Korea Customs Service Tightens Crackdown on E-Cigarettes That Are 'Nicotine-Free in Name Only'

[Financial News] As illegal attempts to bring e-cigarette liquid into the country through circuitous routes to evade taxes continue to proliferate, the Korea Customs Service has tightened its enforcement.
 The Korea Customs Service said on the 23rd that it is strengthening customs-clearance management and post-clearance enforcement for e-cigarette liquids. The measures aim to block illegal imports disguised as non-taxable nicotine analog or nicotine-free products instead of taxable synthetic nicotine, following the revised Tobacco Business Act's implementation on April 24.
 As attempts to circumvent the rules increased, the Korea Customs Service began subjecting all nicotine analog and nicotine-free liquids to review on August 18. In particular, because products from China account for more than 99% of import volume, the agency closely analyzed China's e-cigarette licensing system and began verifying authenticity by requiring licensing documents and five types of supporting documents for the entire transaction process.
 Pre-clearance ingredient testing has also been strengthened. The Central Customs Laboratory and Scientific Service has conducted ingredient analyses before customs clearance for every import declaration since July 16, one month before the enhanced measures took effect. In consultation with the Ministry of Food and Drug Safety, the laboratory developed an officially recognized analytical method for nicotine analogs and is applying uniform standards at customs offices nationwide. From last year through September this year, authorities caught a total of 22 cases involving the importation of nicotine falsely declared as nicotine-free, totaling 65.43 L.
 These stringent customs-clearance controls have led to a noticeable decline in imports. Imports of nicotine analogs fell 83.3%, from 12 t in January-April this year across six cases to 2 t across five cases in May-August. Nicotine-free imports also declined from 153 t to 149 t over the same periods, showing signs of a slowdown.
 The Korea Customs Service plans to continue post-clearance enforcement through customs investigations and cooperation with relevant agencies, including the National Tax Service and the Korean National Police Agency. It has launched customs investigations into companies suspected of evading the individual consumption tax by misrepresenting natural nicotine as nicotine analog or nicotine-free products. The investigations cover not only tax evasion but also trade crimes more broadly, including undervaluation and illegal foreign-currency transfers.
 Lee Jin-hee, Director General of Customs Clearance at the Korea Customs Service, said, "Although 50% of tobacco-related taxes on synthetic nicotine are deferred for two years, the development of new substances and attempts to falsely declare ingredients to evade regulations are expected to continue." Lee added, "We will mobilize all available resources and respond firmly to illegal activities."
 Meanwhile, as imports of synthetic nicotine have plunged since it was included in tobacco regulations, imports of nicotine analogs—which are not classified as tobacco under current law—have surged nearly 28-fold over the past six months. Analysts say that small synthetic nicotine businesses unable to meet the current Enforcement Decree of the Tobacco Business Act's requirement for at least 10 billion won in capital for liquid-form tobacco manufacturing are moving into the nicotine analog market to avoid the tax burden.
[email protected] Kim Won-jun Reporter