Change of freight included in the customs value

 Korean government chose to include the cost of transport of the imported goods to the port of importation in the customs value, which is stipulated in Article 30 (1) 6 of the CUSTOMS ACT (관세법).

 

According to Article 20 (5) of the ENFORCMENET DECREE OF THE CUSTOMS ACT (관세법시행령), the cost is defined as the cost incurred until the arrival of a vessel loaded with the imported goods at the port of entry, ready for the unloading work of such goods.

 

The time when the unloading work of imported goods is ready had been construed as the time when the vessel comes alongside the pier. Additional cost like demurrage which can be incurred when port congestion happens, as a vessel that arrives in Korea has to wait long for its turn to come alongside the pier, had been subject to taxation.

 

There had been some tax tribunal cases regarding taxation of demurrage. Until recently, the same construal had applied.

 

The port congestion caused by COVID-19 made Korean government re-think about the construal. It’s harsh for taxpayers that they have to pay more taxes just because they have to wait long, beyond their control, for a vessel to come alongside the pier.

 

In order to make such cost untaxed, the construal of “ready for the unloading work of such goods” has been changed to the time when the vessel arrives in a place of destination designated in the contract and its captain gives a notice that they are ready for the unloading work of transported cargo just as prescribed in Article 838 (1) of the COMMERCIAL ACT (상법).

 

The change is not just verbal. Article 24 (2) of the NOTIFICATION ON THE OPERATION OF THE CUSTOMS VALUATION (관세평가 운영에 관한 고시) was amended to reflect the new construal, which entered into force on Feb.1, 2023.

 

So, demurrage, pilotage, towage, and line handling charge incurred after the arrival of a vessel loaded with the imported goods at the port of entry are no longer subject to taxation.