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[The Outline of Customs Drawback System of S. Korea]
Ⅰ. Concept and Category of Customs Drawback
The customs drawback refers to a system of paying back received import duties for certain reasons. Each country is operating different customs drawback systems in order to fulfill the purpose of policy, to secure tax revenues, to promote the exportation and other purposes.
The customs drawback system is necessary because customs duties, which are theoretically categorized into the consumption tax imposed on consumed goods, aren't required to be imposed when goods aren't consumed in Korea, or is required to be returned later.
The customs drawback system is divided into a refund of mistakenly paid customs duties under which mistakenly overpaid customs is refunded, and other drawback systems. The characteristics of other drawback system are revealed distinctively when imported raw materials are re-exported after going through processing within the country.
Hereinafter, the characteristics and kinds of customs drawback system will be outlined, and individual drawback and simplified fixed drawback system will be described separately.
■ S. Korea's Characteristics of Customs Drawback System
Of customs drawback system of S. Korea, systems derived from theory of customs duties are almost same with those of other countries such as customs drawback for goods which are different from the terms of contract. But, when general enterprises, not those in bonded area, process imported raw materials and re-export them, such customs drawback has following characteristics.
1) With respect to raw materials for export, the Korean system has adopted a system of the collection of customs duties and drawback at the time of re-exportation, not duty-free importation and post-management.
Korea has adopted the system that customs duties are levied on imported raw materials and paid customs duties are returned if such products made from raw materials are re-exported.(The adoption of customs drawback system)
※ As for China, if goods are scheduled for re-exportation after processed in China, customs duties of imported raw materials are exempted beforehand. Then, at the time of re-exportation of complete products, the exemption is confirmed after going through post-management from government.
2) Korea has operated customs drawback system very broadly compared to other countries.
Korea has operated two kinds of customs drawback system, that is, individual drawback and simplified fixed drawback system, and one of customs drawback system may be chosen through procedures of requirements confirmation by each enterprise.
Under the individual drawback system, customs drawback is available for almost all raw materials for exportation purpose. As for simplified fixed drawback system, certain ratio of export amount may be returned to around 4,000 items(based on HS code 10 unit) in a simplified way, even though import of raw materials and relevant customs amount may not be verified.
※ As for Japan, customs drawback system is operated very narrowly compared to other countries, that the current constitution has limited refunds of imported raw materials to sugar only in the same case that imported raw materials are re-exported after processing.
Ⅱ. Simplified Fixed Drawback System
Simplified Fixed Drawback System, responding to Individual Drawback System, has been introduced to support the export of small and medium businesses incapable of adopting individual drawback. The system is based on the Act on Special Cases concerning the Refundment of Customs Duties, etc. Levied on Raw Materials for Export.
Such system has following several characteristics. It doesn't need a statement of materials quantity applied and the verification of the flow of raw materials. In addition, the amount of refund for each HS item is uniformly fixed by a unit of 10,000 won of a total amount of exportation. Export Declaration form only is required for applying for refund.
For details, click the detail view of simplified fixed drawback.
☞ Detail view of Simplified Fixed Drawback
Ⅲ. Individual Drawback
Individual drawback system refers to calculating the refund amount by classifying and adding paid customs duties of imported raw materials used for export goods, based on used raw materials. The system also is based on Act on Special Cases concerning the Refundment of Customs Duties, etc. Levied on Raw Materials for Export.
Individual drawback system has advantage over simplified fixed drawback system in that exact calculation of paid custom duties is possible, but required documents are complicated and too much time is taken to calculate drawback amount.
For details, click the detail view of individual drawback.
☞ Detail view of Individual Drawback
Ⅵ. Refund of Mistakenly Overpaid Customs Duties, Goods of a Breach of Contract, etc.
It refers to the refund occurred in the cases where custom duties are overpaid by mistake or the original purpose fails to be fulfilled because imported goods are different from the terms of contract.
Refund regulations concerning the above are based on the Customs Act.
■ Refund of the Mistakenly Overpaid Customs Duties
ㅇ Refund of mistakenly overpaid customs duties refers to returning paid custom duties when collected customs duties of imported goods is greater than the amount of customs duties payable due to the error in application of customs rate or determination of dutiable value.
ㅇ The person who wants to request refund should submit the refund application form for mistakenly overpaid customs duties, containing the name, standard, quantity, date of import declaration filed of the goods and the refund amount of relevant goods.
ㅇ In case where the refund is determined, the head of customshouse sends out a refund notice to relevant applicant. In the other hand, he/she also sends out a order for payment to the Bank of Korea, which then implements refund.
ㅇ In the event that an amount mistakenly overpaid is refunded, if a person entitled for such refund is liable to pay any customs duties, any surcharge, any additional duty, the head of any customhouse may appropriate the refund proceed to either of such payments.
■ Refund for the Goods of Breach of a Contract, etc.
Refund for the goods breaching contract, etc. refers to a system under which paid import duties are returned in case where imported goods are different from the terms of contract, and are required to be re-exported or destroyed.
☉ Import duties are returned in case where imported goods are different from the terms of contract
If the goods for which the import declaration is accepted are different from the contents of the contract and the nature or form at the time of import declaration has not been changed, the goods will be refunded. if the goods fall within one year from the date of receipt of the import declaration.
ㅇ The goods which were exported to foreign country again, after being imported and brought into the bonded area (Exports can be made one year after the import declaration date)
ㅇ The goods being produced at bonded area, and brought into the bonded area again
If the customs officer acknowledges that there is no impediment to the calculation of the refund tax amount, the customs tax may be refunded even when a part of the imported goods is exported
If the disposal of the goods is deemed unavoidable and the goods are returned to the bonded area within one year from the date of receipt of the import declaration, if it is approved by the customs officer, the customs duties shall be refunded
ㅇ The goods should be exported to abroad.
The organization to which refund application form shall be submitted and amount of refund are as follows.
ㅇ The report of re-exportation of the goods breaching contract should be filed to the head of customshouse in jurisdiction of bonded area that the goods breaching contract shipped into, and refund application may be accepted at any customshouses across the country.
ㅇ The refund covers the full amount of paid customs duties for relevant goods. If the part of goods is re-exported, customs to be paid are equivalent of customs duties and internal duties of relevant goods. But, value-added tax isn't subject to refund of goods breaching contract.
☉ Refund for the Goods Breaching Contract to be Destroyed
The conditions and principles are almost similar with those of the goods breaching contract to be reexported, but following conditions should be noted.
ㅇ Refund is possible only where the goods have been destroyed by obtaining the permission of the head of a customshouse. In addition, supporting evidence to justify the destruction of goods should be submitted to the head of a customshouse, including basic data such as the name and standards of goods, and reasons, means and place of destruction.
ㅇ Where the remnants of goods exist after destruction, customs duties in proportion to the remnants are non-refundable.
⊙ Customs fee refund for loss, deterioration, damaged goods
If the goods for which the import declaration has been done are still in the designated bonded area after the receipt of the import declaration, the whole or part of the customs duties may be refunded if the value of the goods is lost due to disaster or altered or damaged.
In the event that goods whose import declaration is accepted are destroyed or lost, changed qualitatively or damaged by a calamity, bringing down their value, while being kept stored in a designated bonded area after such import declaration was accepted, customs duties thereon may be refunded, in whole or in part. It's because in the case where the goods which have been lost, still yet to be consumed, may remove the ground of customs duties which are paid on the conditions of consumption.
Extra caution should be taken about the conditions that the goods are required to be placed in designated bonded area, to be lost, changed or destroyed due to a calamity.
⊙ Customs fee refund for self-used goods
ㅇ If personal self-used goods are brought into the bonded area and exported within six months from the date of receipt of the import declaration, the customs duties paid at the time of importation shall be refunded if they are exported again after confirmation by the customs officer
ㅇ However, the goods must be acknowledged by the customs officer that they are not exported or used in the country without change in the nature or form at the time of import declaration.