Violation of the Customs Act

Customs evasion is the act of evading customs duties by falsely reporting the dutiable value or tax rate, or through nonreporting or a false reduction, exemption, or refund(Customs Act, Article 270(1), (4), and (5)).

Common examples include submitting false invoices, concealing transaction conditions, and falsifying the country of origin.

As with tax evasion, depending on the monetary threshold and whether the conduct is habitual, the Act on Aggravated Punishment of Specific Crimes may apply, resulting in a heavy sentence.

This means failing to file an import declaration or importing goods that differ from the declaration(Customs Act, Article 269(2)), and the level of punishment is applied on a graduated basis according to the value of the goods and whether the offense is habitual.

In particular, where the value of the imported goods is 200 million won or more, or where the offender forms a group or organization or acts habitually, the conduct is treated as a serious crime under the Act on Aggravated Punishment of Specific Crimes.

This applies when a person who is not qualified to import does so, or evades customs duties, through a disguised import, an import under another person's name, falsification of the country of origin, or similar means(Customs Act, Article 270(2)).

The punishment is aggravated according to the value of the imported goods and whether the offense is organized or habitual.

This applies when a person fails to file a declaration upon export or return, or exports goods that differ from the declared content, and it may also involve violations of the Foreign Trade Act and the Foreign Exchange Management Act (Customs Act, Article 269(3)).

Where the value of the goods is 500 million won or more, or where the offense is habitual or committed by a group, the offender may be subject to severe criminal punishment.

This means exporting without the prior authorization of the Korea Customs Service, such as falsely disguising an export or unlawfully diverting goods subject to export restrictions (Customs Act, Article 270(3)).

This is treated as conduct that threatens the order of international trade, and Article 6(9) of the Act on Aggravated Punishment of Specific Crimes applies to group offenders and habitual offenders.

Under the Customs Act, knowingly acquiring, transferring, transporting, storing, brokering, or appraising goods that have been smuggled in or out or unlawfully imported or exported is punishable in every case (Article 274 of the Customs Act).

In particular, where a person systematically aids the distribution of smuggled goods or handles them repeatedly, the conduct is treated as that of a group or habitual offender, and the sentence is aggravated.

Under Article 22 of the Customs Act, the state's right to impose and collect customs duties is automatically extinguished after a certain period passes.

This period is called the extinctive prescription of the customs collection right, and it is divided as follows.

That is, a 5-year prescription period generally applies to a simple mistake or the omission of a partial amount, but where the evaded tax amount is large or the matter is serious, it may be extended to 10 years.

The statute of limitations is counted not simply from the date the assessment was made but from the specified reference dates below.

A mistake about the starting date may therefore leave a risk of additional assessment or criminal punishment, so caution is required.

Because the starting date varies depending on the taxpayer's conduct or the measures taken by the taxing authority, a detailed review of the relevant materials is necessary to determine whether the limitation period has run.

If a taxpayer becomes aware of an error or shortfall in the customs duties declared and paid, the taxpayer may reduce liability in advance through the tax amount correction or amended declaration system.

If a taxpayer realizes that the tax amount paid was excessive, the taxpayer may request a refund through a claim for correction within 5 years of the initial declaration date.

Conversely, where the customs office discovers a shortfall in the tax amount through an investigation or other means, it may impose an additional assessment through an ex officio correction, in which case the taxpayer may contest it by proving a justifiable ground or an error.

Where customs duties are delinquent, the customs office may proceed with compulsory collection, such as attachment and public auction, in accordance with the National Tax Collection Act.

To prevent such preliminary measures, it is advisable to apply for a deferral of payment or to establish an early payment plan, and a deferral or payment in installments can be arranged through the taxpayer's explanation and negotiation.

Our law firm includes a number of specialist attorneys with an average of more than 10 years of experience, including tax specialist attorneys registered with the Korean Bar Association.

As a result, in cases involving a violation of the Customs Act, practical and specialized legal support is available, from responding to the investigation at the early stage of the case to building a defense strategy after indictment and responding at trial.

We also work through a collaborative system with in-house tax accountants, certified public accountants, and customs specialists, allowing us to provide comprehensive accounting and tax responses across customs practice as a whole.

If you are being investigated by the customs office or an investigative agency on suspicion of violating the Customs Act, or there is concern that the matter may proceed to criminal proceedings, please request a consultation with a tax specialist attorney.