The U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) has published major revisions to its humanitarian authorizations and other general licenses under the North Korean Sanctions Regulations (“NKSR”), which took effect on February 16, 2024.  These regulatory changes expand the scope of authorized activity in North Korea, which should lead to fewer specific license applications for NGOs engaged in humanitarian work relating to the DPRK.  In this regard, OFAC has narrowed the restriction on authorized activity arising from “partnerships” with the DPRK government.  OFAC has also established a new authorization for journalistic activities in North Korea.  These revisions to the NKSR, along with some improved guidance from OFAC regarding banks’ due diligence expectations, may result in less de-risking by financial institutions when it comes to customer activity involving North Korea.

At the same time, there remain important limitations and conditions to these authorizations that must be observed.  Moreover, OFAC has implemented a new advance reporting requirement if one intends to use the revised humanitarian general license, which may increase the compliance burden on NGOs as well as provide the State Department an opportunity to object to the use of the general license on a case-by-case basis. 

We provide more detail on the key changes below.

Narrowed “partnership” limitation

OFAC’s humanitarian general license at section 510.512 of the NKSR has undergone significant changes.  One important change is the narrowing of the limitation on the applicability of this general license when there are “partnerships” or “partnership agreements” with the Government of North Korea or other OFAC-“blocked” persons.  The previous disqualifying language was very broad and had in the past led many NGOs to determine that they could not rely on this general license, because nearly all if not all activities in North Korea involve coordination with the Government of North Korea.  In the absence of OFAC guidance regarding what was meant by the terms “partnership” or “partnership agreement,” risk-averse NGOs often applied for specific licenses from OFAC in situations when the general license would have applied but for this limitation. 

The revised general license now limits its applicability when there are “[p]artnerships or partnership agreements with any military, intelligence, or law enforcement entity owned or controlled by the Government of North Korea,” rather than any part of the government or other OFAC-“blocked” persons.[1]  Moreover, this limitation does not apply when such a partnership or partnership agreement is “necessary to export or import items to or from North Korea that are licensed or otherwise authorized pursuant to this part [i.e., OFAC’s NKSR] or pursuant to the EAR [i.e., the U.S. Commerce Department’s Export Administration Regulations].”  We believe this is a very helpful modification to section 510.512.  Narrowing this limitation as OFAC has done should now allow NGOs to actually use this general license, and avoid the need for specific licensing in many cases.

The revised general license has retained in essentially the same form the previous authorization for “the payment of reasonable and customary taxes, fees, and import duties to, and purchase or receipt of permits, licenses, or public utility services from, the Government of North Korea that are ordinarily incident and necessary to” the authorized activities. 

Expanded authorizations for goods, software, and technology

In addition to loosening the “partnership” restriction, the revised general license now has a much broader authorization to send to North Korea goods, software or technology (“items”) that are not subject to the EAR (i.e., because they are not U.S.-origin, not provided from or through the United States, do not contain controlled U.S.-origin content beyond what is allowed by the EAR’s “de minimis” rules, or  do not fall under the EAR’s “foreign direct product” rules or its unique encryption-related jurisdictional rules). 

Now, items not subject to the EAR are eligible for this general license if supplying them would be “ordinarily incident and necessary to activities” covered by the general license, and provided that they are not of a type that would be described on the EAR’s Commerce Control List (“CCL”).  In other words, such items must be of a type that would be classified “EAR99” if they were subject to the EAR.  Previously, the authorization in section 510.512 only covered food and medicine that were not subject to the EAR, so this is a useful expansion of the general license’s scope.

OFAC has also provided more clarity, and a somewhat broader authorization, for items that are subject to the EAR due to their links to the U.S.  Specifically, new section 510.520 authorizes “[a]ll transactions ordinarily incident to the exportation or reexportation of items (commodities, software, or technology) to North Korea, including transactions with the Government of North Korea” or certain other OFAC-“blocked” persons, “provided that the exportation or reexportation of such items to North Korea is licensed or otherwise authorized by the Department of Commerce.”  This also includes “services provided outside North Korea to install, repair, or replace such items.” 

This new general license defers to the Commerce Department’s regulations under the EAR for items that are subject to the EAR, minimizing the need for dual licensing by OFAC.  However, under the EAR, a license or other authorization is required for North Korea for anything other than EAR99 food or medicine.  So most export-related transactions with North Korea require specific licenses under the EAR for items that are subject to the EAR.  OFAC noted in the rulemaking’s preamble that section 510.520 applies even to transactions conducted “on a “No License Required” (NLR) basis due to the availability of an EAR license exception.”   We note that NLR transactions under the EAR do not require license exceptions.  What OFAC probably meant by this (consistent with our understanding of OFAC’s longstanding interpretation of the NKSR) is that section 510.520 applies to all three scenarios involving transactions subject to the EAR: 1) when the transaction does not require a license -NLR (i.e., EAR99 food and medicine), 2) when a license would be required but a license exception applies, and 3) when a specific license is obtained.  While OFAC suggests in one of its frequently asked questions (“FAQs”) that this “remov[es]” a “dual licensing burden” that “no longer” applies, in fact the NKSR have long had provisions that have set out a similar policy as in this new general license. 

It also appears that the revised section 510.512 broadly authorizes export activity that is subject to the EAR with “blocked” persons under the NKSR beyond the Government of North Korea, as long as the required authorization under the EAR is obtained.  Of course, licensing under the EAR will involve a review of the parties to the transaction.  Still, this change could, among other things, reduce the risk that financial institutions have perceived in processing funds transfers for North Korea-related transactions and encourage them to participate in such transactions.[2]  As a much broader scope of transactions can now be conducted without any OFAC licensing, combined with this changed guidance, NGOs now have reason for cautious optimism that perhaps more financial institutions will be willing to process transactions related to North Korea for NGO customers.

In addition to the more general provisions discussed above, new section 510.521 authorizes the exportation or reexportation to North Korea of certain agricultural commodities, medicine, medical devices (except for those specifically listed by OFAC as excluded), and one-for-one replacement parts or components for medical devices, provided that: (1) the items are not subject to the EAR, (2) they would be classified EAR99 if they were subject to the EAR, (3) the items are not “luxury goods,” as defined under the EAR, (4) any required UN exemption has been obtained, and (5) the items are not intended for military, intelligence, or law enforcement bodies.

Authorized humanitarian activities

The scope of the authorized activities under section 510.512 has been changed, and appears to represent an expansion of what NGOs can do under the mantle of “humanitarian” activity.  The general license includes a list of “non-commercial activities designed to directly benefit the civilian population” of North Korea that are authorized.   While many parts of this list are very similar to what was previously included, there are a few potentially significant changes. 

OFAC has once again authorized education-related activity, which had been removed from the previous version of this general license.  However, the scope has been limited to reflect a high degree of continuing U.S. policy concern with education in the area of STEM+ (science, technology, engineering, mathematics and computing).  The general license now authorizes:

Activities to support education at or below a secondary school level, including combating illiteracy, increasing access to education at the primary or secondary school level, and assisting education reform projects, provided that such education excludes the subjects of math, sciences, technology, engineering, and computer programming.

While it is welcome that now some education-related activity falls under the general license, many organizations will be disappointed that the U.S. Government found it necessary to exclude basic (e.g., primary school) math and science, as that will make it more challenging to support schools in North Korea for young children.  But this is an area of much sensitivity for U.S. foreign policy and national security, and specific license requests may still be submitted for such activity to test the boundaries of what the U.S. Government may allow.

OFAC has added a new authorization for activities “to support disarmament, demobilization, and reintegration (DDR) programs and peacebuilding, conflict prevention, and conflict resolution programs.”  While OFAC has not explained this new authorization for DDR programs in North Korea, the authorization for peacebuilding, conflict prevention, and conflict resolution programs is a welcome addition to the scope of authorized activity. Programs that can be conducted in these areas of U.S. (and regional) goals can support stabilizing the situation on the Korean peninsula, and may be a subtle form of “track 2” engagement by the private NGO sector serving the interests of needed peace in the region.

There is also a broader authorization for assistance for vulnerable or displaced populations, including the elderly, which was previously limited to individuals with disabilities.  Additionally, it is helpful that OFAC removed the unclear limitation previously in place that human rights programming was only authorized if those human rights were “universal.”  

Reporting requirement

Another important change to the NGO general license at section 510.512 is that it now includes a prior reporting “and wait” requirement in all cases.  Previously, it was common for OFAC to include an after-the-fact annual reporting requirement as a condition of the specific licenses that it granted to NGOs with activity in North Korea.  But now new specified reporting is required for use of the general license, with the required report to be submitted to the U.S. State Department at least 30 days prior to starting the section 510.512 activity.  The State Department then has two weeks to object to use of the general license and so notify the NGO. Therefore, NGOs would need to await any reaction from the State Department before taking advantage of the general license. 

It remains to be seen how difficult this reporting requirement will be for NGOs to implement, and how restrictive the State Department will be in exercising this new authority. For example, would the State Department object in some circumstances to activity that had received an exemption from the UN Security Council 1718 Committee on North Korea?  This is an area where further guidance from the U.S. Government would be helpful, including what factors or considerations the State Department would weigh into a decision to object to an activity.  This would help NGOs decide earlier whether to seek a specific license or rely on the general license, as well as what information might be helpful to provide in a report that might address any articulated U.S. Government considerations. 

For example, will the State Department  exclude activities that fit within the general license’s terms, but which they find to be objectionable on policy grounds, and if so what might be those policy considerations?  If an objection is received, does that mean that a specific license request would also likely be denied?  For NGOs planning their DPRK-related programs, it may be prudent to submit reports as soon as the relevant details are available, so that if the State Department expresses concerns or objects, there could be time to address those or otherwise seek a specific license (if possible) while maintaining momentum and a reasonable schedule for delivering the humanitarian assistance. 

While it was common in the recent past for OFAC’s licensing officers to ask as part of a specific license application whether an NGO had obtained or planned to obtain an exemption from the UN Security Council 1718 Committee on North Korea, now that information must be included in the report as part of the general license’s requirements.  Notably, if an NGO has not obtained a UN exemption, it needs to provide a “detailed explanation” for why it has not done so, including a list of any items that would be sent to North Korea (even those for the personal use of their employees).  Organizations should note the breadth of the UN Security Council restrictions on North Korea.

While this reporting requirement may add to the burdens on NGOs, it can also perhaps be viewed as a helpful provision in some cases.  As there are often grey areas and doubts about whether the general license applies to specific activities, this reporting requirement provides an opportunity for compliance-focused organizations to disclose their plans to the government, and if no objection is received from the State Department, they may be more comfortable with proceeding.

Authorized banking

OFAC has retained the authorization for U.S. financial institutions to process funds transfers in support of the activity covered by section 510.512.  However, given the increasing de-risking that many organizations are experiencing by the financial sector, refusing financial services even when in support of activity that is fully authorized by OFAC, more needs to be done in this area to allow NGOs to securely and effectively carry out the activities that OFAC’s regulations allow. We believe a specific FAQ or guidance announcement, directed at U.S. and non-U.S. financial institutions, should emphasize the scope of OFAC’s permission for financial services, whether in support of specific authorized transactions or for donations to NGOs operating under an OFAC authorization, and make clear that such financial services are not only consistent with U.S. policy but are in support of U.S. policy to allow humanitarian assistance for the people of North Korea.

Specific licenses

Finally, the revised section 510.512 states that OFAC may issue specific licenses, when the general license does not apply, for similar activities.  Most notably, OFAC explicitly mentioned “economic development projects to directly benefit the civilian population of North Korea” as among the areas it may be willing to specifically license.  In the past, there has been less willingness on the part of OFAC and the State Department to authorize “economic development” activities, so this could potentially open the door to longer-term initiatives of that nature.

New journalistic activities general license

Section 510.522 authorizes U.S. news reporting organizations and their employees to engage in certain journalistic activities in North Korea, which previously required specific licenses.  For any such organizations with an interest in doing this, section 510.522 is a significant change.  

[1] In one of its new FAQs, OFAC provides the following examples: “NGOs may engage with North Korea’s Ministry of Public Health to provide assistance to clean water projects; with customs officials to import humanitarian-related items into the country; and with local jurisdictions, such as city governments and hospitals, to provide food and medical devices.”

[2] OFAC has deleted the portion of one of its FAQs on this topic that had stated that “[r]egulated financial entities processing a transaction in accordance with an OFAC or a BIS license are encouraged to request a copy of the license to ensure the transaction meets the terms, conditions, and criteria of the license.”