Rers Korea Limited Liability Company (Attorney Cho Jae-soo et al., Counsel for the plaintiff-appellant)

Head of Seoul Customs Office

July 11, 2018

Seoul Administrative Court Decision 2017Guhap53194 decided August 24, 2017

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance is revoked. The Defendant’s revocation of all the imposition of each duty, value-added tax, and additional tax stated in the separate taxation list against the Plaintiff.

1. Quotation, etc. of the judgment of the first instance;

The reasoning for this Court’s explanation concerning this case is as stated in the reasoning of the judgment of the court of first instance (including relevant statutes, but excluding the list of attached taxation and the part of “3. conclusion”) in addition to revising the relevant part of the judgment of the court of first instance as follows 2. Thus, it is acceptable in accordance with Article 8(2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act.

2. Parts to be corrected;

Of the 1-B of the main text 1-2, one of the 1-B of the two parts is "Turner Brocacacasting Symminacaca, Inc." as "Turn Brocacacacathing system Asian graphic (Turn Brocacacacaca)".

○ Following the two pages, the phrase “ August 2015” shall be read as “ around August 2015”.

2) The last 3th parallel “Turner” to “Turner 4th parallel 1st parallel 4th parallel 1st parallel 4th parallel 1st parallel 3th parallel 2th parallel 1st parallel 1st parallel 1st parallel 1st parallel 1st parallel 1st parallel 2th parallel 1st parallel 1st parallel 2th parallel 2th parallel 1st parallel 2th parallel 3th parallel

○ 8 Then, the following two categories of “data” shall be read as “data on this case” (hereinafter “data”).

○ 11 under the following 9 pages “(1) the royalty shall be added to the customs value of imported goods.”

○ 11. The term “(1)” will be deleted below.

○ 12. Under the 11st sentence, the following shall be added:

In addition, Article 3 subparag. 2 and Article 4 subparag. 2 of the Value-Added Tax Act impose liability for the value-added tax on the import of goods on the importer of the goods, and Article 50 of the Value-Added Tax Act provides that the value-added tax on the import of goods shall also be also reported and paid in cases where customs duties are reported and paid on the import of goods.

○ 12 Up to 17ths below the 10th day shall be as follows:

2) Determination as to the relevance requirement

Article 19(3)4 of the Enforcement Decree of the Customs Act provides that “if the royalty is paid for copyright, the imported goods contain images, etc.” However, customs duties are imposed according to the nature and quantity of the goods at the time of import declaration. As such, the object of taxation becomes final and conclusive at the time of import declaration in the state of containing images of the instant goods. The instant goods are classified into “the medium recorded” under Articles 50(1) [Attachment Table] of the Tariff Schedule 85 Chapter 8523.29-29-3(a) of the Customs Act. The instant goods are classified into “the medium recorded” and “the magnetic tape (the amount exceeding 6.5mm, the amount exceeding 6.5mm, the amount of video recorded). Meanwhile, the Plaintiff’s subjective use of the instant goods, etc. or images recorded after the instant goods can be separated from the subject of taxation of the instant goods (see, e.g., Supreme Court Decision 201Du13141, Dec. 12, 2012).

3) Determination on the elements of transaction terms

Article 19(5)1 of the Enforcement Decree of the Customs Act provides, “Where a purchaser pays a royalty to a seller for the purchase of imported goods, the royalty shall be deemed to be paid as the terms and conditions of the relevant goods.” In light of the following circumstances, which can be seen by comprehensively taking into account the facts acknowledged earlier and the overall purport of arguments as seen earlier, the royalty in this case was paid as the terms and conditions of the instant goods pursuant to Article 19(5)1 of the Enforcement Decree of the Customs Act.

① 원고는 타임 워너의 계열사인 터너 엔터테인먼트 네트웍스 코리아(TNK)가 지분 100%를 소유하고 있는 자회사로서, 터너 엔터테인먼트 네트웍스 코리아(TNK)는 이 사건 라이센서들 중 해외 제작사인 터너 브로드캐스팅 시스템 아시아 퍼시픽의 한국지사이고, 이 사건 라이센서들 중 하나인 워너브라더스 코리아 주식회사 역시 타임 워너를 모회사로 하는 계열사여서, 터너 브로드캐스팅 시스템 아시아 퍼시픽 및 워너브라더스 코리아 주식회사는 원고와 특수관계에 있다.

② According to the license agreement of this case, Article 1 defines License as “non-exclusive right to broadcast Epid” and defines License as “non-exclusive right to broadcast Epid” and Article 2 through 7, 11, and 12 provides that License may use video works within the scope permitted by the Plaintiff through the Internet. Article 9 provides that “Libs, etc. during the contract period, during the contract period, shall deliver Epid each Epid, digital betac format, or other format as agreed to by the parties, by digital betac format, as a video tape (hereinafter “video tape”) for the quality of broadcasting, and Article 19 provides that license is terminated or suspended if license prices fail to pay license fees. The reason why the Plaintiff intended to import video works using the aforementioned format from overseas production companies using the video equipment appears to have been limited to the Plaintiff’s preservation or recycling of digital or other format in the form of a video file in order to transmit it in whole or in part through the Internet.

③ The instant product contains a specific video product. According to the License Agreement, all elements and business rights protected as copyright with respect to the instant video product are all included in the License Agreement. Accordingly, the Plaintiff did not have any option to freely purchase the instant product from other sellers in the open market. Therefore, in order to import the instant product containing a specific video product, it seems that the Plaintiff had no choice to pay the License Agreement to the License in accordance with the License Agreement.

④ The Plaintiff asserts to the effect that the terms and conditions of transaction between the instant goods and the instant license fees do not exist, as customs duties are imposed on the instant goods, given that, even under the license agreement, a video recording recorded on the instant goods may be provided by means of a different method, such as transmission via the Internet in a file format, and even in such a case, the Plaintiff paid the instant license fees. However, customs duties under the Customs Act are imposed on the instant goods and the instant license fees, and the online transmission without import of the goods is merely non-taxation under the no taxation without the law because the requirements for taxation are not established. Even if the Plaintiff received a re-transmission of a part of the hick contained on the instant goods, even if the Plaintiff had already imported the instant goods via the Internet after the import of the instant goods, it does not change in the fact that the Plaintiff intended to import the goods using the medium of the “Master tape” in the first transaction. Accordingly, it is difficult to deem that there is no legislative improvement with respect to whether to impose taxes on the instant goods based on the import method.

4) Whether the license fee of this case constitutes the price for the right to reproduce reproduction

A) Article 19(2) of the Enforcement Decree of the Customs Act excludes the price of “the right to reproduce a specific device or original idea on other goods in Korea using imported goods in which such device or original idea is embodied,” i.e., the price of “the right to reproduce the device or original idea on other goods,” from the added factor of customs value. The legislative intent of the above provision is to exclude the price of “the right to reproduce the device or original idea on other goods,” not in essence pertaining to imported goods, but to domestically reproduced goods which are not existing at the time of their import, and in a case where imported goods are used only for their reproduction in Korea and are not sold or distributed in itself, sales rights, other than the right to reproduce, are nothing more meaningful than the right to reproduce.

Meanwhile, under the principle of no taxation without law, the interpretation of tax laws and regulations shall be interpreted in accordance with the law, barring special circumstances, and shall not be extensively interpreted or analogically interpreted without reasonable grounds. In particular, it accords with the principle of fair taxation to strictly interpret that the provision of tax reduction and exemption is clearly preferential (see Supreme Court Decision 2008Du11372, Aug. 20, 200).

B) In light of the language and purport of the aforementioned relevant Acts and subordinate statutes, in light of the following circumstances, which can be seen by comprehensively taking into account the facts acknowledged prior to the aforementioned facts and the statements in Gap evidence Nos. 18 through 44 (including each number number; hereinafter the same) as a whole, the license fees paid by the Plaintiff to the instant goods are paid in return for the payment of the right to broadcast the instant goods through the video media, such as TV, etc., and the “right to broadcast” generally refers only to the right to broadcast the copyrighted copyrighted video works through the video media, such as TV, etc., so it cannot be deemed as the right to reproduce the new “other goods” by using a specific device or original idea that contains the imported goods. The Plaintiff’s broadcasting of the instant goods via another broadcasting business operator through the domesticization of video works on the instant goods is merely the exercise of the broadcasting right granted to the Plaintiff under the license agreement.

① Article 1 of the License Agreement provides that the Plaintiff shall grant the Plaintiff the right to reproduce the videos owned by the copyright through TV and other visual media in accordance with the aforementioned contract, and the Plaintiff shall pay the license fee in consideration of the above rights. However, given that the license fee of this case was determined in consideration of the period to which the license was granted and the scope of the video permitted to broadcast, etc., the Plaintiff does not appear to have considered the Plaintiff’s act of reproducing the videos recorded in the instant goods after importing them, and thus, it is impossible for the Plaintiff to reproduce them again if they failed to do so. However, considering that Article 9(a)2 of the License Agreement of this case provides that the Plaintiff shall bear all other expenses incurred in the process of delivering the instant goods, including the content and other materials, even if the Plaintiff bears the cost of reproduction and other expenses incurred in the process of delivering the instant goods, the parties to the license agreement of this case shall not be deemed to have considered the act of reproducing the images recorded in the instant goods after importing them (i.e., it is natural for the Plaintiff to use them again., but it is merely an internal circumstance of the Plaintiff.

② In order for the Plaintiff to broadcast the video recorded on the instant product, the instant product ought to undergo the process of reproducing the video recorded on another tape in the Republic of Korea and inserting a caption, inserting a caption, and storing it in a storage device. However, such a series of processes is derived from the nature of the broadcasting right to take into account special circumstances, such as language or domestic sentiments, and it is difficult to evaluate that the instant product was produced a new product that had not existed at the time of importation by using a specific device or original idea contained in the instant product. Thus, it is difficult to view that the re-production right as a kind of re-production right accords with the legislative intent of Article 19(2) of the Enforcement Decree of the Customs Act, which does not include the re-production right in the dutiable value.

③ The Plaintiff asserts that the instant broadcast service provider’s act of reproducing the instant broadcast content constitutes “non-working hours (SVD 1) transmission right,” and that the Plaintiff’s act of reproducing the instant broadcast content through the real-time broadcast service provider, including FVD, State 3) PEV, and that the instant broadcast content constitutes “non-working hours transmission right,” and that the instant broadcast content constitutes “the Plaintiff’s act of reproducing the instant broadcast content and selling it to third parties.” However, it is difficult to view that the Plaintiff’s act of reproducing the instant broadcast content to have separately granted the Plaintiff the right to sell the instant broadcast content or the instant broadcast content content to the Plaintiff, regardless of the Plaintiff’s respective storage contract, constitutes “the Plaintiff’s act of distributing the instant broadcast content or the instant broadcast content content to which the Plaintiff would have granted the Plaintiff the right to self-production of the instant broadcast content or the instant broadcast content content to the Plaintiff during the real-time broadcast service production process.” Meanwhile, there is no express provision that the Plaintiff’s act of distributing the instant broadcast content to the Plaintiff’s own or content content content.

④ The Plaintiff asserts that the Plaintiff’s re-productive right is naturally premised on the Plaintiff’s re-productive act in the provisions on the insertion and editing of caption under the above contract. However, as seen earlier, it is difficult to evaluate the Plaintiff’s act to broadcast the film in the Republic of Korea on the instant product as a re-productive act under the overall provision of Article 19(2) of the Enforcement Decree of the Customs Act. Under Article 19(5) of the 19.1 of the 19.1 of the WTO Customs Valuation Agreement, “The right to reproduce the goods, including reserved rights, is not always granted, and in most cases, the right to broadcast is acquired through a special contract, and it is difficult to view that the right to reproduce is naturally premised on the re-productive right. If the △△△△△△ license is granted a re-productive right, it is difficult to view that the Plaintiff’s reasonable right to broadcast the instant product as a result of the agreement to broadcast the instant product as a result of the agreement with the Plaintiff based on more processing and processing of Korean language on the instant product.

⑤ According to the latter part of Article 8(1)(C) of the WTO Customs Valuation Convention, the Plaintiff merely defines the right to reproduce the imported goods as “right to reproduce them.” In light of the language and text, the Plaintiff asserts that the right to reproduce the goods under Article 19(2) of the Enforcement Decree of the WTO Customs Act does not require any other “physical entity” to be reproduced. If the provision of the above Enforcement Decree is interpreted as “other goods,” i.e., the right to reproduce the goods in violation of the WTO Customs Valuation Convention, and thus, Article 19(2) of the Enforcement Decree of the Customs Act is deemed as invalid as an unlawful enforcement decree. In this case, the right to reproduce the goods is also deemed as included in the right to reproduce the goods, and thus, it is difficult to interpret that the provisions of the 10-year Customs Valuation Agreement were not effective in terms of the legislative intent of the 1st century and the relevant provisions, or that the provisions of the 2nd Convention were not effective in terms of the purport of the 1st Convention.

6) With respect to the meaning of “other goods”, Article 98 of the Civil Act provides that “the term “the material” means the material, electricity, and other natural forces capable of managing the material,” and the Plaintiff’s transmission to viewers by means of radio signals corresponding to the natural material that can manage the material, and even according to the Copyright Act, the broadcasting right is interpreted as a kind of the right of reproduction. Therefore, considering the fact that the video is temporarily reproduced on a specific storage medium and the transmission of the material is made, the act of broadcasting the material must be viewed as re-produced into “other goods” in itself. However, considering the legislative intent of the Customs Act that provides for the imposition and collection of customs duties on imported goods, the Plaintiff’s assertion is difficult to accept.

⑦ 원고는, 이 사건 유럽연합 공동체 관세법 해설자료 내용, 이 사건 국세예규심사위원회 의결사항 및 컴퓨터 소프트웨어 내지 기술사용료와 관련한 대법원 판례( 대법원 1998. 8. 21. 선고 97누13115 판결 , 대법원 1992. 7. 14. 선고 91누10763 판결 )를 들어 이 사건 라이센스료가 재현생산권의 대가로서 이 사건 쟁점 물품의 과세가격에 포함될 수 없다고 주장한다. 그러나 유럽연합 공동체 관세법 해설자료는 위 공동체 관세법에 따라 유럽연합 관세평가위원회가 연구한 결과로서 그 결정 등은 공동체 규정의 통일적인 적용과 해석을 위한 자료이나 법률 문서(legal instruments)로는 채택되지 않은 것으로 보이고, 이 사건 쟁점 물품과 같은 매개체에 수록되어 있는 영상물 등과 관련한 권리사용료를 과세가격에 포함시킬지 여부는 국내법이 규정하는 바에 의하여야 할 것인데, 위에서 본 바와 같이 국내법에 의할 경우 이 사건 라이센스료는 이 사건 쟁점 물품의 과세가격에 가산되어야 하는 권리사용료에 해당한다. 또한, 이 사건 국세예규심사위원회의 의결사항 및 원고가 들고 있는 대법원 판례는 문제가 된 라이센스료 내지 로열티가 재현생산권 또는 기술사용에 대한 대가로 지급된 경우에 관한 것이거나 수입물품이 ‘컴퓨터 소프트웨어’가 수록된 매개체에 관한 것으로, 라이센스료가 방영권에 대한 대가로 지급되고 이 사건 쟁점 물품에 수록된 저작물이 영상물인 이 사건과는 그 사안을 달리하므로, 위 의결사항 및 판례를 이 사건에 그대로 원용하기에 적절하지 않다.

5) Sub-committee

Therefore, the instant royalty constitutes a royalty paid as a transaction condition for the pertinent goods in relation to the instant goods, and cannot be deemed a consideration for the right to reproduce, thus, should be added to the dutiable value pursuant to Article 30(1) of the Customs Act and Article 19(2) of the Enforcement Decree of the Customs Act. Accordingly, the Defendant’s disposition premised on this is lawful.

3. Conclusion

Thus, the plaintiff's claim shall be dismissed as it is without merit. Since the judgment of the court of first instance is just with this conclusion, the plaintiff's appeal is dismissed as it is without merit.

[Attachment]

Judges Poscop (Presiding Judge) Poscop

Note 1) On-Sale Demand, monthly fixed-type video product

Note 2) Vides Demand or Order-based video

Note 3) Free Vides Demand, free order-based video

State 4) Intern Television Television Television, Internet network-based television services

Note 5) Day-In-Examination, Paid viewing system (payment of a fee according to the number or time of a viewing program)