A truck leaving the Kaesong joint industrial zone is inspected at a customs checkpoint at an immigration center near the Demilitarized Zone (DMZ) separating North and South Korea in Paju, Feb. 11, 2016.

North Korean executives are driving up demand for products made in rival South Korea and selling them to the regime’s high-ranking officers, despite an order by the North’s leader Kim Jong Un for citizens to buy only domestically manufactured goods, sources with knowledge of the situation said.

People who work in upper management positions at North Korea's foreign currency-generating firms, such as cross-border traders, are smuggling in South Korean consumer products to sell to high-ranking officers in the Korean Workers’ Party in the capital Pyongyang, the sources said.

Some North Koreans covet cosmetics, electronics, and other items made in South Korea, seeing them as financial status symbols.

“Demand for South Korean products is constantly increasing among high-ranking officials in North Korea,” said a Korean-Chinese source from Dandong in northeastern China’s Liaoning province.

“Executives at foreign currency-generating organizations have recently come to China to purchase South Korean-made products to smuggle back home after replacing South Korean product labels with Chinese labels,” he told RFA’s Korean Service.

North Korean executives of foreign currency-generating enterprises in China often have Korean-Chinese people as middlemen to procure South Korean products, he said.

“North Korean travelers to China, whether the purpose of their trip is personal or business, buy the South Korean products,” the source said, adding that the goods can be in small quantities or in bulk.

“Any individuals or companies that engage in trade that want to take South Korean goods into North Korea should replace the exterior packaging to disguise them as Chinese products,” he said.

The punishment for those caught smuggling in products manufactured in the South is usually a fine, but they often can get off by paying a bribe to the authorities.

After the United Nations imposed new sanctions on North Korea in March as punishment for conducting nuclear tests and missile launches, Kim Jong Un issued a statement ordering citizens to cope with the sanctions by “becoming strong” through their own efforts, which included buying domestically made goods.

The UN Security Council expanded targeted sanctions against North Korea in early June in response to Pyongyang’s continued missile tests.

“People who use South Korean-made goods are traitors,” the source said.

Kim Jong Un patriotism

Since the new sanctions took effect, state-controlled North Korean media have been promoting “Kim Jong Un patriotism” to encourage the use of home-grown products.

So far, North Koreans who have the foreign currency necessary to purchase goods manufactured in the South are not buying into the patriotism campaign.

“North Korean foreign currency-generating businesses are devoting all their energy to securing South Korean products to satisfy Pyongyang’s high-ranking officials,” said a Korean-Chinese source from Shenyang in Liaoning province.

The main items that those who work in foreign currency-generating enterprises are seeking are South Korean home appliances and expensive cosmetics, said the source who declined to give his name.

“Unlike general home appliances, no [foreign] cosmetic products are allowed to pass through customs in China,” he said.

“To pass the inspections at customs, North Korean foreign currency-generating firms replace labels on South Korean goods, such as cosmetic products, with Chinese labels,” the source said.

Those who work for North Korean businesses will say anything to get a discount on products when they sign merchandise purchase agreements, he said.

“It is not certain where the money is coming from, but when they purchase South Korean products they look for the most luxurious and expensive products,” he said.

An executive officer from one of Pyongyang’s foreign currency-generating businesses whom the source said he knows returned to North Korea with six containers of South Korean pre-mixed instant coffee, feminine hygiene products, and cosmetics.

“I assume those items would be worth much more than hundreds or thousands of U.S. dollars,” he said.

About 125 small and medium-sized South Korean firms formerly manufactured a wide range of products, including rice cookers, watches, clothing, and electronics with cheap North Korean labor at the Kaesong joint industrial complex several miles north of the heavily armed border that has separated the two Koreas for nearly 64 years.

Though the goods produced there were shipped back to South Korea or exported to other countries, the industrial park served as a vital source of income for the cash-strapped isolated North.

The South Korean government ordered Kaesong to be shut down in February 2016 in retaliation for a rocket launch and nuclear test by the North and to prevent the regime from using hard currency earned through the venture to fund its nuclear and ballistic missile programs.

Reported by Jieun Kim for RFA’s Korean Service. Translated by Leejin Jun. Written in English by Roseanne Gerin.