US issues advice on how to keep North Korea out of your supply chain

Multiple US agencies have issued a joint advisory highlighting sanctions evasions tactics used by North Korea which, the advisory warns

‘… could expose businesses – including manufacturers, buyers, and service providers – to sanctions compliance risks under U.S. and/or United Nations sanctions authorities.’

It notes that the two primary risks are: ‘(1) inadvertent sourcing of goods, services, or technology from North Korea; and (2) the presence of North Korean citizens or nationals in companies’ supply chains, whose labor generates revenue for the North Korean government.’

Amongst other areas where businesses might find themselves unintentionally complicit, it describes the following:

‘Sub-Contracting/Consignment Firms: Third-country suppliers shift manufacturing or sub-contracting work to a North Korean factory without informing the customer or other relevant parties. For example, a Chinese factory sub-contracts with a North Korean firm to provide embroidery detailing on an order of garments.

‘Mislabeled Good/Services/Technology: North Korean exporters disguise the origin of goods produced in North Korea by affixing country-of-origin labels that identify a third country. For example, North Korean seafood is smuggled into third countries where it is processed, packaged, and sold without being identified as originating from North Korea.

There are also cases in which garments manufactured in North Korea are affixed with “Made in China” labels.

‘Joint Ventures: North Korean firms have established hundreds of joint ventures with partners from China and other countries in various industries, such as apparel, construction, small electronics, hospitality, minerals, precious metals, seafood, and textiles…

‘Raw Materials or Goods Provided with Artificially Low Prices: North Korean exporters sell goods and raw materials well below market prices to intermediaries and other traders, which provides a commercial incentive for the purchase of North Korean goods.’

It also notes that the North Korean government ‘exports large numbers of laborers to fulfill a single contract in various industries, including but not limited to apparel, construction, footwear manufacturing, hospitality, IT services, logging, medical, pharmaceuticals, restaurant, seafood processing, textiles, and shipbuilding’ – and gives information by which North Korean overseas labour can be identified.

For further information, see:
https://www.treasury.gov/resource-center/sanctions/Programs/Documents/dprk_supplychain_advisory_07232018.pdf