department of Commerce imposed the most restrictive export controls
against North Korea. Over the years, export controls were restated as the Export
Administration Regulations, or EARs. In 1965, for example, the EARs were revised
10 Pursuant to authority in sec. 3 of the Export Control Act of 1949 (P.L. 11, 81st Congress;
63 Stat. 7). Superceded by subsequent export administration laws.

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to sort countries into categories of relative restriction; North Korea was classified as
a member of Country Group Z, the most restricted lot.11
In 1989, the EARs were again modified to allow the export to North Korea of
commercially-supplied goods intended to meet basic human needs. The regulations
stipulated that shipments would require validated licenses on a case-by-case basis.12
In September 1999, President Clinton announced the lifting of most export
restrictions applied to North Korea, in response to that country’s willingness to cease
missile testing. Regulations issued the following June amended the EARs to reflect
North Korea’s new relatively unfettered status. Many items that previously had
required a license were now eligible for export without a license; certain items on the
Commerce Control List (CCL) moved from a policy of denial status to case-by-case
review. Departments issuing the new regulations, however, stated that “[t]his easing
of sanctions does not affect U.S. anti-terrorism or nonproliferation export controls
on North Korea, including end-user and end-use controls maintained under the
Enhanced Proliferation Control Initiative.”13
Today, the remaining export restrictions against North Korea include a range of
terms related largely to that country’s place on the State Department’s list of state
supporters of international terrorism.14 Thus, items that are controlled for national
security concerns generally are not available to North Korea. The country is on the
most restrictive list – Country Group E – which severely limits its access to
computers, software, national security-controlled items, items on the Commerce
Control List (CCL), and service or repair of such items. North Korea also is limited
as an end-user by some licenses because it is a communist state, though this problem
can be overcome by license exceptions issued by the Department of Commerce.
The President currently has authority to ease export restrictions imposed against
North Korea. Even if considered a supporter of international terrorism, licensing
exceptions may be considered by the Commerce Department. To lift all the export
controls applied to North Korea, that country would, at a minimum, have to be
removed from the list of countries supporting acts of international terrorism
maintained by the State Department pursuant to section 6(j) of the Export
Administration Act of 1979. The President holds the authority to make such a
change in the sec. 6(j) list.
11 Export Administration Regulations originally set at 15 CFR Part 730; later moved to 15
CFR Part 785.
12 15 CFR Part 785.1, as amended (54 FR 16360). In most cases, when a validated license
is required on a case-by-case basis, there is a presumption of denial for licensing.
13 65 FR 38148-38166 (June 19, 2000), in which Departments of Commerce, Transportation,
and the Treasury each issued changes to regulations (15 CFR Part 730 et al., 44 CFR Part
403, and 31 CFR Part 500, respectively) to implement the President’s June 1999
announcement. Items for which licensing was eased included computers, software, and
related technology.
14 Terrorist states comprise those countries found by the Secretary of State to be supporters
of international terrorism pursuant to sec. 6(j) of the Export Administration Act, currently
North Korea, Cuba, Libya, Iran, Iraq, Syria and Sudan.

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Terrorism. Following the November 29, 1987, destruction of Korean Air
Lines 007, in flight, by a bomb reportedly planted by two North Korean agents,
Secretary of State George Shultz placed North Korea on the list of countries
supporting international terrorism. Most elements of trade, Beneficiary Developing
Country status, sales of items on the U.S. Munitions List, most foreign aid, Export-
Import Bank funding, and support in international financial institutions are denied to
countries found to be supporting international terrorism under the Export
Administration Act of 1979.15 North Korea was added to the list effective January
20, 1988.16 Placement on the sec. 6(j) list not only results in the constriction of trade
possibilities; placement also may trigger denial of beneficial trade designation (NTR
or GSP), unfavorable tax status for investors, new limits on diplomatic relations,
opposition in international financial institutions, and stricter licensing requirements
for trade with the United States in food and medicine.17
Following the easing of sanctions that pertained to trade, travel, and related
transactions in 2000, there was some speculation that North Korea would be the first
country to be removed from the sec. 6(j) list of state sponsors of terrorism. North
Korea was particularly interested in changing its status so that it could effectively
apply for membership in the World Bank and the International Monetary Fund. The
United States is required by law to oppose membership in the international financial
institutions, or financial support, to terrorist states. The United States discussed the
matter with South Korea and Japan in 2000. South Korea supported North Korea’s
bid for this step toward normalization; Japan opposed a change in status until the
15 Section 6(j) of 96-72 (50 U.S.C. App. 2405). Also currently listed as supporters of
international terrorism are Cuba, Libya, Iran, Iraq, Syria, and Sudan. See also sec. 40 of the
Arms Export Control Act and sec. 620A of the Foreign Assistance Act of 1961. Each of
these sections of law authorizes the promulgation of a list of supporters of international
terrorism, though no list has ever been generated under either section. It is generally
considered that the list maintained pursuant to the Export Administration Act of 1979
applies to all three laws.
16 Once a country is designated as a supporter of international terrorism pursuant to sec. 6(j)
of the Export Administration Act of 1979, restrictions in several other laws are triggered.
For example, any third country is likely to be denied U.S. aid if it has conducted business
with a country listed under sec. 6(j), pursuant to secs. 620G and 620H of the Foreign
Assistance Act of 1961 (P.L. 87-195; 22 U.S.C. 2377, 2378), or the annual foreign aid
appropriations act.
17 See sec. 502 of the Trade Act of 1974 (P.L. 93-618;19 U.S.C. 2462); sec. 901(j) of the
International Revenue Code (26 U.S.C. 901(j)); 10 United States Code § 2327 (General
Military Law); sec. 40 of the State Department Basic Authorities Act of 1956 (P.L. 84-885;
22 U.S.C. 2712); sec. 205 of the State Department Basic Authorities Act of 1956 (P.L. 84-
885; 22 U.S.C. 4305); sec. 1621 of the International Financial Institutions Act (P.L. 95-118;
22 U.S.C. 262p-4q); sec. 501 of Miscellaneous Appropriations, 2000 (H.R. 3425, enacted
by reference in Public Law 106-113; 22 U.S.C. 2395a); and sec. 906 of the Trade Sanctions
Reform and Export Enhancement Act (H.R. 5426, enacted by reference in Public Law 106-
387; 22 U.S.C. 7205), as amended.

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matter of kidnaped Japanese citizens was resolved.18 North Korea remains on the
sec. 6(j) list.
North Korea is also among those countries listed as being in violation of section
40A of the Arms Export Control Act, which prohibits the selling or licensing of
defense articles or defense services to any country that the President finds “is not
cooperating fully with United States antiterrorism efforts.” The President is required
to make such a determination annually, and the prohibition may be waived on
grounds that it is in the national interest to do so.19
Nonmarket State. The Trade Agreement Extension Act of 1951 required the
suspension of Most-Favored-Nation trade status (which has since been replaced by
Normal Trade Relations status) for all communist countries except Yugoslavia. As
a result, North Korea was denied MFN trade status on September 1, 1951.
North Korea remains listed in the headnotes of the Harmonized Tariff Schedule
of the United States (HTSUS) as a Rate of Duty Column 2 country (along with Laos
and Cuba). As a result, while trade is not prohibited with North Korea under the
relevant trade laws, tariffs are set at the highest rates for imports from that country.20
A side result of being denied MFN or NTR is that any such country is also denied
preferential trade treatment under the Generalized System of Preferences (GSP),
pursuant to the Trade Act of 1974.21
Proliferator. On several occasions, North Korean entities have been found to
be in violation of U.S. missile nonproliferation laws.22 Once a finding is made, the
imposition of sanctions is mandatory, though sanctions may be waived if the
President finds it “essential to the national security of the United States” to do so.
The severity of the sanction depends on the type of material or technology
transferred. The duration of the sanction also depends on the material or technology
involved; generally sanctions are imposed for two years.
18 See. sec. 1621 of the International Financial Institutions Act (P.L. 95-118; 22 U.S.C.
262p-4q). See also Niksch, Larry A. and Raphael Perl. North Korea: Terrorism List
Removal?
CRS Report RL30613.
19 22 U.S.C. 2781. The most recent certification, issued by the Secretary of State on May
15, 2002 (67 F.R. 36062), included Cuba, Iran, Iraq, Libya, North Korea, Sudan, and Syria,
in other words, the countries already found to be supporters of international terrorism under
sec. 6(j), EAA. This section of law was added to the AECA in late 1996; the first list issued
in May 1997 included these seven countries and Afghanistan. Afghanistan was removed
from the list in 2002.
20 Harmonized Tariff Schedule of the United States, general note 3(b). See also section 402
of the Trade Act of 1974, popularly referred to as the Jackson-Vanik amendment (19 U.S.C.
2432).
21 Section 502(b)(1) of P.L. 93-618 (19 U.S.C. 2461).
22 Section 73 of the Arms Export Control Act (P.L. 90-629; 22 U.S.C. 2797b), sec. 11B of
the Export Administration Act (P.L. 96-72; 50 U.S.C. App. 2410b), and secs. 2 and 3 of the
Iran Nonproliferation Act of 2000 (P.L. 106-178; 50 U.S.C. 1701 note).

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Sanctions include, at a minimum, a denial of contracts with agencies of the U.S.
government, denial of licenses for items on the U.S. Munitions List (USML), and,
at a maximum, a denial of all licenses for importing into the United States for the
foreign person or entity.
Because North Korea is a nonmarket economy, all relevant activities of the
government of North Korea are also sanctioned when entities in North Korea are
found to have engaged in proliferation under U.S. law. Recent citations of violations,
and country in which the trading partner was likely based, include:
! Lyongaksan Machineries and Equipment Export Corporation
(Iranian and Syrian entities cited in same findings) (twice cited in
1992);
! Changgwang Credit Corporation (Iranian and Syrian entities cited in
same findings) (twice cited in 1992);
! Changgwang Sinyong Corporation (Iranian entity cited in same
finding) (1996);
! Lyongaksan General Trading Corporation (Iranian entity cited in
same finding) (1996);
! Korea Pugang Trading Corporation (unnamed entity cited in same
finding) (1997);
! Changgwang Sinyong Corporation (Pakistani entity cited in same
finding) (1998);
! Changgwang Sinyong Corporation (Iranian entities cited in same
finding) (2000);
! Changgwang Sinyong Corporation (trading with Iran entities) (twice
cited in 2001); and
! Changgwang Sinyong Corporation (unnamed entity cited on same
date, separate finding) (2002).
Aid
Terrorism. Aside from restrictions imposed on any country found to be
supporting international terrorism stated in laws that authorize foreign assistance and
military assistance programs, North Korea’s access to U.S. foreign assistance is
limited in annual foreign operations appropriations measures. In most instances, it
is not expressly stated that the restriction or prohibition is associated with North
Korea’s place on the terrorist list. And even if the appropriations law prohibits the
availability of foreign aid, there are numerous exceptions to the law. Thus, programs
in nonproliferation, demining, child survival, conservation and biodiversity, food aid,
debt buybacks, health and disease prevention, unanticipated contingencies,
international disaster assistance, antiterrorism, may be funded or supported in spite
of country-specific restrictions.

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In the current Foreign Operations, Export Financing, and Related Programs
Appropriations Act, North Korea is cited for exclusion or conditional limits on
foreign aid as follows:23
! no direct funding [sec. 507]; and
! no indirect funding [sec. 523].
And supporters of international terrorism, of which North Korea is one, are cited for
denial of foreign assistance as follows:
! no bilateral assistance [sec. 527]; and
! no special debt relief for the poorest [sec. 551].
Nonmarket State. The Export-Import Bank Act of 1945 also singles out
Marxist-Leninist countries for denial of guarantees, insurance, credit, or other Bank
funding programs. North Korea is specifically cited as a Marxist-Leninist country
for purposes of the Export-Import Bank.24
The Foreign Assistance Act of 1961 denies most non-humanitarian foreign
assistance to any Communist country. North Korea is among five countries so
designated, though the law is not limited to those countries named.25
Several laws deny benefits or assistance to communist countries, but do not
explicitly name any particular state. Because North Korea has been denied such
benefits or aid in the course of the events of the early 1950s and thereafter, these
other sections of law would probably be redundant if applied to or cited for North
Korea.
In some instances, the President may determine that, for purposes of a particular
law, North Korea is no longer a “Marxist-Leninist state.” If, however, all other
aspects of the U.S.-North Korea relationship were to improve, it would probably be
necessary for Congress to remove North Korea from the list set out in the Export-
Import Bank Act and the Foreign Assistance Act of 1961, or necessary for the
President to exercise waiver authority made available to his office under those Acts,
to make these other laws inapplicable to North Korea.26
23 P.L. 107-115, continued into Fiscal Year 2003 by P.L. 107-229, as amended. FY 2003
foreign assistance appropriations is currently under consideration as part of an omnibus
continuing resolution, H.J. Res. 2.
24 Section 2(b)(2) of P.L. 79-173 (12 U.S.C. 635(b)(2)). Amended in 1986 to include this
ban on funding to Marxist-Leninist states.
25 Section 620(f) of P.L. 87-195 (22 U.S.C. 2370(f)). Consider also subsec. (h) of that
section, which requires the President to “adopt regulations and establish procedures to
insure that United States foreign aid is not used in a manner which, contrary to the best
interests of the United States, promotes or assistants the foreign aid projects or activities of
any country that is a Communist country for purposes of subsection (f).” Consider also sec.
5(b) of the Export Administration Act of 1979, which requires the President to “establish
as a list of controlled countries those countries set forth in section 620(f) of the Foreign
Assistance Act of 1961...”.
26 For example: sec. 620(h) of the Foreign Assistance Act of 1961 (P.L. 87-195; 22 U.S.C.
(continued...)

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Arms Sales and Arms Transfers
The International Traffic in Arms Regulations (ITAR), administered by the
Department of State, begins:
It is the policy of the United States to deny licenses, other approvals, exports and
imports of defense articles and defense services, destined for or originating in
certain countries. This policy applies to Belarus, Cuba, Iran, Iraq, Libya, North
Korea, Syria, and Vietnam. This policy also applies to countries with respect to
which the United States maintains an arms embargo (e.g, Burma, China, Haiti,
Liberia, Rwanda, Somalia, Sudan and Democratic Republic of the Congo
(formerly Zaire) or wherever an export would not otherwise be in furtherance of
world peace and the security and foreign policy of the United States.27
The first ITAR was issued on August 26, 1955; North Korea has been listed as
a restricted country from the ITAR’s inception. The ITAR further states that any
country found to be a supporter of international terrorism is subject to the ITAR
prohibitions and those stated in section 40 of the Arms Export Control Act, which
denies the export, directly or indirectly, of any munitions item, lease or loan, credits,
guarantees, or other financial assistance to a terrorist country. Section 40 further
prohibits U.S. individuals from engaging in such trade or support of such a country.
Importing of defense articles and defense services is similarly restricted by the
Department of the Treasury’s Bureau of Alcohol, Tobacco, and Firearms, the
regulations of which state: “It is the policy of the United States to deny licenses and
other approvals with respect to defense articles and defense services originating in
certain countries or areas.”28 Defense articles and defense services from North
Korea, along with those of nearly two dozen countries, are so restricted.
Again, the President has the authority to change these regulations by removing
North Korea from the list of restricted countries.
Access to Assets
On December 16, 1950, President Truman invoked authority granted his office
under the Trading with the Enemy Act to declare that a U.S. national emergency
existed because of recent events in Korea (and elsewhere, as “world conquest by
communist imperialism is a goal of the forces of aggression that have been loosed
26 (...continued)
2370(h)), secs. 502(b)(1) and (b)(2)(A) of the Trade Act of 1974 (P.L. 93-618; 19 U.S.C.
2462(b)(2)(A)), sec. 5(b) of the Export Administration Act of 1979 (50 U.S.C. App.
2404(b)), and sec. 43 of the Bretton Woods Agreements Act (P.L. 79-171; 22 U.S.C. 286aa),
the latter of which requires the U.S. Executive Directors to the International Monetary Fund
“to actively oppose any facility involving use of Fund credit by any Communist
dictatorship...”.
27 22 CFR Part 126.1, authorized pursuant to section 38 of the Arms Export Control Act
(P.L. 90-629; 22 U.S.C. 2778).
28 27 CFR 47.52.

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upon the world”).29 A few days later, the Department of the Treasury issued Foreign
Assets Control Regulations (FACR) to forbid any financial transactions involving,
or on behalf of, North Korea and China, including transactions related to travel or the
access to North Korean assets that were subject to U.S. jurisdiction.30 Korea-related
FACR have been modified on numerous occasions, to:
! prohibit transactions related to agricultural products from a third
country if the raw goods originated in North Korea (1975);
! unblock assets of North Koreans who emigrated and established
U.S. residency (1976); ease travel-related restrictions for special
activities (1989);
! allow freer flow of informational materials (and change in legislation
not specifically targeting North Korea, 1989);
! establish telecommunication between the two countries (1992);
! authorize travel-related transactions, greater telecommunications,
news bureaus, banking, and importing magnesite from North Korea
after the Agreed Framework was reached (1995);
! authorize donations targeting basic human needs after flooding and
famine events (1996);
! authorize certain aviation-related fee payments (1997);
! allow transactions related to the exporting of computer hardware and
software, provided there is adherence to the relevant Export
Administration Regulations (2000);
! allow North Koreans to invest in property under U.S. jurisdiction,
provided the property interest is created on or after June 19, 1999
(the date of President Clinton’s announcement to ease U.S.-North
Korea relations) (2000);
! allow imports from North Korea that do not violate various
proliferation laws and regulations (2000); and
! engage in transactions with the government of North Korea provided
those transactions do not constitute a donation to a U.S. individual
and do not violate laws and regulations relating to terrorism (2000).
Generally, the President has the authority to change regulations, as long as those
changes meet the requirements of any relevant law.31 He also annually renews the
state of national emergency, in place against North Korea since 1950. He could
allow the declaration to expire or he could lift it at any time. Congress could
terminate a declaration of national emergency by passing a joint resolution, under
terms of the National Emergencies Act.
29 Proclamation No. 2914, December 16, 1950, 15 FR 9029.
30 31 CFR Part 500.
31 In instances pertaining to other countries (most notably, Cuba), Congress has legislated
what should be covered in regulations, as well as their flexibility or duration. Congress has
also influenced specific regulations as they pertain to aspects of using sanctions in foreign
policy, most recently by determining that food and medicine should not generally be
restricted when sanctions are applied. That action required a restatement of several sections
of regulations.