Adas Korea Co., Ltd. (Law Firm Barun, Attorneys Park Hun-young, Counsel for the plaintiff-appellant)

Head of Seoul Customs Office (Law Firm Dongin, Attorneys Lee Han-san et al., Counsel for the defendant-appellant)

July 15, 2014

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposition of KRW 5,911,755,960, total of KRW 2,00,838,540, value-added tax of KRW 2,678,609,40, and penalty tax of KRW 1,232,30,020, imposed on the Plaintiff on January 12, 201, shall be revoked.

1. Details of the disposition;

A. The Plaintiff, as a subsidiary company in Germany, entered into a license agreement with Adas AG (hereinafter referred to as "AG") in Korea, with respect to the Adas AG brand on January 1, 2009 between AAG, with respect to the Liber International Ltd on January 1, 2010, with respect to the Liveice brand between RebO International Ltd and RebO International Ltd, with respect to the Liveice brand, the Plaintiff entered into the license agreement with the Liveice LLC, for each trademark granted the right to use each trademark, each of the above agreements made between the Plaintiff and the other party to the LAG (hereinafter referred to as "AG, etc."), with respect to the Liveice brand under the name of the other party to the L’s trademark license agreement (hereinafter referred to as the "AG, etc."), with respect to the amount equivalent to the 10% net sales of the LAF and the amount equivalent to the 4% net sales, other than the above agreement made.

B. The Plaintiff imported sports clothes, shoess, etc. with each of the above trademarks (import declaration number omitted) and sold them in Korea. At the time of import declaration of the pertinent goods, the Plaintiff reported a trademark use fee paid to AAG, etc. to the customs value of the pertinent goods, but the IMF did not add it.

C. On January 1, 2011, the Defendant issued a customs-related on-site examination to the Plaintiff and confirmed the aforementioned facts, and thereafter, IMF also deemed that the substance thereof is a trademark usage fee and imposed a customs duty amounting to KRW 2,00,838,540, value-added tax of KRW 2,678,609,60, and KRW 1,232,308,020, and KRW 5,911,75,965, and960 (hereinafter “instant disposition”) on the Plaintiff in addition to the customs value of the goods at issue (i) cost of KRW 4% of the sales amount of the goods at issue in accordance with Article 30(1)4 of the Customs Act.

D. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on March 16, 2012, but the said claim was dismissed on May 16, 2013.

[Ground of recognition] The fact that there is no dispute, Gap 1, 2, Eul 1 through 3, and 5 (including paper numbers, hereinafter the same shall apply), the purport of the whole pleadings and arguments

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Unlike domestic advertising conducted in the country concerned, the IMF is a cost used for international marketing activities. The sales companies in each country including the plaintiff enter into a sharing agreement with trademark rights holders on international advertising activities and expenses, and share part of the advertising expenses required for international advertising activities, which is clearly distinguishable from trademark usage fees.

Furthermore, international marketing activities conducted in AAG, etc. bring any error in the indirect advertising effect on imported goods; however, in light of the fact that the Plaintiff does not constitute individual advertising on the Plaintiff’s imported goods, and that the Plaintiff pays AG, but the goods are purchased from an independent manufacturing company in Korea and abroad, the IMF cannot be deemed as not related to imported goods, nor as the cost paid for the transaction terms of imported goods.

Therefore, since the IMF is not a cost to be included in the dutiable value under Article 30 (1) 4 of the Customs Act, the disposition of this case against this is unlawful.

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

According to the statements in Eul evidence Nos. 1 to 3 and 5, the common main contents of each license agreement of this case are as follows.

5.1 The licensee shall pay to the licensee international marketing costs (IMF) equivalent to 4% of the net sales of the products acquired under this contract as compensation for marketing benefits. 5.5 The licensee shall pay to the licensee the international marketing costs (IMF) equivalent to the 4% of the net sales of the products acquired under this contract. The licensee shall not be obliged to pay to the licensee any of the activities listed in paragraph 2 of Article 5 and the choice shall be at the discretion of the licensee, and the licensee shall not be required to provide detailed details of the actual or planned disbursement arising in carrying out the various activities and investments referred to in paragraph 2 of Article 5 or of the plan. Notwithstanding the above terms and conditions, the licensee shall not be obliged to lawfully pay to the licensee any of the following or any of the existing events and, at the same time, shall not be obliged to pay to the licensee within the expiry of the contract:

D. Determination

(1) In order for a royalty to be included in the dutiable value pursuant to Article 30(1)4 of the Customs Act as seen in the above related statutes, the royalty shall be paid in return for the use of trademark rights. ② The royalty for the use of a trademark should be related to the relevant goods due to the attachment of a trademark (Article 19(3) of the Enforcement Decree of the Customs Act), and ③ Furthermore, it shall be paid in terms of transaction for the relevant goods (Article 19(5) of the Enforcement Decree of the Customs Act

(2) First of all, the following circumstances revealed through the terms and conditions of each license agreement of the instant case, namely, ① AG, etc. is liable for trademark image as a license provider, and part of such liability is conducting international marketing activities (see written contract). ② The value of trademark, such as DNA, etc. has increased due to such marketing activities, and global sales corporations obtain the efficacy, and sales corporations including the Plaintiff pay money to the license provider, such as AG, as consideration for such efficacy (see Article 5(1) of the contract), ③ Furthermore, the said IMF is reasonable to view that it is determined based on the net sales of the entire global sales corporation, rather than on the basis of the actual cost of international marketing activities; ④AG, etc., as consideration for all kinds of sponsor agreements and other marketing activities, and that there is no obligation to provide the Plaintiff with the details of the advertising activities, such as the amount and scope of the advertising costs, as consideration for such efficacy; and ③ Furthermore, it is reasonable to view that the Plaintiff and the Plaintiff, etc., as the owner of the trademark, has no obligation to provide the Plaintiff with the details of the advertising activities (see Article 5).

(3) Furthermore, the key issue is that the goods bearing a trademark is identical to those bearing a trademark, and thus, the IMO added thereto satisfies the relevance to the pertinent goods under Article 19(3) of the Enforcement Decree of the Customs Act.

(4) Finally, according to the above facts, Article 10(3)(a) of the license agreement of this case provides that "the reasons for cancellation of the contract shall not be paid by the IMF." Article 10(4) of the license agreement of this case provides that the licensee shall not use the trademark when the contract is terminated. Therefore, if the plaintiff does not pay IMF to AG, etc., it can be known that it would no longer be possible to import and sell the issues with the trademark attached, such as AG, etc., and therefore, it is difficult to regard IMF as the royalty for the right granted under the terms and conditions of the contract of the pertinent goods.

D. Sub-determination

As a result, the IMF paid by the Plaintiff to aAG, etc. in relation to the disputed goods is a royalty to be included in the dutiable value of the disputed goods as stipulated in Article 30(1)4 of the Customs Act. Thus, the instant disposition based on this premise is lawful.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.

[Attachment Omission of Related Acts]

Judges Choi Young-young (Presiding Judge)

1) On the basis of the basis for calculating the user fee for goods reported by the Plaintiff (10% or 6% of the net sales) and the basis for calculating the royalties for goods, namely, the amount of net sales, the Defendant calculated the “total amount of IMO” paid by the Plaintiff to AAG, etc. among them, extracted the “amount of IMOF assistance” equivalent to the ratio of sales related to the key goods, calculated the “amount of IMOF assistance” in comparison with the amount of the import declaration, and calculated the “amount of IMOF additional charges” by multiplying the amount of each import declaration by the amount of the import declaration.