Five Key Takeaways from the U.S. Advisory on North Korean Labor

On July 23, 2018, the U.S. Department of State released an advisory on North Korean forced labor, detailing the tactics the country deploys to evade related sanctions.

The release contains valuable intelligence, including an FAQ and a fact sheet, that companies are expected to leverage in their due diligence programs as they work to meet requirements outlined in last year’s Countering America’s Adversaries Through Sanctions Act (CAATSA).

Passed on August 2, 2017, CAATSA introduced serious and immediate sanctions risk to businesses with supply chain links to North Korea. While the recent advisory doesn’t introduce any new requirements to CAATSA, it provides visibility into the persistence of North Korean forced labor in multiple industries and countries. It also reveals the poor working conditions endured by laborers, who are either forced to work 12–16 hour days with just one day of rest per month, or trafficked abroad to help fund North Korean weapons of mass destruction and ballistic missile programs.

Leverage Assent’s Human Rights Module to identify and mitigate the risk of North Korean forced labor in your supply chain.

The two key sanctions risks for any company are the “inadvertent sourcing of goods, services and technology from North Korea” and the “presence of North Korean citizens or nationals in companies’ supply chains, whose labor generates revenue for the North Korean government.” The sanctions apply to any goods imported into the U.S., whether in whole or in part. This means that the risk of sanctions violations apply to any part, material or process associated with North Korean labor, either within the country or abroad, and at any stage in the sourcing, production or manufacturing of goods.

Here are five key takeaways from the advisory for companies working with their supply chains to identify any association with North Korean labor (either through exported goods or human trafficking).

1. North Korean companies have made evasive maneuvers.

Many North Korean companies have taken sophisticated precautions to avoid the sanctions introduced by CAATSA. These evasive actions include unauthorized subcontracting, mislabeled goods and commercial incentives such as low prices. Companies importing goods into the U.S. now have an urgent imperative to re-examine their entire supply chain for links to North Korean labor, or they could face enforcement action.

2. North Korean joint ventures have been identified.

North Korea has entered into joint ventures with partners from countries such as China to gain a foothold in several industries, including but not limited to apparel, construction, electronics, hospitality, minerals, precious metals, seafood and textiles. The advisory contains an annex that identifies these partnerships by sector and name.

Don’t miss a detail. Download our in-depth guidance on the U.S. Advisory on Sanctions Against North Korean Forced Labor.

3. At-risk industries are broad.

The advisory identifies and profiles a wide range of industries with an elevated risk of North Korean labor, including but not limited to apparel, construction, footwear manufacturing, hospitality, IT services, logging, medical, pharmaceuticals, restaurant, seafood processing, textiles and shipbuilding.

4. Some of the world’s most heavily-sourced-from countries have been impacted.

The list of 41 jurisdictions at “Heightened Risk for North Korean Overseas Labor Producing Revenue for the Government of North Korea” include China and Taiwan. Many of the world’s largest companies heavily source goods from these countries. China and Russia together host more North Korean laborers than every other country identified in the report combined.

5. Enforcement action will be swift and punitive.

There are a number of U.S. agencies with the regulatory authority to uphold these regulations, including the Office of Foreign Assets Control (OFAC), Immigration and Customs Enforcement (ICE), and Customs and Border Protection (CBP). OFAC can issue civil monetary penalties at either double the value of the goods transaction, or $295,141 per violation, with the option to make a referral for criminal prosecution. Customs and Border Protection can also deny the entry of goods into the U.S., and in collaboration with ICE, can initiate criminal investigations resulting in civil penalties, seizure, and forfeiture of goods and proceeds from the transaction.

How Assent Can Help

With many of the world’s largest manufacturers and suppliers concentrated within China and Taiwan, this advisory outlines urgent requirements for any company importing goods into the U.S. The Assent University Library and Classroom provide a range of resources, including guides and supplier training courses, that companies can use as they assess human trafficking and slavery risk in their supply chains.

Our Human Rights solution helps companies examine their entire supply chain for links to North Korean labor by utilizing industry standard tools such as the Slavery & Trafficking Risk Template (STRT), which is updated regularly to account for new risk factors such as those outlined by the advisory.

Join us for our upcoming webinar, Importer Due Diligence on Forced Labour: Complying with TFTEA & CAATSA, on July 31, 2018, at 2 PM EDT with Kenneth Kennedy of the U.S. Department of Homeland Security. You’ll learn more about CAATSA, the recent advisory and how your company can conduct effective due diligence to ensure you are complying with North Korean sanctions.

For more information about how Assent can help your company identify and mitigate risk, contact info@assentcompliance.com.