U.S. Hits Chinese Companies for Helping North Korea Evade Sanctions – UPDATED: Trump Withdraws

The U.S. Treasury Department announced sanctions on Thursday against two Chinese shipping companies that helped North Korea evade its own sanctions.

The Treasury action was the first taken since the second summit between President Donald Trump and North Korean dictator Kim Jong-un in Hanoi. A few hours after the Treasury announcement, North Korea withdrew from a joint liaison office with South Korea that was established in September.

The Treasury Department’s Office of Foreign Assets Control (OFAC) designated Dalian Haibo International Freight Company Ltd. and Liaoning Danxing International Forwarding Company Ltd. for doing business with banned North Korean companies and employing “deceptive practices” that allowed Pyongyang to purchase goods in defiance of sanctions.

One of those deceptive practices involves covert ship-to-ship transfers, in which North Korean ships link up with foreign vessels at sea and trade banned coal and metal for prohibited goods. OFAC updated its shipping advisory on Thursday to list dozens of individual vessels believed to have engaged in illegal ship-to-ship transfers and provided a map showing the areas where these illicit transfers commonly take place.

OFAC also highlighted the ports often visited after cargo was illegally transferred at sea. Some of these ports are located in Taiwan, South Korea, and Russia.

Treasury Secretary Steven Mnuchin said his department is “making it explicitly clear that shipping companies employing deceptive tactics to mask illicit trade with North Korea expose themselves to great risk.”

“The United States and our like-minded partners remain committed to achieving the final, fully verified denuclearization of North Korea and believe that the full implementation of North Korea-related UN Security Council resolutions is crucial to a successful outcome,” Mnuchin said.

CNN on Thursday quoted a senior administration official who said the new sanctions are not intended as additional pressure on North Korea, but rather part of “continuous activity” to “maintain the integrity” of existing sanctions.

North Korea nevertheless responded to the Treasury announcement within a matter of hours by abruptly withdrawing from the joint liaison office in the border town of Kaesong.

The establishment of this office in September – the first joint diplomatic facility to be inaugurated since the two Koreas split in 1945 – was seen as a major diplomatic victory for the administration of South Korean President Moon Jae-in. Kaesong is also the site of a joint industrial complex both Korean governments have expressed interest in restarting.

“The North’s side pulled out after conveying to us that they are doing so on the instructions from a higher level, during a liaison officials’ contact this morning,” a disappointed South Korean Vice Unification Minister Chun Hae-sung said on Thursday.

South Korean officials hopefully noted their North Korean counterparts did not specify whether their exit from Kaesong is permanent, and they said the Kim regime “will not mind the South remaining” at the liaison office while they await further developments. Chun mentioned the departing North Korean diplomatic officials took documents with them but left most of their equipment behind.

Chun said the Moon administration does not view North Korean withdrawal from Kaesong as a “violation” of the agreements between President Moon and Kim Jong-un that established the office in September.

“We want to monitor the situation for a bit longer and respond to the developments, instead of making predictions or premature judgments,” Chun said.

Analysts speculated North Korea might have closed its Kaesong office in an effort to pressure South Korea to help it extract concessions from the U.S., or as a gesture of defiance intended primarily for domestic consumption, to convince North Koreans that their government is firmly in control of negotiations with South Korea and the United States.

President Moon’s national security adviser Chung Eui-yong convened an emergency meeting of the South Korean national security council after the North announced its decision to pull out from Kaesong. A presidential spokesman said the security council had no public statement to offer after the meeting, referring reports to the statement from Vice Unification Minister Chun Hae-sung instead.

Update: On Friday afternoon, President Trump indicated via Twitter that he will order the new Treasury sanctions withdrawn:

Reuters noted Trump did not specify which sanctions he was referring to, but the Treasury action announced on Thursday is the only significant new sanctions activity.