CONTENTS
- 1. Customs Appeal | Definition
- - Occurrence of Disputes and the Need to Respond
- 2. Customs Appeal | Main Types
- - Customs Valuation Errors and Transfer Pricing Disputes
- - Disagreements over Tariff Classification (HS Code)
- - FTA Rules of Origin and Customs Investigations
- 3. Customs Appeal | Applicable Laws and Procedures
- - Pre-Disposition Remedies
- - Post-Disposition Remedies
- 4. Customs Appeal | Punishment When Customs Act Violation Charges Apply
- - Sentencing Standards
- 5. Customs Appeal | Points to Note When Proceeding with Objection Procedures
- - Situation Review Checklist
- 6. Customs Appeal | Daeryun's Assistance
1. Customs Appeal | Definition
A customs appeal refers to the administrative and judicial procedures by which a taxpayer whose rights or interests have been infringed by an unlawful or unfair disposition of the customs authorities requests the cancellation or modification of that disposition.
In a rapidly changing global trade environment, a company may be exposed to the risk of an unexpected customs assessment or criminal punishment, so it should clearly understand these procedures.
If an export and import company does not agree with a customs office's advance notice of taxation or a tax assessment, it may raise an objection in accordance with the procedures prescribed by law.
This is a system established to prevent abuse of the state's taxing power and to protect taxpayers' rights and interests, and it is operated in two forms: pre-assessment remedy procedures and post-assessment remedy procedures.
Occurrence of Disputes and the Need to Respond
If a company makes decisions based solely on tax-saving purposes or establishes a strategy that does not adequately consider complex customs regulations, it will face disadvantages such as additional tax collection and the imposition of penalty taxes during the customs post-clearance audit process.
For this reason, the process of diagnosing potential dispute factors in advance from the time a trade transaction structure is designed or a new contract is concluded, and preparing an immediate legal response when a disposition is issued, is indispensable.
2. Customs Appeal | Main Types
Customs appeal procedures mainly arise in disputes related to the determination of the customs value of imported goods, tariff classification, and violations of rules of origin.
To contest a customs assessment, a specific disposition by the customs authorities must exist, and it must be proven that an unfair infringement against the taxpayer has occurred.
Customs Valuation Errors and Transfer Pricing Disputes
This is one of the most frequent types of disputes arising in transactions between multinational corporations, concerning how the dutiable value of imported goods should be determined.
Disagreements arise between customs authorities and importers over whether royalties (license fees), post-importation compensation funds, marketing expenses, and similar items should be added to the dutiable value, and the appropriateness of transfer pricing is also examined in depth.
Disagreements over Tariff Classification (HS Code)
Because the tariff classification applied to imported goods serves as the core standard for determining the duty rate, a difference in classification standards directly leads to a difference in the duty amount.
In particular, for items such as complex electronic devices incorporating new technologies, chemical products made of new materials, and specialized medical equipment, customs authorities may issue an arbitrary reclassification disposition on the ground that the goods do not fit the existing classification system.
FTA Rules of Origin and Customs Investigations
To qualify for preferential tariffs under a free trade agreement (FTA), strict rules of origin and the principle of direct transport must be satisfied.
During post-importation origin verification, cases frequently arise in which preferential tariff treatment is denied on the ground of incomplete documentation or failure to meet the criteria, and the duties previously reduced are collected all at once, which becomes a major cause of objections to taxation.
3. Customs Appeal | Applicable Laws and Procedures
The procedures for objecting to customs dispositions are specifically set out in the Customs Act, and a claim may be dismissed if each stage of the remedy procedure is not pursued within the prescribed period.
The objection procedures are divided into pre-disposition remedies and post-disposition remedies, and the principle of mandatory administrative adjudication, which must be completed before proceeding to administrative litigation, applies.
These include the pre-assessment review, which allows an objection to be raised before a disposition is issued, as well as the request for reconsideration, request for review, and request for tax tribunal judgment filed after a disposition, and each claim must be filed in strict compliance with the prescribed deadlines.
Pre-Disposition Remedies
One pre-disposition remedy is the request for a pre-assessment review.
This is a procedure in which a taxpayer requests a review of legality in response to an advance notice of assessment, by which the head of a customs office notifies the taxpayer of the contents before collecting duties.
The request must be filed with the head of the customs office or the Commissioner of the Korea Customs Service within 30 days from the date of receiving the notice of the assessment disposition, and if it is upheld, this is the most effective stage for preventing the assessment disposition in advance.
Post-Disposition Remedies
When an unjust assessment disposition has already been issued, the objection procedure must be pursued within 90 days from the date of receiving the notice of the disposition.
A request for review may be filed with the Commissioner of the Korea Customs Service, or a request for adjudication may be filed with the President of the Tax Tribunal.
In particular, to file a customs administrative lawsuit, one must necessarily complete either a request for review or a request for adjudication in accordance with the law.
If the right cannot be remedied even through administrative adjudication procedures, such as a dismissal decision by the Tax Tribunal, an administrative lawsuit may be filed with the competent court within 90 days from the date of receiving the written decision.
At this stage, the legal dispute becomes more intense, and systematic argument through analysis of similar precedents and specific examination of evidence is required.
4. Customs Appeal | Punishment When Customs Act Violation Charges Apply
When conduct is found to involve intentional duty evasion, smuggling, or price manipulation, it may lead not only to the imposition of taxes but also to criminal punishment for violation of the Customs Act.
There is a possibility that an individual business operator or a company's executives and employees may be investigated as suspects.
Applicable Provision | Type of Crime | Level of Punishment |
| Customs Act Article 269 | Smuggling | Imprisonment of up to 5 years or a fine of up to 70 million won |
| Customs Act Article 270 | Duty evasion | Imprisonment of up to 3 years or a fine of up to the higher of five times the evaded duty amount or the original price of the goods |
| Customs Act Article 270-2 | Price manipulation | Imprisonment of up to 2 years or a fine of up to the higher of the original price of the goods or 50 million won |
| Customs Act Article 276 | False declaration and related offenses | A fine of up to the higher of the original price of the goods or 20 million won |
Sentencing Standards
In Customs Act violation cases, the sentence is determined with reference to the sentencing guidelines of the Sentencing Commission.
Mitigating Factors
ㆍ Where the offender made a sincere effort to fulfill the tax obligation or to repair the harm (such as voluntarily paying the evaded duty amount)
ㆍ Where the offender voluntarily surrendered from the early stage of the investigation or voluntarily reported internal misconduct
ㆍ Where the offender is a first-time offender with no record of criminal punishment
ㆍ Where the criminal intent was weak due to a simple procedural error
Aggravating Factors
ㆍ Where the scale of the evaded duty amount or smuggled goods was enormous and caused serious harm to the national economy
ㆍ Where active deceptive acts such as document forgery accompanied the tax evasion or smuggling
ㆍ Where the offender obstructed the investigation by the investigating agency or attempted to destroy or conceal evidence
ㆍ Where the offender reoffended during the repeat-offense period after being punished for a related crime
5. Customs Appeal | Points to Note When Proceeding with Objection Procedures
When proceeding with a pre-assessment review or an appeal to the Tax Tribunal, the burden of proving the illegality of the disposition rests with the claimant, so a response strategy must be prepared by reviewing relevant laws, opinions of the WCO (World Customs Organization), precedents of the Tax Tribunal, and similar materials.
In this process, it is important to verify the requirements for protecting trade secrets and to follow the procedures so that sensitive internal company information is not exposed.
Situation Review Checklist
ㆍ Has the customs authority pointed out the appropriateness of royalties or transfer pricing policy in transactions with the headquarters of a multinational corporation?
ㆍ Is there a possibility that the duty rate will change due to an HS Code classification error in goods you declared for import?
ㆍ Are you facing the risk of being excluded from preferential tariffs after a post-verification due to errors or inconsistencies in an FTA certificate of origin?
ㆍ Is a foreign exchange investigation underway or anticipated in connection with a violation of the Foreign Exchange Transactions Act or the settlement of import and export payments?
ㆍ Is the objection deadline (90 days from the date of receiving the notice of disposition) close, so that urgent legal measures are needed?
6. Customs Appeal | Daeryun's Assistance
Given the nature of customs cases in which an individual becomes a party, the direction of the initial response and the quality of the supporting materials submitted can have a decisive influence on the subsequent results of administrative adjudication and administrative litigation.
In particular, where there is a possibility that an administrative remedy procedure against an unjust assessment disposition and a criminal procedure on duty evasion charges become entangled at the same time, the final result may differ depending on which procedure is given priority and how the argument is structured.
Simply checking objectively where the current situation stands can help reduce enormous tax collection and unnecessary risk.
Daeryun Law Firm (LLC) responds to complex customs and international trade disputes based on an advanced legal system aligned with the global era.
In particular, for customs appeal cases, a one-stop response is available with a customs specialist who holds a licensed customs broker qualification, allowing assistance through a strategy tailored to the client's case.
In addition, customs attorneys and administrative law attorneys with a deep understanding of customs practice and administrative litigation procedures, together with related legal experts, cooperate through a one-firm system to operate an organic response framework ranging from criminal defense to administrative litigation and civil remedies.
If you stand at a crossroads of legal judgment over a customs appeal matter, please organize a reasonable direction for resolution through a 🔗customs attorney legal consultation reservation, drawing on accumulated analysis of and experience with similar cases.
