[1] The person who bears the burden of proving "whether a special relationship had influenced the transaction price of the pertinent imported goods" under Article 30 (3) 4 of the Customs Act (=the taxation authority)

[2] The case holding that it cannot be concluded that the transaction price of the imported drug was determined unfairly at a low price with the influence of the special relationship between the purchasing company and the selling company on the ground that the sales price of the imported drug was lower than that of the other drug imported by the purchasing company and did not reach the average price of the other companies, or that the re-sale price was not consistent with the selling company's price policy

[1] In full view of the purport and content of Article 30(1) and Article 30(3)4 of the Customs Act, the burden of proving the fact of taxation requirements lies, in principle, at the tax authority, and Article 1(2)(a) of the Convention on the Implementation of Article VII of the General Agreement on Tariffs and Trade provides that “The fact that there is a special relationship between a buyer and a seller alone does not constitute the basis for deeming the actual transaction price as the dutiable value cannot be accepted as the dutiable value,” the tax authority shall prove that the transaction price was affected by such special relationship, in addition to the fact that there is a special relationship between a buyer and a seller in order to apply Article 30(3)4 of the Customs Act.

[2] The case holding that it cannot be concluded that the transaction price of the imported drug was determined unfairly at a low price with the special influence of the purchasing company and the selling company on the ground that the sales price of the imported drug was lower than the average price of the other drug imported by the purchasing company and did not reach the re-sale price of the other company, or that the re-sale price was not consistent with the selling company's price policy

[1] Article 30 (1) and (3) 4 of the Customs Act / [2] Article 30 (3) 4 of the Customs Act

Plaintiff (Attorney Lee Im-soo et al., Counsel for the plaintiff-appellant)

Head of Busan Customs Office

Busan High Court Decision 2006Nu3186 decided April 13, 2007

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined (to the extent of supplement in case of any statement in the supplemental appellate brief not timely filed).

1. Article 30 of the Customs Act provides, with regard to the principle of determining the dutiable value of imported goods, Article 30 of the Customs Act provides, “The dutiable value of imported goods shall be the transaction price adjusted by adding the amount prescribed in each of the following subparagraphs, such as commission and brokerage fees, to the price actually paid or payable by a buyer for the goods sold for the purpose of export to Korea.” In Article 30(3)4 of the Customs Act provides, “Where the relationship between a buyer and a seller as prescribed by the Presidential Decree affects the price of the relevant goods”, the transaction price referred to in paragraph (1) shall not be the dutiable value of the relevant goods, but shall be the method referred to in Articles 31 through 35 of the Customs Act instead of the dutiable value of the relevant goods (wholly amended by Act No. 6305 of Dec. 29, 200).

In full view of the purport and content of each provision and the burden of proof of taxation requirements, in principle, to the tax authority, and Article 1(2)(a) of the Convention on the Implementation of Article VII of the General Agreement on Tariffs and Trade provides that “The fact that there is a special relationship between a buyer and a seller does not constitute a basis for deeming the actual transaction price as a dutiable value cannot be deemed a dutiable value.” In addition to the fact that there is a special relationship between a buyer and a seller for the purpose of applying Article 30(3)4 of the Customs Act, the tax authority should prove that the transaction price was affected by such special relationship.

In addition, in light of the fact that Article 33 of the Customs Act, which is a provision on the determination of dutiable value based on the domestic resale price, can only be applied in cases where the customs authority cannot determine the dutiable value by the methods prescribed in Articles 30 through 32 of the Customs Act, it cannot be deemed that the special relation had proved that the “ratio of profits and general expenses” of the imported goods calculated based on an accounting report submitted by a person liable for duty payment pursuant to Article 33(1) of the Customs Act and Article 27(4) of the Enforcement Decree of the Customs Act does not belong to the scope of profits and general expenses calculated as prescribed by the Commissioner of the Korea Customs Service as ordinary profits and general expenses (hereinafter “the scope of the base ratio”) arising from the category of business to which the goods belong.

2. According to the reasoning of the lower judgment, the lower court acknowledged the facts as indicated in its reasoning after comprehensively taking account of the relevant employment evidence, and determined that the Plaintiff and the non-party company’s special relationship did not have an impact on the base ratio of the standard rate of profit and general expenses on the diesel lines, which are imported drugs of this case, based on the accounting report submitted by the Plaintiff, even if the re-sale price of the diesel lines is lower than the minimum sale price on the price policy determined by the non-party company, it would be attributable to the insurance number determined by the Ministry of Health and Welfare. ② The ratio of profit and general expenses among the domestic enterprises importing medicines that share the diesel lines and the imported goods code is higher than or similar to that of the Plaintiff, and that the rate of total sales of other medicines imported by the Plaintiff is lower than that of the Plaintiff, even if the rate of total sales of the diesel lines is higher than that of the Plaintiff, the lower rate of total sales price cannot be determined by simply comparing it with the lower rate of total sales price of the Plaintiff and the non-party company’s special relationship with the Plaintiff at least 50%.

Examining the above legal principles and records, the above determination by the court below is justifiable. The court below did not err by misapprehending the legal principles as to the interpretation and application of Article 30(1) and (3)4 of the Customs Act and the burden of proof, contrary to what is alleged in the grounds of appeal.

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

Justices Kim Ji-hyung (Presiding Justice)