In his second State of the Union address to Congress, President Donald Trump noted that he campaigned on several core promises, including “to defend American jobs and demand fair trade for American workers.” He argued that his administration has “moved with urgency and historic speed to confront problems neglected by leaders of both parties over many decades” and indicated that “one priority is paramount – reversing decades of calamitous trade policies.”

His prepared speech included comments on the ongoing trade dispute with China and the Section 301 tariffs imposed on $250 billion worth of imported Chinese products. He noted that his administration continues to work on a new trade deal with China, but that any final agreement “must include real, structural change to end unfair trade practices, reduce our chronic trade deficit, and protect American jobs.” On the other major trade issue of 2018, the president called NAFTA an “historic trade blunder” and “catastrophe” that has now been addressed by the new United States-Mexico-Canada Agreement (USMCA). Trump called on Congress to pass the agreement in order to “bring … back our manufacturing jobs, [expand] American agriculture, [protect] intellectual property, and ensur[e] that more cars are proudly stamped with four beautiful words: made in the USA.”

In his only other significant remarks on trade, the president asked Congress to pass the United State Reciprocal Trade Act, arguing that the United States should be able to issue “the exact same tariff on the same product that they sell to us” if another country places an unfair tariff on a U.S. product. See also Trump and Trade Update of January 25 for more details on this act and other recently introduced trade- and tariff-related legislation.

Concerning economic sanctions and relations with certain “rogue” countries, the president announced that he will meet again with Kim Jong-un, Supreme Leader of North Korea, on February 26-27, 2019, in Vietnam, acknowledging that “much work remains to be done.” Trump highlighted his administration’s recent decision to officially recognized the legitimate government of Venezuela and its new interim president, Juan Guaidó. President Trump noted that he has “acted decisively to confront the world’s leading state sponsor of terror: the radical regime in Iran” and “put in place the toughest sanctions ever imposed on a country” after withdrawing from the “disastrous Iran nuclear deal.”

Shortly after the president’s address, the White House released a series of fact sheets on the various topics covered in his message, including “President Donald J. Trump Has Forged New Trade Agreements to Revitalize American Industry and Agriculture.”

Just days after the issuance of an executive order imposing a range of sanctions on North Korea, the Treasury Department’s Office of Foreign Assets Control (OFAC) has taken further action by placing eight North Korean banks and 26 individuals linked to North Korean financial networks on the Specially Designated Nationals List (SDN List). As a result of this action, any property or interests in property of the designated persons in the possession or control of U.S. persons or within the United States must be blocked. “We are targeting North Korean banks and financial facilitators acting as representatives for North Korean banks across the globe,” said Treasury Secretary Steven T. Mnuchin.

OFAC has designated the following eight North Korean banks: Agricultural Development Bank, Cheil Credit Bank, Hana Banking Corporation Ltd, International Industrial Development Bank, Jinmyong Joint Bank, Jinsong Joint Bank, Koryo Commercial Bank Ltd. and Ryugyong Commercial Bank. Also, two other banks already on the SDN List have been further designated as being part of the government of North Korea ­– the Foreign Trade Bank of the Democratic People’s Republic of Korea and the Central Bank of Democratic People’s Republic of Korea. Foreign Trade Bank is North Korea’s primary foreign exchange bank.

The individuals sanctioned by OFAC are North Korean nationals operating in China, Russia, Libya and the United Arab Emirates who act as representatives of North Korean banks.

President Trump has issued a new executive order implementing further sanctions in response to North Korea’s “provocative, destabilizing, and repressive actions,” particularly its recent intercontinental ballistic missile launches and its nuclear test of September 2, 2017. The new sanctions, to be implemented by the Department of the Treasury’s Office of Foreign Assets Control (OFAC), target individuals and entities that engage in trade with North Korea as well as the financial institutions that facilitate such trade. The executive order also authorizes the secretary of the treasury, in consultation with the secretary of state, to impose sanctions on certain persons:

  • Industries: those who operate in the construction, energy, financial services, fishing, information technology, manufacturing, medical, mining, textiles or transportation industries in North Korea;
  • Ports: those who own, control or operate any port in North Korea, including any seaport, airport, or land port of entry; and
  • Imports/Exports: those who have engaged in at least one significant importation from or exportation to North Korea of any goods, services or technology.

These sanctions also target and allow OFAC to block property and interests in property of persons determined to be a North Korean person, including a North Korean person that has engaged in commercial activity that generates revenue for the government of North Korea or the Workers’ Party of Korea.

Further, the new sanctions state that (1) no aircraft in which a foreign person has an interest that has landed at a place in North Korea may land at a place in the United States within 180 days of departure from North Korea, and (2) no vessel in which a foreign person has an interest that has called at a port in North Korea within the previous 180 days, and no vessel in which a foreign person has an interest that has engaged in a ship-to-ship transfer with such a vessel within the previous 180 days, may call at a port in the United States. See new General License 10 for limited exceptions to these shipping prohibitions.

The executive order also provides the authority for OFAC to impose sanctions on any foreign financial institution that knowingly conducts or facilitates any significant transaction on behalf of certain designated North Korean individuals and entities or any significant transaction in connection with trade with North Korea. Under this new authority, the sanctions measures can be either restrictions on correspondent or payable-through accounts or blocking sanctions. The secretary of the treasury will also have the authority to block any funds originating from, destined for or passing through accounts linked to North Korea that come into the United States or possession of a U.S. person. See updated General License 3-A for limited exceptions to these prohibitions.

The White House indicated that these sanctions are specifically targeted towards the shipping and financial industries, noting that North Korea is dependent on these networks to facilitate international trade. Separately, Treasury Secretary Mnuchin stated that “[f]oreign financial institutions are now on notice that, going forward, they can choose to do business with the United States or with North Korea, but not both.” These additional sanctions towards North Korea are effective as of September 21, 2017.

The United Nations (UN) Security Council unanimously passed resolution 2375 (2017) on Monday, further sanctioning the Democratic People’s Republic of Korea for its most recent nuclear test, and reaffirmed that North Korea must immediately suspend all activities related to its ballistic missile and nuclear programs in a complete, verifiable and irreversible manner. This latest round of UN sanctions bans the supply, sale or transfer of all condensates and natural gas liquids to North Korea and bans North Korean exports of its textiles, such as fabrics and apparel products. The UN Security Council further limited the direct or indirect supply, sale or transfer to North Korea of all refined petroleum products beyond 500,000 barrels during an initial period of three months – beginning on October 1, 2017 and ending on December 31, 2017 – and exceeding two million barrels per year during a period of 12 months beginning on January 1, 2018 and annually thereafter. The resolution allows for all UN member states to inspect, with the consent of the flag state, vessels on the high seas if member states have information that provides reasonable grounds to believe that the cargo of such vessels contains items of which the supply, sale, transfer or export is prohibited by past UN Security Council resolutions pertaining to North Korea. In addition to further freezing assets and implementing travel bans on several persons, the UN Security Council also agreed to prohibit UN member states from providing work authorizations for North Korean nationals to work in their jurisdictions in an effort to prevent foreign earnings from being expropriated into North Korea in support of Kim Jong-un’s nuclear weapons program.

The UN Security Council urged the resumption of multilateral negotiations to diplomatically and peacefully resolve matters. In her comments, Ambassador Nikki Haley acknowledged that this new round of sanctions would “cut deep” but that the United States is not “looking for war.” She said, “The North Korean regime has not yet passed the point of no return. … If it proves that it can live in peace, the world will live in peace with it. … The choice is theirs.”

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has designated 16 Chinese and Russian entities and individuals for activities related to the support of North Korea’s Kim Jong-un. These sanctions intentionally target third-country companies and individuals that (1) assist already-designated persons who support North Korea’s nuclear and ballistic missile programs, (2) deal in the North Korean energy trade, (3) facilitate its exportation of workers and (4) enable sanctioned North Korean entities to access the U.S. and international financial systems. These sanctions complement United Nations Security Council Resolution 2371 enacted on August 5, 2017. Treasury Secretary Steven Mnuchin stated, “It is unacceptable for individuals and companies in China, Russia, and elsewhere to enable North Korea to generate income used to develop weapons of mass destruction and destabilize the region. We are taking actions consistent with UN sanctions to show that there are consequences for defying sanctions and providing support to North Korea, and to deter this activity in the future.” For details on the 16 entities and persons that have been placed on OFAC’s Specially Designated Nationals List, see OFAC’s Federal Register notice.

Today, President Trump signed into law the Countering America’s Adversaries Through Sanctions Act, which strengthens and expands statutory sanctions on Iran, Russia and North Korea. In a statement released by the White House, the president said, “I favor tough measures to punish and deter bad behavior by the rogue regimes in Tehran and Pyongyang. I also support making clear that America will not tolerate interference in our democratic process, and that we will side with our allies and friends against Russian subversion and destabilization.” The statement goes on to say that “the bill remains seriously flawed – particularly because it encroaches on the executive branch’s authority to negotiate.”

In a separate statement issued the same day, the president again asserted that the legislation “is significantly flawed,” stating that, “In its haste to pass this legislation, the Congress included a number of clearly unconstitutional provisions.”

See our July 26th update for additional background information.

On July 25, the House of Representatives passed legislation that would impose additional sanctions on Iran, North Korea and Russia. The bill would increase sanctions on those involved in Iran’s human rights abuses, its support for terrorism, as well as its ballistic missile program. For Russia, the bill would ensure that existing economic sanctions remain as long as Russian aggression continues by empowering Congress to review and disapprove any sanctions relief that the president may seek. The bill also includes the text of H.R. 1644, The Korean Interdiction and Modernization of Sanctions Act, which was passed by the House in May by a vote of 419-1, and seeks to expand sanctions targeting North Korea’s nuclear weapons program.

As noted in a previous post, the Senate has also passed legislation (S. 722) to implement additional sanctions on Iran and Russia; the Senate bill does not contain provisions on North Korea sanctions. Because different bills were passed in each chamber and the House bill included additional sanctions against North Korea, it is expected that the Senate will take up consideration of H.R. 3364 for any final vote. Interestingly, given President Trump’s perceived ambivalence on the Ukraine-related Russia sanctions, the votes for passage by each chamber – 419 to 3 in the House and 98-2 in the Senate – likely make any passage of a final bill veto-proof.

After several months of negotiations in the Committee on Foreign Relations, the full Senate on June 15, 2017 considered and passed a bipartisan bill by a vote of 98-2 seeking to hold both Iran and Russia accountable for their recent destabilizing activities in world affairs. S. 722 at Title I contains the Iran component of the legislation and was authored by Senators Corker (R-Tenn.), Menendez (D-N.J.), Rubio (R-Fla.), Cardin (D-Md.), Cotton (R-Ark.) and Casey (D-Pa.). It expands sanctions on Iran for ballistic missile development, support for terrorism, transfers of conventional weapons and human rights violations. The Countering Iran’s Destabilizing Activities Act of 2017 contains the following key provisions:

  • New mandatory ballistic missile sanctions: imposes mandatory sanctions on persons involved with Iran’s ballistic missile program and those that transact with them.
  • New terrorism sanctions: applies terrorism sanctions to the Islamic Revolutionary Guard Corps and codifies individuals who are currently sanctioned due to Iranian support for terrorism.
  • Enforcement of arms embargo: requires the president to block the property of any person or entity involved in specific activities related to the supply, sale, or transfer of prohibited arms and related material to or from Iran.

The text of Title II of S. 722 maintains and substantially expands sanctions against the government of Russia in response to the violation of the territorial integrity of the Ukraine and Crimea, its cyber-attacks and interference in elections, and its continuing aggression in Syria. This portion of the bill will:

  • Provide for a mandated congressional review if sanctions are relaxed, suspended or terminated.
  • Codify and strengthen existing sanctions contained in executive orders on Russia, including the sanctions’ impact on certain Russian energy projects and on debt financing in key economic sectors.
  • Impose new sanctions on: corrupt Russian actors; those seeking to evade sanctions; those involved in serious human rights abuses; those supplying weapons to the Assad regime; those conducting malicious cyber activity on behalf of the Russian government; those involved in corrupt privatization of state-owned assets; and those doing business with the Russian intelligence and defense sectors.
  • Allow broad new sanctions on key sectors of Russia’s economy, including mining, metals, shipping and railways.
  • Require a study on the flow of illicit finance involving Russia and a formal assessment of U.S. economic exposure to Russian state-owned entities.

S. 722 will shortly cross over to the House of Representatives, where it will be assigned to the appropriate committee(s) for consideration. As such, this legislation, while significant, is not yet a law.