Investigation on Korean Tobacco Company KT&G by US Government

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Investigation on Korean Tobacco Company KT&G by US Government
South Korea's largest tobacco company, KT&G, is under investigation by the US government for alleged violations of regulations.

According to a report from South Korean newspaper Dong-A Ilbo on January 18th, KT&G Corporation, the largest tobacco company in South Korea (also known as Han-Yan Ginseng), has confirmed that it is currently under investigation by the United States government. However, the company has stated that it has not received any notifications or penalties regarding any violation of regulations or laws.


Media reports have alleged that KT&G has been accused of violating regulations set by the US Department of Health, and of submitting inaccurate information during the approval and review processes for tobacco products. The media has also expressed concerns that KT&G may not be able to fully recover the 1.54 trillion Korean won (11.47 billion US dollars) long-term deposit it made to the US state government.


KT&G stated that, "Due to the intensified market competition following the enforcement of strengthened cigarette regulations on December 14, 2012, we need to reassess our business in the United States. We have issued a statement confirming that we have received a comprehensive document submission order from the US government." Furthermore, in the business report announcement on March 21, 2021, the company also reported to the board of directors on their response to the document submission order from the US Department of Justice (DOJ)."


In particular, in business reports, the holding company and its subsidiary, KT&G USA Corporation, have complied with the comprehensive document submission order from the US Department of Justice, providing necessary information regarding the regulatory compliance of locally sold cigarette products. However, the company currently expresses its inability to predict the final outcome of this investigation and its implications.


KT&G's position on concerns about the potential inability to fully recover long-term prepayments is to gradually refund them.


Prepayments from an illicit company's unlawful activities have resulted in harm to tobacco consumers, prompting the state government to allocate these funds towards the state's healthcare fund. However, in all other scenarios, according to regulations, reimbursements will be calculated from the date of self-payment and will be fully refunded after 25 years. Nevertheless, considering no particular issues regarding the company, KT&G believes there will be no problems with the reimbursement process. The refund period will commence in 2025.


KT&G stated that "the ongoing investigation is being conducted" and that "the US Department of Justice has requested confidentiality regarding the ongoing investigation, so we cannot confirm the specific details".


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