"The goods are on the lists of the Nuclear Suppliers Group, Missile Technology Control Regime and other control lists. These goods were supplied to Shenyang Machine Tools under the condition that they would not be retransferred to North Korea or other sanctioned states," the report said.

"Shenyang Machine Tools has strong ties to North Korea. For example, it hosted a North Korean delegation in October 2013.

Evidence indicates that at the time of the re-exports it employed a person whose sales area is stated to be North Korea," it said.

Shenyang officials claimed that the exports at issue were inadvertent, but evidence indicates that company officials knew the end user of the controlled machine tools was North Korea, ISIS said, calling for a further investigation into the case.

"As this case highlights, China has been hesitant to enforce its own trade control laws or UN Security Council resolutions on North Korea. This non-compliance is a product of poor awareness among Chinese industries, underdeveloped domestic trade control and sanctions legislation, and a lack of political will in the government to enforce laws that could be detrimental to economic growth," ISIS said.

"If this situation is to change for the better, the United States will need to exert pressure on China," it said. "Initiating a sanctioning action against Shenyang Machine Tools Company is an important way to send a signal to China that it needs to do more." (Yonhap)