KT&G "US Regulatory Violation Investigation Underway... No Notification or Sanctions"

Complied Diligently with Regulatory Violation Investigations Since 2021
Long-term Deposits of 1.54 Trillion Won... Full Refund Expected from 2025

KT&G stated that since 2021, despite being under investigation by the U.S. Department of Justice and the Food and Drug Administration (FDA), it has not received any notifications or sanctions regarding violations of regulations.

On the 17th, KT&G said in a statement, "The company is diligently cooperating with the investigation by submitting documents and responding to related inquiries in accordance with the U.S. government's comprehensive document submission order concerning the regulatory compliance status of tobacco products sold in the U.S. We have not received any notifications or sanctions regarding regulatory violations." However, it added, "Since the investigation is still ongoing and the U.S. Department of Justice requires confidentiality regarding the matter under investigation, we cannot disclose specific details."

Previously, KT&G had disclosed that it was under investigation by the U.S. Department of Justice. Since 2022, KT&G has stated in its business reports that "the Korean headquarters and the U.S. subsidiary are under investigation following a comprehensive document submission order from the U.S. Department of Justice concerning the regulatory compliance status of tobacco products sold in the U.S., and the final results and impacts of the investigation are unpredictable."

Some concerns have been raised that depending on the results of the U.S. government investigation, KT&G might not be able to properly recover the long-term deposits it made to U.S. state governments. KT&G explained, "The deposits may be incorporated into the state government's medical finances if tobacco consumers suffer damages due to the company's illegal actions and the state government's medical finances are used as a result. In other cases, the full amount is to be refunded after 25 years from the payment date." It further stated, "Since no such issues have occurred related to the company so far, the company expects to sequentially receive refunds of each amount starting from 2025 according to the payment schedule."

As of the end of the third quarter last year, KT&G's long-term deposits to U.S. state governments amounted to 1,541,284,000,000 KRW. Regarding tobacco exports to the U.S. region, KT&G deposited a certain amount of sales proceeds to the state governments where the tobacco was sold, in accordance with the escrow laws enacted by the U.S. state governments under the Tobacco Master Settlement Agreement.

KT&G began exporting to the U.S. in 1999 and established its U.S. subsidiary in 2010. However, in December 2021, it announced a temporary suspension of cigarette sales in the U.S. KT&G's U.S. subsidiary sales amounted to 246.3 billion KRW in 2020, accounting for 4.6% of consolidated gross sales.

In its disclosure at the time, KT&G explained, "Due to strengthened regulations on cigarettes in the U.S. and intensified market competition, a review of the U.S. business was necessary." It also noted that regulations were tightening with the FDA's legislative push for nicotine reduction regulations, the Department of Commerce's anti-dumping investigation, and the Department of Justice's comprehensive document submission order concerning tobacco product regulatory compliance.

This content was produced with the assistance of AI translation services.