1.

Strengthening of Sanctions Against Customs Duty Evasion

The previous version of the Customs Act set the statute of limitations for imposing customs duties at five years, in principle, allowing it to be extended to ten years in cases of evasion, refund or exemption of customs duties through unlawful means. However, the amended Customs Act introduces a provision that extends the statute of limitations for imposing customs duties for imports made without filing a declaration (“non-declared imports”) from five years to seven years. Therefore, even instances of simple omissions in import declarations, misstatements of product names, and errors in HS codes, without intentional smuggling or unlawful acts, may be classified as “non-declared imports” and subject to the seven-year statute of limitations period for imposing customs duties.

In addition, under the amended Customs Act and FTA Special Act, the penalty for under-declaration due to unlawful acts and for importers’ unlawful acts has increased from 40% to 60%. This change strengthens sanctions for customs duty evasion. Starting this year, if an under-declaration is determined to be the result of misconduct, the penalties will significantly increase. In this regard, importers and exporters must regularly verify the accuracy of their declarations under the Customs Act and FTA Special Act.
 

2.

Expanding Risk Management Plans for Customs Duty Payers

Previously, to be eligible for the ex post facto application of conventional tariffs, an importer had to file an application within one year from the date of acceptance of the import declaration. The ex post facto application was permitted within 45 days from the date of receipt of the payment notice only in cases where the head of a customs office imposed customs duties by assigning a tariff classification different from the tariff classification declared by the importer. However, the amended FTA Special Act has broadened the scope of application for the ex post facto application of conventional tariffs. Importers can now apply for conventional tariffs within 45 days from the filing of a revised declaration when they need to revise underpaid customs duties due to a change in the tariff classification, regardless of the general period for filing an application for the ex post facto application of conventional tariffs (i.e., within one year from the date of acceptance of the import declaration). This revision is expected to provide greater flexibility and broader opportunities for the ex post facto application of conventional tariffs, thereby strengthening the protection of the rights and interests of importers.

The “Preliminary Assessment of Country of Origin” is a system that serves as the basis for applying conventional tariffs. When a person has inquiries about certain matters (e.g., whether the criteria for determining the country of origin have been met) and requests the Commissioner of the Korea Customs Service (the “KCS”) to review such inquiries before filing an import declaration of the relevant goods, the Commissioner reviews the inquiries and responds with the review results. Previously, an application for Preliminary Assessment of Country of Origin was allowed only if the relevant Free Trade Agreement (“FTA”) specifically addressed matters concerning the Preliminary Assessment of Country of Origin. However, the amended FTA Special Act has removed the aforementioned proviso. Consequently, beginning this year, an application for Preliminary Assessment of Country of Origin can be submitted even if the FTA does not specifically stipulate matters concerning the Preliminary Assessment of Country of Origin. As a result, it is now possible to apply for the Preliminary Assessment of Country of Origin even for goods related to the Korea-European Free Trade Association (“EFTA,” consisting of Switzerland, Norway, Iceland and Liechtenstein) Agreement, which was previously not permitted.
 

3.

Enhancing Effectiveness of Customs Duty Collection

The amended Customs Act has expanded the scope of virtual asset service providers that are tax data filing agencies, in order to address unfair trade practices exploiting virtual assets and prevent taxpayers’ from concealing of their assets. Specifically, Article 264-2, Subparagraph 7 of the Customs Act now includes “virtual asset service providers defined in Article 2, Subparagraph 2 of the Act on the Protection of Virtual Asset Users” among the entities that the Commissioner of the KCS can request to submit data or statistics related to the imposition and collection of customs duties and customs clearance. As a result, actions against tax delinquency involving virtual assets are likely to increase in the future.