Customs authorities have cracked down on illegal activities amounting to 500 billion won that exploited a system temporarily lowering tariffs to stabilize prices.

The Korea Customs Service announced today (the 9th) that, following intensive crackdowns on quota tariff abuses conducted from February to August, it carried out targeted customs investigations on 21 importers and uncovered violations by 10 of them.

The amount of tax evasion totals 58.6 billion won.

Quota tariffs are a system designed to temporarily lower import duties to help stabilize consumer prices.

The purpose of the system is to reduce import costs by lowering the tariff burden, thereby decreasing the domestic supply prices of the goods in question.

By category, cases where importers inflated import prices to excessively remit import payments and evade corporate taxes accounted for the largest share at 410 billion won.

Cases involving the wrongful acquisition of quota tariff allocations through dummy companies amounted to 102 billion won, while cases where quota-applicable goods were kept in bonded areas for extended periods totaled 34.8 billion won.

Company A, a banana importer, exploited the 0% quota tariff rate applied to bananas by reporting import prices higher than their actual values.

Based on these inflated import prices, the company excessively remitted import funds to its overseas headquarters and evaded corporate taxes by overstating cost of goods sold in its accounting books to reduce operating profits.

Company B borrowed the names of multiple dummy companies to secure a larger quota volume than the amount allocated to it.

Quota tariffs apply lower rates only up to a specified volume, after which standard tariff rates are applied.

To secure a larger volume, Company B had dummy companies participate in quota allocations, received quota tariff recommendations under their names to import and clear customs at low tariff rates, and then took over the goods on paper.

The Korea Customs Service believes that unnecessary costs such as commissions generated during this process drove up distribution prices.

In addition, cases involving the delayed market distribution of quota-applicable goods such as beef, frozen mackerel, chicken, and sugar left in bonded areas for prolonged periods were also uncovered.

The Korea Customs Service stated that it has discovered 292 tons of illegally stockpiled goods through on-site inspections of bonded areas and induced their supply to the market.

The Korea Customs Service plans to strengthen the management of the quota tariff system moving forward.

First, it will pursue amendments to the Customs Act to shorten the import declaration deadline for 18 intensively managed quota tariff items from the current 30 days to 20 days, and raise the penalty cap for delayed declarations from 5 million won to 10 million won.

The revision will also include measures allowing the head of customs to order the removal of quota tariff items from bonded areas upon a request from the competent minister, with a fine of up to 5 million won imposed for non-compliance.

To prevent the unfair acquisition of quota tariff volumes, the agency also plans to consult with relevant organizations on allocation methods centered around actual end-users.

(Photo: Yonhap News)