The meaning of “transaction price of similar goods, which has been recognized as dutiable value” under Article 32(1) of the Customs Act, and whether “the dutiable value determined by the competent tax office according to the methods prescribed in Articles 31 through 35 of the Customs Act denying the declared value” is included therein (negative)

Article 30 through Article 35 of the Customs Act provides for the six methods of determining the dutiable value of imported goods. In principle, Article 30 of the Customs Act provides for the determination of the dutiable value based on the “transaction price adjusted by adding up commissions, etc. to the price actually paid or payable by the buyer to the price actually paid or payable by the buyer” and Articles 31 through 35 of the Customs Act provide that if the determination cannot be made by the method under Article 30, Articles 31 through

Article 32(1) of the Customs Act provides, “If it is impossible to determine a dutiable value by the method provided for in Articles 30 and 31, the dutiable value shall be determined based on the transaction price of similar goods which is recognized as a dutiable value and meets certain requirements.” Article 35(1) of the Customs Act provides, “If it is impracticable to determine a dutiable value by the method provided for in Articles 30 through 34, the dutiable value shall be determined based on a reasonable standard consistent with the principles provided for in Articles 30 through 34, as prescribed by Presidential Decree.”

Meanwhile, Article 35(2) of the Customs Act provides, “If it is impossible to determine the dutiable value by the method under paragraph (1), the dutiable value shall be determined by the method reasonably recognized in light of the substance and practice of transactions, such as the method of applying the price adjusted at the time of international transactions and the price of mountainous district investigation

In light of the language, structure, and purport of the provision on the determination of dutiable value of imported goods, and in particular, Article 32(1) of the Customs Act uses the term “market price” used in Article 30 of the Customs Act as it is, it is reasonable to interpret that “market price of similar goods recognized as dutiable value pursuant to Article 30 of the Customs Act” only refers to “market price of similar goods recognized as dutiable value pursuant to Article 30 of the Customs Act,” and “the dutiable value determined by the method prescribed in Articles 31 through 35 of the Customs Act to deny the declaration price by the competent tax office” is not included.

Articles 30, 31, 32, 33, 34, and 35 of the Customs Act

Plaintiff 1 and one other (Attorney Choi Young-young, Counsel for the plaintiff-appellant)

Head of Jeonju Customs Office

Gwangju High Court ( Jeonju) Decision 2018Nu1225 decided July 10, 2019

All appeals are dismissed. The costs of appeal are assessed against the plaintiffs.

The grounds of appeal are examined.

1. As to the illegality of the declaration price setting aside

In full view of the circumstances stated in its holding, the lower court rejected the Plaintiffs’ assertion that the Defendant denied the Plaintiffs’ import declaration price on the grounds that the reported price is significantly different from the transaction price of similar goods and that there are reasonable grounds to suspect the accuracy or truth of the reported price, on the grounds that the Plaintiff’s import declaration price was illegal.

Examining the relevant legal principles and records, the lower court did not err in its judgment by failing to exhaust all necessary deliberations, contrary to what is alleged in the grounds of appeal, by exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules, or by misapprehending the legal doctrine on the grounds for denial of transaction prices under Article 30

2. As to whether the determination of dutiable value is illegal

A. As to the determination of the dutiable value of the instant goods except for “the lawsuit listed in [Attachment 1-7]” among the instant goods

The lower court, based on its reasoning, rejected Plaintiff 1’s assertion that: (a) the Defendant deemed it lawful to regard the vegetation harvested from the Chinese mountain zone, which appears to be the production site, as similar goods, on the remainder of the instant goods except for “the rivers listed in [Attachment 1-7] among the instant goods; and (b) determine the dutiable value pursuant to Article 32 of the Customs Act; and (c) consider the import declaration price of E company or Einsan Co., Ltd. as the transaction price of similar goods.

In light of the relevant legal principles and records, the lower court did not err in its judgment by failing to exhaust all necessary deliberations, contrary to what is alleged in the grounds of appeal, by exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules, or by misapprehending the legal doctrine on the method of determining dutiable value under

B. As to the determination of the dutiable value for “the lawsuits listed in [Attachment 1] Nos. 1 to 7” among the instant goods

(1) Relevant legal principles

(A) As to the determination of dutiable value of imported goods, Articles 30 through 35 of the Customs Act stipulate, in principle, the determination of dutiable value based on the “transaction price adjusted by adding up commission, etc. to the price actually paid or payable by the buyer” under Article 30 and Articles 31 through 35 of the Customs Act are applied in order to determine the dutiable value in cases where the determination cannot be made by the method under Article 30.

Article 32(1) of the Customs Act provides, “If it is impossible to determine a dutiable value by the method provided for in Articles 30 and 31, the dutiable value shall be determined based on the transaction price of similar goods which is recognized as a dutiable value and meets certain requirements.” Article 35(1) of the Customs Act provides, “If it is impracticable to determine a dutiable value by the method provided for in Articles 30 through 34, the dutiable value shall be determined based on a reasonable standard consistent with the principles provided for in Articles 30 through 34, as prescribed by Presidential Decree.”

Meanwhile, Article 35(2) of the Customs Act provides, “If it is impossible to determine the dutiable value by the method under paragraph (1), the dutiable value shall be determined by the method reasonably recognized in light of the substance and practice of transactions, such as the method of applying the price adjusted at the time of international transactions and the price of mountainous district investigation.

(B) In light of the language, structure, and purport of the provision on determining the dutiable value of imported goods, and in particular, Article 32(1) of the Customs Act uses the term “transaction price” used in Article 30 of the Customs Act as it is, it is reasonable to interpret that “the transaction price of similar goods recognized as the dutiable value pursuant to Article 30 of the Customs Act” only means “the transaction price of similar goods recognized as the dutiable value pursuant to Article 30 of the Customs Act,” and that “the dutiable value determined by the competent tax office in accordance with the method stipulated in Articles 31 through 35 of the Customs Act shall not be included.”

(2) Determination

The lower court held that the Defendant’s determination of the dutiable value based on the Chinese mountainous district price pursuant to Articles 35(2) and 35(2) of the Customs Act is lawful on the ground that the dutiable value for imported goods of the instant company, which the Plaintiff 1 claimed to be recognized as the transaction price of similar goods, is not included in the “transaction price of similar goods, for which there is a fact that the dutiable value is recognized as the dutiable value” under Article 32(1) of the Customs Act, since the tax authority denied the declaration price and determined pursuant to Article 35 of the Customs Act, is not included in the “transaction price of similar goods, for which there is a fact that the dutiable value is recognized as the dutiable value.”

Examining the record in light of the aforementioned provisions and legal principles, the lower court did not err in its judgment by misapprehending the legal doctrine regarding “transaction price of similar goods, which has been recognized as dutiable value” as provided by Article 32(1) of the Customs Act, contrary to what is alleged in the grounds of appeal. The Supreme Court Decision 2005Du17188 Decided December 27, 2007 cited in the grounds of appeal is different from the case, and thus, it is inappropriate to invoke the case in this case.

3. Conclusion

Therefore, all appeals are dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Jung-hwa (Presiding Justice)