South Korea: Heineken Korea under customs scrutiny for import prices manipulations
Heineken Korea Co., a local branch of Dutch brewing company, is under scrutiny by the Korean customs authority for allegedly manipulating original import prices of its beer brands to lower tax, a move when confirmed could draw a fine of more than 10 billion won ($8.9 million), the Pulse News reported on January 18.
According to sources from the liquor distribution industry on January 17, the Korea Customs Service has almost finished its probe on Heineken Korea. It is also expected to expand the investigation scope to all import beer retailers in the country upon suspicion that they had intentionally undercut import prices to pay less tax. Korea imposes a 113 percent alcohol tax according to the price. A underreport of 100 won could save the distributor tax dues by more than 100 won per 500 ml canned beer.
Once found guilty, the foreign beer brands’ local retailers would be slapped with fines of tens of millions of won in total including more than 10 billion won for Heineken Korea alone, according to an industry source.
Industry sources pointed out that it might be easy for Heineken Korea to rig the price as it is fully owned by its headquarters in the Netherlands. The customs service is also looking into whether the head office has been aware of this practice and has directed the Korean unit to do so.
The unfair business practice allegations on foreign beer retailers has taken place at a time when foreign brands dominate the Korean market after their retail prices have become as competitive as Korean labels.
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