The Korea Customs Service (KCS) has benchmarked the successful US Importer Self-Assessment (ISA) program and decided to establish a similar program in Korea for importers to use. Similar to the US, the ISA process starts with membership in Authorized Economic Operator (AEO). Korean AEO import companies are eligible to utilize the newly implemented ISA program, which is expected to become effective this month.
The basis of the ISA program is that it is practically impossible for the Customs authority to verify the legality of all import declarations due to the limited manpower of the auditors. Given this circumstance, Customs audits so far have been focused on collecting additional duties and are often very aggressive (as I already have mentioned from an earlier blog post). This environment ultimately increased the number of objections and appeals filed against Customs. All of this is very unproductive in terms of both business management stability and tax collection.
To help rectify this, KCS came up with introducing the ISA program into Korea so that both taxpayer and KCS would be able to come to an agreement without unnecessary dispute against each other. To facilitate participation in the new program, KCS plans to focus on expanding the number of AEO entities and reassigning some auditors to the manage those AEO entities.
Companies that plan to utilize ISA will need to submit an annual self-assessment report to KCS. However, submitting an annual report of self-assessment report is NOT the only thing required.
There are two main processes in order to make ISA valid:
- For credibility of the report, it must be verified by Customs attorneys (more than two customs attorneys, excluding the customs attorney belonging to the customs broker who declares import/export/drawback filing on behalf of the taxpayer)
- A discussion between the taxpayer (or their representative customs attorneys) and KCS is necessary for conclusion of the review of the report
ISA is a voluntary approach to trade compliance that provides recognition and support to participating companies. The ISA program offers meaningful benefits, such as enjoying exemption from Customs audit and the possibility of getting amended import tax invoices (which allow VAT refunds) in case there is any additional assessment to pay as a result of the self-assessment. Needless to say, it will allow importers to enjoy greater business certainty.
As ISA is a new program, no Korean customs attorneys have experience or a specific plan to support you yet.
However, Tradewin does. Tradewin has long experience assisting with ISA type programs in various industries in the US and other countries. Tradewin Korea, with licensed customs attorneys, has learned from this accumulated experience and knows how to best support you.
For detailed information about ISA program in Korea, please contact Tradewin Korea at [email protected]. We will provide you with the explanatory material in the local language.