Semiconductor Smugglers Caught in South Korea: $10 Million Scheme Uncovered

Semiconductor IC chip, intended for smuggling into China, was seized by the Seoul Customs. Photo provided by the Korea Customs Service

A Korean distributor was caught attempting to smuggle $10.4 million worth of strategic materials, disguised as sample products, to China without an export permit.

Seoul Customs announced on the 25th that it had sent the CEO B (male, in his 40s) and Director C (male, in his 40s) of company A, who had smuggled strategic semiconductors into China, to the Seoul Central District Prosecutors’ Office without detention on charges of violating the Foreign Trade Act, Customs Act, and Act on the Regulation of Punishment of Criminal Proceeds Concealment.

Strategic materials refer to items or technologies applicable to developing or manufacturing weapons of mass destruction, such as nuclear weapons, biochemical weapons, missiles, conventional weapons, etc., or goods that can be converted for use in weapon manufacturing.

B and C, while operating company A, a Korean distributor of overseas electronic components, purchased American communication semiconductors imported for domestic use by a Korean communication equipment development company and smuggled them to China without declaring them to customs. The semiconductors produced by a global semiconductor manufacturer in the United States are exclusively distributed in Korea through an official agency, making it impossible for a non-end user like company A to import the product. As a result, it was confirmed that company A had the Korean communication equipment development company import more semiconductors than necessary through the official distribution agency in Korea, receive the excess quantity, and smuggle it out.

In particular, Company A repackaged the semiconductors purchased from the Korean communication equipment development company in small quantities, disguised them as sample products, and smuggled them to China by air 144 times from August 2020 to August 2023. Of the 96,000 semiconductors company A smuggled out, 53,000 are classified as strategic materials. Exporting such materials requires submitting a usage statement, an import purpose confirmation certificate (issued by the import country’s government), and a pledge from the importer and the final user to the Minister of Industry, Trade, and Energy to receive an export permit. However, company A did not accept this.

Company A, to recover the smuggling money, exported low-cost semiconductors to Hong Kong and, despite the actual price being about $3,400, inflated it to approximately $5.6 million and falsely declared it to customs. After that, they submitted the false shipping invoice as evidence to the bank, received $5.6 million for the smuggling of semiconductors, and laundered the remaining balance through illegal methods such as alternative remittance systems. A customs official said, “The U.S. is tightening control over semiconductor exports to China, so there is a high risk that Korea will be used as a detour route. We will sternly respond to crimes of smuggling and illegal exports of strategic materials and controlled goods through continuous monitoring and information analysis.”