President Bush said Thursday he will lift key trade sanctions against North Korea and remove it from the U.S. terrorism blacklist, a remarkable turnaround in policy toward the communist regime that Bush once branded as part of an "axis of evil."

The announcement came after North Korea handed over a long-awaited accounting of its nuclear work to Chinese officials on Thursday, fulfilling a key step in the denuclearization process. Bush said the move was "a step closer in the right direction" although he made clear the United States remains suspicious about the communist regime in Pyongyang.

"The United States has no illusions about the regime," Bush said in a statement that he read to reporters in the Rose Garden.

Specifically, Bush said the U.S. would erase trade sanctions under the Trading With the Enemy Act, and notify Congress that, in 45 days, it intends to take North Korea off the State Department list of nations that sponsor terrorism.