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North Korea sanctions: Swiss government prevents ski lift sale

The government of Switzerland has prevented the export of ski lifts to North Korea. The Swiss government is believed to have taken this decision in line with the UN Security Council resolutions prohibition on the import of Luxury goods. This short article will provide some background to the story and summarise the situation with regards to North Korea and luxury goods imports.

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Swiss Action on Ski Lifts

North Korea is currently constructing a large ski resort at Masik. The resort is believed to be an effort by the DPRK to match South Korea’s efforts to prepare for the 2018 Winter Olympics. Reports indicate that UN sanctions, implemented by the Swiss government, have prevented Swiss company Bartholet Maschinenbau from signing a deal to export mechanical chair lifts and cable cars to the North Korean resort.[1] The deal is purported to have been valued at 7 million Swiss Francs (£4.8 million).

Press reports indicate that the Swiss company approached the Swiss government to ask for advice regarding the export in early June. Initial government advice indicated that the export was not technically illegal, but advised against proceeding with the transaction. However, recent changes to Swiss sanctions measures on North Korea which came into effect on 3 July 2013 did prohibit the export.[2] The spokesperson for the Swiss Secretariat for Economic Affairs (SECO), the Swiss government department for export licensing issues amongst other responsibilities, noted ‘this is obviously a prestigious propaganda project for the regime’.[3] SECO also noted that it was ‘inconceivable’ to envisage ordinary North Koreans using the resort.[4]

The Swiss company is said to be unhappy with the Swiss government’s position.[5] A company spokesperson is reported to have said ‘this was a pure business deal with a Chinese firm that said one of three firms worldwide would get the contract to build this system. Now it just won’t be the Swiss’.[6] A campaign has been mounted by a human rights organization based in Tokyo, Human Rights in Asia, to try and slow down the project. [7] The organization has written to Japanese embassies in countries that manufacture ski resort equipment and machinery to remind them of their obligations under UN resolutions. So far, French and Austrian ski lift manufacturers have also turned down the business.[8]

Luxury Goods

Luxury goods bans are a type of UN targeted sanction, designed to penalise or put pressure on the leadership of a country in response to a policy of concern. This type of pressure is designed to avoid collateral damaging effects on the ordinary people. North Korea is governed by the Kim family and their associates, with ordinary North Koreans living in extreme poverty, a luxury goods ban is seen as an appropriate measure to try and pressure the leadership into halting their nuclear and ballistic missile activities.

The first UN sanctions on North Korea which prevented the import of luxury goods were contained in UNSCR 1874 (2009) which reads:[9]

Decides that:

(a) All Member States shall prevent the direct or indirect supply, sale or transfer to the DPRK, through their territories or by their nationals, or using their flag vessels or aircraft, and whether or not originating in their territories, of:

(iii) Luxury goods;

However, while a ban on the import of luxury goods has been in place since 2009, it has since been an issue of contention. The resolution does not set out what the term ‘luxury goods’ encompasses. This has made it difficult both for national authorities and for industry in enforcement and compliance.

Some member states have submitted lists of luxury goods to the Committee. For example, the 2012 North Korea Sanctions Expert panel report includes lists of goods from 10 countries and customs areas. These lists include things as varied as certain types of food, alcoholic beverages, jewellery, electronics, musical instruments, sports items and works of art. Notably, in the 2012 report, Switzerland did submit a list; however, the list did not include any sports-related items.[10]

A new UN sanctions resolution was passed in March 2013 in response to North Korea’s third nuclear weapons test. As well as further financial measures, UNSCR 2094 (2013) provides a baseline definition of the term ‘luxury goods’. The resolution notes that:[11]

  1. Reaffirms the measures imposed in paragraph 8 (a) (iii) of resolution 1718 (2006) regarding luxury goods, and clarifies that the term “luxury goods” includes, but is not limited to, the items specified in annex IV of this resolution;

Annex IV of the resolution lists the following luxury goods:

  1. Jewellery:

(a) Jewellery with pearls;
(b) Gems;
(c) Precious and semi-precious stones (including diamonds, sapphires,

rubies, and emeralds);

(d) Jewellery of precious metal or of metal clad with precious metal.

  1. Transportation items, as follows:

(a) Yachts;

(b) Luxury automobiles (and motor vehicles): automobiles and other motor

vehicles to transport people (other than public transport), including

station wagons;

(c) Racing cars.

Therefore, which items constitute ‘luxury goods’ is very much open to the interpretation of member states. It seems that the change in Swiss government policy mentioned in media reports on 3 July 2013 related to internal discussions, rather than international legal requirements. Exporters considering the export of goods to North Korea should contact the national authority, but also consider the potential reputational damage of it being publicised that they are dealing with the North Korean regime.

[1] Julian Ryall, ‘How one determined activist is spoiling Kim Jong-un’s plans for a top-notch ski resort’, South China Morning Post, 21 August 2013, http://www.scmp.com/news/asia/article/1298184/activist-ken-kato-determined-block-north-korean-ski-resort.

[2] ‘Switzerland Blocks Deal to Sell Ski Lifts to North Korea for Kim Jong-un’s Resort’, news.com.au, 19 August 2013, http://www.news.com.au/travel/news/switzerland-blocks-deal-to-sell-ski-lifts-to-north-korea-for-kim-jong-uns-resort/story-e6frfq80-1226700202649.

[3] ‘Switzerland blocks deal to sell ski lifts to North Korea’, South China Morning Post, 20 August 2013, http://www.scmp.com/news/asia/article/1297908/switzerland-blocks-deal-sell-ski-lifts-north-korea.

[4] Bill Chappell, ‘No Ski Lift For You, Swiss Government Tells Kim Jong Un’, NPR, 19 August 2013,  http://www.npr.org/blogs/thetwo-way/2013/08/19/213520084/no-ski-lift-for-you-swiss-government-tells-kim-jong-un.

[5] ‘Bern blocks Swiss ski lift sale to North Korea’, The Local.ch, 19 August 2013, http://www.thelocal.ch/20130819/bern-blocks-swiss-ski-lift-sale-to-north-korea.

[6] Veronica DeVore, ‘How Elitist is North Korea’s Ski Resort, swissinfo.ch, 20 August 2013, http://www.swissinfo.ch/eng/politics/How_elitist_is_North_Korea_s_ski_resort.html?cid=36713786

[7] Julian Ryall, ‘How one determined activist is spoiling Kim Jong-un’s plans for a top-notch ski resort’, South China Morning Post, 21 August 2013, http://www.scmp.com/news/asia/article/1298184/activist-ken-kato-determined-block-north-korean-ski-resort.

[8] ‘Switzerland Blocks Deal to Sell Ski Lifts to North Korea for Kim Jong-un’s Resort’, news.com.au, 19 August 2013, http://www.news.com.au/travel/news/switzerland-blocks-deal-to-sell-ski-lifts-to-north-korea-for-kim-jong-uns-resort/story-e6frfq80-1226700202649.

[9] United Nations, Security Council Resolution 1874 (2009)

[10] United Nations, ‘Panel of Experts Established Pursuant to Resolution 1874 Final Report’, 11 June 2013, p.56, available at http://www.securitycouncilreport.org/atf/cf/%7B65BFCF9B-6D27-4E9C-8CD3-CF6E4FF96FF9%7D/s_2013_337.pdf.

[11] United Nations, Security Council Resolution 2094 (2013), available from http://www.un.org/ga/search/view_doc.asp?symbol=S/RES/2094%20%282013%29.