Investigation of 5-Year Bunker Oil Payment Transactions of 15 Shipping Companies

Industry Unites for Joint Response
"Targeted Investigation" Alleged

The Korea Customs Service's investigation into whether 15 major domestic shipping companies violated the Foreign Exchange Transactions Act has prompted these companies to jointly respond through the Korea Shipping Association. Some in the shipping industry are protesting, calling it a "targeted investigation."

It is known that the Customs Service recently reviewed five years' worth of bunker fuel payment transactions for major shipping companies such as HMM, Janggeum Shipping, Korea Shipping, SK Shipping, and Pan Ocean. The Customs Service and the investigated shipping companies interpret differently whether the payment method for bunker fuel (ship fuel) constitutes a "third-party payment" under the Foreign Exchange Transactions Act.

Korea Customs Service

The Customs Service reportedly views the method of receiving bunker fuel and making payments to a WFS (World Fuel Services) affiliate different from the supplier as potentially violating the Foreign Exchange Transactions Act. The shipping companies receive the necessary fuel during voyages from local WFS branches, and the settled payments are remitted to accounts listed on invoices issued by WFS headquarters. The Customs Service considers the actual transaction party and the payment recipient to be different entities, thus classifying it as a "third-party payment" under Article 16 of the Foreign Exchange Transactions Act, and holds that failure to report to the Bank of Korea prior to payment constitutes a violation of current law.

Under current law, even the relationship between headquarters and branches can be legally interpreted as involving a third party. A maritime law specialist stated, "The prior reporting obligation for third-party payments was introduced by foreign exchange authorities to transparently monitor fund flows," adding, "Even if it is a headquarters-branch relationship, legally it can be considered a third party." He also noted, "However, depending on the facts, there is room for legal dispute."

The shipping industry is protesting, calling this investigation unusual. The shipping companies express bewilderment, saying, "This payment method has been a customary practice for years, so why is it now an issue?" An industry insider who requested anonymity said, "We only remitted payments to the accounts designated by WFS, and we have regarded the headquarters and branches as the same company," adding, "If we had known it was a 'third-party payment,' the shipping companies would not have paid that way, and guidance should come before criminal measures." Some also suspect that the Customs Service's simultaneous investigations have ulterior motives. A maritime industry expert said, "There is an industry view that, amid a shortage of tax revenue, there is an intention to collect taxes from the still-booming shipbuilding industry."

The Korea Shipping Association is discussing joint responses with the 15 shipping companies under investigation. A representative from the Shipping Association said, "We are not yet at the stage of legal action, but if necessary, we will actively respond through law firm consultations."

There are also observations that differing interests among shipping companies could affect the direction of their response. Some companies are considering arguing that WFS affiliates should be recognized as the headquarters' fund management entities, making the payments subject to post-reporting rather than prior notification. Meanwhile, other companies are preparing to individually hire law firms to actively engage in legal disputes with the Customs Service.

Reporter Lim Hyun-kyung, Legal Times

※This article is based on content supplied by Law Times.

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