On March 28, it was confirmed that the Korea Customs Service is investigating whether multiple shipping companies, including HMM, Janggeum Shipping, and Korea Marine Transport, violated the Foreign Exchange Transactions Act. The investigation focuses on whether the shipping companies failed to report properly during the process of receiving bunker fuel for their vessels and making payments.
The shipping companies under foreign exchange inspection had contracts with the U.S. headquarters of WFS (World Fuel Services), a global bunker fuel supplier, and received fuel from WFS branches in various regions while at sea. The payment structure was arranged so that the settled amounts were paid in bulk to WFS headquarters or branches regardless of the fuel supply location.
The Korea Customs Service reportedly takes issue with the fact that the actual bunker fuel supplier and the payment recipient are different entities. According to the Customs Service, paying a party different from the actual bunker fuel supplier constitutes a “third-party payment,” which is prohibited under the Foreign Exchange Transactions Act. Article 16 of the Foreign Exchange Transactions Act requires residents to report in advance to the Bank of Korea if they make foreign currency payments to a third party who is not a party to the transaction. Violations involving amounts exceeding 5 billion KRW may result in criminal penalties of up to one year imprisonment or fines up to 100 million KRW. Since bunker fuel payments can amount to tens of billions of KRW per refueling, violations could lead to criminal prosecution.
The shipping companies argue that the payment recipients are agents of the suppliers and therefore do not constitute third-party payments, or at least serve as specialized fund management companies. According to foreign exchange regulations, if foreign currency is paid to a multinational corporation’s specialized fund management company, only a post-report within one month after payment is required instead of prior notification. Violations of this rule result in administrative fines of up to 30 million KRW rather than criminal penalties, thus lowering the severity of sanctions.
Reporter Lim Hyun-kyung, Law Times
※This article is based on content supplied by Law Times.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
