The proposed tax law amendments announced by the Ministry of Economy and Finance (the “MOEF”) on July 6, 2021 (the “Proposed Tax Law Amendments”) contain proposed amendments to the Customs Act.

Businesses that engage in imports and exports may be affected by the following proposed amendments to the Customs Act (the “Proposed Amendments”) included in the Proposed Tax Law Amendment and should review them carefully.
 

• Clarification of the Definition of Purchasing Agent (Article 19 (5) of the Customs Act)
  
  If a purchasing agent that received customs duties, etc. in advance from a domestic purchaser fraudulently obtains such funds by providing false information, such as the customs value of the goods to be imported, to an import declarant, etc., the purchasing agent will be jointly and severally liable for customs duties, etc. (Article 19 (5) 1 (c) of the Customs Act).  In addition, if the act is proven to be intentional, the purchasing agent may be punished for the crime of customs duty evasion (Article 270 (1) 7 of the Customs Act). 
  
  In this regard, the Customs Act currently defines purchasing agent as “a person who engages in the business of performing delegated purchases of imported products from platforms such as cyber [online] shopping malls in accordance with requests made by a property owner [i.e., consumer] who intends to import such products for personal use.”  However, as the number of direct overseas purchases have increased in line with the recent growth in e-commerce transactions, demands to supplement the current provisions have increased.  The Proposed Amendments expand the definition of “purchasing agent” in the Customs Act by revising the definition to add “a person who engages in the business of providing information relating to the goods that can be purchased overseas through his or her cyber [online] shopping mall, etc., and selling such goods after purchasing them in accordance with requests made by a property owner [i.e., consumer].” 

• Expansion of Scope of Penalties Eligible for Exemption in Relation to ACVAs¹ (Article 42-2 of the Customs Act)
  
  Currently ACVA applicants can receive an exemption in respect of underreporting penalties, which equal 10% of the underreported amount of duties and other taxes due, by filing an amendment to declarations of the “amounts of duties, etc. reported and paid before filing ACVA” within two months following the receipt of the results of the ACVA application.  The Proposed Amendments would expand the scope of underreporting penalties eligible for such exemption under the Customs Act to also include penalties relating to “amount of duties, etc. reported and paid until the day before the date on which the notification of the ACVA result is made,” thereby encouraging voluntary correction of erroneous declarations. 

• Strengthened Sanctions Against Violations of Obligation to Submit Customs Valuation Materials by Multinational Companies (Article 277 (1) of the Customs Act)
  
  Pursuant to the Customs Act as currently in effect, a party related to an importer may be asked to submit materials relating to customs valuation issues during a customs audit for the purpose of reviewing the appropriateness of the dutiable value of the products imported by the importer.  Where such related party fails to submit the requested materials within the allowed period of time without just cause or submits false materials, a fine not exceeding KRW 100 million can be imposed.
  
  The Proposed Amendments introduce an additional fine on top of the existing fine (i.e., the aforementioned fine not exceeding KRW 100 million) in order to increase the effectiveness of the provision obligating related parties to submit materials relating to customs valuation.  Specifically, where a related party does not submit materials or submits false materials, the applicable customs office can order corrective measures with respect to such acts be taken within 30 days.  If the party fails to timely take such corrective measures, a maximum additional fine of KRW 200 million may be imposed depending on the period of the delay.  Consequently, if a related party fails to comply with the obligation to submit materials relating to customs valuation, a maximum total fine of KRW 300 million may be imposed (i.e., an initial fine of up to KRW 100 million plus an additional fine of up to KRW 200 million).

The Proposed Tax Law Amendments announced by the MOEF were submitted to the meeting of the Cabinet on August 31, 2021 and were subsequently submitted to the National Assembly on September 2, 2021.  It will be necessary to observe whether any further revisions are made to the Proposed Tax Law Amendments during the course of deliberation and adoption by the National Assembly.