According to a report by South Korea's Dong-A Ilbo on January 18, South Korea's largest tobacco company KT&G (Korean Tobacco and Ginseng Co., Ltd.) stated that it is under investigation by the US government and has not received any notification or penalty for violations.
Some media reported that KT&G was accused of violating U.S. health department regulations and submitting incorrect information during the tobacco product approval and review process. At the same time, the media also expressed concerns that KT&G may not be able to fully recover the 1.54 trillion won (US$1.147 billion) long-term advance deposit paid to the U.S. state government.
In this regard, KT&G said, "Due to the tightening of cigarette regulations implemented on December 14, 2012, and the intensification of market competition, it is necessary to re-evaluate the U.S. business. We have issued an announcement stating that we have received a comprehensive document submission from the U.S. government Order” and in the “business report announcement on March 21, 2021, the Board of Directors was also reported on the response to the U.S. Department of Justice (DOJ) document submission order.”
In particular, in the business report, the holding company and KT&G USA Corporation (U.S. subsidiary) have submitted the necessary information regarding the regulatory compliance of cigarette products being sold locally in accordance with the comprehensive document submission order of the U.S. Department of Justice. However, the company said it is currently unable to predict the final outcome of the investigation and its impact.
Regarding concerns that long-term advance deposits may not be recovered in full, KT&G’s position is that they can be returned in sequence.
Advance deposits can be attributed to the state government's health fund in cases where the company's illegal conduct results in harm to tobacco consumers and therefore the state's health fund is used. But in other cases, according to regulations, a full refund will be given after 25 years from the date of payment. However, given that there are no specific issues related to the company, it is KT&G's judgment that there will be no issues with the refund. The refund period starts in 2025.
KT&G stated that "the investigation is currently ongoing" and "the U.S. Department of Justice requires that the ongoing investigation be kept confidential, so we cannot confirm the specific content."
