Supreme Court Rules "Imposing Customs Duty on 'Free Samples' Received After Annual Contract Is Unfair"

[Asia Economy Reporter Heo Kyung-jun] The Supreme Court has ruled that imposing customs duties on 'free samples' received as a certain percentage of the annual purchase quantity is unfair.

The Supreme Court's First Division (Presiding Justice Park Jeong-hwa) overturned the lower court's ruling, which had dismissed the lawsuit filed by pharmaceutical company A against the Seoul Customs Office seeking the cancellation of customs duties and other charges, and remanded the case to the Seoul High Court on the 6th.

Company A had an exclusive contract to import pharmaceutical raw materials from a Japanese company and agreed to receive goods corresponding to a certain percentage of the annual purchase quantity as 'free samples.' The Seoul Customs Office imposed an additional total of approximately 180 million KRW in customs duties, penalties, and value-added tax, citing the presence of 'goods imported free of charge.'

The customs office argued that since Company A received additional free samples equivalent to a certain percentage of the raw materials imported annually from the Japanese company, customs duties should be levied based on the average price. According to the Customs Act and its Enforcement Decree, it is stipulated that for 'goods imported free of charge,' the taxable value cannot be determined by the general method but should be based on the transaction price of identical or similar goods. Company A filed a lawsuit challenging the taxation.

The first and second trials recognized the free samples provided by the Japanese company as 'goods imported free of charge' and ruled in favor of the customs office.

However, the Supreme Court judged that the goods could not be considered as imported free of charge. The court stated, "The additional supply of goods corresponding to a certain percentage of the annual purchase quantity is part of an annual purchase contract, and once the additional supply quantity is confirmed according to the annual purchase quantity, the final transaction price is determined on a yearly basis according to the total annual payment and total annual purchase quantity."

Furthermore, the court ruled, "Considering that the quantity of additional supplied goods is not insignificant, being 10% or more of the annual purchase quantity, even if the goods were supplied under the name of 'free samples,' it cannot be regarded as supplied without any compensation."

This content was produced with the assistance of AI translation services.