US troubleshooter Bill Richardson has proposed to officials in Pyongyang that North and South Korea set up a military hotline to address incidents along their border, CNN reported Sunday.

He also proposed a military commission with members from North and South Korea plus the United States to monitor disputed areas in the Yellow Sea, CNN said, as Richardson visited Pyongyang aiming to defuse sky-high tensions.

Richardson spoke to CNN after meeting Major General Pak Rim Su, who leads North Korean forces along the tense border with the South, describing their talks Sunday as "very tough" but making "some progress".

He added that a meeting of the UN Security Council being held Sunday might also calm the crisis after the South said it would proceed with a live-fire drill, an exercise which the nuclear-armed North said would prompt "disaster".

"It's a very, very tense situation, a crisis situation," Richardson told CNN's Wolf Blitzer from Pyongyang. "This is when the UN Security Council can be most effective."

The general had also told Richardson North Korea has recovered the remains of several hundred US servicemen killed during 1950-1953 Korean War and offered to help secure their return to the United States, CNN said.

Pak showed Richardson pictures of the remains and a dog tag retrieved from a American soldier's corpse, it reported.

"It was a positive gesture," CNN quoted Richardson as saying.

A veteran negotiator with the reclusive communist state, Richardson has previously secured the return of US servicemen's bodies and held talks with Pyongyang over its controversial nuclear programme.

His trip to North Korea, officially in a private capacity, followed the North's shelling of a border island last month which killed four people including civilians and prompted threats of strong retaliation from Seoul.

Richardson said he hoped the Security Council — which includes Pyongyang's sole major ally, Beijing — would issue a statement "urging all sides to exercise maximum restraint (and to) cool things down".

Scheduled to leave North Korea on Monday, Richardson has also met the country's chief nuclear negotiator and leaders from the foreign ministry and military.

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