AMEL Korea Ltd. (Law Firm LLC, Attorneys Kang Dong-ho et al., Counsel for the plaintiff-appellant)

Head of Busan Customs Office (Law Firm Jeong, Attorneys Lee Jae-soo et al., Counsel for the plaintiff-appellant)

June 12, 2015

Busan District Court Decision 2014Guhap21401 Decided January 8, 2015

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance shall be revoked. The defendant shall revoke all the imposition of KRW 226,081,570 in total of KRW 31,551,60 in customs duties and value-added taxes of KRW 149,60 in value-added taxes of KRW 149,601,940 in value-added taxes of KRW 44,928,030 in value-added taxes of KRW 226,08

1. Details of the disposition;

The court's explanation on this part is the same as the corresponding part of the reasoning of the judgment of the court of first instance. Thus, this part of the reasoning is cited by Article 8 (2) of the Administrative Litigation Act and the main text of Article 420 of the Civil Procedure Act.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Chapter 1 (whether the Plaintiff is an actual buyer or a sales agent of AMF Hong Kong)

The Plaintiff is not simply a sales agent of AMF Hong Kong, but constitutes an independent buyer who performs its role and function as an independent party to import and trade of the instant goods and sales transactions in Korea and acquires profits therefrom. Nevertheless, the instant disposition taken on the premise that the Plaintiff is merely a sales agent of AMF Hong Kong is unlawful.

2) Chapter 2 (A taxpayer as to the import of the instant good)

Although the Defendant deemed that the Plaintiff is not a party to actual import transaction of the instant goods, but a sales agent, the Plaintiff’s disposition of this case was made as a taxpayer of customs duties, etc. on the import of the instant goods. Therefore, the instant disposition was erroneous in selecting a taxpayer of customs duties, etc.

3) Chapter Three (as to whether Article 30, Paragraph 1, of the Customs Act is applicable)

Article 30(1) of the Customs Act and Article 17 subparag. 3 of the Enforcement Decree of the Customs Act are not applicable to “goods sold to be exported to Korea” and thus, the customs value cannot be determined pursuant to Article 30(1) of the Customs Act. Thus, Articles 31 through 35 of the Customs Act shall be applied in order. Since it is difficult to find the same kind and quality of the instant goods and similar goods that conform to Articles 31 and 32 of the Customs Act, the customs value of the instant goods shall be determined in accordance with Article 33 of the Customs Act. Nevertheless, the instant disposition that determined the customs value by applying Article 30(1) of the Customs Act is unlawful.

4) Chapter 4 (Method of Determining Dutiable Value)

Article 30(1) of the WTO Customs Valuation Agreement provides that "The sales for the purpose of distribution, which is made between a supplier and an end buyer (time between a nominal agent and an end buyer), shall constitute a transaction that can be assessed pursuant to Article 1 of the Agreement (i.e., a dutiable value based on a transaction price)." According to the above provision, in the case of an import transaction by a sales agent, the customs value should be determined based on the sales agency transaction for the purpose of distribution (the transaction between the plaintiff and the domestic buyer), not on the sales price already concluded (the transaction between the plaintiff and the domestic buyer) but on the sales agency transaction for the purpose of distribution (the transaction between the plaintiff and the AMF Hong Kong). Thus, the customs value should be determined by considering the transaction amount between the plaintiff and the AMF Hong Kong as the actual payment amount stipulated in Article 30(1) of the Customs Act. Nevertheless, the disposition of this case is unlawful.

B. Relevant statutes

Attached Form "Related Acts and subordinate statutes" shall be as stated.

(c) Fact of recognition;

1) Status and relationship between AMF Hong Kong and the Plaintiff’s Company

A) AML Hong Kong is currently under development by obtaining the right to develop a mine between the net Republic of South Africa, and is currently under development, a company that exports Gohap iron, the raw and subsidiary materials of steel, to the world, there are 10 branches, including the Plaintiff, in the world.

B) The Plaintiff’s major imported goods are protein additives or combined ingredients additives for the removal of anti-nets in the process of steel process by electricity, i.e., Pluco net and Pluco net. Since 2009, only through AML Hong Kong, the Plaintiff imports all of the above goods and supplies them to domestic steel manufacturers, such as modern steel, East International River, YKethyl, etc.

C) As of August 2013, AMF Hong Kong owns 100% of the Plaintiff’s shares as of August 2013, and the Plaintiff and AMF Hong Kong’s representative are the same person as “overboard person.”

D) The Plaintiff’s summary of the Plaintiff’s business is 2.2 of the review data on the transfer price between the Plaintiff and AMF Hong Kong (AML Hong Kong) stating that “the Plaintiff is mainly involved in the distribution of related products among the networks in Korea market and provides sales support services to the AMF Hong Kong. Major customers in Korea of the AMF Hong Kong are Hyundai Steel, the East International River, the YHS, and the Korea Steel. The AMF Hong Kong employed three domestic customers by May 31, 2012. They are responsible for the sale, promotion, management support, etc. of the instant products.” 3.1.6 operation, finance, legal and personnel management items include “the Plaintiff is in charge of the general management of the region, human resources management, and involvement in the employment of the Plaintiff.”

E) In addition, according to the above T/P review data, a total of three types of transactions are scheduled between the Plaintiff and AMF Hong Kong. Specifically, “(1) sales support services for the Plaintiff: (2) sales of AMF Hong Kong; (3) purchase support services for the Plaintiff.” In particular, the above data provide that “the Plaintiff sells products to customers (i) or (ii) by way of 2, depending on various factual relations, such as financing, timing and method of sales contract,” and that “the Plaintiff sells products by means of 1 or 2,” and that indirect sales (i.e., export through the Plaintiff) to the Korean market (or (ii) indirect sales (i.e., export through the Plaintiff) are not applied to the settlement of foreign currency, or it is merely a type of sales from the service level to reduce the efforts of Korean customers for import clearance. In fact, transactions between the Plaintiff and AMF Hong Kong are conducted in most ways.

2) The process of determining the import declaration price of the Plaintiff’s instant goods and sales price for domestic buyers

A) Domestic buyers, including modern steel, East International steel, and YK ethyl, send a bidding invitation for participation in competitive bidding to various domestic and foreign suppliers, including the Plaintiff, in connection with the supply of the instant goods.

B) Accordingly, in order to purchase the instant goods, domestic buyers, including the Plaintiff, received a bid price by a competitive bidding method from several suppliers including the Plaintiff, and concluded a contract with a supplier who presented the lowest bidding price. If the Plaintiff participated in the said competitive bidding and received the lowest bid price, the Plaintiff would import the instant goods from AMF Hong Kong and supply them to domestic buyers.

C) The terms and conditions of delivery under the sales contract with domestic buyers are set at 1) DP designated places (domestic buyers’ storages of raw materials for factories). The selling price is determined by adding the price at which a certain discount rate is applied to the international mineral trade price of the instant goods, and the expenses for import, such as customs duties, and transportation, to the price at which the goods are sold. Thus, in order to be awarded a successful bid at a competitive bidding, the discount rate shall be set higher than the competitors.

D) On the other hand, in the course of participating in a competitive bidding with domestic buyers, the Plaintiff is instructed by AMF Hong Kong in determining the specific price, and the e-mail related to the determination of the price of domestic steel products sent to the Plaintiff by the Defendant, as well as the following information, is written:

From 1,180,00 won per ton, to 1,180 won per ton, at 00 o.0 o.0 o. o. o. o. o. o. o. o. o. o. o. o. o. o. o. o. o. o. o. o. o. o., to enter into negotiations with the Korean Steel in one way from the last 1.5% discount to the last 2.0% below.

E) If the successful bid price (the purchase price between the Plaintiff and the domestic buyer) is determined through the above process, the price determined at the successful bid price at the price, excluding the Plaintiff’s margin (1-2%) and the cost, etc. after arrival of import port, such as customs duties, shall be determined at the import price of the Plaintiff and AMF Hong Kong (C

3) Terms and conditions of a trading (import) agreement between the Plaintiff and AMF Hong Kong

A) According to Articles 11 and 12 of the Trade (Import) Agreement entered into between the Plaintiff and AML Hong Kong, quality inspections at the port of arrival are to be conducted by an end-user rather than the Plaintiff. In the event that the result of export conducted at the port of shipment differs from the result of the end-user’s inspection conducted at the port of registry, an end-user’s inspection conducted at the port of registry shall be accepted. However, if the exporter objects to the result of the end-user’s inspection, the exporter’s inspection conducted by a third party and the cost should be borne by the exporter, the exporter’s independent supervisor of the place of import, and the weight in the weight inspection subject matter shall be borne by the exporter, the exporter, and related

B) In addition, according to paragraph (13) of the above contract, where the AMF Hong Kong fails to deliver it on the designated payment date, the rate of liquidated damages (the contract volume entered into between the buyer and the final consumer x 1/100 of the contract price between the buyer and the final consumer x 1/100 of the contract price between the buyer and the final consumer) shall be paid to the Plaintiff in cash for each week. This is completely identical to the sales contract clause entered

[Ground of recognition] without any dispute, Gap evidence 3, Eul evidence 4, Eul evidence 1, Eul evidence 3, Eul evidence 6, Eul evidence 8, Eul evidence 9, Eul evidence 12, the purport of the whole pleadings

D. Determination

1) As to Chapter 1

A) Article 30(1) of the Customs Act provides that the dutiable value of imported goods shall be determined on the basis of the price actually paid or payable by the buyer for the goods sold for export to Korea. In determining the dutiable value, the definition of the buyer and the seller, who are the core subject thereof, is not stipulated in the Customs Act. However, in general, in import transactions, the seller and the buyer refer to a person who actually engages in import transactions under their own account and risk burden. In other words, a buyer means a person who, in an import transaction, determines the quality, quantity, price, etc. of the imported goods and bears the risk of defects, quantity, accident, bad amount of claims, etc. In other words, a buyer shall be free to sell the goods at the desired price, and he shall be free to choose a customer, and even without consultation with the exporter, a buyer shall negotiate price and other sales terms and conditions, etc., and thus, the buyer shall not be entitled to the above determination or risk of loss in stock, etc. Accordingly, in case of typical import transactions, the buyer shall not be entitled to any order or sales agent for the goods transaction.

B) In light of the above legal principles and provisions, we examine whether the Plaintiff is a real purchaser of the instant product or a sales agent of AMF Hong Kong.

6. The Plaintiff’s primary role is to support the Plaintiff’s domestic sales of the goods at issue in accordance with the Hong Kong’s domestic sales contract, i.e., the Plaintiff’s domestic sales of the goods at issue, i.e., the Plaintiff’s representative as its subsidiaries, i., management of personnel and organization under the AMF Hong Kong. ② the Plaintiff’s overall contractual relationship between the Plaintiff and AMF Hong Kong is involved in distribution of the goods at issue, and the Plaintiff’s domestic sales of the goods at issue, i.e., the sales of the goods at issue., the Plaintiff’s domestic sales price for the goods at issue, i.e., the Plaintiff’s domestic sales of the goods at issue., the Plaintiff’s domestic sales price for the goods at issue, i.e., the Plaintiff’s domestic sales of the goods at issue, and ii., the Plaintiff’s domestic sales price for the goods at issue, i.e., the Plaintiff’s domestic sales price for the goods at issue.

C) Therefore, the first proposal of the Plaintiff on a different premise is without merit.

2) As to the second proposal

A) Article 19(1) of the Customs Act provides that a person who falls under any of the following subparagraphs shall be liable to pay customs duties. Article 19(1)1 provides that "in the case of goods on which an import declaration was made, the owner of the imported goods shall be liable to pay customs duties." However, only if the owner is not identified, "in the case of goods imported by an import firm on behalf of an import firm upon entrustment of import: the person entrusting the import of the goods: (a) in the case of goods imported by an import firm on behalf of an import firm: (b) in the case of goods imported by an import firm on behalf of an import firm upon entrustment of import: (c) in the case of goods not imported by an import firm on behalf of an import firm: (a) the consignee entered in the commercial document prescribed by Presidential Decree; and (c) in the case of goods transferred before an import declaration was made: The "owner of the goods" refers to the actual owner of the goods imported; and specifically, the determination of whether the goods are the owner shall be made by taking into account the following circumstances:

B) We examine the following circumstances, namely, ① both the bill of lading and import-related documents on the instant goods described as their owner; ② the Plaintiff directly participated in import procedures, such as the opening of the letter of credit and the settlement of the price; ③ the Plaintiff, as its sales agent, voluntarily files an import declaration as its principal agent for independent import transactions; ③ the Plaintiff, as its sales agent, paid customs duties thereon; ④ the provision on taxpayers is different from the provision on the determination of dutiable value; ⑤ domestic buyers are those who purchase the instant goods cleared by the Plaintiff under a general purchase contract, and are not the parties to import transactions as defined in the Customs Act, etc.; ② domestic buyers already paid the price for the instant goods, including customs duties, to the Plaintiff; and ③ In this case, there is no other data to find the owner unclear. In light of the above, it is reasonable to deem that the Plaintiff constitutes a duty payer for import-related goods.

C) Therefore, the second proposal by the Plaintiff is without merit.

3) As to the third proposal

A) Articles 30 through 35 of the Customs Act providing for the method of determining the dutiable value refers to Articles 1 through 8 of the WTO (hereinafter referred to as the “WTO”) to which Korea is a member of the Customs Valuation Agreement, and Article 17 of the Enforcement Decree of the Customs Act accepts 1.1 of the WTO’s recommendations on the WTO Customs Valuation Agreement as it is. Therefore, in interpreting Articles 30 through 35 of the Customs Act and Article 17 of the Enforcement Decree of the Customs Act, it is reasonable to deem that the WTO’s recommendations on the WTO Customs Valuation Agreement presented by the WTO as a criterion for interpreting the WTO Customs Valuation Agreement can be a single basis.

Article 30(1) of the Customs Act (the same shall apply to Article 1 of the WTO Customs Valuation Agreement) provides that the customs value of imported goods shall be the transaction price adjusted by adding up the amount of commission and brokerage fees (excluding purchase commissions) to the price actually paid or to be paid by the buyer to the “goods sold to be exported to Korea” by the buyer. In order to be subject to Article 30(1) of the Customs Act, it shall fall under the “goods sold to be exported to Korea” but Article 17 of the Enforcement Decree of the Customs Act (Article 17(1) of the WTO Recommendation on the Customs Valuation Agreement) provides that the “goods imported to be sold to Korea on the responsibility of the exporter (Article 3)” shall not be included in the “goods sold to be exported to Korea.”

However, in interpreting Article 30(1) of the WTO Customs Valuation Agreement and Article 17 subparag. 3 of the Enforcement Decree of the Customs Act, even if “goods imported by an intermediary for sale in Korea on an exporter’s responsibility” is considered to fall under “goods sold for sale in Korea on an importer’s behalf (any time between a nominal agent and a customer)” and “the goods sold for sale in accordance with a sales contract already concluded between a supplier and a customer’s agent,” and thus, it should be determined by applying Article 30(1) of the WTO Customs Valuation Agreement in interpreting Article 30(1) of the Customs Act and Article 17 subparag. 3 of the Enforcement Decree of the Customs Act.

B) Therefore, the third proposal by the Plaintiff is without merit.

4) As to Chapter 4

A) As seen earlier, the instant goods constituted “goods sold to be exported to Korea” as they were already concluded between the Plaintiff and the domestic buyer, not the actual buyer, and thus, constitute “goods sold to be exported to Korea.” As such, the price actually paid by the domestic buyer pursuant to Article 30(1) of the Customs Act, i.e., the transaction amount under a sales contract concluded between the Plaintiff and the domestic buyer, which is the basis of dutiable value.

B) The Plaintiff’s opinion on the recommendation of the WTO Customs Valuation Agreement provides that the import transaction between the Plaintiff and AMF Hong Kong constitutes a transaction that can be assessed in accordance with Article 30(1) of the Customs Act. Thus, the Plaintiff’s assertion to the effect that the import price paid to AMF Hong Kong should be the dutiable value. However, if the import price between the Plaintiff and AMF Hong Kong is viewed as the basis of dutiable value, such as the Plaintiff’s assertion, it goes against the basic legislative intent of the Customs Act on the determination of dutiable value that “the actual purchaser” intends to calculate the dutiable value based on the price paid or to be paid by the buyer. ② The calculation of the dutiable value based on the transaction amount between the seller and the buyer is consistent with the legislative intent of Article 30(1) of the Customs Act. Accordingly, it is difficult to accept the Plaintiff’s assertion that the Plaintiff’s agent should pay the price of the goods to the buyer, including the sales commission and brokerage service under Article 8 of the Agreement on Tariffs 1, 2008.

C) Therefore, the Plaintiff’s fourth ground is without merit.

5) Sub-committee

Therefore, it is legitimate to regard the Plaintiff as a sales agent of AML Hong Kong, and determine the amount calculated by deducting deduction elements such as domestic transportation expenses and customs duties, etc. accrued after the instant goods arrive at the port of entry as the dutiable value based on the actual payment amount for the instant goods under Article 30(1) of the Customs Act, based on which the Plaintiff’s purchase price paid to the Plaintiff by domestic buyers is the actual payment amount for the instant goods.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit, and the judgment of the court of first instance is just in conclusion, and the plaintiff's appeal is dismissed as it is without merit. It is so decided as per Disposition.

[Attachment]

Judges Park Jae-soo (Presiding Judge)

1) The condition that the seller’s duty of delivery is deemed to have been fulfilled upon arrival at the place of designation designation and being placed in the controlled territory of the buyer.

2) As a consulting company that analyzes and provides market prices of mining, metal, fertilizers, etc., and generally, steel companies, etc. in each country shall determine the purchase price on the basis of market prices surveyed by the CRU when purchasing mining, metal, etc.