[1] In a case where a domestic consumer directly ordered goods to a foreign seller and delivered goods under the domestic consumer’s name and completed import clearance procedures in its name, and there is a separate domestic business entity, whether the actual owner who actually imported the goods is the domestic consumer (affirmative in principle)

[2] In the case of a transaction in which a domestic consumer directly imports goods from a foreign seller and sells them to a domestic consumer, whether a domestic business operator may be deemed a domestic business operator (affirmative), and in such a case, matters to prove that the domestic business operator actually controls and manages income or profits while controlling and managing a foreign seller, but the domestic business operator did not prove that there was a separate domestic transaction between the domestic business operator and the domestic consumer, whether the actual owner who actually imported the goods should be deemed a domestic consumer (affirmative)

[1] In a case where a domestic consumer directly orders goods to a foreign seller and delivers them under the name of the domestic consumer, and has undergone import clearance procedures under the name of the domestic consumer, the actual owner who imports the goods is not the domestic consumer, but the domestic consumer, in the absence of special circumstances.

[2] Even if a domestic consumer takes the appearance of a transaction such as direct import from a foreign seller, if a domestic business operator directly imports goods to a foreign seller and sells them to a domestic consumer, the actual owner who imports the goods may be deemed a domestic business operator. However, in such a case, the actual owner who imports the goods shall be deemed a domestic consumer in order to constitute such transaction. Even if a domestic business operator actually controls and manages income or profits while controlling and managing a foreign seller, it cannot be readily concluded that the domestic business operator and the domestic consumer have a separate domestic transaction between the domestic business operator and the domestic consumer. Thus, if such circumstance is not sufficiently proven, the actual owner who imports the goods shall be deemed a domestic consumer.

[1] Article 19(1)1 of the former Customs Act (Amended by Act No. 10424, Dec. 30, 2010) / [2] Article 19(1)1 of the former Customs Act (Amended by Act No. 10424, Dec. 30, 2010)

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

Head of Seoul Customs Office

Seoul High Court Decision 2012Nu28348 decided December 27, 2013

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

The grounds of appeal are examined.

1. As to the grounds of appeal Nos. 1 and 2

A. Article 19(1) of the former Customs Act (amended by Act No. 10424, Dec. 30, 2010) provides that “any person who falls under any of the following subparagraphs shall be liable to pay customs duties.” The main text of Article 19(1) provides that “in respect of goods on which an import declaration was filed, the owner of the goods who imports the goods is liable to pay customs duties,” and “the owner of the goods who imports the goods” refers to the actual owner who imports the goods (see Supreme Court Decision 2002Du8442, Apr. 11, 2003):

On the other hand, in a lawsuit seeking revocation of a tax disposition, the tax authority bears the burden of proving the legality of the taxation disposition and the existence of the taxation requirement. Thus, in the case where a tax disposition was rendered on the grounds that the nominal owner who imported the goods and the actual owner who imported the goods are different, the burden of proving that the other

B. The lower court acknowledged the following facts: (a) domestic consumers directly purchased functional health foods from NTUREWRE and delivered them as small duty-free goods to local subsidiaries of the U.S. (NTURE, INC; and (b) the Defendant avoided customs duties, etc. on November 25, 2009 by pretending that the Plaintiff, a domestic seller, imported functional health foods and sold them to domestic consumers while substantially operating the Internet shopping mall of this case; and (c) the Plaintiff, a domestic seller, avoided customs duties, etc. on November 25, 2009 by pretending that the Plaintiff was directly imported from foreign buyers.

Furthermore, the lower court determined that the instant disposition was lawful on the ground that the operator of the instant Internet shopping mall and the person liable to pay customs duties and value-added taxes should be deemed the Plaintiff, in view of the following: (a) the instant online shopping mall was established only for domestic consumers and carried out in Korea cash settlement, return, and refund of sold goods; (b) the returned goods were sold or disposed of domestically by the Plaintiff; and (c) the Plaintiff used a considerable portion of the sales proceeds as its funds for purchasing real estate.

C. However, the lower court’s determination is difficult to accept for the following reasons.

(1) Examining the legal principles as seen earlier, even if a domestic consumer directly orders goods from a foreign seller and delivers them under the name of the domestic consumer, and some auxiliary acts related to the convenience of domestic consumers or sales promotion and return of goods by a foreign seller exist, barring special circumstances, the actual owner of the goods imported is not a domestic consumer but a domestic consumer. However, even if a domestic consumer directly imports goods from a foreign seller, the actual owner of the goods may be deemed a domestic consumer if the domestic consumer directly imports them from a foreign seller and sells them again to the domestic consumer. However, in order to fall under such a case, the actual owner of the goods imported may be deemed a domestic consumer. However, even if a domestic consumer actually controls and manages a foreign seller, it may be deemed that there was a transaction between the domestic consumer and the domestic consumer, and if it is not proven that there was a separate domestic consumer transaction between the domestic consumer and the domestic consumer, the domestic consumer still should be deemed a domestic consumer.

(2) Examining the above facts in light of the aforementioned legal principles, domestic consumers in this case should be deemed to have traded functional health foods, etc. directly imported from foreign countries as their owner. The mere fact cited by the lower court alone cannot be readily concluded that domestic consumers constitute a transaction again purchasing functional health foods, etc. imported by the Plaintiff through domestic trade.

(3) Nevertheless, the lower court determined that the actual owner of functional health foods, etc. imported should be deemed the Plaintiff solely on the grounds stated in its reasoning. In so doing, the lower court erred by misapprehending the legal doctrine on the method of determining “actual owner who imported the goods,” or the burden of proof.

2. As to the third ground for appeal

A. In a case where both the principal and the additional taxes are to be imposed upon a single tax notice, the individual tax amount and the basis for calculation thereof shall be stated in the tax notice separately; and in a case where multiple types of additional taxes are to be imposed, the individual tax amount and the basis for calculation thereof shall be described separately. As such, if only the principal tax and the additional tax are stated without properly distinguishing the individual tax amount and the basis for calculation thereof from the individual tax amount and the individual tax amount, the basis for calculation thereof, and the basis for calculation thereof, etc., without properly distinguishing them, the imposition disposition is unlawful (see Supreme Court en banc Decision 2010Du12

On the other hand, if it is evident that a taxpayer was not affected by the determination of whether he was dissatisfied with the disposition or by the notice of tax notice sent by the tax authority prior to the taxation disposition, the defect of the tax notice can be supplemented or cured. However, the document that can supplement the defect of the tax notice can be supplemented by the law, etc. is to be delivered to the taxpayer prior to the tax notice, so that the document that can supplement the defect of the tax notice can be integrated with the tax notice. In addition, the necessary matters to be stated in the tax notice should be properly stated (see Supreme Court Decision 2005Du5505 delivered on October 13, 2005).

B. The reasoning of the lower judgment and the evidence duly admitted by the lower court reveal the following: (a) the instant tax notice only contains separate descriptions of the amount of customs duties, value-added taxes, and additional taxes, but does not contain separate descriptions of the amount of tax by type; and (b) the Defendant sent the instant tax notice to the Plaintiff along with the instant tax notice, which did not stipulate the grounds for calculation, such as the tax base or tax rate by type; and (c) the Defendant did not stipulate the grounds for calculation of each principal tax and additional tax rate.

Examining these facts in light of the legal principles as seen earlier, each principal tax and additional tax payment notice of the instant customs duties, etc. contain any defects that are required to be stated in accordance with the principle of due process, and such defects cannot be deemed supplemented or cured. Thus, the instant disposition is unlawful.

C. Nevertheless, the lower court determined that the instant disposition was lawful on the grounds stated in its reasoning. In so doing, the lower court erred by misapprehending the legal doctrine on the supplementation and recovery of defects in the duty payment notice, thereby adversely affecting the conclusion of the judgment. Therefore, the lower judgment cannot be maintained even in this regard.

3. Conclusion

Therefore, 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 Lee Sang-hoon (Presiding Justice)