The International Group has published a circular, released by all IG Club Members on “the significant risk of evading the comprehensive international sanctions regime against the Democratic People’s Republic of Korea (DPRK) which the United Nations Security Council introduced in 2017”.
IG noted that enforcement of sanctions generally, and against the maritime industry specifically, had intensified since 2017. The Group therefore drew attention to some of the measures that Governments were taking to enforce sanctions and warned of the serious consequences of trading with DPRK and DPRK-related interests.
Since 2017 the UN Security Council had combined with some of its prominent members to step up surveillance of any maritime activity that aroused a suspicion of sanctions evasion.
As a result of the heightened surveillance of shipping activities in the Yellow Sea, East China Sea and Sea of Japan, surveillance agencies continue to detect and identify ships while they are engaged in trading activities with DPRK, as well as foreign-flagged vessels and their owners that have been sanctioned for a global port entry ban and assets freeze.
Surveillance photographs of foreign-flagged ships and the people connected with them had resulted in their listing by the Security Council 1718 Committee as designated entities and individuals, subject to a UN asset freeze and travel ban.
Photographs had revealed the extent to which some shipowners involved in both North Korean sanctions evasions and related transnational organised crime syndicates were prepared to go, including attempts to conceal the ship’s identity by covering or overwriting its legitimate IMO number and name, while also turning off the AIS transmitter. IG said that such ships invariably concealed their identity to hide the unlawful transfer of coal and liquid cargoes in ship-to-ship operations with North Korean vessels and foreign-flagged or stateless vessels that have been designated by the UN for earlier violations.
The UN Panel of Experts on DPRK sanctions had documented these ships’ activities and the people associated with them. The UN reports were publicly accessible, and they had been disclosed to or read by maritime authorities. In some cases, this had resulted in the withdrawal of registration services. Some of these ships were detained at their next port of call under the auspices of a global port entry ban on such ships.
Meanwhile the US Department of Treasury had so far designated individuals and entities along with 28 ships involved in DPRK sanctions evasion. Any shipowner, charterer or manager involved in these activities would find it very difficult to trade such ships or to raise finance because of the US designation resulting in asset freeze and exclusion from trading in US Dollars. This inevitably would attract further scrutiny from the banking sector, whose members might freeze or cancel accounts or freeze transactions.
Many states, either individually or under the umbrella of supranational bodies such as the EU, had introduced measures to implement the UN Security Council Resolutions in their domestic law.
IG said that Club Members should be aware that the scope of UN sanctions against DPRK was intensified during 2017 under UN Security Council Resolution No. 2371 of August 2017:
1) banned all exportation of coal, iron, iron ore, lead and lead ore from North Korea and prohibited the transport of said North Korean origin commodities by the vessels of any Member State of the UN.
2) banned all exportation of seafood from North Korea, and prohibited the transport of North Korean origin seafood by the vessels of any Member State of the UN.
3) authorized the UN Committee monitoring the sanctions against North Korea to designate any vessels engaged in activities prohibited by various UN Resolutions relating to North Korea, and called upon UN Member States to ban said vessels from entry to their ports.
4) prohibited new joint ventures or cooperative entities with North Korean entities or individuals.
Meanwhile,UN Security Council Resolution No. 2375 of September 11th 2017:
1) banned the supply, sale or transfer of all condensates or natural gas liquids to North Korea.
2) imposed a cap of 2m barrels per year of all refined petroleum products imported to North Korea (since reduced to 500,000 barrels and requiring the Member State to advise the Security Council every 30 days of the amounts supplied and the parties to the transaction).
3) restricted the supply, sale or transfer of crude oil to North Korea in any two-month period after the Resolution was passed to the amount which any UN Member State supplied, sold or transferred to North Korea in the 12 months before the Resolution was passed.
4) banned the exports of textiles from North Korea.
5) banned UN Member States from providing work authorizations for North Korean nationals after the date of the Resolution;
6) prohibited all joint ventures or the expansion of current joint ventures with North Korean entities or individuals.
7) called upon Member States to inspect vessels, with the consent of the flag State, if there are reasonable grounds to believe that such vessels are carrying cargoes whose supply, sale or export is prohibited under various UN Security Council Resolutions.
Finally, UN Security Council Resolution No. 2397 of December 22nd 2017:
1) prohibited nationals and persons of a UN Member State, and entities incorporated in its territory or subject to its jurisdiction, from providing insurance or re-insurance services to ships it had reasonable grounds to believe were involved in activities, or the transport of items, prohibited by various UN Security Council Resolutions.
2) required that Flag States deregister any ship it had reasonable grounds to believe was involved in activities, or the transport of items, prohibited by UN Security Council Resolutions, and prohibited re-registration without UN Committee approval.
3) prohibited the provision of classification services to such ships unless it was approved by a UN committee in advance on a case-by-case basis.
Automatic Identification Systems
Where a ship is not in compliance with Flag State requirements the owner risked prejudicing cover under his P&I club rules. There would also be grounds to deny P&I cover on the basis of imprudent or unlawful trading where an owner traded his vessel in breach of sanctions, disguising its location by manipulating or withholding the transmission of AIS data.
IG noted that the sanctions agreed by the UN Security Council formed one of the most comprehensive sanctions regimes ever targeted against a country. It said that Club Members should therefore be in no doubt that any trade with North Korea would be subject to surveillance and scrutiny.
Any activity established to be in breach of sanctions would result in insurance coverage being withdrawn, and would risk possible vessel confiscation and other severe penalties imposed on companies and individuals concerned – “which at best may affect the future trading of a vessel and at worst could prove fatal to the future viability of a Member’s whole enterprise”.
The Group warned that, even if it were possible to undertake legitimate trade with North Korea, Members had to bear in mind that the Club was very unlikely to be able to support vessels trading to North Korean ports, with payment of claims and fees and the provision of security liable to be very delayed and perhaps completely prohibited. Any vessel doing so would also be automatically banned from US waters for the following 180 days.
All Members were therefore “strongly urged to re-assess the risks of undertaking any business with North Korea including STS operations and should also exercise the fullest possible due diligence to ensure that they are not unwittingly entering into prohibited activities with North Korean entities”.