CONTENTS
- 1. Export Control | Overview
- - Why It Matters for Export and Import Companies
- 2. Export Control | Key Risks and Penalty Levels
- - Foreign Trade Act
- - Nuclear Safety Act
- - Customs Act
- - Inter-Korean Exchange and Cooperation Act
- - Defense Acquisition Program Act
- 3. Export Control | Daeryun's System for Preventive and Responsive Support
1. Export Control | Overview
Export control refers to legal measures that restrict and manage the export of goods, software, technology, and similar items.
Items and technologies that could be diverted to harmful purposes, such as military use, the development of weapons of mass destruction, or terrorist activity, are designated as controlled, and an exporter that intends to send them abroad is required to obtain prior approval from a government agency.
It is a core institutional safeguard for protecting national security and maintaining international peace.
Why It Matters for Export and Import Companies
Export control is not a concern only for defense and nuclear companies.
Companies that handle dual-use items, which are intended for civilian use but can be diverted to military use, such as semiconductors, telecommunications equipment, drones, optical devices, and software, are subject to regulation.
Exporting without a license or failing to properly verify the end user invites serious criminal punishment and administrative sanctions.
2. Export Control | Key Risks and Penalty Levels
Export control is not governed by a single statute but instead follows a structure in which multiple statutes each apply depending on the item and its nature.
An exporting company should first determine accurately which statute governs its own items.
Statute | Competent Ministry | Main Controlled Items |
Foreign Trade Act | Ministry of Trade, Industry and Energy | Export, re-export, and transfer of strategic items, dual-use items, and technology |
Nuclear Safety Act | Nuclear Safety and Security Commission | Nuclear-specific items, nuclear material, and related technology |
Customs Act | Ministry of Economy and Finance, Korea Customs Service | The entire export and import declaration and customs clearance stage |
Inter-Korean Exchange and Cooperation Act | Ministry of Unification | Outbound shipment of goods to North Korea, trade, and cooperation projects |
Defense Acquisition Program Act | Defense Acquisition Program Administration | Export and brokering of defense materiel and defense science and technology |
Foreign Trade Act
The Foreign Trade Act is the basic law of Korea's export control regime, and anyone seeking to export strategic items or dual-use items designated and announced by the Minister of Trade, Industry and Energy must obtain an export license in advance.
The system provides for self-classification, under which an exporter determines on its own whether an item is a strategic item, and expert classification, under which the determination is referred to a specialized institution, and the exporter must verify the end user and the end use without exception.
Even if an item is not designated as a strategic item, situational licensing is required when there is a concern that it could be diverted to the development of weapons of mass destruction.
Violation | Penalty Level |
Unlicensed export of strategic items | Up to 7 years of imprisonment or a fine of up to 5 times the value of the goods |
Unlicensed export of goods subject to situational licensing | Up to 5 years of imprisonment or a fine of up to 3 times the value of the goods |
Obtaining an export license by false or improper means | Up to 5 years of imprisonment or a fine of up to 3 times the value of the goods |
Export or import of restricted goods without approval | Up to 3 years of imprisonment or a fine of up to 30 million won |
Violation of a stop-movement order or obstruction of a stop-movement measure | Up to 5 years of imprisonment or a fine of up to 100 million won |
Administrative sanction (restriction on export and import) | Restriction on the export and import of strategic items for up to 3 years |
Administrative sanction (administrative fine) | An administrative fine of up to 20 million won and an order to undergo training |
Nuclear Safety Act
The Nuclear Safety Act strictly manages nuclear material and nuclear-related items and technology through export licensing so that they are not diverted to purposes such as nuclear weapons development.
The Nuclear Safety and Security Commission handles export licensing for nuclear-specific items under NSG (Nuclear Suppliers Group) Part 1, and it reviews matters such as the importing government's assurance of non-possession of nuclear weapons and its implementation of the IAEA safeguards agreement.
Violation | Penalty Level |
Use, possession, or business activity without a license or registration | Up to 3 years of imprisonment or a fine of up to 30 million won |
Violation of a suspension order | Up to 3 years of imprisonment or a fine of up to 30 million won |
Customs Act
The Customs Act governs the entire export and import declaration and customs clearance stage, and from an export control standpoint, it provides strong penalties for conduct such as undeclared export or import, false declaration, and smuggling.
Representative types of violation include the undeclared export of prohibited goods and disguised export under a false item description.
Violation | Penalty Level |
Exporting or importing prohibited goods (smuggling) | Up to 7 years of imprisonment or a fine of up to 70 million won |
Importing goods without a declaration | Up to 5 years of imprisonment or a fine not exceeding the greater of 10 times the customs duty or the cost of the goods |
Exporting through a false declaration | Up to 3 years of imprisonment or the greater of 5 times the evaded amount or the cost of the goods |
Confiscation | Confiscation of all smuggled goods |
Inter-Korean Exchange and Cooperation Act
The Inter-Korean Exchange and Cooperation Act governs trade, cooperation projects, and the movement of people between South and North Korea, and the outbound and inbound shipment of goods to and from North Korea requires the approval of the Minister of Unification.
The outbound shipment of goods to North Korea through a circumvention transaction can also fall within this Act, and a duty to report may arise even in the event of an unexpected contact abroad.
Violation | Penalty Level |
Outbound or inbound shipment of goods without approval | Up to 3 years of imprisonment or a fine of up to 30 million won |
Carrying out a cooperation project without approval | Up to 3 years of imprisonment or a fine of up to 30 million won |
Violation of approval conditions (visits to North Korea, shipments, cooperation projects, transport equipment, and the like) | An administrative fine of up to 3 million won |
Defense Acquisition Program Act
The Defense Acquisition Program Act strictly governs the export and brokering of defense materiel and defense science and technology.
To conduct a defense materiel export business, a company must report to the Defense Acquisition Program Administration, and each individual export requires a license from the Administrator of the Defense Acquisition Program Administration.
In particular, when Korean defense materiel incorporates U.S. components or technology, a separate re-export authorization under the U.S. ITAR may also be required, so companies must comply with domestic law and overseas export control rules at the same time.
Violation | Penalty Level |
Disclosing or misappropriating a secret learned in the course of duties | Up to 5 years of imprisonment with or without labor or a fine of up to 50 million won |
Conducting a major defense materiel export business without a report, or filing a false report | A fine of up to 5 million won |
Acquiring controlling management rights over a defense company without a license | Up to 1 year of imprisonment or a fine of up to 5 million won |
Revocation of defense company designation, restriction on bidding eligibility (administrative sanction) | Applied on a graduated basis according to the severity of the violation |
3. Export Control | Daeryun's System for Preventive and Responsive Support
Export control violations reach beyond domestic criminal punishment and administrative sanctions and form a complex risk area in which investigations and penalties by overseas authorities, including the U.S. BIS and OFAC, can unfold at the same time.
In particular, because strategic items, defense materiel, and North Korea-related transactions are subject to overlapping application of several statutes and international norms, a single transaction not infrequently constitutes multiple violations at once.
Prevention
∙ Building an end-user and end-use due diligence framework
∙ Cross-review of domestic export control statutes against overseas export control rules such as the U.S. EAR and ITAR
∙ Advice on building an internal export control compliance program and training officers and employees
Subsequent Response
∙ Responding to criminal investigations and joint penalty provisions related to export control violations
∙ Support with appeal procedures against administrative sanctions such as export and import restrictions
∙ Responding to investigations into export control violations by overseas authorities such as the U.S. BIS and OFAC
∙ Responding to investigations into violations of the Inter-Korean Exchange and Cooperation Act related to trade and cooperation projects with North Korea
Export control violations often lead to consequences that are difficult to reverse once a transaction has been carried out, so responding at the export contract review stage, or right after receiving notice that an investigation has begun, works best.
Daeryun Law Firm has many customs and international trade attorneys with experience handling export control, customs, and international trade matters.
If you need legal advice on export control, you can have your case assessed through the 🔗international trade attorney legal consultation booking.
