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Weapons of Mass Destruction (WMD)

[CRS Issue Brief for Congress]

Korea: Procedural and Jurisdictional Questions Regarding Possible Normalization of Relations With North Korea

Congressional Research Service: Report for Congress 94-933 S
November 29, 1994
-ti- Korea: Procedural and Jurisdictional Questions Regarding Possible
Normalization of Relations With North Korea
By Zachary S. Davis, Larry A. Niksch, Larry Q. Nowels, Vladimir
N. Pregelj, Rinn-Sup Shinn and Robert G. Sutter
The Clinton Administration signed an agreement with North Korea
on October 21, 1994, detailing steps to end the crisis caused by
North Korea's nuclear program and pledging to "move toward full
normalization of political and economic relations." Many details
of the accord have not been disclosed, including the precise
mechanisms to be used to provide light water nuclear reactors and
annual shipments of U.S. heavy oil to North Korea, and a clear
process to be followed in normalizing political and economic
As Congress and the Administration consider taking steps to
implement the agreement and normalize U.S.-North Korean
relations, they will face a complicated array of legal and
regulatory restrictions currently governing U.S.-North Korean
relations. These restrictions affect significant aspects of the
October 21 accord on nuclear transfers and oil shipments. They
cover all areas of official relations including economic,
consular, diplomatic, cultural and other interactions. They have
often deep historical roots in American opposition to Communist
regimes in the Cold War and, more specifically, the Korean War.
A review of the legal and regulatory restrictions and an
examination of the American experience in normalizing relations
with other Communist countries like China and current efforts
with Vietnam show that the process of normalization with a
Communist country and former military adversary like North Korea
could be protracted. Many of the current restrictions on U.S.
relations with North Korea are mandated by statutes specifically
referring to North Korea or broader statutes affecting certain
types of countries that would include North Korea. Some statutes
give an element of discretion to the President. Other
restrictions on North Korea have been imposed under general
statutory or other authorities that have been applied to North
Korea by executive decision in response to specific situations or
policy goals.
There are a variety of paths that might be followed to normalize
relations-- e.g., moving ahead first in diplomatic areas while
holding back economic ties; moving ahead more quickly in economic
than political areas; moving forward in all areas concurrently;
etc. In general, the initiative to move ahead rests mainly with
the President, but Congress plays an important role in many
areas. Without congressional support, full normalization of
relations is impossible.
U.S.-NORTH KOREAN RELATIONS SINCE 1948                      1
     U.S. Involvement in Korea, 1945-1953                   1
     The Korean War and the Armistice Agreement of 1953     2
     Armed Confrontation, 1953-1980s                        2
     Confrontation with Limited Bilateral Contacts, 1988-91 5
     The Nuclear Issue in U.S.-North
     Korean Relations, 1992-94                              6
     Agreed Statement of August 12, 1994                    7
     Agreed Framework of October 21, 1994                   8
     APPENDIX I - The Agreed Framework Between the United
     States and the Democratic People's Republic of Korea
     Geneva, October 21, 1994                              10
     APPENDIX II - President Clinton's Letter to
     Kim Jong Il                                           13
     POLITICAL RELATIONS?                                  14
     Which Branch of the U.S. Government Has
     Responsibility for Normalizing Political Relations?   14
     What Are the Different Processes Involved in
     Establishing Government-to-Government Relations?      15
     What Are the Procedures to Establish an Interest
     Section? A Liaison Office?                            15
     If the United States Were to Normalize Diplomatic
     Relations With North Korea, What Further Steps Might
     the United States Consider Taking?                    16
          Cultural and Educational Exchanges               16
          Travel Restrictions                              16
          Consular Agreement                               16
U.S.-NORTH KOREAN MILITARY RELATIONS                       17
     The Armistice Agreement                               17
     Withdrawing U.S. Troops; Ending the U.S.-R.O.K.
     Mutual Defense Treaty                                 19
     Background                                            21
     Embargo on All Transactions                           22
     U.S. Imports                                          23
          Most Favored-Nation (MFN) Status                 23
          Generalized System of Preferences                25
     Control of U.S. Exports                               26
     Exports from Foreign Countries                        29
     Export Financing                                      30
     Private Foreign Investment                            31
TABLE OF CONTENTS--(continued)
     Bilateral Economic Assistance                         32
     Food Assistance                                       35
     Multilateral Economic Assistance                      35
     Statutory Requirements for Nuclear Cooperation        38
     Dual-Use Technology                                   40
     Nuclear-Related Assistance                            40
     Financial Aspects of Nuclear Cooperation              40
NOTE: This report was prepared at the request of the Senate
Foreign Relations Committee. With the Committee's permission, the
report is made available for general congressional use.
page CRS-1
*    Prepared by Rinn-Sup Shinn, Analyst in Asian Affairs,
     Foreign Affairs and National Defense Division.
The United States has no formal relations with the Communist
North Korean regime in Pyongyang. North Korea, or the Democratic
People's Republic of Korea (DPRK), was established in September
1948 under the aegis of the Soviet Union as a counterweight to
South Korea. U.S. policy toward DPRK has since been a function
largely of U.S. relations with South Korea; the United States
played a direct role in the establishment of the Republic of
Korea (R.O.K.) and defended the fragile republic from North
Korean aggression in the Korean War (1950-53). In the ensuing
decades, the triangular U.S.-North Korean-South Korean relations
have been frozen in Cold War confrontation. This situation may
soon be modified, however, by gradual steps toward normalization
of political and economic relations between Washington and
Pyongyang. This was made possible under U.S.-North Korean
agreements signed in Geneva, in August and October 1994, as part
of multilateral effort aimed at "an overall resolution of the
nuclear issue on the Korean Peninsula."
U.S. Involvement in Korea, 1945-1953
Post-war U.S. involvement in Korea began in 1945, when, to effect
the surrender of Japanese forces on the Korean Peninsula, the
United States and the Soviet Union agreed to divide Korea at the
38th parallel into two military zones of administration. Under
the arrangement, Japanese forces surrendered to U.S. forces
south--and to Soviet forces north--of that line. Although
intended for temporary military expediency, the dividing line
became the de facto north-south boundary in 1948, when the two
Koreas emerged as rival political entities, both claiming to be
the only legitimate government on the peninsula. The United
States recognized South Korea; the Soviet Union did the same for
North Korea. By December 1948, the Soviet forces had withdrawn
from the North and U.S. forces withdrew from the South by the
spring of 1949.
page CRS-2
The Korean War and the Armistice Agreement of 1953
The Korean War was started by Kim Il Sung with backing of Soviet
leader Joseph Stalin, a fact confirmed by the recent release of
official Soviet documents. The United Nations, in accordance with
the terms of its Charter, engaged in its first collective action
to repulse the aggressors, established "a unified command for UN
Forces in Korea," or the UN Command (UNC), to which 16 member
nations sent troops and assistance. With the exception of South
Korea, the United States contributed the largest contingent to
this UN effort. The battle line seesawed from south to north
after large numbers of Chinese "people's volunteers" intervened
to save the North from the brink of extinction; by summer 1953,
the line had stabilized north of Seoul near the 38th parallel
into what is now called the demilitarized zone (DMZ).
Armistice negotiations began in July 1951, but hostilities
continued until July 27, 1953, when the military commanders of
the North Korean People's Army (KPA), the Chinese "people's
volunteers", and the UNC signed an armistice agreement at
Panmunjom. Technically, neither the United States nor South Korea
is a signatory to the armistice per se, but both continue to
adhere to it through the UNC. No comprehensive peace agreement
has replaced the armistice. Thus a condition of belligerency
still exists on the peninsula. A Military Armistice Commission
composed of 10 members, five appointed by either side, was to
supervise implementation of the pact. The war claimed the lives
of 54,540 American servicemen (including 33,870 in combat) and
left 103,284 wounded and some 7,900 Americans still unaccounted
for. (Beginning in May 1990, North Korea handed over 208 sets of
"remains" claimed to be those of Americans; in 1993, the U.S.
Defense Department paid $890,000 to Pyongyang for 46 of these
returned sets in compensation for itemized "expenses"; the U.S.
side wants to limit compensation to $2,000 to $3,000 per set of
remains, while the North reportedly demands $30,000 each.) Korean
casualties, North and South, numbered in the millions. (North
Korea remains silent on human toll to this day.)
The armistice called for a political resolution to the problem of
Korea's division within three months. An international political
conference met in Geneva in April 1954 but, after seven weeks of
futile Cold War-influenced debate, ended without agreement or
Armed Confrontation, 1963-1980s
For nearly four decades since the end of the Korean War, the
United States has not had a specific policy directed toward North
Korea. In fact, whatever policy it did have was aimed largely at
complementing its policy toward South Korea, ensuring the
security of the South, and maintaining close bilateral ties. To
that end, the United States has maintained a military presence in
the South under the 1954 Mutual Defense Treaty. For its part,
North Korea concluded mutual security treaties with the Soviet
Union and China in 1961 and has
page CRS-3
continued to build up its military strength as part of its
continuing--and economically draining-effort to counter
U.S./R.O.K forces in the South.
Through the 1980s and beyond, the United States continued to face
a hostile North Korea under Kim Il Sung, who tried a mix of soft
and hardline approaches toward Washington. In the 1960s, the
United States had to contend with belligerent North Korean
actions such as the 1968 seizure of U.S.S. Pueblo near Wonsan and
the 1969 downing of a U.S. reconnaissance plane off Chongin.
In the 1970s, U.S.-North Korean relations remained frigid,
despite Pyongyang's assertions that the historic beginning of
inter-Korean dialogue in 1972 opened a new era of peace on the
peninsula. North Korea contended that the United States should
withdraw its troops from the South, since the two Koreas had
agreed in July 1972 to cooperate for peace and unification. It
also began to signal its desire for people-to-people contacts in
direct appeals to the United States. In March 1974, in a letter
addressed to the United States Congress, North Korea proposed
bilateral negotiations on replacing the "outdated" Korean
armistice with "a peace agreement." It argued that direct talks
were necessary inasmuch as the United States, not South Korea,
had the real power of command and control over South Korean
security. Also on Pyongyang's agenda was the demand that U.S.
troops be withdrawn from the South as early as possible. In 1975,
North Korea began to complain that U.S. nuclear arsenals in the
South posed a new threat to the DPRK.
Then, as now, the U.S. policy was to encourage dialogue between
the two Koreas for mutual accommodation and to ensure peace and
stability on the peninsula. Toward the end of 1974, the United
States signaled to the Soviet Union and China its willingness to
improve relations with North Korea, provided that Moscow and
Beijing would take similar steps toward South Korea. In January
1976, North Korea criticized the so-called "cross-recognition"
formula as a plot to perpetuate the division of Korea. In a
message intended for the two Communist allies, Pyongyang
pointedly noted that "a socialist country by nature cannot deal
with the puppets raised by the imperialists, much less
`recognize' them." Otherwise, Pyongyang insisted, "it would be
tantamount to recognizing the U.S. imperialist occupation of
South Korea."
In the mid-1970s, the United States heightened its vigilance
against North Korea, after the discovery in late 1974 of a North
Korean tunnel dug under the demilitarized zone (a second tunnel
was uncovered in February 1975). Shortly before the fall of
Saigon in April 1976, there were also troubling reports out of
Beijing that Chinese officials had cautioned Kim Il Sung, at the
time of his sudden visit to Beijing on April 18, against
launching an attack on South Korea. Then in August 1976, there
were North Korean axe murders of two American officers attached
to the UNC at Panmunjom. Against this backdrop, the first of
U.S.-R.O.K "Team Spirit" joint military exercises began in 1976.
Under the Carter Administration (1977-80), U.S. policy toward
North/South Korea took a new turn. In March 1977, President
Carter announced his intention to pull out all of the 40,000 U.S.
ground forces in the South during
page CRS-4
the next four to five years, adding that "I am very determined to
take this action." Also announced was his intention to lift
restrictions on travel by U.S. citizens to North Korea, Cuba,
Vietnam, and Cambodia on March 18, 1977, on the ground that these
restrictions violated human rights. Two years later, in July at
the end of his state visit to Seoul, Carter and his South Korean
counterpart jointly proposed to North Korea a tripartite
conference for the resolution of Korean problems. Pyongyang
rejected it in the belief that an acceptance would amount to
tacit recognition of South Korea--and by implication an
acknowledgment of a two-Korea policy that North Korea claimed was
being pursued by Washington. Later in July 1979, however, Carter
ordered a halt to the withdrawal of the remaining 32,000 U.S.
combat troops, the "timing and pace" of any further troop
reduction was to be reexamined in two years.
Under the Reagan Administration (1981-1988), U.S. relations with
North Korea showed no sign of movement, even though the
Administration in November 1983 urged Pyongyang to come to a
tripartite conference; in January 1984, North Korea proposed a
similar meeting to be convened on its own terms. But
circumstances then were not conducive to dialogue. In early 1983,
North Korea had launched an ultra-nationalistic, anti-American
propaganda offensive designed to create social and political
unrest in the South. This was designed to capitalize on the
groundswell of anti-American sentiments among South Koreans in
the wake of a civil uprising in Kwangju in 1980, suppressed in a
bloody crackdown by U.S.-backed South Korean troops. Pyongyang
sought to incite South Korean students and dissidents to
anti-American actions, blaming the United States for the
continuing territorial division and the resulting "agony and
misery of the Korean people." Through clandestine publications
(the quarterly Ch'ongmaek in particular) and the Voice of
National Salvation broadcasts, North Korea urged South Koreans of
all walks to rise up in "anti-U.S., pro-independence" struggles.
To that end, Pyongyang in August 1985 inaugurated an
anti-U.S./anti-R.O.K underground organization called the "South
Korean National Democratic Front"--actually a renaming of the
North Korea-based "Reunification and Revolutionary Party" at the
disposal of Pyongyang since 1969, as an instrument of propaganda,
agitation, and disinformation against U.S./R.O.K. interests.
Other factors hampering U.S.-North Korean relations included the
October 1983 assassination attempt on the South Korean President
Chun Doo Hwan in Rangoon, Burma. Although Chun was not harmed, 17
members of his South Korean entourage, as well as four Burmese
officials, were killed by a bomb planted by North Korean agents.
Then, in November 1987, in an attempt to underscore Pyongyang's
assertions that Seoul would be a highly unsafe place to go for
the 1988 Summer Olympics, agents of North Korea on order from top
leadership sabotaged a Korean Airlines plane over the Indian
Ocean, causing the deaths of all 115 passengers on board. Since
January 1988, North Korea has been on the U.S. Government list of
states supporting international terrorism. North Korea is also
subject to a general embargo on trade and financial transactions
under the Trading with the Enemy Act.
page CRS-5
Confrontation with Limited Bilateral Contacts, 1988-91
Shortly before the Seoul Olympics (September 17-October 2, 1988),
the United States indicated to North Korea that it would move
toward improving relations if North Korea did not disrupt the
Summer Olympics. At the end of October 1988, the U.S. announced a
package of steps on relations with the North. This initiative was
also in support of South Korean President Roh Tae Woo's July 7,
1988 overture aimed at drawing Pyongyang out of its isolation,
promoting free inter-Korean cross-border movement of people and
goods, and cooperating in international forums. The modest
package authorized U.S. diplomats to hold substantive discussions
with North Korean counterparts in neutral settings; encourage
unofficial, nongovernmental visits from North Korea for academic
and cultural purposes; facilitate the travel of U.S. citizens to
North Korea for family visits, academic and cultural purposes and
so on; and permit humanitarian trade in items meeting "basic
human needs," on a case-by-case basis.
Beginning in December 1988, the U.S. Embassy's political
counselor in Beijing met with his North Korean counterpart 33
times, most recently in May 1993. In these meetings, the United
States suggested several issue areas in which North Korea could
take positive steps as part of a sustained, reciprocal process.
These areas included:
*    Progress in dialogue with South Korea, including serious
     discussion with the South about confidence-building measures
     and other concrete steps to reduce tensions;
*    Conclusion and implementation of an International Atomic
     Energy Agency (IAEA) safeguards agreement, as required under
     the Nuclear Nonproliferation Treaty (NPT);
*    Regularization of a process for returning Korean War remains
     of U.S. servicemen missing in action (MIAs) and an eventual
     accounting for all MIAs from the Korean War:
*    A credible statement condemning terrorism; and
*    Demonstration of greater respect for human rights.
The United States also expressed its concern about North Korean
exports of ballistic missiles and related military technology.
For its part, North Korea repeated its demand for replacing the
1953 armistice with a peace treaty, withdrawal of U.S. troops
from the South, and upgrading the status of talks in Beijing. The
United States recognizes that the future of Korean issues is a
matter for the authorities of North and South Korea to resolve
peacefully through negotiations. As the fundamental decisions
must be made by the Korean people themselves, the United States
refuses to be
page CRS-6
drawn into separate negotiations with North Korea on the 1953
armistice. The United States remains prepared, however, to
participate in talks with the representatives of North and South
Korea, if so desired by the two Korean governments, provided that
both are full and equal participants in any such talks.
The Nuclear Issue in U.S.-North Korean Relations, 1992-94
In the early 1990s, Pyongyang's suspected nuclear weapons program
overshadowed all other issues in U.S.-North Korean relations. The
United States and other countries sought North Korean adherence
to its obligations as a signatory to the NPT since 1985. As
inducements, U.S. nuclear warheads were withdrawn from South
Korea in late 1991, followed by South Korean President Roh's
announcement that there were no nuclear arms in the South.
Additionally, the United States and South Korea offered to cancel
the 1992 Team Spirit joint military exercise, which Pyongyang had
long criticized as rehearsals for nuclear attack against the
North; and in January 1992, in New York, U.S. Undersecretary of
State Arnold Kanter had a first high-level meeting with North
Korea's Kim Yong Sun, the ruling Korean Workers Party secretary
for international affairs. At the meeting, both sides outlined
their respective policies on bilateral and inter-Korean issues--
the U.S. side especially underscoring the critical importance of
North Korea's nuclear transparency.
At the end of January 1992, North Korea signed a NPT safeguards
agreement after six years of stonewalling, and the following
month, North and South Korea exchanged signed texts of a Joint
Declaration on the Denuclearization of the Korean Peninsula that
they had initiated in December 1991. From June 1992 to February
1993, the IAEA was allowed to conduct six regular inspections of
North Korea's seven declared nuclear facilities. Meanwhile,
inter-Korean negotiations over the implementation of the
North/South denuclearization accord were broken off by North
Korea, which argued that the nuclear issue should be resolved
only through bilateral talks with Washington, not with South
Korea or the IAEA.
By late 1992, IAEA inspectors found evidence suggesting that
North Korea had reprocessed more plutonium than it had declared
to the IAEA; plutonium is a key ingredient in the making of
nuclear bombs. Rejecting the IAEA demand for special inspections
of two nuclear waste sites at Yongbyon that could reveal the
history of reprocessing dating back to 1989, Pyongyang announced
its decision to withdraw from the NPT on March 12, 1993. It
contended that the LAEA violated the principle of "impartiality"
as it had relied on intelligence provided by "a third country"
(the United States) in calling for special inspections. Pyongyang
asserted that such intrusive inspections were part of a U.S. plot
to undo North Korea. In May 1993, the United Nations Security
Council passed a resolution, urging the North to cooperate with
the IAEA and to implement the inter-Korean denuclearization
accord. It also called on all member states to encourage North
Korea to respond positively to the resolution and to facilitate a
page CRS-7
To persuade North Korea to return to the NPT, the Clinton
Administration held talks with North Korea in early June 1993, in
New York, that led to North Korea "suspending" its withdrawal
from the NPT on June 11. A second round of talks was held in
July, in Geneva, to set the guidelines for resolving the nuclear
issue, inter alia, by exploring ways in which new light water
reactors, not capable of producing nuclear weapons material,
could be provided to North Korea, for laying the basis for
improving overall U.S.-North Korean relations, and for restarting
inter-Korean dialogue.
In 1994, however, the crisis surged as North Korea not only
continued to reject an IAEA full-scope inspection but, in May,
removed 8,000 fuel rods from its 25-megawatt reactor, without
permitting monitoring by IAEA inspectors. The Clinton
Administration began to discuss possible UN sanctions against the
North. Pyongyang responded by announcing its intent to withdraw
from the LAEA. The mounting crisis was defused, however, after
former President Jimmy Carter held talks in June, in Pyongyang,
with Kim Il Sung. As a result, a third round of U.S.-North Korean
talks opened in Geneva on July 8, 1994, but was cut short by Kim
Il Sung's death. An historic North-South Korean summit meeting,
planned for late July, was put off indefinitely.
Agreed Statement of August 12, 1994
Resumed in Geneva on August 5, 1994, the talks produced an
"agreed statement" of August 12. The joint statement stated that
the following "elements" should be part of a final resolution of
the nuclear issue:
*    North Korea is prepared to replace its graphite-moderated
     reactors with light water reactors (LWRs); the United States
     is prepared to make arrangements for the provision of LWRs
     of about 2,000 megawatts total to the North and to make
     arrangements for the supply of interim energy alternatives
     pending the transfer of the LWRs.
*    Once the United States provides the assurances for the
     provision of the LWRs and interim energy alternatives, North
     Korea will freeze construction of 50- and 200-megawatt
     graphite-moderated reactors now under construction, forego
     reprocessing 8,000 spent fuel rods placed in a cooling pond,
     and seal its reprocessing facility called "radiochemical
     laboratory," to be monitored by the LAEA.
*    The United States is prepared to provide North Korea with
     assurances against the threat or use of nuclear weapons; to
     agree to establishment of diplomatic representation in each
     other's capitals; and to reduce barriers to trade and
     investment as a move toward full normalization of political
     and economic relations with North Korea.
*    In return, North Korea is prepared to remain a party to the
     NPT, to allow implementation of its NPT safeguards agreement
     and to
page CRS-8
     implement the North-South [Korean] Joint Declaration on the
     Denuclearization of the Korean Peninsula.
Both sides also agreed that important issues raised during the
talks remained to be resolved, that expert-level discussions were
needed to hammer out technical details of the agreed statement,
and that U.S.-North Korean talks would resume in Geneva on
September 23, 1994.
Agreed Framework of October 21, 1994
After 17 months of difficult on-and-off negotiations, the two
countries signed an "agreed framework" in Geneva, on October 21,
1994, paving the way for ending their nuclear dispute and for
moving toward improving their relations (For particulars, see
Appendix I. The Agreed Framework between the United States and
the Democratic People's Republic of Korea, October 21, 1994). The
agreement has a confidential annex detailing how the agreement
will be put into effect.
The agreed framework is consistent with the broad elements of the
August 12 agreed statement. Under the accord, North Korea is to
freeze its nuclear activities and "eventually" dismantle its
nuclear facilities by the time the second internationally
supplied reactor is completed; open two nuclear waste sites to
IAEA inspections "when a significant portion of the light water
reactor project is completed, but before delivery of key nuclear
components." The two sides also agreed to hold expert talks to
discuss arrangements for spent fuel storage and ultimate
disposition of 8,000 fuel rods unloaded in May 1994 from the
existing 25-megawatt thermal (5-megawatt electrical) reactor. The
spent fuel is to be shipped out of North Korea by the time the
first reactor is completed.
In exchange, North Korea will be provided electrical with two new
LWRs with a combined generating capacity of around 2,000
megawatts by a target date of 2003. To compensate the North for
not restarting the 25-megawatt reactor and for halting
construction of 50- and 200-megawatt reactors, North Korea will
receive 500,000 metric tons of free heavy oil annually as an
interim energy source for heating and generation of electricity
until the light water reactor project is finished.
The United States also pledged to set up an international
consortium (tentatively called the Korea Energy Development
Organization--KEDO) to finance and undertake the light water
reactor project worth about $4 billion; South Korea will
reportedly pay for around 55 percent of the total, with Japan and
others paying the balance. Consortium participants include South
Korea, Japan and several other countries. In his October 20,
1994, letter addressed to "Kim Jong Il, Supreme Leader" of the
DPRK, President Clinton confirmed that he would "use the full
powers of my office to facilitate arrangements" for the light
water project and for "the funding and implementation of interim
energy alternatives" pending completion of the first reactor unit
of the project. In the event of some unforeseen difficulties in
completing the deal, Clinton assured
page CRS-9
that the United States would itself, wto the extent necessary,"
honor the accord, "subject to approval of the U.S. Congress" (see
Appendix II. President Clinton's Letter of Assurance to Kim Jong
II, October 20, 1994).
The October deal also contains a North Korean pledge to "engage
in North-South dialogue, as this Agreed Framework will help
create an atmosphere that promotes such dialogue." The outcome of
such dialogue, always contentious in the past, will have a
significant bearing on how the Agreed Framework will be
implemented, since South Korea is to play a key role in providing
light water reactors--a role Pyongyang seems to have condoned
page CRS-10
Delegations of the Governments of the United States of America
(U.S.) and the Democratic People's Republic of Korea (DPRK) held
talks in Geneva from September 23 to October 17, 1994, to
negotiate an overall resolution of the nuclear issue on the
Korean Peninsula.
Both sides reaffirmed the importance of attaining the objectives
contained in the August 12, 1994 Agreed Statement between the
U.S. and the DPRK and upholding the principles of the June 11,
1993 Joint Statement of the U.S. and the DPRK to achieve peace
and security on a nuclear-free Korean peninsula. The U.S. and the
DPRK decided to take the following actions for the resolution of
the nuclear issue:
I. Both sides will cooperate to replace the DPRK's graphite-
moderated reactors and related facilities with light-water
reactor (LWR) power plants.
     1) In accordance with the October 20, 1994 letter of
     assurance from the U.S. President, the U.S. will undertake
     to make arrangements for the provision to the DPRK of a LWR
     project with a total generating capacity of approximately
     2,000 MW(e) bs a target date of 2003.
     -- The U.S. will organize under its leadership an
     international consortium to finance and supply the LWR
     project to be provided to the DPRK. The U.S., representing
     the international consortium, will serve as the principal
     point of contact with the DPRK for the LWR project.
     -- The U.S., representing the consortium, will make best
     efforts to secure the conclusion of a supply contract with
     the DPRK within six months of the date of this Document for
     the provision of the LWR project. Contract talks will begin
     as soon as possible after the date of this Document.
     -- As necessary, the U.S. and the DPRK will conclude a
     bilateral agreement for cooperation in the field of peaceful
     uses of nuclear energy.
     2) In accordance with the October 20, 1994 letter of
     assurance from the U.S. President, the U.S., representing
     the consortium, will make arrangements to offset the energy
     foregone due to the freeze of the DPRK's graphite-moderated
     reactors and related facilities, pending completion of the
     first LWR unit.
     -- Alternative energy will be provided in the form of heavy
     oil for heating and electricity production.
     -- Deliveries of heavy oil will begin within three months of
     the date of this Document and will reach a rate of 500,000
     tons annually, in accordance with an agreed schedule of
page CRS-11
APPENDIX I-(continued)
     3) Upon receipt of U.S. assurances for the provision of
     LWR's and for arrangements for interim energy alternatives,
     the DPRK will freeze its graphite-moderated reactors and
     related facilities and will eventually dismantle these
     reactors and related facilities.
     -- The freeze on the DPRK's graphite-moderated reactors And
     related facilities will be fully implemented within one
     month of the date of this Document. During this one-month
     period, and throughout the freeze, the International Atomic
     Energy Agency (IAEA) will be Allowed to monitor this freeze,
     and the DPRK will provide full cooperation to the IAEA for
     this purpose.
     -- Dismantlement of the DPRK's graphite-moderated reactors
     and related facilities will be completed when the LWR
     project is completed.
     -- The U.S. and DPRK will cooperated in finding a method to
     store safely the spent fuel from the 5 MW(e) experimental
     reactor during the construction of the LWR project, and to
     dispose of the fuel in a safe manner that does not involve
     reprocessing in the DPRK.
     4) As soon as possible after the date of this document. U.S.
     and DPRK experts will hold two sets of experts talks.
     -- At one set of talks, experts will discuss issues related
     to alternative energy and the replacement of the graphite-
     moderated reactor program with the LWR project.
     -- At the other set of talks, experts will discuss specific
     arrangements for spent fuel storage and ultimate
II. The two sides will move toward full normalization of
Political and economic relations.
     1) Within three months of the date of this Document, both
     sides will reduce barriers to trade and investment,
     including restrictions on telecommunications services and
     financial transactions.
     2) Each side will open a liaison office in the other's
     capital following resolution of consular and other technical
     issues through expert level discussions.
     3) As progress is made on issues of concern to each side,
     the U.S. and DPRK will upgrade bilateral relations to the
     Ambassadorial level.
page CRS-12
APPENDIX I-(continued)
III. Both sides will work together for peace and security on a
nuclear-free Korean peninsula.
     1) The U.S. will provide formal assurances to the DPRK,
     against the threat or use of nuclear weapons by the U.S. 
     2) The DPRK will consistently take steps to implement the
     North-South Joint Declaration on the Denuclearization of the
     Korean peninsula.
     3) The DPRK will engage in North-South dialogue, as this
     Agreed Framework will help create an atmosphere that
     promotes such dialogue.
IV. Both sides will work together to strengthen the international
nuclear non-proliferation regime.
     1) The DPRK will remain a party to the Treaty on the
     Non-Proliferation of Nuclear Weapons (NPT) and will allow
     implementation of its safeguards agreement under the Treaty.
     2) Upon conclusion of the supply contract for the provision
     of the LWR project, ad hoc and routine inspections will
     resume under the DPRK's safeguards agreement with the IAEA
     with respect to the facilities not subject to the freeze.
     Pending conclusion of the supply contract, inspections
     required by the IAEA for the continuity of safeguards will
     continue at the facilities not subject to the freeze.
     3) When a significant portion of the LWR project is
     completed, but before delivery of key nuclear components,
     the DPRK will come into full compliance with its safeguards
     agreement with the IAEA (INFCIRC/403), including taking all
     steps that may be deemed necessary by the IAEA, following
     consultations with the Agency with regard to verifying the
     accuracy and completeness of the DPRK's initial report on
     all nuclear material in the DPRK.
Kang Sok Ju - Head of the Delegation for the Democratic People's
Republic of Korea, First Vice-Minister of Foreign Affairs of the
Democratic People's Republic of Korea
Robert L. Gallucci - Head of the Delegation of United States of
America, Ambassador at Large of the United States of America
Source: U.S. Department of State
page CRS-13
October 20, 1994
I wish to confirm to you that I will use the full powers of my
office to facilitate arrangements for the financing and
construction of a light-water nuclear power reactor project
within the DPRK, and the funding and implementation of interim 
energy alternatives for the Democratic People's Republic of Korea 
pending completion of the first reactor unit of the light-water
reactor project. In addition, in the event that this reactor
project is not completed for reasons beyond the control of the
DPRK, I will use the full powers of my office to provide, to the
extent necessary, such a project from the United States, subject
to the approval of the U.S. Congress. Similarly, in the event
that the interim energy alternatives are not provided for reasons
beyond the control of the DPRK, I will use the full powers of my
office to provide, to the extent necessary, such interim energy
alternatives from the United States, subject to the approval of
the U.S. Congress.
I will follow this course of action so long as the DPRK continues
to implement the policies described in the Agreed Framework
Between the United States of America and the Democratic People's
Republic of Korea.
Bill Clinton
His Excellency Kim Jong Il
Supreme Leader of the Democratic People's Republic of Korea
page CRS-14
     * Prepared by Robert G. Sutter, Senior Specialist in
     International Policies.
The United States does not have normal diplomatic relations with
the North Korean government. It maintains no diplomatic, consular
or trade relations with authorities there.
The United States has recognized the Democratic Peoples Republic
of Korea as a state in the international law sense. Moreover, the
United States has acknowledged that the government of the DPRK
exercises effective control within North Korea. In recent years,
U.S. officials have dealt with DPRK authorities on a range of
issues centered on North Korea's nuclear program. In addition, a
few Members of Congress have traveled to North Korea for talks
with DPRK officials.
The United States recognizes that the future of the Korean
peninsula is primarily a matter for the people of Korea to
decide. The U.S. Government believes that a constructive dialogue
between the authorities of South and North Korea to resolve the
issues on the peninsula, and that concrete steps to promote
greater understanding and reduce tension, are needed to pave the
way for unifying the Korean nation. Because the fundamental
decision must be taken by the Korean people themselves, the
United States refuses to be drawn into separate negotiations with
North Korea, as Pyongyang has insisted, on replacing the 1953
armistice with a peace treaty. The United States remains prepared
to participate in negotiations between representatives of North
and South Korea, if so desired by the two Korean governments and
provided that both are full and equal participants in such talks.
Which Branch of the U.S. Government Has Responsibility for
Normalizing Political Relations?
The Constitution divides the foreign relations powers between the
executive and legislative branches of the government. For
example, the Constitution gives the President the power to send
and receive ambassadors, while Congress has the power to regulate
commerce with foreign nations, to define offenses against the law
of nations, and to declare war. The President and the Senate
share the power to make treaties and appoint ambassadors.
Although the Constitution does not ascribe the powers of
recognizing states and governments to any particular branch of
the Government, the President traditionally exercises such
authority. The legislative branch of the Government exercises
little direct influence over the normalization of relations.
Congress, however, controls appropriations that are necessary to
implement the President's plan to establish relations.
page CRS-15
What Are the Different Processes Involved in Establishing
Government-to-Government Relations?
General aspects of the process of establishing relations between
governments include: 1) recognition of a sovereign state, and 2)
establishment of diplomatic relations. Governments can choose to
recognize a state -- such recognition is accorded to an entity
having a defined area and population under the control of a
government that has the capacity to engage in foreign relations.
Recognition of a state, however, does not necessarily mean that a
government may recognize the government of that state. Often
times, political considerations influence a government's
willingness to establish or reestablish diplomatic relations with
the foreign state.
What Are the Procedures to Establish an Interest Section? A
Liaison Office?
In certain cases, the United States has maintained interest
sections or liaison offices in countries with which it has no
diplomatic relations. In the case of Cuba, for instance, the
United States conducts business with Cuba through the U.S.
Interests Section in Havana. The Interests Section is officially
part of the Swiss Embassy, but is located in the former U.S.
Embassy building. The Cuban Interests Section in Washington
operates through the Swiss Embassy, although it is located in the
former Cuban Embassy building. The State Department was
responsible for negotiating the agreement with the Government of
Cuba that led to the creation of the respective interests
The United States maintained a liaison office in Beijing from
1973 until it established diplomatic relations with the People's
Republic of China (PRC) in 1979. Until 1979, the United States
officially had relations with the government of the Republic of
China -- located in Taiwan. Upon establishing diplomatic
relations with the PRC in 1979, the United States broke official
relations with Taiwan.
Currently, American commercial and cultural interaction with the
people of Taiwan is facilitated through the American Institute in
Taiwan (AIT) -- a nongovernmental entity staffed largely by U.S.
State Department and other officials who are temporarily
separated from the U.S. Government. The AIT was established under
the authority of the Taiwan Relations Act (P.L. 96-8, 22 U.S.C.
3301-3316). Section 7(a) of the Act authorizes personnel at the
AIT to perform notarial, conservator, and consular services.
Section 10(c) of the Act provides the means to grant diplomatic
privileges and immunities to the Coordination Council for North
American Affairs (the Taiwanese liaison office in Washington, now
known as the "Taipei Economic and Cultural Representative
Office"), and to its personnel.
In 1994, the United States announced that it would soon exchange
liaison offices with Vietnam. While the U.S. passed legislation
to allow for establishing liaison offices with China, such
legislation was said not to be needed in the case
page CRS-16
of liaison offices with Vietnam as both Vietnam and the U.S. are
parties to multilateral conventions governing diplomatic and
consular relations. Later in 1994, the Clinton Administration
expressed a willingness to consider opening liaison offices with
North Korea. Since North Korea is also a party to the
multilateral conventions, U.S. legislation is seen as not needed
in the case of a U.S. liaison office with North Korea.
If the United States Were to Normalize Diplomatic Relations with
North Korea, What Further Steps Might the United States Consider
Cultural and Educational Exchanges
The United States has no official cultural, scientific, or
educational exchange programs with North Korea. If the United
States were interested in pursuing such programs with North Korea
it might look to the U.S.-Chinese experience as a model.
In January 1979, the United States and China signed a Cultural
Agreement that has established a long-term basis for official
exchanges. According to the agreement, the U.S. Information
Agency is charged with managing the U.S.-China cultural exchange
program. The agreement, however, governs only official,
government-to-government contacts, and neither precludes nor
covers U.S.-China cultural exchanges that may be privately
sponsored. As has occurred under many official U.S.-China
agreements, costs of the official cultural exchange programs have
been arranged, with each country covering the costs of its own
Travel Restrictions
The United States has no restrictions against U.S. citizens
travelling to North Korea. Freedom of travel is limited in part
by strict restrictions on the amount of money and the use of
credit cards and other financial instruments by U.S. citizens in
North Korea, governed by the Office of Foreign Assets Control of
the U.S. Treasury (see section on U.S.-North Korean commercial
relations). Because the United States has no consular
establishment in North Korea at this time, the State Department
is able to provide no assistance to U.S. citizens travelling
Consular Agreement
The United States and North Korea may decide to conclude a
consular agreement. Since both sides are parties to multilateral
conventions governing consular relations, such an agreement may
appear redundant. Nevertheless, supporters of such bilateral
consular agreements see them as possibly increasing the ability
of U.S. diplomats to visit promptly Americans imprisoned abroad.
If a bilateral consular treaty is reached, as it was with China
in 1981, it would require congressional approval.
page CRS-17
     * Prepared by Larry A. Niksch, Senior Specialist in Asian
U.S. military relations with North Korea are governed by: the
armistice of 1953 which ended the Korean War; the role of U.S.
troops in South Korea (currently about 36,000) to help defend
against a North Korean attack; and the Mutual Defense Treaty
between the United States and South Korea, signed in 1953 and
ratified in 1954. North Korea has proposed negotiating with the
United States (without South Korea's participation) for the
replacement of the armistice with 8 U.S.-North Korean peace
agreement. According to North Korea's proposal, first made in
1974, a peace agreement would provide for the withdrawal of
American forces from South Korea.
Proposals of changes in the armistice agreement, the size and
operations of U.S. troops, and in the U.S.-R.O.K. (Republic of
Korea) Mutual Defense Treaty would constitute major policy
questions for the Clinton Administration and Congress. They also
involve several legal and technical issues, some of which overlap
with policy questions.
Several technical and possibly financial issues in any U.S. troop
withdrawal would involve provisions in the U.S.-R.O.K. status of
forces agreement. Signed in 1966 and entered into force in 1967,
the U.S.-R.O.K. Status of Forces Agreement stipulates rights,
obligations, and understandings between the two governments
regarding base facilities, entry and exit of U.S. military
personnel, customs duties, and criminal jurisdiction necessary
for the stationing of U.S. forces in Korea.
The Armistice Agreement
The Korean armistice agreement was signed on July 27, 1953, by
military representatives of the United Nations Command, North
Korea, and China. The agreement set up an armistice commission
composed of the three signatories. The United Nations Command was
established by a UN Security Council resolution of July 7, 1950.
The resolution placed a "unified command . . .under the United
States." The command was authorized "at its discretion to use the
United Nations flag." The resolution gave the United States broad
authority, requiring it only to report to the Security Council
"as appropriate."
From July 1953 to the present, the UN Commander in Korea has been
the American general who commands U.S. forces in South Korea.
Until 1979, the UN Commander had operational command of U.S. and
R.O.K. forces. At that time, operational control was transferred
to the new U.S.-R.O.K. Combined Forces Command.[1]  This left the
UN Command with responsibility for only the
page CRS-18
armistice, participating in the armistice commission and
administering the Joint Security Area in Panmunjom. where the
commission meets.
     1. Pollack, Samuel. Self Doubts on Approaching Forth: The
     United Nations' Oldest and Only Collective Security
     Enforcement Army, the United Nations Command in Korea. In
     Dickinson Journal of International Law, Vol. 6, No. 1. p.
Moreover, the makeup and operation of the armistice commission
has changed since 1990. Under a U.S.-R.O.K. agreement in March
1991, a South Korean general replaced an American general as head
of the UN team on the armistice commission. In 1953, South Korea
had refused to sign the armistice and had not participated in the
armistice commission. North Korea refused to meet with the new
South Korea-led team and announced in April 1994 that it was
withdrawing from the commission.[2]  China made a similar
withdrawal announcement in early September 1994.
     2. Radio Pyongyang, April 28, 1994. Text of North Korean
     Foreign Ministry Statement.
The U.S. Government, through the UN Commander in Korea, would
have wide prerogative in negotiating changes in the armistice
agreement or even negotiating a new armistice accord. If the U.S.
Government directly negotiated a peace agreement with North Korea
that replaced the armistice agreement, the UN Security Council or
the General Assembly probably would consider action to abolish
the UN Command. In 1975, under the Ford Administration, the
United States submitted a resolution to the General Assembly to
disband the UN Command if alternative arrangements to maintain
the armistice were found.[3]  With regard to the role of
Congress, the Clinton Administration might argue that since
Congress did not declare war during the Korean conflict, it would
not have to ratify a peace agreement.
     3. Pollack, p. 18.
If South Korea did not participate in U.S.-North Korean
negotiations, South Korea presumably would not be bound legally
by such an accord. However, South Korea's participation in the
Combined Forces Command (CFC) would constitute a means by which
the United States could ensure South Korean compliance, if the
commander of the CFC were given responsibility for administering
provisions of a peace agreement similar to provisions of the
armistice agreement (for example, the status of the demilitarized
zone and investigations and negotiations of violations of the
agreement). The CFC commander would need operational control over
R.O.K. forces related to such provisions. Gaining this kind of
command authority probably would require U.S.-R.O.K. negotiations
and amendments to agreements governing the CFC.
Such procedural problems could be avoided partially if South
Korea were included in negotiations over a peace agreement South
Korea would then be a full party to any agreement. However, the
inclusion of South Korea in any
page CRS-19
such negotiation is a policy issue in large part because of North
Korea's opposition to inclusion of South Korea in talks over a
peace accord.
Withdrawing U.S. Troops; Ending the U.S.-R.O.K. Mutual Defense
The U.S.-R.O.K. Mutual Defense Treaty contains the following
language: "Either Party may terminate it [the treaty] one year
after notice has been given to the other Party." Under identical
language, the United States gave Taiwan a one year's notice in
1979 for termination of the U.S.-Republic of China Mutual Defense
The Carter Administration invoked the treaty's one year's notice
despite a sense-of-Congress resolution passed in 1978 as part of
the FY 1979 foreign assistance act. That resolution stated that
there should be "prior consultation between Congress and the
executive branch on any proposed policy changes affecting the
continuation in force of the Mutual Defense Treaty of 1954."
Following the Carter Administration's announcement of the one
year's notice, the Senate passed a "sense of the Senate"
resolution declaring that Senate approval "is required to
terminate any mutual defense treaty between the United States and
another nation." Senator Barry Goldwater also filed suit in
federal court seeking to block the treaty's abrogation without
Senate approval. A federal district judge ruled in Goldwater's
favor, but the appeals court overturned that decision. The
appeals court, however, noted special circumstances regarding the
treaty with Taiwan and said that the ruling applied only to that
     4. Congressional Quarterly, Inc. China: U.S. Policy Since
     1945. Washington, D.C., 1980. p. 39-42.
A U.S. decision to withdraw U.S. troops from South Korea would
not be prohibited by the Mutual Defense Treaty or any other
U.S.-R.O.K. agreement. The Bush Administration unilaterally
withdrew about 7,000 troops from South Korea during the 1990-1992
period without legal impediments.[5]  The United States
progressively reduced the number of its troops in South Korea
from the end of the Korean War until the mid-1970s. The Carter
Administration abandoned its plan to withdraw American ground
forces because of policy reasons, not legal restrictions.
     5. U.S. Department of Defense. A Strategic Framework for the
     Asian Pacific Rim. Report to Congress, 1992. pp. 19-20.
page CRS-20
The Carter Administration came under heavy criticism from both
the House and Senate over the withdrawal policy (a key reason for
Carter's cancellation of the withdrawal), but Congress made no
legislative attempt to mandate a retention of ground troops in
South Korea.[6]
     6. Niksch, Larry A. U.S. Troop Withdrawal from South Korea:
     Past Shortcomings and Future Prospects. Asian Survey, March
     1981. p. 325-341.
Nevertheless, the United States and South Korea have set up a
security consultative system, composed of several organizations
that undoubtedly would be utilized to discuss issues related to a
U.S. decision to withdraw. An annual R.O.K.-U.S. Security
Consultative Meeting at the defense ministers' level no doubt
would consider policy questions as well as broad procedural
issues. These might include: the scheduling of withdrawals, the
status of base infrastructure, allowances for Korean workers at
U.S. bases, and disbandment of joint U.S.-R.O.K. command
organizations, including the Combined Forces Command. Much of the
detailed drafting of procedural arrangements would be carried out
by the Policy Review Subcommittee and the Logistics Cooperation
Committee. The U.S.-R.O.K. commands also establish other working
level groups as the need arises. One could expect that they would
set up a number of these groups to draft specific plans for a
troop withdrawal.[7]  Under the U.S.-R.O.K. Status of Forces
Agreement (SOFA), a joint committee sets policies and procedures
related to Korean workers at U.S. bases.[8]
     7. For a description of the security consultation system,
     see: R.O.K. Ministry of Defense. Defense White Paper,
     1991-1992. pp. 157-161.
     8. R.O.K. Ministers of Defense. Defense White Paper,
     1993-1994. p. 115.
page CRS-21
     * Prepared by Vladimir N. Pregelj, Specialist in
     International Trade and Finance, Economics Division.
This section discusses restrictions at present in force on U.S.
commercial relations with North Korea, and presents a brief
history, and the means for their removal or modification. Some
changes in the restrictions are likely to be made in the short
term pursuant to the recent U.S.-North Korea framework agreement
on North Korean nuclear issues.
For well over four decades--longer than any other country--North
Korea has been the target of a regime of U.S. commercial
sanctions of the most comprehensive and restrictive kind. Because
of their varied rationale and historical development, these
sanctions also at times overlap and are duplicative. In addition
to--and along with--a virtually total embargo on U.S. commercial
and financial transactions and blocking of North Korean assets in
the United States, imposed in 1950, various other types of
transactions (specific aspects of merchandise trade, export
credits, private investments) are prohibited, limited, or subject
to discriminatory practices.
Apart from the sanctions imposed unilaterally by the United
States, economic relations between the United States and North
Korea are adversely affected by North Korea's reluctance to
engage in broad international economic relations. Examples
include North Korea's nonparticipation in various international
economic entities and compacts (e.g., the International Monetary
Fund, the World Bank Group, the General Agreement on Tariffs and
Trade, or the prospective World Trade Organization, and the
Multifiber Arrangement), which to some extent also directly
affects bilateral U.S.-North Korean economic relations.
The measures whereby the existing restrictions on U.S.-North
Korean economic relations can be removed or mitigated depend
primarily on the type of authority under which they have been
imposed. Most are mandated by statutes affecting a group of
countries (e.g., "Communist," or other similarly described
countries) which include North Korea either specifically or by
implication. Such statutes may, however, contain an element of
executive discretion, generally subject to statutory conditions
for its use. Other restrictions have been imposed under general
statutory authorities that have been applied to North Korea by
executive decision in response to specific situations or policy
Consequently, certain restrictions can be lifted only by the
enactment of measures repealing or modifying the applicable
statutory mandate, others can be revoked by executive action as
authorized by and subject to the conditions, if any, imposed by
the relevant statute, and others still might be repealed at
page CRS-22
executive discretion alone. All restrictions, of course, can be
removed by specific legislation.
Measures reducing or removing some restrictions on U.S.
commercial transactions with North Korea are expected to be taken
in the near term in view of the framework agreement between the
two countries on North Korean nuclear issues, reached in Geneva
on October 21, 1994 (see p. 10). Under the agreement, "the two
sides will move toward full normalization of political and
economic relations." Specifically, "within three months of the
date of this document, both sides will reduce barriers to trade
and investment, including restrictions on telecommunications
services and financial transactions."
Embargo on All Transactions
The most comprehensive U.S. measure restricting economic
relations with North Korea is a virtually total and strictly
enforced embargo on U.S. trade and financial relations with North
Korea. Following the mid-1950 imposition of a ban on exports to
North Korea, triggered by North Korea's attack of South Korea
(see below: Control of U.S. Exports), the comprehensive embargo
was imposed under the "national emergency" authority of section
5(b) of the Trading With the Enemy Act (TWEA). The embargo was
based on the proclamation of a national emergency (Pres. Proc.
2914; 15 F.R. 9029) after the escalation of the North Korean
conflict by the entry of Chinese forces into it.[10]  The embargo
was implemented as of December 17, 1950 (15 F.R. 9040) through
Foreign Assets Control Regulations (31 C.F.R. Part 500), which
are administered and have been modified in various ways by the
Office of Foreign Assets Control (OFAC) of the Department of the
     10. Identical embargo, imposed at the same time on China,
     was lifted in June 1971.
Although the "national emergency" authorities of the TWEA were
repealed in late 1977 and replaced by the International Emergency
Economic Powers Act (IEEPA) (50 U.S.C. 1701-1706), the measures
taken in exercising the original TWEA national emergency
authorities (e.g., the North Korean embargo) have been continued
in effect through annual determinations by the President that
extensions of such authorities are in the national interest of
the United States. The latest such determination extended the
North Korean embargo through September 14, 1995 (Presidential
Determination No. 94-46, September 8, 1994, 59 F.R. 47229).
The regulatory mechanics of the embargo consist of a general ban
on commercial and financial transactions, which can take place
only if they are authorized by regulation (general license), or
specifically licensed by OFAC. One general license under the
Foreign Assets Control Regulations, major in scope, permits
exports to North Korea (31 C.F.R. 500.533), provided they have
been licensed or otherwise authorized by the Bureau of Export
Administration (BXA) in the Department of Commerce under the
Export Administration Act and
page CRS-23
related regulations (see below: Control of U.S. Exports). With
the operational control over exports in the hands of the BXA, the
OFAC, in practice, controls only imports from and financial
transactions with North Korea, including the blocking of North
Korean assets in the United States (amounting to $9.1 million).
Regulations also permit certain types of marginal financial
transactions, such as limited remittances to individuals in North
Korea for necessary living expenses, transactions incidental to
individual travel to, in, and from North Korea, and to travel of
North Korean individuals to, from, and in the United States, and
importation or exportation of informational materials. Specific
licenses are issued for imports of small value gifts of North
Korean origin and, on a case-by-case basis, for travel agencies
to provide travel services in connection with travel to North
Korea for noncommercial tours or various private exchange
Apart from its possible removal or modification by specific
legislation, the embargo on all transactions with North Korea--
including the blocking of North Korean assets in the United
States--can be removed or modified by executive action. This
could take place in several ways: by instituting a policy of
approving on a case-by-case basis, instead of denying, the
licenses required under current regulations; by changing the
restrictiveness of the regulations with respect to North Korea
(e.g., by increasing the scope of transactions permitted by
various, if still marginal, general licenses); or, definitively,
by revoking their applicability to North Korea by striking North
Korea from the list of countries subject to Foreign Assets
Control Regulations (31 C.F.R. 600.201).[11]
     11. In addition to North Korea: Cambodia and, for
     transactions that took place before February 3, 1994,
U.S. Imports
In addition to being generally prohibited under the comprehensive
embargo, U.S. imports from North Korea are subject to two other
separate restrictions, in practice of virtually no consequence
while the embargo remains in force and generally of lesser
impact: the denial of the nondiscriminatory (most-favored-nation;
MFN) status; and ineligibility for the U.S. generalized system of
Most-Favored-Nation (MFN) Status
Lack of North Korea's MFN status in its trade with the United
States means, mainly, that the United States would assess customs
duties on imports from North Korea essentially at the high rates
enacted by the protectionist Tariff Act of 1930 rather than at
the substantially lower rates resulting from concessions granted
by the United States in subsequent negotiations with other
countries. Because of long-standing U.S. statutory policy, dating
back to 1934 and at present stated in section 126 of the Trade
Act of 1974 (19 U.S.C.2136),
page CRS-24
and, in most cases, also obligations under various international
trade agreements, concessional rates granted to any country are
applied as a matter of general policy to imports from all U.S.
trading partners.
This policy was changed by section 5 of the Trade Agreements
Extension Act of 1951 (65 Stat. 73), which required the President
to suspend MFN status of most Communist countries. The suspension
was implemented generally by Presidential Proclamation 2935 of
August 1, 1951 (16 F.R. 7635) and specifically for "any part of
Korea which may be under Communist domination or control" by
Trade Agreement Letter of the same date with effect on Sept. 1,
1951 (16 F.R. 7637). This provision remained in the form of a
regulation until it was incorporated into the Tariff Schedules of
the United States (TSUS), a completely revised and restructured
form of the United States basic tariff document, enacted in 1962.
In General Headnote 3(e) (later redesignated 3(d)), the TSUS
contained a list of "Communist countries" denied MFN status,
including "Korea (any part of which may be under Communist
domination or control)."
This identification was modified somewhat in a new thorough
revision of the tariff document (Harmonized Tariff Schedule of
the United States - HTS; 19 U.S.C. 1202; not codified), which was
enacted by section 1204 of the Omnibus Trade and Competitiveness
Act of 1988 (19 U.S.C. 3004) and entered into force on January 1,
1989. Countries denied MFN status, listed in its General Headnote
3(b), including "North Korea," were no longer referred to as
"Communist countries" but merely listed as countries the imports
from which were subject to "Rate of Duty Column 2" (i.e., the
full, non-MFN rate).
Meanwhile, the denial of MFN status to North Korea was reaffirmed
by section 401 of the Trade Act of 1974 (19 U.S.C. 2431),[12] 
which required continued denial of MFN status to any country
denied such status at the time of its enactment, except as
otherwise provided in Title IV of the Act. The procedure of Title
IV, applicable to "nonmarket economy" (NE) countries (of which
North Korea is one),[13]  requires compliance with the provisions
of the freedom-of-emigration (usually referred to as
Jackson-Vanik) amendment (sec. 402; 19 U.S.C. 2432), and the
conclusion of a bilateral trade agreement and its implementation
by enactment (sec. 405; 19 U.S.C. 2435).
     12. Unless otherwise stated, further references to statutory
     titles or sections in this part of the report are those to
     the Trade Act of 1974.
     13. This is the procedure under which EN status has been
     extended to and is annually being renewed with respect to
     most present or former "Communist" countries, including
The requirements of the Jackson-Vanik amendment can be fulfilled
by either (1) a Presidential determination that North Korea is in
full compliance with the freedom-of-emigration requirements of
the amendment, or (2) a waiver of such compliance by the
President if he has determined that such waiver will
substantially promote the objectives of the amendment. The
determination of full compliance must be renewed semiannually and
is subject, at year-end, to
page CRS-25
disapproval by a joint resolution, enacted under a special fast-
track procedure (sec. 162; 19 U.S.C. 2192). Waivers of full
compliance are issued under the waiver authority originally
granted in 1976 and automatically renewable, under specified
conditions, every mid-year; annual renewals of the waiver
authority also are subject to joint resolutions of disapproval
(which may target individual countries), enacted by a fast-track
procedure applicable only to such disapprovals (sec. 163; 19
U.S.C. 2193). The initial issuance of a waiver does not require
congressional approval nor is it subject to congressional
The trade agreement required by law must contain a reciprocal
grant of MFN status as well as several safeguard provisions. Its
implementation must be approved by the enactment of a joint
resolution (sec. 407(c)(1); 19 U.S.C. 2437(c)(1)), considered
under the same fast-track procedure (sec. 151; 19 U.S.C. 2191)
(but without being subject to the additional detailed procedural
conditions) as other trade agreements (e.g., the Uruguay Round
agreements). By its own terms, such trade agreement remains in
force for three-year periods but may be renewed virtually
automatically. Such renewals are not subject to congressional
approval or disapproval.
Closely tied in with the provisions of section 401 are those of
section 409 (19 U.S.C. 2439), which bar the extension of MFN
status to an NME country which denies or places serious obstacles
to a citizen's right to emigrate to join a close relative in the
United States. Affecting the same countries as section 402, this
provision does not apply to any country with respect to which a
Jackson-Vanik amendment determination or waiver is in effect.
The United States also accords MFN status as a reciprocal
obligation under the General Agreement on Tariffs and Trade
(GATT) to the parties to the Agreement. In the event that North
Korea, which is not now nor has made any moves toward becoming a
party to the GATT, were to accede to the GATT--or, rather, to its
institutional successor, the World Trade Organization (WTO), once
it is established--the United States could avoid its MFN
obligation under the GATT or the WTO toward North Korea by
invoking, respectively, GATT Article XXIV or WTO Article XIII.
Either provision allows reciprocal nonapplication of the GATT or,
respectively, the Uruguay Round agreements between a current and
a newly acceding party to the GATT or the WTO if either does not
consent to it.
Generalized System of Preferences
North Korea also is denied the status of "beneficiary developing
country" (BDC) under the U.S. generalized system of preferences
(GSP) (secs. 501-505; 19 U.S.C.2641-2645), which permits a
substantial array of products of countries designated as BDCs to
be imported into the United States under certain conditions free
of duty. North Korea has not been designated a BDC and,
consequently, does not appear in the list of designated BDCs
contained in General Note 4(a) of the HTS.
page CRS-26
Designation of a country as a BDC is subject to a number of
conditions several of which would clearly appear to be relevant
with respect to North Korea (sec. 502(b); 19 U.S.C. 2462(b)).
Designation is denied, for example, generally, to a country that:
aids or abets international terrorism;[14]  does not afford
internationally recognized worker rights to its workers; or, if a
Communist country, does not have MFN status with the United
States, is not a party to the General Agreement on Tariffs and
Trade (GATT) nor a member of the International Monetary Fund
(IMF), and is controlled by international communism. While
compliance with the antiterrorist and the worker rights
conditions may be waived by the President if he determines that
the designation of a country as a BDC is in the national economic
interest of the United States, the Communist-country restriction
may not.
     14. For more detail, see below: Control of U.S. Exports.
As to the conditions applicable solely to Communist countries:
North Korea is denied MFN status by the United States and is
neither a party to the GATT nor a member of the IMF, but,
arguably, could be considered as not being controlled by
international communism, an aspect to be definitively determined
at the time of the eventual designation.
Once the conditions for designation are fulfilled or, if
waivable, waived, a country may be designated as a BDC of the GSP
by Presidential action alone and neither requires approval by
Congress nor is subject to disapproval by Congress (other than by
specific legislation).[15]
     15. GSP legislation expired October 1, 1994. Measures to
     extend it are pending.
Control of U.S. Exports
The United States has controlled most commercial exports of
civilian-use articles to foreign countries, primarily for
national security and/or foreign policy reasons, under the
authority of a succession of export control acts dating back to
1949 and most recently reenacted as the Export Administration Act
of 1979 and since amended several times (50 U.S.C. App.
2401-2420).[16]  Just as the scope of the legislation has
expanded over the years, so also has the scope and detail of
export control regulations, now codified at 15 C.F.R. 769-799.2
as Export Administration Regulations, and promulgated and
administered under statutory policies and guidelines by the
Bureau of Export Administration (BXA) of the Department of
     16. The Act expired in June 1994; its provisions are carried
     out under Executive Order 12923 of June 30, 1994 (59 F.R.
     34551), issued under the authority of sec. 101(b) of P.L.
     95-223 (Title I - Amendments to the Trading with the Enemy
     Act)(50 U.S.C. App. 5 note), until the Act itself is
     extended by legislation.
page CRS-27
Under present regulations, the scope and severity of controls
applicable to exports to any country depends on the country group
to which a country is assigned, where the degree of
restrictiveness is reflected in the range of articles that
require an individual "validated" license for each shipment (or
group of related shipments) to a certain destination. The greater
the number of articles requiring a validated license, the more
restrictive the export control, not only quantitatively but also
qualitatively in the sense that validated licenses may also be
denied. Validated licenses are not required for exports that may
take place under a general license, that is, a regulation which,
in effect, gives an advance blanket permission for a specific
type of export. The assignment of countries to their groups and
the application of specific licensing requirements are done by
the BXA.
The statutory export control authority, specifically the Export
Control Act of 1949, was used to impose, on June 28, 1950, as an
immediate reaction to North Korea's attack on South Korea, the
earliest restriction on U.S. trade with North Korea: an export
embargo, by suspending all licenses, general as well as
validated, for exports to North Korea (15 F.R. 4189). While this
embargo later became part of the comprehensive embargo on all
transactions imposed in December 1950 under a different
authority, its administration has remained with the export
control agency rather than OFAC (see above: Embargo on all
After the February 1994 lifting of the embargo on Vietnam, North
Korea is one of only two countries--the other being Cuba--still
remaining in Country Group Z (15 C.F.R. Part 770, Supplement No.
1), the group subject to the heaviest restrictions, amounting to
a virtually total embargo on exports. The mechanics of the
embargo consist of the requirement that, for foreign policy
purposes, virtually all exports to group Z countries must be
approved by validated licenses, and of the stated general policy
to deny all applications for them (15 C.F.R. 785.1).
Altogether excepted from the validated license requirement are
informational materials (books, newspapers, journals, movies,
maps) (15 C.F.R. 785.1), and gift parcels of limited value,
content, and frequency (15 C.F.R. 771.18). While requiring
specific approval, "Humanitarian Licenses" are issued, under
specified conditions, for exports of donated goods to meet basic
human needs (15 C.F.R.773.5 and Part 773, Supplement No.7);
commercially supplied goods to meet basic human needs, in
quantities larger than allowed by the humanitarian license, and
exports to meet emergency needs that do not qualify for the
humanitarian license are considered on a case-by-case basis (15
C.F.R. 785.1).
In addition to the embargo on exports to North Korea as such, a
separate foreign-policy restriction applies to exports to North
Korea as a country supporting international terrorism. As
provided for in sec. 6(j) of the Export Administration Act of
1979, as amended (50 U.S.C. App. 2405(j)), the Secretary of
State, on January 20, 1988, determined "that North Korea is a
country which has repeatedly provided support for acts of
international terrorism" (53 F.R.
page CRS-28
3477). As a consequence of such determination, exports to the
country involved of goods or technology that are determined of
being able to make a significant contribution to its military
potential, or enhance its ability to support acts on
international terrorism, require a validated license. Denial of
the license, in effect, constitutes a ban on such exports. The
determination is also cause for sanctions in other economic
relations, such as denial of eligibility for the generalized
system of preferences, and denial of foreign income tax credit
under income tax law (see above: Generalized System of
Preferences, and below: Private Foreign Investment).[17]
     17. An identical determination, provided for in sec. 620A of
     the Foreign Assistance Act of 1961 (22 U.S.C. 2371), bars
     the affected country (e.g., North Korea) from receiving any
     assistance under the Foreign Assistance Act, the
     Agricultural Trade Development and Assistance Act of 1954
     ("P.L.480"), the Peace Corps Act, or the Export-Import Bank
     Act of 1945 (see below: Bilateral Economic Assistance). In
     practice, the same determination is made for the purpose of
     both statutes.
A determination of support of international terrorism can be
rescinded only if the President submits to the Congress, (1)
before the rescission takes effect, a report certifying that
there has been a fundamental change in the leadership and
policies of the country's government, that the government is not
supporting acts of international terrorism, and that it has given
assurances that it will not do 80 in the future; or (2) at least
45 days before the rescission, a report that the government in
question has provided no support to international terrorism
during the preceding 6 months and has given assurances that it
will not do so in the future.
Since changes in the overall U.S. export control policy can be
made by executive action by the Bureau of Export Administration
within the statutory guidelines, any relaxation of controls on
U.S. exports to North Korea is possible without congressional
involvement. The first likely step in the direction of
normalizing export controls--most likely in the context of the
lifting of the comprehensive embargo--would be in reassigning
North Korea to Country Group Y, which would place North Korea at
the level of control restrictiveness applied to mast of the
former Warsaw Pact members.
In the matter of commercial exports of defense articles or
services, section 38 of the Arms Export Control Act (22 U.S.C.
2778) authorizes the President to designate those items that are
to be considered as defense articles and services (the U.S.
Munitions List) and to promulgate regulations for the export of
such articles and services. The President delegated this
authority to the Secretary of State, who has issued the
International Traffic in Arms Regulations (ITAR) (22 C.F.R.
121-130). Section 126.1 of the ITAR establishes the policy of the
United States to deny licenses for export to or import from 28
countries, including North Korea.
page CRS-29
This regulation may be temporarily suspended or modified in the
interest of the security and foreign policy of the United States
(22 C.F.R. 126.4), or an exception to it made under specified
conditions (22 C.F.R. 126.2) to allow the licensing of exports of
Munitions List articles and services to North Korea. The
regulation itself can be amended administratively within its
statutory intent.
In the case of government-to-government military sales, section
3(a)(1) of the Arms Export Control Act (22 U.S.C. 2763(a)(1))
prohibits the U.S. Government from selling or leasing defense
articles or services unless the President finds that the
furnishing of such articles or services to a country or
international organization would strengthen the security of the
United States and promote world peace.
In addition to special provisions for controlling exports to any
destination of nuclear-related commodities placed on the "nuclear
referral list" because of their possible "dual use" (15 C.F.R.
778.2), which are administered by the BXA under the Export
Administration Act (see p. 40), a separate control regime is in
effect for exports of nuclear equipment and material[18]  and is
administered by the Nuclear Regulatory Commission in conjunction
with the State Department under the authority of the Atomic
Energy Act of 1946, as amended. Regulations governing trade in
nuclear equipment and material are contained in 10 C.F.R. Part
110, section 110.28 of which lists North Korea as an embargoed
     18. Virtually identical restrictions apply also to imports
     of nuclear equipment and material.
Exports from Foreign Countries
Exports from foreign countries to North Korea are to some extent
affected by Transaction Control Regulations (31 C.F.R. 505). With
some exceptions, these prohibit a U.S. person to engage in any
transaction in connection with the sale or purchase in any
foreign country, and shipment to any country of the former Sino-
Soviet bloc (or its successors), including North Korea, of any
merchandise included in the list of articles at one time subject
to international controls of the now defunct Coordinating
Committee for Multilateral Export Controls (COCOM), or prohibited
by U.S. munitions or nuclear control provisions. This prohibition
was promulgated on July 23, 1953 (18 F.R. 4291), with respect to
all countries of the then Sino-Soviet Bloc and is maintained in
force under the same authority and administered in the same way
as Foreign Assets Control Regulations (see above: Embargo on All
Transactions). While shipments originating in 23 Western
countries have been excepted from this prohibition, the exception
does not apply to shipments to North Korea. These provisions are
administered and can be modified by the Office of Foreign Assets
page CRS-30
Export Financing
Financing of exports to North Korea through export credits is
restricted or affected in several ways. Participation in any U.S.
Government program that extends export credits or export credit
guarantees or insurance is prohibited to any non-market economy
country (including North Korea) unless the freedom-of-emigration
requirements of the Jackson-Vanik amendment are fulfilled. The
principal export-financing programs affected by this restriction
are export credits and credit guarantees or insurance of the
Export-Import Bank of the United States and the Commodity Credit
The prohibition of North Korea's access to U.S. Government export
credits and export credit guarantees or insurance contained in
the Jackson-Vanik amendment can be removed by the President in
either of the two ways provided in that amendment for compliance
with its requirements (a determination of full compliance, or a
waiver) for the restoration of the MFN status (see above: Most-
Favored-Nation (MFN) Status). However, although functionally
related to it, a country's (North Korea's) access to U.S.
Government financial facilities is not contingent on its having
been extended MFN status,[19]  nor is it subject to congressional
approval or disapproval.
The Export-Import Bank of the United States also is specifically
prohibited by its own organic law (sec. 2(b)(2), Export-Import
Bank Act of 1945; 12 U.S.C. 635(b)(2)) from engaging in any type
of credit transaction (credit, credit guarantee or insurance) for
the benefit of any "Marxist-Leninist" country, among them North
Korea, unless the President determines either (1) that the
country has ceased to be a Marxist-Leninist country, or (2) that
such transactions are in the national interest. A separate
determination of national interest is needed for any Eximbank
loan of $50 million or more.
North Korea is also barred by sec. 620A of the Foreign Assistance
Act of 1961, as amended (22 U.S.C. 2371) from participation in
the Eximbank's facilities as a country determined to have
provided support to acts of international terrorism, but the
restriction is waivable (see below: Bilateral Economic
North Korea's access to Eximbank's credit facilities would,
consequently, be subject to compliance with, or waiver of, the
requirements of the (1) Jackson-Vanik amendment, (2) Marxist-
Leninist provision, and (3) counter-terrorist provision, none of
which would, however, need to involve congressional action.
     19. As a past example: a Jackson-Vanik waiver was issued on
     December 29, 1990 (E.O. 12740, 56 F.R. 355) for the then
     still existing Soviet Union, to a substantial extent in
     order to allow it access to U.S. export credit facilities,
     but MFN status was not extended to any part of the by then
     (in December 1991) dissolved Soviet Union until June 1992.
page CRS-31
Private Foreign Investment
American private investment in North Korea falls under the
embargo on all transactions with North Korea. Were the embargo to
be lifted, such investment would still be adversely affected by
three provisions involving the investors' ability to use the
facilities of the Overseas Private Investment Corporation (OPIC),
a U.S. Government agency insuring or guaranteeing American
private investments in developing countries. One is the
prohibition, contained in the Jackson-Vanik amendment, of
investment guarantees for investments in nonmarket economy
countries that do not comply with the requirements of that
amendment (see above the implications of the Jackson-Vanik
amendment for Eximbank operations); the other two consist of
restrictions placed on OPIC operations by virtue of OPIC
legislation being part of foreign assistance legislation (see
below p. 33-34) in (a) Communist countries and (b) countries
determined under sec. 6(j) of the Export Administration Act of
1979 as providing support to acts of international terrorism (see
above p. 27).
The terrorist country determination also plays a role in two
provisions of the U.S. income tax law, functionally related to
American private foreign investment, which create certain
disadvantages for incomes originating directly or indirectly in
such countries. Section 901(j) of the Internal Revenue Code (26
U.S.C. 901(j)) disallows any credit to U.S. taxpayers for taxes
paid or accrued to such countries (as well as those with which
the United States does not have diplomatic relations) on income,
war profits, or excess profits. Moreover, under section 952(a)(5)
of the Code (26 U.S.C. 952(a)(5)), income of any controlled
foreign corporation (CFC) (a foreign corporation in which U.S.
shareholders own 50 percent of the voting power of all voting
stock, or 50 percent of total stock value) derived from a country
while it is on the terrorist support list is considered "Subpart
F income." While U.S. income taxes on foreign-source income of
U.S. shareholders of foreign corporations generally may be
deferred until the income is actually distributed, "Subpart F
income" to a shareholder is taxable when earned by a CFC, whether
distributed or not.
page CRS-32
     * Prepared by Larry Q. Nowels, Specialist in Foreign
     Affairs, Foreign Affairs and National Defense Division.
With the end of economic support from the Soviet Union and the
continuation of systemic problems associated with a highly
centrally planned economy, economic conditions in North Korea
have declined dramatically in recent years. The North Korean
economy contracted by a reported 20 percent between 1989 and
1993, with output declining by an estimated 10-15 percent in 1992
alone. The country suffers from chronic food shortages that have
led to short-term austerity measures but no long-term solutions
to the food security problem. If the recently signed nuclear
agreement proceeds successfully and North Korea becomes a less
isolated nation, it might be expected that Pyongyang will seek
external economic assistance from bilateral aid donors like the
United States, and membership in the International Monetary Fund
(IMF), the World Bank. and the Asian Development Bank.
The United States has never extended any type of foreign
assistance to North Korea and numerous legislative restrictions
stand in the way of future consideration of economic aid
initiatives. These same legal impediments would also block the
use of foreign aid resources to finance the procurement of heavy
oil for North Korea that the U.S. pledged as part of the nuclear
agreement between the two countries. Restrictions also exist
governing U.S. actions in the international financial
institutions that would impede North Korean membership and access
to the facilities of these multilateral organizations.
Bilateral Economic Assistance[18]
     18. Bilateral economic assistance primarily involves
     programs administered by the U.S. Agency for International
     Development, but may also include aid activities including
     those of the Overseas Private Investment Corporation, the
     Trade and Development Agency, the Peace Corps, the State
     Department's narcotics control program, and others depending
     on the scope of the legislative restrictions noted below.
Although several restrictions stand in the way of the initiation
of a regular U.S. bilateral foreign aid program, the most
explicit prohibition -- and one that does not include a direct
Presidential waiver authority -- appears as section 507 of the
Foreign Operations Appropriations Act, FY 1995 (P.L. 103-306).
Section 507 prohibits any assistance provided under the Act for
direct (bilateral) aid to a list of countries, including North
Korea. Though Congress has included a list
page CRS-33
of prohibited countries in annual foreign aid appropriation
measures dating back to 1974, North Korea was added for the first
time in the FY 1995 act.[19]
     19. North Korea was added to the ineligible country list
     during the House-Senate Conference Committee on the Foreign
     Operations appropriation bill in early August 1994. The
     House-passed measure contained no references to the DPRK
     while the Senate version of H.R. 4426 included an amendment
     banning funds in that or any other act for North Korea
     unless the President certified that the DPRK did not possess
     nuclear weapons, had halted its nuclear program, and had not
     exported weapons-grade plutonium. Sponsors of the Senate
     amendment expressed concern over what they regarded as a
     series of concessions made by U.S. negotiators during talks
     with North Korea over the past 18 months. They saw foreign
     aid as an additional "carrot" that American officials might
     use in subsequent discussions, and wanted to ensure that
     U.S. assistance would not be offered unless the DPRK took
     significant steps to terminate its nuclear program.
     Conferees deleted the Senate amendment, which would have
     blocked the use of any U.S. funds for assisting North Korea,
     but added the DPRK to the section 607 list of countries
     prohibited from receiving Foreign Operations funds.
If the Administration wanted to use foreign aid funds for North
Korea, it would have to pursue one of two routes: convince
Congress to drop North Korea from this list in next year's
Foreign Operations Appropriations bill, something that would not
lift the ban on using FY 1995 funds for financing the oil or
launching other programs; or the President could utilize his
special and most expansive foreign policy waiver authority, found
in section 614(a) of the Foreign Assistance Act of 1961, to lift
the immediate prohibition of section 507. Section 614(a) allows
the President to provide assistance (up to $50 million annually
per country) to a nation otherwise prohibited by determining that
to do so is important to the security interests of the United
States, and notifies Congress in writing. Because of the far-
reaching nature of the section 614(a) authority, the President is
required to consult with, and provide a written policy
justification to the House Foreign Affairs Committee, the Senate
Foreign Relations Committee, and the House and Senate Foreign
Operations Appropriations Subcommittees. In practice, past
Presidents have used the authority sparingly and with close
consultation with Congress.
While the removal of North Korea from the list of section 507
countries would eliminate the most direct aid prohibition,
several other foreign assistance laws ban or potentially block
assistance to North Korea. Each, however, contains a waiver
authority that the President would presumably exercise if he
chose to use the section 614(a) waiver. Provisions applying to
North Korea include:
     *    Communist country prohibition -- section 620(f) of the
          Foreign Assistance Act of 1961 (FAAct, 61) prohibits
          U.S. aid to Communist countries. North Korea is on the
          list of Communist countries included in section 620(f).
          The President may exempt a country from this
page CRS-34
          this restriction if he determines and reports to
          Congress that to do so would be important to the
          national interest of the United States.
     *    terrorist country prohibition -- section 620A of the
          FAAct, 61, bans assistance under that Act, food aid
          under P.L. 480, Peace Corps assistance, or Export-
          Import Bank credit facilities for countries that the
          Secretary of State has determined to have repeatedly
          supported acts of international terrorism. The
          Secretary designated North Korea as a terrorist country
          on January 20, 1988.[20]  The President can waive this
          prohibition after consulting with Congress and
          determining that national security interests or
          humanitarian reasons warrant the resumption of
          assistance. The President may also remove a country
          from the list of terrorist nations, if he certifies to
          Congress that either, (1) there has been a fundamental
          change in leadership and government policies, the
          government is no longer supporting acts of terrorism
          and it has provided assurances that it will not to do
          so in the future, or (2) 45 days in advance of removing
          the terrorist designation, the government has not
          supported acts of terrorism for the past six months and
          has provided assurance that it will not do so in the
          future. Congress has included a similar prohibition and
          waiver authority annually since FY 1988 in the Foreign
          Operations Appropriations Act (at present section 529
          of the FY 1995 appropriation, P.L. 103-306).
     20. The Secretary designated North Korea as a terrorist
     country under the authority of section 6(j) of the Export
     Administration Act of 1979, and not under the authority of
     section 620A.
     *    non-nuclear weapon state prohibition -- section 530(b)
          of the Foreign Relations Authorization Act, FY 1994-95
          (P.L. 103-236), prohibits any assistance under the
          FAAct, 61, to any non-nuclear weapon state that the
          President has found to have "terminated, abrogated, or
          materially violated" an International Atomic Energy
          Agency (IAEA) safeguards agreement or violated a
          bilateral U.S. nuclear cooperation agreement. The IAEA
          has found North Korea to have violated its safeguards
          agreement. The President may waive this prohibition if
          he reports to Congress in advance that the prohibition
          of aid would be "seriously prejudicial" to the
          achievement of U.S. nonproliferation goals or would
          "jeopardize the common defense and security."
One additional restriction concerning human rights violations
might also potentially apply, although no determination has been
made. Sections 116 (development aid) and 502B (security aid) for
the FAAct, 61, ban assistance to the governments of countries
that consistently violate the human rights of its people.
page CRS-35
Despite these broad restrictions limiting possible U.S. economic
assistance to North Korea, a few programs administered by the
Agency for International Development (USAID) are exempt from any
legislative prohibitions. Presumably, the President could extend
these activities -- for child survival programs and for research
on and treatment and control of AIDS to the DPRK without issuing
any waivers. USAID can also provide foreign disaster relief in
any country regardless of aid prohibitions that would otherwise
prohibit U.S. assistance.
Food Assistance
The Agricultural Trade Development and Assistance Act of 1954
("PL 480") (P.L. 83-480) authorizes the transfer, on both a grant
and credit basis, of U.S. agricultural commodities to developing
and least developed countries facing foreign exchange shortages,
difficulties in purchasing food needs through commercial
channels, food deficits and high levels of malnutrition, and
emergency food requirements. So long as North Korea meets these
requirements, presumably, it could be declared eligible for U.S.
food assistance. (As noted above, however, the President would
first have to waive section 620A of the FAAct, 61, or remove
North Korea from the list of terrorist states.)
Regardless of these general eligibility requirements, emergency
food aid under title II of PL 480 may be extended notwithstanding
any other limitation or prohibition. Congress repealed in 1990 a
general exclusion for Communist countries which the President
would have had to waive for the DPRK if it were still in force.
Multilateral Economic Assistance
North Korea is not a member of the International Monetary Fund
(IMF), the World Bank or the Asian Development Bank, so that
existing restrictions on U.S. contributions to these institutions
and lending to countries like North Korea would not apply at the
present time. Should the DPRK seek membership in the future, the
United States could take steps to facilitate North Korean
admittance or to oppose it.[21]  Once a member, however, several
legislative restrictions, unless waived, would require U.S.
executive directors to these institutions to oppose loans for the
     21. To become a member of these institutions, country
     applications must be approved by a majority vote of the
     Boards of Governors. Generally, eligibility is based on the
     country's willingness to meet economic standards that apply
     to all members. The IMF, for example, requires that members
     avoid restrictive foreign exchange practices and all
     institutions insist on receipt of information concerning
     internal economic affairs of their members. The United
     States would have a voice in the decision-making process,
     but could not unilaterally veto North Korea's application.
page CRS-36
     *    selected countries prohibited from indirect assistance
          --beginning with the FY 1992 Foreign Operations
          Appropriations, Congress annually has included North
          Korea in a list of countries that are ineligible from
          receiving assistance "indirectly"--that is, through
          multilateral organizations--from the United States. The
          President may waive this restriction, as he has done
          annually, if he certifies that it is in the U.S.
          national interest. (The current prohibition is in
          section 523 of the Foreign Operations Appropriations,
          FY 1995.)
     *    Communist dictatorships -- section 43 of the Bretton
          Woods Agreements Act (22 U.S.C. 286aa) -- commonly
          referred to AR the "Gramm Amendment"-- requires the
          Secretary of the Treasury to instruct the U.S.
          Executive Director of the IMF to "actively oppose" the
          use of any IMF credit facility by a "Communist
          dictatorship" (not further defined, but presumably
          including North Korea) unless the Secretary of the
          Treasury, upon request, at least 21 days before the IMF
          vote on approving such use, certifies that the loan
          meets a series of economic criteria.
     *    terrorist nations -- section 628 of the FY 1995 Foreign
          Operations Appropriations requires the Secretary of the
          Treasury to instruct each U.S. Executive Director to
          international financial institutions (IFIs) to oppose
          any loan to a country that the Secretary of State has
          designated (under section 6(j) of the Export
          Administration Act of 1979) as a terrorist state. As
          noted above, the Secretary determined on January 20,
          1988 that North Korea repeatedly supported
          international acts of terrorism.
     *    non-nuclear weapon state - section 823 of the Foreign
          Relations Authorization Act, FY 1994-95, requires the
          Secretary of the Treasury to instruct U.S. IFI
          Executive Directors to oppose use of the institutions'
          funds "to promote the acquisition of unsafeguarded
          special nuclear material or the development,
          stockpiling, or use of nuclear explosive device by any
          non-nuclear weapon state."
As with restrictions concerning bilateral assistance,
requirements to oppose IFI loans based on human rights conditions
might also apply if a determination applicable to North Korea was
made (section 7001 of the International Financial Institutions
Present U.S. law also affects potentially U.S. contributions to
international organizations, such as the UN Development Program,
that assist North Korea. Section 516 of the Foreign Operations
Appropriations Act, 1995, states that, at the discretion of the
President, the United States may withhold a share of its
voluntary contribution to various UN and other international
organizations in proportion to the amount of aid such
organizations might have provided to Communist countries listed
under section 620(f) of the Foreign Assistance Act of 1961.
page CRS-37
     * Prepared by Zachary S. Davis, Analyst in International
     Nuclear Policy, Environment and Natural Resources Division.
On August 12, 1994, the United States and North Korea announced
an agreement in principle to exchange North Korea's current
nuclear program for new reactors that would be less suited for
making nuclear weapons. The State Department proposal would
assist North Korea in acquiring two light water reactors (LWRs)
in exchange for a "freeze" on its current nuclear program. The
"freeze" would require an end to construction at the Yongbyon
reprocessing facility and at two reactors that are nearing
completion, and their eventual dismantlement. An international
consortium - the Korea Energy Development Organization - would
facilitate the transfer of replacement reactors. The delivery of
the reactors is to take place over a ten-year period if North
Korea complies with its obligations under the Non-Proliferation
Treaty (NPT) and its safeguards agreement with the International
Atomic Energy Agency (IAEA).[22]  Negotiations during September
and October produced a framework agreement which was announced by
President Clinton on October 18 and signed by the United States
and North Korea on October 21.[23]
     22. South Korea and the United States have agreed that South
     Korea should build the reactors. Seoul has agreed to pay
     about 60-75 percent of the estimated cost of around $4
     billion, with Japan and perhaps other countries contributing
     the rest of the money. The deal would also provide "interim
     energy alternatives" to North Korea until the new reactors
     begin operation. North Korea at one point rejected this
     offer, apparently because it would rather have Russian or
     German reactors as well as $2 billion in compensation.
     "Agreed Statement of August 12th, 1994"; State Department
     Briefing, September 21, 1994; R. Jeffrey Smith, "Demands by
     North Korea Puzzle U.S. Negotiators," Washington Post,
     September 23, 1994, A32.
     23. Statement by President Bill Clinton Regarding U.S.-North
     Korea Framework Agreement, The White House, October 18,
     1994; Special Briefing on U.S.-North Korean Relations,
     Robert Gallucci, Assistant Secretary of State for Politico-
     Military Affairs and Ambassador at Large, The White House,
     October 18, 1994.
This section focuses on the parameters that would permit U.S.
nuclear cooperation with North Korea, including participation in
the proposed reactor transfer. Some questions remain about the
precise nature and timing of the U.S. role in the reactor
transfer. The requirements for direct U.S. nuclear cooperation
may not apply for the near term, but could be relevant at a later
stage in the reactor construction project if the U.S., U.S.
companies, or U.S. allies are to make material contributions to
North Korea's nuclear program.[24]  Other restrictions could
apply depending on the terms of the transfer.
     24. The issue of U.S. allies could be relevant in connection
     with the retransfer of U.S.-origin technology to North
page CRS-38
Statutory Requirements for Nuclear Cooperation
Two laws govern direct nuclear cooperation between the U.S. and a
foreign country: the Atomic Energy Act of 1954 (P.L. 83-703) and
the Nuclear Nonproliferation Act of 1978 (P.L. 95-242).[25] 
These laws establish criteria that must be satisfied as a
condition for nuclear cooperation.
     25. The Nuclear Nonproliferation Act of 1978 tightened the
     restrictions on nuclear exports in the Atomic Energy Act of
Foremost among the criteria is the requirement that a bilateral
agreement for nuclear cooperation be in force between the U.S.
and a foreign government.[26]  There is no cooperation agreement
between the United States and North Korea, so direct nuclear
transfers would not be permitted until such an agreement was in
effect. State Department officials have indicated that
negotiations on a U.S.-North Korea bilateral nuclear agreement
are expected to commence in the near future. Agreements for
nuclear cooperation must be submitted for consideration by
     26. Agreements for cooperation are negotiated by the State
     Department, then reviewed by the Department of Energy, the
     Nuclear Regulatory Commission, the Arms Control and
     Disarmament Agency and the President before being sent to
     27. Under Section 123 of the AEA, the President must submit
     agreements for cooperation, accompanied by a Nuclear
     Proliferation Assessment Statement prepared by the Arms
     Control and Disarmament Agency, to the Senate Foreign
     Relations Committee and the House Foreign Affairs Committee.
     For most agreements, Congress has thirty days of continuous
     session to consider the agreement; it can either adopt a
     resolution of disapproval or consent to the agreement by
     taking no action.
Other criteria in the Atomic Energy Act (AEA), as amended by the
(NNPA) could restrict U.S. nuclear exports to North Korea.
Section 123(a)(2) of the AEA (42 U.S.C. 2153(a)(2)) requires that
"IAEA safeguards be maintained with respect to all nuclear
materials in all peaceful nuclear activities within the
territory" of any non-nuclear weapon state as a condition for
U.S. supply of nuclear technology. The unresolved issue of North
Korea's plutonium inventory could present a problem for meeting
this requirement. The President may exempt a proposed agreement
from the requirements of section 123 "if he determines that
inclusion of any such requirement would be seriously prejudicial
to the achievement of United States non-proliferation objectives
or otherwise jeopardize the common defense and security."
page CRS-39
Export licensing requirements for nuclear technology are
contained in Sections 126, 127, and 128 of the AEA, as amended by
the NNPA (42 U.S.C. 2165, 2156 and 2157). The Nuclear Regulatory
Commission (NRC) issues such licenses after consultations with
the Departments of State, Energy, Defense, Commerce, and the Arms
Control and Disarmament Agency. The criteria in sections 126,
127, and 128 include: IAEA safeguards on the export; no use of
the export for nuclear weapons; adequate physical security; no
retransfer without prior U.S. consent; and no reprocessing of
U.S.-origin materials without prior consent. Like section 123
discussed above, section 128 requires full-scope safeguards on
all nuclear activities in any non-nuclear weapons state as a
condition of export. The President can waive the criteria and
authorize an export license that does not satisfy sections 126,
127, and 128, provided that the license is submitted to Congress
and Congress does not adopt a concurrent resolution of
disapproval (AEA, section 128(b)(1)).
If a nuclear cooperation agreement between the United States and
North Korea enters into force, the AEA, as amended, conditions
cooperation on compliance with the terms of the agreement.
Section 129 on "Conduct Resulting in Termination of Nuclear
Exports" (42 U.S.C. 2158) states: "No nuclear materials and
equipment or sensitive nuclear technology shall be exported to
(1) any non-nuclear weapon state that is found by the President
to have, at any time after the effective date of this section:
     (A)  detonated a nuclear explosive device; or
     (B)  terminated or abrogated IAEA safeguards; or
     (C)  materially violated an IAEA safeguards agreement; or
     (D)  engaged in activities involving source or special
          nuclear material and having direct significance for the
          manufacture or acquisition of nuclear explosive
          devices, and has failed to take steps which, in the
          President's judgement, represent sufficient progress
          toward terminating such activities."
Points B, C, and D could be relevant in the case of North Korea,
depending on the nature of the cooperation.[28]
     28. The President can waive the restrictions.
page CRS-40
Dual-Use Technology
Section 309(c) of the NNPA directs the Department of Commerce to
control exports of dual-use equipment that could have nuclear
applications. Under the authority of the Export Administration
Act of 1979, as amended, the Bureau of Export Administration
maintains a Commodity Control List (CCL) as well as a list of
controlled countries. The items on the CCL that are subject to
nuclear nonproliferation control are known as the Nuclear
Referral List.[29]  North Korea is a controlled country with
respect to nuclear technology. Thus, North Korea's status as a
controlled country could bar the United States from contributing
controlled items to a reactor project in North Korea unless North
Korea were removed from the controlled country list, and/or the
Commerce Department issued licenses for export of dual-use items
to North Korea. However, it may be possible for the United States
to provide uncontrolled items such as safety equipment for the
storage of spent fuel rods or non-nuclear power generating
equipment if such assistance is not barred by other laws.
     29. The Export Administration Act expired in June 1994 after
     the 103rd Congress failed to pass new export control
     legislation. Authority for maintaining export controls is
     provided by the International Emergency Economic Powers Act
     (P.L. 95-223.) (see also above: Control of U.S. Exports.)
Nuclear-Related Assistance
Several other laws could also could restrict U.S. nuclear-related
cooperation with North Korea. These mainly affect the non-nuclear
aspects of the agreement. In addition to the prohibitions cited
above in the Foreign Operations Appropriation FY 1995 and the
Foreign Assistance Act of 1961, the Foreign Relations
Authorization Act for FY 1994-95, section 530, prohibits U.S.
assistance under the 1961 foreign aid act to any non-nuclear
state found by the President to have terminated, abrogated, or
materially violated an IAEA safeguards agreement. The IAEA has
found North Korea to have violated its safeguards agreement. This
restriction, as well as others, could especially narrow U.S.
options to provide alternative energy supplies such as oil and/or
compensation to North Korea for stopping its current nuclear
Financial Aspects of Nuclear Cooperation
Financing for the reactor construction project is to be arranged
through an international consortium. Although it is not clear how
or if the United States might contribute materially to the
proposed multilateral consortium, U.S. law could restrict certain
types of contributions. Most importantly, Congress would have to
authorize and appropriate funds for any U.S. financial
contribution. Moreover, as mentioned above, several legal
impediments stand in the way of utilizing foreign assistance
funds for these purposes, although the President maintains waiver
page CRS-41
Regarding international funding, the Foreign Relations
Authorization Act for FY 94-95, section 823, amended the
International Financial Institutions Act (22 U.S.C. 262d(a)) to
direct the Secretary of the Treasury to instruct U.S.
representatives to international financial institutions to oppose
the use of the institution's funds to promote the acquisition of
unsafeguarded special nuclear material or the development,
stockpiling, or use of any nuclear explosive device by any non-
nuclear weapon state. Ongoing problems with undeclared, and
therefore unsafeguarded, nuclear materials in North Korea could
trigger this restriction with respect to financial institutions
such as the World Bank, the International Monetary Fund, and the
Asian Development Bank. Also, North Korea is not a member of
these institutions.

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