This is how it worked in v12.0.5 HF2 and v12.3.0.
With v12.0.8, v12.0.9, and v12.3.1, it no longer works this way. In these versions, regardless of the value of the keepFolderLinks parameter, ImportObject behaves as if the parameter were set to true.This also affects the Java User Interface and Automic Web Interface. The problem appears to lie with the Automation Engine itself, and not the Java APIs (uc4.jar).I reported the problem to Broadcom in case 20110674. Has anyone else observed this problem?See also this old (somewhat) related bug:overwriteLinks parameter of ImportObject class is named & documented incorrectly
In case you replace the objects, activate Keep existing folder links if you want to preserve the object links as they were in the original system. This means that links to objects from the Favorites list, dashboards, etc. will work in the target system, you do not have to recreate them.