China has announced that it will begin to implement the most recent round of UN sanctions on North Korea (see previous blog). In a statement, China’s ministry of Commerce said that all exports of condensates and natural gas liquids to North Korea would be banned immediately, and from 1 October exports of refined petroleum products to North Korea would also be limited. Imports of North Korean textiles will also be banned immediately, with an exception for contracts signed before 11 September where import procedures are completed before 10 December.
Separately, Taiwan has decided to ban all trade with North Korea in order to comply with the latest UN sanctions, although it is not a member of the UN itself.
China has begun to implement the most recent wave of UN sanctions on North Korea, imposed by a resolution passed on 6 August (see previous blog). Yesterday, its Commerce Ministry authorised the implementation of the new prohibitions on North Korean exports of coal, iron, iron ore, lead, lead ore, and seafood. Cargo already en route to China will be cleared as usual before the deadline for implementing the new sanctions passes on 6 September.
China has yet to begin implementation of other elements of the new sanctions, which include a ban on increasing the total number of work authorisations for North Koreans without approval from the Security Council committee and a ban on the opening of new joint ventures or expansion of existing joint ventures with North Korean firms or people.
ZTE (Zhongxing Telecommunications Equipment Corporation and ZTE Kangxun Telecommunications Ltd), a Chinese telecoms company, has agreed with OFAC, BIS and the DOJ in the USA to plead guilty to civil and criminal charges of violating US sanctions on Iran and North Korea, and pay a combined $1.2bn in fines ($300m of which is suspended). It also agreed to a 7-year suspended denial of export privileges, and to dismiss 4 senior officials who were involved in the violations.
A 5-year-long investigation found that ZTE had conspired to evade US sanctions by incorporating US components into its equipment and illegally shipping it to Iran, and by making 283 shipments of telecoms equipment to North Korea. ZTE is also said to have used “isolation companies” to conceal the use of controlled US-components, intentionally failed to mention them on customs declarations, employed people to specifically remove incriminating evidence from internal communications, and caused its lawyers to unintentionally lie to US officials.
ZTE was first penalised by US authorities in March 2016, when US companies were prohibited from selling to it without a specific licence, and non-US companies were prohibited from selling products to it which contained a significant percentage of US-made components (see previous blog). The US Department of Commerce will recommend that the requirement for a licence to do business with ZTE be lifted if ZTE complies with the terms of its settlement agreement.
The US Bureau of Industry and Security has extended its temporary general licence for exports, reexports, and in-country transfers to Zhongxing Telecommunications Equipment (ZTE) until 28 November 2016. The US imposed export restrictions on ZTE in March, in response to ZTE allegedly breaching US sanctions by illicitly re-exporting controlled items to sanctioned countries, and organising a series of shell companies for this purpose in relation to Iran (see previous blog). BIS has indicated that it will continue to renew the temporary general licence provided ZTE continues to cooperate with the US government in resolving the issues that led to the violations.
The Department of Commerce’s notice is here.
China has banned the export to North Korea of items that could be used in the development of nuclear weapons, missiles, and other weapons of mass destruction. China’s decision marks its implementation of another of the prohibitions set out in the UN’s wide-ranging new sanctions on North Korea introduced in March, which it jointly drafted with the US (see previous blog). Since that time, China has also implemented the UN’s ban on imports of North Korean coal and iron ore, and on sales of aviation fuel to North Korea.
China’s Ministry of Commerce has said that 40 items are covered by the new prohibition, which is effective immediately, and includes cutting and laser-welding equipment, metal alloys, and materials that could be used in the production of chemical weapons.
The United States has imposed export restrictions on Chinese smartphone manufacturer ZTE, prohibiting US companies from selling to it without a specific licence, and foreign companies from selling products to it which contain a significant % of US-made components. The US Commerce Department issued a statement saying this was in response to ZTE breaching US sanctions by illicitly re-exporting controlled items to sanctioned countries, and organising a series of shell companies for this purpose in relation to Iran. 3 such shell companies have also been designated.
The Commerce Department has said that applications for export licences to ship to ZTE will generally be denied, though ZTE is not prohibited from continuing to sell its products in the US.
At a joint press conference with Chinese President Xi Jinping held on Friday, President Obama announced that he had reached a “common understanding” with his counterpart on the issue of economic cyber espionage, with both governments agreeing not to engage in it. Though he recognised the “significant progress” that had been made on a matter that he told journalists “has to stop”, Obama cautioned that “The question now is, are words followed by actions?”, and emphasised that he is prepared to sanction Chinese persons who continue to engage in cybercrime.
Prior to President Xi’s visit, the US had prepared to unveil sanctions targeting Chinese companies it believed to be responsible for cyber theft of US intellectual property, under an order signed by President Obama in April (see previous blog).