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N. Korea replacing S. Korea with China on consignment trade: source

All Headlines 11:21 August 01, 2010

SEOUL, Aug. 1 (Yonhap) -- North Korea has been able to make up for losses in consignment trade from Seoul's ban on cross-border trade by finding new partners in China, sources here said Sunday, weakening the impact of measures imposed to punish the communist neighbor.

South Korea severed nearly all economic cooperation and trade with North Korea in May after a Seoul-led multinational investigation team concluded that Pyongyang was responsible for the sinking of the South Korean warship Cheonan that killed 46 sailors.

Firms that had contracts with North Koreans for consignment, in which companies in the South send raw materials to the North and get back manufactured products, have been hurt the most by the ban.

"After the South Korean companies became unable to send the raw materials, North Korean factories have been manufacturing products ordered by China," a source here said, speaking on condition of anonymity.

"Most of the goods made on consignment trade with China are for exports to Europe."

Seoul's Unification Ministry, which handles inter-Korean affairs, partially lifted the ban to allow South Korean firms to proceed on deals that were signed before the government announced the punitive measures.

"North Koreans said they already signed contracts with Chinese firms and told us they will manufacture the orders from the Chinese side first," the source said.

More than 500 South Korean companies were involved in consignment trade with the North, which amounted to US$254 million in 2009.
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