The government imposed the National Health Promotion levy on importers of e-cigarette liquid, but the court did not accept it. Contrary to the importers' claims, the liquid nicotine was extracted from tobacco leaves rather than the stem or root, but the levy was so excessive that importers effectively could not pay it.
The Seoul Administrative Court's 9th Division (Judge Kim Guk-hyeon) said on the 25th that on Nov. 17 last year it ruled to cancel all National Health Promotion levies the Ministry of Health and Welfare had imposed on six liquid nicotine importers in a lawsuit seeking to overturn the levy imposition.
Under the Tobacco Business Act, tobacco is currently defined as "a product manufactured in a state suitable for smoking, sucking, inhaling as vapor, chewing, or smelling, using tobacco leaves as all or part of the raw material."
In Sept. 2016, the Ministry of Economy and Finance issued an authoritative interpretation that only nicotine extracted from tobacco leaves falls under tobacco under the Tobacco Business Act, and nicotine extracted from stems or roots does not. As a result, imports of nicotine extracted from tobacco stems and roots surged. That is because importers did not have to pay the so-called "tobacco taxes," including the tobacco consumption tax, the special consumption tax, and the National Health Promotion levy.
However, the Ministry of Health and Welfare imposed a total of 3.24 billion won in National Health Promotion levies, saying that the e-cigarette liquid imported by the six companies from 2018 to 2020 was manufactured using leaves, not stems or roots, and thus constituted tobacco under the Tobacco Business Act. The companies imported a total of 6.17 million ml of liquid nicotine. At the time, liquid nicotine classified as "tobacco" was subject to a levy of 525 won per ml. From Oct. 2020, it rose to 1,050 won.
The companies submitted to Incheon Customs export clearance certificates issued by Chinese customs that were labeled "stem/root-extracted nicotine." The court said, "It can be said that the importers were negligent in failing to recognize that (the liquid nicotine) was extracted from tobacco leaves, but there is insufficient evidence that they definitively recognized it was extracted from leaves and concealed it."
The court also said, "The levies imposed on the importers exceed their sales and reach as much as 3.5 times," adding, "It is practically impossible for the importers to pay the National Health Promotion levy." The six companies imported liquid nicotine for 1.17 billion won, and their sales totaled 1.84 billion won.
Meanwhile, the Tobacco Business Act, which had regulatory loopholes, was amended in the National Assembly last month. Starting Apr. 24 this year, liquid nicotine made from tobacco stems and roots will also be recognized as tobacco under the Tobacco Business Act and will be subject to the same taxes and levies as conventional tobacco. Synthetic nicotine that does not use tobacco as a raw material has also become legal tobacco. The government plans to prepare countermeasures for "similar nicotine," which is not nicotine but has a chemical structure similar to nicotine.