As Kumho Tire faces a lawsuit in the United States from a local logistics company claiming $3.15 million (about 4.5 billion won) in unpaid fees, it is now also subject to an investigation by the Korea Fair Trade Commission. The logistics company says Kumho Tire inserted a logistics firm linked to its Chinese major shareholder as a middleman to pressure price cuts and failed to pay properly. Kumho Tire fully denies the allegations, saying the issue arose between a subcontractor and a sub-subcontractor and that all transportation fees were paid.
According to the tire industry on the 31st, Korean American logistics company James Worldwide filed a complaint against Kumho Tire with the Korea Fair Trade Commission on the 21st. The reason cited is a violation of the Monopoly Regulation and Fair Trade Act. James Worldwide also said it "plans to additionally file a National Tax Service report or request a tax audit."
◇ "After a direct contract, a middle agent was inserted, a typical 'tollgate transaction'… fees also unpaid"
The dispute began in Feb. 2024, when James Worldwide was selected through bidding as a carrier for certain North American routes of Kumho Tire's U.S. subsidiary. Just 14 days later, however, the U.S. unit allegedly demanded that transactions be conducted through Melis, a logistics agent, according to James Worldwide. James Worldwide also claims Melis asked to re-sign the contract at a price lower than the original bid and continued to press for various unit price cuts.
A James Worldwide official said, "Even after the transaction structure changed (with Melis inserted), actual transportation instructions and operations were still handled by Kumho Tire's U.S. subsidiary," adding, "Direct transactions were possible and transportation was in fact being carried out directly, but inserting a company (Melis) with an unclear substantive role in the middle to provide economic benefits constitutes a 'tollgate transaction.'"
James Worldwide also argues that payment was not properly made. The company said, "We billed $3.5 million (about 5.02 billion won) for three months of transportation fees, but the amount Melis actually paid was only $350,000, about one-tenth."
James Worldwide believes Kumho Tire's U.S. subsidiary was aware of and neglected the nonpayment of transaction fees by Melis. According to a transcript James Worldwide attached to its FTC complaint, an official at Kumho Tire's U.S. unit said, "It's not that Melis doesn't have money (to make the payment)," and added to James Worldwide, "It's because they failed to manage whom to pay."
James Worldwide ultimately filed a local lawsuit in Nov. 2024 against Kumho Tire's U.S. subsidiary seeking payment of $4 million in transportation fees. A ruling is due on Aug. 24.
◇ Kumho Tire says "an issue between a subcontractor and a sub-subcontractor… all transportation fees paid"
Kumho Tire fully denies the allegations, saying James Worldwide is confusing separate business contracts. The disputed contract, it says, involves Melis, a subcontractor of Kumho Tire's U.S. unit, awarding a sub-subcontract to James Worldwide, making it an issue between the two logistics firms.
A Kumho Tire official said, "Kumho Tire's U.S. subsidiary, as a warehouse third-party logistics (3PL) operator, selected and contracted with a carrier called Melis, and for other overland routes selected James Worldwide and others through route-by-route bids," adding, "James Worldwide's claim that it did not receive transportation fees from Melis concerns warehouse 3PL work, and we did not have a direct contract with James Worldwide for that." Kumho Tire says it paid Melis the full amount for this work.
Kumho Tire said it paid all fees for transportation work directly contracted with James Worldwide and that the work has concluded. A Kumho Tire official said, "Even in the ongoing U.S. lawsuit, transportation fees for sections directly contracted between James Worldwide and Kumho Tire's U.S. subsidiary were not at issue."
◇ Allegations of intervention by the Chinese major shareholder as well… Kumho Tire says "not true"
James Worldwide is also questioning who is really behind Melis. Given Melis' track record and how it became involved in the transactions, the company contends that China's Doublestar, Kumho Tire's major shareholder, is backing Melis. In a transcript submitted to the FTC, an official at Kumho Tire's U.S. unit is heard saying, "Because the Chinese company decided, we have no choice but to use (Melis), and it is absolutely not my choice."
James Worldwide said, "If it is true that, under the decision of the Chinese major shareholder, a specific company occupied a key point in the U.S. logistics network and even the local subsidiary could not control that company, it must be verified whether the transaction structure between a listed company and its overseas subsidiary under the controlling shareholder's influence was used to provide unjust economic benefits to a particular company."
Kumho Tire said the staffer who made the remarks has since left the company, making it difficult to verify, but added, "All the allegations raised are not true," and "We selected carriers according to due process."