KT&G under investigation in U.S. for 'omitting harmful product details'

KT&G has been investigated by the U.S. Department of Justice and the Food and Drug Administration since 2021 for allegedly omitting information on harmful tobacco substances in its products launched in the United States.

KT&G's cigarette brands that were sold in the United States [SCREEN CAPTURE]

KT&G, Korea's largest tobacco company, has been investigated by the U.S. Department of Justice (DOJ) and the Food and Drug Administration (FDA) since 2021 for allegedly omitting information on harmful tobacco substances in its products launched in the United States.

The company confirmed that the probes are under way, although it has neither received punishment or any notifications regarding the results.

"The Group and KT&G USA Corporation received an order from the DOJ to submit a comprehensive document on the regulatory compliance status of tobacco products sold in the U.S. and have submitted the requested information accordingly," KT&G said in a statement shared with the Korea JoongAng Daily on Wednesday.

"No notifications or sanctions related to legal violations have been received," the company said, adding that details of the investigation cannot be shared due to confidentiality issues with the DOJ.

KT&G temporarily halted its U.S. operations in December 2021, citing "intensified regulations and heightened market competition" in the country. KT&G launched Carnival cigarettes in 2007, Timeless Time in 2011 and THIS in 2017.

The company highlighted "an increased burden in responding to regulations", posed by the U.S. Department of Commerce's anti-dumping investigation, the DOJ's order to submit comprehensive regulatory compliance documents and the prolonged FDA substantial equivalence (SE) investigation, as stated in its regulatory filing on Dec. 14, 2021.

The specific reasons for document submission and details of the investigation were not explained by KT&G. Local media reports suggested that KT&G is being investigated for omitting harmful substance information in FDA reports for products Carnival and Timeless Time, both launched in the U.S.

A local media report raised concern over the possibility of KT&G failing to retrieve a long-term deposit worth 1.5 trillion won ($1.1 billion), as of the end of third quarter last year, as the result of a possible penalty. Long-term deposits, governed by escrow laws, are funds set aside with the U.S. government by tobacco-selling companies, earmarked to address potential health or physical harm to smokers. By contributing a portion of its tobacco sales, the entire amount can be reclaimed 25 years from the payment date if no major issues arise.

KT&G, however, dismissed the concerns.

"Since no problems related to the company have arisen thus far, the company expects to receive gradual reimbursements starting from 2025 and contingent on the payment schedule," it stated.

The company is currently in the process of selecting its next CEO.

BY SEO JI-EUN [seo.jieun1@joongang.co.kr]