INSIGHT: North Korea Sanctions




Sanctions against North Korea (Democratic People's Republic of Korea) were expanded in May 2016 in response to nuclear testing and ballistic missile launches. The continued development of the nuclear and missile programmes during 2017 have led to further extension of sanctions by the UN, EU and US.

Reference is made to the International Group Circular published on 14 January 2019 which contains important information about the enforcement of sanctions.

The restrictions imposed by the sanctions now include:

  • Prohibition on any activities with the Government of North Korea or Workers Party
  • Arms embargo
  • Ban on the purchase and transportation of petroleum products from North Korea
  • Ban on import or export from/to North Korea of certain goods, services and technology
  • Ban on the purchase or transportation from North Korea of gold, titanium ore, vanadium ore, rare earth minerals, coal, iron and iron ore
  • Ban on vessels entering EU ports which are owned, operated or crewed by North Korea
  • Ban on all leasing and chartering of vessels and the provision of crew services to North Korean flagged vessels
  • Ban on owning and operating of or providing classification, insurance services to North Korean-flagged vessels
  • Inspection for vessels proceeding to or from North Korea to be searched
  • Ban on having financial or banking correspondent relationships and JVs with North Korea
  • Ban on investing on North Korean energy, transportation, financial services, information technology, manufacturing, mining, refining and chemical industries
  • Ban on luxury goods which cannot be supplied to North Korea
  • Expansion of persons and entities on SDNs lists, including banks and shipping companies and high ranking military officers

For designations check:


AIS and sanctions

The use of Automated Identification Systems (AIS) has become a focus of attention in the context of sanctions and is now seen by governmental and inter-governmental agencies as an important tool in the enforcement of national and international sanctions.

Almost all ships in commercial operation are required to have AIS on board in order to comply with SOLAS Chapter V on Safety of Navigation Regulation 19. This equipment must of course not only be kept on board – it must also be used. Paragraph 2.4 of Regulation 19 provides that:

"AIS shall be operated taking into account the guidelines adopted by the [International Maritime] Organization. Ships fitted with AIS shall maintain AIS in operation at all times except where international agreements, rules or standards provide for the protection of navigational information."

This is supplemented by IMO Guidelines adopted in 2015 which provide as follows:


22. AIS should always be in operation when ships are underway or at anchor. If the master believes that the continual operation of AIS might compromise the safety or security of his/her ship or where security incidents are imminent, the AIS may be switched off. Unless it would further compromise the safety or security, if the ship is operating in a mandatory ship reporting system, the master should report this action and the reason for doing so to the competent authority. Actions of this nature should always be recorded in the ship's logbook together with the reason for doing so. The master should however restart the AIS as soon as the source of danger has disappeared.

There are therefore very limited circumstances in which switching AIS off is permitted under SOLAS. There must be clear reasons for doing so which must be recorded in the log book and the AIS must be switched on again at the earliest opportunity. The authorities must also be informed if the vessel is in an area subject to mandatory reporting.

Failure to comply SOLAS will generally amount to a breach of the term in the insurance policy requiring members to comply with all statutory requirements of the vessel's flag state. It may also amount to imprudent, unsafe, improper or unduly hazardous trading. There is therefore a clear risk that switching off AIS will prejudice P&I cover.

There may be innocent explanations for why an AIS signal cannot be detected, including poor satellite coverage or adverse weather conditions. However government agencies are likely to regard as suspicious the lack of availability of an AIS signal in an area which is being closely monitored for sanctions purposes. There are also increasing expectations on insurers to monitor vessel movements. Owners can no longer operate in the mistaken belief that switching off an AIS transmitter provides an easy way of evading sanctions.



In January 2019, the International Group issued a Circular on the Democratic People's Republic of Korea – Enforcement of UN, US and EU Sanctions which noted that:

"Where a ship is not in compliance with Flag State requirements the owner risks prejudicing cover under his P&I club rules. There will also be grounds to deny P&I cover on the basis of imprudent or unlawful trading where an owner trades his vessel in breach of sanctions, disguising its location by manipulating or withholding the transmission of AIS data [...] Any activity established to be in breach of sanctions will result in insurance coverage being withdrawn."

The UN Security Council Panel of Experts responsible for monitoring UN sanctions against DPRK has been particularly focused on AIS transmissions. Illicit cargoes have commonly been discharged or loaded by ship to ship transfers. AIS transmitters have frequently been switched off during these operations but attempts at concealment have also taken a more advanced form with signals being manipulated to transmit a fake vessel identity. The Panel of Experts Report published in February 2019 contained detailed sections on AIS, included the following:

"Ship-to-ship transfers involve increasingly advanced evasion techniques. The disguising of vessels through ship identity theft and false Automatic Identification System (AIS) transmissions is not being taken into account by most global and regional commodity trading companies, banks and insurers, whose due diligence efforts fall extremely short. The manipulation of vessel AIS transmissions remains an overarching feature of illegal transfers, contrary to International Maritime Organization (IMO) regulations governing safety of life at sea, which require that AIS be in operation at all times. This highlights weak monitoring by flag States. In addition, insurers do not monitor the AIS of the vessels for which they provide coverage and services."

Many insurers use AIS as a tool in checking the activity of vessels where there are grounds for suspecting that illicit activity is taking place.



UN Security Council adopted Resolution 2270 (2016) imposing a variety of restrictions on trade with North Korea including arms embargo. The Security Council adopted further measures on 2 June 2017 under Resolution 2356 (2017).

On 5 August 2017 UN Resolution No. 2371 imposed further sanctions on North Korea including ban on export/transportation of seafood from North Korea and exportation of coal, iron, iron ore, lead and lead ore. UN also authorised designation of vessels engaged in any of the prohibited activities relating to North Korea.

On 11 September 2017 UN issued Resolution 2375 banning imports to North Korea of gas and condensate, capping import of refined petroleum products at two million barrels and restricting supply of crude oil. Resolution further prohibits exports of textiles, establishing or expanding JVs with North Korean entities; providing work authorisations to North Korean nationals.

Following North Korea's ballistic missile test on 29 November 2017, the UN Security Council decided to increase sanctions against North Korea by unanimously adopting UNSC Resolution 2397 (2017) (word document). The main measures are as follows:

  • Caps North Korea's imports of refined petroleum to 500,000 barrels for 12 months starting on 1 January 2018;
  • Limits North Korea's imports of crude oil to 4 million barrels for 12 months as of 22 December 2017;
  • Introduces a ban on North Korea's export of food and agricultural products, machinery, electrical equipment, earth and stone, wood and vessels;
  • Introduces a ban on the supply, sale or transfer to North Korea of all industrial machinery, transportation vehicles, iron, steel and other metals (except spare parts to maintain North Korean commercial civilian passenger aircraft currently in use);
  • Requires Member States to repatriate all North Korean nationals earning income within 24 months from 22 December 2017;
  • Authorises Member States to seize, inspect, freeze and impound any vessel in their territorial waters found to be illicitly providing oil to North Korea through ship to ship transfers, or smuggling coal and other prohibited commodities from the country.

The UNSC stated that additional tests of nuclear weapons or long range ballistic missiles by North Korea would result in further restrictions on its import of petroleum. UN press release here.



EU restrictive measures against North Korea were first introduced in December 2006.

In March 2016 the EU implemented the UN's wide-ranging new sanctions on North Korea, which included a ban on importing North Korean coal, iron, and iron ore, a prohibition on financial institutions opening new branches, subsidiaries, or representative offices in North Korea, and made any cargo originating in or destined for North Korea liable for inspection.

In August and October 2017 new regulations were issued: Council Regulation (EU) 2017/1509 and EU 2017/1836 aligning sanctions with latest UN Resolutions; new designated vessels and entities were also added.

EU continued to expand its sanctions on North Korea during 2017 and further extensions can be expected.



Current North Korea sanctions program began in 2008 with E.O. 13466.

Since 2008 subsequent Executive Orders have been issued expanding the national emergency, blocking property of designated persons and prohibiting certain transactions including any transactions of arms or related materials with North Korea and any activity supporting the Government of North Korea.

E.O. 13722 expanded prohibitions imposing a comprehensive trade embargo against North Korea and going beyond the measures imposed by the UN and the EU. The E.O. 13722 allows US to impose secondary sanctions on non-US persons involved in trade to/from North Korea of prohibited goods and where the revenue may benefit the Government of North Korea/Worker's Party of North Korea. The list of designated entities and individuals has been steadily expanded from 2017 onwards.

On 2 August 2017 the President signed the "Countering America's Adversaries Through Sanctions Act (CAATSA)" introducing wide sanctions against North Korea aimed at cutting off sources of income for the North Korean Government and deterring nuclear program. CAATSA prohibit providing bunkers, fuel, insurance or registration services to North Korean vessels; purchase of precious metals, supply of crude oil, gas, coal, iron and petroleum products.

On 20 September 2017 President signed Executive Order 13810 further expanding US sanctions against North Korea. E.O. 13810 authorised to sanction foreign banks that engage in significant transactions with North Korea and block specific bank accounts linked to North Korea. New sanctions apply a "180 days rule" prohibiting calling into US of aircraft and vessels that have stopped in North Korea for a period of 6 months. Certain exceptions are granted under General License 10 for vessels in destress and seeking refuge. E.O also imposes a ban on owning, controlling or operating any port in North Korea.

OFAC has updated its FAQs to reflect changes to the sanctions regime. OFAC also has replaced existing General License No. 3 with General License No. 3A, which permits US financial institutions to debit blocked accounts for normal service charges.

On 23 February 2018 OFAC and USCG jointly issued a special advisory on "Sanctions Risks Related to North Korea's Shipping Practices" regarding deceptive methods in shipping used by North Korea to evade sanctions.
OFAC also published new designations targeting 27 entities and 28 North Korea linked vessels.

On 3 March 2018 OFAC amended and re-issued in its entirety the North Korea Sanctions Regulations, in order to implement Executive Orders 13687, 13722, and 13810, and to reference the North Korea Sanctions and Policy Enhancement Act of 2016 and the Countering America's Adversaries Through Sanctions Act of 2017.

On 21 March 2019 OFAC published Updated Guidance on Addressing North Korea's Illicit Shipping Practices drawing the industry's attention to the deceptive methods used by North Korea. The Guidance includes a list of risk mitigation measures that the shipping industry shall adopt, e.g. monitor for AIS manipulation and disablement, research prior to ship-to-ship transfers, etc.

On 9 April 2020 OFAC has amended the North Korea Sanctions Regulations widening scope of financial and secondary sanctions. The regulations come into effect on 10 April 2020. The changes open up for imposing secondary sanctions on foreign financial institutions if they knowingly have provided "significant financial services" to individuals or entities designated under US or UN sanctions, on or after 18 April 2020.

Further Regulations now lists activities relating to North Korea for which both a US or a foreign individual or entity may be sanctioned if they have directly or indirectly, including:

  • engaging in import from/export (or provision of services or technology) to North Korea of significant quantities of coal, textiles, seafood, iron/iron ore, as well as certain quantities of refined petroleum products or crude oil
  • selling or transferring a significant number of vessels to North Korea, or engaging in significant activity to charter, ensure or register a vessel owned, controlled, commanded, or crewed by a North Korean person

For further details please also see OFAC Notice.

On 1 September 2020 US issued a North Korea Ballistic Missile Procurement Advisory. The advisory identifies key procurement entities and deceptive techniques used by North Korea's missile program and provides an overview of relevant provisions under US law.

For more information on the US sanctions please see OFAC's North Korea page.



Members attention is drawn to Skuld Rule 30.4.6 which excludes "liabilities, costs or expenses where payment by the Association or the provision of cover in respect thereof may expose the Association to the risk of being subject to a sanction, prohibition or any adverse action by a state or international organisation or competent authority".

In addition, it is unlikely that Skuld would be able to make a full recovery under the reinsurance contract because a number of the participants on the reinsurance programme are subject to US primary sanctions and such payments would be unlawful. Such shortfalls under the Skuld Rule 32.6. would fall to the Member, if they arose as a result of an inability to pay as a result of sanctions. Terms and Conditions for non-mutual products contain the same provision.