"Luxury Import and Sales Company Caught for Customs Fraud Including Submission of False Certificates"

A luxury goods import and sales company was caught by customs authorities for evading customs duties and other taxes by submitting false certificates of origin.

On the 25th, the Incheon Airport Customs of the Korea Customs Service announced that it had detected a sales company that evaded customs duties and domestic taxes, and sent the company representative Mr. A and seven related persons to prosecution without detention on charges of violating the Customs Act.

According to Incheon Customs, Mr. A and others are suspected of evading customs duties and domestic taxes worth 2.3 billion KRW while importing about 50,000 high-end luxury bags and clothing items (with a market value of approximately 35 billion KRW) from Italy over more than five years since 2019, in over 3,000 instances.

Mr. A and others distributed the imported luxury goods to the market for home shopping and online shopping mall sales. The problem was that during this process, Mr. A and others evaded customs duties by submitting false Free Trade Agreement (FTA) certificates of origin to customs in order to receive preferential tariff rates when importing luxury goods, and also smuggled goods.

The "Free Trade Agreement between the Republic of Korea and the European Union and its Member States (Korea-EU FTA)" requires that when goods are imported from the partner country to Korea, a certificate of origin properly prepared by an authorized person must be submitted to customs to receive preferential tariff rates.

Also, if the price of goods sent by the exporter in the partner country exceeds 6,000 euros per shipment, only an "authorized exporter" certified by European customs authorities can prepare the certificate of origin, while goods priced at 6,000 euros or less can receive preferential tariff rates through a simplified procedure.

The simplified procedure allows exporters who are not authorized exporters to prepare the certificate of origin by including the prescribed origin declaration wording in trade documents such as detailed invoices and manually signing the original signature of the exporter.

However, the investigation revealed that Mr. A and others imported luxury goods priced over 6,000 euros but, despite not obtaining a formal FTA certificate of origin, deliberately split the prices (to below 6,000 euros) and reported multiple domestic sole proprietors established under the names of employees and family members as importers to customs (dispersed import), thereby applying preferential tariff rates and evading taxes.

In particular, during the investigation, Incheon Customs additionally confirmed that Mr. A and others smuggled some goods by disguising them as personal use items valued under 150 USD or by bringing them into the country without customs declaration after overseas business trips.

Through these methods, Mr. A and others paid only 2.2 billion KRW out of the total 4.5 billion KRW in taxes owed, evading approximately 2.3 billion KRW in taxes, Incheon Customs explained.

An official from Incheon Customs said, "We will strictly crack down on illegal activities that evade taxes by abusing the special provisions of free trade agreements and simplified customs clearance systems to establish a fair trade order and sound national finances."

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