Date from which the limitation period for assessing customs duties is counted

Pursuant to Article 38 (2) of the CUSTOMS ACT (관세법), in general cases, the amount of duty by self-assessment shall be reviewed by Customs after an import declaration is accepted. So, if incorrect HS Code was used in importing a product and the declared tariff rate is lower than that of correct HS Code, Customs can collect the difference of customs duties with additional tax as penalty.

 

Then, how long does the risk of incorrect declaration of HS Code exist? Generally speaking, it is 5 years. Because it is stipulated in Article 21 (1) of the Act that no customs duty may be assessed after the lapse of five years from the date on which the relevant customs duties were due to be assessed. Although it is 10 years in the cases where customs duties were evaded or a refund, reduction, or exemption of customs duties was claimed by improper means, as technical issues are involved in HS Code determination, 10-year limitation period for assessing customs duties rarely applies to HS Code issue.

 

As the limitation period is fixed, what affects the amount of customs duties to be collected is the date from which the limitation period is counted. Such initial date is prescribed in Article 6 of the ENFORCEMENT DECREE OF THE CUSTOMS ACT (관세법시행령) as follows:

Article 6 (Initial Date in Calculating Limitation Period for Assessing Customs Duties) In calculating the limitation period for assessing customs duties under Article 21 (1) of the Act, the day following the day on which an import declaration is filed shall be the day on which customs duties may be assessed: Provided, That in cases falling under each of the following subparagraphs, the day prescribed by the relevant subparagraph shall be the day on which customs duties are assessed: 1. In cases falling under subparagraphs 1 through 11 of Article 16 of the Act, the day following the day on which the fact occurs; 2. Where reduced or exempted customs duties are collected on the ground that obligations are not fulfilled, the day following the day on which the ground therefor arises; 3. In cases of foreign goods shipped into a bonded construction work site, the day following the day that arrives first between the following days: (a) The day on which a report is filed on the completion of construction works under Article 211; (b) The day on which the license period (referring to the extended license period if extended) expires under Article 176 of the Act; 4. The day following the day on which customs duties are collected on the grounds of excessive refund, unfair refund, etc.; 5. The day following the day on which the final value is filed, if the final value is filed after filing the provisional value in accordance with Article 28 of the Act (Provided, That, where no final value is filed within the period prescribed in Article 28 (2) of the Act, the day following the expiration date of the relevant period).

 

Thus, in general cases, we can calculate the limitation period on the basis of the import declaration date.

But, how about the cases where the provisional value declaration is used?

Pursuant to Article 28 of the Act, in some special cases where the customs value of imported products is not determined at the time of import declaration, importers may use the provisional value declaration, promising to file the final value declaration by a certain date within 2 years. The date may be extended within 2 years if the application for extension is accepted by Customs.

Therefore, if provisional value declaration is used, as the limitation period for assessing customs duties starts from the day following the day on which the final value is filed, tax payment notice may be issued by Customs for the import declaration which was filed more than five years before the tax payment notice date.

 

As the provisional value declaration is used when the customs value of imported products is not determined at the time of import declaration, it is rational that the initial date in calculating limitation period for assessing customs duties is adjusted in case some elements of final value declaration are proved to be incorrect. However, what if the incorrect element is HS Code of an imported product for which final value declaration has been filed?

 

The Ministry of Economy and Finance answered to the relevant inquiry that, the initial date shall be calculated on the basis of the initial import declaration date, not the date when the final value declaration is filed, if it is not related to the customs value.

 

HS Code has nothing to do with customs value. So, the risk of declaring incorrect HS Code exists for 5 years from import.