My colleagues Andrea Berger, Cameron Trainer, Shea Cotton, and I have published a CNS occasional paper on North Korea’s IT networks. Part of this research involved looking into Chinese companies in the network and sifting through business registration documents provided by the China Administration for Industry and Commerce (AIC). During the course of the investigation, the Beijing AIC revoked the business license of one of the companies, Peifu Electronic Technology (Beijing) Co., Ltd. (培富士电子技术(北京)有限公司), pursuant to UNSCR 2375 (2017). This resolution requires countries to prohibit joint ventures and cooperative entities with DPRK entities or individuals, mandating the closure of existing joint entities by 9 January 2018. It appears that this is a very welcome example of sanctions enforcement in China.
This is the first time I’ve come across a notice like this in China under 2375, so I am posting the original letter retrieved from the AIC (full translation at the bottom of the post). There are a few things in this letter that stand out to me and have prompted a few additional implementation questions in my mind:
- UNSCR 2375 serves as the explicit foundation for this action.
In accordance with the requirements of the UNSCR 2375 of September 12, 2017, and the General Administration of Industry and Commerce of the Ministry of Commerce regarding the implementation of UNSCR 2375 to close down businesses in the DPRK (No. 55 of 2017), North Korean entities or individuals are required to be in China. Established Sino-foreign equity joint ventures, Chinese-foreign cooperative enterprises, and foreign-funded enterprises shall be closed within 120 days from the date of the adoption of the UN Security Council resolution 2375.
- The notice indicates that joint ventures or cooperative entities were required to seek cancellation by 9 January 2018. In this case, Pefis had not sought cancellation, and the Beijing AIC took action to revoke the company’s business license. In order to accomplish, how has China been tracking companies with DPRK links?
- The company has a period of appeal. I wonder what this looks like in practice or if PEFIS (or other companies if they exist) have appealed.
For reference, here is a full, but quick and rough translation of the letter (all errors are my own).
Beijing Administration for Industry and Commerce
Executive Office Penalty Decision Book
Beijing Industrial and Commercial Corporation No. 128 [2018]Parties: Peifu Electronic Technology (Beijing) Co., Ltd.
Address: Room 223-225-227, Building 8, No.2, Shenggu Middle Road, Chaoyang District, Beijing
Registration number: 110000410111651
Legal representative: Li Wenshan
Business scope: production of fingerprint identification system and civil fingerprint system software; provision of technical advice, technical services; sales of self-produced products. (Projects that are subject to approval according to law shall be subject to approved content after the approval of relevant departments.)
In accordance with the requirements of the UNSCR 2375 of September 12, 2017, and the General Administration of Industry and Commerce of the Ministry of Commerce regarding the implementation of UNSCR 2375 to close down businesses in the DPRK (No. 55 of 2017), North Korean entities or individuals are required to be in China. Established Sino-foreign equity joint ventures, Chinese-foreign cooperative enterprises, and foreign-funded enterprises shall be closed within 120 days from the date of the adoption of the UN Security Council resolution 2375. As of January 9, 2018, the parties have not registered for cancellation.
The above facts are corroborated by the UN resolutions, announcements made by the Ministry of Commerce and the State Administration for Industry and Commerce, on-site inspection transcripts, and corporate information on Beijing Enterprises Credit Information Network.
On January 16th, 2018, the Bureau sent a Beijing Industrial and Commercial Banking Enterprises Monitoring and Reporting [2018] No. 10 Administrative Penalty Hearing Notice to the parties, informing the parties of the facts, reasons and basis for the decision of the Bureau to decide on the administrative penalty. The content and the parties’ right to statement, right of defense, and the right to hold hearings according to law. The parties did not submit statements or defense opinions within the statutory time limit.
The above behaviors of the parties violated the provisions of Article 20 of the Regulations of the People’s Republic of China on the Administration of the Registration of Enterprise Legal Persons and constituted the act of not performing registration cancellation according to the regulations. According to the “Regulations of the People’s Republic of China on the Administration of the Registration of Enterprise Legal Persons,” Article 29, Section 1, Section 1, Page 1 Executive Order of Punishment, Beijing Industrial and Commercial Corporation, No. 128 (2018).
(3) The stipulations are as follows: Revoke the party’s business license.
If the party refuses to obey this penalty decision, it may apply for reconsideration from the State Administration for Industry and Commerce or the Beijing Municipal People’s Government within 60 days from the date of receiving the administrative penalty decision letter, or it may submit the decision within six months from the date of receipt of the administrative penalty decision letter. The Haidian District People’s Court of Beijing instituted a lawsuit.
Beijing Administration for Industry and Commerce
January 22, 2018
There likely are more examples of this type of action in China, and there may be similar administrative actions occurring in Hong Kong (perhaps more to come on that). If any readers have more examples of a recent administrative action like this, I certainly would be interested in hearing about its in the comments!
**Addendum as of 4:15pm EST on 16 May 2018: The registration details and the administrative letter for this company are no longer available via the AIC website, which is puzzling, to say the least. There is obvious value in maintaining a public record of implementation actions.
And from what I can tell, this could actually be an over-interpretation of UNSCR 2375, which bans joint ventures (as defined: an entity in which there is both a DPRK controlling party and a foreign party). It’s unclear that this company actually had a Chinese partner, and it may therefore not be a JV by UNSCR definition. It seems to just be a North Korean-controlled entity.
One thing that springs to mind here is whether it is known or possible to investigate further is whether operating licences have also been revoked in any provinces for this company. From memory (which may be faulty so shout if I am wrong) in the 2017 POE report there was a note that Namchong trading Co, had its licence revoked in Beijing years before it had it revoked in Dandong. It might be interesting therefore to see if there are also other similar patterns with the IT sector.