When foreign-invested enterprises are required to apply for exemption from customs duties when they introduce capital goods under Article 121-3 of the former Restriction of Special Taxation Act (=before the import declaration is accepted)

In full view of the language, structure, and purport of the relevant provisions of the former Restriction of Special Taxation Act (amended by Act No. 8827 of Dec. 31, 2007) and the former Customs Act (amended by Act No. 8852 of Feb. 29, 2008), especially the examination of the amount of customs duties on goods subject to reduction or exemption prior to the import declaration, and the fact that when a foreign-invested enterprise has been exempted from customs duties, etc. under Article 121-3 of the former Restriction of Special Taxation Act, it shall undergo follow-up management after the import declaration was accepted, and if the foreign-invested enterprise fails to use the relevant imported goods for the purpose of exemption, it shall be exempted from customs duties, etc. prior to the import declaration in order to be exempted from customs duties, etc. under Article 121-3 of the former Restriction of Special Taxation Act, it shall be exempted from customs duties, etc.

Articles 121-3(1)1 and (3), and 121-5(2) of the former Restriction of Special Taxation Act (amended by Act No. 8827 of Dec. 31, 2007); Article 116-8(1)2 of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 20516 of Dec. 31, 2007); Article 51-5 subparag. 3 of the Enforcement Rule of the Restriction of Special Taxation Act; Article 38(2) of the former Enforcement Decree of the Foreign Investment Promotion Act (amended by Presidential Decree No. 20344 of Oct. 26, 2007); Article 38(1) of the former Customs Act (amended by Act No. 709 of Dec. 30, 2003); Article 128(1)2 of the former Enforcement Rule of the Customs Act (amended by Act No. 8132 of Feb. 12, 2008)

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

Head of Daegu Customs Office

Daegu High Court Decision 2006Nu959 decided Nov. 24, 2006

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

The grounds of appeal are examined.

Article 121-3(1)1 of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Act No. 8827, Dec. 31, 2007; hereinafter “former Act”) provides for the exemption from customs duties, special consumption tax and value-added tax (hereinafter “customs duties, etc.”) where the capital goods prescribed by the Presidential Decree are introduced as means of foreign payment or means of domestic payment invested by a foreign investor under Article 5(1) of the Foreign Investment Promotion Act from among those introduced into high technology, and for which the foreign investor has made an application for exemption from customs duties, etc. under Article 121-3(2)1 of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Act No. 820, Dec. 30, 2007; hereinafter “former Enforcement Decree of the Restriction of Special Taxation Act”) and Article 121-3(1)2 of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 2135, Mar. 1, 2015>

In addition, Article 38(1) and (2) of the former Customs Act (amended by Act No. 8852, Feb. 29, 2008; Act No. 7009, Dec. 30, 2003); Article 8(1)1 of the Enforcement Rule of the Customs Act provides that “any person who intends to import goods shall file a declaration on payment of customs duties (hereinafter referred to as “tax declaration”) with the head of the relevant customs office at the time of filing an import declaration; on the reported amount of customs duties, it shall be examined after receiving the import declaration; on the one hand, the amount of customs duties or internal taxes to be reduced or exempted shall be examined before an import declaration is filed; on the other hand, Article 32(1)2 of the Enforcement Decree of the Customs Act provides that “where a person who files a declaration on duty reduction or exemption under Article 38(1) of the Act is subject to the reduction or exemption of customs duties under other Acts or a treaty, the person who intends to obtain the reduction or exemption of customs duties shall also submit an application form.”

In full view of the language, structure, and purport of the relevant provisions of the former Act and the former Customs Act, especially the fact that the assessment of the amount of customs duties on the goods subject to the reduction or exemption of customs duties should be conducted prior to the import declaration, and that when a foreign-invested enterprise is exempted from customs duties, etc. under Article 121-3 of the former Act, the ex post facto management shall be conducted after the import declaration is accepted, and if the relevant imported goods are not used for the exempted purpose, the customs duties, etc. shall be additionally collected. In order for a foreign-invested enterprise to be exempted from customs duties, etc. under Article 121-3 of the former Act, the foreign-invested enterprise must file an application for exemption with the head of

After finding the facts as stated in its holding, the court below rejected the Plaintiff’s assertion that, in light of Article 121-3 of the former Act and Article 112(1) of the Enforcement Decree of the Customs Act, in order for the Plaintiff to be exempted from customs duties, etc. following the introduction of the imported goods of this case, the Plaintiff did not meet the requirements for exemption from customs duties, etc. under Article 121-3 of the former Act because the Plaintiff did not apply for exemption from customs duties, etc. even before the import declaration was filed with the head of the relevant customs office, and determined that “the provisions of exemption from customs duties under Article 121-3(3) of the former Special Act are merely those of the duty to cooperate with the duty payer, and therefore there is no exemption from customs duties, etc., as a matter of course, even if there is no exemption from customs duties, etc., the time of exemption from customs duties under Article 112(1) of the former Enforcement Decree of the Customs Act is not a new requirement for exemption from customs duties, etc.

The grounds for appeal are different from the applicable statutes and cases, and it is not appropriate to invoke this case. The Supreme Court Decisions 85Nu695 delivered on March 11, 1986, 97Nu10628 delivered on October 24, 1997, etc.

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.

Justices Kim Young-ran (Presiding Justice)