The US is preparing to lift its sanctions against North Korea.
The news comes after North Korea handed over a long delayed report on its nuclear activities to China - a move which could end the country's international isolation.
The White House stated its intent to remove North Korea from its list of terrorist states within 45 days.
But US President George W Bush gave a cautious welcome to North Korea's account of its nuclear activities, saying Pyongyang would face consequences if it did not fully disclose its operations.
'The United States has no illusions about the regime in Pyongyang,' he said.
North Korea said last year it would end its nuclear activities and has closed its main reactor.
