Cheese company executives who evaded tariffs worth 1 billion won by abusing the tariff quota system receive probation

Judge Lee Chang-kyung of the Incheon District Court's Criminal Division 1 announced on the 6th that he sentenced three former and current executives, including A (68), the former CEO of a food additive manufacturing and sales company, to eight months in prison and two years of probation, respectively, who were indicted on charges of violating the Customs Act.

Additionally, the company that was brought to trial on the same charges was sentenced to a fine of 100 million won.

Mr. A and others were indicted on charges of importing 1,556,800 kg of cheese on 152 occasions from September 2020 to March 2023 and evading 1.018 billion won in customs duties owed.

Originally, when domestic producers import cheese, a tariff of 6 to 19 percent is applied.

However, when importing cheese from countries with which a free trade agreement (FTA) has been signed, there is a 'tariff quota' (FTA TRQ) system in which a 0% tariff is applied to a certain quota volume.

To this end, domestic importers apply for allocation of import rights to a recommended agency, and the agency goes through a process of allocating FTA TRQ import rights to each company according to certain standards.

However, it was revealed that Mr. A and others used a trick to receive tariff-free benefits even after using up all the import rights allocated to the company.

As a result of the investigation, they falsely reported partner companies with remaining quotas as cheese shippers and tax payers.

To this end, the bill of lading (certificate of title to imported goods) for imported cheese was transferred only as a formality, and the relevant companies were required to report imports.

Afterwards, upon completion of import customs clearance with a 0% tariff applied in the name of a partner company, the cheese was repurchased at the original import cost.

In return, it was revealed that half of the customs duties that should have been paid to partner companies was given as a fee.

Judge Lee pointed out, “As a leading company in the cheese import industry, the defendants have systematically committed crimes for over 10 years as if they had found a brilliant idea to legally reduce tariffs,” and added, “They are not reflecting, even denying the crimes in court as if it was a legal tax saving plan.”

However, he explained the reason for the sentencing by saying, "There appears to be a side effect of import rights being secretly traded due to a system problem where import rights are not sufficiently allocated to companies with a large volume of imports and cannot be transferred," and "We also took into account the fact that he paid the full amount of customs duties and value-added tax of about 8.8 billion won notified by customs."