Seizure of the North Korean Vessel the Wise Honest by the U.S. Department of Justice

Photo credit: The BBC

The first-ever seizure of a North Korean cargo vessel by U.S. authorities in retaliation for international sanctions violations shows Washington’s determination to return to hard-line enforcement of the Trump administration's "Maximum Pressure" policy.

On May 9th, the US Department of Justice announced the forced seizure of the 17 061 ton, single-hull North Korean bulk carrier ship the Wise Honest (IMO No. 8905490) and her cargo. The ship was transferred from Indonesian into U.S. custody pursuant to an unsealed U.S. warrant issued in July 2018. These developments mark the conclusion of the matter between Washington and Jakarta, ongoing since July 2018 when Indonesian authorities received a request for cooperative legal assistance from the U.S. regarding the vessel.

The move is framed as a civil forfeiture action between the U.S. government and the defendant in rem, and involves the seizure of the Wise Honest (absent of its cargo) from the owner Korea Songi Shipping Company, and its parent company the Korea Songi General Trading Corporation. The vessel’s owners were designated a sanctioned company by the U.S. Office of Foreign Assets Control (OFAC) in 2017, in being subordinate to the Korean People's Army and involved in the repeated export of North Korean coal abroad. Having passed through 8 separate state owners since its construction in 1989, the ship had come into North Korea’s possession following its last registration in November 2016, and is the second-largest cargo ship within Pyongyang’s merchant fleet.

In March 2018, the Wise Honest was loaded with 25,500 tons of coal worth US $2 990 000 in Nampo, North Korea, before being intercepted and detained by Indonesian maritime authorities in April 2018 approximately 2,800 miles south of Nampo. The Wise Honest had intended to conduct a ship-to-ship transfer around the waters of Balikpapan in East Kalimantan, Indonesia.

Consequently, in November 2018 the Indonesian Balikpapan District Court convicted the vessel's captain of offenses related to improper documentation for the Wise Honest, but later dropped a pending charge of "using a false flag." The court also released the entire coal shipment to an Indonesian broker following the presentation of a Certificate of Origin document issued by Russia in February 2019 - a decision contrary to the recommendations of U.N. sanctions monitors, and in violation of active U.N. sanctions on commerce with North Korea. The shipment was then transferred to a Vietnamese-owned vessel sailing under a Panamanian flag, before being again intercepted en-route to Malaysia. All 25 North Korean sailors of the Wise Honest were thereafter repatriated from Indonesia to North Korea on May 10th, 2019.

The Wise Honest was reported as impounded by Indonesian Ministry of Transportation "due to major deficiency" in the port city of Balikpapan since its interception in April 2018. As of May 9, 2019 the vessel is being towed by a commercial tow boat en-route to American Samoa.

Alleged offenses

In the complaint issued by the U.S. DOJ, the Wise Honest was seized as property derived from proceeds traceable to violations of the International Emergency Economic Powers Act (IEEPA), per executive orders pursuant to the IEEPA, per the North Korea Sanctions and Policy Enhancement Act of 2016, per domestic anti-money laundering legislation, and per numerous U.N. Security Council Resolutions.

The Wise Honest was also alleged to have engaged in the use of illicit sanctions evasion techniques to conceal the origin and location of the vessel from international maritime authorities. Following an investigation by the Indonesian authorities in September 2018, it was reported that the ship had been registered under two jurisdictions - once under the flag of Sierra Leone and again under North Korea. This is evidence that North Korea used flags of convenience to disguise the identity of the vessel.

Furthermore, the vessel had also engaged in position spoofing using its Automatic Identification System (AIS) - a device required under the International Convention for the Safety of Life at Sea (SOLAS) for the purposes of providing positional information of a vessel to other vessels and coastal authorities for navigational and safety reasons. It was reported that the Wise Honest had not broadcast an AIS signal since August 4, 2017 in an apparent attempt to disguise its location, course, speed, and navigational status.

Why is this happening?

The use of such vessels by Pyongyang has allowed North Korean companies to export raw natural resources (i.e. coal), which exist as a crucial revenue source for domestic companies and the government. The loss of vessels and their cargo is not perceived to have a significant effect upon North Korea's foreign income stream, but its impact may be elicited from the timing and messages conveyed through such an act to the North Korean leadership - that the U.S. is able to track, intercept, and seize its property at will under international law should Washington seek to exert additional pressure.

The seizure of international vessels on the high-seas should not be viewed as a trivial affair, given that vessels navigating internationally fall under the jurisdiction of the flag they are sailing under. The interdiction and seizure of such vessels has constituted a casus belli in prior instances under international law.

The first-time seizure by the U.S. of a North Korean vessel and its cargo initially seized by Indonesian authorities within Indonesian territorial waters appears to be an unanticipated development, with U.S. officials emphasizing that the timing of the ship seizure and the deteriorating bilateral relationship between the US and North Korea was coincidental. However this decision by the Trump administration is interpreted as a response to the following factors.

This incident could be a response by President Trump after his failure to reach a deal to disarm and denuclearize North Korea at the February 2019 Hanoi Summit with Kim Jong-un. Trump's support for CVID during the summit demanded not only a full dismantling of North Korea's nuclear infrastructure - involving the transfer of all nuclear weapons and fissile materials to the U.S. - but the simultaneous disassembling of Pyongyang's chemical and biological warfare programs in addition to its ballistic missiles, launchers and associated facilities. This "Libyan Model" for disarmament was outright rejected by Kim Jong-un, leading to the abrupt end of the Summit without an agreement. With the perceived breakdown in dialogue and diplomacy, and lacking any coherent strategy beyond that outlined within the 2018 Singapore Summit Joint Statement, Trump appears to be reverting to his initial policy of Maximum Pressure - resulting in the intensification of U.S. enforcement of international sanctions against North Korea.

Additionally, this action is a response to the release of the March 2019 report by a UN Panel of Experts pursuant to resolution 1874 (2009) - reporting on the sustained patterns of offshore ship-to-ship transfers by North Korean vessels with foreign companies. Wherein the contents of the report illustrated North Korea's continued use of such tactics to successfully evade international sanctions, this highlighted shortfalls within President Trump's strategy of "Maximum Pressure.” Additionally, growing public concern over the perceived lack of results yielded by Trump's North Korea policy, highlighted through the critical nature of the UN report, may have propelled Washington to action in order to allay domestic and international concerns over a perceived weakening in U.S. foreign policy vis-a-vis Pyongyang.

Thirdly, the seizure is a response to the series of ballistic missile tests conducted by North Korea on May 4th and 9th. In light of the displays of military aggression by Pyongyang, Trump appears to be falling back upon his "cards" by exerting increased pressure on Pyongyang through the timely seizure of a North Korean vessel - which Indonesia and the U.S. had long been aware of, and upon which a sealed warrant of seizure had been issued by the court of the Southern District of New York in July of 2018.

Fourthly, the event illustrates Washington’s lack of confidence in its Asian partners to independently and effectively enforce the letter of UN sanctions within their own jurisdiction. Despite the imposition of UN sanctions, many member states party to such agreements have consistently allowed North Korea to escape the legal consequences of its actions, or enabled North Korea's use of deceptive and illicit shipping practices to evade international sanctions.

Where North Korea is known to regularly employ false flags or "flags of convenience" to disguise the identity of its vessels on the high seas, the registration services of governments providing North Korea with said false flags are either purposefully enabling these actions or exhibiting a significant degree of negligence - both of which are detrimental to the scope and purpose of the sanctions regime. This notion is supported by the fact that over 60 flag states have not ratified all six core conventions (SOLAS, MARPOL, LL 66, STCW, MLC and CLC/FUND92) representing a minimum level of maritime regulation – including Indonesia, Sierra Leone, and North Korea.

The recent decision of U.S. authorities to act and seize the Wise Honest may be owed to increased concerns regarding Indonesia - which has maintained friendly relations with North Korea - and the likelihood that Indonesian officials were affecting the imminent release or return of the vessel, just as they had previously released its cargo in February 2019.

To the Maximum Pressure

The seizure of the Wise Honest and its underlying factors reveal a intensification of Trump's established strategy of Maximum Pressure - designed to disarm and denuclearize North Korea through several key pillars:

A series of UN Security Council Resolutions in 2017 banned 90% of North Korean exports - including coal, iron ore, seafood, and textiles amounting to US $2.9 billion.
Engagement in diplomatic outreach, to gather partners in the region and spearhead a multilateral approach - encouraging countries to intensify sanctions on North Korea's illicit activities
Expansion of U.S. sanctions against North Korea - Increasing the number and scope of sanctions designations, as outlined under the mandate of US Presidential Executive Order 13810.

This strategy had been less emphasized throughout the period of increased diplomacy and detente with North Korea in 2018, as Trump participated within direct negotiations with Kim Jong-un and the North Korean leadership. This was illustrated through Trump's comments leading up to the June 2018 Singapore Summit, where he proclaimed that while the US had “hundreds of new sanctions that are ready to go” these would not be applied to Pyongyang while the dialogue was ongoing, as he explained “Why would I do that when we’re talking so nicely.”

This was further illustrated on March 21st, 2019 when the Treasury Department announced U.S. sanctions against two Chinese shipping firms helping Pyongyang circumvent UN sanctions, including the imposition of additional large scale U.S. sanctions targeting North Korea. However on the following day, March 22nd, Trump tweeted that he would withdraw those additional sanctions against Pyongyang - reflecting the degree of disarray within the Trump administration regarding U.S. policy on North Korea.

Accordingly, the events surrounding the Wise Honest reveals that Trump is finally willing and capable of rolling back his diplomatic achievements over the past year with North Korea and enforcing his strategy of Maximum Pressure, should Pyongyang continue to pressure and goad the U.S. and its international allies by testing ballistic missiles.

What happens next?

Despite the apparent reduction within Pyongyang's capacity to circumvent international sanctions effected by the seizure of the Wise Honest, the loss of a single vessel is unlikely to have a significant effect upon North Korea's economy. However, it must be emphasized that Pyongyang’s biggest source of foreign currency comes from the sale of coal, with coal consistently accounting for between 33% to 40% of official exports.

While Pyongyang strongly criticizes the U.S. and conducts more weapons tests, its capacity to retaliate tit-for-tat in seizing a U.S. ship on the high-seas is negligible. North Korea lacks a blue water navy, and such a response would constitute an outright act of war without broad international or UN support. A strong response from Pyongyang is also improbable, given that the government likely prioritizes the speedy return of its vessel and a resumption to its covert export coal shipments.

The U.S. is likely to intensify its enforcement of UN sanctions regarding North Korea vis-a-vis its Asian partners. As seen in Washington’s decision to assert control - taking possession of the Wise Honest from Indonesia - similar proactive or cooperative measures may also be adopted in the future should Japan, South Korea, or Taiwan appear reluctant or slow to act. How Washington decides to act hereafter with its Asian partners will either reinforce or compromise its reputation and will contribute towards defining U.S. leadership in East Asia under the Trump Administration. Furthermore, the precedent established by this incident may also carry broad implications for U.S. maritime activities and presence in the South China Sea, should similar incidents arise here.

Above all, what should be kept in mind is the message conveyed through the U.S. response, namely that Washington is able to discover and implement new avenues of exerting additional pressure on Pyongyang - being fully-capable of tracking North Korea's shipping, seizing its cargo at will under international law, and prosecuting such actions under U.S. domestic law. Moving forward, it remains to be seen whether Washington will continue to apply pressure vis-à-vis Pyongyang through the strict enforcement of UN sanctions, whether the seizure of North Korean vessels on the high-seas will increase in frequency, and whether such tactics will form the centrepiece of Trump’s revived Maximum Pressure strategy.

****The views expressed herein do not necessarily reflect the views of NKR or the Yonsei Institute for North Korean Studies.

Sources

Arirang News, 'Trump's note to Kim Jong-un at the Hanoi summit revealed: Report' on Arirang News - Youtube (30 March 2019) <https://www.youtube.com/watch?v=y1vdd-4OmQc>
Aruna Viswanatha andMichael R. Gordon, 'U.S. Seizes North Korean Ship' on the Wall Street Journal (9 May 2019) <https://www.wsj.com/articles/u-s-seizes-north-korean-ship-11557420141>
Australian Maritime Safety Authority, 'How the automatic identification system works' on Australian Maritime Safety Authority (2019) <https://www.amsa.gov.au/safety-navigation/navigation-systems/how-automatic-identification-system-works>
BBC, 'US seizes North Korean coal ship for violating sanctions' on BBC (9 May 2019) <https://www.bbc.com/news/world-asia-48221507>
Bruce Klinger, 'Trump undercuts 'maximum pressure' strategy on North Korea' on The Hill (30 March 2019) <https://thehill.com/opinion/national-security/436180-trump-undercuts-maximum-pressure-strategy-on-north-korea>
Caitlin Oprysko, 'Trump reverses North Korea sanctions a day after they were announced' on Politico (22 March 2019) <https://www.politico.eu/article/donald-trump-reverses-north-korea-sanctions-immediately/>
Eileen Sullivan and Benjamin Weiser, 'U.S. Seizes North Korean Ship for Violating Sanctions' on the New York Times (9 May 2019) <https://www.nytimes.com/2019/05/09/us/politics/wise-honest-north-korea-ship-seized.html>
FleetMon, 'Wise Honest' on FleetMon (2019) <https://www.fleetmon.com/vessels/wise-honest_8905490_10079248/#tab-datasheet>
Ham Ji-ha and Christy Lee, 'Documents Show Indonesia Released Banned N. Korean Coal' on VOA (27 April 2019) <https://www.voanews.com/a/documents-show-indonesia-released-banned-n-korean-coal/4893504.html?c=1557425071760>
International Chamber of Shipping, ‘Shipping Industry Flag State Performance Table’ on International Chamber of Shipping (January 2019) <http://www.ics-shipping.org/docs/default-source/Flag-State-Performance-Table/flag-state-table-2019.pdf>
KBS World Radio, 'VOA: Malaysia Begins Probe into Ship Carrying N. Korean Coal' on KBS World Radio (20 April 2019) <http://world.kbs.co.kr/service/news_view.htm?lang=e&Seq_Code=144611>
Leo Byrne, 'U.S. seizes North Korean coal smuggling vessel held in Indonesia' on NK News (9 May 2019) <https://www.nknews.org/2019/05/u-s-seizes-north-korean-coal-smuggling-vessel-held-in-indonesia/>
Makowsky, Peter et al., ‘A Snapshot of North Korea’s Supply Chain Coal Activity’ on 38 North (8 March 2019) <https://www.38north.org/2019/03/supplychaincoal030819/>
Marine Traffic, "Wise Honest" on Marine Traffic (2019) <https://www.marinetraffic.com/en/ais/details/ships/shipid:672235/mmsi:445582000/vessel:WISE%20HONEST>
Merrit Kennedy, 'U.S. Takes Control Of North Korean 'Sanctions-Busting' Ship' on NPR (9 May 2019) <https://www.npr.org/2019/05/09/721827706/u-s-takes-control-of-north-korean-sanctions-busting-ship>
Mikhail Voytenko, 'North Korean bulk carrier riddle – new scheme of illegal trade?' on FleetMon (14 April 2018) <https://www.fleetmon.com/maritime-news/2018/22137/north-korean-bulk-carrier-riddle-new-scheme-illega/>
Mullen, Jethro, ‘How North Korea makes its money: Coal, forced labor and hacking’ on CNN (5 April 2017) <https://money.cnn.com/2017/04/05/news/economy/north-korea-economy-china-trump-xi/>
Report of the Panel of Experts established pursuant to resolution 1874 (2009), UN Doc S/2019/171 (5 March 2019) <https://www.undocs.org/S/2019/171>
Reuters, ‘Malaysia to reopen embassy in North Korea: Mahathir’ on Reuters (12 June 2018) <https://www.reuters.com/article/us-northkorea-malaysia/malaysia-to-reopen-embassy-in-north-korea-mahathir-idUSKBN1J80O2>
Shannon Pettypiece and Nick Wadhams, 'Trump Says North Korea Summit Back On for June 12 in Singapore' on Bloomberg (2 June 2018) <https://www.bloomberg.com/news/articles/2018-06-01/trump-receives-north-korean-aide-in-historic-white-house-visit>
US Department of Justice, 'North Korean Cargo Vessel Connected to Sanctions Violations Seized by U.S. Government' on US Department of Justice (9 May 2019) <https://www.justice.gov/opa/pr/north-korean-cargo-vessel-connected-sanctions-violations-seized-us-government>
US Department of Justice, "United States of America v Wise Honest" on US Department of Justice (9 May 2019) <https://www.justice.gov/opa/press-release/file/1161356/download>
US Department of the Treasury, ' Treasury Sanctions Suppliers of North Korea’s Nuclear and Weapons Proliferation Programs' on US Department of the Treasury (1 June 2017) <https://www.treasury.gov/press-center/press-releases/Pages/sm0099.aspx>