Claiming Duty Drawback on Domestically Sourced Imported Raw Materials for Export Manufacturing Released

The scenario you described falls under the category of "indirect export," where imported raw materials are procured through domestic transactions to produce goods for export. To answer your question directly: Yes, even if you did not import the materials yourself or pay the duties directly, you can legally claim a refund for the customs duties included in those materials through a document called the Certificate of Split Tax Amount.

1. Concept of the Certificate of Split Tax Amount and Drawback Principles

Under South Korea's "Act on Special Cases Concerning the Refund of Customs Duties, etc. Levied on Raw Materials for Export," the principle is to refund duties paid on raw materials used to manufacture export goods. However, if you purchase raw materials from a third party rather than importing them directly, you do not possess the initial import tax data. Therefore, a method to prove the tax amount is required.

The document used in this specific context is the Certificate of Split Tax Amount. This certificate proves the portion of customs duties and other taxes originally paid at the time of import that corresponds to the quantity of goods transferred domestically. Essentially, the domestic supplier (transferor) separates and certifies the tax amount associated with the volume sold to you. This document serves as the legal basis for you to apply for a refund with the Korea Customs Service after completing the export.

2. Key Requirements and Considerations for Issuance

To obtain this certificate and utilize it for duty drawback, specific legal requirements must be met. Please review the following criteria carefully:

• State of Goods: The supplier must transfer the raw materials to you in the original imported state. If the supplier has performed any processing on the materials before the transfer, the transaction requires a "Certificate of Basic Raw Material Tax" instead of a Certificate of Split Tax Amount.
• Transfer Period: The Certificate of Split Tax Amount can only be issued if the domestic transfer occurs within 2 years from the date of import declaration acceptance of the original materials. If this period lapses, the right to claim a refund expires; therefore, strict inventory and document management are essential.
• Issuing Authority: The certificate can be issued by the entity supplying the goods under a Local L/C (Letter of Credit) or by a Customs Broker meeting the criteria set by the Commissioner of the Korea Customs Service. In practice, it is standard to have a professional Customs Broker issue the document to ensure accurate tax calculation and regulatory compliance.

3. Required Documents and Application Procedure

To receive the Certificate of Split Tax Amount from the supplier, you must provide documentation proving that the transaction involves raw materials intended for export. The major supporting documents specified in the Customs Service's 'Refund Notification' include:

• Proof of Domestic Transaction: Documents such as a Local L/C, Purchase Confirmation Letter, or a Transfer Approval Certificate are required. If these are unavailable, you must prove the goods contribute to exports via an export L/C or export contract.
• Proof of Transfer Date: Documents verifying the actual delivery date, such as tax invoices or transaction statements, are necessary.
• Application Form: The specific form (Form No. 26 of the Refund Notification) must be filled out accurately.

Finally, obtaining the Certificate of Split Tax Amount is not merely about receiving a paper document; it must be electronically transmitted and approved via the Korea Customs Service's UNI-PASS system. We recommend requesting the issuance from your supplier, but if they are unable to process it directly, advising them to seek the assistance of a professional Customs Broker is the most efficient approach. With a valid certificate, you can successfully claim refunds for customs duties, VAT (under certain conditions), and individual consumption taxes paid upon the original import of the raw materials.