Korea Gas Corporation (Attorney Choi Jae-hwan et al., Counsel for the plaintiff-appellant)

Head of Pyeongtaek-si (Attorney Choi Sung-soo, Counsel for the defendant-appellant)

April 30, 2015

1. All of the plaintiff's claims are dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

Each disposition that the defendant made against the plaintiff shall be revoked in all the details of the attached taxation.

1. Details of the disposition;

A. The Plaintiff entered into a contract for the introduction of FOB (hereinafter referred to as “LNG”) (hereinafter referred to as “this case’s introduction contract”) from the first exporter of Matar, Malaysia, Indonesia, Indonesia, Russia, Russia, Rusia, on the condition that the buyer bears the burden of the freight and insurance premium) and paid the freight by entering into the respective introduction contract with the domestic shipping company (hereinafter referred to as “each of the instant carriage contract”) and then, paid the freight with the LNG transport contract with the domestic shipping company (hereinafter referred to as “each of the instant carriage contracts”). The Plaintiff filed a customs duty and value-added tax on the amount calculated by adding the freight and other charges paid to the domestic shipping company as its dutiable value to the goods prices under each of the instant introduction contracts.

On October 16, 1995, 1999-2023 Malaysia LNG SDR. BHD. June 28, 1993, 1995-201-2018-2018 Indonesia PERUSAHE Posian Posian GUM DuEARA (PERA) (1) (1) May 7, 1991, 194-2014-2014 (2) August 12, 1995, 198-198-2017 HuN 205-205-208-208-308-4.207 208-4.208-8.208-8.204.20-198-37. 1997

B. The Defendant, while allowing the Plaintiff to use BOG as fuel to a domestic shipping company, paid part of the freight in kind, deemed that the Plaintiff omitted the freight equivalent to the value of BOG at the time of filing a declaration on customs duties, etc., and rendered a corrective disposition (hereinafter “each of the instant dispositions”) imposing additional KRW 31,006,311,480 in total, value-added tax amounting to KRW 72,498,132,850 in total, value-added tax amounting to KRW 9,520,157,570 in total, value-added tax amounting to KRW 72,498,132,850 in addition, as stated in the attached taxation disposition (hereinafter “each of the instant dispositions”).

C. On February 3, 2014 and February 4, 2014, the Tax Tribunal filed an appeal against each of the dispositions in this case on four occasions. On February 3, 2014, the Tribunal rendered a decision to rectify the tax amount and to dismiss the claim on customs duties and value-added taxes on the ground that the Plaintiff’s failure to perform his/her duty is not a justifiable reason to be subject to taxation due to lack of the tax law or lack of opinion in the interpretation of the tax law.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 6, 11, 15, 21, 22, Eul evidence Nos. 2 and 3 (including branch numbers; hereinafter the same shall apply) and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

On the other hand, the plaintiff, on the basis of FOB, paid the price for all the quantity shipped and filed an import declaration in addition to the freight and insurance premium, and the price for the goods paid by the plaintiff to the exporter includes the price for the part on the BOG, which is alleged to violate the WTO Evaluation Convention and the principle of substantial taxation with double calculation, and subsequently, determined that the Customs Valuation Board's prior to the disposition in this case did not add the BOG amount to the freight, which is contrary to the principle of good faith, and thus, the disposition in this case is unlawful.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

(c) Fact of recognition;

1) On October 16, 1995, the Plaintiff entered into a contract for the introduction of the following LNG with Ras Laffan Gas (hereinafter referred to as “Ras”), and imported it.

본문내 포함된 표 매매계약서 제9.2조 가격계산의 공식 (a) 시장 LNG 가격 계산은 최초인도일의 해당 월에서 시작하여 모든 월의 최초일로부터 성립되며 공식은 다음과 같다. Ｐmkt＝ 9 （3.117× JCC ）＋ 1 （2.822×（1＋0.03）ⁿ） 10 US＄18/BBL 10 (Ｐmkt : m월에 적용되는 시장 LNG 가격, JCC : 매월 일본으로 수입되는 모든 원유의 가중 평균가격) 제10.1조 인보이스 LNG 운송선의 선적완료 후 판매자는 구매자에게 텔렉스 또는 팩시밀리로 계약단가(Contract Sales Price)에 인도되어 판매된 LNG 물량을 BTU(열량단위, 1평방인치당 14.696 파운드의 절대압력상태에서 1파운드의 증류수를 화씨 59도에서 화씨 60도로 가열하는데 소요되는 열량)로 환산한 양을 곱한 금액을 기재한 1차 잠정 인보이스(First Provisional Invoice)를 제공해야 한다. 제11.5조 선적된 LNG 물량의 계측과 계량 본건 계약 하에서 인도된 LNG 물량은 선적 직전 및 직후에 LNG 운송선의 탱크에서 LNG를 계측함으로써 결정된다. 제13조 소유권이전 판매자에 의하여 판매되고 구매자에 의하여 구입될 LNG는 선적항의 인도점에서 구매자에게 인도되어야 한다. 그 LNG가 인도점을 통과하면 LNG의 인도는 완료된 것으로 간주되고, 동 LNG의 소유권 및 손실로부터의 위험은 판매자로부터 구매자에게 이전된다.

본문내 포함된 표 특약서 A(Side Letter A) 2. FOB 거래특성을 반영한 본건 단가의 조정 카타르에서 한국까지의 LNG 운송 도중 발생하는 기화(Boil Off)로 인한 물량감소의 문제를 해소하기 위하여, 그리고 본건 단가가 착선 인도조건의 단가와 동일한 가치를 가지도록 하기 위하여 판매자는 본건 단가를 Boil Off 요소만큼 차감하기로 합의하며, 이를 위하여 본 계약 9.2(a)조의 본건 단가 산출은 다음의 환산법을 적용하여 정하기로 한다. Market LNG Price = Ｐmkt × (1-B.O)

2) The Plaintiff entered into a contract for the introduction of LNG with Malaysia, Indonesia, Rusia, Russia, and Russia exporters (hereinafter “outtar exporters”) and imported it. The unit price formula for each contract is as follows, and there is no provision for the unit price adjustment in consideration of BOG, such as the contract with Katar exporters.

2

3) Meanwhile, the Plaintiff entered into a contract of carriage of LNG between SK Shipping Co., Ltd., Hyundai merchant Shipping Co., Ltd., Korea Shipping Co., Ltd., STX Co., Ltd., Korea LNG Co., Ltd., and transported imported LNG as above.

The freight of Section 2.1 of the Table Transport Contract (Before 2000), contained in the main text, consists of the following parts: (a) capital cost; (b) cost of the vessel; (d) cost of the vessel; (a) cost of operation under Article 3.3 of the Operating Expense Determination; (a) cost of the operating cost under Article 3.3 of the Operating Expense; (b) cost of fuel - main fuel: Bunker C - incidental fuel - Yellst: Glas - BOG cost of LNG due to natural occurrence from LNG on board, which is not included in the cost of transport:

The rate of 2.4. BOG generation per day, calculated by the formula below the rate of 2.4. BOG generation under the table contract contained in the main text, shall not exceed 0.15% of the cargo tank capacity of the main line. BOG generation rate = 20G generation quantity / 1/163 x total cargo tank quantity of the main line at the time of loading (BOG generation quantity - total cargo tank quantity - total cargo tank quantity - total cargo tank quantity at the time of loading at the time of loading at the time of loading at the time of loading at the time of loading at the time of loading at the time of unloading: the rate of freight and the payment of the fare (i.e., the time from the date of loading at the time of loading at the time of loading at the time of loading at the time of the loading to the date of unloading. 3) The total transport amount of the cost to be paid for the main period of the contract may be within the permitted limit of 2.14.G. gas generation per day of the BG.

4) The Plaintiff, in accordance with each of the instant introduction contracts, filed an import declaration by adding the freight and insurance premium to the amount of goods paid after the payment of the price for the goods, if the Plaintiff, by calculating the volume of the goods to be loaded by deducting the amount of measurement before shipment from the volume of the goods to the volume of the goods to be loaded, and by calculating the price for the goods in a way that is linked with the price of the goods, multiplied with the contractual unit determined

5) On June 12, 2008, in a case where the Plaintiff imported LNG 100M/T from a foreign exporter to a 1,000CU under the terms and conditions of FOB, and during transportation, 1M/T existed, and left the remaining gas (HEL) 1M/T to maintain the cooling condition of the storage tank in the ship after the arrival of an import port, and unloaded 98M/T, the Customs Classification Board decided to the effect that the Plaintiff should levy 1,00CU on 98M/T, which is the quantity at the time of customs clearance, since the Plaintiff imported goods under a total contract with the exporter, and thus, did not add it to the transportation-related cost (hereinafter “instant decision”).

6) The defendant asked the World Customs Organization (WCO; hereinafter referred to as “WCO”) about whether it can assess and impose BCOGs used as fuel at the fare, and the said organization respondeds to the effect that it is determined by the Member's domestic law to include the fare in the dutiable value under Article 8 of the WTO Evaluation Convention.

[Ground of recognition] Facts without dispute, Gap evidence 7 through 10, 13, 20 evidence, Eul evidence 6, the purport of the whole pleadings

D. Judgment on the main argument

1) Method for determining dutiable value

According to Article 30(1) of the Customs Act, the customs value of imported goods shall be the transaction price adjusted by adding up the following amounts to the price actually paid or to be paid by a buyer for the goods sold for export to Korea. The main sentence of Article 30(6) of the Customs Act provides that “the amount determined, as prescribed by Presidential Decree, for freight, insurance premium and other expenses related to transportation to port of importation.” According to the main sentence of Article 20(5) of the Enforcement Decree of the Customs Act, the amount under the main sentence of Article 30(1)6 of the Customs Act provides that “the amount shall be borne by an importer until the arrival of the port of entry into the port of entry into the port of entry into the port of entry into the port of entry into the port of entry into the port of entry into the port of entry into the port of entry into the port of entry into the port of entry into the port of entry into the port of entry into the port of entry into the port of entry into the port of entry into the port of entry into the port of entry into the port of entry into the customs office.”

2) Whether the inclusion of a fare on a dutiable value violates the WTO Evaluation Convention

According to the following circumstances, the Plaintiff’s calculation and taxation of BOG paid in kind to the navigator as freight cannot be deemed to violate the WTO Evaluation Convention and the principle of substantial taxation, based on the overall purport of the pleadings, based on the evidence Nos. 22 and 22 and 6.

① Article 1 of Part I of the WTO Customs Valuation Regulations provides that the customs value of imported goods shall be the price actually paid or payable at the transaction price, and Article 8 provides that each Member may determine whether the transportation cost, etc. at the port of entry may be included in the customs value, and accordingly, the Customs Act enacted the principle of arrival that the transportation cost, etc. at the port of entry shall be added to the price of goods as seen earlier.

② At the time of customs valuation, the UNFCCC confirmed that the UNFCCC, which is provided as a fuel for the promotion of a ship, may add a fare in accordance with its domestic law by responding to the issue to be determined according to the legislation of each country in accordance with Article VIII(2) of the WTO Valuation Convention.

③ According to the main sentence of Article 30(1)6 of the Customs Act, Article 20(5) of the Enforcement Decree of the Customs Act, and Article 3-5(2)1 of the Notice of this case, with respect to imported goods which arrive by self-operation of vessels, etc., freight shall be calculated as “the amount actually required for transportation, such as fuel cost, crew’s meal cost, wages, allowances, crew’s delivery cost, and other expenses, until the relevant vessel or aircraft arrives at the port of entry from the port of exportation to the port of entry.” Each of the instant carriage contracts is determined as part of the BOG fuel cost, which is included in freight, or that the operator can use BOG free of charge as the fuel on board.

④ The WTO Evaluation Convention permits a Member to include freight in its dutiable value in accordance with domestic law, and Article 30 of the Customs Act provides that additional elements, such as goods price and freight, shall be separate factors that determine the dutiable value. Thus, the addition of BOG price used as actual fuel in accordance with each of the instant transport contracts cannot be deemed to violate the WTO Evaluation Convention or the principle of substantial taxation, and as seen thereafter, this does not change depending on whether the price of the goods paid by the Plaintiff includes BOG price.

3) Whether a separate taxation of the BOG price is contrary to the double taxation prohibition principle

A) The point at which the quantity of the taxable object becomes fixed

According to Article 16 of the Customs Act, customs duties are imposed according to the nature and quantity of goods at the time of entry (including an import declaration prior to entry). According to Articles 243(2) and 241(1) of the Customs Act, in principle, an import declaration can only be made after a ship, etc. loaded with the relevant goods enters the port, and even if an import declaration prior to entry is permitted pursuant to Article 244(1) of the Customs Act and Article 249(1) of the Enforcement Decree of the Customs Act, even if an import declaration prior to entry is permitted, the quantity of goods subject to taxation can be determined at the time of entry of the ship, etc. (one day prior to entry into the port) and the quantity of goods at the time of entry is determined at the time of entry into the port, and since the import declaration prior to entry is only permitted for the convenience of the customs procedure, it cannot be deemed that the quantity of goods subject to taxation at the time

Therefore, even if the plaintiff reported to the head of the customs office the quantity at the time of shipment while filing an import declaration prior to entry, the actual quantity at the time of arrival (in the case of an import declaration prior to entry into an port, at the time of arrival) is not the quantity stated in

B)in the case of recommendations to introduce tar car:

① While determining the unit price under the terms and conditions of FOB in Article 9.2 (a) of the sales contract, a special agreement was concluded and the unit price was adjusted on the premise that 0.3% BOG per vessel normally occurs in the course of transportation under Article 2, which, in substance, aims to determine the price of the quantity at the time of arrival by excluding it from the import volume, taking into account the quantity of BOG generated in the course of transportation. However, it appears that the method of adjusting the unit price to avoid a spread that should be calculated for each shipment.

② On the other hand, the Plaintiff asserted that the above unit price adjustment was made in order to coincide with the price according to the DES conditions [Devered Ex Sheet, pre-delivery (open port), freight and insurance premium to be borne by the seller] in the course of negotiations on the above import contract. However, the meaning of the price of the DES conditions (the price of the portion of goods other than freight and insurance premium) at the time of arrival is different from that of the price of the quantity other than BOG scheduled to occur in the course of transportation. Thus, the price of goods under the import contract with the exporter of Katar shall be deemed to be the quantity at the time of arrival except BOG.

③ As long as the Plaintiff deemed that the price of the goods at the time of arrival is the price for the quantity at the time of arrival, among the dutiable value for LNG introduced from tar exporters, the price of the goods is deemed to be the price for the quantity at the time of arrival, excluding BOG, under the agreement with tar exporters, BOG excludes not only the quantity of taxable goods at the time of arrival but also the goods price, so there is no room for double taxation issues by adding BOG

C)in the case of recommendation to introduce Matar,

Since the volume at the time of arrival of LNG, which is a taxable object, is not included in BOG even if it is recommended to introduce tar, there is no difference between the introduction of tar in terms of the quantity of taxable object.

However, each import contract with the exporters other than tar does not include a price adjustment clause taking into account the BOG differently from the import contract with the exporter of tar, and therefore, there is room to view that the price paid by the Plaintiff to the above exporters includes the BOG price. Accordingly, this paper examines the above.

① Article 5-13 of the Notice of this case provides that, in cases where the quantity of imported goods is in excess of or in the time of customs clearance for products, the total amount actually paid shall be a dutiable value when the price of the imported goods is transacted on the total amount of total quantity. This purport is that, in cases of a total contract, the tax authority does not make a adjustment of the price of the goods due to the decrease in quantity in quantity, in cases of a contract under which the parties agree to pay the total amount determined at the beginning without considering the nature of the goods, such as the instant LNG, even in cases where

Each import contract between LNG exporters other than tar is expected to be made up of part of the shipment volume into BOG and reduce the shipment volume at the time of arrival in the course of transport of LNG, and the Plaintiff agreed to pay the shipment volume to each of the above exporters the total shipment volume multiplied by the unit price stipulated in each import contract, and the price is not adjusted in consideration of BOG. Therefore, it is reasonable to deem each of the above import contracts as total.

② There is room to deem that the respective import contract between the exporters other than ktar as above includes the BOG price inasmuch as the total amount paid to the actual exporter is considered as the dutiable value even if the amount of customs clearance decreases pursuant to the above notice provision.

However, this is only the result of the Plaintiff’s payment made to the above exporter on the basis of the shipment volume at the time of shipment. The quantity of the taxable object is determined as at the time of arrival, and as long as the price of the goods as a dutiable value is also deemed to be about the quantity of the taxable object at the time of arrival, the BOG should be deemed excluded from the quantity of the taxable object as well as the price of the goods.

In this case, the reason that the price of the goods includes BOG values is that: (a) the price of the goods actually paid or payable under Article 30(1) of the Customs Act provides for the price of the goods as the price of the goods; and (b) the Plaintiff, in principle, agreed not to reduce the price of the goods even if the amount falls short of the quantity at the time of arrival when concluding each import contract with the exporter other than Katar; (c) the Plaintiff appears to include BOG prices in the price of the goods as a result of the application of the total price contract, but this is only the price for the quantity at the time of arrival when the goods were excluded from the amount of BOG prices. If the Plaintiff set the price of the goods under the unit price contract, not the total price contract with the above exporter, then the BOG

③ Furthermore, even if the BOG price, as alleged by the Plaintiff, is deemed to be included in the goods price, the goods price and the freight are separate factors constituting the dutiable value. As long as the goods price is determined by the total contract, in cases where BOG price, which is part of the shipment quantity, is paid in lieu of the freight in the course of transportation, even if it is imposed separately on the freight, both are different aspects of the shipment subject to taxation, and thus,

If the plaintiff did not provide BOG as a fuel even after concluding the total amount contract, and terminated during the transport, the plaintiff paid an additional fare equivalent to the BOG value, and in this case, even if the price of the goods paid by the plaintiff is deemed to include BOG value, the customs value will be determined by adding the total fare, including the portion that the plaintiff paid in lieu of BOG.

Other conditions shall be the same as above, and in calculating the fare included in the dutiable value by providing BOG generated during transport for the reduction of freight, it cannot be the reason to deduct the amount equivalent to the BOG value paid in kind from the customs value.

D) Sub-committee

Therefore, this part of the plaintiff's assertion is without merit, which differs from the time when the quantity of taxable object is determined and the premise of the object of the price of goods.

E. Judgment on the conjunctive assertion

Article 6 of the Customs Act provides that "When a taxpayer performs his/her duties, he/she shall perform his/her duties in good faith. The same shall apply when a customs officer performs his/her duties." This is a general provision on the principle of good faith in the Customs Act by prescribing that "The principle of good faith in the Customs Act shall be applied." This is to respect the existing legal relationship in certain cases worthy of protecting the taxpayer's trust even if there is a sacrifice, and to protect the taxpayer's trust. In general, in order to apply the principle of good faith to a tax authority's act, the tax authority should first issue a public opinion that is the object of trust in the taxpayer. Second, the taxpayer's opinion that is fair and trusted by the tax authority should not be attributable to the taxpayer; third, the taxpayer should have trusted the opinion and conducted any act based on it; fourth, the tax authority's disposition against the above opinion list should result in a violation of the taxpayer's interest (see, e.g., Supreme Court Decisions 84Nu593, Apr. 23, 1985; 207Du747.

The following circumstances, which are acknowledged by considering the purport of the argument in Gap evidence No. 16, i.e., (i) whether the main issue at the time of the determination of this case is whether BOG should be taxed as freight, (ii) whether the price determined based on the shipment quantity can be imposed despite the decrease in the shipment quantity, and whether the adjustment of the unit price in consideration of BOG constitutes a discount by conditions or circumstances stipulated in Article 30 of the Customs Act, and its order also is reasonable to impose tax on the total amount of the imported goods as the price of the relevant imported goods is determined by the total contract. It is reasonable to impose tax on the actual payment because the unit price adjustment considering BOG is not a discount by conditions or circumstances, and (iii) it is difficult to determine whether BOG gas was used as freight-free for the purpose of maintaining the cooling condition of LNG transport tank, and thus, it is difficult to view that the Plaintiff merely stated that it is not a customs duty-free container related to the transport charge of this case, and thus, it cannot be seen as an additional cost-related to the transport charge.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.

[Attachment]

Judges Park Jong-hee (Presiding Judge)