Kim You-mi, chief executive of accessories maker J.ESTINA, received a suspended prison term in a first trial ruling on charges of removing country-of-origin labels from Chinese-made watches and selling them as domestic products. The court rejected the CEO's claim that she had been unaware of the practice because it was never reported to her internally.
The Seoul Eastern District Court's criminal division 1, presided over by Judge Yang Hwan-seung, sentenced Kim at around 2:14 p.m. on the 15th to one year in prison, suspended for two years, on charges including violations of the Foreign Trade Act and the Act on the Development of Market Channels for Small and Medium Enterprises. Four other company employees tried alongside the CEO were each fined 8 million won.
Kim and the others are accused of using acetone and other solvents to remove "Made in China" markings from about 120,000 watches imported from China between 2017 and 2023, then selling them as if they were domestically produced. They also face charges of supplying watches sourced from other companies to the Public Procurement Service while passing them off as in-house products.
The employees other than Kim had admitted to the charges, while the CEO denied wrongdoing during the trial, saying the removal or false labeling of country-of-origin markings had never been reported and was not known.
The court, however, found it difficult to accept the claim of ignorance about the origin issue, citing the CEO's position, the company's internal reporting structure and the symbolic importance of the watch business. "The practice of removing country-of-origin markings from watches imported from China and attaching labels listing the Republic of Korea, then selling them, was carried out systematically within the company over several years," the court said. "It does not stand to reason that employees would not report a matter of such gravity, or that the defendant did not know."
Specific reporting records also formed the basis for the guilty finding. The court concluded that Kim was aware by February 2022 at the latest that Chinese-made watches were being sold with their origin markings removed and replaced with Korean labels. It also pointed to business plans drafted afterward that referred to the need to resolve risks tied to the "country-of-origin issue."
On the public-institution bidding, the court likewise found it hard to believe that Kim, as the final decision-maker, was unaware of the matter. It said it was implausible that working-level staff would have pursued something capable of affecting the company's reputation on their own without informing the CEO.
"We did not accept the charges merely on the grounds that all the employees involved have admitted to them and that the CEO must therefore have known," the court said. "We reached a guilty verdict on the basis of specific evidence."
Mitigating factors included the fact that the improper practices surrounding country-of-origin labeling had continued from before Kim took office as chief executive. "The defendant did not actively commit the offense with definite intent from the outset, and this can be assessed as passive acquiescence in a longstanding wrong," the court said, adding that it also took into account the absence of any notable prior record of punishment.
"In light of the methods used, the culpability is serious," the court said. "It caused grave harm to foreign trade and damaged consumer trust, disrupting the order of commerce."