[Defendant-Appellant] Korea Hammo Lease Co., Ltd. (Bae, Kim & Lee LLC, Attorneys Cho Il-young et al., Counsel for defendant-appellant

Head of Busan Customs Office (Law Firm LLC, Attorneys Gangwon-gu, Counsel for defendant-appellant)

December 12, 2014

Busan District Court Decision 2012Guhap5818 Decided February 20, 2014

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance court shall be revoked. ① The Defendant’s respective disposition of imposition of KRW 585,346,930 on March 29, 201, the aggregate of the customs duties of KRW 1,141,086,510 on June 27, 2011, KRW 327,156,980 on September 27, 201, KRW 727,156,980 on the aggregate of the customs duties of KRW 3,43,831,630 on the aggregate of KRW 30,71, KRW 360 on the aggregate of the customs duties of KRW 30, KRW 165, KRW 20 on the aggregate of KRW 11-5, KRW 385, KRW 475, KRW 208, KRW 165, KRW 167, KRW 208, KRW 165, KRW 201-16, KRW 3615, KRW 208, KRW 1616,205.15.

1. Details of the disposition;

A. The Plaintiff is a company running the wholesale business, tobacco manufacture and sales business, etc. of manufactured tobacco, and is a subsidiary of the Whitelip International Inc. (hereinafter referred to as "PMF"), a U.S. legal entity, and is a company affiliated with "PMF group" (hereinafter referred to as "PSSA"), a Switzerland-based legal entity, and is one of its affiliated companies within the TPP group.

B. Conclusion of a first contract between the Plaintiff and the PMFA

On May 31, 2001, the Plaintiff entered into a license agreement (hereinafter referred to as “first agreement”) with PMPA to obtain a license to use a trademark necessary for manufacturing and selling finished tobacco products of pen-type lease in Korea, and accordingly, paid royalties to PPEA. The main contents of the first agreement are as follows.

본문내 포함된 표 〈제1계약의 주요 내용〉 이 라이선스 계약은 2001. 5. 31. 체결되었다. [LICENSE AGREEMENT entered into as of May 31, 2001.] 전문 PMPSA는 원고가 아래 조건에 따라 계열회사들을 통해 계약제품을 제조할 수 있는 권리를 포함하여 본 계약 조건에 따라 본건 상표를 사용할 수 있는 권리를 갖기를 바란다. [Licensor desires that Licensee have the right to use the Trademarks(as defined herein) pursuant to the terms and conditions of this Agreement, including the right to have Licensed Products manufactured by Affiliates in accordance with the terms hereof.] 제1조 정의(DEFINITIONS) 1.01. 정의(Definitions) 다음 용어는 본 계약에서 사용되었을 때 다음과 같은 의미를 가진다: [The following terms shall have the specified meanings when used in this Agreement:] (b) 어느 일방의 “계열회사”란 직접 또는 간접적으로 그 당사자를 지배하거나 그 당사자에 의해 지배되거나 그 당사자와 공동으로 지배를 받는 사람 또는 단체를 의미한다 ; 다만, 본 계약의 목적을 위해 어느 일방도 상대방의 “계열회사”로 간주되지 않는다. ["Affiliate" of a party shall mean any person or entity directly or indirectly controlling, controlled by, or under common control with, such party ; provided that, for purposes of this Agreement, neither party shall be considered an "Affiliate" of the other.] (f) “계약제품”이란 품질표준과 사양서에 따라 본 계약 부록 A에서 확인되는 담배 브랜드 제품 또는 본 계약 부록 A에서 확인되는 상표로 판매되는 담배 브랜드 제품을 의미한다. ["Licensed Products" shall mean the brands of cigarettes identified in Schedule A hereto or sold under the trademarks identified in Schedule A hereto, conforming to the Quality Standards and Specifications.] (k) “계약지역”이란 관세가 부과되는 대한민국 시장을 의미한다. [“Territory" shall mean the duty paid market of the Republic of Korea.] (l) "본건 상표“란 본 계약 부록 A에 정한 브랜드에 대한 상표, 상표 등록, 상표 적용 및 그러한 상표, 상표 등록, 상표적용의 모든 재적용, 재등록, 갱신을 의미한다. [“Trademarks" shall mean the trademarks and any trademark registrations and trademark applications for the brands set forth in Schedule A as well as all reapplications, reregistrations, and renewals of any of the foregoing.] 제2조 라이선스 허여(LICENSE GRANT) 2.01. 허여되는 권리(Rights Granted) (a) PMPSA는 원고에게 본 계약의 조건 및 제한에 따라 계약지역에서 판매와 소비를 위한 계약 제품의 제조와 관련하여 본건 상표를 사용할 수 있는 비독점적인 권리를 허여한다. [Licensor hereby grants to Licensee, upon the terms and subject to the conditions and restrictions of this Agreement, the non-exclusive right to use the Trademarks upon and in connection with the manufacture of the Licensed Products for sale and consumption in the Territory.] (b) PMPSA는 원고가 현재 대한민국 내에 제조설비를 가지고 있지 않고, 그 설비를 건설하고자 계획하고 있으며, 그 설비가 적어도 1년 동안 가동될 수 없다는 것을 인식하고 있다. 따라서 그 설비가 완전 가동될 동안, 본 계약일로부터 2년을 초과하지 아니하는 범위 내에서, PMPSA는 원고에게 원고의 계열회사들(“계열 제조회사들”)을 통해 계약지역 밖에서 계약제품을 제조할 수 있는 권리를 허여한다 ; 단, 그 계열 제조회사 각각은 PMPSA의 사전 승인을 받아야 한다 ; 나아가 원고는 그 계열 제조회사가 제조한 모든 계약제품에 대하여 본 계약 조건에 따라 PMPSA에게 항상 직접적인 책임을 부담한다. [Licensor recognizes that Licensee does not currently have manufacturing facilities in Korea and is intending to construct such facilities and that such facilities will not be operational for at least one year. Accordingly, pending such facilities being fully operational, but not for a period exceeding two years from the date hereof, Licensor hereby grants to Licensee the right to have Licensed Products manufactured outside the Territory by Licensee's Affiliates("Affiliated Manufacturers") ; provided, that each such Affiliated Manufacturer shall have been approved in advance by Licensor ; and provided, further, that Licensee shall at all times remain directly liable to Licensor under the terms of this Agreement for all Licensed Products manufactured by any such Affiliated Manufacturer.] 제4조 로열티, 세금(ROYALTIES, TAXES) 4.01. 로열티 금액(Royalty Amount) (a) 본 계약에 따라 본건 상표를 사용하기 위하여 원고에게 허여하는 권리와 라이선스를 고려하여, 원고는 PMPSA에게 본 계약에 규정된 방식으로 원고의 계약제품 순매출액의 5%를 로열티로 지급한다. [In consideration of the right and license granted to Licensee to use the Trademarks pursuant to this Agreement, Licensee shall pay to Licensor, in the manner and as provided in this Agreement, a royalty of 5% of Licensee's Net Sales of the Licensed Products.] 제5조 유효일, 기간, 해지(EFFECTIVE DATE, TERM, TERMINATION) 5.01. 유효일, 기간(Effective Date ; Term) 본 계약은 2001. 3. 28. 또는 그 이후 대한민국 항구에서 양륙되는 계약제품에 적용되고 유효하며 본 계약의 조건에 따라서 조기 종료되지 않는 한 2006. 3. 31.까지 계속 유효하다. [This Agreement shall apply and be effective to Licensed Products unloaded at a Korean port on or after March 28, 2001, and, unless earlier terminated pursuant to the provisions of this Agreement, shall continue in effect through March 31, 2006.]

C. Around October 14, 2002, when the Plaintiff imported and sold finished tobacco products, the Plaintiff manufactured and sold tobacco finished products in Korea from around that time. At the time, the Plaintiff was not in possession of manufacturing process of each original (referring to the raw materials of finished tobacco products manufactured in a way that is cut off in a certain size) because the Plaintiff was not in possession of manufacturing process of each original (referring to the manufacturing process of tobacco finished products manufactured in a way that is cut off in a certain size, referring to the process of drying, mixing, adding, heat processing, melting, etc. tobacco leaves harvested from each original, cutfiler, farming household, and then processed tobacco leaves harvested from each original (referring to raw materials of finished tobacco products manufactured in a way that is cut off in a certain size). Accordingly, the Plaintiff imported tobacco as a whole and manufactured tobacco finished products (after the Plaintiff completed the first manufacturing process on June 2012, he manufactured tobacco products

D. The notification of the results of the survey conducted on June 30, 2003 by the Head of Seoul Customs Office

On June 30, 2003, the head of Seoul Customs Office investigated the legality of the Plaintiff’s export and import clearance, etc. and notified the Plaintiff of the results of the investigation (hereinafter “the notification of the results of the investigation by the head of Seoul Customs Office”). The main contents are as follows:

As a result of the 30th investigation of the Seoul Customs Office on June 30, 203: (i) the main contents of the notification of the results of the 1st Customs Office’s investigation of the 5th Customs Office on the first sale price of the goods on the basis of the said 5th Customs Office; (ii) the details of the correction of customs duties from November 1, 2007 to 202; (iii) the Plaintiff calculated the import price of the goods on the basis of the 5th sale price of the goods from the first sale price of the said goods; (iv) the total of the import price of the goods on the basis of the 5th sale price of the goods from the first sale price of the goods from the first sale price of the said goods; and (v) the amount calculated by adding the import price of the goods on the basis of the 5th sale price of the goods from the first sale price of the goods from the first sale price of the said goods that the Plaintiff would have had an effect on the 5th sale price of the goods from the first sale price.

E. Conclusion of a second contract between the Plaintiff and the PMFA

On January 1, 2004, the Plaintiff entered into a license agreement with the PMPA to obtain a license for trademark and other intellectual property rights (hereinafter referred to as “second license agreement”) and accordingly, paid royalties (hereinafter referred to as “the royalty of this case”) to the PMPA in accordance with the second license agreement, and the main contents of the second license agreement are as follows.

본문내 포함된 표 〈제2계약의 주요 내용〉 본 계약은 2004. 1. 1. 체결되었다 [This Agreement, effective as of January 1, 2004.] 전문 가. PMPSA는 계약지역 내에서 본건 상표를 소유하고 있다. 나. 본 계약 조건에 따라, PMPSA는 원고에게 본건 상표와 기타 지적재산권의 사용권을 허여하고자 하며, 원고는 본건 상표와 기타 지적재산권을 사용하고자 한다. [A. PMPSA owns the Trademarks in the Territory(each, as defined below); and B. PMPSA wishes to license the Trademarks and certain other intellectual property rights to Licensee, and Licensee wishes to use the Trademarks and other intellectual property rights, subject to and in accordance with the terms and conditions hereof.] 1. 정의(Definitions) 1.5. “기타 지적재산권”이란 PMPSA가 본 계약 기간 동안 언제든지 사용권을 허여할 권리를 보유하고, 계약지역 및/또는 본 계약에 의한 계약제품 제조국의 법령, 법률 또는 형평법에 의하여 보호받는 계약제품과 관련된 본건 상표 이외의 산업 및 지적 재산권을 의미하며, 계약지역 이외의 지역인 경우 작업 또는 기타 관련 사항에 존재하거나 향후 존재할 수 있는 모든 등록 또는 미등록 저작권과 유사한 권리, 발명에 관한 권리(특허 및 특허출원이 포함됨), 노하우, 기밀정보 및 영업비밀에 대한 권리와 디자인(등록 여부를 불문함)에 관한 권리를 포함한다. [1.5. "Other Intellectual Property Rights" means any industrial and intellectual property rights, other than the Trademarks, applicable to the Products, as to which PMPSA has at any time during the term of this Agreement the right to grant licenses and which are protected by statute, at law or in equity in the Territory and/or in the country of manufacture of the Products pursuant to the Agreement, if this shall be other than the Territory, including all registered and unregistered copyright and similar rights which may subsist or may hereafter subsist in works or other subject matter, rights in relation to inventions(including patents and patent applications), rights in relation to know-how, Confidential Information and trade secrets, and rights in relation to designs(whether registerable or not registerable)]. 1.6. “계약제품”이란 본 계약에 따라 제조되고 본건 상표가 부착된 모든 담배를 의미한다. [1.6. “Products" means all cigarettes, bearing the Trademarks and manufactured in accordance with this Agreement.] 1.7. “사양서”란 PMPSA가 수시로 통지하는 계약제품의 제조를 위한 PMPSA의 표준, 사양 및 지시를 의미한다. [1.7. “Specifications" means the standards, specifications and directions of PMPSA for the manufacture of the Products as communicated from time to time by PMPSA.] 1.8. “계약지역”이란 관세 및 소비세가 부과되는 대한민국 국내시장을 의미한다. [1.8. “Territory" means the duty paid and excise tax paid domestic market of the Republic of Korea.] 1.9. "본건 상표“란 본 계약 부록 A(별지2 기재와 같다)에 열거된 상표(본 계약에 따라 수시로 수정되는 내용을 포함한다)를 의미한다. [1.9. “Trademarks" means the trademarks listed in Schedule A hereto, as amended from time to time in accordance with this Agreement.] 2. 라이선스 허여(License Grant) PMPSA는 원고에게 본 계약의 조건에 따라 한국 내에서의 계약제품 제조와 계약지역에서의 계약제품 판매를 위하여 본건 상표 및 기타 지적재산권을 사용할 비독점적인 권리를 허여한다. [PMPSA hereby grants to Licensee under the terms and conditions of this Agreement the non-exclusive right to use the Trademarks and the Other Intellectual Property Rights for the manufacture of the Products in the Republic of Korea and the sale of the Products in the Territory.] 4. 품질관리(Quality Control) 원고는 사양서를 엄격하게 준수하여 계약제품을 제조하며, 그와 같이 제조되지 않는 계약제품은 판매하지 아니한다. 원고는 매 분기마다 이전 분기 동안 제조하여 판매한 모든 계약제품의 견본을 PMPSA 또는 PMPSA가 지명한 자에게 제출한다. PMPSA는 본 계약 기간 동안 언제든지 적법하게 수권된 대리인을 통하여 원고에 의해 또는 원고의 계산으로 계약제품이 제조 또는 보관되거나 또는 제조시 사용될 재료가 보관된 장소를 검사할 수 있으며, 그러한 대리인은 그러한 장소의 모든 부분을 자유롭게 출입할 수 있고, 계약제품 또는 재료를 검사하고 시험하며 원고의 관련 장부와 기록을 복사할 수 있다. PMPSA는 계약제품이 사양서의 모든 점에 부합되게 생산되도록 하는데 합리적으로 필요한 경우 재료나 제조방법의 변경을 요구할 무제한적인 권리를 가진다. 원고가 광고, 판촉, 판매 또는 관련 재료에 본건 상표를 사용하는 경우 기존의 절차(수시로 변경되는 내용을 포함함)에 따라 PMPSA 또는 그 대리인의 사전 승인을 받아야 한다. [Licensee shall manufacture the Products in strict accordance with the Specifications and shall not sell any Products which are not so manufactured. Licensee shall submit to PMPSA of its designees each calendar quarter fair samples of all Products that have been manufactured and sold by it during the preceding calendar quarter. PMPSA shall at all times during the term of this Agreement be entitled to inspect, by its duly authorized agents, any premises where the Products are manufactured or stored, or where materials to be used in their manufacture are stored, by Licensee or for its account, and said agents shall have free access to all parts of said premises and may inspect and test the Products or such materials and make copies of the related books and records of Licensee. PMPSA shall have an unqualified right to require such changes in materials or methods of manufacture as may reasonably be necessary to secure the production of Products complying in all respects with the Specifications. Any use of the Trademarks by Licensee in advertising, promotional, sales, or related materials shall be subject to the prior approval of PMPSA or its representatives under existing procedures, as may be modified from time to time.] 5. 로열티(Royalties) 5.1. 원고는 본 계약에 따라 허여된 권리에 대한 대가로 본 계약에 따라 원고가 제조하여 판매한 각 계약제품에 대하여 PMPSA에게 로열티를 지급하여야 한다. 계약제품 각 브랜드에 대한 로열티는 원고의 해당 브랜드 순매출액 중 본 계약 부록 A에 기재된 비율에 해당하는 금액으로 한다. [5.1. In consideration of the rights granted herein, Licensee shall pay to PMPSA a royalty for each of the Products which Licensee manufactures and sells pursuant to this Agreement. For each brand of the Products, such royalty shall be that percentage of Licensee's Net Sales Value for that brand which is specified in Schedule A.] 7. 기술지원 및 개량물(Technical Assistance and Improvements) PMPSA는 PMPSA가 판단하기에 원고가 사양서에 따라 계약제품을 제조 및 판매할 수 있도록 하는데 필요하거나 적절한 기술지원을 제공한다. 원고는 그러한 기술지원 제공과 관련된 합리적인 출장비와 생활비를 부담한다. 원고는 원고나 그 직원이 만든 기타 지적재산권과 관련된 개량물에 대하여 신속하게 무상으로 PMPSA에게 통지하며, 통지 후 해당 개량물은 PMPSA의 단독 재산이 된다. [PMPSA shall supply such technological assistance as PMPSA deems necessary or appropriate to enable Licensee to manufacture and sell the Products in accordance with the Specifications. Licensee shall assume the cost of reasonable travel and living expenses associated with the provision of such assistance. Licensee shall promptly communicate to PMPSA without charge any improvements relating to the Other Intellectual Property Rights made by it or its employees, and once communicated such improvements shall become the sole property of PMPSA.] 9. 기간 및 해지(Term and Termination) 9.1. 본 계약은 2004. 1. 1.에 발효되며, 제9.2.조의 규정에 따라 어느 당사자가 해지할 때까지 무기한 계속된다. [9.1. This Agreement shall be effective as of January 1, 2004 and shall continue indefinitely until terminated by either party in accordance with the provision of Section 9.2.]

F. From April 6, 2006 to December 28, 2007, the Plaintiff imported each of the beginnings from PMFSA, Whitelip Morris Limited, Whitelip Morris Ltd. (hereinafter collectively referred to as “the seller of this case”), and manufactured finished tobacco products (hereinafter referred to as “the beginning of this case”) on a total of 397 occasions from April 6, 2007.

G. The defendant's notification of the results of the corporate examination of this case on March 13, 2008

1) On March 13, 2008, the Defendant conducted an corporate review to confirm the customs clearance of exported and imported goods, and notified the results of the review to the Plaintiff on the following particulars (hereinafter “the notification of the results of the instant corporate review”) and attached the “detailed collection by import declaration” as stated in the attached Table 3. The Defendant stated that “the Plaintiff may request additional data regarding the royalty paid by the Plaintiff and the relation between the royalty for the instant right and the transfer price.”

본문내 포함된 표 〈피고의 2008. 3. 13.자 이 사건 기업심사결과 통지의 주요 내용〉 ① 심사대상기간 : 2003. 1. 1. ~ 2007. 12. 31. ② 경정할 내역 (단위 : 원) 관세 부가가치세 가산세 합계 539,101,830 669,453,740 225,954,890 1,434,510,460 □ 붙임 : 조사항목별 적출내역 1) 디자인 개발비용 및 인쇄판 제작비용 신고누락 2) 가산금액 누락 ○ 일부 각초 수입건의 가산금액을 신고에서 누락(서울세관 심사 결과 각초에 대해서는 mark-up 8% 기준으로 신고하도록 하였으나, 일부건에 대해 가산금액 미신고) 3) AOC 비용 ○ AOC(말레이시아 소재 아시아제조본부)가 원고에게 기술지원비로 청구하는 비용 중 담배잎 구매, 선별 등과 관련된 비용은 국내로 수입되는 각초를 수출하는 자의 제조원가로 계상되었어야 할 비용으로 각초 수입신고 가격에 가산되는 것으로 보아 과세 ○ 적용규정 : 적출내역 2), 3) 관련 관세법 제35조 합리적인 기준에 의한 과세가격 결정(관세법 제34조 산정가격을 기초로 한 과세가격 결정의 신축적용 유지) ⇒ 기존 서울세관 심사결과 인정된 mark-up 비율에 대한 가산비율 유지 및 종전 심사 후 신설 비용인 AOC 비용 중 담배잎 관련비용에 대한 추가 가산 총 예상 추징세액 : 65건 1,434,510,460원

2) Since then, the Plaintiff filed a revised return only on the part of the “additional amount omitted,” among the above parts of the parts of the recovered amount, and the Defendant imposed tax on April 17, 2008 on the part of the “design Development Costs and Printing Production Costs Report,” which was not reported by the Plaintiff, and the part of the “Omission of the AOC Costs,” which was not reported by the Plaintiff.

H. The defendant's disposition of this case

1) After reviewing the additional data related to each beginning of the instant case and the royalty for the use of the instant right after being provided by the Plaintiff, the Defendant deemed that the royalty for the instant right was related to the beginning of the instant case and the terms and conditions of transaction imported by the Plaintiff from the seller of the instant case. Accordingly, the Defendant calculated the amount calculated by multiplying the royalty for the instant right by the percentage of the price of finished products (excluding taxes and the royalty for the use of the instant right at manufacturing cost) of the first beginning of the instant case in accordance with the proviso of Article 3-4 subparagraph 2 and subparagraph 4 (a) of the former Public Notice on the Determination of Dutiable Value of Imported Goods (wholly amended by the Korea Customs Service Notice No. 2014-1, Jan. 3, 2014; hereinafter referred to as the “former Public Notice on the Determination of Dutiable Value”) and Article 3-4 subparagraph 4 (a) of the former Public Notice on the Determination of Dutiable Value of Goods (hereinafter referred to as the “former Notice on the Determination of Dutiable Value”).

① On March 29, 2011, the Defendant imposed KRW 948,921,660 on the first 46 of each of the instant seconds for which the Plaintiff filed an import declaration from April 6, 2006 to June 28, 2006, as shown in attached Table 1-1.

② On June 27, 2011, the Defendant imposed total of KRW 1,849,847,300 on each of 74 seconds for which the Plaintiff filed an import declaration from July 3, 2006 to September 29, 2006, as shown in attached Table 1-2.

③ On September 27, 2011, the Defendant imposed the total amount of KRW 1,178,813,70 on each of the 32 seconds for which the Plaintiff filed an import declaration from October 9, 2006 to December 28, 2006, as shown in attached Table 1-3.

④ On November 1, 2011, the Defendant imposed KRW 6,013,858,720 on each second of 246 import declaration filed by the Plaintiff from January 3, 2007 to December 28, 2007, as shown in attached Table 1-4, totaling KRW 6,013,858,720, including additional tax on value-added tax, and additional tax on value-added tax.

2) On June 29, 2011 and September 24, 2011, the Plaintiff filed an appeal with the Tax Tribunal on December 29, 201 through an objection on September 24, 2011. On September 20, 2012, the Tax Tribunal corrected the amount of customs duties and the additional tax on the Defendant’s initial disposition, and dismissed the Plaintiff’s remaining appeal. Accordingly, the Defendant’s initial disposition was corrected to impose only customs duties and value-added taxes as shown in attached Tables 1-5 through 1-8.

3) After correcting the additional rate for the year 206 from 21.44% to 21.43% on December 8, 2014 during the instant lawsuit, the Defendant stated the total of KRW 585,754,340 as of March 29, 201, the total of KRW 585,346,930 as of March 29, 201, the total of KRW 141,81,81, KRW 148,390 as of June 27, 201, KRW 141,81, and KRW 390 as of June 27, 201, KRW 148, KRW 141,510 as of June 27, 2011, KRW 16, KRW 206, KRW 17, KRW 196-17, KRW 196, KRW 207, KRW 196, KRW 27.197, respectively,67.19

[Ground of recognition] The fact that there is no dispute, Gap's evidence 1 through 8, 16, 39, Eul's evidence 1, 3, 11, 53 (including additional evidence; hereinafter the same shall apply) and the purport of whole pleadings

2. The plaintiff's assertion

The instant disposition shall be revoked on the grounds that it is unlawful for the following reasons.

(a) Nullity of the underlying statute;

The following statutes, which served as the basis for the instant disposition, are null and void:

1) Article 19(1) of the Enforcement Decree of the Customs Act

Article 30(1)4 of the former Customs Act (amended by Act No. 11121, Dec. 31, 201; hereinafter “former Customs Act”) only delegated specific methods for calculating royalty to Presidential Decree, and does not delegate the meaning or scope of “other rights similar thereto.” Nevertheless, Article 19(1) of the Enforcement Decree of the Customs Act provides for the scope of “other rights similar thereto.” This is null and void as there is no delegation of the parent law.

Even if there is delegation of the mother law, the content of “other rights similar thereto” under Article 30(1)4 of the former Customs Act ought to be at least the same level as patent rights, utility model rights, design rights, and trademark rights. Nevertheless, Article 19(1)2 of the Enforcement Decree of the Customs Act provides that “trade secret” is “trade secret” and Article 19(1)2 of the Enforcement Decree of the Customs Act provides that the content and scope of unclear elements are included in the subject of royalty, thereby expanding the scope thereof. This is invalid as it deviates from the limitation

2) Article 19(6) of the Enforcement Decree of the Customs Act

Article 19 (6) of the Enforcement Decree of the Customs Act is null and void since the method of calculating royalty delegated pursuant to Article 30 (1) 4 of the former Customs Act is not determined by the comparison of the matters concerning the method of calculating royalty, and it goes beyond the limits of re-delegation by delegating blank to the Commissioner of the Korea Customs Service as is.

3) The proviso to Article 3-4 subparagraph 2 and subparagraph 4 (a) of the former Notice of Determination of Dutiable Value

Even if Article 19(6) of the Enforcement Decree of the Customs Act is valid, the scope of delegation is limited to the method of calculating royalty to be added on the basis of data on the premise that there are objective and quantitative data pursuant to the proviso of Article 30(1) of the former Customs Act. Nevertheless, Article 3-4 subparag. 2 proviso and 4(a) of the former Public Notice of Determination of Dutiable Value delegated by Article 19(6) of the Enforcement Decree of the Customs Act provides for the method of calculating royalty to be added on the basis of data. In the absence of objective and quantitative data for which only the amount related to the imported parts can be identified, even in cases where there is no objective and quantitative data for which only the amount related to the imported parts can be identified, Article 30 of the former Customs Act provides for the method of determination of dutiable value (Article 30 through 35 of the former Customs Act in relation to the method of determination of dutiable value). Thus, it is invalid in that the same order applies to the method of calculating royalty by deviating from the scope of delegation.

(b) lack of relevance and transaction terms;

The royalty for the use of the right of this case cannot be added to the customs value of each of the beginning of this case on the following grounds, since there is no relevance and transaction terms with the beginning of this case as imported goods.

1) Lack of relevance

Comprehensively taking into account the content of the contract, the manufacturing process of finished products, and the calculation method of the royalty of this case, the royalty of this case is paid for the use of trademarks and other intellectual property rights held by PPSA when manufacturing and selling finished products in Korea. There is no relevance with the beginning of each of the instant cases, which are imported raw materials.

2) Failure of transaction terms and conditions

In full view of the content of the contract, the reason why the Plaintiff purchases each beginning from the affiliated companies of the PMF Group, and the case of the first transaction between the affiliated companies of the PMF Group and the non-affiliated companies, the Plaintiff has the right of choice for each beginning, and unless there is no obligation to purchase each beginning of the instant case, the royalty of this case cannot be deemed as the terms and conditions of each beginning revenue of this case.

C. Illegal methods for adding the royalty to the right;

Some of the royalty for use of a right shall not be applied to imported goods, while a part of the royalty for use of a right can not be calculated on the basis of objective and quantitative data when the imported goods are related to the domestic process.

The method of computation prescribed in the proviso of Article 3-4 subparag. 2 and subparag. 4(a) of the former Notice of Dutiable Value Determination is a structure in which the imported goods related to the royalty is determined by the ratio of the imported goods price to the finished goods price. In light of the fact that the value of the imported goods, such as the trade secrets, etc. embodied or embodied, is not determined on a daily basis according to the ratio of the imported goods price to the finished goods price to the finished goods, and that the value of the trademark is entirely inconsistent with the reality of the tobacco industry that accounts for the absolute weight of the goods, and that the amount paid for the use of the trademark

Therefore, the method of calculating the royalty applied by the Defendant to the instant disposition cannot be deemed as based on the “data that can be objectively and numericalized” under the proviso of Article 30(1) of the former Customs Act, and thus, the instant disposition is unlawful.

D. Violation of the principle of good faith and prohibition of duplicate investigations

1) Violation of the principle of good faith

On June 30, 2003, the head of Seoul Customs Office explicitly denied the application of the first method and applied the sixth method to the Plaintiff’s special relationship between the buyer and the seller in relation to the determination of the customs value of each beginning imported by the Plaintiff. On March 13, 2008, the notice of the result of the corporate review of this case maintained it as is. All of them can be seen as “public opinion statement” which is the requirement for the application of the principle of trust and good faith, and the disposition of this case, which determined the customs value of each beginning of this case by applying the first method against the public opinion of the above two times, is unlawful.

2) Violation of the principle of prohibition of double investigation

The defendant notified the plaintiff on March 13, 2008 of the results of the corporate review of this case and conducted an investigation on each of the beginning of this case, but thereafter, the defendant conducted a new investigation on the same product as the period subject to review and issued the disposition of this case. Thus, the disposition of this case is based on the result of the duplicate investigation prohibited under Article 111 of the former Customs Act, and there is a serious procedural error.

3. Relevant statutes;

Attached Form 4 shall be as listed in attached Table 4.

4. Determination

A. As to the allegation on invalidity of the underlying statute

1) Article 19(1) of the Enforcement Decree of the Customs Act

The Enforcement Decree of the Act can not change or supplement the contents of rights and obligations of an individual or set new contents that are not prescribed by the Act, unless otherwise prescribed by the Act. However, although the contents of the Enforcement Decree of the Act are merely the contents that can be interpreted by the interpretation of the parent law through the organic and systematic examination of all of the provisions related to the legislative intent of the parent law and the whole of the provisions related thereto, or when they are intended to specify them based on the purport of the parent law, they cannot be deemed to exceed the scope of the parent law's regulation. Thus, even if there is no provision of direct delegation of the parent law, it shall not be deemed null and void (see Supreme Court Decision 2008Du13637, Jun. 1

The main text of Article 30(1) of the former Customs Act provides that “The dutiable value of imported goods shall be the transaction price adjusted by adding up the following amounts to the price actually paid or payable by a buyer for the goods sold to be exported to Korea.” Article 30(1)4 of the same Act provides that “The dutiable value of imported goods shall be the transaction price adjusted by adding up the following amounts to the price actually paid or payable by the buyer

Article 19(1)4 of the Enforcement Decree of the Customs Act provides, “The term “the right similar thereto” refers to any of the following: Article 30(1)1 of the Act provides, and Article 19(1)2 of the Enforcement Decree of the Customs Act provides, “The legal right, such as copyright, etc.” refers to “the legal right,” and Article 19(1)2 of the same Act provides, “the production method, sale method, and other technical or business information, etc. useful for business activities, which are not included in the legal right, but are kept confidential by considerable effort (hereinafter “trade secret”):

Examining the legislative intent of Article 30(1)4 of the former Customs Act, the customs value of the imported goods is in principle determined on the basis of the price actually paid or payable by the buyer for the imported goods (hereinafter “actual payment price”). However, even in cases where the buyer and the seller jointly determine the actual payment price for the imported goods more unreasonably than the market price in ordinary commercial transactions due to the purchaser and the seller, and instead pay the difference as a royalty, the determination of the customs value of the imported goods on the basis of only the actual payment price would be an obstacle to the elimination of customs duties, and not only would the expansion of international trade through free competition, but also would be an obstacle to the expansion of international trade through free competition, but also the difference between the actual payment price and the actual payment price, as the actual payment price is the price of the imported goods, the customs value of the imported goods is to be fair and reasonable by determining the customs value of the imported goods on the basis of the transaction price adjusted in addition to the actual payment price (hereinafter “actual payment price”).

However, the problem of determining the scope of rights eligible for royalty is highly likely to be flexibly and flexibly regulated according to changes in economic situation, and it is not always desirable to regulate all rights individually and specifically under the legal provisions in detail. Thus, Article 30(1)4 of the former Customs Act provides for the possibility that new rights, other than patent rights, utility model rights, design rights, and trademark rights, may be included.

In full view of the legislative purport and text of Article 30(1)4 of the former Customs Act, the term “other rights similar thereto” under Article 30(1)4 of the former Customs Act does not necessarily mean that the legal rights, such as patent rights, utility model rights, design rights, and trademark rights, are limited to the legal rights, or the legal rights that can be recognized at the same level as that of this Act, and it does not necessarily mean that the said term “the rights” under Article 30(1)4 of the former Customs Act are limited to the legal rights, and it also includes that the actual payment is likely to be raised or concealed due to the royalty

In light of this point, Article 19(1) of the Enforcement Decree of the Customs Act provides the scope of “other rights similar thereto” and Article 19(1)2 of the Enforcement Decree of the Customs Act provides “trade secret” as one of the “other rights similar thereto” is nothing more than specifying the possible contents in the interpretation of Article 30(1)4 of the former Customs Act, which is a parent company, or is aimed at embodying them based on the purport of Article 30(1)4 of the former Customs Act. Thus, even if there is no provision directly delegated to the mother law, it shall not be deemed null and void, and it shall not be deemed null and void beyond the bounds of delegation beyond the scope of the parent law.

Therefore, the plaintiff's above assertion is without merit.

2) Article 19(6) of the Enforcement Decree of the Customs Act

Re-elections without entirely stipulating the matters delegated by law are contrary to the legal principles of the prohibition of re-entrustment in blank, and are not permitted since it causes changes in the contents of the delegation. However, in the event that the delegated matters are determined by the Presidential Decree and re-entrusted to the subordinate statutes by fixing the scope of the specific matters among them, re-delegations is allowed (see Supreme Court Decision 2004Du14793, Apr. 14, 2006).

Since the phrase of Article 30(1)4 of the former Customs Act does not delegate only the method of calculating royalty for use of rights to the Enforcement Decree, the Enforcement Decree may also stipulate all necessary matters for calculating royalty for use of rights.

Article 19 (2) of the Enforcement Decree of the Customs Act provides that, with respect to matters necessary for the calculation of royalties for use of rights delegated by Article 30 (1) 4 of the former Customs Act, the royalty for use of rights shall be related to the relevant goods and shall have relevance and characteristics of transaction terms and conditions. Article 19 (3) of the Enforcement Decree of the Customs Act provides that cases deemed related to the relevant goods shall be prescribed in paragraph (4) of the same Article, and cases deemed unrelated to the relevant goods shall be prescribed in paragraph (4) of the same Article, and cases where transaction terms and conditions are deemed to exist. Article 19 (5) of the Enforcement Decree of the Customs Act provides that "The details necessary for the calculation of royalties for use of rights, other than the provisions of paragraphs (1) through (4), shall be prescribed by the Commissioner of the Korea Customs Service," and Article 19 (6) of the Enforcement Decree of the Customs Act provides that "The matters necessary for the calculation of royalties for use of rights, other than the provisions of paragraphs (1) through (4), shall be again delegated to subordinate

Therefore, the plaintiff's above assertion is without merit.

3) The proviso to Article 3-4 subparagraph 2 and subparagraph 4 (a) of the former Notice of Determination of Dutiable Value

The Plaintiff’s assertion in this part is identical to the Plaintiff’s assertion that “the method of adding royalty to the right is unlawful,” and thus, also examined in the following Section C.

B. As to the assertion of lack of relevance and transaction terms

1) Whether to recognize relevance

A) Article 19(2) of the Enforcement Decree of the Customs Act provides that “The royalty to be added to the price actually paid or payable by a buyer for the relevant goods under Article 30(1) of the Act shall be the amount paid directly or indirectly by a buyer according to the terms and conditions of transaction in relation to the relevant goods.”

Furthermore, Article 19(3) of the Enforcement Decree of the Customs Act provides that "in applying the provisions of paragraph (2), in cases falling under any of the following subparagraphs, the royalty shall be deemed to be related to the relevant goods" and the cases deemed related to each subparagraph of the same paragraph are shown as follows:

(1) If the royalty is paid for the right of patent, the case where imported goods are parts, raw materials or components of goods to be produced using the relevant patent in Korea and in which the relevant patent is embodied in whole or in part ( subparagraph 1 (c)).

(2) If the royalty is paid for trademark rights, where the trademark is attached to an imported goods or a trademark is attached to an imported goods after the insignificant processing, such as dilution, mixture, classification, simple assembly, re- packing, etc. ( subparagraph 3).

(3) Where the royalty is paid for the right to utility model or trade secret, where the utility model right or trade secret concerned is related as corresponding to the provisions of subparagraph 1 to imported goods ( subparagraph 5).

(4) If the royalty is paid for other rights, the case where the relevant right is related to the provisions of subparagraphs 1 through 5 concerning the right most similar to the relevant right in light of the nature of the right in question (subparagraph 6) with the imported goods.

In full view of the relevant provisions, the fact that the royalty is related to the imported goods in question refers to the case where the intangible property right, which is the object of the royalty, is integrated with or embodied into the imported goods and thereby forming part of the imported goods.

B) In light of the following circumstances, the aforementioned evidence, Gap evidence Nos. 9, Eul evidence No. 5, Eul evidence No. 12, and evidence No. 16, which can be acknowledged by comprehensively considering the overall purport of the pleadings, other intellectual property rights, "Subject to the royalty of this case," which are subject to the payment of royalty of this case, shall be deemed to be integrated into or embodied in each beginning of this case, which is imported goods, and constitute a part of the beginning of this case, and therefore, the royalty of this case is related to each beginning of this case. Therefore, this part of the plaintiff'

(1) According to the manufacturing process of tobacco finished products, tobacco finished a finished product if the tobacco leaves harvested from a tobacco farm have been dried in an adequate temperature and damp level (the process of mixing tobacco leaves with each other at an appropriate rate taking into account the characteristics of the flag and smells of various tobacco leaves in order to standardize the characteristics and quality of tobacco), the process of processing, such as flaging and flaging (the process of mixing tobacco with each other in an appropriate manner in order to improve the tobacco massage and quality), heating treatment (the process of adding the flag and glaging, etc. to the mixture of raw materials), and the processed raw materials have been cut off, and then the processed raw materials have been cut down in a tobacco paper with each other in a tobacco paper. As such, since the basic massage and flag of the finished product of tobacco finished products are most determined at each stage of manufacturing, the manufacturing technology of finished products held by the relevant enterprise manufacturing the tobacco is finished products, each of which is generally made public without disclosing the trade secrets of each beginning.

② PMFSA operates a research and development center in the SPSel and sells tobacco leaves to the SPSA’s affiliated companies or non-affiliated manufacturers in order to enhance the value of a trademark by conducting research and development activities to maintain the manufacturing process and quality level, to ensure that products meet the standards and global regulatory levels, and to ensure that products sold under the same trademark have the same quality and have the same product characteristics all over the world by maintaining the same quality. PMFSA has exclusive license in areas other than the United States for trade secrets, products, and other business regulations developed at the above research and development center. In addition, PMFA has to be deemed to have engaged in each first manufacture of tobacco products, such as trade secrets, products, and other manufactured products in accordance with the product standards, such as the form, quantity, quality, price, etc. of PMFA, and sell tobacco leaves from the world to the manufacturing enterprises or non-affiliated manufacturers of PMFI, and to maintain the well-being and mixed ratio of tobacco leaves in storage in an area other than the United States.

③ Moreover, the Plaintiff did not select and import any of the criteria already developed by the PMF, but suggested requirements to the department in charge of the AOC suitable for the Korean market, so that it could develop the optimal beginning for creating tobacco that is most suitable for the Korean consumers’ massage and then imported it.

④ The instant royalty is paid in consideration of the Plaintiff’s trademark and other rights to use intellectual property rights (Article 2, 5.1.1 of the Agreement). Article 1.5 of the Agreement provides that “other intellectual property rights” refers to industrial and intellectual property rights other than this trademark related to a contract product, and includes rights to an invention (including patents and patent applications), rights to an invention (including patents and patent applications), know-how, confidential information and trade secret rights and designs (registration non-registration) that exist or may exist in a region other than the contract area, and includes know-how, confidential information and trade secret rights in other intellectual property rights.

⑤ Furthermore, Article 7 of the TPPA provides necessary or appropriate technical assistance to enable the Plaintiff to manufacture and sell contract products in accordance with the specifications in the determination of the TPPA, and the Plaintiff promptly notifies the TPPA of the improvement materials related to the intellectual property rights created by the Plaintiff or his/her employees without compensation, and then the relevant improvement materials shall be the sole property of the TPPA after notification, and if the improvement materials created by the Plaintiff or his/her employees are related to the “other intellectual property rights” at the same time as the technical assistance, it shall be deemed that they are the sole property of the Plaintiff or his/her employees, thereby securing and expanding other intellectual property rights.

(6) The Plaintiff asserts that the royalty of this case was not related to the beginning of this case since it was related to know-how and trade secrets related to the manufacturing of finished products in Korea after importing each of the beginning of this case. However, the Plaintiff received no first step in Korea from April 6, 2006 to December 28, 2007, which is the target period of the disposition of this case, and received no first step in Korea. Since the process of packing each second step connected to a cigarette in a tobacco paper is very mechanical and simple process compared to the manufacturing process of each second step, the degree of know-how, trade secrets, etc. related to the manufacturing of finished products in Korea is not larger than each second step.

7) In addition, the Plaintiff asserts that the royalty of this case is not related to the beginning of each case in light of the fact that the royalty of this case is not in the proportion to the import volume of each beginning, the Plaintiff’s process of manufacturing cannot be considered as a major manufacturing process, considering the Plaintiff’s current status of facilities and personnel investment, and all the finished products for exporting tobacco and finished products for domestic consumption are used without distinction. However, the Plaintiff’s assertion that the royalty of this case is not related to the beginning of each beginning of each case, although the royalty of each period does not appear to be proportional in appearance between the royalty amount and the initial import volume of each beginning, it is merely in accordance with the transfer pricing policy of the PMFI Group that imposes royalties on the royalties at the final sales stage without the royalties in the interim re-transaction stage. In light of the importance of each first manufacturing stage, it is difficult to view each beginning manufacturing process as an important manufacturing process only based on the Plaintiff’s mere equipment and personnel investment situation of each first manufacturing stage. In light of the importance of each first manufacturing stage as seen earlier, it is insufficient for the Plaintiff’s assertion above.

2) Whether to recognize transaction terms and conditions

A) Article 19(5) of the Enforcement Decree of the Customs Act provides that “In applying the provisions of paragraph (2), in cases falling under any of the following subparagraphs, royalties shall be deemed to have been paid as the terms and conditions of transaction for the pertinent goods” and the cases deemed to have the terms and conditions of transaction in each subparagraph of the same paragraph are shown as follows:

(1) Where a buyer pays the royalty to a seller to purchase imported goods ( subparagraph 1):

(2) Where a buyer pays the royalty to a person other than a seller to purchase imported goods according to an agreement between the buyer and the seller ( subparagraph 2).

(3) Where a buyer, upon permission of a person other than a seller for the use of a patent right, etc., allows such seller to use such patent right and pays the royalty to a person who is not the seller to purchase imported goods ( subparagraph 3).

Comprehensively taking account of the relevant provisions, the fact that the royalty is paid as the transaction terms of the imported goods in question refers to the case where a buyer pays the royalty to purchase the imported goods and the buyer has no choice of purchase for the imported goods (see Supreme Court Decision 91Nu7958 delivered on April 27, 1993).

B) In light of the following circumstances, the Plaintiff paid the royalty of this case to purchase each of the beginning of this case, imported goods, and in fact, the Plaintiff did not have the right to purchase each of the beginning of this case. Therefore, the royalty of this case should be deemed to have been paid according to the terms and conditions of each of the beginning of this case. Accordingly, the Plaintiff’s assertion on this part is without merit.

(1) PMFSA shall purchase all the world tobacco leaves, and voluntarily manufacture each of them, or sell tobacco leaves to affiliated companies of the PMF Group, including the sellers of this case, to manufacture each of them only by the order of the PMFA.

② Article 4 of the TPPA imposes on the Plaintiff the duty to strictly observe the specifications and not to sell contractual products that have not been manufactured, the duty to submit samples of all contractual products that have been manufactured and sold during each quarter, and the obligation to submit samples of all contractual products that have not been manufactured and sold during the previous quarter, and the TPPA, at any time, may inspect the place where contractual products have been manufactured or stored, or materials to be used in the manufacture are stored, and all such places may be freely access to the place, and the right to inspect and test contractual products or materials, the right to copy the Plaintiff’s related books and records, and the right to produce the contract products reasonably necessary to conform to all aspects of the specifications, and the right to request the change of materials or manufacturing methods, and if necessary, exercise broad authority to “quality control” during all processes, each of the beginning of the instant case, as raw materials of tobacco finished products, has been completed as finished as finished products.

③ The Plaintiff and the instant sellers, including the Plaintiff and the PMFA, are affiliated companies within the PMF group and are related companies. The Plaintiff involved in each first manufacture so that the products sold under the same trademark can be maintained the same quality, and thus, the Plaintiff supplied each of the above quality to the Plaintiff by the sellers of this case. Furthermore, the Plaintiff suggested the requirements appropriate for the Korean market, thereby enabling the Plaintiff to develop the optimal beginnings for creating the most suitable tobacco that is compatible with the quality of Korean consumers. The Plaintiff had no choice but to manufacture tobacco products by strictly observing the specifications presented by the PMFSA from the sellers of this case by importing each of the beginnings from each of the instant trademarks from other third parties. The Plaintiff did not have manufactured tobacco finished products by importing tobacco from each of the instant sellers of this case from other third parties. The Plaintiff did not import each of the instant sellers of this case, but strictly comply with the standard of quality and quantity of finished products demanded by the PMFSA and thus making it impossible to manufacture tobacco products. As a result, the Plaintiff did not have the right to select each of this case.

C. As to the allegation of illegality in adding the royalty to the right

1) As regards the method of determining dutiable value, Articles 30 through 35 of the former Customs Act provide for the first or sixth method as follows, and provide for the first method in principle. However, when it is impossible to determine the dutiable value by prior method, the subordinate method shall be applied in order and supplementary order.

(1) The first method (Article 30 of the former Customs Act): The method of determining the dutiable value on the basis of the actual transaction price adjusted by adding a specific amount to the actual payment price of the relevant goods: Provided, That where a certain amount is added as above to an organization which is an organization which is a branch of the Korea Customs Service, it shall be based on objective and numerical data, and where there is no such data, the dutiable value shall be determined by the second through six methods without determining the dutiable value by the first method (proviso of Article 30 (1) of the former Customs Act), and where there is a special relationship prescribed by Presidential Decree between the buyer and the seller of the goods and such special relationship affects the price of the relevant goods, the dutiable value shall not be determined by the first method but by the second through six methods (Article 30 (3)

(2) Second method (Article 31 of the former Customs Act): The method of determining the dutiable value based on the transaction price of the same kind and quality goods.

(3) Third method (Article 32 of the former Customs Act): The method of determining the dutiable value based on the transaction price of similar goods.

(4) The fourth method (Article 33 of the former Customs Act): The method of determining the dutiable value based on the domestic sale price (the price calculated based on the unit price of goods sold in the Republic of Korea in the largest quantity at the same time as the relevant goods, the goods of the same kind and quality, or similar goods are imported).

(5) 5 method (Article 34 of the former Customs Act): The method of determining the dutiable value based on the calculated price (the total of the cost of raw materials used in the production of the relevant goods, the cost of assembly and processing, profits, general expenses, etc.).

(6) 6 method (Article 35 of the former Customs Act): The method of determining the dutiable value according to a reasonable standard consistent with the principles provided for in Articles 30 through 34 of the former Customs Act.

2) As seen earlier, Article 19 of the Enforcement Decree of the Customs Act provides for a general rule in regard to matters necessary for the calculation of royalties, which are delegated by Article 30(1)4 of the former Customs Act, and Article 30(2) through (5) of the same Act provides that “The Commissioner of the Korea Customs Service shall determine the detailed matters necessary for the calculation of royalties, other than the provisions of paragraphs (1) through (4)” in Article 30(6) of the same Act provides that “The Commissioner of the Korea Customs Service shall determine the detailed matters necessary for the calculation of royalties, which are difficult to be prescribed in advance or require expertise and expertise.”

Article 3-4 of the former Notice of Dutiable Value Determination provides that "the calculation method of royalties for use of a right" shall be made with the delegation of Article 30 (1) 4 of the former Customs Act and Article 19 (6) of the Enforcement Decree of the Customs Act. Article 3-4 of the same Act provides that " even though imported goods are parts, raw materials, components, etc. (hereinafter "import parts, etc.") of goods to be produced in Korea, if the relevant right is related only to imported goods, the full amount of royalties for use of the right to be paid shall be added: Provided, That where the royalty for use of the right to be paid includes costs for production and other activities in Korea that are not related to the relevant imported parts, etc. in relation to the relevant imported goods, the royalty for use of the right shall be calculated by multiplying the royalty for use of the right by the ratio of the price of the relevant imported goods to the price of the relevant imported goods (excluding taxes and royalties for use of the right at manufacturing cost) to the price of the relevant imported goods."

3) Where a provision of a statute grants authority to determine the specific contents of the statute to a specific administrative agency and the delegated administrative agency specifically provides for the matters that are to be the contents of the statute in the form of administrative rules, such administrative rules, unless delegated by the pertinent statute, become effective as an external binding legal order, unless it goes beyond the delegated limit (see, e.g., Supreme Court Decisions 86Nu484, Sept. 29, 1987; 2006Du3742, 3759, Mar. 27, 2008).

In full view of the relevant provisions, Article 3-4 of the former Public Notice of Determination of Dutiable Value provides for “the method of calculating royalty,” which is delegated by the Commissioner of the Korea Customs Service pursuant to Article 30(1)4 of the former Customs Act and Article 19(6) of the Enforcement Decree of the Customs Act, it shall be deemed that the method of calculating royalty, in combination with the relevant statutory provisions, becomes effective as an external binding legal order. Furthermore, if the Commissioner of the Korea Customs Service determines the method of calculating royalty within the scope of delegation, barring any special circumstance, such as where the content is clearly contrary to the purpose or fundamental purport of the relevant statutes, it shall not be deemed that the method

The provision at issue in this case is the proviso of Article 3-4 subparag. 2 and subparag. 4 (a) of the former Notice of Determination of Dutiable Value, and considering the following circumstances, it cannot be deemed that the above provision deviates from the delegation scope of the relevant statutes, and it cannot be deemed that the above provision is clearly contrary to the purpose or fundamental purport of the relevant statutes or is inconsistent with each other

① Article 19(3) of the Enforcement Decree of the former Customs Act, upon delegation of Article 30(1)4 of the same Act, presents cases where royalty is deemed related to the relevant imported goods. Of the foregoing, the term “where imported goods are parts, raw materials or components of goods to be produced in Korea using the relevant patent, and in which the relevant patent is embodied in whole or in part (Article 1(c))” or “where imported goods are parts or components of goods to be produced in Korea using the relevant design right and express the relevant design in whole or in part (Article 2(2)).” Therefore, it is necessary to provide for the method of calculating royalty even in cases where imported goods are parts, raw materials or components of goods to be produced in Korea and are related to the payment of royalty for use of right.

② However, if the royalty paid for the use of a right includes an amount unrelated to the imported goods, an amount related to the imported goods shall be separately calculated, excluding such amount. On the other hand, in applying the method of Article 30(1) proviso of the former Customs Act, the royalty for the use of a right to be added on the basis of objective and numerical data pursuant to the proviso to Article 30(1) of the former Customs Act should be calculated. Article 3-4 Subparag. 2 proviso and Subparag. 4(a) of the former Public Notice provides that the royalty for the use of a right shall be calculated on the basis of the ratio of the price of the relevant imported goods to the price of the relevant finished goods (excluding taxes and the relevant royalty for use of a right at manufacturing costs). In such a case, the royalty for the use of a right is ordinarily determined on the basis of the amount calculated by multiplying the sales of the finished goods by a specific ratio. The price of the finished goods or the price of the relevant imported goods exists; the amount related to the relevant imported goods, among the royalty for the use of a right to be determined on the basis of discretionary authority.

4) Furthermore, according to the aforementioned evidence, the defendant calculated total payment royalty, prices of each beginning of the instant case, finished products of tobacco products, etc. on the basis of objective and quantitative data, such as audit report and financial statements on the plaintiff, payment details of royalties submitted by the plaintiff to the defendant, etc., and calculated the adjusted amount and additional rate based thereon. This is lawful as it is in accordance with the proviso of Article 3-4 subparagraphs 2 and 4 (a) of the former Public Notice of Dutiable Value Determination, and it cannot be deemed that there was any error in the method of adding the defendant's royalty. Thus, the plaintiff's assertion

D. As to the assertion of violation of the principle of good faith and prohibition of duplicate investigation

1) Whether the principle of good faith is violated

The plaintiff's assertion appears to the purport that the disposition of this case violates the principle of the protection of trust. In general, in administrative legal relations, in order to apply the principle of the protection of trust to an administrative agency's act, the public opinion that is subject to trust by the administrative agency should be the first, the public opinion that is subject to trust by the individual, the second, the opinion of the administrative agency should not be attributable to the individual, and the third, the individual should have trusted and trusted the opinion of the administrative agency, and the third, the individual's interest in the trust of the opinion of the administrative agency should be infringed by the administrative agency's disposition contrary to the opinion list. Lastly, the administrative disposition pursuant to the opinion list should not be likely to seriously undermine the public interest or legitimate interests of the third party.

In light of the following circumstances, the Defendant’s determination of the dutiable value under the first method while rendering the instant disposition is as seen earlier. In light of the overall purport of the arguments, it is difficult to view that the Defendant’s determination of the dutiable value pursuant to the first method, rather than the six method, and the Defendant’s determination of the dutiable value pursuant to the first method, cannot be deemed to have expressed to the Plaintiff a public opinion by the administrative agency solely based on the notification of the results of the investigation conducted on June 30, 2003 by the head of the Seoul Customs Office or the Defendant’s notification of the results of the corporate examination conducted on March 13, 2008. Therefore, it is difficult to view that the Defendant’s determination of the dutiable value in the instant disposition

(1) The former Customs Act provides for the methods of Articles 2 through 6 in principle based on the actual market price of the relevant imported goods in determining a dutiable value. However, barring any special circumstance, the tax authorities should impose customs duties according to the method of paragraph 1, barring any special circumstance. Therefore, it is necessary to strictly interpret the requirements to exclude the application of the method of paragraph 1 and determine a dutiable value by the method of paragraphs 2 through 6 (see Supreme Court Decision 2005Du17188, Dec. 27, 2007).

② On May 31, 2001, the Plaintiff decided to construct a tobacco manufacturing plant while importing and selling tobacco finished products without having a tobacco manufacturing factory in Korea. The main content of the first agreement is to grant the Plaintiff the right to use a trademark of PMFSA including the right to use finished products through an affiliated company located abroad from the PMFA until the completion of the tobacco manufacturing plant, and to pay 5% of the net sales in return for the granting of the right to use the trademark (Article 1, Articles 2.01, 4.01). After completion of the first agreement, the Plaintiff completed the tobacco manufacturing factory at ○○○○○ on October 14, 2002, and manufactured and sold tobacco at home after importing all the beginning of the tobacco manufacturing plant, and concluded the first agreement with the PMFSA on January 1, 2004, the Plaintiff concluded the first agreement with the PMFSA to use the finished products through its affiliated company located abroad, and the details of the first agreement are to receive 20% of the finished products from the Plaintiff to the first agreement.

③ Examining the main contents of the notification of the investigation result as of June 30, 2003 by the head of the Seoul Customs Office, the Seoul Customs Office determined the customs value according to the method of 6, stating that as a result of the investigation period from November 1, 1997 to November 1, 2002, “the Plaintiff imports tobacco products from the exporter, and then imports them at a price that does not include the exporter’s reasonable profits. This is because the Plaintiff and the special relationship between the Plaintiff, the PMFSA, and the PMF had influenced the market price, and thus, the actual increase in the import price for the finished products of tobacco imported was added to the import price and 3% of the import price for each first product should be added to the import price.” The above investigation period is a finished product on November 1, 1997 to which the Plaintiff mainly imported and sold tobacco products at issue during that period, and the head of Seoul Customs Office seems to have difficulty in understanding the market price due to the Plaintiff’s special relationship and the head of Seoul Customs Office’s application of the PMF.

④ Examining the main contents of the Defendant’s notice of the results of the corporate review of the instant case on March 13, 2008, the Defendant, upon determining the period from January 1, 2003 to December 31, 2007, pointed out the problems such as “design development costs, omission of report on printing printing costs, omission of additional charges, omission of AOC costs,” etc., and subsequently, maintained the application of the six methods recognized by the head of Seoul Customs Office’s notice of the survey on June 30, 203, and stipulated that “the Plaintiff may request additional data, etc. regarding the royalty paid by the Plaintiff and the relation between the royalty and transfer price of the instant right.” After examining the additional data related to the first and the royalty of the instant case from April 6, 2006 to November 28, 2007, the Defendant determined the relevance between the Plaintiff and the first and the first customs duty rate from November 1, 2019 to November 21, 2019.

⑤ As seen earlier, the first method based on the actual market price of the pertinent imported goods is in principle in determining the dutiable value. The Plaintiff imported and sold tobacco finished products before, and changed its business method to manufacture and sell tobacco finished products. The Plaintiff’s findings of investigation on June 30, 2003 by Seoul customs collector were mostly pertaining to the period during which the Plaintiff imports and sells tobacco finished products. In the case of the instant disposition, imported goods at issue are not tobacco finished products, but the type of imported goods vary. Furthermore, the Plaintiff concluded a first contract with the Seoul customs collector on June 30, 2003, and concluded a second contract after the notice of investigation as of June 30, 2003 by the Seoul customs collector. The second contract, compared to the first contract, cannot be evaluated as identical to the previous one by changing the Plaintiff’s right to receive from the PMFA and the ratio of calculating royalties royalties to be paid for the same. The Defendant’s decision on the first half of this case’s import and sale method to the Plaintiff based on the results of the review of the Plaintiff’s respective rights to be notified.

2) Whether the principle prohibiting double investigation is violated

Article 111 of the former Customs Act provides that "No customs officer shall re-examine the person who has been investigated in relation to the relevant case except in cases where there is clear evidence to prove a suspicion of evading customs duties, etc., where it is necessary to investigate the transaction partner of the person who has been investigated, or where there is any other case prescribed by Presidential Decree."

In light of the following circumstances, Gap's evidence Nos. 2, 8, 29, 30, 37, 38, 48, Eul's evidence Nos. 1, 5, 6, 7, 8, 9, 25, 28, 29, and 35, it is difficult to view the disposition of this case as being based on the result of a duplicate investigation, and therefore, the plaintiff's assertion on this part is without merit.

① On March 13, 2008, the Defendant notified the Plaintiff of the results of the instant corporate examination, stating only “the development costs of design, omission of the report on the production costs of printing plates, omission of additional charges, omission of AOC expenses” due to the details of recovery by items of research, and indicating that “the Plaintiff may request additional data on the royalty of this case paid by the Plaintiff, the royalty of this case, and the relationship between the transfer price and the royalty of this case.”

② On August 10, 2009, the Defendant sent to the Plaintiff the “written request for an examination of dutiable value and a written request for the submission of data on the remaining data on August 10, 2009.” On September 11, 2007, the Defendant submitted to the Plaintiff the written request for an examination related to royalties from August 1, 2007 to the date of foreign exchange payment, data on the type of brand tobacco produced and sold since 2005 (annual), and the Plaintiff’s annual specifications of manufacturing cost from 2005 to the date of submission.” The Plaintiff submitted the written request for an additional written request for an examination related to royalties from the Defendant on September 11, 2009 to the date of submission. The Defendant submitted an additional written request for an examination related to royalties from September 11, 2009 to the Defendant on December 9, 2009 to the date of submission.

③ On March 29, 2011, the Defendant notified the Plaintiff on March 29, 201 that “The royalty of this case is related to the beginning of the instant case imported by the Plaintiff from the seller of this case, and thus, imposed customs duties, etc. on the tax base omitted.”

④ As seen earlier, the Defendant’s notice of the result of the corporate review of this case on March 13, 2008 did not include whether to add the royalty to the actual payment price of each of the beginning of this case. In addition, the Defendant’s additional investigation was conducted by submitting data from the Plaintiff as to whether to add the royalty to the actual payment price of each of the beginning of this case. The additional investigation conducted by the Defendant limited to whether to add the royalty to the actual payment price of each of the beginning of this case, and the investigation conducted by the Defendant seems to have not been conducted with the exception of the above specific items. In full view of the fact that the above investigation conducted by the Defendant prior to the disposition of this case differs substantially from the investigation conducted to notify the result of the corporate review of this case, and thus, it cannot be deemed that it constitutes a duplicate investigation prohibited in principle under Article 111 of the former Customs Act (see Supreme Court Decision 2004Du10470, Jan. 14, 2005).

5. Conclusion

If so, all of the plaintiff's claims shall be dismissed due to the lack of reason. The judgment of the court of first instance is just in conclusion, and the plaintiff's appeal against this is dismissed as there is no reason.

[Attachment]

Judges Park Jae-young (Presiding Judge)