CONTENTS
- 1. Customs Duty Evasion | The Quota Tariff System, From a Support Policy to an Area of Criminal Risk
- - Explanation of the Concept of Quota Tariffs
- - The Core of the Government's System Improvement: Even "Delay" Is Subject to Investigation
- 2. Customs Duty Evasion | Legal Issues in Applying the Charge of Customs Duty Evasion
- 3. Customs Duty Evasion | Five Things Companies Should Review Now
- - The Essence of the Policy Signal: The Criminalization of Customs Risk
- - Responding to a Customs Duty Evasion Charge Is Advance Design, Not an After-the-Fact Response
1. Customs Duty Evasion | The Quota Tariff System, From a Support Policy to an Area of Criminal Risk
The crime of customs duty evasion is a matter that corporate management must be aware of, in that customs clearance delays or pricing methods that have continued as a matter of practice may be converted into criminal liability.
The government has formalized a policy of conducting rigorous inspections and investigations of companies that received the benefit of the quota tariff system, which it had implemented for the stated purpose of price stability since February 27, 2026, yet abused it.
In particular, it made clear that for companies that abused quota tariffs by intentionally violating the obligation to release goods from bonded areas or by inflating their declared import prices, it will conduct special investigations premised on applying the crime of customs duty evasion.
Because this represents a shift toward a response centered on criminal punishment, it is not a matter that companies should regard lightly.
Explanation of the Concept of Quota Tariffs
A quota tariff is a system that temporarily reduces the tariff on specific items by up to 40% in order to stabilize prices and expand supply.
The scale is considerable, with support of more than 1 trillion won provided each year for roughly 100 items since 2022.
The problem is that some importers have abused this system in the following ways.
- Intentionally delaying domestic distribution after filing the import declaration
- Delaying the release of goods from bonded areas to secure a price margin
- Inflating and declaring import prices at a higher value
- Securing only the profit without distributing the quota tariff recommended volume
The government regards this as constituting the crime of customs duty evasion.
Article 270 of the Customs Act (Crime of Customs Duty Evasion, etc.)
1. A person who, in order to affect the determination of the tax amount, imported goods by falsely declaring the dutiable value, the tariff rate, or the like, or without filing a declaration (including purchasing agents under Article 19(5)1(c))
2. A person who, in order to affect the determination of the tax amount, applied for advance examination or reexamination under Article 86(1) or (3) or reexamination under Article 87(3) by furnishing false documents
3. A person who, for the purpose of evading matters whose import is restricted under statutes, imported goods as parts, or imported an incomplete or unfinished article having the principal characteristics, or a finished product, by dividing it into parts
The crime of customs duty evasion is an offense applied where customs duties are reduced, exempted, or evaded by wrongful means under the Customs Act, and it is a serious offense that may be punished by imprisonment for not more than three years or a fine not exceeding the higher of five times the evaded customs duty amount or the value of the goods.
The Core of the Government's System Improvement: Even "Delay" Is Subject to Investigation
This system improvement has three core elements.
(2) Tightening the standard for the additional tax on delayed import declarations (30 days → 20 days)
(3) Expressly providing for special investigations and the application of the crime of customs duty evasion
The point that warrants particular attention is the view taken toward intentional release delays.
Matters that were previously regarded as mere delays may now be assessed as intentional acts aimed at unlawfully obtaining quota tariff benefits.
The head of the customs office may issue an immediate release order, and where it is not complied with, an administrative fine of 5 million won may be imposed, and where the conduct is judged to be repeated or organized, it may even lead to a criminal accusation.
From a company's perspective, a structure has emerged in which methods that had been carried out as a matter of practice may be converted into a criminal matter.
2. Customs Duty Evasion | Legal Issues in Applying the Charge of Customs Duty Evasion
For the crime of customs duty evasion to apply, the following elements are at issue.
- The existence of wrongful means
- Intent
- The scale of the customs duties reduced, exempted, or evaded
- Whether the conduct was repeated or organized
An important premise here is the quota tariff "recommendation" system.
Quota tariffs do not apply automatically to all imported volume; rather, the structure is such that a company seeking to import the relevant item can receive the reduction benefit only by obtaining a "quota tariff application recommendation" from the competent ministry or a designated recommending agency.
In other words, a recommendation is a kind of policy approval granted on the premise that "this volume is an import consistent with the purpose of price stability."
Accordingly, a problem arises where the actual distribution route differs markedly from the import purpose, the projected distribution plan, the supply schedule, and the like submitted at the time the recommendation was received.
In practice, this gap between the purpose stated at the time the recommendation was issued and the actual method of market supply becomes the key issue.
For example, where the following circumstances are confirmed, whether there was an intent from the outset to wrongfully use the customs duty reduction may be at issue, and it is at this point that the intent for the crime of customs duty evasion is assessed.
- Where the reduction was received on the premise of prompt distribution at the time of recommendation, but the release from the bonded area was intentionally delayed in practice
- Where it was declared to be for the purpose of stabilizing domestic prices, but was in substance operated in a manner that maximized the margin
In particular, internal emails, the plan prepared at the time of the recommendation application, the transaction terms, the price-setting structure, and reporting documents on the reasons for logistics delays may be used as important evidence during the investigation.
Where a contradiction exists between the statements made at the recommendation stage and the actual course of implementation, the investigative authorities may interpret this as circumstantial evidence of wrongful means.
Ultimately, one must recognize that the "recommendation" in quota tariffs may become the starting point that determines whether the crime of customs duty evasion is established going forward.
3. Customs Duty Evasion | Five Things Companies Should Review Now
This policy change carries significance beyond strengthened enforcement. Import and export companies should immediately review the following.
In particular, where there is no internal control system to prove why a delay occurred, there is a risk that intent may be presumed.
The Essence of the Policy Signal: The Criminalization of Customs Risk
This announcement is part of price stabilization measures, but from a company's perspective, its essence is the criminalization of customs risk.
Customs administration has traditionally been treated similarly to the tax domain, but recently the trend has been one of gradually strengthened criminal investigation of tax offenders and customs offenders.
In particular, matters linked to prices, the livelihood of the public, agricultural products, and livestock products attract high political and social interest, so the intensity of investigation is also likely to increase.
Responding to a Customs Duty Evasion Charge Is Advance Design, Not an After-the-Fact Response
For the crime of customs duty evasion, a tax investigation and a criminal investigation may proceed in parallel.
Where it leads to a search and seizure, account tracing, the questioning of related persons, and the like, it may directly affect not only a company's reputational risk but also its financial transactions and business activities.
Accordingly, the response should be divided into the following two stages.
Advance Review Stage
- Reexamining the quota tariff application structure
- Establishing a system to document distribution performance
- Refining the internal control manual
Investigation Response Stage
- Organizing the facts
- Designing a logical structure to deny intent
- Establishing a strategy to minimize the collection of customs duties and criminal liability
There is a strong perception that the crime of customs duty evasion is an intentional tax evasion offense, but in practice it is not uncommon for problems to arise from a lack of understanding of the system or inadequate internal controls.
This government announcement conveys a clear message.
Quota tariffs are a support policy, but when abused, they become subject to criminal punishment.
For an importing or distributing company, customs policy is an area directly connected to the company's criminal risk, and this is precisely the time to review internal customs risk.
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