WorldECR
October 2020
On 1 September 2020, the US departments of Commerce, State, and the Treasury published an advisory on North Korea’s illicit ballistic missile procurement activities, aimed at helping industry prevent such procurement.[1] The advisory includes a list of items sought by North Korea for use in ballistic missiles that fall below export control thresholds – one of the first such lists publicly released by the US government in relation to North Korean procurement. This information will help countries improve the implementation of catch-all controls, as required by UN Security Council resolution 2270, and support enhanced due diligence by private sector actors that manufacture and trade these items, including the electronics, chemical, metals, and materials industries.
The advisory also provides information about North Korea’s procurement and sanctions evasion techniques, lists key entities involved in acquiring items for the country’s ballistic missile programme, and offers guidance on how the private sector can avoid being exploited by North Korea through the development of compliance programmes.
Procurement techniques
Despite North Korea’s increasingly robust indigenous missile development, the country continues to rely on foreign-sourced components that it is not able to produce domestically. To acquire these components, North Korea uses various illicit techniques to evade sanctions and deceive suppliers. The advisory highlights a number of these tactics.
First, North Korea employs extensive overseas networks of procurement agents. These agents often operate under the guise of North Korean diplomatic missions and trade offices to avoid detection. Kim Su Il, an official of North Korea’s Munitions Industry Department (‘MID’), which oversees the country’s ballistic missile programme, was sanctioned by the United States in 2019 for conducting business on behalf of MID in Vietnam. He is also reportedly connected to a North Korean trading company that has attempted to transfer ballistic missile technology to Libya. In an earlier example, two diplomats based out of North Korea’s trade office in Belarus were arrested in Ukraine in 2011 for attempting to gain access to ballistic missile design information.
Other key entities linked to North Korea’s ballistic missile programme that deploy overseas representatives include Korea Ryonbong General Corporation, which has maintained representatives in China and Russia, and Korea Mining Development Trading Corporation (‘KOMID’), North Korea’s primary arms dealer and exporter of ballistic missile-related equipment. According to a March report by a UN Panel of Experts, KOMID currently has two representatives based in Iran, Ha Won Mo and Kim Hak Chol.[2]
Second, North Korea collaborates with foreign-incorporated companies and third-country nationals to acquire commercial components used in ballistic missiles. These foreign companies purchase items directly from manufacturers and distributors and repackage them for shipment to North Korea, obfuscating the ultimate end-user. These entities also mislabel sensitive goods in export documentation, falsely declaring specialised goods as general-purpose items.
The advisory cites the example of debris recovered from an Unha-3 rocket launch in 2012, which showed that North Korea had acquired foreign-produced components that were used in the rocket, including pressure transmitters manufactured in the United Kingdom. North Korea acquired these pressure transmitters in 2006 and 2010 from a Taiwan-based company, Royal Team Corporation (‘RTC’), which purchased them from the United Kingdom-based manufacturer. RTC continued to acquire pressure transmitters from the manufacturer even after two of its employees were convicted in Taiwan in 2008 of exporting strategic articles to North Korea via Macau and Beijing. RTC employed a complex payment system in the transactions to avoid direct transfers to North Korea.[3]
Third, North Korea uses state-controlled, foreign-incorporated front companies to facilitate logistics and transactions for procurements. Mingzheng International Trading Limited, a front company for North Korea’s Foreign Trade Bank, is named in the advisory and has been involved in transactions related to illicit commodity procurement and proliferation finance.
Entities involved in illicit procurement
In addition to MID, Korea Ryonbong General Corporation, and KOMID, the advisory highlights other key entities involved in North Korea’s missile programme and related procurements, including the Second Academy of Natural Sciences (‘SANS’), Second Economic Committee (‘SEC’), and Korea Tangun Trading Corporation. SANS and SEC oversee the research, development, and production of North Korea’s weapons systems and ballistic missiles. Korea Tangun Trading Corporation is subordinate to SANS and has been involved in procurement for North Korea’s defence programmes.
The advisory also mentions a number of entities sanctioned by the United States that support North Korea’s weapons procurement. While some of these entities have been involved in missile-related procurement, others have been involved in military-related transfers and proliferation finance. North Korea employs similar tactics across its missile, military, and commodity procurement and proliferation finance networks. Therefore, it is vital for industry to establish compliance programmes tailored to disrupting all North Korean networks. Any of these networks could ultimately be used to facilitate the procurement of missile-related items.
Items used in North Korea’s ballistic missile programme
Perhaps the most notable part of the advisory is the annex listing specific items sought by North Korea for its ballistic missile programme, many of which fall under export control thresholds. The annex serves as an additional resource to support the implementation of ‘catch-all’ controls by listing ‘uncontrolled, and seemingly innocuous, items that may be used in North Korea’s ballistic missile programmes.’ The highlighted items include:
- Multiple-axle heavy vehicles, which may be used as transporter erector launchers (‘TELs’) for ballistic missiles;
- Heat-resistant steels and aluminums alloys, including specialty metals containing titanium;
- Filament winders and other winding equipment;
- Fibrous materials, including carbon fibre, and related production equipment;
- Precursor chemicals for propellant;
- Bearings of certain technical specifications for use in missiles;
- Other equipment, including electronics and guidance, navigation, and control-related technology.
North Korean imports of these items in the past have been used in ballistic missile development. For example, in 2011 North Korea imported six lumber transporter vehicles from China-based Wuhan Sanjiang Import and Export Co. Ltd. that it converted to TELs.[4] According to press reports, last year North Korea also increased the production of TELs, including those converted from heavy vehicles imported from China, aiming to acquire parts for 70 TELs through trading companies subordinate to MID.[5]
Because many of these goods fall below export control thresholds, the advisory calls on countries to implement ‘catch-all’ controls that require a national authorisation for the export of unlisted items if there is any risk of weapons of mass destruction-related end-use, as required in resolution 2270. Companies should also apply enhanced due diligence measures when supplying these goods to buyers that may forward them to North Korea.
The annex provides detailed technical specifications for the items listed, including common names for particular steel and aluminum alloys, along with their formulations, closest GOST, Chinese, and European standards, the US designation, and alternate metal options.
Recommendations for the private sector
The advisory reiterates well-known compliance recommendations for industry aimed at countering North Korean illicit procurement and reminds companies of their exposure to US sanctions and the civil and criminal penalties that could result from a violation. While the advisory focuses on North Korea’s ballistic missile-related procurement, the compliance programme recommendations it makes are applicable to combatting North Korean illicit procurement in general.
According to the advisory, exposed sectors include the electronics, chemical, metals, and materials industries, along with the financial, transportation, and logistics sectors. Companies operating in these sectors should establish a risk-based approach to sanctions compliance, including the development of a tailored sanctions compliance programme. The advisory highlights a number of additional US government resources related to establishing compliance programmes, including resources provided by the Commerce and Treasury Departments, as well as a May 2020 maritime advisory that discusses best practices for industry to adopt to mitigate exposure to sanctions risk.
Conclusion
The advisory offers industry a useful overview of North Korean procurement techniques and key entities involved in the country’s ballistic missile programme, as well as a helpful compilation of resources companies can use when establishing compliance programmes. However, the most valuable aspect of the advisory is the annex listing a number of items with missile-related applications that are below control thresholds. While the focus of the list is North Korea, the list may also be useful in implementing ‘catch-all’ controls on other countries developing ballistic missile technology in contravention of UN resolutions, such as Iran. The availability of such a list will allow companies in industries that supply and manufacture these items to better screen their buyers and evaluate the potential of diversion to North Korea and other countries.
Treston Chandler is a research associate at the Wisconsin Project on Nuclear Arms Control and assistant editor of The Risk Report database.
Links and Notes:
[1] North Korea Ballistic Missile Procurement Advisory, US Departments of Commerce, State, and the Treasury, 1 September 2020, https://home.treasury.gov/system/files/126/20200901_nk_ballistic_missile_advisory.pdf.
[2] ‘Report of the Panel of Experts established pursuant to resolution 1874 (2009),’ United Nations, 2 March 2020, pp. 48, 151, https://undocs.org/S/2020/151.
[3] ‘Report of the Panel of Experts established pursuant to resolution 1874 (2009),’ United Nations, 6 March 2014, pp. 22-24, https://undocs.org/S/2014/147; ‘Report of the Panel of Experts established pursuant to resolution 1874 (2009),’ United Nations, 23 February 2015, p. 27, https://undocs.org/S/2015/131; ‘Report of the Panel of Experts established pursuant to resolution 1874 (2009),’ United Nations, 24 February 2016, pp. 62-64, https://undocs.org/S/2016/157.
[4] ‘Report of the Panel of Experts established pursuant to resolution 1874 (2009),’ United Nations, 11 June 2013, pp. 26-27, 80, 84, https://undocs.org/S/2013/337; ‘Treasury Designates the IRGC under Terrorism Authority and Targets IRGC and Military Supporters under Counter-Proliferation Authority,’ Press Release, US Department of the Treasury, 13 October 2017, www.treasury.gov/press-center/press-releases/Pages/sm0177.aspx.
[5] Tomotaro Inoue, ‘North Korea mass producing ballistic missile transporters: sources,’ Kyodo News, 23 December 2019, https://english.kyodonews.net/news/2019/12/9966769374c0-n-korea-mass-producing-ballistic-missile-transporters-sources.html.