Copyright ⓒ 2013 Yulchon LLC. All Rights Reserved.

2014. 02.

Yulchon's Customs Practice

1. Overview of customs disputes

2. Recent trends in customs disputes

3. Strengths of Our Customs and Trade Team

4. Major practice areas

5. Noteworthy cases

6. Our professionals

Contents

3

5

7

14

15

16

1. Overview of Customs Disputes

3

Yulchon's Customs and Trade Team

Assessment of

Duties and Penalties

Heavy financial

burden on companies

Relation to

Corporate

Financial Strategies

Impact on internal

policies on finance

and tax

Criminal

Customs Cases

Negative public view of

customs law violators

1. Overview of Customs Disputes

4

Build Transparent and Ethical Corporate Image

Customs and

Trade Advisory Services

General Customs Advisory Services

Customs Audit Defense Services

Coordination with Our Domestic and

International Tax Team

Protect Legitimate Rights and Interests

Administrative Appeals and

Litigations

Customs Appeal to Tax Tribunal

Customs Litigations in Courts

Customs-related Criminal Proceedings

2. Recent Trends in Customs Disputes

5

• Changes in International Trade Environment

1Expansion of Free Trades and Bloc Economies • Korea-U.S. Free Trade Agreements ("FTA") signed in 2007

• Korea-India Comprehensive Economic Partnership Agreement ("CEPA") and Korea-EU FTA signed in 2009

• Increase in Regional Trade Agreements ("RTA") despite the launch of the WTO

2Emergence of China, India and Russia • Sharp rise in volumes of trade with China

• Emergence of India and Russia as new markets

3 Weakening of Trade Bases due to Unstable Global Market Conditions

• Worldwide economic recession caused by the US economic crisis

• Trade bases weakened by sudden rise in raw material prices and unstable global financial

market conditions

2. Recent Trends in Customs Disputes

6

• Intensified Customs Investigation by the Customs Authorities

Monitoring System for

Foreign Exchange Rule Violators(2012.6. Jose Ilbo)

"Increase of fake transactions, price

manipulation, fraud, property smuggling, etc.

using import/export transaction."

"Violation amount for property smuggling,

money laundering, etc.

in 2011 is KRW 3 trillion 811 billion."

Intensified Audit of

Overseas Tax Evasion(2011.3., Yeonhap News)

"Coordination between National Tax Service,

Korea Customs Service (KCS) and Financial

Supervisory Commission to attack overseas

tax evasion."

“Plan to continuous increase of KCS auditors

specialized in overseas tax evasion.

Crack Down on Duty Evasion using Related

Party Relationship(2012.6. Korea Economic Daily)

"Out of duty assessment of KRW 1 trillion 700

million for four years, KRW 701.3 billion (70%)

from related party transactions."

"Especially, most of duty evasion since 2010 is

estimated to be from related party

transactions."

Intensified Origin Verification

under Korea-EU FTA(2011.12. Jose Ilbo)

"Intensified origin verification starting

from 2012."

"EU Customs selected electric, electronic,

automobile, textile products (Korea's major

export items) as target of verification."

3. Strengths of Our Customs and Trade Team

7

Yulchon, Attorneys at Law

Voted Best Korean Law Firm in Tax Field [Chosun Daily Survey]

‒ 19 out of 30 largest Korean corporations voted Yulchon as having the best tax practice in 2007

‒ Ranked second in “most preferred law firm” category

Cooperative system among domestic tax-customs-international tax teams

‒ Offers clients reliable and efficient legal advice based on understanding of all aspects of domestic and international

taxation

‒ Provides all manners of tax planning, dispute resolution, legislative, administrative and policy-related services

Customs and Trade Team

Composed of leading authorities and experts

‒ Ministry of Strategy and Finance outside counsel, WTO panelist, WTO committee expert

‒ Former National Tax Tribunal ("NTT") adjudicator and customs officials at Korea Customs Service ("KCS")

Offers best legal services in all aspects of customs based on extensive field experience

‒ Efficient and reliable legal advice by highly acclaimed experts with more than 30 years of experience in customs and

trade area

‒ Highest rate of success in Korea in customs administrative appeals and litigations

‒ Offers comprehensive legal services covering all aspects of customs and trade-related laws

Accolades and Recognitions

8

2010. 08. 29.

30.8 30.4 28.6

24.1 22.7 22.2 18.6

15.2

9.8

JPJS Yulchon Hwang Mok

Kim & Chang

Barun BKL Y&Y Lee & Ko

Shin & Kim

40.036.4

31.1 28.6 27.3 27.3 25.6

20.6

12.9

Yulchon JPJS Barun Hwang Mok

Kim & Chang

BKL Y&Y Lee & Ko

Shin & Kim

58.7

47.0 46.6 43.9 42.9 39.7 39.1 38.5 33.9

Yulchon Barun Kim & Chang

Shin & Kim

Hwang Mok

BKL Lee & Ko

JPJS Y&Y

65.7 62.2

54.5 50.0 48.4 47.7

42.9 38.5 36.4

Yulchon Barun Kim & Chang

Lee & Ko

Shin & Kim

BKL Hwang Mok

Y&Y JPJS

[Law Firm Competitiveness] ‘Master of Offense and Defense' Yulchon

Supreme Court Winning Ratio of Law Firms

Civil, Administrative, Patent Case Winning RatioUnit: % Unit: %

Overturning at Supreme Court Ratio

Civil, Administrative, Patent Case Overturning at Supreme Court Ratio

Unit: % Unit: %

Accolades and Recognitions

9

2012 Firm of the Year for Antitrust/Competition, Litigation & Dispute Resolution, Projects & Project Financing,

Real Estate/Constructions in South Korea

2007 ~ 2010, 2012 Firm of the Year for Taxation in South Korea

2010 Firm of the Year for Restructuring & Insolvency, Project Finance

2012 Leading IP Law Firm in Korea, Leading Arbitration Law Firm in Korea

2010 ~ 2011 ALB’s Leading Tax Law Firms

2009 ~ 2011 One of the Top 50 Largest Law Firms in Asia

2009 ~ 2012 Employer of Choice

2008 ~ 2011 Top 30 Rapidly Growing Law Firm in Asia

2002 ~ 2012 One of the Top Law Firms in the World in the Practice of Competition Law (11 consecutive years)

2012 Behavioural Matter of the Year (Asia-Pacific, Middle East & Africa) for the defense of Samsung Electronics in the TFT-

LCD cartel investigation

Accolades and Recognitions

10

2011 ~ 2012 Tier 1, Competition

2007 ~ 2012 Tier 1, M&A

2010 ~ 2012 Band 1, Tax

2010 ~ 2012 Tier 1, Tax

2011 ~ 2012 Tier 1, Tax

2009 ~ 2010 Band 1, Competition/Antitrust

2012 Tier 1, Competition/Antitrust

2010 ~ 2012 Tier 1, Corporate / M&A

2012 Social Contribution Award, Legal Service Contribution Sector

2010 In-house Legal Departments Select Yulchon’s Antitrust and Tax as the Best in Korea

Accolades and Recognitions

11

2009 ~ 2012 First Tier, Tax

2010 Dynamic Firm of the Year in Korea Corporate Tax Advisory Firm of the Year in Korea

2010 Korean - Corporate Tax Law Firm of the Year

2010 Outbound Investment Deal of the Year for Marfrig Alimentos’s Acquisition of Keystone Foods

2010 1st in Win Rate in the Korean Supreme Court cases

2008 ~ 2012 Tier 1, Tax

Accolades and Recognitions

12

2011. 09. 20. "Yulchon" is Number 1 in Successful Customs Litigation

According to the documents submitted by the Korea Customs Service

to Rep. Lee, Hye Hoon (Grand National Party), currently litigation

between the KCS and taxpayer are 112 cases and the amount at stake

is KRW 92.5 billion. Kim & Chang represents 51% of the cases in

the amount of KRW 47.1 billion, followed by Yulchon (KRW 18.9

billion), Lee & Ko (KRW 4.1 billion) and Barun (KRW 1.5 billion).

Yulchon is handling the most number of cases (19 cases, 17%)

followed by Kim & Chang (17 cases, 15%), Lee & Ko (7 cases, 6%),

Barun (7 cases, 6%), Seojeong (6 cases, 5%), Seoul (5 cases, 4%)

and Yoon & Yang (3 cases, 3%). Since 2006, 48 duty assessments

were cancelled in court and the amount was KRW 45.5 billion. Yulchon

has the most number of successful litigation followed by Kim & Chang

and Hwang Mok Park. These firms represent whopping 85% of the

successful litigation.

Winning Ratio

31%

28%

26%

7%

4%4%

Yulchon

Kim&chang

Hwang Mok Park

etc.

BarunPro

Se

First Ever ACVA Reached in Korea

13

In July 2009,

Yulchon Tax Group successfully represented a major multinational consumer product company in its bid to reach an

Advance Customs Valuation Arrangement ("ACVA") with the Korea Customs Service for the first time since the introduction

of the ACVA system at the end of 2007.

Advance Customs Valuation Arrangement (ACVA)

• In Korea, ACVA was introduced in 2007 for the first time among major jurisdictions.

• Under an ACVA, the customs administration and the taxpayer agree in advance on the method to determine the

customs value of products imported from a related foreign exporter. If an ACVA is reached and the importer reports

the customs value in accordance with the method prescribed under the ACVA, the Korea Customs Service ("KCS")

will accept, without challenge, the reported customs value for a period specified under the ACVA.

• Prior to the introduction of the ACVA system, when a Korean subsidiary of a foreign company imports products from

the foreign parent or its affiliate, the customs value reported was often rejected by the KCS on the ground that it was

affected by the related party relationship and the taxpayer was consequently assessed additional customs duty and

penalties based on the customs value recalculated by the KCS.

‒ Taxpayers had difficulties in estimating their ultimate customs duty liabilities and also had to pay penalties whenever the

reported customs value was rejected

‒ Due to aggressiveness of KCS, underreporting of customs value may lead to criminal case.

• Thanks to the introduction of the ACVA system, however, taxpayers may now enjoy some stability in their business

management and have the ability to accurately estimate their ultimate customs duty liabilities, and the customs

administration may secure a stable flow of tax revenue and also avoid frictions with taxpayers.

4. Major Practice Areas

14

Advice on Customs

Investigation

Procedure and Representation

in Customs Controversies

• Customs field investigation (comprehensive or specific investigation)

• Representation in customs administrative appeals and litigations

Representation in

Criminal Customs Cases• Representing clients in customs criminal cases

(e.g., smuggling charges) as well as foreign currency control cases

Consulting on

International Trade Law Issues

• Services relating to anti-dumping duty, countervailing duty and safeguard

measures

• General consulting on international trade law issues

• Advisory services in connection with the Free Trade Agreements

• IP protection in respect of imports and exports

Legal

Consulting

• Administrative rulings on customs and international tax law

• Designing TP system for customs and tax purposes

• Drafting and execution of contracts for international trade

Representation in Customs Disputes

• Cancellation of customs duty of 150 billion won imposed on Samsung

Electronics upon importation of Multi-Chip-Packages and Dual-Die-

Packages. (Merchandise classification)

• Cancellation of customs duty on forfeiting expense

• Cancellation of customs duty imposed on SK Energy (Applicability of quota tariff)

• Cancellation of customs duty imposed on Tyco Healthcare

(Merchandise classification)

• Customs duty refund for oil used for vessel trial runs

• Many other cases involving merchandise classification,

customs valuation, customs duty exemptions & refunds

Representation in Customs Audits

Representation in Criminal Customs Cases Customs and International Trade Consultations

• First successful conclusion of ACVA in Korea

• Defending targeted audits for multinational corporations

in the luxury fashion industry

• Defending targeted audit for beer company

• Customs valuation of semiconductor inspection equipment for

repairs of a multinational corporation

• Customs audit with respect to import price discounts by a

multinational IT enterprise

• Customs valuation on oil transactions by an oil refinery

• Many other comprehensive and specific customs audits

Successful resolution of:

• Alleged smuggling of 15 billion won worth of products by agricultural

products importer

• Alleged bareboat charter smuggling

• Alleged illegal importation of medical equipment

• Alleged illegal export & import and country-of-origin violation involving

toll-processed apparel

• Alleged foreign exchange control violation by a famous duty-free shop

• Many other cases involving customs law violations

• Anti-dumping case involving Indonesian and Chinese wood-free paper

• Consulting on Korea-US and Korea-EU FTA negotiation

• Obtained World Customs Organization ruling relating to

Dual-Die-Package classification

• Consulting on country-of-origin rules for luxury goods company

• Many other customs and international trade law consultations

5. Noteworthy Cases

15

Yulchon's

Customs and

Trade Team

6. Professionals

16

Soh, Soon Moo (Partner)

Chief Judge, Seoul Central District Court

Research Judge, Supreme Court of Korea

• Arbitrator, Korean Commercial Arbitration Board / Adjunct Professor, Korea University / Chairman, Tax Law Association

• Legal Advisor, Ministry of Strategy and Finance / Member, Legal Interpretation Committee, National Tax Service / Legal

Advisor, Seoul Regional Tax Office / Honorary Member, Korea Independent Commission Against Corruption

• Member, Sanctions Committee, Financial Supervisory Service / Honorary Judge, Tax Tribunal / Member, Tax Development

Committee, Corporate Tax Division / Vice President, Korean Bar Association

Yun, Sai Ree (Partner)

Associate, Baker & McKenzie (Chicago and New York)

Associate, Lee & Ko

Public prosecutor, Busan District Prosecutor's Office

6. Professionals

17

Cho, Jeong Cheol (Partner)

Superintendent Public Prosecutor,

Seoul Central Prosecutor’s Office

Superintendent Public Prosecutor,

Suwon, Goyang, Miryang, and Seosan Prosecutor’s Office

Lee, Jong Hyok (Partner)

Steptoe & Johnson Washington, D.C. (Dispatch service)

Government Attorney

Park, Sang Tae (Senior Advisor)

President and CEO, KIS Information & Communication

President and CEO, Korea NICE e-Banking Service

Deputy Commissioner, Korea Customs Service

Kim, Eki (Senior Advisor)

Counsellor, World Trade Organization (WTO)

Technical attaché, World Customs Organization (WCO)

First Secretary, Permanent Mission of the Republic of Korea to

the UN Secretariat and International Organizations in Geneva

Director of Valuation Division of the KCS

Jung, Un Sang (Senior Customs Attorney) Shin, Min Ho (Senior Customs Attorney)

Hwang Mok Park

Screening Division, Seoul Main Customs

National Tax Tribunal, Ministry of Strategy and Finance

Hwang Mok Park

Namkyeong Customs Office

Joyang Logistics Int’l Co., Ltd.

Daemoon Customs Brokerage Inc.Korea Customs Service

6. Professionals

18

Kim, Hyung Bae (Customs Attorney)

Korea Customs Service, Customs Valuation & Classification Institute

Seoul Customs (Audit office)

Incheon Airport Customs (Clearance)

Seo, Chang Hee (Customs Attorney)

Financial Investigation Section, Money laundering Special

Investigation Section, Seoul Customs Service

Financial Special Investigation Section, Korea Customs Service

Sohn, Dong-June (Customs Attorney)

Yijung Customs Corporation

Bridge Customs Office

Unit 03, 4th Floor, Kumho Asiana Plaza, 39 Le Duan St., Ben Nghe Ward,

Dist.1, Ho Chi Minh City, Vietnam

Tel: +84 8 3911 0225 Fax: +84 8 3911 0230 E-mail: eyang@yulchon.com

Textile Center 12F,

518 Teheran-ro, Daechi-dong, Gangnam-gu, Seoul 135-713, Korea

Tel: 02-528-5200 Fax: 02-528-5228 E-mail: mail@yulchon.com

Yulchon LLC (Seoul)

Yulchon LLC (Vietnam, Ho Chi Minh City)

Yulchon LLC (Vietnam, Hanoi City)

9F,SK Tower,6A Jianguomenwai Avenue, Chaoyang District,Beijing

100022,P.R.China

Tel: +86-10-8567-0828 Fax:+86-10-8567-0738 E-mail :Beijing@yulchon.com

Yulchon LLC (China, Beijing )

Suite 2502, Keangnam Hanoi Landmark Tower, Pham Hung

Street, Tu Liem District, Hanoi, Vietnam

Tel: +84-4-3837-8200 Fax: +84-4-3837-8230 E-mail: eyang@yulchon.com