South Korea uncovered chip smuggling case to China for the first time, involving 96,000 chips worth US$11.6 million
Latest update time：2024-01-30
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According to Korean media BusinessKorea, South Korean customs recently uncovered a chip smuggling case and arrested an executive of a semiconductor chip distribution company, accusing the executive of smuggling U.S.-made chips to China with a total value of US$11.6 million.
Seoul's main customs office announced on January 25 that it had handed over the 40-year-old CEO and executives of Company A, which distributes overseas electronic components in South Korea, to the Seoul Central District Prosecutor's Office, but was not detained, on charges of violating the Foreign Trade Regulations. Act, Customs Act and Criminal Proceeds Seizure Regulation Act.
Since these chips are classified as strategic items, they can only be used in South Korea after being imported, and re-export is prohibited. Therefore, the executive violated relevant regulations by transporting it to China. This is also the first time that South Korean customs has uncovered the case of using South Korea as a tool to smuggle imported foreign-made chips into China. The scale of this smuggling operation was so large that an entire company (referred to as "Company A") was behind the scenes rather than one person. All of the company's executives have been charged by prosecutors for crimes committed over three years.
According to a notification from Seoul Customs, from August 2020 to August 2023, "Company A" legally purchased chips made in the United States and imported them to South Korea. Some of the chips were shipped to China via 144 air shipments without being declared to customs. These chips have been designated as strategic projects by the Korean government in 2020. These chips can convert analog signals into digital signals. Since they may be used in non-civilian applications, they do not have export permission from the Korean government.
The investigation showed that Company A smuggled 96,000 chips worth approximately 13.9 billion won (US$11.6 million) in three years, of which 53,000 chips worth 11.8 billion won were classified as strategic items. The chips involved are produced by a U.S. semiconductor manufacturer and are only supplied domestically through official Korean distributors, which requires the importer to provide an end-user certificate and a no-export commitment for distribution management. Therefore, importation by an entity other than the end user (such as Company A) is generally not possible.
Company A circumvented these restrictions by having domestic telecommunications equipment development companies import IC chips in excess of demand through official Korean distributors, and then obtained the excess through smuggling. The chips were repackaged in small batches and shipped to their destination disguised as samples without obtaining the necessary export permission from the Minister of Trade, Industry and Energy.
Their profit plans are carefully planned. When they exported semiconductor components worth only 4 million won to China, they exaggerated their value to 7.5 billion won, made false declarations to customs, and submitted forged documents to banks to obtain smuggling proceeds.
A key difference between the South Korean smuggling operation and most other smuggling operations is that the goods were all successfully smuggled and the crime was not discovered until months after it was reported to have ended. The CEO and executives of “Company A” could face serious consequences.
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