Order Code RL31696
CRS Report for Congress
Received through the CRS Web
North Korea:
Economic Sanctions
Updated June 16, 2005
Dianne E. Rennack
Specialist in Foreign Policy Legislation
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

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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. At the President’s discretion, North Korea would
also be subject to the economic sanctions pursuant to the International Religious
Freedom Act of 1998, under which the administration has identified North Korea as
a “country of particular concern” since 2001, and pursuant to the Trafficking Victims
Protection Act of 2000, under which the administration has classified North Korea
in the category of most severe offender (Tier 3) since 2003.
In October 2002, after meetings between high-level U.S. and North Korean
government officials, the United States reported that North Korea had confirmed
suspicions that it had reactivated its nuclear weapons development 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 European Union — in
turn suspended shipments of fuel oil. KEDO also suspended construction of the
light-water reactors, the completion of which had been planned for 2003. North
Korea officially withdrew from the Nuclear Nonproliferation Treaty on January 10,
2003 (effective three months hence), the first signatory country to do so.
In August 2003, North Korea joined the United States, Japan, South Korea,
China and Russia in six-party talks. The six nations have met for three rounds; at the
last, in June 2004, the United States offered to provide security guarantees and an
easing of sanctions to make foreign aid available if North Korea dismantled its
nuclear program. North Korea did not respond and there have been no further talks.
The vacuum created by the absence of multilateral or bilateral talks in the past
year has been filled with public pronouncements from North Korea about its
progress: it declared in February 2005 that it had assembled a nuclear weapon; in
May it announced it had harvested weapons-grade plutonium from spent fuel rods
from a power plant, thought to be enough to develop 6-to-10 additional weapons.
The vacuum has also been filled with the other five nations strategizing among
themselves, and each of the five meeting or exchanging messages with North Korea,
about the urgency of returning to the six-party talks.
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.

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Contents
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
U.S. Economic Sanctions Against North Korea . . . . . . . . . . . . . . . . . . . . . . 1
The Current Crisis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Events and international response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
U.S. Economic Sanctions Currently In Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
National Emergency Because of Threat to U.S. National Security . . . . 6
Terrorism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Nonmarket State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Proliferator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Terrorism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Nonmarket State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Arms Sales and Arms Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Access to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

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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.
At the President’s discretion, North Korea would also be subject to the
economic sanctions provided in three provisions of law addressing human rights
conditions: the Foreign Assistance Act of 1961, under which North Korea is annually
castigated for its human rights record; International Religious Freedom Act of 1998,
under which the administration has identified North Korea as a “country of particular
concern” since 2001; and Trafficking Victims Protection Act of 2000, under which
the administration has, since 2003, classified North Korea as a Tier 3 (most severe)
offender of standards pertaining to the trafficking of persons for slavery or sex trade.
Any sanctions imposed pursuant to these acts would be largely redundant, however,
with penalties already prescribed to North Korea for the above-stated reasons.
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 only the offending
entities. Assets frozen prior to June 19, 2000, however, remain frozen.
Developments in North Korea since 2002, particularly the U.S. report that North
Korea was pursuing nuclear weapons capability, 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,

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however, particularly with North Korea’s neighbors, which generally favor a greater
emphasis on negotiations and engagement.
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, after which U.S. officials reported that North Korea had revealed it was
renewing its nuclear weapons program3 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,
1 It should be noted that, at the onset of the nuclear weapons revelation, not everyone called
the turn of events a “crisis.” Policymakers, analysts, and the media all gave consideration
to the Bush Administration’s steadfast avoidance of that word. Many discussed 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 The language used by both the United States and North Korea over the last three years,
some contend, has been part of the problem. The President’s “axis of evil” in 2002 gave
way to then-Secretary of State nominee Condoleezza Rice’s “outposts of tyranny” testimony
in 2005 before the Senate Committee on Foreign Relations. For North Korea’s part,
President Bush has been called a “philistine,” a “half-baked man in terms of morality,” and
“a hooligan bereft of any personality as a human being,” to note the more colorful. See
President George W. Bush. State of the Union. January 29, 2002.
[http://www.whitehouse.gov/news/releases/2002/01/20020129-11.html]
“Opening Remarks By Secretary of State-Designate Dr. Condoleezza Rice,”
FDCH/Congressional Quarterly, Inc. January 18, 2005.
Sang-hun, Choe. “U.S.-North Korea Insults Get Personal,” International Herald Tribune.
May 2, 2005, p. 3;
3 Initially, North Korea denied the claim. Though it announced in March 2005 that it had
a nuclear weapon, participants in the six-party talks other than the United States, particularly
China and South Korea, have publicly expressed doubts about North Korea’s true capability
or emerging arsenal. See Kahn, Joseph. “China Doubts U.S. Data on North Korean Nuclear
Work,” The New York Times. March 7, 2005. p. 7; and Herman, Burt. “Electricity Is
Carrot in North Korea Talks,” Associated Press Online. March 16, 2005. Even U.S.
officials have, on occasion, doubted the veracity of North Korea’s announcements: Powell,
Bill. “Walking the Tightrope; Kim Jong Il’s Nuclear Brinkmanship Has China, South
Korea, and the U.S. at Odds Over How Best to Bring Him Back to the Bargaining Table,”
Time International. February 28, 2005. p. 24.

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CRS-3
asserting that the crisis never ended but instead has evolved into the current
situation.4 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)
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.5
4 The scope of this paper is to consider economic sanctions; other CRS products discuss in
detail the U.S.-Korea relationship — foreign aid to, and trade with, the country, and its
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 Larry A. Niksch; CRS Report RS21391, North Korea’s Nuclear Weapons:
How Soon an Arsenal? by Sharon A. Squassoni; CRS Report RS21834, U.S. Assistance to
North Korea: Fact Sheet, by Mark Manyin; and CRS Report RL32493, The North Korean
Economy: Background and Policy Analysis, by Dick K. Nanto and Emma Chanlett-Avery.
5 El Baradei, Dr. Mohammed, IAEA Director General. Introductory Statement to the Board
of Governors, January 6, 2003, Vienna, Austria. See [http://www.iaea.org] for all relevant
IAEA documents.

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North Korea officially withdrew from the Nuclear Nonproliferation Treaty on
January 10, 2003 (effective three months hence), the first signatory country to do so.
In response, the IAEA Board of Governors adopted a resolution on February 12,
2003, declaring North Korea in noncompliance with its nuclear safeguard obligations
and referring the matter to the U.N. Security Council.6 The U.N. Security Council,
in turn, on April 9, 2003 (when the withdrawal went into effect), discussed the matter
but declined to consider a resolution of condemnation or sanctions, reportedly
because of the opposition of Russia and China — two Security Council permanent
members with veto power.7
The Bush administration’s position has evolved over the three years since the
October 2002 meeting, after which the United States reported that North Korea was
pursuing nuclear weapons capability. In the weeks after the disclosure in late 2002,
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.”8 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.”9 The United States participated in six-party talks — along with North
Korea and its major trading partners and neighbors Japan, South Korea, China, and
Russia, hosted by China in August 2003, February 2004, and June 2004. At the last
meeting, the United States proposed providing security guarantees foreign aid in
response to North Korea dismantling its nuclear weapons program. North Korea did
not respond and there have been no further talks. Nearly one year later, in early June
2005, it is reported that North Korea has stated a commitment to return to the six-
party talks. No date is set, however, and there is a range of optimism and doubt in
Washington among policy analysts here and in the other involved countries as to
North Korea’s commitment.10
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
6 International Atomic Energy Agency document GOV/2003/14.
7 “Nuclear Ban Expires for N. Korea: U.N. Refuses to Condemn Treaty Pullout,” Associated
Press. April 11, 2003.
8 Schweid, Barry. “Bush Administration Faces Wide Choices, None Guaranteed To Offset
Nuclear Threat.” Associated Press, December 24, 2002.
9 U.S. Department of State, Joint Statement by the Trilateral Coordination and Oversight
Group. January 7, 2003. [http://usinfo.state.gov]
10 Kessler, Glenn. “U.S. Officials Wary of N. Korean Statement,” Washington Post. June
8, 2005. p. A17. Regarding the shape future meetings should take, see especially:
Testimony of Christopher Hill, Assistant Secretary of State, Bureau of East Asian and
Pacific Affairs, and Richard Lawless, Deputy Assistant Secretary of Defense, Asian and
Pacific Affairs, Bureau of International Security Affairs, before the House Committee on
International Relations, Subcommittee on Asia and the Pacific. Hearing on U.S. and
Northeast Asia. May 26, 2005.

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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, in 2002 some analysts proffered that North Korea’s coyness about
its nuclear weapons pursuits was 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 other foreign relations matters
pending between the various neighboring states and North Korea, and without a U.N.
Security Council resolution, North Korea’s trading partners imposed unilateral
economic and diplomatic sanctions. For example, Japan suspended rice shipments
and now requires all ships using its ports to have substantial environmental and
accident liability insurance, a cost that few North Korean shippers can likely bear.
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 delayed opening an embassy in Pyongyang, originally
scheduled to open by mid-2003, until the nuclear weapons issue is resolved. China
briefly shut off deliveries through its oil pipleline to North Korea to pressure North
Korea to join the first round of six-party talks, though has more recently declined to
take this step a second time.
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.11 North Korea’s neighbors — China, Japan, and South Korea —
however, conduct ever-increasing trade with North Korea, and account for nearly
70% of North Korea’s imports.12 North Korea’s foreign trade — trade primarily
conducted with three participants of the six-party talks — over the past two years has
increased some 22%, from $2.9 billion in 2002 to $3.55 billion in 2004. Trade
between China and North Korea nearly doubled between 2002 and 2004, to $1.39
billion. Trade between North Korea and Russia skyrocketed from $80.7 million in
2002 to $218.4 million in 2004.13 In 2003, trade between North Korea and South
Korea reached $724 million, and between Japan and North Korea, $259 million.14
These figures may be expected to grow dramatically in the coming years. Thus,
11 In 1999, President Clinton announced that most export restrictions against North Korea
would be lifted; new regulations were implemented the following year. In the first year,
2000, the United States exported $2.7 million in goods to North Korea; in 2004, $23.75
million. [http://dataweb.usitc.gov]
12 [http://www.cia.gov/cia/publications/factbook/print/kn.html]
13 Faiola, Anthony. “Despite U.S. Attempts, N. Korea Anything But Isolated; Regional
Trade Boom Reflects Division Between Bush Priorities, Asian Interests,” The Washington
Post. May 12, 2005. p. A18.
14 Brooke, James and David E. Sanger. “Japan Urges North Korea to Rejoin Disarmament
Talks,” The New York Times. February 12, 2005. p. 6.

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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.
Following a North/South summit in 2000, South Korean companies began to
invest in industrial zones along the North Korea-South Korea border, in part to
alleviate South Korea’s domestic labor shortage. The industrial zone in Kaesong
(Gaesong), for example, hosts 15 South Korean businesses overseeing and financing
the productions of garments and kitchenware, and is subsidized by the South Korean
government.15 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.
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.16 The Department of Commerce imposed the most restrictive export controls
available 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 to sort countries into categories of relative restriction; North Korea was
classified as a member of Country Group Z, the most restricted lot.17
15 “Seoul to Ensure Inter-Korean Cooperation Projects Continue Uninterrupted,” BBC
Monitoring International Reports. February 15, 2005.
16 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.
17 Export Administration Regulations originally set at 15 CFR Part 730; later moved to 15
CFR Part 785.

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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.18
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 in June 2000 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.”19
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.20 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.21
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
18 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.
19 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 seq., 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.
20 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, Syria and Sudan.
21 The Export Administration Regulations (15 CFR Part 730 et seq.) at Part 744 address the
matter of issuing a license based on the end-user’s status. For example, the issuing of export
licenses for goods and services to South Korea is guided by that country’s placement on the
Commerce Control List and other factors particular to that country. But if an item is
exported to South Korea as an intermediate point, with an end-user in North Korea, the latter
country’s status on the Commerce Control List comes into consideration. This may become
an issue as South Korea pursues the development of industrial zones in North Korea, such
as Kaesong. See 15 CFR Part 744.

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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.
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 1979.22 North Korea was added to the list effective January
20, 1988.23 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.24
Following the easing of sanctions that pertained to trade, travel, and related
transactions in 2000, there was some speculation that North Korea would 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 of, 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
22 Section 6(j) of P.L. 96-72 (50 U.S.C. App. 2405). Also currently listed as supporters of
international terrorism are Cuba, Libya, Iran, Syria, and Sudan. See also sec. 40 of the Arms
Export Control Act (22 U.S.C. 2780) and sec. 620A of the Foreign Assistance Act of 1961
922 U.S.C. 2371). Each of these sections of law authorizes the promulgation of a list of
supporters of international terrorism, though no list has 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.
23 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.
24 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 P.L. 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 P.L. 106-387; 22 U.S.C.
7205), as amended.

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the matter of kidnaped Japanese citizens was resolved.25 North Korea remains on the
United States’ 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.26
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.27
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 1974.28
Proliferator. On several occasions, North Korean entities have been found to
be in violation of U.S. missile nonproliferation laws.29 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.
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,
25 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.
26 22 U.S.C. 2781. The most recent certification, issued by the Secretary of State on May
13, 2005 (70 F.R. 28979), included Cuba, Iran, Libya, North Korea, and Syria. This section
of law was added to the AECA in late 1996; the first list issued in May 1997 included North
Korea.
27 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).
28 Section 502(b)(1) of P.L. 93-618 (19 U.S.C. 2461).
29 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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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 (when available), include:
! Lyongaksan Machineries and Equipment Export Corporation
(Iranian and Syrian entities cited in same findings) (twice cited in
1992) (57 F.R. 11767; 57 F.R. 29924);
! Changgwang Credit Corporation (Iranian and Syrian entities cited in
same findings) (twice cited in 1992) (57 F.R. 11767; 57 F.R. 29924);
! Changgwang Sinyong Corporation (Iranian entity cited in same
finding) (1996) (61 F.R. 29785);
! Lyongaksan General Trading Corporation (Iranian entity cited in
same finding) (1997) (62 F.R. 44302);
! Korea Pugang Trading Corporation (unnamed entity cited in same
finding) (1997) (62 FR. 44302);
! Changgwang Sinyong Corporation (Pakistani entity cited in same
finding) (1998) (63 F.R. 24585);
! Changgwang Sinyong Corporation (Iranian entities cited in same
finding) (2000) (65 F.R. 20239);
! Changgwang Sinyong Corporation (trading with Iran entities) (twice
cited in 2001) (66 F.R. 4050; 66 F.R. 33988);
! Changgwang Sinyong Corporation (unnamed entity cited on same
date, separate finding) (2002) (67 F.R. 54693);
! Changgwang Sinyong Corporation (unnamed entity cited on same
date, separate finding) (2003) (68 F.R. 16113);
! Changgwang Sinyong Corporation (trading with Iran entities) (2003)
(68 F.R. 40011);
! Changgwang Sinyong Corporation (no other entity identified) (2003)
(68 F.R. 44136);
! Changgwang Sinyong Corporation (trading with Iran entities) (2004)
(69 F.R. 18415); and
! Paeksan Associated Corporation (trading with Iran entities) (2004)
(70 F.R. 133).
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,

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international disaster assistance, antiterrorism, may be funded or supported in spite
of country-specific restrictions.
Under the current Foreign Operations, Export Financing, and Related Programs
Appropriations Act,30 North Korea is denied direct foreign aid and direct loans,
credits, insurance and guarantees of the Export-Import Bank. In the same Act,
supporters of international terrorism, of which North Korea is one, are denied
bilateral assistance and participation in programs designed to provide debt relief to
the poorest nations.
Under the current Department of Defense Appropriations Act, North Korea is
denied assistance “unless specifically appropriated for that purpose.”31
At the President’s discretion, North Korea would also be subject to the
economic sanctions provided in three provisions of law addressing human rights
conditions: the Foreign Assistance Act of 1961,32 under which North Korea is
annually castigated for its human rights record; the International Religious Freedom
Act of 1998,33 under which the administration has identified North Korea as a
“country of particular concern” since 2001; and the Trafficking Victims Protection
Act of 2000,34 under which the administration has, since 2003, classified North Korea
as a Tier 3 (most severe) offender of standards pertaining to the trafficking of persons
for slavery or sex trade. Any sanctions imposed pursuant to these acts would be
largely redundant, however, with penalties already prescribed to North Korea for the
above-stated reasons.
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.35
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.36
30 Division D of the Consolidated Appropriations Act, 2005 (P.L. 108-447; 118 Stat. 2809).
See particularly sec. 507 — Prohibition Against Direct Funding for Certain Countries (118
Stat. 2992); sec. 527 — Prohibition on Bilateral Assistance to Terrorist Countries (118 Stat.
3002); and sec. 565 — Special Debt Relief for the Poorest (118 Stat. 3022)
31 Department of Defense Appropriations Act, 2005 (P.L. 108-287; 118 Stat. 951). See
particularly sec. 8051 (118 Stat. 982).
32 Secs. 116 and 502B of P.L. 87-195 (22 U.S.C. 2151n and 2304, respectively), as amended.
33 P.L. 105-292 (22 U.S.C. 6401 et seq.).
34 P.L. 106-386 (22 U.S.C. 7101 et seq.).
35 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.
36 Section 620(f) of P.L. 87-195 (22 U.S.C. 2370(f)). Consider also subsec. (h) of that
(continued...)

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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.37
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 and other approvals for
exports and imports of defense articles and defense services, destined for or
originating in certain countries. This policy applies to Belarus, Cuba, Iran, 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, Somalia, and Sudan) or whenever an export would not
otherwise be in furtherance of world peace and the security and foreign policy
of the United States.38
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
36 (...continued)
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...”
37 For example: sec. 620(h) of the Foreign Assistance Act of 1961 (P.L. 87-195; 22 U.S.C.
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...”.
38 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).

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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.”39 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
upon the world”).40 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.41 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) (40 F.R.
19202; subsequently amended);
! unblock assets of North Koreans who emigrated and established
U.S. residency (1976) (41 F.R. 16554);
! ease travel-related restrictions for special activities (1989) (54 F.R.
5231);
! allow freer flow of informational materials (and change in legislation
not specifically targeting North Korea, 1989) (54 F.R. 5231;
subsequently amended);
! establish telecommunication between the two countries (1992) (57
F.R. 58986; subsequently amended);
! authorize travel-related transactions, greater telecommunications,
news bureaus, banking, and importing magnesite from North Korea
after the Agreed Framework was reached (1995) (60 F.R. 8934);
! authorize donations targeting basic human needs after flooding and
famine events (1996) (61 F.R. 9344);
39 27 CFR 447.52.
40 Proclamation No. 2914, December 16, 1950, 15 FR 9029.
41 31 CFR Part 500; 15 F.R. 9040; December 19, 1950, subsequently amended.

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! authorize certain aviation-related fee payments (1997) (62 F.R.
17548);
! allow transactions related to the exporting of computer hardware and
software, provided there is adherence to the relevant Export
Administration Regulations (2000) (65 F.R. 38165);
! 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) (65 F.R. 38165);
! allow imports from North Korea that do not violate various
proliferation laws and regulations (2000) (65 F.R. 38165); 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)
(65 F.R. 38165).
Generally, the President has the authority to change regulations, as long as those
changes meet the requirements of any relevant law.42 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.
42 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.

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