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KOREA INSIGHT
KOREA ECONOMIC INSTITUTE OF AMERICA
Volume 2, Number 6 -- July 2000
U.S. Opens Door to Trade with North Korea
by R. Ben Weber
Director of Business & Public Affairs
Korea Economic Institute (KEI)
On June 19th, the United States finalized
the regulations allowing the easing of sanctions on North Korea.
By easing sanctions, the United States has placed the "ball" back
in North Korea's court and fostered engagement with North Korea
on nuclear and missile proliferation, as well as maintenance of
regional stability. However, it is reasonable to ask whether the
easing of sanctions will lead to significant economic benefits for
either North Korea or the United States, or is it merely an element
of the continued engagement that the Perry Report recommends.
Since 1953, the
United States has maintained a virtually complete embargo on all
trade in goods and services with North Korea. In the early nineties,
discussions among the two countries and South Korea led to
the 1994 Agreed Framework, which established an organization, led
by the United States, South Korea and Japan, to develop two light
water reactors, and provide heavy fuel oil to North Korea.
In addition, the U.S. government offered the possibility of the
easing of sanctions. North Korea, for its part, agreed to close
its single working 5 Megawatt nuclear reactor, the canning of its
fuel rods, and the halting of any further construction and proliferation
of nuclear technology. Despite a number of setbacks on both
sides, most of these issues have been addressed. The reactors
are currently being built, the HFO continues to be delivered and
North Korea has closed its reactor and has completed the canning
process of all its old fuel rods. The easing of sanctions was also
designed to further encourage North Korea to continue to support
the Agreed Framework and to refrain from any further long-range
missile tests.
Exporting Made Easy
The Bureau of
Export Administration (BXA) in the U.S. Commerce Department has
been charged with the task of regulating and monitoring all U.S.
exports to North Korea under the new federal regulations. With the
easing of sanctions with North Korea, export of most consumer goods,
such as dishwashers, TVs and foodstuffs are no longer restricted
and do not require government approval or licensing. Restrictions
on items which may pose a threat to national security and which
are on the Commerce Control List (CCL)�such as computers with a
rating of 6MTOPS (25Mhz) or faster; diesel engines and tractors
that are over 400 horsepower and aircraft and aircraft parts�are
handled on a case-by-case basis. However, BXA, has placed a
heavy burden on potential U.S. exporters. It is the responsibility
of the exporters to know with whom they are trading in North Korea.
If it is determined that the exporter is trading with a North Korean
entity which is connected to North Korea's nuclear or missile programs,
the U.S. government will take immediate action against the U.S.
exporter. BXA contends that determining the real motive of the North
Korean partner will be difficult, but that, if the U.S. exporter
is unsure of the intentions of its North Korean counterpart, it
would be wise to contact BXA and seek their assistance and insight.
Currently, the U.S. State Department has designated only the North
Korean Mining Corporation as a restricted trading partner.
Importing...Not So Easy!
The U.S. Treasury
and its Office of Foreign Assets Control (OFAC) is responsible for
monitoring all U.S. payments from North Korea for imports and other
purposes. In order to import North Korean goods, a letter
of approval will be required in all cases, for either imports directly
to the U.S. or through third countries, regardless of the product.
Importers are required to inform OFAC if the items produced were
from "a) a foreign person having engaged in missile technology proliferation
activities; b) an activity of the North Korean Government related
to the development or production of any missile equipment or technology;
or c) an activity of the North Korean Government affecting the development
or production of electronics, space systems or equipment and military
aircraft." If importers are found to have violated any of
the above listed requirements, the penalty ranges up to 10 years
in prison and $1 million in fines for corporations and $250,000
for individuals, along with civil penalties of up to $55,000 per
violation.
As part of the sanctions easing process,
travel restrictions to North Korea by U.S. residents have been lifted.
However, this does not guarantee entry. Travelers will need
to acquire the permission of the North Korea government in order
to gain admittance. Currently, there are no U.S. based flights
or ships that visit North Korea.
R. Ben Weber works for the Korea
Economic Institute on E-commerce and security issues for the Institute.
He has written numerous articles on both subjects in both Korea
and the United States. He can be reached at rbw@keia.org.
For the full article, click
here, or visit the Korea
Economic Institute Home Page.
[Note: The file is in PDF format, please have Acrobat
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