What are the procedures, additional duties, and surcharges if goods exempted on condition of re-export are not re-exported within the deadline or are used or transferred without customs approval? Released

The conditional duty exemption system for re-export is a system that exempts customs duties on the premise that goods brought into the country temporarily for a specific purpose will be re-exported within a certain period. If the re-export obligation is not fulfilled, or if the purpose is changed or the goods are transferred without approval, deviating from the original intent of this system, strict sanctions will follow according to the Customs Act. This requires special attention as it goes beyond simply paying back the exempted duty and may involve additional taxes and administrative procedures.

First, let’s look at the case where **the goods are not re-exported within the re-export period**. As specified in Article 97, Paragraph 1 of the Customs Act, the originally exempted duty amount will be collected immediately. In addition, an **additional tax** equivalent to 20/100 of the collected duty amount will be imposed. However, this additional tax is imposed within a limit not exceeding 5 million KRW. For example, if 30 million KRW in duty was exempted, 30 million KRW will be collected upon failure to re-export, and the additional tax will be 5 million KRW, rather than 6 million KRW (which is 20% of 30 million KRW). This can be understood as an administrative penalty for failing to fulfill the re-export obligation within the deadline.

Next is the case where **goods subject to re-export duty reduction or exemption are used for other purposes or transferred without the approval of the head of the customs office within the re-export period**. According to Article 97, Paragraph 2 of the Customs Act, such actions are prohibited in principle. If the purpose is changed or the goods are transferred to another person in violation of this, the originally exempted duty will be collected immediately according to Article 97, Paragraph 3 of the Customs Act. An important point here is that if the unauthorized use or transfer occurs before the re-export period has expired, the additional tax for failure to re-export (20% of the duty, up to 5 million KRW) is not imposed. In this case, the core of the violation lies in the "unauthorized use or transfer" itself, and since the re-export deadline has not yet arrived, it is interpreted that the additional tax for "failure to re-export" should not be double-charged.

The **processing procedure** when such a situation occurs is as follows. Usually, violations are identified through regular customs audits, information analysis, or the company's own discovery and reporting. Once a violation is confirmed, the customs office issues a **Notice of Payment** to the taxpayer, stating that the customs duty and additional tax will be collected. The taxpayer must pay the relevant customs duty and additional tax within the period specified in the notice (generally within 15 days from the date of notice). If the taxpayer has an objection to the notice or wishes to appeal the administrative disposition, they may follow appeal procedures such as a request for review, a request for adjudication, or administrative litigation under the Customs Act.

A customs broker can play an important role in these complex situations. For example, if re-export is inevitably difficult even though the re-export period is approaching, the period can be legally extended through an **application for extension of the re-export period** (Article 116-2 of the Enforcement Decree of the Customs Act). Furthermore, even if use for other purposes or transfer is necessary, duty collection or additional taxes can be avoided by obtaining **prior approval from the head of the customs office**. Recognizing these procedures in advance and responding appropriately is very important for a company's compliance management and cost reduction. If a violation occurs due to an unforeseen situation, it is the role of the customs broker to resolve the situation with minimum loss through accurate legal interpretation and provide consulting to prevent the recurrence of similar cases in the future.

In conclusion, as goods with conditional duty exemption for re-export provide tax benefits, they carry a responsibility to fulfill those conditions. It must be clearly understood that violations such as failure to re-export, use for other purposes, or transfer are all subject to the collection of customs duties, and especially in the case of failure to re-export, additional taxes may be imposed. To avoid unnecessary duty collection and additional taxes, it is most important to accurately understand relevant laws and regulations and strictly comply with necessary procedures, such as extending the re-export period or obtaining approval for a change in purpose, in advance.