[1] Whether the act of an importer, upon applying for a recommendation to apply for the quota tariff to the recommending agency, by submitting false explanatory materials as to the qualifications required by the recommending agency while applying for a recommendation to the recommending agency, constitutes an act of evading customs duties under Article 270(4) of the Customs Act (affirmative); and whether the act of deceiving the recommending agency and obtaining a recommendation constitutes an act of evading customs duties under Article 270(4) of the Customs Act (affirmative)

[2] The case holding that in case where Gap, who manufactures and sells the ground beer as a raw material of beer, imported beer, declared and paid customs duties, etc. at the time of import clearance by applying the quota tariff rate with recommendation from the Korea Food and Drug Trade and Trade Corporation for the application of the quota tariff, while roasting Korea, imported as a raw material of manufacturing the beerer and sold it to others without processing after discovering the fact that the head of the customs office discovered that part of the imported goods were used as raw material of manufacturing the ground beer, and without processing, sold it to others, the disposition of increased or corrected customs duties, etc. calculated by applying the basic rate for the ground beer as to the ground beer as it was not used for manufacturing the ground beer as it did not meet the requirements for applying the quota tariff as to that part, and thus, it constitutes a ground for disposition of duty adjustment and imposition

[1] In full view of the structure and contents of Articles 71(1)2 and (3), 270(1) and (4) of the Customs Act, and Article 92(1), (3), and (4) of the Enforcement Decree of the Customs Act, an importer may obtain a recommendation from the recommending agency to apply the quota to the head of a customs office before the import declaration of the recommendation, and submit the recommendation to the head of a customs office within a certain amount of quantity within the scope of the relevant goods. As such, such recommendation by the recommending agency is essential procedural requirements to apply the quota, and the importer is subject to reduction or exemption of customs duties through the application of the quota. Accordingly, the importer must obtain a recommendation from the recommending agency through legitimate procedures. Therefore, if the importer, upon applying for the recommendation by the recommending agency, submitted false explanatory materials about the requirements for recommendation requested by the recommending agency, and thus, the quota quota can not be applied through legitimate procedures, and thus, the importer constitutes an act of evading customs duties by improper means, and the head of a customs office may be subjected to reduction or exemption from customs duties.

Therefore, even if an importer applies for a recommendation to apply the quota tariff to the recommending agency along with relevant data, and the recommending agency determines that the recommendation agency satisfies the requirements for recommendation following a certain examination, the recommendation is merely a primary examination and confirmation as to whether the quota tariff can be applied when the import declaration is filed or paid, or the imposition of customs duties is imposed. Since a final determination as to the application of the quota tariff is made in the form of a disposition of rectifying customs duties by the head of a customs office, etc., the “recommended” of the recommending agency cannot be deemed as a disposition that determines the application of the quota tariff or is binding the determination by the head of a customs office, etc.

[2] The case holding that in a case where roasting Party A, who manufactures and sells the ground beer as a raw material of beer, declared and paid customs duties, etc. at the time of import clearance by applying the quota tariff, upon recommendation from the Korea Food and Drug Trade and Trade Corporation for the application of the quota tariff, while importing the ground beer, and then selling it to others without processing after discovering the fact that only some of the quantity of the ground is used as a raw material for manufacturing the beer and without any separate processing, and then selling it to others, the disposition of increased or decreased customs duties, etc. calculated by applying the basic rate for the ground beer as to the ground beer that the head of the customs office discovered the fact that the remainder was imported as a raw material for manufacturing the beer, the final determination of the application of the quota tariff to the entire imported goods does not have the effect of final determination of the application of the quota tariff to the entire imported goods, and as Party A did not sell it to others without being used in manufacturing the beer products as a premise for partial recommendation, this constitutes a ground for imposition of customs duties.

[1] Articles 71(1)2 and (3), 270(1) and (4) of the Customs Act; Article 92(1), (3), and (4) of the Enforcement Decree of the Customs Act / [2] Articles 71(1)2 and (3), and 270(1) and (4) of the Customs Act; Article 92(1), (3), and (4) of the Enforcement Decree of the Customs Act; Article 71 of the former Customs Act concerning the application of the quota tariff (Amended by Presidential Decree No. 22925, May 12, 201); Article 71 of the former Customs Act concerning the application of the quota tariff (Amended by Presidential Decree No. 23673, Mar. 26, 2012)

[1] Supreme Court Decision 82Nu275 delivered on September 27, 1983 (Gong1983Ha, 1600), Supreme Court Decision 2000Do4916 Delivered on December 28, 2001, Supreme Court Decision 2001Du4832 Delivered on February 14, 2003 (Gong2003Sang, 833) Supreme Court Decision 2007Do4952 Delivered on May 29, 2008

Plaintiff (Law Firm LLC, Attorneys So-young et al., Counsel for the plaintiff-appellant)

Head of Seoul Customs Office

Seoul High Court Decision 2015Nu38544 decided January 22, 2016

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

1. Regarding ground of appeal No. 1

A. According to Article 71(1)2 and (3) of the Customs Act, “where it is necessary to stabilize the domestic price of goods, the import price of which has risen rapidly, or goods made of such raw materials,” the quota tariff may be imposed after deducting a rate within the limit of 40/100 from the basic tariff rate. If deemed necessary, the quantity may be limited, and if deemed necessary, the goods subject to the quota tariff, quantity, tax rate, application period, etc. shall be prescribed by Presidential Decree. According to Articles 92(1), 92(3) main sentence and Article 92(4) of the Enforcement Decree of the Customs Act upon delegation, where the head of a related party or an interested party intends to request the imposition of the quota tariff, he/she shall submit to the Minister of Strategy and Finance certain materials, such as the quantity and calculation basis of the relevant goods, and specific allocation of the relevant goods within the limit of a certain quantity for which the quota tariff may be imposed, upon the recommendation of the competent Minister or the delegated person, and the competent Minister or the delegated person shall submit a letter of recommendation.

Meanwhile, Article 270(1)1 of the Customs Act provides that "any person who imports goods without filing a false report or filing a false declaration on their dutiable value, tariff rate, etc. in order to affect the determination of the amount of customs duties" among those who filed an import declaration, and Article 270(4) of the Customs Act provides that "any person who is subject to reduction or exemption of customs duties or evades the collection of customs duties on goods whose customs duties are reduced or exempted

In full view of the structure and contents of the aforementioned provisions, an importer may be subject to the quota tariff applied to the relevant goods by receiving “recommendation” from the recommending agency within a certain quantity of the relevant goods and submit the recommendation to the head of the relevant customs office before the import declaration is accepted. As such, such recommendation by the recommending agency may necessarily meet the procedural requirements to be subject to the quota tariff (see Supreme Court Decision 2001Du4832, Feb. 14, 2003). The importer shall obtain lawful recommendation from the recommending agency through due process (see Supreme Court Decision 82Nu275, Sept. 27, 1983). Therefore, where the importer, upon filing an application for recommendation with the recommending agency and obtaining recommendation by deceiving the recommending agency by submitting false explanatory materials as to the qualifications of recommendation requested by the recommending agency, and thus, the quota tariff applied to the recommending agency through legitimate procedures, and thus, the importer constitutes a person who is subject to the quota tariff reduction or exemption by 200Do2709, Feb. 27, 2008>

Therefore, even if an importer applies for a recommendation to apply the quota tariff to the recommending agency along with relevant data, and the recommending agency determines that the recommendation agency satisfies the requirements for recommendation following a certain examination, the recommendation is merely a primary examination and confirmation as to whether the quota tariff can be applied when the import declaration is filed or paid, or the imposition of customs duties is imposed. Since a final determination as to the application of the quota tariff is made in the form of a disposition of rectifying customs duties by the head of a customs office, etc., the “recommended” of the recommending agency cannot be deemed as a disposition that determines the application of the quota tariff or is binding the determination by the head of a customs office, etc.

B. Article 71 of the former Regulations on the Application of Quota Tariff under Article 71 of the Customs Act (Presidential Decree No. 22690 and Presidential Decree No. 23391, Dec. 28, 2011; hereinafter collectively referred to as “Enforcement Decree of the Quota Tariff”) provides for the rate of quota (24%) to be applied to impitified among imported goods, application period and limit quantity. Furthermore, among items subject to the quota tariff under the Enforcement Decree of the Quota Tariff Act, the Ministry for Food, Agriculture, Forestry and Fisheries shall determine the guidelines for recommending the quota of agricultural and livestock products under the jurisdiction of the Ministry for Food, Agriculture, Forestry and Fisheries for the designation and recommendation of the agency recommending the quota tariff and the guidelines for applying for the quota tariff (in cases of items subject to the quota tariff under Article 201-98 of the Ministry for Food, Agriculture, Forestry and Fisheries, the Ministry of Agriculture, Forestry and Fisheries announced on March 7, 2011).

In full view of the contents of these provisions, even if an importer made an import declaration on the importation of it, upon recommendation of the application of the quota tariff from the Korea Agriculture and Fisheries Corporation, which is the recommending agency, to the head of the customs office, the quota tariff may be applied only when the importer uses it as a raw material after the importation.

C. According to the reasoning of the lower judgment, the following facts are revealed.

(1) The Plaintiff, with the trade name “○○○○○○○○,” manufactured and sold in Korea the ground beer, using the ground as a raw material for beer. From September 21, 201 to May 24, 2012, the Plaintiff imported the beer totaling 528.4t, and filed a declaration and payment of customs duties, etc. by applying 24% of the quota tariff at the time of import clearance with the recommendation of applying the quota tariff from the Korea Agriculture and Fisheries Corporation.

(2) On July 3, 2012, the Defendant conducted a general investigation with respect to the Plaintiff, and discovered that roasting, as seen above, the Plaintiff used 129.5t of the ground bean, as its raw material to manufacture the remainder 398.9t of the ground bean, and sold it to others without any separate processing.

(3) As to roasting 398.9t sold by the Plaintiff without processing as above, the Defendant calculated customs duties by applying 63.9% to the ground bean, calculated the value-added tax base by including the increased customs duties in the base of value-added tax, and calculated the additional tax on the increased amount of tax, and imposed and notified the Plaintiff of KRW 669,845,380 in total, including the increased amount of customs duties 423,986,660, value-added tax 42,398,68,680, value-added tax 42,398,680, and additional tax 203,460,040 (hereinafter “instant disposition”).

D. Examining the above facts in light of the legal principles as seen earlier, even if roasting, the Plaintiff imported the ground bean aggregate of 528.4t, and received recommendation from the Korea Food and Drug Trade and Trade Corporation to apply the quota tariff, it does not have the effect of finally confirming that the said imported goods are subject to the quota tariff. The Plaintiff reported and paid customs duties, etc. on the said imported goods after applying the quota tariff at the time of import clearance, and sells them to others without using them for manufacturing them as they were without processing, contrary to the premise that the recommendation was premised, thereby failing to meet the requirements for applying the quota tariff as to the said portion. Thus, it constitutes grounds

E. Nevertheless, the lower court determined that the Defendant’s recommendation for the application of the quota tariff of the Korea Agriculture and Food Trade Corporation constitutes an administrative disposition and is bound by the recommendation, and that the Defendant’s rejection of the application of the quota tariff according to the recommendation and the disposition of this case was unlawful as it goes against the fairness of the recommendation. In so determining, the lower court erred by misapprehending the legal doctrine on the requirements for the application of the quota tariff and the disposition for the imposition of the surcharge, thereby adversely affecting the conclusion of the judgment.

2. Therefore, without further proceeding to decide on the remaining grounds of appeal, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Ko Young-han (Presiding Justice)