CONTENTS
- 1. Overview of the Foreign Trade Act Violation Case
- 2. The Court's Determination on the Foreign Trade Act Violation Charge
- - Implications of the Foreign Trade Act Case Judgment
- 3. Criteria for Determining the Scope of the Foreign Trade Act Violation Charge
- - The Framework for Determining the Establishment of Illegality
- - The Scope of Responsibility by Representative, Officers, and Working-Level Staff
- - Daeryun's Role
1. Overview of the Foreign Trade Act Violation Case
This case, in which the defendants were indicted on charges of violating the Foreign Trade Act, centered on a representative director who had established and operated a defense contractor after retiring from the navy as a commander, and it concerned the conduct of that company's officers and employees, along with personnel involved in the technology transfer, in transferring strategic technology relating to submarine torpedo launch tubes and storage facilities to the Taiwanese side.
According to the prosecution's charged facts, the defendants entered into a contract to supply submarine equipment with a Taiwanese state-owned shipbuilding and defense institution, and in the course of performing that contract they provided, or directed the provision of, technical data with very high military applicability, such as the system design technology, detailed design technology, and production drawing preparation technology for the torpedo launch tubes, without the export permit or expert classification ruling of the Administrator of the Defense Acquisition Program Administration, by means such as USB drives, email, and CDs.
The technical data at issue in this case was assessed as exceeding the level of ordinary mechanical design and as material that could be applied directly to an actual submarine weapons system, and some of it was printed out and used in Taiwan, so it was found that the overseas transfer of strategic technology had effectively occurred.
The prosecution therefore concluded that the defendants' conduct constituted the unauthorized export of strategic items under the Foreign Trade Act and brought the indictment.
2. The Court's Determination on the Foreign Trade Act Violation Charge
The court first treated whether the transferred technical data constituted 'strategic items' under the Foreign Trade Act as the central issue.
It then found that the data constituted strategic items, citing that the design and production technology relating to submarine torpedo launch tubes and weapons systems carried an extremely high possibility of military diversion and could cause serious harm to national security if it spread internationally.
The defendants argued that some of the technology was merely a supplementation and reorganization of existing material provided by the Taiwanese side or was technology that had already been disclosed, but the court did not accept this.
The court held that even where existing material served as the basis, the result may be assessed as independent strategic technology if design judgments, technical integration, and structural supplementation were carried out in the process.
The court also assessed each defendant's role and degree of involvement in concrete terms.
As to the person who served as the representative of the defense contractor and exercised actual decision-making authority, the court found a heavy degree of responsibility for leading the structure of the strategic technology export and for circumventing the permit procedures, and it imposed an actual custodial sentence of two years and six months' imprisonment.
By contrast, for some defendants who were involved in providing and conveying the technology but participated in a limited capacity under direction, the court imposed suspended sentences (a suspended sentence under Korean law, broadly comparable to a suspended sentence or probation in common-law systems, under which the conviction loses its effect once the suspension period passes without incident) or comparatively lighter sentences, taking into account the scope of their involvement and their degree of responsibility.
In addition, considering that the profits generated by the offense in this case were enormous, the court also ordered the collection of the equivalent value of criminal proceeds amounting to approximately KRW 95 billion.
This may be viewed as a measure reflecting a strong intent to treat the unauthorized export of strategic technology as close to a leak of technology and to thoroughly strip away the resulting economic gains.
Implications of the Foreign Trade Act Case Judgment
This judgment on the violation of the Foreign Trade Act made clear that, in the defense and military supply sector, even where a technology transfer was carried out as part of contract performance, it is difficult to avoid criminal liability if the export permit procedure was not followed.
It carries particular significance in clarifying that the qualification as a strategic item is not negated merely because the technology originated abroad or because the work was a supplementation based on existing material.
This judgment also goes beyond issues at the corporate level: by directly holding the actual decision-maker and the key participants individually criminally liable and ordering a large-scale collection of criminal proceeds, it sends a strong cautionary message to defense and export companies generally.
In a Foreign Trade Act violation case, the determinations made at the early investigative stage regarding the nature of the technology, the circumstances of the transfer, and the necessity of a permit effectively shape the direction of the case.
Accordingly, where a defense or export company, or a person involved in such work, faces a similar suspicion, accurately organizing the scope of the technical data and the structure of the transfer and establishing a response strategy through professional legal review may be a key factor in determining the outcome.
3. Criteria for Determining the Scope of the Foreign Trade Act Violation Charge
This case has the distinctive feature of involving the leakage of submarine technology with high military applicability, but the court's analytical framework is not limited to defense contractors.
Where there is a structure for sharing technical data, design drawings, or process information with an overseas corporation, a foreign business partner, or an overseas affiliate, the same legal principles may apply regardless of the industry.
In particular, because the court judged the matter by reference to the substantive strategic value and the possibility of diversion rather than the name or form of the technology, ordinary manufacturing, IT, plant, and parts companies may also be affected by this judgment.
Criterion | The Court's Core Perspective |
Industry | The nature of the technology matters more than whether it is defense-related |
Scope of provision | Even partial provision is problematic if there is a possibility of integration or application |
Form of transaction | The structure of overseas transfer or sharing is itself a risk factor |
The Framework for Determining the Establishment of Illegality
A charge of violating the Foreign Trade Act is not established immediately by the mere fact that 'technology was handed over abroad.'
The court found, however, that illegality is recognized where the technology was subject to a permit or report requirement and that requirement was not followed.
In particular, it made clear that circumstances such as “it was a transaction we had customarily conducted” or “it was a business necessity” do not justify the illegality, and that illegality may be recognized if even a portion of the technology can perform a function comparable to that of a strategic item.
In practice, the starting points for determining illegality are as follows.
- Whether the technology is a strategic item or carries a possibility of military diversion
- Whether it is subject to a prior permit or reporting obligation
- Whether this could have been recognized or foreseen during the overseas transfer
The Scope of Responsibility by Representative, Officers, and Working-Level Staff
A notable aspect of this case is that responsibility expanded in stages according to the degree of involvement, rather than being confined to particular positions.
Criminal liability was at issue not only for the representative but also for officers and working-level staff, and even a mere act of conveyance did not negate liability where there was awareness.
Category | Criterion for Determining Responsibility |
Representative | Decision-making and management responsibility at the corporate level |
Officer | Whether the officer planned, approved, or aided the technology transfer |
Working-level staff | Whether the staff was aware of the nature of the technology and the degree of involvement |
The court's determination in this case showed that what matters more than a title is the substantive role and the level of awareness.
In a Foreign Trade Act violation case, the response at the stage before the investigation begins, rather than after it has commenced, determines the outcome.
By the time a request for documents, a contact for fact-finding, or a notice of an inspection relating to foreign exchange or trade is received from the Korea Customs Service or a customs office, the matter has, in all likelihood, already come to attention.
Because the direction of statements and document submission at this stage often fixes the scope of criminal liability, professional assistance is needed immediately in situations such as the following.
- Where the structure of an overseas technology transfer has been internally raised as a concern
- Where technology of unclear strategic-item status has been provided abroad
- Where there are signs that a customs office or the Korea Customs Service is commencing an investigation relating to foreign exchange or trade
Daeryun's Role
At the early stage of responding to a Foreign Trade Act violation case, Daeryun Law Firm LLP closely analyzes the nature of the technical data and the structure of the transfer to determine whether it constitutes a strategic item, and it reviews the possibility of an omitted permit or report.
Thereafter, at the investigation stage, it designs the strategy for statements and the scope of document submission so as to defend against an unnecessary expansion of liability, and it manages the customs and administrative risks that proceed in parallel with the criminal process on an integrated basis.
Area of Response | Daeryun's Role |
Technical analysis | An attorney handling corporate matters assesses strategic-item status and the possibility of diversion and provides advance advisory |
Investigation response | Establishing a strategy for statements and document submission |
Criminal procedure | Defense to narrow the scope of liability |
Derivative risks | A customs specialist who holds a licensed customs broker qualification, together with an attorney handling international trade matters, provides integrated response to customs and administrative sanctions |
This kind of structural and proactive response is a key factor that can substantially lower the risk of an actual custodial sentence and a large-scale collection of proceeds.
In addition, Daeryun can assist a client's case through attorneys with experience in matters such as defense industry advisory.
If you need assistance with a related matter, you are welcome to make a 🔗legal consultation reservation at any time.
See More
