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North Korea

Meet the North Korean firm which reinvents itself to beat sanctions

Shinhung Trading Company has sold everything from iron ore to cancer ‘cures’, avoiding sanctions and creating revenue as the hermit state develops nuclear weapons

PUBLISHED : Friday, 01 December, 2017, 2:49pm
UPDATED : Friday, 01 December, 2017, 9:50pm

While the United States pushes for new sanctions on North Korea, one trading company from the hermit state has creatively reinvented itself to survive. Its latest offer: a US$50 root to “cure” cancer.

The Shinhung Trading Company has exported seafood, sold millions of dollars of iron ore to China’s national railway and bypassed sanctions to import luxury goods from Japan.

But as a series of United Nations sanctions have taken those big ticket items off the plate, the firm has resorted to selling “North Korean specialities”.

At an alcohol and confectionery expo held recently in bustling Jinan in northern China, two North Korean women in purple gowns, with images of the North’s departed dear leaders pinned to their lapels, manned Shinhung’s booth.

They sold North Korean herbal remedies, cigarettes and a special type of ginseng “efficacious for prevention and curing all sorts of cancers”, its label said.

“We also sell tiger bone liquor,” said one of Shinhung’s representatives, declining to give her name. “It is made from tiger bone, one of our most important animal products.”

How long they had been selling such products was “our company’s little secret”.

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Shinhung is one of the North’s numerous state-owned trading companies, which experts say bring in money for ministries, pay loyalty fees to the Kim family and fund the rogue weapons programme.

It is overseen by the North’s Ministry of State Security, according to an academic paper published by South Korea’s Ministry of Unification.

China’s market and Chinese middlemen remain crucial to its aims, although sanctions appear to be hammering its ability to earn in the country, which accounts for 90 per cent of North Korea’s total trade.

As US President Donald Trump seeks new sanctions after Pyongyang tested another intercontinental ballistic missile this week, Shinhung’s latest venture highlights ways used by North Korea to adapt and dodge UN measures targeting its most vital industries.

“Shinhung in early 2000s was doing computers, they’ve been all across the board, they’ve done fish, they’ve done produce,” said Korea expert Ken Gause of CNA research in Virginia.

“They’ve reinvented themselves many times as most of these trading companies have.”

A decade ago, Shinhung mainly sold “shellfish, crabs, fish” abroad, according to an official North Korean trade website.

As the North’s dependence on China grew, it set up offices in the border city of Dandong and the northeastern port city of Dalian.

With China’s booming economy devouring resources, Shinhung ventured into mining, sending 210,000 tonnes of iron ore through the remote Nanping border crossing to a subsidiary of China Railway Corp in 2014.

The subsidiary – Tumen Xinhuan Goods Trading Company – brought in 165 million yuan (US$25 million) that year by trading in the North’s iron ore, the Shenyang Railway Bureau says on its website.

To haul the loads from the North, truckers “rose at dawn and returned at dusk, working more than 10 hours each day”, the bureau says.

Tumen requested bids to bring 150,000 tonnes across the Nanping border this year, but Jia Juncai, Tumen’s manager, said they halted trade after new UN sanctions passed in August.

In 2008 and 2009, Shinhung used a shipping agency in China to purchase US$100,000 of high-end cosmetics from Japan and ship them to North Korea via Dalian, according to UN investigators.

Dalian is also a frequent port of call for the Hae Bang San, an ageing 73-metre cargo ship linked to Shinhung, that has changed its name and flag at least half-dozen times over the last decade, according to a database on the NK News website.

Back when the ship was called the Mono Lake, a Dalian company tied to China’s state-owned investment giant SDIC Group booked cargo for the vessel until 2013.

The North Koreans took the opportunity to register the ship under the name of the group’s Hong Kong-based company, Hong Kong Complant International Transportation, according to its chairman Wang Junliang, who said he did not know anything about the ruse.

“They’ve been illegally using our name,” Wang said. “We’ve been trying to get in contact with the North Koreans to discuss this for months, but it’s not that easy to find them, or easy to pressure them.”

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Experts say the ship’s Hong Kong ownership may have allowed the North Koreans to procure sanctioned items.

“If you’re sending cargo on it, you’re dealing with the third party and not directly dealing with the North Korean state,” said professor Robert Huish at Dalhousie University.

“That would make it more difficult to track and identify it as a violation of sanctions.”

Wang said he had explained the situation to the Hong Kong authorities, who were investigating on behalf of the UN.

In August, he received documents from the North Koreans showing the ship had changed its registration, which he provided to Agence France-Presse.

The new owner is listed as “Shinhung Trading Co 3”.

The ship sailed from China for North Korea at the end of August and has not updated its position since.