The Mu Du Bong

September 10, 2014 7:00 AM

Back in July, we posted on a nice piece of investigative journalism by Claudia Rosett at Forbes on the Mu Du Bong. Using technology like Vessel Finder, Rosett was able to track the vessel—at least when its Automatic Identification System (AIS) was switched on—and found that its itinerary looked a lot like the Chong Chang Gong’s. A number of things have happened since then that are worth noting, as they pertain to our broader interest in sanctions.

At the very end of July, Treasury sanctioned two companies involved in the Chong Chon Gang case: the state-owned Chongchongang Shipping Company, the owner/operator of the Chong Chon Gang; and Ocean Maritime Management Company, which managed the ship and apparently provided the instructions to its captain and crew to conceal the weapons and provide false documentation to the Panamanian authorities. However, in addition to these firms Treasury also identified as “blocked property” 18 vessels these companies own or have an interest in, including not only the Chong Chon Gang but the Mu Du Bong as well.

“Blocking” of property is a technical and legal term with quite precise meaning: title to the blocked property remains with the owner (or target in a sanctions case), but “the exercise of powers and privileges normally associated with ownership is prohibited without authorization from the Office of Foreign Asset Control. Blocking immediately imposes an across-the-board prohibition against transfers or dealings of any kind with regard to the property.”

This definition raises an important question, however; OFAC can quite easily assert its power with respect to property that is in the US. But what about when the property is abroad?

As it turns out, the Treasury designation followed the designation of OMM by the Security Council committee established pursuant to UNSC Resolution 1718, and was undertaken in support of it. Other countries, including Japan, quickly followed suit despite its diplomatic initiative on abductees. In addition, UNSC Resolution 2094 explicitly sought to close what we call the “whack a mole” loophole: the ability for North Korea to shift companies and assets around to avoid such designations. Art. 19 of UNSCR 2094 “Requests all States to communicate to the Committee any information available on transfers of DPRK aircraft or vessels to other companies that may have been undertaken in order to evade the sanctions or in violating the provisions of resolution 1718 (2006), 1874 (2009), 2087 (2013), or this resolution, including renaming or re-registering of aircraft, vessels or ships, and requests the Committee to make that information widely available…”

In the interim, NKNews ran an excellent piece by Leo Byrne tracking the environmental-insurance saga of the Mu Du Bong, which ran aground in a coral reef in the Gulf of Mexico near Tuxpan, damaged the reef, but lacked the requisite insurance to cover the damages. Among the juicy details in the piece was his finding that the Bermuda-based South of England Protection and Indemnity Association (SEPIA) had insured about half the North Korean fleet, but was subsequently shut down by the High Court of Bermuda, probably explaining the lack of appropriate coverage; who wants this business?

As a result, salvage had to be orchestrated by Mexican authorities against a North Korean promise to pay; the ship was subsequently impounded (the Vessel Tracker link above shows you exactly where the ship is).

It didn’t take Josh Stanton long to jump on the case; as he points out, Mexican authorities not only had their own legal, insurance and financial issues to worry about in connection with the salvage, but they had an obligation under UNSCR 2094 to “share information” on the vessel given its links to OMM.

Representatives of the Panel of Experts are now on the case, with a mandate to inspect the ship (Global Post). But even if nothing is found, Mexico would be acting within its international obligations—assuming the appropriate domestic powers have been granted—not only to search the ship and impound illicit cargo but to impound the ship itself as an asset of a sanctions-violating firm, namely OMM. Our plain reading of the text suggests that such an impound would be legal even if the ship were not carrying contraband.

We suspect that Mexican authorities would prefer to just wash their hands of the whole affair and ultimately will let the ship go once the North Koreans pay up. But going after North Korean shipping is a powerful sanctions tool, and one likely to keep the North Korean merchant marine much closer to home; posts by Hugh Griffith and Lawrence Dermody at SIPRI and at 38North make the case.

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Stephan Haggard Senior Research Staff

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