법무법인(유한) 율촌 | Yulchon LLC

Tax and customs specialists obtained a not-guilty ruling for Dorco, a razor manufacturer, in the appeal of a criminal case relating to country of origin markings on product packaging.
 

Typically, a razor or cutter consists of a handle and detachable blades. In an effort to reduce manufacturing costs, Dorco established a corporation in China that attached blades manufactured in Korea to handles manufactured in China to make a single package product for import to and sale in Korea.
 

Dorco included the following declaration on the back of each package: Blades made in Korea and handle made in China. Korean Customs fined Dorco, claiming that Dorco should have written "Made in China" for the whole package instead of indicating the country of origin for each part, and prosecuted Dorco for violation of the Foreign Trade Act.

Dorco indicated the country of origin for each part of the product after referring to competitors' indications of country of origin. The Foreign Trade Act and regulations in effect at the time, however, did not have any express clause allowing for the indication of country of origin for each part of a product. Only the indication of country of origin for the whole product was contemplated. After the charges were brought against Dorco, the foreign trade management regulation was amended to add a clause explicitly allowing the indication of country of origin for each part of a product. The trial court acquitted Dorco, citing the "amendment and abolishment of a law after the commitment of a crime." Dorco believed, however, that the ruling implied it is lawful to indicate that razors with Dorco's Korea-source blades are made in China, which would confuse consumers as to country of origin.
 

On behalf Dorco, Yulchon not only appealed the acquittal but also asserted that customers may misunderstand the country of origin indication if the six-blade razor developed by Dorco is indicated as made in China, and pointed out a provision in the Customs Act stating that the country where a simple repackaging is conducted cannot be the country of origin for the whole product.
 

The appellate court determined that the amendment or revocation of a law cannot be the basis for acquittal, and also found that the issue of whether country of origin indicators may mislead consumers should be considered. Reasoning that the performance of razors depends on the blade and thus consumers are more concerned about the country of origin of that part rather than the handle, the court declared Dorco not guilty of violating the Foreign Trade Act when it indicated the country of origin for each part of its razors.
 

This ruling is significant in that it allows companies to specify the country of origin of each part of a product when this information increases consumers' understanding. As disputes over determining the country of origin and indication method are expected to increase in line with Korea-EU FTA, this case will be a material precedent.
 

Partner Seok Hoon Kang, associate Se Hoon Park, and customs consultants Un Sang Jung and Hyung Bae Kim from Tax Group handled this case.