Customs Investigation | Supreme Court Judgment Holding That a Request for Materials After the Investigation Period Is Not a Procedural Violation

A customs investigation is an administrative investigation conducted by a customs office to verify the legality of import and export transactions and the appropriateness of the dutiable value.

In practice, a customs investigation covers various issues, including the calculation of the dutiable value, transactions with related parties, verification of origin, and review of refunded tax amounts.

For companies that are in a related-party relationship with an overseas parent company in particular, the dutiable value may be suspected of having been understated or distorted, so the risk of a customs investigation is considerably high.

The plaintiff argued that the customs office had abused its investigative authority by continuing the investigation even after the investigation period it had notified (August 10 to August 28, 2015) had passed.

The Supreme Court, however, held that the customs office's subsequent measures were lawful for the following reasons.

-The plaintiff submitted important materials (the invoices) just before or after the closing date of the investigation
-The customs office did not conduct an on-site visit or take any coercive measures, but requested supplementation of the materials and explanations
-The plaintiff also cooperated voluntarily

The Customs Act, in principle, prohibits reinvestigation of the same matter.

This is an important safeguard for the protection of taxpayers.

The Supreme Court held that the measures the customs office carried out after the closing date were not a new investigation but merely a continuous supplementary act in relation to the existing investigation, and it did not accept the argument that the principle prohibiting reinvestigation had been violated.

This reaffirmed the established precedent that, in determining whether there has been a reinvestigation, the purpose, period, method, and nature of the materials of the investigation, among other factors, must be comprehensively considered.

Under the Customs Act, a notice of correction may, in principle, be served electronically only upon an application.

The plaintiff argued that the notice was unlawful because it had never submitted a formal application.

The Supreme Court, however, held that there was no illegality even in the absence of a formal application procedure, for the following reasons.

-The plaintiff had consented in advance to electronic delivery
-An employee prepared a confirmation of receipt without objection
-There was no resulting disadvantage

The Customs Act defines the dutiable value as the “price the buyer is actually required to pay.”

The Supreme Court held that the unpaid amount was included in the dutiable value, for the following reasons.

-The unpaid amount stated on the invoices issued by the parent company was a sum the plaintiff was required to pay without fail
-This was a cost directly related to the transaction in goods

The plaintiff did not submit the invoices to the customs office in a timely manner.

The Supreme Court held that, because this deprived the customs office of the opportunity to accurately examine the dutiable value, there was no justifiable ground, and the imposition of the additional tax was therefore proper.