The Korean government regulates export of strategic items under the Foreign Trade Act and multinational export control regimes to comply with global agreements and ensure national security. The strategic items are identified in Annex 2 (Dual Use Items) and Annex 3 (Munition Items) of the Public Notice on Export Control of Strategic Items. Prior permission is required in advance of exporting any item specified in these lists. The term "strategic item" encompasses both goods and technologies, and can be classified into (i) dual use items (materials, production equipment, electronics, information security, sensors, lasers, marine, and aerospace); (ii) nuclear items; and (iii) military items. Notably, "dual use items" are often overlooked and exported without obtaining the necessary approvals since they are generally seen as everyday goods or technologies. Thus, please take extra care in reviewing the "dual use items" to ensure proper compliance.
Moreover, the Korean government has strengthened regulations on export of strategic items by amending the Foreign Trade Act, which was promulgated on March 18, 2020 and is scheduled to go into effect on June 19, 2020 ("Amendment"). The Amendment includes the following provisions:
- export permission ("situational permission") is now required if there is suspicion of using an item to manufacture "conventional weapons" (whereas previously situational permission was needed only for missiles or weapons of mass destruction). In this context, "conventional weapons" refers to nearly all kinds of weapons, except for nuclear and biochemical weapons, such as tanks, bombs, firearms, military aircrafts, etc.;
- exporters who would like to directly classify strategic items themselves, must participate in a training session (regarding how items can be classified as strategic items) and details about any strategic item must be registered in the export and import management system (violation in either of these requirements may result in a fine not exceeding KRW 5 million); and
- the definition of exporters who fall under the Amendments has been enlarged from only exporters to include anyone who has filed an export declaration, which enables imposition of criminal and administrative penalties on unauthorized export declarations (e.g., discovered through customs investigation), in addition to the export itself.
Further, through revision to the Enforcement Decree of the Foreign Trade Act, the Ministry of Trade, Industry and Energy ("MOTIE") has significantly increased the amount of administrative fines as shown below.
Act of Violation |
Fine (KRW 10k) |
||
1st violation |
2nd violation |
3rd violation |
|
Previous → After amendment |
Previous → After amendment |
Previous → After amendment |
|
Violation of obligation of document storage (Article 24-2, obligation of storing documents for 5 years)
|
50 → 500 |
250 → 700 |
1000 |
False report, failure to report, false submission, or failure to submit required report or data (Article 48(1))
|
50 → 1000 |
250 → 1500 |
1000 → 2000 |
Refusal/interference/avoidance of inspection (Article 48(2))
|
50 → 1000 |
500 → 1500 |
1500 → 2000 |
Failure to undertake training (Article 49) |
50 → 500 |
250 → 700 |
1000 |
Accordingly, we recommend that you review (1) whether your products correspond to strategic items subject to export permission (license) or specific non-strategic items subject to situational permission and (2) whether documents related to expert determination or export permission are being kept for at least 5 years. Furthermore, it would be essential to evaluate whether your company implements adequate policy or system with respect to export controls of strategic items, and whether it is being operated in an effective manner.
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