DR & AJU’s Tax and Customs Team secured acquittals in both the initial and appellate trials for a trading company and its CEO, who were indicted for making a false declaration under the Customs Act (Offense of False Reporting). The indictment alleged that the value of apparel imported from the Philippines worth KRW 1.3 billion was reported at KRW 400 million.

In this case, we highlighted the difference in scope and subject between the offenses of dutiable value reporting and false reporting under the Customs Act. Following a thorough investigation and document review, we found that the trading company did not falsely declare the actual transaction value but merely omitted the value of raw materials that were provided free of charge by the exporter. This omitted value should have been added by the importer to the actual transaction value when declaring the dutiable value, which serves as the tax base used for calculating customs duties. We successfully persuaded the court that under the Customs Act, the offense of false declaration is a penal provision aimed at ensuring the proper conduct of import and export customs procedures and is unrelated to securing customs revenue through the assessment and collection of duties. Therefore, even if the importer omitted elements that should have been included in the dutiable value, as long as the actual transaction value of the imported goods was correctly declared, such omissions could not be penalized as a false declaration.

In import transactions, underreporting the dutiable value can result in substantial tax reassessment and, in some cases, criminal penalties. It is advisable to consult with experts from the investigation stage to identify risk factors and develop a defense strategy.