1.

Continued Focus on Regular Customs Audits

Since the pandemic, the Korea Customs Service (the “KCS”) has annually selected and regularly audited more than 200 companies. In 2026 as well, the KCS is reportedly maintaining its policy of continuously strengthening customs audits led by the main regional customs offices. Accordingly, companies should manage customs compliance issues with the expectation that customs audits will be conducted on a regular cycle over certain periods.
 

2.

Advanced Data-Driven Risk Assessment and Selection of Audit Targets

Following the introduction in 2025 of the bulk submission system for Customs valuation data, the KCS has been enhancing data-driven risk assessment based on valuation data secured at the declaration stage. As this data-driven risk assessment becomes fully operational, companies that the KCS views as having the following high-risk customs issues—identified through multi-dimensional analyses such as past declaration patterns, industry benchmarking, and the proportion of related-party transactions—are more likely to be selected for audit:
 

(i)

Appropriateness of transfer prices in related-party transactions

(ii)

Whether royalties are included in the customs value, and the scope of inclusion

(iii)

Transfer pricing adjustment mechanisms

(iv)

Indirect payments for production assistance services and warranty/defect costs

(v)

Foreign exchange (“FX”) issues in a high exchange-rate environment

(vi)

Import requirements related to public health and industrial safety
 

3.

Close Scrutiny of FX Issues in High Exchange Rate Environment

Customs audits in Korea are typically accompanied by foreign exchange inspections to check compliance with the Foreign Exchange Transactions Act. As the high exchange rate environment continues, customs authorities will likely examine more closely the structure of FX-related transactions and accounting treatments, including the settlement currency for import payments, recognition of FX gains/losses, and short-/long-term foreign currency borrowings. In particular, the following matters are expected to receive heightened scrutiny:
 

(i)

Appropriateness of the exchange rate applied when settling import payments (TT (telegraphic transfer) selling rate vs. the actual applied rate)

(ii)

Link between foreign currency lending/borrowing between related parties and customs value determination

(iii)

Impact of FX hedging transactions on customs value

(iv)

Method for determining customs value under multi-currency settlement structures
 

4.

Close Scrutiny of Import Requirements Related to Public Health and Industrial Safety

In line with the government’s policy direction to protect public health and strengthen industrial safety, enforcement is expected to intensify regarding compliance with import requirements (certification, inspection, labeling, safety standards, etc.) for high-risk items such as food, pharmaceuticals, chemicals, and machinery/equipment, focusing on items including:
 

(i)

Safety inspections and labeling requirements for imported food under the Food Sanitation Act and the Health Functional Foods Act

(ii)

Import reporting and registration of hazardous chemicals under the Chemicals Control Act and K-REACH (Act on the Registration and Evaluation of Chemicals)

(iii)

Safety certification/verification under the Electrical Appliances Safety Control Act and the Special Act on Safety of Children’s Products, etc.

(iv)

Import approvals and product filings under the Medical Devices Act and the Pharmaceutical Affairs Act
 

5.

Aftereffects of Bulk Submission System for Customs Valuation Data Introduced in 2025

The “bulk submission system for customs valuation data,” fully implemented as of September 1, 2025, requires importers to submit in a single package at the import declaration stage key materials affecting customs value determination, such as royalties, production assistance fees, post-import proceeds, and related-party transactions. In addition, as of December 1, 2025, the questions and formats of the price declaration form were fully revised to improve operation of the import goods price declaration system. The combination of this bulk submission system and the revised forms requires caution because, in future audits: (i) materials submitted at the declaration stage will be used as baseline data, and (ii) if inconsistencies are found between declared information and actual transactions, the risk of additional duties and penalties will increase.
 

6.

Implementation of Guidelines for Issuing Amended VAT Import Tax Invoices (effective January 1, 2026)

To address the significant practical confusion over whether amended import VAT tax invoices should be issued whenever VAT corrections are made during customs audits, the KCS has been implementing the “Operational Guidelines for Issuing Amended Import Tax Invoices” since January 1, 2026. These guidelines apply to price declarations made from January 1, 2026, and notably designate “repeated assessments for the same error” as a non-issuance category. As a result, it is expected that in future customs audits there will be frequent disputes over whether a case constitutes a “repeat of the same error.”

Accordingly, companies should review whether there are items that could be interpreted as repetition of the same type of issue previously flagged in past customs audits, and consider preemptive measures to minimize the related risks.
 

7.

Introduction of Regular Anti-Dumping Review System

The KCS introduced a regular anti-dumping review system with the goal of “blocking circumvention of dumping measures.” Recently, the KCS has been more actively performing its border protection function through trade security investigations and expanded regular FX inspections, and in that context has been expanding its organization, functions, and roles. The introduction of the regular anti-dumping review system aligns with this trend; ongoing monitoring and regular reviews are expected to expand for products subject to anti-dumping duties, focusing on dumping-circumvention patterns such as price reductions, parallel/indirect import structures, and relocation of production/export bases. 
 

8.

Changes in Practical Customs Audit Environment

Notable changes have recently emerged in customs audit practice. Three key issues that companies should consider when responding to customs audits are summarized below.
 

A.

Requests by Customs Authorities for Access to a Company’s ERP System

There is a growing number of cases in which, during a customs audit, the customs authorities request direct access to the target company’s ERP system and press for such access to be granted. In the past, it was more common for the company to extract the requested data from its ERP system and submit it. Recently, however, customs audit teams have increasingly taken a firm position that they will log into ERP systems such as SAP or Oracle to directly review accounting ledgers, transaction histories, cost data, and the like—often placing companies in a quandary.

While there is no clearly defined provision stating whether such broad requests for direct ERP access and inquiry rights are permitted under the Customs Act, or whether taxpayers have an obligation to cooperate, the KCS revised, as of July 1, 2025, the “Directive on Securing Taxation Data,” taking the position that if a company refuses to grant ERP access rights, it may be designated as “non-cooperative in submitting taxation data” and be subject to customs-clearance sanctions such as cancellation of approval for monthly payment. In practice, because refusing such requests may affect the audit atmosphere and outcomes, companies face a substantial burden, and the difficulty of responding has in reality increased significantly.

Accordingly, companies should, in advance, determine how they will respond if they are asked to grant direct access to their ERP systems, and review whether granting access could result in the disclosure of sensitive information—such as trade secrets or personal data—that is unrelated to the customs audit or exceeds the scope of the audit, and should consider and prepare response measures beforehand.
 

B.

Strengthened Sanctions for Refusing to Submit Requested Materials

Penalties for refusing or delaying responses to requests for submission of materials during customs audits have been significantly strengthened. If a company fails to comply with a request by a customs office to submit materials or goods, an administrative fine of up to KRW 50 million may be imposed pursuant to Article 277 of the Customs Act (up to KRW 100 million for non-compliance with submission of customs valuation data in the context of related-party transactions). In addition, the KCS has stated in its audit operation direction that it will apply, in conjunction with criminal fines and administrative penalties, sanctions in customs duties payment and customs clearance procedures to companies that refuse or delay submission of materials.

This effectively means that refusing to submit materials may result in disadvantages in the import customs clearance process, increasing the need to establish a more careful submission strategy when responding to customs audits. Companies should closely review the legality and scope of submission requests, while noting that refusing submission without just cause entails substantial risk.
 

C.

Introduction of Attorney–Client Privilege Regime Following Amendment to Attorney-at-Law Act

Amended Article 26-2 of the Attorney-at-Law Act, which was passed by the National Assembly on January 29, 2026, has significant implications for responding to customs audits. It introduces into Korea’s legal framework the so-called “Attorney–Client Privilege” (“ACP”). Under the amendment, the disclosure of confidential communications between an attorney and a client for the purpose of legal advice, as well as documents prepared for litigation, investigation, or audit purposes, may be refused during investigations by government agencies.

Although the law takes effect one year after promulgation—on February 20, 2027—it is particularly noteworthy that it will apply retroactively to communications made and documents prepared prior to the effective date.

However, there are exceptions under which ACP does not apply. Confidentiality protection does not apply where: the client consents; the attorney and the client are in a co-offender relationship; the communications/documents were used for illegal acts; a public-interest necessity is recognized; or another law contains special provisions.

Nevertheless, under ACP, legal advice exchanged between a company and its attorney, and materials prepared in that process, may be withheld even if customs authorities request submission during a customs audit. Conversely, once such materials are submitted, they may no longer remain confidential, which could result in the company no longer being able to assert ACP in investigations by other government agencies. Accordingly, companies should keep this new ACP regime in mind and proactively review and evaluate their strategies both for preparing for future customs audits and for responding during actual audits.
 

9.

Implications — Corporate Response Strategies to KCS Customs Audits

In 2026 as well, the KCS is expected to strengthen inspections of customs and foreign exchange compliance for import/export companies through both regular and non-regular customs audits. Corporations should therefore strengthen internal control systems within departments responsible for customs and foreign exchange compliance, and through periodic reviews, identify legal and financial risks and areas for improvement prior to a customs audit, and take preventive measures in advance.