Korean tobacco company KT&G under investigation by the U.S. government, has not received any notice

  The Korean tobacco company KT&G is under investigation by the U.S. government and may not be able to fully recover the long-term deposits paid to U.S. state governments. KT&G stated that it needs to reassess its U.S. business.

According to a report by the Korea Dong-A Ilbo on January 18, KT&G (Korea Tobacco & Ginseng Corporation), the largest tobacco company in South Korea, stated that it is under investigation by the U.S. government and has not received any notice or penalties for violations.

Media reports indicate that KT&G is accused of violating U.S. health department regulations and submitting incorrect information during the approval and review process for tobacco products. At the same time, there are concerns that KT&G may not be able to fully recover the long-term deposit of 15.4 trillion won (approximately 11.47 billion USD) paid to U.S. state governments.

In response, KT&G stated, "Due to the strengthened measures implemented on December 14, 2021, regarding cigarette regulations, market competition has intensified, and thus it is necessary to reassess our U.S. business. We have issued a statement indicating that we have received a comprehensive document submission order from the U.S. government," and in the "business report announcement on March 21, 2021, we also reported to the board on our 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 (the U.S. subsidiary) have submitted the necessary materials regarding the regulatory compliance of cigarette products currently being sold locally, in accordance with the comprehensive document submission order from the U.S. Department of Justice. However, regarding the final outcome of the investigation and its impact, the company stated that it cannot predict at this time.

Regarding concerns about the possibility of not fully recovering the long-term deposit, KT&G's position is that it can be refunded in stages.

If the deposit is used for medical funds by the state government due to the company's illegal activities causing harm to tobacco consumers, it can be allocated to the state government's medical fund. However, in other cases, according to regulations, it will be fully refunded after 25 years from the date of payment. However, given that there are no specific issues related to the company, KT&G believes that there should be no problems with the refund. The refund period starts in 2025.

KT&G stated, "The ongoing investigation matters," and "the U.S. Department of Justice requires confidentiality regarding the ongoing investigation, so we cannot confirm specific details."