DPRK Sanctions: Trade, Shipping, Financial Bans

Summary#

The final regulations, Regulations Amending the Regulations Implementing the United Nations Resolutions on the Democratic People’s Republic of Korea (DPRK) (SOR/2020-119), were registered on June 1, 2020 and published in the Canada Gazette on June 10, 2020. They add and clarify a range of trade, financial and shipping restrictions to bring Canada’s rules into full alignment with recent United Nations Security Council decisions on North Korea.

What it does#

• Updates the existing Regulations Implementing the United Nations Resolutions on the Democratic People’s Republic of Korea (DPRK) to implement the remaining elements of Security Council Resolution 2321 (2016) and Security Council Resolution 2397 (2017).
• Prohibits dealing with property owned or controlled by designated DPRK persons and blocks related financial services.
• Bans the supply or receipt of large amounts of cash (bulk cash) to or from the DPRK.
• Prohibits selling, leasing or otherwise making available real property to the DPRK or to its agents, except when the property is used exclusively for diplomatic or consular activities.
• Prevents registration or requires deregistration of vessels that are designated, DPRK-owned/controlled, deregistered by another UN Member State, or where the Minister has reasonable grounds to believe the vessel is involved in prohibited activities.
• Creates a right for owners of vessels denied registration or deregistered in Canada to ask the Minister for a review of that decision.
• Expands and clarifies embargoes on exports to the DPRK, including bans on:
  • arms and related material;
  • luxury goods;
  • aviation fuel (with a narrow exception for return flights);
  • crude oil and refined petroleum products, condensates and natural gas liquids;
  • certain vehicles, machinery and electrical equipment (specific HS code ranges are named in the regulations);
  • base metals and related articles.
• Prohibits importing or acquiring a long list of items from the DPRK, including coal and other minerals, wood, statues, seafood, certain food and agricultural products, textiles, and specified machinery and electrical equipment.
• Bars services that support vessels or aircraft involved in prohibited activities, and bans provision or procurement of crew services to/from the DPRK.
• Prohibits technical assistance, training or teaching that could help the DPRK’s weapons or missile programs.
• Keeps exceptions where the UN Committee (the 1718 Committee) has approved an activity or where the activity is strictly diplomatic or humanitarian and coordinated with the United Nations.
• Requires a range of Canadian financial and regulated entities to watch for and report assets linked to designated persons, and allows disclosures of personal information to the UN or Canadian security agencies for enforcement.
• Reinforces enforcement roles for federal agencies and sets criminal penalties under the United Nations Act (see Who's affected for the penalty amounts).

Who's affected#

• Individuals and businesses in Canada, and Canadians outside Canada, who deal with trade, shipping, aviation or finance connected to the DPRK.
• Importers and exporters of goods that could fall under the expanded embargo lists (for example, those handling metals, machinery, textiles, seafood, coal or luxury goods).
• Ship and aircraft owners, operators, masters and crew, and companies that provide port, stevedoring, insurance, classification or maintenance services.
• Banks and many regulated financial institutions and intermediaries, which must monitor and report suspicious property or transactions.
• Airport and port authorities, which may be required to refuse landing or docking on the Minister’s advice.
• Government agencies enforcing the rules, including the Royal Canadian Mounted Police and the Canada Border Services Agency.
• Owners of vessels denied Canadian registration or deregistered in Canada (they now have a formal review right).
• Note: the regulations say existing leases entered into before the rules came into force are generally not affected; the document also says there are no known significant Canadian business interests in the DPRK, so direct commercial impacts in Canada are expected to be limited.

Why it matters#

• These changes make Canada meet its legal duty to carry out binding UN Security Council decisions on North Korea. That helps the international effort to pressure the DPRK to stop its nuclear and missile programs.
• For businesses and banks, the rules tighten what can be traded, shipped, insured or financed in connection with the DPRK. That raises the importance of compliance checks and could mean some trade or shipping options are no longer available.
• For vessel owners and the shipping sector, the new registration and deregistration rules increase the risk that a ship will be denied Canadian registration or services if tied to prohibited activity — but owners can ask the Minister for a review.
• Violating these rules can lead to criminal penalties under the United Nations Act, including on summary conviction a fine up to $100,000 or imprisonment up to one year, or on indictment imprisonment up to 10 years.
• The regulations keep narrow exceptions for diplomatic and UN-coordinated humanitarian actions, and allow case-by-case approvals from the UN Committee when they are explicitly authorized.