WASHINGTON — A vessel loaded with $3 million worth of North Korean coal is now floating off Vietnam’s coast, searching for a place to dock.
The Dong Thanh, a Vietnamese-owned vessel sailing under a Panamanian flag, entered Vietnamese territorial waters Thursday carrying the North Korean coal. It has wandered the international waters off Malaysia and Indonesia for two months after each denied the ship entry into their territorial waters.
The coal aboard the Dong Thanh began its odyssey in the cargo hold of the Wise Honest, a North Korean cargo vessel now in U.S. custody in American Samoa. The Justice Department authorized seizure of the Wise Honest in early May, alleging it was transporting North Korean coal and violating U.S. and United Nations (U.N.) sanctions.
Prior to the U.S. action, Indonesia detained the Wise Honest for over a year starting April 2018. Indonesian authorities held the ship for having improper shipping documents and violating the country’s maritime law.
But the coal was released by the Indonesian Balikpapan District Court, the district where the vessel was ordered to remain anchored, when an Indonesian broker with ties to North Korea requested that the coal be sold.
The court released the coal based on a Certification of Origin that stated the coal originated in Russia.
Because the Wise Honest took on the coal on board while docked at Nampo, North Korean port of Nampo in March 2018, and Pyongyang has a history of creating false documents, the certificate is widely believed to be fake, according to the U.N. Panel of Experts.
When the Justice Department seized the Wise Honest, officials described the action as a part of a broad plan to use U.S. law to enforce international sanctions in an effort to apply “maximum pressure” to squeeze off North Korea’s source of income that finances its nuclear and missile programs.
“North Korea and the companies that help it evade U.S. and U.N. sanctions should know that we will use all tools at our disposal – including a civil forfeiture action such as this one or criminal charges – to enforce sanctions,” said U.S. Assistant Attorney General for National Security John Demers in a statement released by the U.S. Attorney’s Office in the Southern District of New York on May 9.
He continued, “We are deeply committed to the role of the Justice Department plays in applying maximum pressure to the North Korean regime to cease its belligerence.”
Although the Justice Department was applying the maximum pressure policy initiated by President Donald Trump at the start of his presidency in 2017, the seizure is seen as a move by the Justice Department and unconnected to post-summit approaches to North Korea by the Trump administration.
“This should not been seen as a reflection of the administration’s political mood,” said Joshua Stanton, a Washington-based attorney who helped draft the North Korean Sanctions Enforcement Act in 2016, one of the laws the U.S. invoked to seize the Wise Honest.
Trump’s attitude toward North Korea has softened since his first face-to-face meeting with North Korean leader Kim Jong Un at their first summit last year in Singapore despite the two countries’ differences over denuclearization.
Even after having major disagreements with Kim over the timing of denuclearization and lifting the sanctions, in the failed Hanoi summit in February, Trump has continued to speak favorably of Kim while moderating maximum pressure on Pyongyang.
On March 22, Trump tweeted an order reversing Treasury sanctions on North Korea issued that day, throwing Washington into confusion because there were no sanctions issued on the same day as his tweet. The Treasury had announced financial sanctions on North Korea the day before.
In an attempt to explain Trump, White House Press Secretary Sarah Sanders said, “President Trump likes Chairman Kim, and he doesn’t think these sanctions will be necessary.”
Stanton said, “Trump isn’t saying maximum pressure anymore.” He added, “Trump isn’t doing maximum pressure.”
Despite Trump’s easing of maximum pressure amidst stalled diplomacy with Kim, the U.S. District Court in the Southern District of New York (SDNY) invoked the International Emergency Economic Powers Act (IEEPA) and the North Korean Sanctions and Policy Enhancement Act of 2016 (NKSPEA) to seize the Wise Honest.
“The most independent district in the entire country by a mile is the Southern District of New York,” said Stanton. “They are notoriously independent of the prerogatives of the politicians in Washington.”
NKSPEA, enacted under President Barack Obama in 2016 and amended under Trump in 2017, authorizes the U.S. to forfeit North Korea’s property involved in illicit activities such as maritime coal smuggling. IEEPA bans sanctioned persons from accessing the U.S. financial system.
“This is based on legal authorities that [were signed into law] before Trump was president,” said Stanton. “And SDNY, if they’re doing it, it’s because they see a violation of the law that they can prosecute and win for an amount that is worth their prosecutorial resources.”
The Wise Honest was owned by Korea’s Songi Trading Company which was designated by the Treasury’s Office of Foreign Assets Control (OFAC) in June 2017. [[ https://www.treasury.gov/press-center/press-releases/Pages/sm0099.aspx ]] The Korean People’s Army runs the company according to OFAC. The Wise Honest was also used to import heavy machinery into North Korea according to the court complaint.
Kwon Chol Nam, one of the company’s representatives, paid for services expenditures and equipment purchases for the Wise Honest in U.S. dollars. Those funds were routed through correspondent banks in the U.S. including ones doing business within the jurisdiction of the SDNY. The U.S. forbids its financial institutions from processing transactions for the benefit of North Korea.
The use of the U.S. financial system gave the U.S. jurisdictional authority to seize the Wise Honest, which was property involved in maritime coal smuggling and thus in violation of U.N. sanctions.
Stanton said “I think [the Justice Department is] actually being more aggressive than the president.”
Ken Gause, director of Adversary Analytics Program at the CNA, said, “We have tried the naming and shaming…other countries involved in the ship-to-ship transfers.”
He continued, “And that doesn’t seem to have had much effect. And so now this would be kind of like the next step up – to actually impound and take possession of North Korean property that is involved in illicit activities.”