Prohibition on Repetitive Investigation

 

If importers and exporters are subjected to repetitive investigations for the same transactions, they may become too nervous to focus on their business. Fortunately, as stipulated in Article 111 of the CUSTOMS ACT (관세법) and Article 136 of the ENFORCEMENT DECREE OF THE CUSTOMS ACT (관세법 시행령), customs reinvestigation is allowed only in limited cases.

CUSTOMS ACT   Article 111 (Prohibition from Abusing Right to Investigate Customs Duty) (1) Customs officers shall conduct a customs duty investigation to the minimum extent necessary to realize proper and fair taxation and to protect lawfulness of customs clearance and shall not abuse the investigation right for other purpose. (2) Customs officers are prohibited from reinvestigating the same person who has been investigated in connection with the relevant case except in any of the following subparagraphs:  <Amended on Dec. 19, 2017; Dec. 31, 2023> 1. Where there exists hard evidence corroborating a suspicion of a duty evasion, etc.; 2. Where it is necessary to investigate a trading partner of a person who has been investigated; 3. Where a reinvestigation (limited to a reinvestigation conducted within the scope specified in the text of the written decision) is conducted based on a decision on reinvestigation made under the latter part of Article 118 (4) 2 or the latter part of Article 128 (1) 3 (including cases applicable mutatis mutandis in the main clause of Article 132-4); 4. Where a duty payer provides or offers to provide any money or valuables to any customs officer in connection with the duties of the customs officer; 5. General investigations are conducted against persons who have been on suspicion of tax evasion and other cases prescribed by Presidential Decree.   ENFORCEMENT DECREE OF THE CUSTOMS ACT   Article 136 (Prohibition on Repetitious Investigation) "General investigations are conducted against persons who have been on suspicion of tax evasion and other cases prescribed by Presidential Decree" in Article 111 (2) 5 of the Act means the case where a general investigation is conducted on persons suspected of evading customs duties through smuggling, illegal or unfair trade or other acts which disrupt economic order.  <Amended on Apr. 1, 2011; Feb. 2, 2012; Feb. 13, 2018>

 

Simply put, the fact that a general customs investigation has been conducted does not guarantee that a customs offense investigation won’t be conducted. How about the reverse? If someone has undergone a customs offense investigation and received a ‘Not Guilty’ decision, are they then exempt from a general customs investigation for the same transactions? The answer is yes, as confirmed in the recent tax tribunal ruling (Case No. 조심 2023관0053).

Customs authorities argued that, as prescribed in Article 110 (2) of the CUSTOMS ACT, a customs offense investigation is differentiated from a general customs investigation. The prohibited reinvestigation under the Article 111 of the CUSTOMS ACT is considered a repetitive general customs investigation. Therefore, import declarations may be subject to a general customs investigation after a customs offense investigation.

 

Tax judge opposed the customs authorities’ opinion for the following reasons:

-        When investigating an importer for a suspected violation of Article 270 [Offense of Evading Customs Duties], the inquiry not only serves the purpose of initiating criminal proceedings but also aims to rectify any deficient or overpaid taxes under Article 38-3 [Amendment and Rectification].

-        Discriminating between a customs offense investigation and a general customs investigation and excluding the former from the principle of prohibiting reinvestigation does not conform to the principle’s purpose.

-        Despite having collected materials during the customs offense investigation, the customs authorities chose not to take similar action.

-        There seems to be no other unavoidable reasons for conducting a general customs investigation after the delivery of ‘Not Guilty’ notice for the customs offense investigation.

-        Allowing reinvestigation for a customs offense investigation while prohibiting reinvestigation for a general customs investigation neutralizes the principle of prohibiting reinvestigation, depending on the order of customs investigation types.

-        Since the customs authorities’ disposition resulted from the prohibited reinvestigation, the disposition in question is unjust.

Therefore, if Korean importers are not involved in customs offenses such as smuggling, evading customs duties, price forgery, acquiring smuggled goods, evading disposition, lending titles, or false reporting, they don’t have to worry about reinvestigation.