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A domestic distribution dealer company that smuggled semiconductor IC chips imported from the United States to China was caught by customs. Customs authorities plan to strengthen crackdowns to prevent strategic semiconductor IC chips from being smuggled to China via a detour through Korea.

The Korea Customs Service Seoul Customs Office announced on the 25th that it had sent the CEO B (in his 40s) and director C (in his 40s) of company A to the Seoul Central District Prosecutors' Office without detention on charges of violating the Foreign Trade Act, Customs Act, and the Act on the Regulation of Concealment of Criminal Proceeds.

Provided by Seoul Customs Service, Korea Customs Service

B and C are accused of operating a dealer company (Company A) that imports electronic components from overseas and distributes them domestically, and smuggling U.S.-made communication semiconductor IC chips, imported for domestic use by a domestic telecommunications equipment developer, to China.

The semiconductor IC chips smuggled to China by B and others without customs declaration were products manufactured by a global U.S. semiconductor manufacturer and supplied domestically only through Korea’s official distribution agents.

At this time, the distribution agents are required to manage distribution by receiving a final user confirmation letter and a re-export prohibition pledge from the importer. In other words, if one is not the final user of the semiconductor IC chips, it is fundamentally impossible to import the goods.

However, it was revealed that Company A colluded with a domestic telecommunications equipment developer to receive more semiconductor IC chips than needed from Korea’s official distribution agents (imported), then diverted the excess quantity and smuggled it to China.

The smuggling continued from August 2020 to August 2023, and the total number of semiconductor IC chips smuggled to China during this period was about 96,000 units, worth approximately 13.9 billion KRW. B and others were found to have packaged the semiconductor IC chips in small quantities, disguised them as samples, and smuggled them to China by air.

The problem is that among the semiconductor IC chips smuggled, about 53,000 units (worth approximately 11.8 billion KRW) are classified as strategic items. Strategic items refer to goods and technologies used in the development and manufacture of weapons of mass destruction such as nuclear weapons, biochemical weapons, missiles, and conventional weapons.

To export strategic items, according to the Foreign Trade Act, an exporter must submit a usage description, an import purpose confirmation (issued by the importing country's government), and a pledge from the importer and final user to the Minister of Trade, Industry and Energy to obtain export permission.

However, customs explained that B and others smuggled semiconductor IC chips classified as strategic items without export permission for strategic items.

Additionally, B and others are also accused of exporting low-priced semiconductor devices worth about 4 million KRW to Hong Kong to recover smuggling proceeds, falsely declaring 7.5 billion KRW to customs, and submitting false shipping invoices as supporting documents to banks to receive 7.5 billion KRW in smuggling proceeds for semiconductor IC chips. The investigation confirmed that the difference inflated by the false declaration was laundered and brought in through illegal channels such as hawala.

A Korea Customs Service official said, “In the current situation where the U.S. is strengthening semiconductor export controls against China, concerns are growing that Korea could be exploited as a detour export route for strategic items,” adding, “The Customs Service plans to respond strictly to smuggling and illegal export crimes of strategic items and export-controlled high-risk goods through continuous monitoring and information analysis.”

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