However, taxpayers may choose at will what legal form to achieve a specific economic purpose in economic activities, and the tax authority shall respect the legal relationship in accordance with the legal form chosen by the taxpayer, barring special circumstances, such as where it is the most recent act or there is a tax avoidance purpose. Therefore, even if an importer, as a domestic subsidiary of an exporter, has special characteristics between general third parties, such as complying with the parent company’s instructions in the process of import and supply transaction of goods or sharing import risks with the parent company and the subsidiary company, it does not deviate from the transaction method ordinarily conducted between the parent company and the subsidiary in light of the transaction norms, it is not easy to readily conclude that the subsidiary is a sales agent rather than a buyer of imported goods.

1. The dutiable value of imported goods is the transaction price adjusted by a buyer to the price actually paid or payable by the buyer (Article 30(1) of the Customs Act). Therefore, in principle, the dutiable value shall be determined based on the import price paid by the importer to an overseas exporter. However, in special circumstances where the importer is merely a domestic sales agent of an overseas exporter and thus it can be deemed substantially the same as the imported goods directly from an overseas exporter, the price paid by the domestic buyer to the importer may be the basis for determining the dutiable value. In this case, whether the importer is an independent seller to a domestic buyer or is merely an agent of the exporter’s sales agent, the determination of the import price and the domestic sales price for the domestic buyer shall be based on the transaction concept and social norms, comprehensively taking into account the following factors: (a) the contracting party to the import contract and the sales contract for the domestic buyer; (b) the method of determining the import price and the domestic sales price for the domestic buyer

However, taxpayers may arbitrarily choose what legal form to achieve a specific economic purpose in carrying out economic activities, and the tax authorities shall respect the legal relationship in accordance with the legal form chosen by the taxpayers, barring special circumstances, such as where the act is deemed to be the most unfair act or the purpose of tax avoidance (see, e.g., Supreme Court Decisions 90Nu3027, May 14, 191; 2007Du26629, Apr. 9, 2009). Therefore, even if an importer, as a domestic subsidiary of an exporter, is distinct from a transaction between general third parties, such as complying with the parent company’s instructions in the course of import and supply transaction or sharing economic risks on imported goods with the parent company and the subsidiary company, it is not readily concluded that the subsidiary is merely a sales agent, not a buyer of imported goods, in disregarding the contractual terms between the relevant parties.

2. Review of the reasoning of the lower judgment and the evidence duly admitted by the lower court reveals the following facts.

1) On March 29, 2005, the Plaintiff is a domestic corporation established by the Asia-U.S. Biod (ASI MINERL LIITD) located in Hong Kong, and holds 100% of its equity interest. AMF Hong Kong has ten branch offices, including the Plaintiff, in each of the countries of the world.

2) The Plaintiff’s major imported goods are glusiums or flusiums (hereinafter “instant goods”) that are additives of lusium or lusiums (hereinafter “instant goods”), which are used to eliminate the anti-nets in the process of the process of the process by electricity. Since 2009, the Plaintiff’s major imported goods were imported entirely through AM Hong Kong.

3) Domestic lecturers (hereinafter “domestic buyers”) sent an invitation letter to domestic and foreign suppliers, including the Plaintiff, through competitive bidding to purchase the instant goods. The Plaintiff participated in the bidding and received the lowest bid price, thereby importing the instant goods from AMF Hong Kong and supplying them to domestic buyers.

4) In such a way, the Plaintiff, while importing the instant goods from AMF Hong Kong over 263 occasions, declared and paid customs duties, etc. on the basis of the import price stipulated in the sales contract concluded with AMF Hong Kong as the dutiable value.

5) On June 22, 2013, the Defendant: (a) deemed that the Plaintiff was not an actual buyer of the instant goods, but a sales agent of AMF Hong Kong; and (b) the actual party to the instant goods import and export transaction was the actual buyer between AMF Hong Kong and domestic buyers; and (c) accordingly, issued the instant disposition that corrected and notified the Plaintiff of customs duties, etc. based on the transaction price adjusted by deducting domestic transportation expenses, etc., from the purchase price of the instant goods.

3. Examining the above facts and the following circumstances revealed through the record in light of the legal principles as seen earlier, it is reasonable to view that the party to the export and import transaction that purchased the instant goods from AML Hong Kong as the Plaintiff, and the process does not change on the ground that the Plaintiff was instructed by AML Hong Kong as the parent company.

1) The Plaintiff participated in the tender in response to the tender announcement by domestic buyers, received the lowest bid price, and concluded a contract for the sales of the instant goods with domestic buyers in the name of the Plaintiff, thereby having a direct obligation to supply the instant goods to domestic buyers. Based on this, the Plaintiff entered into a contract for the import of the instant goods with AMF Hong Kong. In the actual process of implementation, the Plaintiff fulfilled its contractual responsibility as a supplier of the instant goods to domestic buyers.

2) In addition, the instant sales contract between the Plaintiff and domestic buyers entered into a customs duty payment and delivery condition (hereinafter “DP condition”) under which the seller shall import and clearance the goods and transport them to the designated destination. The instant sales contract between the Plaintiff and AMF Hong Kong was entered into as a freight and insurance premium (CIF condition) under which the seller bears the maritime freight and insurance premium in the port of importation. Accordingly, the Plaintiff shall hold the ownership of the instant goods from the time of arrival at the port of import to the time of arrival at the destination designated by the domestic buyer, and shall be held by the Plaintiff, and the domestic buyer shall also be held by the Plaintiff. Moreover, it is reasonable to deem that the transaction of the purchase price under the DP condition, which is based on the premise that the goods will be supplied by the import clearance procedure, not by the CIF price, but by the import clearance procedure.

3) Meanwhile, when the Plaintiff entered into the instant goods sales contract with domestic buyers, received specific strategies, etc. on price negotiations from AMF Hong Kong, and when determining the import price of the instant goods, it is not an independent price negotiations. It is recognized that not only inventory management risks but also liability for damages arising from delay in the supply of the instant goods and risks arising from the settlement of payments through the provisions of the import contract with AMF Hong Kong. However, this is merely due to either a cooperative relationship that can be generally established between the parent company and the subsidiary or a special nature of the instant goods transaction. This is merely attributable to the Plaintiff’s acquisition of sales profits by 1% or 2% of the import price in the process of the import transaction of the instant goods. Accordingly, it cannot be readily concluded that the Plaintiff is merely a sales agent of AMF Hong Kong, a seller of the instant goods.

4) Moreover, there is no circumstance to deem that the above sales profits earned by the Plaintiff are excessive compared to ordinary cases, or that the Plaintiff and AMF Hong Kong have raised abnormal sales profits in the intent to reduce customs burdens.

4. Nevertheless, solely based on its reasoning, the lower court determined that the instant disposition was lawful, solely on the grounds as indicated in its reasoning, deeming that the Plaintiff was in a sales agent position to import the instant goods from AMF Hong Kong to deliver them to domestic buyers, and that the price adjusted based on the price paid by domestic buyers for the purchase of the instant goods at the actual purchase price is deemed as the dutiable value. In so determining, the lower court erred by misapprehending the legal doctrine on the determination of dutiable value under the Customs Act, thereby adversely affecting the conclusion of the judgment. The allegation in the grounds

Therefore, without further proceeding to decide on the remaining grounds of appeal, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices

Justices Kwon Soon-il (Presiding Justice)