Diffeo has discovered evidence that suggests a relationship between one of the few Chinese companies authorized to export apples (fruit) to the United States and another Chinese company possibly associated with North Korea sanction violations. Given China’s interest in entering the US food market, this discovery could help negotiators put pressure on Beijing to further crackdown on Chinese companies that are violating sanctions against the Democratic People's Republic of Korea (DPRK).
In August of 2017, the United States Department of Treasury’s Office of Foreign Assets Control (OFAC) designated several Russian and Chinese companies and individuals for supporting the North Korean regime, violating UN Security Council Resolutions, and attempting to evade US Sanctions.1
Several news outlets and research centers such as the Center for Advanced Defense Studies (C4ADS) discussed the companies accused of participating in these money laundering operations and have discussed some interesting connections with additional companies. 2
Among these OFAC designated companies is Chinese company Dandong Chengtai Trading Company, who is accused of assisting North Korea money laundering operations through North Korean coal exports. Connections between Dandong Chengtai and another Chinese company named Dandong Dongyuan Industrial Company have been discussed at length. They share an email address Point of Contact. But what we explored with Diffeo is Dongyuan Enterprise USA, according to multiple news outlets, is a US company owned by the same alleged owner of Dandong Dongyuan, Mr Sun Sidong (孙嗣东). 3
In this intelligence bulletin, we focus on this US-based company because it has received little attention in previously published reports.
Collaborating with the Diffeo agent
In this Web research, we used Diffeo’s AI-powered research assistant to explore connections related to North Korean money laundering. Starting with OFAC’s list of sanctioned entities and their known connections, we asked what new connections we could uncover. Opening the OFAC press release and C4ADS blog post in our web browser, we invited Diffeo to view the documents with us. As we read, Diffeo suggested entities for further investigation by highlighting names in context.
As we broadened our investigation to study Dongyuan Enterprises USA, Diffeo recommended publicly available import records from 2017 that indicate Dongyuan Enterprise USA has only imported goods from its sister/parent company, Dandong Dongyuan, which has been discussed in other reports, and a food packing company in China, Yantai Junjie Foodstuff Company, which has not been discussed. 4
Figure 1. Diffeo recommended that we read import records
With all eyes on the connection between Dandong Chengtai,and Dandong Dongyuan, little attention is being paid to the interesting relationship Dongyuan Enterprise has with Yantai Junjie Foodstuff.
We looked more closely at Yantai Junjie Foodstuff Company Ltd and found that it is a subsidiary of “Laiyang Junjie Food Company Ltd". Given our notes on the company, Diffeo suggested a document that expanded our perspective: USDA lists Yantai Junjie Foodstuff as one of only 16 registered packing houses allowed to export apples from China and import them into the United States. 5
Figure 2. Diffeo recommended that we read USDA’s list of approved apple packing houses in China
Diffeo uncovered records showing Dongyuan Enterprise importing goods from Yantai Junjie Foodstuff, as well as information from USDA indicating that Yanjtai Junjie was one of a limited number of authorized Chinese apple exporters to the United States.
Why is the Connection between Yantai Junjie Foodstuff and Dongyuan Enterprise Important?
China has increasingly sought access to the US apple market, but it’s not quite clear why. As of 2008, China produced over 40 percent of the world’s apples and is responsible for nearly a quarter of the world’s apple exports 6. However, it sends few apples to the US. Washington State supplies 60 percent of US apple consumption. 7
The US has been pushing China to intervene in DPRK’s ballistic missile development program. Given China’s interest in the US apple market, these connections could be leveraged to insist on cooperation in shutting down Chinese companies that are helping DPRK avoid sanctions. In April 2017, China showed that it is willing to shutdown such companies , when China’s customs department issued an official order telling traders to return their North Korean coal cargoes, according to a source cited by Reuters.8
There is no evidence to suggest Yantai Junjie Foodstuff is involved in skirting UN sanctions against North Korea. However, their relationship with Dongyuan Enterprise USA, a sister or sub company to Dandong Dongyuan Industrial Company that is likely owned and operated by the owner of the sanctioned Dandong Chengtai Trading Company warrants further research.
This discovery is only one thread that Diffeo helped us explore. Below is an image of the larger network that Diffeo created while we researched this topic together.
Figure 3. Diffeo Knowledge Board created by the Diffeo system as we explored