Korea: Amendments to “Method 4” for determining customs value

Improving procedure for calculating “comparable ratio” when determining customs value applying “Method 4”

Amendments to “Method 4” for determining customs value

Korea Customs Service issued an administrative notice amending the “Notice of Customs Valuation Operation” to improve the procedure for calculating the “comparable ratio” when determining the customs value applying “Method 4” pursuant to Article 33 of the Customs Act and to specify the cases in which “Method 4” cannot be applied.


Article 33 of the Korea Customs Act stipulates the method of determining the customs value by deduction from the domestic selling price, referred to “Method 4.” In applying “Method 4,” customs authorities determine the customs value of imported goods by calculating “comparable ratio” corresponding to the profit or general expenses of the comparable company and deducting it from the price at which the goods are resold in Korea after importation.

In several cases where the Korea Customs Service has made a determination by applying “Method 4,” importers have filed appeals on the grounds that the comparable companies selected in the process of determining the “comparable ratio” are significantly less comparable to the imported goods, and the courts have mostly sided with the importers on the grounds of errors in the process of calculating the “comparable ratio.”


If the importer is unable to calculate the ratio of the importer’s profit and general expenses (“importer’s ratio”), “Method 4” may not be applied by using “comparable ratio” calculated by Customs.

Improvements to the procedure for calculating “importer’s ratio” and “comparable ratio” include:

  • Specifically stipulates the criteria for determining the product group to be calculated and the procedure for determining HS Code of comparable items
  • Removes the limits on the number of comparable companies per stage of comparable companies’ selection
  • Stipulates transaction amount criteria to ensure that comparable companies with similar import amounts to the importer are selected
  • Prescribes a formula for calculating the “importer’s ratio” based on sales and cost of goods sold for each category of imported goods subject to “Method 4”
  • Rationalizes the procedure for selecting comparable companies by fiscal year of importation

KPMG observation

The amendment is expected to increase the number of cases in which “Method 4” cannot be applied and determination of customs value based on reasonable standards (“Method 6”) is used.

Read a July 2023 report [PDF 910 KB] prepared by the KPMG member firm in Korea


The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.